A complete summary of all mandatory articles for the course organisations and society (MAN-MOD004) for the master Organisational Design and Development in 2019/2020.
Literature:
Freeman, E., Martin, K., and Parmar, B. (2007) Stakeholder Capitalism; Journal of Business Ethics; 74, pp. 305-314
Fri...
Radboud University
Summary Organisations and Society 2019/2020, MAN-MOD004
Assignment 1
The Social Responsibility of Business is to Increase its Profits by
Milton Friedman
Friedman argues that businessmen that are pro CSR are socialist. What does CSR imply for
companies? Executives work for the owners of companies max profits within rules of society.
Individuals can have social responsibilities. When he contributes to social responsibilities, these come
from him as a principal and not as an agent for the company. So, the social responsibilities are not for
the companies. Acting social within the business would be against the interest of his/her employers
(the owners) and be spent with money of employees, customers or the owners of the business. If the
executive starts acting socially responsible, he is acting against the will of the owners who elected
him. If they are social servants, then there should be a political system to elect them political
mechanism instead of market mechanism. How can an executive choose what is a just price and how
to battle social problems? And will he not be fired for spending company money. In the current
system you can only do good at your own expense. Individuals should only spend their own money
willingly on socially responsible activities. It could be in the long-term interests of companies to
invest in socially responsible ways (customer binding better infrastructure and environment for new
employees). But it can harm the foundations of a free society (especially government involvement on
markets). Society is a collection of individuals and the groups they voluntarily form focus on
individual who can do whatever he wants instead of the political conformity. Social responsibility
could be a political mechanism to every action taken by persons. Friedman believes holy in capitalism
and the freedom it provides to live up to the sole purpose of profit maximalisation.
Making Globalisation Work – The 2006 Geary Lecture, Joseph E.
Stiglitz
Introduction: talks about his making globalisation workbook. So, what would I like to change, some
minor and major changes.
What are legitimate complains about globalisation?
1. the assumption that everyone will be better of and those who say they are not simply don’t
know it yet. Especially the tariff structure is bad for poor countries (covered up by aid
programs).
2. Global financial system is not working properly. Money is flowing from poor to rich and risks
of interest and exchange rates are for poor countries only increasing. Resulting in a lot of
crises.
3. Developing countries did not receive the benefits they were promised.
Are things getting better or worse? More people do have become more increasingly integrated in the
global trading system (India, China), leading to enormous growths of their economies. But to engage
you need resources technology and high levels of education (smaller poor countries cannot
undertake). The world is not on a flat playing field but there are mixed effects. We have become
more aware of some globalisation problems. IMF had free markets as a religion, forcing unprepared
countries to liberalise. They now recognize the problems and negative effects. EU and US come back
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,on promises like higher agricultural subsidies instead of lowering them as promised. Also, some
countries (EU and US) have too much power with veto rights within the IMF and UN.
Why globalisation has not lived up to its potential: three underlying core problems: trade, financial
markets and resources. The overarching problems:
1. Economic globalisation has outpaced political globalisation. We should act more
cooperatively but we do not yet have the (democratic) institutions. Policies don’t focus on
fair when looking internationally but on what is in the countries individual gain.
2. Tense competition between communism and the west. We only looked at are the people
were dealing with anti-communistic so that their resources don’t go to the communists. Did
not focus on development for countries themselves.
3. Pollyanna view of globalisation: everyone will be better of in the long run. Winners can
compensate losers but they don’t. Look more at Scandinavian countries!
Specific problems:
1. Intellectual property rights: less access to life saving medicines. Patent offices don’t know all
products over the world. Strong patents are not always good for science nor poor countries
because the companies do no research on illnesses in poor countries. Do not work with
patent but prize money.
2. Global warming: shows failing global governance and economic perspective does not matter
if the world becomes hostile for humans. Need trade sanctions to get countries like the US to
get on board. Force them to pay the real costs of actions while US does not trade sanctions
can rebalance.
