Business and Societies
The relationship between business and society has triggered various social, economical, environmental, and ethical issues over the decades. Even though businesses have played a crucial role in the development of society, they have often provoked criticism in recent years. It might be an archetype of basic tendency to ignore the positive aspects of relationship and to emphasise the drawbacks or negative factors. Over the years, the relationship between business and society has significantly changed (Carroll & Buchholtz 2012, p. 2-3). The main focus of this paper is to highlight these changes with the help of extensive research and study.
In today’s competitive world, it has become important for the companies to pay attention to their stakeholders’ interests and needs. In fact, effective stakeholder management is the key to success of a business. Modern business organisations and companies collect the data about the expectations and demands of their stakeholders. Such charting has become usual in corporate field. Successful business organisations stay up to date with their stakeholder management and minimize the risks in their businesses (Boatright 2006, p. 107-109). The protection of the regular profits and development of more opportunities for the growth of a company are one of the crucial responsibilities of a manager. As stakeholders’ involvement can be decisive in company’s development and prosperity, it is an important role of management to identify pertinent stakeholders and acknowledge the aspects of their power, interests, and bonds with one another. Apparently, stakeholder management is becoming more relevant to the manger’s role (Boatright 2006, p. 107-110). With the help of various reports and data, the paper will try to present the importance of stakeholder management in the contemporary business system and the manager’s responsibility for it.
Relationship between Business and Society
In order to evaluate the relationship between business and society over the years, it is necessary to define the concepts of business, society, and their relationship with each other.
Business comprises profit-oriented commercial organisations or firms, varying in size from individual ownerships (for example, Zim’s Bagels, Dolce and Gabbana, and Maitland-Smith etc.) to corporate giants (like Pepsi, Google, Microsoft etc.) (Carroll & Buchholtz 2008). The concept of business in a comprehensive manner involves all types, sizes, and forms of commercial firms and industries. However, while analysing the relationship between business and society, the big corporate and business giants will be mostly considered for a variety of reasons. The most significant reason is their high visibility. Due to aggressive marketing and wide distribution, their products and services are more recognized in the market. Consequently, they are closely monitored and frequently targeted by the critics. Though small businesses and firms have easily outnumbered the business giants, the power, visibility, and impact of the business giants and big brands keep them far ahead of small businesses in society (Carrol & Buchholtz 2008).
Society can be characterized as a community, or at a broad perspective, a state or a country having collective groups of people with own traditions, culture, values, interests, and activities (Carroll & Buchholtz 2008). However, when one speaks about the business-society relationship, it consists of business and local community, business and the country, or business and a particular group of people such as stakeholders, minorities, and consumers, among others (Carroll & Buchholtz 2008).
The healthy relationship between society and business is essential for the success of any company or business organisation. The concept of business-society bonding analyses how a business system collaborates with society. Such symbolic and fundamental relationship has been examined for years. Being a social animal, humans tend to work in groups and form a special bond with each other. Such social bond exists in all forms of society, including families, various entities, and businesses (Trodick 2012). Hence, the social factor for effective functioning of the mechanism of business organisation cannot be ignored. The successful company is the one that builds the healthy and long-lasting relationship with its stakeholders. Hence, many companies form independent departments which solely focus on maintaining good relationship with their stakeholders (Trodick 2012). The significance of relationship between society and business is not obscure and is clearly evident through the records of successful business organisations. Therefore, today business organisations need to give priority to the enhancement of relationship with society to insure own development and success (Trodick 2012).
Changes in the Relationship over the Years
During the late 1800s, the approach of business entities toward society can be summarized in a famous statement of the president of the New York Central Rail William Henry Vanderbilt who once stated, “the public be damned” (Sharp n.d.). At that time, business and society were entirely different bodies with mere interaction and interference in each other’s activities as long as companies made profits and created job opportunities for society. Till the early years of the 20th century, the role of business organisations was to provide products and services and gain much profit for the company and shareholders. The society’s duty was to facilitate the consumption of the products and services (Sharp n.d.). Before the era of the Civil War, the industries in the US were operating on a limited scale. However, as the war intensified, local manufactures required to develop their manufacturing techniques in order to accelerate the production of the required goods. After the end of the war, business organisations discovered new techniques for rapid production of goods and services that were in demand with the growing population of the country. Apparently, the demand for operation processes in factories and transportation of goods led to a high dependency on petroleum energy. The leading businessmen of the time such as Andrew Carnegie, John D. Rockefeller, Andrew Mellon, and J. Pierpont Morgan took advantage of such golden opportunity and provided the capital, oil, transportation, and other services required for the growth and prosperity of the country (Sharp n.d.). However, while maximizing own profits and interests, hardly any business paid attention toward the impact of their industry on the society or environment. On the contrary, all businesses were busy in profit-war, and even federal government backed them at that time. During the late 1800s and early 1900s, the government rejected labour unions and allowed businessmen to run their companies according to their comfort. Various monopolies in business existed till the late 19th century. Commodities like oil, whiskey, sugar, beef, lead, and transportation were controlled by the corporate giants (Sharp n.d.). Moreover, even states in the West and South adopted antitrust laws to control monopoly practices. However, they could not affect the interstate industries. Therefore, public demand started to rise to implement federal legislation to regulate interstate businesses. Though the government was first unenthusiastic to involve into business affairs, it accepted the idea in the end due to the growing public demand. For instance, the implementation of the Interstate Commerce Act in 1887 and the Sherman Antitrust Act in 1890 were the initial government efforts to control the business practices to protect the interests of society (Sharp n.d.). In the 20th century, the government was targeted at strengthening consumer, investor, and labour rights and discouraging business monopoly (Sharp n.d.). Various acts and legislations such as minimum wage act, labour rights, responsibilities of employer toward society, employee rights, consumer’s rights, and shareholder’s rights emphasised legal protection for stakeholders of company, local communities and the overall society (Sharp n.d.).
