Corporations

Corporations

 

Question 1

The world today has become a global village where corporations are an unfettered political, cultural, environmental and economic force. Large corporations have an impact on the daily living of billions of people worldwide.  Their effects are not always simplistic but can be complex in an imperceptible way. For example, in 2000, in the US, Ben & Jerry’s, an ice cream company was considered as one of the most environmentally responsible companies in the country as it packaged its products in unbleached paperboard Eco-Pint containers. Additionally, the company had a campaign dubbed the One Sweet Whirled campaign that was at the fore in addressing the changing climatic conditions. In this regard, the company was a darling of the American public and the antithesis of large corporations. However, in 2000, the company was taken over by Unilever, a global corporation in a semi-hostile takeover (Kelly, 2003). Unilever has over 400 brands worldwide and impacts the lives of over 150 million people on a daily basis. Thus, the company has far reaching influences on governments, cultures and the environment. It employs an estimated 200,000 people worldwide including the 700 that work at Ben & Jerry’s.

Unilever is an example of how corporations have expanded and gained economically which is evidenced by its assets, stock prices, profits and number of employees. However, the reach of such companies should not be considered with only the economic parameters in mind. Their decisions in terms of production usually have far reaching effects on the environment. Moreover, such companies also have political influence which they use to have their taxes reduced, to receive subsidies and to influence public policy. The quality of life of millions of people rests on the decisions made by such companies in relations to the wages they offer, the quality of goods they avail to markets, the production methods they use, the conditions of work they subject employees to and in many other ways. Corporations have been viewed both positively and negatively. They have been regarded as avenues to economic prosperity while offering lower prices for quality goods and jobs. On the contrary they have been viewed as negatively influencing public policy while subjecting employees to exploitative conditions, destroying the environment and negatively influencing the culture of different regions.  However corporations are viewed, one thing is for certain: that they are an important part in shaping the world today and in the future. Discussions have shifted from which role corporations should play to how they should conduct themselves in regards to alignment to societal goals which include both economic and non-economic goals.

The rise in corporations has more than doubled since the 1990s. It is estimated that while there were around 35,000 multinational corporations then, they are about 70,000 now (Kelly, 2003). These MNCs are mainly found in developed countries but have been steadily spreading into developing countries in the recent past. Denmark has the largest number of MNCs operating with around 12% of the number compared to a lowly 3% in the US. Developing economies like China, Brazil and India have around 5% of the global MNCs operating in them. It is undoubted that corporations have a major effect on the global economy. Their contribution to GDPs for the countries they operate in runs into trillions of dollars. Anderson and Cavanagh (2000) documented that some corporations are economically larger than some countries. They specifically quoted DaimlerChrysler as being bigger than Poland, General Motors being bigger than Denmark, Sony being bigger than Pakistan and IBM being bigger than Singapore.

Corporations are basically private entities that are controlled by executive officers on behalf of shareholders. Unlike countries therefore, they do not have obligations to improve the livelihoods of people but are rather driven by profit maximization. The decisions made by corporations are largely determined by their shareholding. Since the governments deregulated markets in order to foster competition, corporations have operated with little control from consumers and governments themselves.

Corporations have been able to wield political control through donations and lobbying. It is estimated that around half of all donors to political campaigns are corporations in the US that have business interests in the areas they campaign in. In 2004 for example, Goldman

Sachs contributed an upwards of $6.5 million to political campaigns, Microsoft contributed $3.5 million, Time Warner chipped in $3.4 million, and Morgan Stanley gave $3.4 million. Sugar growers in Florida have also been lobbying and donating to representatives to ensure that they continue to receive subsidies. It is documented that all the ten Senate and House members that received contributions from sugar interests voted for the retaining of sugar subsidies. The result of this is that an estimated $1.4 billion per year burden was placed on the taxpayers. These subsidies did not however benefit all sugar growers with about half of the sugar subsidy money going to one percent of U.S. sugar growers that had major political clout.

