Should Corporations Play a Political Role in Society - Essay Example

Should corporations play a political role in society? i. Introduction Corporations have an intrinsic great moral responsibility since they may fail economically, morally, culturally, and politically. Some of them are close and more susceptible to politics and they have no alternative but to exercise their political influence. The corporation’s massive economic power and influence in society affects the lives of individuals and communities around the world. They reached across cultures and beyond boundaries of nations. Their massive impact on both nation’s welfare and government’s success makes them the most important institutions in the world. However, their political influence is seen to some extent, an abuse of their inherent social responsibility and therefore should be regulated or ultimately stop. This paper will discuss the corporation’s social responsibility and the implications of its intervention into the public sphere of activity. More importantly, it will undertake a review of corporation’s political role in our society to determine whether they should or should not play a political role. ii. Corporation’s Social Responsibility In 1970, as stated by Hood (1996), economist Milton Friedman in an article released by New York Times magazine claimed, “only people have responsibilities; businesses have not responsibilities as such” (Hood, 1996:8). He maintains that if a corporation has a responsibility to pursue a social good is really to state that persons affiliated with the corporation, be their managers, worker, or shareholders, and bear that responsibility. For instance, when a corporation donates to charity, corporate managers are donating assets that ultimately belong to corporate shareholders. However, he added, if the shareholders did not express their desire to make such a donation then that donation are not from the corporation but from one person only. In Friedman’s view, the purpose of the corporation is to “use its resources and engage in activities designed to increase its profits”(Hood, 1996:9). Therefore, profit is the purpose of the corporation and to claim that they are ‘socially responsible’ is purely socialism (Hood 1996). Some critics who maintain that the dichotomy between shareholder and social societal member must be reconsider since stockholders increasingly invest in diversified mutual funds or pension plans because of their conscious interest in the health of business and society as a whole. Moreover, a firm will actually fulfil true desires of shareholders by making investments in institutions that make the economy or society better off generally, even if the firm sacrifices its own profits to do so. Another argument lodged against Friedman’s view is that he oversimplifies the nature of business activity and he overlooked the massive involvement of business in the realm of law (Hood, 1996). His critic explains that without good schools, infrastructures, peaceful and safe communities, solid families, and a prosperous public with money to spend, business cannot thrive and therefore its economic responsibilities are so intertwined with social responsibilities that the two cannot be distinguished. “Corporations play a political role, governments play an economic role”-Thomas Jones (Hood, 1996:10). Jones’ believed that corporations are social institutions and as such must live up to society’s standards because society has every right to define the standards for corporations. iii. Corporation’s Political Role in Society No matter what normative assumption one attains about the role that corporation should play in modern society; it would be tough to refute corporate activity’s substantial impact on both the nation’s welfare and the government’s success. Matters such as the best means to avoid price increases and unemployment both of which may well be as attributable to business operation as they are to government decision-making. Furthermore, even governmental pronouncements that do not deal directly with economic issues can have a momentous impact on the economy and therefore on corporate well-being (Redish, 2001). Therefore, recognition of the public-corporate intersection recognized that corporate use of economic power would certainly have a social and political impact away from the narrow interest of the corporation itself. This is due to the considerable influence of corporate leaders in public values directly and in the short run. Corporations recurrently use their influence whether they want to or not since state issues and public interest affect them. They just cannot disregard these matters since their sheer existence, size, power, ubiquity, and public acceptance leaves them no alternative, as they are an indispensable “nonstatis political institution” (Redish, 2001:10). However, not all find this notion positive as their arguments asserting that the economy’s health is normally dependent upon the amount of corporate expenses on capital goods thus public policy unavoidably tends to be oriented in a direction, which basically in line with the advantage of the great corporate enterprises even they are in conflict with other social goals. Similarly, because of corporate power’s distorting effect, political preference are in effect made by the economic interest that the system was intended to regulate since it would be ridiculous to imagine that a large corporate interest have exercise little or no influence over modern economic and regulatory policies. However, particularly in the U.S., the very creation of “New Deal” as well as the ratification of the social welfare legislation in the 1960s and the congressional failure to ratify federal tort to reform legislation that would significantly benefit corporate defendants, implies that large “corporate interest have not always had their way in the political process” (Redish, 2001: 74). One great advantage of a large corporation is their expertise, resources, and incentives that are exceptionally suited to update the voting public about many of the socio-economic issues facing the nation. The reality that a major profit-making corporation is of the opinion that a particular candidate or a particular policy is vital to the community’s prosperity may relatively influence individual judgements on the matter. However, the corporate viewpoint is optional but it will give an idea to the voting public to assess (Redish, 2001). Apparently, corporations have become a kind of public official carrying out public functions based on a broad view of their role. Multinational corporations can also become diplomats performing unofficial interaction among non-state actors with the goal of creating an environment in which political leaders are freer to reach accords. According to Fort and Schipani (2004), an economic enterprise that provide benefits to two different countries embroiled