Shifting Era towards Corporate Social Responsibility and Stakeholder Management
The relationship between business and society rapidly started to change with the advancement of technology and media. From the late 1960s, the traditional and conservative roles of business and society began to change, and “stakeholder,” namely anyone with the direct or indirect interest in the company who can affect or be affected by any company’s decision, policy, or objective, became a crucial part of the business-society relationship (Sharp n.d.). Since the late 1990s and early 2000s, various news stories, which were associated with the ethical and social issues in the business-society relationship, have come in limelight (Carroll & Buchholtz 2008). Apparently, it is not surprising that with the modern media and advanced communication technologies such news widely caught the public attention and business management was highly criticized for their behaviour, decisions, or actions. Among the notable examples, one can name the case against Dow Coming for the trade of impaired silicone breast implants, accusations of sales-abuse at Sears Roebuck & Co.’s automobile centres by pressurizing the customers to buy unnecessary services, or exposure of unethical practices of Beech-Nut Nutrition Company which was involved in selling of contaminated apple juice to public by advertising it as “100% fruit juices” (Carroll & Buchholtz 2008). The list of such examples is endless, but it serves as an illustration of the regular tensions between society and business. Consequently, such cases affect the company’s reputation and overall business. Sooner, most of the business organisations began to take necessary steps to establish good relationship with their stakeholders and society as a whole. Business organisations now acknowledge the company’s obligations and responsibilities to society and private business sectors that involve more than just creating job opportunities and providing products or services (Carroll & Buchholtz 2008). Today, the corporate social responsibility (CSR) is widely acknowledged in business sector (Norén 2004, p. 9-10). Most of the reputed corporations and business utilities are enforcing the code of conducts which protects the fairness and equality at the workplace, discourages the environmental harms, and honours the social, cultural, and moral values and norms of society. Today, the relationship between business and society is gradually evolving toward a symbiotic corporation between government, business, and the overall society (Norén 2004, p. 9-18).
Stakeholder Management and Its Importance in Business
The concept of stakeholder management was first introduced by R. Edward Freeman in 1984 (Boatright 2006, p. 106). Though it is analysed in various forms, generally it has been considered in a moral conduct that managers while taking any decision must acknowledge the interests of all stakeholders of the company. The term stakeholder usually involves all employees, supplies, shareholders, customers, investors, as well as overall community or society. The obligation to protect the interests of stakeholders is often characterised by stakeholder management. Unlike corporate governance, the stakeholders’ interests get priority in stakeholder management (Boatright 2006, p. 106-108).
Importance and Manager’s Role in Stakeholder Management
Stakeholder management is crucial for the success of any business organisation. By involving right individuals in a proper way in a precise task, a company can make a big difference and achieve its objectives. In fact, it is evident from the research of Professor Witold Henisz and his colleagues at the Wharton School of Business (The economic benefits of stakeholder engagement n.d.). According to their studies, effective stakeholder management increases the rate of profitability and success of business. Professor Henisz and his team examined 26 gold-mining companies which were listed on the trading platform of the Toronto Stock Exchange from 1993 to 2009 (The economic benefits of stakeholder engagement n.d.). During the period, more than 50000 stakeholder engagement programs were coordinated by these companies. The research team found that the companies with a high number of stakeholder management activities were seen finishing their projects in provided time and budget, consequently, eliminating extra expenses and delays that could affect the total profit margin (The economic benefits of stakeholder engagement n.d.). Based on the findings, Professor Henisz confirmed that the effective stakeholder management can make a significant difference to the overall value of the company. Moreover, he further argued that these results are easily applicable to any business sector (The economic benefits of stakeholder engagement n.d.).
The basic responsibility of company managers is to implement actions and policies to achieve long-term objectives of company’s growth and run profitable business. A manager can achieve the targeted profitability by managing production costs, expanding the market, sales growth or a combination. Managers usually have to maintain specific performance factors such as annual sales growth, profit margin, and overall return on investments. Effective products and service placement, innovative policies and offers, and aggressive marketing can lead to the growth in sales (Boatright 2006, p. 110-116). The main advantage of stakeholder management is that it allows the manager to execute such projects without any issue. With the help of stakeholder management, the manager identifies, analyses, and controls the risk associated with the projects and stakeholders (The economic benefits of stakeholder engagement n.d.). Furthermore, except risk management, it allows the manager to indentify beneficial opportunities and factors for the completion of the projects (The economic benefits of stakeholder engagement n.d.). In other words, stakeholder management is directly associated with the objectives of the manager’s role in businesses. As research and studies have shown, the effective stakeholder management is the key to success of the company, consequently, it can be considered relevant to the manager’s role to run the successful business.
In the past, business and society were separate utilities with own roles and interests. With the development of new technologies and globalization, corporate social responsibilities and importance of stakeholder management were recognised. Various research and studies have confirmed the necessity of mutual cooperation and protection of reciprocal interests for the successful growth of both business and society. In the fast-paced and competitive world with continuously varying public demands and government policies, managers have to face the tough challenge of fulfilling company’s targets while simultaneously protecting the interests of stakeholders and society. Stakeholder management is an effective tool for mangers to achieve their goals and maintain the healthy relationship between business and society. Therefore, stakeholder management can be considered relevant to the manager’s role.