The Power of Corporations and Industries - Assignment Example

Business and Society Analyze the power of corporations and industries, past and present, to shape our world. According to Anderson (2000), large corporations remain a political, economic, environmental, and cultural force synonymous to today’s world. Big corporations are seen and have been seen to have an impact on the lives of billions of people each passing day in every imaginable way. While some people view the presence of corporations as a positive tide bringing with it jobs, economic growth, lower prices and quality products to an ever burgeoning world population, others see these firms, large and small, as the perpetrators of exploiting workers, degrading the natural environment, domination of the public policy processes and sometimes degradation of the cultural values. Whichever the effect may be, corporations and industries have been and are continuously shaping our world. This section will seek to elaborate on how corporations exert power in the political sphere as well as how they have gained power over time, their social, economic and environmental effects, and their precise contribution to social responsibility among areas in their scope. Perhaps the effects of industries are better discussed from the conception of the railroads that changed the American economic, political and social landscape in tremendous ways. It is this single industries that saw demographic changes in the form of immigrants brought in to make it, the economic changes seen in development of new concepts such as cost accounting and provided a gateway for blossoming of other industries in the United States (Steiner 2006). The railroad was also responsible for the ripple effect experienced in other countries and laid the foundation stone for the electric trains, the motor vehicles of today among others. The same changes have been witnessed in the invention of the aircraft. The traditional definition of a corporation is an entity that provides maximal benefits, directly or otherwise to the societies they operate in while still seeking great profits. In 2005, the United Nations Conference on Trade and Development (UNCTAD) identified close to 75000 MNCs operating globally. The world’s largest corporations are certainly huge economic organizations and conglomerates whose operations are certainly felt in the Gross Domestic Products (GDP) of the countries they operate in. According to the data published by the U.S Census Bureau, on the foreign and domestic economic activities of corporations in 2003, these corporations contributed $ 2.7 trillion to the world’s gross production. It only serves to show the economic shaping of industries. In fact, according to Steiner (2006), it is noted that of the 100 biggest economies globally, only 49 are countries while the rest, at 51 percent, are companies. According to this, IBM is bigger than Singapore, Sony is certainly bigger than Pakistani and general Motors greater than Denmark. The reports go on to state that the revenues realized by the largest corporations were close to 27.5 percent of the world’s GDP in 1999. Thus, corporations and industries are certainly shaping the world’s economic climate with those unable to compete at this scale being completely edged out of the market. To the average consumer, competition is good as it allows for innovation in industries to produce bigger and better. But with the merging of corporations to create monopolies, the consumer has persistently found herself in a quagmire of substandard goods sold at exorbitant prices. (Anderson 2000) argues that, while this may not always be the case with consumers in developing countries, they are subjected to dumping of substandard goods in their backyard. There are multiple effects to this, ranging with the “killing” of local industries that produce this, freedom of consumption by the consumer. Corporations might influence governments and shape the political climate through the political lobbying and donations. In the United States, according to statistics from the Centre for Responsive Politics (CRP) federal lobbying expenses were close to $ 2.6 billion up 16% from the previous two years. However, these estimates are likely to be low because many lobbying expenses are very difficult to keep track. These corporations are also ardent contributors to the political campaigns with main corporate donors, according to CRP, being Goldman Sachs ($ 6.5), Microsoft ($3.5 million), Time Warner ($3.4 million) and Morgan Stanley ($3.4 million) during the 2004 election period. These political contributions have been effective in shaping the public policies and opinions on important federal matters. Industries and corporations too have been seen to have effects on cultures worldwide both recently and in the past. It is through industrialization that women from most conservative cultures in the world have established themselves as managers and started movements supporting both their domestic and industrial contributions, people have left their countries to go work elsewhere taking their cultures their and adopting others, cuisine and lifestyle changes have been experienced (Anderson 2000). For example, McDonald and KFC operate in virtually all countries promoting a fast food culture to suit a world where people rarely leave their seats leading to spill-over effects of