Business, Government And Society Notes Slides 4p6cj

McGraw-Hill/Irwin

Chapter 1 The Study of Business, Government, and Society

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

ExxonMobil Corporation o Company history

o Main business is discovering, producing, and selling oil and natural gas o Descended from the Standard Oil trust o In 1890 Congress ed the Sherman Antitrust Act to outlaw its monopoly o Once had more than a 90% market share of the American oil market o The values of its founder, John D. Rockefeller, defined the company culture

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ExxonMobil Corporation o The leader

o John D. Rockefeller (Standard Oil) o Emphasized cost control, efficiency, centralized organization, and suppression of competitors

o ExxonMobil is no longer the commanding trust of Rockefeller’s era

o Its power is challenged and limited by economic, political, and social forces

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ExxonMobil Corporation

o As a corporate citizen ExxonMobil funds worldwide programs to benefit communities, nature, and the arts o The story of ExxonMobil raises central questions about the role of business in society

o When is a corporation socially responsible? o How can managers know their responsibilities?

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ExxonMobil Corporation

o What actions are ethical or unethical? o How responsive must a corporation be to its critics?

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Government

Business

Structures and processes in society that authoritatively make and apply policies and rules

Profit-making activity that provides products and services to satisfy human needs

What is the Business–Government– Society Field?

Society

An intangible object of thought

A network of human relations composed of ideas, institutions, and material things

Idea

A bundle of values that creates a particular view of the world

An enduring belief about which fundamental life choices are correct

Ideology

A formal pattern of relations that links people to accomplish a goal

Value

Institution Material things

Tangible artifacts of a society that shape and are shaped by ideas and institutions

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Figure 1.1 - How Institutions Markets

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Why is the BGS Field Important to Managers?

o To succeed in meetings its objectives a business must be responsive to both its economic and its noneconomic environment o Recognizing that a company operates not only within markets but within a society is critical

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Why is the BGS Field Important to Managers?

o A basic agreement or social contract exists between economic institutions and other networks of power in a society

o Establishes the general duties that business must fulfill to retain the and acquiescence of the others as it organizes people, exploits nature, and moves markets

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Figure 1.2 - The Market Capitalism Model

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Four Models of the BGS Relationship: The Market Capitalism Model

o Depicts business as operating within a market environment, responding primarily to powerful economic forces o The market acts as a buffer between business and nonmarket forces o Understanding the history and nature of markets is important to appreciate this model

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Four Models of the BGS Relationship: The Market Capitalism Model

o The advent of market economy, reshaped human life

o Market economy: The economy that emerges when people move beyond subsistence production to production for trade, and markets take on a more central role

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Four Models of the BGS Relationship: The Market Capitalism Model

o Capitalism: An economic ideology with a bundle of values including private ownership of means of production, the profit motive, free competition, and limited government restraint in markets o Managerial capitalism: A market economy in which the dominant businesses are large firms run by salaried managers, not smaller firms run by ownerentrepreneurs

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Four Models of the BGS Relationship: The Market Capitalism Model o Important assumptions

o Government interference in economic life is slight

o Laissez-faire: An economic philosophy that rejects government intervention in markets

o Individuals can own private property and freely risk investments o Consumers are informed about products and prices and make rational decisions

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Four Models of the BGS Relationship: The Market Capitalism Model

o Moral restraint accompanies the self-interested behavior of business o Basic institutions such as banking and laws exist to ease commerce o There are many producers and consumers in competitive markets

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Four Models of the BGS Relationship: The Market Capitalism Model

o The BGS relationship according to the market capitalism model:

o Government regulation should be limited o Markets will discipline private economic activity to promote social welfare o The proper measure of corporate performance is profit o The ethical duty of management is to promote the interests of shareholders

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Four Models of the BGS Relationship: The Market Capitalism Model o Criticism

o Increased prosperity comes at the cost of increased inequality o Results in base values being energized and virtue being eroded

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Figure 1.3 - The Dominance Model

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Four Models of the BGS Relationship: The Dominance Model

o Represents the perspective of business critics o Business and government dominate the great mass of people o Those who subscribe to the model believe that corporations and a powerful elite control a system that enriches a few at the expense of the many

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Four Models of the BGS Relationship: The Dominance Model

o Proponents of the dominance model focus on the defects and inefficiencies of capitalism o Populism: A political pattern, recurrent in world history, in which common people who feel oppressed or disadvantaged seek to take power from a ruling elite seen as thwarting fulfillment of the collective welfare

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Four Models of the BGS Relationship: The Dominance Model

o Populist reform movement opposed the dominance model o Marxism: An ideology holding that workers should revolt against property owning capitalists who exploit them, replacing economic and political domination with more equal and democratic socialist institutions

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Figure 1.4 - The Countervailing Forces Model

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Four Models of the BGS Relationship: The Countervailing Forces Model

o Suggests exchanges of power among them, attributing constant dominance to none o This is a model of multiple forces o It differs from the dominance model in rejecting an absolute primacy of business and crediting more power to a combination of forces and interactions rendered paltry by the dominance model

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Four Models of the BGS Relationship: The Countervailing Forces Model o Conclusions:

o Business is deeply integrated into an open society and must respond to many forces, both economic and noneconomic o Business is a major force acting on government, the public, and environmental factors

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Four Models of the BGS Relationship: The Countervailing Forces Model

o To maintain broad public , business must adjust to social, political, and economic forces it can influence but not control o BGS relationships evolve as changes take place in the ideas, institutions, and processes of society

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Figure 1.5 - The Stakeholder Model

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Four Models of the BGS Relationship: The Stakeholder Model

o Stakeholder: An entity that is benefitted or burdened by the actions of a corporation or whose actions may benefit or burden the corporation

o The corporation has an ethical duty toward these entities

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Four Models of the BGS Relationship: The Stakeholder Model

o Primary stakeholders: Entities in a relationship with the corporation in which they, the corporation, or both are affected immediately, continuously, and powerfully o Secondary stakeholders: Entities in a relationship with the corporation in which the effects on them, the corporation, or both are less significant and pressing

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Four Models of the BGS Relationship: The Stakeholder Model

o Exponents of the stakeholder model debate how to identify who or what is a stakeholder o The stakeholder model reorders the priorities of management away from those in the market capitalism model

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Four Models of the BGS Relationship: The Stakeholder Model o Criticism

o It is an unrealistic assessment of the power relationships between the corporation and other entities o It sets up too vague a guideline to substitute for the yardstick of pure profit o There is no single, clear, and objective measure to evaluate the combined ethical/economic performance of a firm

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Four Models of the BGS Relationship: The Stakeholder Model

o The interests of stakeholders vary that they conflict with shareholders and with one another o Most fanatical pursuit of profit creates greater lasting good for society than pursuit of profit tempered by comion

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Four Models of the BGS Relationship: The Stakeholder Model o Advocacy for the stakeholder model:

o A corporation that embraces stakeholders performs better o It is the ethical way to manage because stakeholders have moral rights that grow from the way powerful corporations affect them

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Our Approach to the Subject Matter

o Comprehensive scope o Interdisciplinary approach with a management focus

o Strategic management: Actions taken by managers to adapt a company to changes in its market and sociopolitical environments

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Our Approach to the Subject Matter o Use of theory, description, and case studies

o Theory: A statement or vision that creates insight by describing patterns or relationships in a diffuse subject matter

o A good theory is concise and simplifies complex phenomena

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Our Approach to the Subject Matter o Global perspective o Historical perspective

o History: The study of phenomena moving through time

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