in a dispute contributes to an environment where the leaders of the countries can point to the mutual economic advantages of resolving a conflict as a reason to avoid escalation. He further added that it also occur when a businessperson who has integrity and access deliver messages between governments without going through official diplomatic channels. In the entire scenario, we can see that corporations can build relationships that cross boundaries in a way that might not be accomplished through traditional political means. Therefore, corporations are capable of providing channels for communication that might not otherwise have existed. On the other hand, Novak (1990) believes that “private corporations are social organisms” (Novak, 1990:57). They were formed and designed “to break the immemorial grip of mercantilist and clerical systems upon economic activity” (Novak, 1990:57) but they cannot come into life and probably cannot perform without a political system that will support the “conditions of their flourishing” (Novak, 1990:57). These includes sound currency, a system of laws, the regulation of competitive practices, the construction of infrastructures like roads, harbours, airports, certain welfare functions, and so on. The state then plays an indispensable role in democratic capitalism and the relation between a democratic state and a social market economy built around private corporations are deep, inter-reliant, and multifaceted. However, democratic capitalism is not entirely individualist since the corporation depends upon and necessitate exceedingly developed social skills like mutual trust, teamwork, compromise, cooperation, creativity, originality and inventiveness, and pleasurable management and personnel relations. Corporations are therefore has an intrinsic great moral responsibility since they may fail economically, morally, culturally, and politically. Many believe that the principles inherent in the system of private business corporations demand that they be loyal to these principles (Novak, 1990). Some industries are close to the political process, and so are more vulnerable to involvement with it. The newspaper industry for instance and the industries that are regarded as essential to national economies such as manufacturing or arms, may find themselves under pressure from government or may be able wield pressure themselves (Vernon, 2002). However, some critic wish to hold down, control, and guide the business system through power of the state and or through moral and cultural forces like “public opinion, shame, ridicule, boycotts, and moral suasion” (Novak, 1990:57). In the United States according to Habisch (2005), American courts seem to view the corporation as an actual person and begin to give it certain constitutional safeguard (Habisch, 2005). The current popularity of the notion of corporate citizenship in business and academic communities indicate not only the decline of the welfare state and its destabilized economic role but also the corporate claim of the rightful and institutionalise sharing in political decision-making processes. This is because many supporters of this concept unremittingly assume that the constraint on the political activity of the large-scale corporations is constitutionally acceptable and politically advantageous. They argue that nobody has ever conferred the justifiable authority of the political use of corporate wealth upon corporations in order to promote their own values and ideas. As a result, corporations should play only a limited role in the political arena (Habisch, 2005). However, the supporters of corporate social responsibility raise the question as to whether the management of large corporations should only act in the advantage of the shareholders or whether it should take account of other constituencies too. Moreover, the theory behind social corporate responsibility is a more impressive as it tries to recommend ethical guideline for the right arrangements of economic, legal, social, environmental, and ethical responsibilities as well (Baker, 2003). Therefore, the symbiotic relationship between business and society becomes progressively more evident and it has revealed itself in many ways, from local discontent to global protests. Around the world, we are witnessing the drawing back of the state and the process of deregulation, trade liberalization and the rapid internationalizing of markets. As state funding reduces across the globe, a gap is developing between society’s needs and the government’s or the state’s ability to provide for them. In this kind of environment, corporations have become an increasingly powerful force within society and consumers recognize this. The corporation’s significant economic power and influence in society affect the lives of individuals and communities around the world (Baker, 2003). “Corporation’s reaches across cultures, it go beyond boundaries of the nations, it operates as the principal form of organization for virtually every social institutions” (Stackhouse, 1995:10), it is the most important centre of production and applied technology, and it unites people of various backgrounds in new global networks of mutual supports and exchange (Stackhouse, 1995). However, with the increasingly role of corporations comes great responsibilities and implications. iv. Implications of Corporate Intervention into the Public Sphere of Activity “There is a public/private demarcation between the role of the state and that of corporations” (Roonegard, 2007: 252). This means the role of the state is to regulate the corporate legal form while actual corporation should decide on the best means to achieve their goals given the frame of regulation that defines their environment. This demarcation defines a normative line, which corporations ought not to cross since their intervention in the public sphere of activity is illegitimate because it is a bypass of the democratic process. More importantly, they should no be allowed to act as a counter weight to the states pursuit of the public good (Ronnegard, 2007). Although they indispensable instrument of our modern society, their role should be decided by the citizens of the state through the process of democratic representation. Since corporations are not”moral agent” (Ronnegard, 2007: 252) but merely legal person, the citizens of democratic states should through representative government enact in law the duties they require their corporate legal instruments to fulfil in accordance with preferences (Ronnegard, 2007). “Big corporations are despised and rejected even when the market system, small businesses, and private ownership are not” (Stackhouse, 1995: 780). Accusations in such corporations includes being ‘autocratic’ and internally not democratic and alienate their employees in the workplace. However, beyond it economic effects and public rejection, the corporation changes the ethos