3. Global debt: how to prevent problem of debt occurring? Rich should bare the risks of
exchange rate volatility. We need international institutions that focus on this problem.
Concluding remarks: globalisation will change but will it change in series of crisis or can we act before
that?
Stakeholder Capitalism – Freeman, Martin & Parmar
Introduction: markets provide issues as well like the division between rich and poor. And the impact
on the environment and marginalised. There are 5 contemporary narratives that assumes that
participants have naïve self interest and that prosperity is separate from morality and that it is about
limited resources. Institutional structure and market design help market strive. We show four
contemporary problems connected to capitalism and a final section with a new alternative narrative
to deal with these problems.
The narratives of capitalism: each of the following narratives are dominant in thinking but fala short
in addressing concerns of a broad set of stakeholders.
a. Labour capitalism: division between the owners (capitalist/bourgeoisie) and those selling
their labour (proletariat). Business is amoral and the labour is to take control of those
productive assets.
b. Government capitalism: macro view of Keynes. Capitalism should be managed by
governments. Capitalism is not capable of producing good when in hands of individuals.
Governments should impose ethics and solve problems created by markets (social welfare).
c. Investor capitalism: Friedman laissez-faire economic policies. Economic freedom from
shareholders and investors as dominant group that are tasked to increase profits. Ethics are a
side constraint and you should only be busy with maximising profits.
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, d. Managerial capitalism: owner of private company in control. Ownership on the one side and
control on the other. Control more in hands of managers than shareholders with leads to
competing interests.
e. Entrepreneurial capitalism: important stakeholder within the role of value creation. Can be
seen as the dominant player like with Schumpeter’s creative destruction to develop new
markets. Or more conservative view of creative discovery. Entrepreneurs change the status
quo.
Problems with traditional narratives: every narratives assumes tat participants have a naïve version
of self-interest, morality is separate from economic prosperity and that competition for limited
resources is the dominant mode of prosperity. This leads to four problems:
I. The problem of competition: competition as the only way while collaboration can be
necessary to survive, and we find that value creation can come from joint resolutions.
Collaboration is important (supply chain of Porter).
II. The problem of business ethics: managers are being thought that business is amoral. They
are not acknowledging the moral aspect of every decision. But you need moral for a working
market (thrust and honesty, teams and agreements).
III. The problem of the dominant group: focus on conflicting demands and needs. There is one
group to which others must align (government for Keynes, shareholders for Friedman,
laborers for Marx) then all stakeholders will benefit. Can hurt long term value creation fo the
company.
IV. The problem of business in a liberal democracy: government roles are resolving conflict (no
freedom for other relationships between stakeholders), legislates morality (mostly just legal)
and redistributes resources. The role only exists because of a problem that does not have to
exist. Stakeholders don’t learn to cooperate, and businesses can manipulate general
legislation.
Stakeholder capitalism: new vision of capitalism based on freedom, right, and the creation by
consent of positive obligations. Focus on voluntary in working together for sustainable relationships.
Give individuals right protecting them in those agreements. And individuals can decide to cooperate
and obligate themselves to others through voluntary agreements. Six principles that build a
framework for our value creation:
1) The principle of stakeholder cooperation: jointly satisfy needs and desires on voluntary
agreements.
2) The principle of stakeholder engagement: businesses must engage with stakeholders, they
affect value creation.
3) The principle of stakeholder responsibility: accept responsibility for the consequences of
one’s actions compensate those who are harmed. Morality should be at its centre.
4) Principle of complexity: people work from many different values and points of views
connected to their social context.
5) The principles of continuous creation: businesspeople continuously create new sources of
value.
6) The principle of emergent competition: competition emerges from a relatively free society so
that stakeholders have opinions. Do our best to first look for the win-win.
Conclusion: the way we take about business changes how business is done (self fulfilling prophecy).
Business should be about the best we can create together.
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,Globalization What it is and who benefits – Johnson
Globalisation is blamed for rising inequality of income and homogenisation of trade. Opposite view is
inequality is caused by globalisation not spreading fast and far enough. Author states that the
inequality comes from more people becoming rich, not more people becoming poor.
