external environment - business and society
Richard Bowett examines the role of business in society and the importance of stakeholders
Introduction
Businesses interact with the wider society they are part of. Businesses are affected by society, for example in the kinds of goods and services they are expected to produce, and businesses affect society by their activities. It is a two-way process. See, for example this article on discrimination in the workplace: http://news.bbc.co.uk/1/hi/business/1605029.stm
Some of the ways in which businesses affect society are negative, and usually governments limit these activities by law. For example, some business activities damage the environment. In addition, there are ethical constraints set by the wider expectations of society. For example, it is legal to sack workers for some actions (eg ignoring a written warning), but society may think the sacking is unreasonable, and the business may feel pressured to not do it.
Groupings of people, such as Trades Unions, can be very effective at putting such pressure on businesses. The environment is a good example. The legal restrictions on environmental damage are relatively few, but society at large has increasingly strong views (orchestrated by some very effective groupings such as Green Peace) about what activities by business are acceptable and unacceptable. This produces pressure for businesses to change their behaviour, especially if sales and profits are threatened.
Many consumer businesses now produce ‘green’ versions of their products to attract environmentally conscious customers; their corporate advertising boasts (eg BP) that they have stopped doing this, or started doing that, in order to better look after the environment. Another good example is the way that some businesses (eg Nike) have changed their activities in some developing countries due to concerns by society over ‘sweat-shop’ labour.
The Case for Growth
A different argument says that the government should not stop businesses doing whatever it takes to create growth and employment. This argument says managers are products of their society, and won’t do anything that is against the interests of that society – managers have their standards, too, and won’t work for an employer that asks them to take part in wrong actions. Businesses are therefore self-regulating. A business that starts to behave in an unacceptable manner will find it increasingly hard to recruit workers, and to sell products, until the business decides to change its behaviour into a more acceptable form.
However, this argument tends to overlook the very great imbalance in power and information. Employees and customers don’t always know or understand what businesses are up to. Employees (even managers) might feel they can’t afford to lose their job, and so feel pressured to agree to behaviour they don’t really approve of.
Businesses and Stakeholders
A business is owned by its shareholders. A traditional view is that the behaviour of the business is nobody’s business but the owners’, the shareholders who are interested in profit.
A more modern view is to consider all the groups of people that are affected by a business’ behaviour – employees, customers, suppliers, the local community – and not just the shareholders.
The word ‘stakeholders’ is used to describe this wider community of interests. Some investment funds and pension companies refuse to invest in businesses whose behaviour they disapprove of eg arms manufacturers.
Business & Ethics
Ethical behaviour is morally ‘good’ behaviour. Businesses have always been ethical to the extent that their owners and managers have been interested in ethical behaviour (sometimes very little). There is now a new and strong interest from a growing number of businesses in ethical behaviour, especially in large MNCs which operate in different societies with different ethical standards. Some businesses even employ professional philosophers to help them understand the ethical consequences of their behaviour.
Read this BBC article to find out more how businesses are addressing ethical
issues such as the environment: http://news.bbc.co.uk/1/hi/uk_politics/541422.stm
The main reason for this is that society at large takes more of an interest in ethical behaviour, and society has much bigger expectations of businesses.
There are different reasons given for this development.
1. Employees (including managers) are better educated than they used to be, and so understand these issues better than they used to.
2. We have a less deferential society where ‘ordinary’ people are more willing to questions and challenge the decisions of their ‘elders and betters’.
3. Competition for customers is fiercer, and any possible reason for losing customers has to be taken seriously.
4. The same issue is developing in employment, with employers increasingly dependent on attracting high quality staff who, with more choice than they used to have, are less willing to work for morally ‘iffy’ businesses.
5. The media have become very good at exposing questionable behaviour. Allied to this is that information is now so easy to get hold of, and the Internet makes it easier again.
6. Business decisions can be much more complex than they used to be., especially where very advanced technology is involved, and not all the consequences are known.
7. Businesses are entering new and morally more debatable areas. A good example of this is medical businesses where new knowledge about eg genes raises the possibility of products that pose fundamental moral questions; these were simply irrelevant until recently because no-one knew how to do it.
Teacher Subject Newsletters | Teacher Forums | Online Store | tutor2u News tutor2u on Twitter: Subject Blogs: About tutor2u | Copyright | Privacy | Terms of Use | Contact tutor2u Our Development Partners: |