and the cultural forms of society and some extent, it has undercut ancient ways in which human relate to each other, with some good effects and some bad (Stackhouse, 1995). Acting as an economic, moral-cultural institution, it provides a new base for politics but only a free political system permits the voluntary formation of private corporations. Therefore, those who value private economic corporation have a strong interest in resisting both statism and socialism. As we discussed earlier, it would be naïve and wrong to assume that persons involved in corporation are utterly neutral about political systems. In fact, an economic system within which private corporations play a role, in turn, alters the political horizon. It lifts the poor, creates a broad middle class, and challenges aristocracies of birth. More importantly, sources are power are fashioned independent of the power of the state thus a corporation with plants and factories all over the country with thousands of employees, are to be expected to express their special political concerns. Moreover, “political jurisdiction often competes to attract corporations but their arrival also creates political problems” (Stackhouse, 1995:782). ”Corporations err morally”(Stackhouse, 1995:782), they may incorporate methods of governance that injure dignity, cooperation, inventiveness, and personal development. More importantly, they may seek their own immediate interest at the expense of the common good and they may become offensively involved in the exercise of political power (Stackhouse, 1995). According to Useem (1984), in the 1970s and 1980s, there were periods of unprecedented expansion of corporate political activities, whether through direct subvention of candidates, informal lobbying at the highest levels of government, or formal access to governmental decision-making process through “numerous business-dominated panels created to advise government agencies and ministries” (Useem, 1984:3). In addition, this political mobilization of business can be traced to the decline of company profits in both the United States and the United Kingdom and to discriminating government regulation in America and labour’s challenged of “management prerogatives in Britain” (Useem, 1984:4). Corporations in Britain and America have thus changed, for the most part without mindful design, the means for combining and advancing their common interest. Furthermore, most corporate business decisions are regarded, rightly, as “a product of internal logic of the firm” (Useem, 1984:4) but when decisions are made on the distribution of company monies to political candidates, the direction of its altruistic activities and other forms of political outreach, as an external logic is also significant (Useem, 1984). In the past, the role of trying to help society has been seen as the role of government agencies until corporations played an active role. However, the undertaking of large corporations in most territories has raised eyebrows although the corporate social responsibility was growing. It seems there is less faith in the ability of the corporate sector to uphold principled values and make meaningful contributions to society particularly in the sudden increase of corporate accountability in scandals similar to the ENRON fiasco. One very important thing to mull over during the peak of the economic growth is, “the global gap in wealth and power not only persisted but grew” (Maurrasse, 2004:11). The cost of living has gone up, getting necessities has become increasingly complicated, and technology basically transformed our lives. Consequently, as technology advances, jobs require higher skills thus workers population were slowly being downgraded. Now, this same population works in the service sector for significantly less wages and job security. What even more depressing is manufacturing companies have either closed or transferred in search for lower operating cost, leaving workers without jobs (Maurrasse 1984). Corporations particularly with globalization increased its power and significance consequential to the diminishing decision-making power of civil society. Non-existence of consideration to the common good therefore results to prioritizing individual success that is also reliant to the resources produced by these corporations. At a global level, politics can open or close markets, simplify or perplex international trade. Corporations also plays a part in international politics, for instance the oil industry role in the politics of the Middle East or those corporations that are being allowed to invest in China and the role they play in unwinding communism (Vernon, 2002). Similarly, Donaldson (1982) explains that the “going concern” of corporations in our society is a vital element and it maybe the critical “factor in the life or death of a small community” (Donaldson, 1982:8). It is an essential part of the immediate environment and its needs are network of support systems such as roads, utilities, and labour pool, which must itself be house and provided with schools, parks, and commercial facilities. Consecutively, the corporation provide jobs, tax revenues, and frequently civic leadership to the community. Apparently, neither town nor corporation can function well without the other. However, while communities are locked geographically, corporations are not, and for a variety of reasons such as wage scales, proximity to distribution points, and climate, corporations sometimes move. When this happens, the results can be catastrophic to the community (Donaldson, 1982). v. Conclusion Corporations do have social responsibility and this is to pursue a social good. However, many believe that the real purpose of the corporation is to use its resources to increase their profits and being socially responsible is purely a matter of socialism. Corporations and their business cannot thrive without a prosperous public and infrastructures thus its economic responsibilities are son intertwined with social responsibilities. Whatever they think about the role of corporation in modern society, it is still very difficult to ignore its massive impact on both nation’s welfare and government’s success. Corporations simply cannot keep their distance on national issues because of the very nature of their existence, size, power, and public acceptance. They actually have no choice but to pursue their interest over modern economic and regulatory policies. They are “social organisms” that cannot function without a political system backing them. However, even with a noble purpose, corporations have a propensity to seek their own immediate interest at the expense of the common good and can offensively exercise political power. In sum, corporation’s political role should be regulated down to the level that they can still serve our society and enhance our economy. vi. 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