The Origin and Development of Great Business Combinations - Assignment Example

? The problem to be investigated is the social responsibility of corporation vis-a-vis achievement of its business goals within the broader frameworkof social justice and equitable exchange. Answer 1 Corporation has existed for centuries when commercial activities were looked upon as dishonest that exploited the disadvantaged and fleeced the general public. It was especially frowned upon by aristocracy, landowners, church, philosophers etc. who were least concerned as to from where their needs are fulfilled. The moral implications of business activities have been the key issues for their opposition. The intervention of state was a welcome move that promoted corporation as business that was supposed to serve many generations of the people. It involved large input of finance and human capital, thus serving the society by not only providing the goods and services but also helping people to become gainfully employed. In olden days, while the development of business, private and government sponsored was resisted by the aristocracy and others, it nevertheless had tremendously impact on the society and its development through the times. American society has been the fastest developing society that had embraced the concept of corporation to introduce wide ranging development processes. Novak asserts that while corporation was initially started as burial societies, controlled by state and dependent on Royal charter, American society defied the Royal diktats and instituted charter for Harvard University in 1636. That led to the floodgate of new initiatives in the development of private business and corporation in the various area of public interest. Increased number of universities and large network of railroad that much exceeded the combined length of railroad across Europe, were critical achievements of corporation that not only created wealth but also jobs, homes and new opportunities to widen one’s knowledge. America therefore, became the first nation where corporation was developed by the civil society for the development of society with least intervention from the state. The state merely ensured the approval of corporation within certain defined criteria but largely left the running and survival of the same in the hands of private owners. Answer 2 The British and European corporations were very different to American corporations. They were an instrument of privilege that were formed as exclusive body and controlled strictly by the state. The royal charter was critical factor that allowed the formation of corporation. The private equity was not an option and they primarily served the interests of the state. The major corporations that were formed were burial societies, monasteries, town and universities that were hub for higher education. The state remained the sole body responsible for the development of the state. The corporations were founded for the purpose of implementing public projects with all discretionary powers vested on the state (Davis, 2005). Hence, their main objective was social welfare rather than profit making. In contrast, American corporations highlighted private participation in the growth processes. They actively encouraged formation of universities to empower people with knowledge and expertise on various fields. They were also committed to the development of the region which is reflected in the development of huge network of railroads that considerably contributed to increased mobility across the geographical area. Moreover, profit making was also a key element of corporation with strong capitalist attitude. Most importantly, the state promoted entrepreneurship and private holding in the formation of corporation. The state intervention was limited to approving the corporation within the defined legal guidelines and objectives and ensured that it worked within the defined parameters. This helped the private owners of corporation to increase their wealth. Thus American corporations were encouraged freedom to infuse private capital and take risks to make wealth and significantly contributed to the development process. Novak believes that the differences between the two corporations have given way to Modern Corporation that is dynamic and incorporates the best of both the corporations. According to him, corporations have mainly for objectives: create jobs; provide goods and services; create wealth; and should act as social instrument and contribute towards the development of society both in terms of moral obligation and material support. As a source of private capital and wealth, it is intrinsic part of freedom that is not dependent on the state for its survival. Rather, it acts as social instrument that funds social institutions like universities, hospital, charitable organizations, art and music etc. which are linked to the wider welfare of society and their development. The capitalistic approach of modern corporation incorporates the modules of social responsibilities and social consciousness. Novak says that social accountability and responsibility have become essential as the commercial activities of corporation are being threatened by pressure groups. These pressure groups are champions of social causes and issues. They assess the activities of corporations for the socio-political risks that adversely impact the interests of the civil society. Through extensive campaigns, mass supported by various stakeholders, pressure groups expose the anti-society activities of the corporation, resulting in loss of credibility and revenue. Thus, while corporate social responsibility has become important part of corporate strategy, it is both a social pressure and duty of the firms to contribute towards welfare of the society within which it operates. Marjorie Kelly (2001) asserts that moral obligations of the corporations are focused on the interests of the stockholders and shareholders. They believe in the shareholder’s entitlement in terms of high remunerations, properties etc. which they