2. Nexus-of Contracts Theory Orthodoxy is business management and business ethics is currently occupied by a deontological “Nexus-of-Contracts Theory,” whereby: “Each constituency or stakeholder group bargains with the firm over a set of rights that will protect the firm specific assets that it makes available for production.” (Boatright p. 1837)

3. Stockholder Theory John Locke Adam Smith –Invisible Hand –Self-Organization Milton Friedman –Classical Economic Theory Role of Government:

4. Stakeholder Theory Kant Eugene Freeman John Rawls (Welfare Liberalism) Stakeholders- –Interests –Harms Corporate Stakeholders –Stockholders (owners) –Employees –Managers –Consumers –Financiers –Suppliers –Local Community Role of Government

5. Critique of Theories Stockholder Theory –Strengths –Weaknesses Stakeholder Theory –Strengths Weaknesses

6. Agency Theory Machiavellian Background Jensen and Meckling: “Theory of the Firm” (1976) –Conflict of interest between contracting parties (shareholders, corporate managers, debt managers etc.) Conceptual Framework- –Contractual Obligations –Principals (owners) –Agents (managers) –Behavior of Principles and Agents Delegation of Authority from Principle to Agent –Incentives and Monitoring- Problem of Self-Interest- Agency and Moral hazard: Who bears cost? Who enjoys Benefits? –