Are Corporations the Dominant Institution of Our Time? Can “ethical Business” Exist?
Essay Preview: Are Corporations the Dominant Institution of Our Time? Can “ethical Business” Exist?
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Just how important are corporations in our world today? There is a very simple mental exercise that can help us get to an answer. To do that, any person living in the developed world can try to remove all the objects in his or her room which were produced by a corporation. Its easy to imagine how empty that room would become – if there was even a room left!
That simple metaphor can set a background for understanding just how easily the corporate world has become dominant in our lives, and actually the corporation itself has been described as “one of the most important innovations in human history” . As corporations grew from family businesses to large organizations employing strangers to work for them , there was little concern in the public about it. Already in the 1930s there was academic interest in the “large corporations” and it was already plain how little surprise and public concern there was about their power and their influence on society. There are more recent examples that explain how far the importance of corporations has grown and eventually dig into the dangers that such an importance has, perhaps the biggest one being the “Too Big to Fail” case. Although the name actually became institutional almost 30 years ago it actually became known to the public because of the 2007-2009 crisis to describe those corporations (financial institutions like banks, generally) that are “so large and so interconnected that their failure would be disastrous to the economy, and they therefore must be supported by government when they face difficulty” . This theory alone, which has proven itself quite right with the disaster following Lehman Brothers collapse after the governments failed to rescue it in 2008, puts corporations in a position powerful enough for governments, and therefore societys money, to be actually subsidiary to their survival – necessary for the societys good.
Given the importance of corporations in todays society, it is necessary to focus on what is their role in that same society. Many great minds have put themselves on this task, with very different results. Possibly the most famous argument was advanced by Nobel prize winner Milton Friedman, who in 1970 wrote in his famous article that “the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them” and that the social responsibilities are of in¬dividuals, not of business. While such an explanation might have served as a motivation driver in a slowing and more competitive economy, it is no more so. Actually, it might have easily done more harm than good, by “allowing” businesses to focus on money for the sake of money while money might have just been a mean, not an end. With the power to employ people, provide them with goods and services they use every day, and paying taxes on which governments run, corporations cannot be separated from the rest of the world as simple money-making machines with no responsibilities towards anyone who does not hold financial value into them. That is where the term stakeholder comes from. Even though it dates as far back as 1963, it was not fully developed until the 1980s, possibly because of Friedmans big influence on both thinkers and practitioners of business in those years. By definition, stakeholders represent “those groups without whose support the organization would cease to exist” , and it is vital that any business should address them for its survival. This would seem only logical, and an absolute necessity for any business, but the management style of the past 50 or 60 years