acquire. More than 50% of the market gain from 1983 to 1998 had benefited the richest 1%! The increase in major stockholders’ remunerations as against the rise of salary of the employee is indecently high. Corporates become responsive to society’s needs mainly because it helps them to retain best workers and earn consumers’ loyalty. Jon Entine and Jennings, (1998) claim that philanthropy hides a much vicious face of the corporation. In the garb of social contributions, corporates become better equipped to deceive the stakeholders and commit serious felonies. Besides, the image of good socially conscious front gives them leverage which is often exploited by them for their vested interests. Body Shop is an excellent example that projected the image of socially responsible business with tags like ‘100% natural ingredients’. It was later revealed that even the name Body Shop was stolen and products had petrochemicals and preservatives. One can therefore say that pressure groups are hugely important elements of society that help the corporations to act ethically. Answer 3 Novak has given two definitions of stakeholders. In the first instance, he says that stakeholders are mainly owners who have invested financial capital and taken risks. The term was derived from the time when individuals used to claim stake on piece of property that guaranteed ownership by the state. It promoted the concept of a free state as opposed to slave state. The state also believed that private ownership would facilitate greater common good as they would be better equipped and motivated towards investment of capital for business which would lead to the wider welfare of people. Thus, it produced stakeholders’ society where private ownership increased which was for the larger interests of the general public. The risks taken by few owners became hugely important factor that led to the welfare of people at large. Thus, the theory of stakeholders’ society also became the foundation of free society where people were free to start their own corporation and create wealth for themselves and the society. In the second definition, Novak gives a social democratic stance to the stakeholder’s theory where it refers to people who think they are entitled to make demand on the system. In such a society, people will be constantly making demands to fulfill their needs which are unending. It would therefore, lead to a society that is perpetually dissatisfied. The definition highlights the social ownership of corporation and property rather than private ownership. While it promotes working class with equal rights, the wider ramifications of the same could have dangerous consequences without strong mechanisms of control. Answer 4 Social democracy is complex to define primarily because it gives people the freedom to enjoy the best at the cost of few. While socialism encourages equity amongst the people and democracy grants them their right to freedom of choice, they together become lethal because it may create anarchy and suppression of the disadvantaged. In social democracy, stakeholders’ society is driven by socialism where a sense of belonging and being taken care is highlighted. Stakeholders make demands from the system for satisfying their needs and requirements. After a time, the demands may become more vociferous without participation in the production process. Interestingly, this would lead to a society of idle people whose sense of justice would demand satisfaction of their needs without any effort! This is self interest at its worst where there is no personal responsibility or desire for social cooperation for collective work. This could be highly dangerous in its intent as vested interests would be more determined to gain the most through mobilized demands undermining the needs and requirements of the less privileged segment. Thus, the social democracy that defined stakeholders’ society is actually undemocratic and promotes power play in the acquisition of goods and services as demanded by few. Answer 5 When Novak says that corporation is ‘not a cold meteor fallen from the sky’ he means that it a people’s body that is made by the civil society for the good of the civil society. It is therefore not an emotionless and hard entity like meteor but flexible and highly adaptable body of various stakeholders that understand the needs and requirements of the people and satisfy them through production of goods and services. Most importantly, the moral and ethical considerations within their commercial activities ensure sustainability of the resources that caters to the wider welfare of the society. The commercial activities of the corporations depend on the political risks that are rectified and improved as per the demands of the society. The social consciousness of the corporation becomes a major factor that gives them the flexibility to endorse projects and programs designed for community development (Weiser & Zadek, 2000). Unlike meteors they respond to the needs of the people. Indeed, the importance of being socially responsive to the needs of the society lies in the fact that they exploit the resources of the society in terms of environment, human capital, natural resources etc. Therefore, they become morally bound to give back to society that is sustaining them as corporation. This emotional interchange is the basic difference that Novak wants to emphasize when he compares corporation with falling meteor. (words: 1752) Reference Davis, John P. (2005). Corporations: A Study of the Origin and Development of Great Business Combinations and of Their Relation to the Authority of the State. NY: Putnam sons.  Entine, Jon & Jennings. Marianne M. (1998) Business with a soul: A Reexamination of What Counts in Business Ethics. Hamline Journal of Law & Public Policy, 20(1), 1-88. Kelly, Marjorie. (2001). The Divine Right of Capital: Dethroning the Corporate Aristocracy. San Francisco: Barrett-Koehler. Weiser, J. & Zadek, S. (2000), Conversations with Disbelievers: persuading companies to address social challenges. NY: Ford Foundation. Read More