Should business be "responsible" to it's stakeholders?

[Newbie 0]

Or should it negate all responsibility and just concentrate on making decisions based purely on how it affects the bottom line? Perhaps you feel by generating economic wealth for itself, that this is in fact the best way to help society - as wealth generating is good for everyone, including the community in which the business operates.

Maybe you think there should be a balance?

Perhaps you believe in the new class of business being toted around, the "social entrepeneur" - someone who deems success in business to be about how far they manage to right a particular social issue, placing that above and beyond how much profit they can make (although obviously, the business has to be run so it does not make a loss).

Do you think corporate responsibility is something being driven to assure shareholders that stakeholder relations - and ultimately share price - are sound, and therefore nothing more than window dressing?

Let me know, i'd like to know what you think and why

"Skydiving is a door"
Happythoughts

[AlexCrowley 0]

I think the history of how corporations became an entity in the US business world is interesting. I also think it's become everything that was feared it would be.

The truly sad thing is that those realities have warped our perceptions to the point where any discussion of this sort will talk about economic realities rather than human ones, and that any attempt to turn the conversation in that direction will be considered weak at best a 'socialist nightmare' at worst.

The drones they keep on droning.

TV's got them images, TV's got them all, nothing's shocking.

[Newbie 0]

Isn't that the point of any discussion? To put you side across and do it convincingly. The only direction this discussion should go should be based on people putting their view on the topic down and then justifying why they feel that way.

It's more just a means for me to see how people feel on the subject, rather than a way to sway people to a particular way of thinking.

"Skydiving is a door"
Happythoughts

[AlexCrowley 0]

Perhaps, but it's a lot like trying to discuss religion. When somethign is so engrained into a model of thought that it becomes something held on faith then it ceases to hold any interest for me personally.

Look at the Microsoft monopoly situation for pointers on what I'm talking about.

TV's got them images, TV's got them all, nothing's shocking.

[Newbie 0]

It's a lot like discussing any of the topics we discuss in SC - some people go in all guns blazing, stating their view is the right view, others just want to hear what people think and why and try to learn something. You can apply what you said to every topic in here

"Skydiving is a door"
Happythoughts

[mnealtx 0]

I think for most companies the bottom line is king - if you can't keep the doors open and keep people buying/investing/etc, you're not going to have the company very long.

No company is in the business of giving away money - unless they're being supported in other ways, that is.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[BIGUN 1,488]

With shareholders; a corporation's first responsibility is the bottom line. The shareholders can choose to be good community citizens with their dividends.

Nobody has time to listen; because they're desperately chasing the need of being heard.

[wmw999 2,589]

Quote

With shareholders; a corporation's first responsibility is the bottom line.

I think though that the pendulum has swung way too far into the "bottom line rules" direction, leading to short-term benefit decisions that are clearly terrible long-tern investments.

That's partly a reflection of the swings that stocks take, and the reactions to those swings, based on easy communication and the internet. How many people here have looked at some stock service (e.g. Yahoo finance) and made a decision based on teh day's headlines?

Clearly lots of people do that -- otherwise, why the swings when they bring in a new CEO, or announce that their profits are 1% less or more than anticipated? It gets to where the quality of anticipation is the marker of corporate success, at least as measured by stock price.

A privately-held company has the luxury of investing into longer-term things that don't show a clear benefit. A big one does too, but it takes more intestinal fortitude.

Wendy W.

There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

[lawrocket 3]

Quote

I think though that the pendulum has swung way too far into the "bottom line rules" direction, leading to short-term benefit decisions that are clearly terrible long-tern investments.

Indeed. And I think that the market will bear this out. The companies making foolish short-term decisions will go kaput. Check out Enron - looked great and a large influx of money. The company looked to be doing great, but the lie can't keep going and down it goes.

Look at the 90's tech stock economy. Man, it was humming, but foolhardy. KAPUT!

Others saw these as crashes and the loss of billions of dollars. Perhaps I am rare in viewing these events as merely "market corrections." Yes, the tech stocks were over-inflated. Yes, Enron was shaky. Down they come.

Plenty of people lost a lot of money. That's sad. If there was criminal conduct that caused it then punishment should ensue. But they also operated as a lesson to other businesses.

What's the first responsibility of a corporation? The same as any business - "stay in business." Second? "Make a profit." Third priority? "Make a large profit." Fourth priority? "Make a large profit now and in the future."

Businesses and corporations can only perform these responsibilities by sound business practices and products and services that provide social utility. Unless there is a benefit to the population for a price the population is willing to pay, say goodbye to your business.