Question 2

There are innumerable forces that impact businesses today. Forces from within and without the business have led management tasks to change acutely while modifying the expectations of stakeholders. The world today is changing at a fast pace with inventions that may be key for businesses being constantly developed. Managers and other stakeholders must therefore be on the look out in order to determine which combination of factors will best impact the business.

Commoditization is one of the major forces for change. This force has the singular effect of driving prices of products downwards. Outsourcing of manufacturing, drop in air fares, outsourcing of customer services to countries like India and the drop in computer prices are some of the accompanying factors in commoditization. Prior to 1992, Sears was the largest retailer in the US. However, the retailer developed a sense of invincibility and allowed Wal-Mart to overtake it in this regard (Langdon, 2013). They are three areas that Sears fundamentally failed in that allowed Wal-Mart to capitalize. They are in the cost of distribution networks, the pricing of products and in the cost of goods. Essentially, managers must understand that they must always work towards the production of the lowest priced goods at the lowest cost and avail it to the customers through a comprehensive network. Outsourcing some business functions has been one of the major ways through which businesses have been able to lower their bottom lines.

Digitization is also another force that has greatly influenced the conduct of business. This has been largely due to the presence of cheap computing resources that were previously a reserve of big corporations. Companies all over the world have lowered their costs of doing business by increasing their IT capabilities in order to create better products and services and readily avail them to the market. Manufacturing and distribution has been digitized to the success of companies like Home Depot and Tesco in the US. Brands that were previously regarded as luxurious can now be readily availed in the market at mass market prices due to leveraged design, manufacturing and distribution systems.

The new wave of sharing information through an avalanche of channels including social media has led to a fundamental shift in the ways businesses are conducted. It is almost inconceivable to have a business that does not take advantage of the internet and its vast possibilities. Interconnectedness between business and society has become indispensable in the ensuring that information about a product reaches the maximum possible number of potential customers. Platforms like Facebook, Twitter and LinkedIn have become an important asset in the business environment. Managers should ensure that they capitalize on these new channels so that they reap maximum benefits from their businesses.

Another important force warranting a rethink in business conduct is globalization. Countries have been clustered into a single economic system that has been made possible through avenues like the social media. Many people and businesses are now transacting in a manner transcending national boundaries. The net result of globalization is that businesses have been given access to markets they previously had no access to. Therefore, managers must be progressive in order to capitalize on these new opportunities. Customer communities are now globalized with their interest somewhat harmonized due to extensive interactions on a wide range of platforms. No forward-thinking manager can successfully operate without expanding his/her reach to international markets.

The world today is very turbulent with a number of interruptions occurring on a daily basis. From gang violence in South America, to the Arab spring in the Middle East and northern Africa to student strikes in Italy and worker strikes in Greece, there seem to be many circumstances within which businesses can suffer (Langdon, 2013). In this age of terrorism coupled with the never ending tussles between North and South Korea and the supremacy battles between the US and Russia and China, the troubled spots across the globe should provide every progressive manager with food for thought. It is prudent that companies have the expertise to navigate them through the many murky waters that form the global markets. These hard troubles are however less common and therefore largely insignificant for many small and medium businesses pitted against the real threats of corporate espionage and the possibilities of takeovers mostly hostile.

All the above considered forces are in no way mutually exclusive. Businesses must muster all of them in order to survive in the turbulent global economic climate. Comprehensive planning is a major determinant to the success that will be enjoyed by a given business entity. It is important for managers to understand that all major forces that lead to change largely deal with innovativeness and the most innovative businesses usually cope better with changing environments.

Question 4

Businesses have one of the most significant impacts on the operation of the state and thereby impact the lives of billions of people on a daily basis. Where there is weak governance, businesses have found it difficult to thrive. It is prudent that governments and businesses have cordial relationships for the betterment of the citizens. On the other hand, it is important for the relationship to be mutual so that the businesses can be provided with a conducive environment for operation while the government can get revenue for improving the lives of people. In 2011, it was found that ExxonMobil and Wal-Mart were 28^th and 31^st in the global ranking of the largest economies which means that they were larger than the economies of Venezuela, Nigeria and Sweden among many others (U.S. Department of State, 2013). For these corporations to play fair, there must be comprehensive and effective government regulation.