1) What made globalisation possible and effective? 5 developments
1. Enormous increase in knowledge since 1750.
2. Faster and cheaper transportation
3. Faster and cheaper communication
4. The growth of income that permitted the expansion of trade
5. Reduction of barriers to trade (following ww2)
2) Why the world is different now: knowledge . Produce far more than before with the same
world, caused by increase in knowledge in for example agriculture.
3) Sources of benefits of globalization : enormous gains by flow of goods. But also other positive
aspects of open flow; flow of ideas; flow of capabilities; spread of literacy and education;
flow of institutions and policies required for sustained economic growth. Why have some
been able to benefit more than others?
4) Have the poor benefited? Yes, looking at GDP
5) Life expectancy: mayor decline in infant and child mortality raised life expectancy in
developing countries. More access to clean water, sanitation and vaccination come from
globalisation.
6) Increased agricultural productivity: yield was for a long time equal across the world. Since
1930s increasing in developed countries and since the green revolution of 1970s also in
developing countries. Also, the daily intake of calories increased.
7) Immunization: large benefit from globalisation in developing countries is children receiving
immunization shots.
8) Knowledge: globalization made rapid exchange of knowledge possible across the world due
to low costs, high speed of communication and the spread of literacy and education.
9) Where markets have been permitted to function: the rich have gotten richer but the poorer
did not get poorer. China example of more injustice in non-free market.
10) Concluding comment: dislocations are the result of growth not globalisation. Not only trade
and investment but also sharing ideas and knowledge. Globalisation has many benefits that
are widely distributed and much more remains to be accomplished and much has not been
recognised.
A review of the theories of corporate social responsibility: Its
evolutionary path and the road ahead – Lee
Introduction: CSR has developed to a widely accepted concept in the business world. The purpose of
this paper is to trace the conceptual developmental path of theories on CSR and to reflect on the
implications of the change.
Conceptual shifts in CSR: wide supports from institutional investors. Example is the activities of the
Coalition for Environmentally Responsible economies (CERES) which wants institutional investors to
address environmental, social and corporate governance issues. More and more managers are
convinced of the possible positive effects of CSR on financial outcomes. In 1950-60 esearch was
focused on macro social institutions promoting CSR. Friedman was a big opposer not seeing that CSR
and Corporate financial performance (CFP) could go hand in hand. Stalemate between CSR and
shareholder value (Friedmann). In 2970 reconciliation efforts were attempted by making CSR
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,observable and concrete. But the link between CSR and CFP only gradually developed in the 1980’s
and 90s.
The evolution of the theory of CSR:
Social responsibilities of businessmen: the 1950s and 1960s: first to theorize the relationship
between corporations and society by Bowen (1953). He stated that the influential position of
business and the far-reaching scope and consequences of their decisions, obligated them to
consider social consequences and responsibilities. Responsibilities are the choices in terms of
the objectives and values of our society. Looks from an institutional perspective. It came at a
time of more legal possibilities for environmental actions and opposition from society
towards greedy corporations which lead to eroding relationships between companies and
society in the 60s. CSR was mostly a top executive level of strategy to not get the public
against them but middle management was not yet committed on bottom line financial
performance. Friedman became a classical opposer of CSR. The two sides did not cooperate,
and little theoretical developments were made beyond Bowen no alternative perspectives
beyond two radicals.
Enlightened self-interest: the 1970s: breakthrough from the committee for economic
development on CSR leading to a reshaped debate. Make a reconciliation between social and
economic interests. CSR should be inline with shareholder interests. Even shareholders with
spread risks would not need max profit for one company because it would likely be at the
expense of another investment joint profit for social optimisation on long term interest of
shareholders. You need the critical support structure and customer base for long term
survival as a company. Concept of enlightened self-interest model had no theoretical model
yet.