My wife is hotter than your wife.

[kallend 2,151]

Quote

Quote

I think though that the pendulum has swung way too far into the "bottom line rules" direction, leading to short-term benefit decisions that are clearly terrible long-tern investments.

Indeed. And I think that the market will bear this out. The companies making foolish short-term decisions will go kaput. Check out Enron - looked great and a large influx of money. The company looked to be doing great, but the lie can't keep going and down it goes.

Look at the 90's tech stock economy. Man, it was humming, but foolhardy. KAPUT!

Others saw these as crashes and the loss of billions of dollars. Perhaps I am rare in viewing these events as merely "market corrections." Yes, the tech stocks were over-inflated. Yes, Enron was shaky. Down they come.

Plenty of people lost a lot of money. That's sad. If there was criminal conduct that caused it then punishment should ensue. But they also operated as a lesson to other businesses.

What's the first responsibility of a corporation? The same as any business - "stay in business." Second? "Make a profit." Third priority? "Make a large profit." Fourth priority? "Make a large profit now and in the future."

Businesses and corporations can only perform these responsibilities by sound business practices and products and services that provide social utility. Unless there is a benefit to the population for a price the population is willing to pay, say goodbye to your business.

Without disputing anything you say, there is an element of "Prisoner's Dilemma" about the way business operates, in which corporations making good long term decisions can get eaten up by those who defect.

For example, taken to it's extreme, how can outsourcing to Asia or Mexico really be good in the long term for business, since eventually you impoverish all your domestic customers. Yet in the short term the agressive outsourcers are the winners.

...

The only sure way to survive a canopy collision is not to have one.

[pirana 0]

Quote

What's the first responsibility of a corporation? The same as any business - "stay in business." Second? "Make a profit." Third priority? "Make a large profit." Fourth priority? "Make a large profit now and in the future."

Ah yes, the ugly little chink in the armor of capitalism that occasionally raises it's head. Any system that has the accumulation of wealth as it's driving force (it's incentive) can be at best only at truce with issues of social inequity. When the bottom line is to accunulate money, there just isn't much reason to give it away, or do anything that results in not making the most you can.

Aside from preventing violent revolution, there is no incentive for a good capitalist to give away any of their cash. Even then, a good capitalist is out there making money on the revolution. Those that don't, most likely just guessed the wrong way.

As for the bottom line, it's making money, not staying in business. There often is lots of money to be made by going out of business, and a good capitalist recognizes those opportunties also. I'm not saying I'm a fan of all the side effects; but overall, capitalism is the best thing going - for now.

Capitalism is when one man takes advantage of another. Communism is the other way around.

" . . . the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging them and kicking them into obedience." -- Aldous Huxley

[lawrocket 3]

Quote

there is an element of "Prisoner's Dilemma" about the way business operates, in which corporations making good long term decisions can get eaten up by those who defect.

Without a doubt, you are correct. Remember back in the 1980's (you may be too young for this, kiddo) when "Buy American" was such a huge thing? It was advertised in commercials. The problem was that the Japanese products, cars, etc., were outselling American goods because they were cheaper and better. The American automobile just couldn't compete.

"Buy American" was actually a failure. So the American companies, in order to maintain their viability, had to adjust and adapt to the modern marketplace. By the mid 1990's, American vehicles were again becoming super-competitive, and presently the auto industry is doing okay.

Also, you can watch any number of movies from the mid-70's to the early 80's and find out that a key issue back then was the continuing closure of the steel mills. Of course, most of them closed, and for some reason American ingenuity seems to head off those issues. There was a great deal of hardship for those people and towns whose economies were based on those mills. Some areas have not recovered. Plenty have actually moved forward.

The news was on NPR this morning - for the first time this millenium, Silicon Valley added jobs. While there is a prisoner's dilemma with respect to the arguments for outsourcing, there is also a long-term cost for those who minimize risk in the dilemma.

In another few years, something will come along. It turns out we needed not be too concerned about the Japanese owning the US. All it did was force us to become better. I don't have a problem with market corrections, and I certainly don't take too much issue with businesses managing the bottom line.

Even today, banks and lenders are gettign spooked by high property values. They are looking at the long-term possibilities of a property value crash, as happened in the 1980's with the S&L crisis. Furthermore, people are far more aware of the fact that money saved in a bank might not be there above FDIC limits.

