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Business And Society, Corporate Strategy,

Essay by   •  December 24, 2010  •  10,165 Words (41 Pages)  •  1,677 Views

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1 INTRODUCTION

The role of business has been changing over the centuries. Throughout the existence of shareholding organisations there have been different theories (Jones v. H. F. Ahmanson & Co., 1 Cal. 3d 93 (1969) regarding the role of business. Organisations too have been changing their role to adapt to resource, capital and society pressures (The Hugh & Helene Schonfield World Service Trust).

Modern corporations are multidimensional. Therefore, like individuals, they too cannot be judged by a simple measure of profit maximization. They are viewed not only as wealth-creators for their legal owners (their equity shareholders), but also as vehicles for enhancing both the local economic and influencing public policy. They are expected to meet the diverse expectations of all their stakeholders. While earning their profits, they must conduct themselves righteously, upholding social norms and keep in mind the well being of all their stakeholders. In the end, they must be perceived as having enriched all of society. If they have a multidimensional role, they cannot be judged in terms of a single measure.

There are numerous examples of how corporations can enhance and essentially deliver to numerous incentives to increase public awareness and social, economical benefits in the community at large. There are various paradigms I have taken into account of how these incentives can be perceived by communities as being both good and bad. This subject raises a range of questions, such as;

* Does a company that moves its manufacturing base from North America to Mexico fully take into account or understand the impact to the local communities?

* Can we class the price of labour and therefore lowered manufacturing costs as a basis for potentially devastating a local community?

* Is it cheap labour or is it slave labour?

* Is this the exploitation of resources or is it an opportunity for 'third world countries' to improve the lives of the entire community?

These and many questions like these will be addressed in this paper, however this paper will take a holistic view point of the bigger questions and focus more on how certain business leaders and corporations have taken on the challenge of the 21st century to become more socially and economically viable.

Many corporations across the globe utilize manpower from a diverse range of countries and backgrounds. The overall perception of the community's at large and corporate executives is that expertise can only come from the more developed countries and this is specifically prevalent in the Telecommunications environment.

"The greatest wealth in the 21st century will not be made from products or services, but rather by the company that creates the conduit for international M-Commerce through the mobile device"

(Unknown author)

2 DESCRIPTION

There are multiple theories competing to define the role of business in the 21st century. We try and look at the variety of theories explaining the role of business and the arguments for and against a number of these. The aim is to acquaint the reader with the background so that my point of view on the same is better understood and appreciated.

The dominant views regarding the role of business are those of three key individuals that I have chosen as appropriate subjects for the document.

Milton Friedman - Published in 1970 his dominant work on the subject "The Social Responsibility of Business is to Increase its Profits", argues that in a free society "there is one and only one social responsibility of business-to use it's resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." For the 'Puritanical Cult of Capitalism', of which Adam Smith is the high priest and Milton Friedman the most forceful evangelist, profit maximization is the most sacred mantra. Though this cult may have shrunk to minority status in recent years, its surviving zealots still cling passionately to their belief that profit is the noblest objective of all. Those who pursue it with single-minded devotion are regarded as contributing the most to society and, therefore, being the true inheritors of the 'kingdom of heaven'.

Andrew Carnegie - In 1889, Carnegie wrote an article for the North American Review, entitled "The Gospel of Wealth." He like Gandhi advanced the idea that the rich are merely trustees of wealth and that they have a duty to use their resources to benefit society. He took his admonishment to others to heart and spent the last two decades of his life giving away the great bulk of his fortune. He advocated benevolent, paternalistic leadership and enunciated both

- Principle of Charity

and

- Principle of Stewardship

Keith Davis - Talking about the "Iron Law of Responsibility", he refers to social responsibility as having risen from the concept of an Enlightened Self Interest where organisations realize that it is in their own best interest to act in ways that community considers socially responsible. In the long run, those who do not use power in a way society considers responsible will tend to loose it.

First we try and understand why Friedman is wrong in claiming that the only responsibility a corporation owes is to its shareholders.

The pursuit of shareholder self-interest has degenerated into a vicious zero-sum game with competitors employing ingenious methods to gain advantage at the expense of their rivals. There may be conflicts of interest among economic players. To ensure that there are no conflicts of interest, Smith invented the 'invisible hand of the market'. It was bestowed with the mysterious power to supervise the pursuit of self-interest (or profit maximization) and guide resources into uses that would have the greatest social value. This magical hand would mediate in such a way that all parties would emerge with 'win-win' solutions with each being conferred the maximum benefits possible.

Modern organisations unlike the organisations of primitive capitalism belong to a multitude of shareholders (insert research reference). These shareholders who may be passive in most cases cannot be expected to provide direction to the organisation. Most shareholders rarely ever take part in the AGM meetings or exercise their voting rights and hence the managers

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