convenience and lifestyle diseases and in the consumer goods industry, Unilever has maintained being a household name. Corporations and industries have also shaped the world through their corporate social responsibility (CSRs) by offering residents of areas where they operate with clean water, electrification, equal employment, scholarships, schools, promotional opportunities among others (Anderson 2000). The downside to this is that they are perpetrators of environmental degradation as, depletion of natural resources as earlier stated with their unyielding power making most local governments silent to this. How forces inside and outside the business firms change the management tasks Also referred to as the finance or property theory, the ownership theory of the firm states that the firm is the property of its owners. It should not be forgotten that the long-term goal of the firm, or its main purpose is to make the most money for the shareholders who own stock in the company. The managers and the board of directors are, therefore, viewed as agents of the shareholders and only serve the objectives of these personalities (Anderson 2000). However, a contrasting theory called the stakeholder theory claims that the business is meant to serve a greater public purpose creating value for the society while they still struggle to survive. As such, the business is dictated by forces within and without the business at any given time of operation. The business environment, hence, gives corporations multiple obligations, and all the stakeholders’ interests have to be taken into consideration. This particular school of thought has been adopted by many corporations the world over. In the pharmaceutical industry, Norvatis gives us a mirror image of the code of conducts whereby it “places a premium on dealing fairly with the employees, commercial partners, the public, the government authorities as well as the competitors. The company understands that their operations are only as successful as long trust between these stakeholders is maintained (Steiner 2006). At the same time, managers have to pay close attention to the annual performances, attract investors and promote an increase in stock prices. However, the job of the management is always complex and will, in some cases, be forced to bend away from stakeholders’ expectations. Business interactions with the society differ in many ways while the same company’s relationships with diverse stakeholders also being diverse. The market stakeholders, namely the employees, distributors, wholesalers and retailers, the stockholders, customers and suppliers notably from the internal environment of the business operations to some extent. The other nonmarket stakeholders are those who do not engage in direct economic activities, but are affected by or can affect its operations. They include the various levels of government, the media, non-governmental organizations, the general public, and business support groups (Steiner 2006). When analyzing the business environment, the natural environment is usually not considered a stakeholder as it is not a social group, but in most cases represented by the nongovernmental organizations (Anderson 2000). An example of how forces outside the business have altered business operations is seen in the case study of Energy Management Inc. (EMI) when it announced plans to build a wind farm about 6 miles from the shore of Cape Cod in Massachusetts in pursuit of clean and renewable power to the New England customers. Instead of receiving an acclamation, this project received intense operation from the residents of Cape Cod. These opponents were able to block its progress for close to a decade and despite Cape Wind succeeding in some legal hurdles, the project has stagnated to date. It is an ideal example of how factors such as the community have been able to derail management’s operations and frustrate stakeholder’s expectations. The core argument is that both the external environment are not static and sometimes overlap. Thus, businesses continually operate in ethical, social, global, political and sometimes technological fronts that can be threats or opportunities to them. The changing societal expectations means that people are expecting the companies to be keen on the social and legal spheres. The management response is closely scrutinized. Globalization also presents a unique challenge to businesses and corporations. Because we are living in an integrated economy characterized with seamless movements of goods, capital and services across the countries, the prevailing economic forces really play a major part. For instance, the products consumed in Hungary may have come from the United States, Mexico, Indonesia or even Germany. If there are any prevailing legal constraints or wars between those countries, it will mean that the management would intervene or look for alternative channels for business to continue (Steiner 2006). Financial crisis can also quickly impact on the economies across the world and negatively impact on the business operation prompting management to maybe retrench the employees, look for more creditors, and fail to meet creditors’ expectations among others. The movement for the women’s equality will see the management devise ways of creating more positions for women, the environmental issues such as the ozone depletion will affect all