Corporate responsibility? We see it happening every day in the mortgage business. It screws some of the poor and middle class - make no mistake. But mortgage companies, in managing long-term risk above short-term commissions and fees, are focusing on the long-term. Many find it socially irresponsible, which is a value judgment.

My wife is hotter than your wife.

[lawrocket 3]

Quote

When the bottom line is to accunulate money, there just isn't much reason to give it away, or do anything that results in not making the most you can...Aside from preventing violent revolution, there is no incentive for a good capitalist to give away any of their cash.

Really? Then why is there so much giving and donations in the American corporate world? Why is there so much going on with that?

Because charitable giving can be highly capitalistic in its application. You've got the Bill and Melinda Gates Foundation, for one. They are huge in donations for minority scholarships and for Third World health issues. Gates donated 5 billion to the foundation in 1999. Why?

First, he probably got a tax break. Second, it gets Gates named as a "Time Person of the Year." To some people, that means something.

You've also got loads of celebrity galas going on. Charitable $10k per person appearances that they do. Of course, none of these are to help the poor or anything, since bums aren't usually considered a fashionable issue. But, these celebs get their pictures in the Hollywood rags and TV Entertainment informercials like Entertainment Tonight, and people say, "Wow. What a good person." This increases their marketability. Thus, more money. "See? I'm a good person" is a highly useful way to make more money.

Jeez, my wife and I donated 500 dollars each to tsunami aid and Katrina relief. (Pat me on the back). It also happens that we are interested in making money. But, dirtbag scummy capitalist swines like me also have a heart. So we donate because it makes us feel better, and we do a better job of helping people than some freaking government can.

There is a helluva good incentive to donate. It's because most capitalists have hearts, too. This may surprise the random commie, who think that they have a monopoly (ironic, isn't it?) on the "heart" issue. It's why pinkos spend more time hating on corporations, the wealthy, etc., than capitalists.

As an aside, there's a lot of money to be made in communism and leftist ideology. I've thought about taking that racket up. Look at the wealth and power of Castro. Look at the money brought in by moveon.org. I'll bet moveon.org's founders and board aren't living in some run-down studio apartment in the bad part of town.

Quote

There often is lots of money to be made by going out of business, and a good capitalist recognizes those opportunties also.

Sure there is. Sometimes, going out of business is a useful way to make money. Your business isn't doing as well as it did, and you see foresee bankruptcy in the next 18 months. So, you decide, "Dang. I need to get out now." You liquidate your company and pocket some money with for it. What's wrong with that?

Oh, yes. What about the employees? What about the city? What about all of the tax revenue the city, county, state and feds are gonna lose? Well, that's too bad, but if I am expected to ruin myself in the process, what good does that do?

Yeah, those employees are gonna have a tough time. So am I. It'll be hard for them. But they'll be jobless in a year or two, anyway. Also, you actually find yourself able to honor the paychecks you give them. Even better, you can pay off your creditors! Imagine that! Instead of giving creditors 30 cents on the dollar under Chapter 13 protection, you actually pay them in full. Wow. Something done to help lower the interest rate everyone else pays.

Closing an unprofitable and inefficient business is a GOOD thing for society. Why not use those resources where they can be better suited to perform a greater societal benefit?

Is it society you are interested in or individuals? If it is individuals that you are interested in, then you have to make a value judgment on whether it makes sense to keep these people hanging by a thread when the fall would be a six-footer, or by hoping that thread holds while pulling them to a far higher drop. If you value society, then inefficient businesses and uses of capital should be eliminated.

Quote

capitalism is the best thing going - for now.

I agree. I think it's the only system that fully accounts for human nature. I haven't got a better idea for a basis of economy.

My wife is hotter than your wife.

[Newbie 0]

Quote

With shareholders; a corporation's first responsibility is the bottom line. The shareholders can choose to be good community citizens with their dividends.

What about businesses that do not have shareholders?

"Skydiving is a door"
Happythoughts

[billvon 3,120]

>What about businesses that do not have shareholders?

Then it does whatever its CEO wants to do.

[mnealtx 0]

Quote

What about businesses that do not have shareholders?

Then, as Bill said, it does what the CEO wants. If they've got the extra cash laying around to help in the community, great! If they want to fill a swimming pool with it like Scrooge McDuck, that's great too...

You get much more charity voluntarily than by trying to force people to give.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[Newbie 0]

Quote

Corporate responsibility? We see it happening every day in the mortgage business. It screws some of the poor and middle class - make no mistake.

Can you explain what's happening and how it's affecting the poor/middle classes?

"Skydiving is a door"
Happythoughts

[Newbie 0]

Quote

Quote

What about businesses that do not have shareholders?

