According to Mintzberg "the strategic decisions of large organizations inevitably involve social as well as economic consequences, inextricably intertwined...there is no such thing as a purely economic strategic decision." Corporate competitiveness, corporate governance, and corporate citizenship are the three key pressures that shape the agenda of business leaders today along with the growing pressure on their companies to deliver broader societal value (Smith, 2003). This pressure has been brought on by public reaction to globalization, and distrust of big businesses. In today’s social and political climate by consumers
Agency problems. Who owns a corporation? Describe the process whereby the owners control the firm’s management. What is the main reason that an agency relationship exists in the corporate form of organisation? In this context, what kinds of problems can arise?
In his article The Social Responsibility of Business is to Increase its Profits, economist Milton Friedman argues that the main responsibility of corporate executives is to use the resources available to them to maximize profits, as long as it is within the “rules of the game,” which he defines as “free competition without deception or fraud.” Friedman claims that the presence of “social responsibilities” in corporate culture is detrimental to the shareholders, as corporate social conscience contradicts the inherent nature and function of capitalism and corporations. Friedman states that because corporate executives are simply agents of the shareholders who carry out the operations of the corporation, their main objective should be to meet the desires of the shareholders, which he believes, is profitability. When social responsibilities are introduced and corporate executives begin to make decisions with them in mind, Friedman believes that the managers are effectively imposing a tax on the shareholders, as they are spending money/foregoing additional profits to achieve a general social interest. Such behaviour defies the employer-agent relationship (becomes more of a public servant), as they are acting against the interests of his/her employers. In addition, Friedman states that managers are often ill-equipped to be making decisions regarding social interests as they lack the necessary expertise to do so.
The social responsibility of business is to increase its profits while maintaining integrity and loyalty to its consumers. Since responsibility is a human characteristic then it is the duty of the managers to ensure they meet the desired outcome of the owners/executives. In most instances the desired outcome is to make as much financial profit while adhering to all business laws and ethical practices. Business ethics relates to the good or bad things that occur in business practices. Many times the bad situations that may arise do not happen on purpose and the effects that they have on the consumer may be short lived.
It seems that Gap understood the importance of its worker’s welfare as stated by various sources including their own research coming from the Social Responsibility Report, and outside interests such as activist investors and the United States Against Sweatshops (USAS). Gap found to better understand and to grasp the enormity of the problem it had with such things as ethical employment practices and working conditions, a complete an analysis of their factories and outlets in regard to (working) conditions was necessary. Global corporate citizenship means that companies must not only be engaged with stakeholders but are stakeholders themselves alongside governments and civil society. Since companies depend on global development, which in turn relies on stability and increased prosperity, it is in their direct interest to help improve the state of the world. When Gap Social Responsibility Report in 2004, which was unprecedented, historic and in the category of pioneer work, I think Gap demonstrated global corporate citizenship.
The use of child labor or work conditions in the labor force are some of the malpractices organizations are noted as using on both the local and international level (Heffner, 2012). Nike Corporation is among those corporations that have been highlighted and criticized for its organizational culture. Nike outsources their labor to countries that are in need of economic growth. They are able to obtain the labor at a cheap, and some may say, unfair rate. This causes workers to be exposed to working conditions that would be far below what we would accept here in the US or any developed country in the world.
An obstructive company does not make social responsibility an effort, instead making profits the most important aspect of its business. Some people view obstructive businesses as immoral since they may exploit their employees, pollute natural lands or deceive customers. Joseph Smith Student ID 61755 Defensive In most cases, companies that take a defensive stance towards social responsibility are not particularly responsible. These companies may consider themselves neutral, and they make profits a more important motive than performing actions in a socially responsible way. These companies make a point of following the law to ensure that others cannot take legal action against them.
Should corporations only be responsible to their shareholders and not to society as a whole? In recent years, social problems tend to be a pressing issue to all human being races on this planet. Therefore, Corporate Social Responsibility (CSR) has gained its collective attention as an integrated world economy. However, the debates about CSR continue growing that come a long way from Friedman Milton famed doctrine. This critical review focuses significantly on the controversial assertion of pros and cons in promoting CSR.
Within this model, the rich elite are the ones that control businesses at the expense of the average person. The Countervailing Forces model shows the BGS relationship as a complex exchange between many major elements of a society. These forces are stronger or weaker depending on many factors such as “the subject at issue, the power of competing interests, the intensity of feeling, and the influence of leaders.” (Steiner & Steiner, 2009, p. 14) This model differs from the market capitalism model because businesses can be
As Milton Friedman said, the social responsibility of a business is to increase profits, then Union Carbide Corporation’s decision to approve the cost-cutting plan seems appropriate and acceptable. Friedman’s view, however, is far from universally accepted. Many believe that corporations’ responsibilities to their shareholders, employees, customers and communities extend past fiduciary and enter the realms of ethics and Corporate Social Responsibility. Egoism fully applies to Union Carbide because to them no one else matters except for their happiness and profit . What Union Carbide failed to see was without the employees and the local community , there will not be profit because how can a corporation run without people to help it function or run .