Corporate social performance model: the 1980s:CSP was initiated as a three dimensional
model by Carrol (1979) and picked up and further developed in the 80s. Corporate
objectives are integrated within a framework of total social responsibility in which for every
category strategic choices can be made (reactions, defence, accommodation or pro-cation).
Very pragmatic model but not very widespread because you could not empirically test and
measure the model (not compare goals).
Strategic management: the 1990s: stakeholder model of CSR clear groups to take care off
with more data available. Survival by the company is affected by stakeholders as well, so the
difference between economic and social goals became irrelevant. Clarkson: you need to
check if something is a shareholder or stakeholder issue and on which level you can analyse
the problem (institutional, organisational or individual). Jones links CSR to more economical
theories such as principal-agent theory to create an instrumental stakeholder theory with a
predictive capacity. Stakeholder theory got a centre stage role when discussing organisations
and society. Forced CSR to be more specified for stakeholders widening its meaning to
include many new categories. Furthermore, it evolved more practical applications in
philanthropic expenditures. CSR has serious implications for a firm financial performance in
theory.
Trend: tighter coupling between CSR and CFP: CSR is now seen as resources to be used to improve
bottom line performances of firms. Now carbon emission is on the front-page agenda. Corporate
performance became to change to a broader meaning including social performance instead of just
financial performance (satisfaction, employee turnover, R&D, NPD). CSR became to develop as
including economic and social interest as well as Corporate performance became to include the same
things making CSR much more attractive amongst all corporate actors (so also lower management).
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, CSR will eventually pay off or is already adding value is the current mindset. Also, theoretical
activities to link CSR and CFP more tightly.
Discussion and Assessment: CFP and CSR have not yet empirically been verified to come closer. So
the result of the proposed positive relation between CSR and CFP remains inconclusive (paper is from
2008). But the empirical studies on CSR have more issues to face. Business case studies are valuable
but do net capture the full-scale dynamic and complex relationships between organisations and
society. Three shortcomings:
1. Not clear what business case research will achieve in the end (link with profit has still not
been proven).
2. Business case research has little explanatory power to account for the recent organisational
changes with respect to CSR (other factors like managerial ethics, institutional changes or
social movements can have affects).
3. Business case driven CSR falsely assumes that was is good for society should also be good for
corporations.
Implications for further research: we need to renew basic research on what CSR is and how and why
CSR related changes take place. Could propel the applied research to beyond the proving state it is in
now.
1. Better measurements for CSR are needed especially for objectives and comparison between
firms focus on actions not words. Look at gathered data to look if companies are equally
meeting data of community in the case of pollution industries. External data collections that
can offer much more specific measures for various CSR categories.
2. More attention should be payed to the social side of the equation and not just for corporate
perspective but social perspective. How do change sin society affect corporations?
Institutions can have a large impact, but current models are not equipped enough yet to
analyse CSR from social side. Corporations are social actors and their actions are embedded
in concrete social relations. Corporate interactions with external stakeholder reshape the
organisation. It is a very complex web between corporations and its social interaction with all
the different actors with different agenda’s in their external world. In order to investigate
social mechanisms that lead to socially responsible business practices by corporations, we
need to focus on middle range theories that link macro institutional effects and micro
behavioural changes.
3. Expand the empirical scope of CSR research beyond existing boundaries. Almost no reflection
on small and medium companies, only fortune 500. Therefore, researchers need whole new
set of empirical and conceptual tools. They usually lack long term vision and are more
economically oriented less likely to invest in CSR and be more interested in local
reputation management. What also misses is the comparative aspect geographically (only US
now. Also look at the international affects of MNO activities in other parts of the world.
Conclusion: purpose of this paper was to trace the conceptual evolution of CSR in management
theory. It has moved from macro societal o organisation level with a more implicit ethical
orientation. Researchers have laid greater emphasis on managerial and strategic issues (especially
between CSR and CFP). There are several limitations to CSR and this paper is not alone in that
opinion. Also look at the points made in the last chapter to greatly enrich our understanding of
business-society relations.
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