communities and the business firms will always be on their toes to become global citizens. Other factors include the evolving government regulations and the business responses. How influential ideas in the business environment shape the business-government-society relationship The political, legal and the social environment presents critical and very influential management issues and ideas. Influential ideas can emanate from the board of directors, the corporate political power, industrial policies, the business ethics and social responsibilities, the alternative corporate roles in the society, as well as capitalism (Roach 2007). The business-government-society relationship is as old as entrepreneurship itself. The paper has adopted the case of Coca-Cola and the Cyprus market in 1953. In 1946-1957. the first fizzy drink company was started in a rented mansion by one Kemal Rustem. Until 1953 when Coca-Cola ventured to the Cyprus market, the company continued to produce fizzy drinks. However, later on, with the fervent advertisements, modern technological advancements that Coca-Cola adopted and competition, all other small businesses in the sector closed down. Roach (2007) uses this example just to show how the elite people, privileged and influential people are advantaged on the political, social, legal and cultural (PESCL) pyramid. These influential ideas has seen the emergence and continued operations of monopolies, the setting of prices, business practices such as sanctions, trade quotas, standards of products, and what passes as the ethical behaviors of these firms. It is important to note that when analyzing the business-society-government relationship, the depth of the information available and withheld by others, the data touching on other factors will determine the extent of influence. The political atmosphere is fundamental in influencing or chasing away investors, the government through their trade rules, the society by desisting from sabotaging business operations through demonstrations, powerful competitors by not fully dominating the market (Roach 2007). The business too can play an influential role through employment opportunities, quality products and most importantly through Corporate Social Responsibility. The relationship is only healthy where each player pulls their strings effectively without undermining others. Measure the importance of law and government regulation as a force guiding business behavior To determine the importance of the law and the government in regulatory practices, we need to discern the contribution that effective regulation plays in the policy challenges facing governments such as ageing populations, climate changes, unemployment as well as the frequent environmental disasters. With businesses frequently complaining about the red tapes, bureaucratic practices and other practices that curtail competitiveness and takes the time of businesspeople, the clarity of the law on factors such as inflation and the financial institutions should be analyzed for sustainable development. Regulatory policy have played a significant role to the economic development and societal well-being. It is through the regulatory policies that economic growth and developments have been promoted through various forms such as liberalization of product markets, structural reforms, international market openness and enabling a less constricted business environment enabling innovation as well as entrepreneurship (Roach 2007). These policies are important in supporting the rule of law via initiatives that simplify the law while improving access to it, social cohesion in enhanced transparency and aids in minimizing red tapes for the citizens. Effective regulation helps to breakdown challenges facing governments thus sealing the GAP between the design and the evaluation of outcomes in institutional oversight and leadership, maintaining a good balance between public and the private responsibilities and accountability and emphasis on the communication, consultation and coordination in the public arena among others. Thus, this gives a benchmark against where future efforts are measured in the currency (monetary policy), regulation (regulatory policy) and the taxes (fiscal policy) creating value of free markets, curbing market failure and promoting welfare as applied in the regulatory cost measure which was developed by the Bertelsmann Institute and borrowing from the Standard Cost Model (SCM) in order to measure the regulatory costs including financial, administrative, financial costs and the opportunity costs of the businesses (Roach 2007). While these are favorable, business practices will conform to that whereas if they are negative, business behaviors such as overpricing, tax evasion and deregulation might occur. References Anderson, S., and John C., 2000. Top 200: The Rise of Corporate Global Power. Institute for Policy Studies, Washington, DC. Brian, R., 2007. Corporate Power in a Global Economy. Global Development and Environmental Institute, Tufts University, Medford, MA. Steiner, C., and Steiner, J., 2006. Business, Government and Society: A Managerial Perspective. McGraw Hill Irwin, New York. United Nations Conference on Trade and Development, 2006. World Investment Report 2006, FDI from Developing and Transitional Economies: Implications for Development. United Nations, New York and Geneva. Read More