Businesses must respect human rights and work towards elimination of harm to people. The onus is on individual governments to ensure that there is adherence to basic human rights principles. On the other hand, businesses must be self regulating by treating the benchmarks for human rights as floors rather than ceilings and working towards surpassing their basic requirements (Williams, 2000). There are three pillars that states must stand by in order to influence the behavior of businesses. First, they must protect those that are vulnerable to abuse or exploitation by businesses. The fundamental concept here is prevention of abuse and exploitation by third parties. Additionally, states must investigate and deviations from laws and regulations, punish the culprits and redress all matters through appropriate policies, adjudication, regulations and legislation. Second, states must enforce respect for laid out laws and regulations and also for the rules and procedures that are set as a way of protecting employees. Businesses must thus avoid infringing on the rights of individuals as this may have negative consequences for them. Lastly, states must be on hand to remedy any business-related abuses through appropriate judicial, administrative and legislative means.

Governments have realized that business are an important part of their structure and must be incorporated in their clamor for provision of better conditions for their citizens. They should support businesses, partner with them in matters that are of mutual importance and promote a level playing field based on the principles of respect and fairness. Businesses are nowadays global and the existence of a corporation in a foreign country has many benefits for the home country. The private sector is thus very crucial in determining the foreign policy to be adopted by a given country. The US for example has aligned its foreign policy to include respect for labor and human rights, protection of the environment and economic inclusion. While fostering the economic performance of a corporation, states should ensure that the laws and regulations also foster peace, security, stability and prosperity. This ensures that a country attracts investors while improving the lives of its citizenry. The major challenge of the laws and regulations lie in combating state capitalism where some countries deliberately skew their policies in order to gain strategic advantages over others in global markets (Hertz, 2001). This may be a blight in crafting and upholding universal laws and regulations to guide business behavior but should not be used as a reason for governments to condone unfavorable behavior.

States should ensure that they partner with businesses in ensuring that they adhere to laid out laws regarding human rights and labor. There should be regular meetings, seminars and workshops between the government and businesses to ensure that there is a mutual discussion regarding the challenges that companies face in domestic and international businesses environments. The laws and regulations are very important here because they help to deal with a wide range of issues including perceived rights and wrongs. For example, child labor is prevalent in some Asian countries especially in Uzbekistan whereas there are numerous labor rights flaws in Vietnam. These cases can be well dealt with by multinational corporations having bases in such countries using the home laws and regulations as their basis (Thevenet, 2003). Another way that laws and regulations have influenced business behavior is seen in the case of the US private-public partnerships in dealing with minerals in the Democratic Republic of Congo. The Public Private Alliance for Responsible Minerals Trade was crafted as a means of sourcing minerals in a manner that does not promote or foster conflicts (U.S. Department of State, 2013).

Question 5

Business ethics are moral principles and values that guide and inform the behavior an organization should adopt regarding what is legally, environmentally, culturally, economically, historically and politically considered wrong or right. Business ethics simply encompass the philosophies and priorities of a given organization. In present day, the conduct of individuals on a day-to-day basis in the workplace is also encompassed herein. People are increasingly conscious of business processes and demand for more ethical practices in the course of conducting business. There is increased public pressure to have more stringent laws and initiatives regarding business ethics. For example, people who drive luxurious vehicles are expected to be taxed higher than those that do not (Velentzas et al., 2009). It is widely known that in order for businesses to gain in the short-term, there must be unethical behavior regarding how to capitalize the market, deal with competitors and treat employees and customers.

Issues of finance have been previously treated as a matter of law as they dealt with technical maters such as dividend policies, the optimal mix of debt and equity, investments, evaluation of stocks, swaps, futures, and other securities, and diversification of portfolio. Many people considered these technicalities as being free of any ethical burdens and thereby considered finance as requiring no business ethics. Presently, however, there has been a direct link between finance and the market meltdowns that threatened to cripple whole economies. Theories of business cycle were no longer enough to explain these meltdowns hence warranting the introduction of business ethics to guarantee prudence in business performance.

