Joined: 02 Apr 2012
Concentration: Strategy, Finance
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WE: Sales (Commercial Banking)
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If the primary duty and concern of- Review Please [#permalink]
08 May 2012, 03:44
If the primary duty and concern of a corporation is to make money, then conflict is inevitable when the corporation must also acknowledge a duty to serve society.
From your perspective, how accurate is the above statement? Support your position with reasons and/or examples from your own experience, observations, or reading.
The issue at hand delves upon the classic corporate dilemma of balancing the commercial ambition of a company with its social responsibilities. The statement suggests that there would be a clear conflict if in case the primary duty of a corporation is to make money and it is made to realize about its social duties towards society. I do not concur with the statement at hand and I am of the view that even if the primary duty of an organisation is to make money, it cannot do so without paying sufficient attention towards its social duties.
To start my analysis, I present the case of the American automobile industry which was filled with gas guzzling, high maintenance and sub-standard quality cars in mid to late 1990s. These corporations had little or minimal concern for environment pollution, depleting natural resources and to some extent even driver safety. The rise of the Japanese car makers in the US has been associated with the above mentioned negatives which they were able to improve upon in a major way. They started production of cars which were fuel economical, caused lesser pollution and also were more secure and durable than their counterparts. I believe that both corporations like General Motors and Toyota were set up with the primary aim and duty of making money, but the one with a social strategy won.
Many corporate gurus like Jack Welsch have emphasized that society and business are inter-twined. To do business in society, you have to think about society. The progress of society will then in turn lead to progress of the business and that is the only sustainable way of doing business. If a corporation chooses to ignore society and focuses on immediate gains, economics and trade have a way of balancing it in the long run. Continuing with the example of General Motors from above, the company is still struggling to get a grip on the current market needs and is under a lot of financial and management stress. On the other hand a company like Toyota has prospered over the years with an eye towards cars which were in sync with environment and customers.
In order for corporations to focus on their core area of operation and in turn make money, there has been International bodies (Eg. UN, IMF) set up, which provide guidelines for businesses to adhere and fulfil their social responsibilities. Businesses who have adhered to these guidelines or at times even outperformed them are the ones which are most successful in today's scenario. Banks, ready for Basel 3 regulations, or automobile manufacturers who are Euro 5 compliant, get maximum valuations when you consider the net worth. Even the government rewards a company for being socially inclined, with rebates and tax breaks.
To do business in a certain place, one has to be concerned for the health of that place. If the general health of society is good, then business will automatically prosper. I disagree with the issue at hand and state that conflict is not inevitable and in fact the reverse is true if a corporation ignores its social duties. With so much pressure on the earth's resources and knowledge being spread across continents at the speed of light, the obvious way forward for any corporation is to become society centric.