Corporations: good or bad?
Blog by Jennifer Collins
Whether Ford, Nike, Royal Dutch Shell, Google or Microsoft – they all are well-known corporations. A corporation, by definition, is a large company or a group of companies authorised to act as a single entity, which legally exists separately from its shareholder owners. However, there is more to the role of corporations such as: do corporations improve or hinder societies? Who are the winners and losers in our corporate dominated world? And in what ways is corporate power challenged? More specifically: social movements, activists and non-governmental organisations (NGOs) have all brought to our attention corporate responsibility. Thus, who should be held responsible for a corporation’s actions?
At the core of most corporation’s structures is financial investment from shareholders. There is usually a board of directors and a CEO elected to run the corporation. This structure can make it difficult to decide where corporate responsibility should be held. Corporations are constantly expanding, and some earn profits, which are higher than entire countries’ GDPs while the number of their employees exceeds that of some countries’ populations. This has been made possible by corporations intensively seeking to increase profits, merging corporations together or by corporate takeovers to create a super corporation, for example, there are plans for 21st century Fox to take over Sky.
A pressing issue of modern society is the high level of inequality that globalisation and corporations have aided, which has, in turn, created ‘winners’ and ‘losers’ of globalisation. Many, particularly from neo-liberalist approaches, comment on positive contributions corporations can make to developing countries, for example, the Asian Tigers (Hong Kong, Singapore, South Korea, Taiwan). Whilst recognising that there are some issues, overall, the impacts of corporations offshoring and outsourcing into special economic zones (SEZs) within these countries has rapidly expanded their economies which allowed profit to be invested into societies, creating strong educational systems and highly skilled workforces. Globalisation and corporations saw other positive changes such as a ‘free market’ approach being accepted, increase in jobs with promotion potential and the formation of ‘Asian middle classes’ with surplus value to spend. However, at the same time corporations can have devastating effects on communities, environments, and economies – particularly for those in the poorest countries as they face corporate exploitation
One example of a ‘loser’ of corporate interference is Lagos, located in Nigeria, which is classified by the World Bank as one of the ‘poorest of poor’ countries. Nigeria is one of the world’s largest oil producers and Lagos is its commercial capital. Despite this, the majority of Lagos’ population are living below the poverty line with oil companies evicting people from their homes to allow oil mining. One key disadvantage of corporations is environmental degradation. Many are attracted to developing countries as there are less ‘red tape’ restrictions, especially in SEZs, concerning environmental protection. However, this causes problems such as water pollution, air pollution, over consumption of non-renewable energy and dumping waste. The concepts of the ‘carbon bubble’ and the ‘divestment movement’ explain that the valuation of companies is dependent on fossil fuel based energy production and its reserves. If reserves are not burnable they are worthless and so will be any investment. However, if they are burned they cause major climatic changes, which leaves corporations with the choice of contributing to climate change or shareholder value declining.
When discussing the negatives of corporations, the question of ‘who is responsible?’ almost always arises. The British Social Attitudes Survey reveals that 88% of respondents think corporations have the resources and influence to make a change at international, national and local levels, while 78% think they should do it and be held responsible for their own damages whilst potentially using their power for the greater good of society. From a sociological perspective, Friedman (1962) takes a shareholder approach when deciding responsibility. He believes that corporations should have no responsibility to the public as their only concern is to increase profit. In this view, shareholders in their private capacity are responsible for this, while companies concerning themselves with the community rather than focussing on profit could lead to totalitarianism. Contrastingly, in her book ‘No Logo’ Naomi Klein (2003) writes from an anti-globalisation perspective and states that corporations should be held fully responsible for their actions. Klein (2003) further highlights the extremity of corporate disadvantages such as sweatshops and aggressive advertising. From the perspective of an expert in corporate social responsibility with a background in corporate business, Baker’s blog presents corporate issues, with one post explaining Baker’s view that as a result of their extreme wealth corporations have a moral responsibility to give back to societies, aid sustainable living and serve a purpose to communities that they use to increase their profits.
So what is being done? Many changes seen in corporations have been a result of public driven social movements, with the example case of Royal Dutch Shell’s Brent Spar as proof. King & Pearce (2010) highlight how social movements use multiple strategies to point out corporate flaws and undermine corporate power such as using public stunts to attract media coverage, protesting, and by boycotting the corporation’s products which in turn creates new markets and popularises brand alternatives as they replace branded products. Government intervention has also seen changes like the Paris Climate Change Conference (2016) alongside social media campaigns to spread messages. In response to the public’s demands some corporations are addressing the matter, though some argue that this is not always done on a big enough scale or by enough corporations. Corporations have focussed on rethinking management, with the role of CSR managers becoming increasingly more popular. The day of a typical CSR manager starts by trying to “convince everyone else in the business to do things they don’t really want to do because it’s the ‘right thing to do’”. After years of scandals about ethical crimes reported about Nike, the corporation is showing evidence of change. The Nike website reflects these changes, with a page called ‘sustainable innovation’ and ‘community impact’ along with publishing corporate reports for the general public which motivates them to reduce their negative impacts. Nike has also created 2020 targets to minimise their environmental footprint, such as ‘reach 100% renewable energy’ and ‘eliminate footwear manufacturing waste going to landfill or incineration’.
Overall, there are both good and bad aspects of corporations in modern society with it being fair to say that developed societies are perhaps the ‘winners’ when it comes to corporate expansion whilst developing societies experience corporate exploitation. As corporations become more powerful than ever whether they should have a responsibility to give back to the community and how they should use their power is questioned.
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