Human resource ethics are also a key part of business ethics. They detail the favorable relationship between employees and employers (Murphey et al., 2007). Human resource ethics are aimed at stemming discrimination which occurs along different lines including: age, gender, disabilities, race, religion, occupational safety, weight, attractiveness, and health.

Today, marketing ethics are much more pronounced than they were a decade ago. They go beyond the provision of information pertinent to a product. It is a fact that customers expect to be manipulated in regards to the value of a product (Marcoux, 2009). However, marketing business ethics are crucial in drawing the line. Experts assert that there is a close relationship between marketing ethics and media ethics. Marketers must act within specific parameters guided by political philosophies and transactional practices. There are opposing schools of thought; with one asserting that marketing initiatives are aimed at maximizing profits for shareholders and the other arguing that marketing should be responsible to customers and other stakeholders. Marketing ethics are somewhat pragmatic, consequential, virtual and deontological. This is largely due to the limited literature detailing the core tenets of the study, that is relatively new. Additionally, there is no agency that has been charged with the responsibility of ensuring that marketing ethics are upheld. Presently, agencies check competition, autonomy of different personnel in the marketing hierarchy, target customer awareness, rivalry among firms and profit margins claimed, which is just a scratch on the surface compared to the enormity of marketing practice. Marketers do not have the impetus to be ethical and they are not granted any choices due to lack of agency. Marketing ethics are not only limited to the academic realms of the study but should encompass all aspects of a person’s life to ensure that they are deeply entrenched in business.

Another ethical consideration is production. This entails ensuring that processes leading to eventual products do not cause any harm to people and to the environment (Phillips, 2008). There are dilemmas that arise from these types of ethics which stem from the fact that there is always a degree of danger that is associated with production processes. It therefore becomes difficult to establish the degree to which it is prudent to expose a person to the processes. Furthermore, advances in technology may nullify a certain risk thereby making ethical standards obsolete or societal perceptions towards a certain risk may fundamentally change. An example of such dilemmas is the manufacture of weapons. Others include production of alcohol and tobacco or bungee jumping. The tradeoff between risks and thrill in bungee jumping creates a scenario where production ethics need to be thoroughly reconsidered. Eventually, the relationship between the company and the environment should be considered as a core concept of production ethics. Here, the parameters may be more direct as there is no middle ground between environmental preservation and destruction.

 

References

Anderson, S. & Cavanagh, J. (2000). Top 200: The Rise of Corporate Global Power. Washington, D.C.: Institute for Policy Studies

Hertz, N. (2001). The Silent Takeover: Global Capitalism and the Death of Democracy. New York: William Heinemann.

Kelly, M. (2003). The Legacy Problem. Business Ethics, 11-16.

Langdon, M. (2013). The Innovation Master Plan. Innovationmanagement.se. retrieved 21st Feb 2014 from http://www.innovationmanagement.se/2013/07/18/the-driving-forces-of-change/

Marcoux, A. (2009). Business-Focused Business Ethics. Plymouth: Rowman & Littlefield

Murphey, P.E. et al. (2007). An ethical basis for relationship marketing: a virtue ethics perspective. European Journal of Marketing, 41(1&2), 37-57.

Phillips, K. (2008). Bad money: Reckless finance, failed politics, and the global crisis of American capitalism. New York: Viking.

Thevenet, M. (2003). Global responsibility and individual exemplarity. Corporate Governance: International Journal of business, 3(3), 114-125.

U.S. Department of State. (2013). U.S. Government Approach on Business and Human Rights. Retrieved 22nd Feb. 2014 from http://www.humanrights.gov/2013/05/01/u-s-government-approach-on-business-and-human-rights/

Velentzas, I. et al. (2009). Economic analysis of environmental law: pollution control and nuisance law. Journal of International Trade Law and policy, 8(3), 252-271.

Williams, O. F. (Ed.) (2000). Global codes of conduct: An idea whose time has come. Notre Dame, IN: University of Notre Dame Press.

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