Then, as Bill said, it does what the CEO wants. If they've got the extra cash laying around to help in the community, great! If they want to fill a swimming pool with it like Scrooge McDuck, that's great too...

You get much more charity voluntarily than by trying to force people to give.

Being a responsible business is not about giving money to good causes though, is it?

"Skydiving is a door"
Happythoughts

[billvon 3,120]

>Being a responsible business is not about giving money to good
>causes though, is it?

Fiscally responsible? No.

Responsible to the community? Yes, generally it _does_ mean that. (Or more accurately it means _helping_ the community it chooses, whether that means giving money, organizing blood drives, giving its employees time off to do charitable work etc.)

[mnealtx 0]

Quote

Quote

Then, as Bill said, it does what the CEO wants. If they've got the extra cash laying around to help in the community, great! If they want to fill a swimming pool with it like Scrooge McDuck, that's great too...

You get much more charity voluntarily than by trying to force people to give.

Being a responsible business is not about giving money to good causes though, is it?

They are already bringing jobs and income into the community, including the surrounding businesses (textile worker hitting the grocery on the way home, for example) - how much more do you want them to give??

This is sounding more and more like the classic communist mantra, translated into a business model.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[Newbie 0]

Quote

>Being a responsible business is not about giving money to good
>causes though, is it?

Fiscally responsible? No.

Responsible to the community? Yes, generally it _does_ mean that. (Or more accurately it means _helping_ the community it chooses, whether that means giving money, organizing blood drives, giving its employees time off to do charitable work etc.)

So do you think this "funding in kind" then (giving resource instead of cold hard cash) is a good idea?

"Skydiving is a door"
Happythoughts

[happythoughts 0]

Quote

It turns out we needed not be too concerned about the Japanese owning the US. All it did was force us to become better.

For some things. For cars, it is import quotas. If they did not exist, very few cars would be being built in the US. The rule became, "you can only import Z number of cars". To get around that, foreign companies started building cars in the US.

Saturn was a good response. My fav commercial was the Chrysler ad with Iacocca stating, "Chrysler has increased the quality of its product by 33%". Did the old product suck or what?

For a great while, some US products sucked and only existed by regulation.

US made outboard motors for example. They didn't have features like oil-injection while the Japanese motors had used it for 7 years.

Some of the US motors like Force were so bad that there was no resale value for them.

[happythoughts 0]

Quote

short-term benefit decisions that are clearly terrible long-tern investments.

It isn't always for the good of the company. Some decisions are for the short-term good of a manager. I see it more and more.

My last telecom contract, software architecture was aligned under the Finance VP. At the end of October, he determined that he was going over budget, so he layed off 130 contractors without any analysis.

My small group of 8 was doing cost reduction and had saved the company $80million that year.

However, if the VP went over budget, he didn't get his performance bonus. The long-term effect of the decision was measured in millions.

I see management making short-term decisions based on personal interest, not any value to the company. Bonuses are tied to 6-month goals, not a 5-year or 10-year plan.

[lawrocket 3]

Quote

Quote

Corporate responsibility? We see it happening every day in the mortgage business. It screws some of the poor and middle class - make no mistake.

Can you explain what's happening and how it's affecting the poor/middle classes?

The skyrocketing property values have led the mortgage companies to start field reviews of hoe values in the last year or so. Let's say that a person agrees to buy a house for $275k. The buyer only has 15k as a down payment, leaving a need for a note for $250k.

The lender looks at property values and says, "Okay. This house was valued at $160k 24 months ago. Now it's up by $90k, making an appreciation of 60 percent in two years. What if this house is overvalued? What if property values go down."

So the mortgage company looks to what it can be sure it can get back in the event of foreclosure and trustee's sale. The mortgage company then says, "I think this house is only worth &210k, and that's all I will loan."

Now the buyer is left to come up with another $40k to buy the house. That wouldn't be a problem - usually - for the person who is moving from a house he already owned (his propery value increased, too). But this first-time buyer cannot get the money and loses out on the house.

The "little man" is the one who is most implicated by this. The first-time buyer.

This is all done because the lender wants to make sure of its long-term viability (of course, the lender then sells the loan to another financial institution, but that's getting it complicated) and does this not by charity, but by ensuring it is a smart loan. The mortgage companies don't look at the person's character, etc. They look at numbers to make money.

The little man suffers in this. But, to ensure the viability of the company and the system, it's probably the way it's got to be.

My wife is hotter than your wife.