Companies etc (1 Viewer)

[neo o]

"The only responsiblity of a company is to its shareholders." Discuss.

 

[katie_tully]

-Employees?
-Consumers?

Depends what sort of company it is I guess... but, if they don't look after consumers and their employees, there will be no company....

 

[anti]

I work at Westpac and I can explain the Westpac work cycle thingy.. which involves customers, employees, shareholders and the community.. yada.. yada..

In this day and age, it's impossible to only care about your shareholders unless a) you are the only employee and b) you are the only shareholder. On one hand people will not work for you if you don't offer them the sort of incentives that other companies do. On the other hand, shareholders will be cautious about buying shares in a company that does not appear to care about its employees, because they realise that a company with poor morale will not perform as well as it could.

 

[Xayma]

Broadly yes it has only the responsibility to it's shareholders.

The responsibility to it's employees, customers etc, are necessary to keep the business afloat, and be responsible to it's shareholders.

It has a responsibility to it's employees to provide a safe working environment, which in turn can be seen as a responsibility to it's shareholders, nobody will work for an unsafe company so they need to provide the safe working environment to have the company running.

 

[LeftrightOut]

A company exists solely to turn a profit for shareholders. Anyone who thinks that a company is there to provide for the well being of staff or service a customers needs is naive. The bottom line is profit, if you do not aim to make the best return possible in most circumstances you would not have a job on the board very long.

Anything positive a company does is incidental to its main purpose.
Let me give you 2 examples of arguments people might put:
"Oh but they contribute to charity" - As would I if it meant I could get free publicity and a nice tax break.
"Staff at company X get good benefits" - Only as long as they are seen to be cost effective to providing to the profits of the company at a low cost. Many companies now use outsourcing for what they deem to be "non-core" activities. This has often come back and made things worse for the company down the line as they no longer control that function.

There are a number of laws constantly being implemented to try and get a company to be more responsible to others not just its shareholders. If in their current situation they would be responsible to a larger number of stakeholders already then these laws would not need to be thought of.

 

[LeftrightOut]

It has a responsibility to it's employees to provide a safe working environment, which in turn can be seen as a responsibility to it's shareholders, nobody will work for an unsafe company so they need to provide the safe working environment to have the company running.

It has a legal responsibility to do this, if a large company can get away with doing business in an unsafe working environment at a lower cost than paying the legal fine they would do so. Lots of people will and do work in unsafe working environments at various companies.

Things like heights, lighting, sick building syndrome, noise pollution, bullying, sexual harrasment, equal opportunity, overtime conditions, holiday allowances, and many many more things that if they were not specifically legislated for a company would simply not adhere to. Even with legislation in place some companies do break these on a regular basis.

 

[LeftrightOut]

-Employees?
-Consumers?

Depends what sort of company it is I guess... but, if they don't look after consumers and their employees, there will be no company....

Do the thousands of companies who have outsourced their local work force to countries with less restrictive employment condition laws look after employees? Once they have this outsourced they don't care how things are done as long as they are. Take clothing companies for example, as long as they get the clothes they don't care that someone was paid 2 cents to make it, in fact they're happy because it means they make more profit.

Does microsoft look after consumers in the security they provide in their products? Does Telstra retail charge fair rates when compared to other ISPs and their products? No? Why do they survive? Not because they care but because they are large enough and have a strong grip on mindshare in the general population as being one of the few reliable solutions.

As for suppliers, does a large purchasing power company like Walmart or McDonalds care that their suppliers are selling products to them for only cents more than it cost to make? Of course not, if this company went bust they would just find the next supplier who would be willing to provide the same product for the same price.

 

[anti]

Big companies don't necessarily provide community services because of a tax break or good image to the public.

Westpac (ahh here I go again) offers one day off for community service for every employee. A paid day off where you / your team go work for whatever good charitable purpose.

Of course if you talk about the fact that if employees are happy they provide better services and thus better returns and shareholders are happy then I can't win.

 

[anti]

Outsourcing doesn't always work as planned. Sure if you outsource to Vietnam or China you will make more produce at cheaper prices, but people may stop buying your goods, or buy less because of poor quality or a concern about the wellbeing of those people, etc.

Outsourcing to a large company such as Telstra gives huge headaches since their customer service is, well, pathetic. I highly doubt that in the next few years (maybe ten) that outsourcing will still be seen as the 'quick, high level' solution for all but several industries.

 

[Generator]

Greenwashing... Does the company actually care or is it merely trying to reinforce its position within a dynamic business/consumer world?
For what it's worth, I agree with LeftrightOut.

 

[LeftrightOut]

ok let me answer the points.

A company DOES NOT CARE about the community and employees, they may have a legal obligation which many continually break anyway.
Here let me give you some more list of things companies do:
Close branches /stores that are deemed not profitable enough.
Push for a casualised workforce that has less rights as employees and cost less.
A company does not care about suppliers, you will not find many case studies where any company has come to the aid of its supplier if the supplier was seen to be inefficient yet you will see many instances where a supplier has gone under because a company has ofund someone cheaper.

Whether you support outsourcing or not it does exist, and the simple fact that it does and has been so popular just goes to further illustrate my point that they DO NOT have an obligation to their employees (your job is gone) or the community (your unemployment is up). There are many case studies out there that showcase the failures of outsourcing, there are some companies who have moved back to insourcing front line services but they are only doing it because it hurt their bottom line, not because of a fuzzy feeling they might get by providing a few hundred people with jobs. You will also notice many of those in-sourcing are doing so only for their high end clients whom they really should not have entrusted to a non-accountable system anyway.

I think you will find outsourcing will continue well into the future, don't just think of places like India but also outsourcing to other companies within the country that offer cheaper alternatives for expertise.

natstar while I appreciate your essay and i'm sure it was a lovely mark for an ethics subject I have been through restructures, downsizings and seen the insides of guerilla marketing within large and small companies. They all do it for one reason, make more money. I have also written essays through my degree on ethics and related topics, but they would get laughed at in the corporate world. Everyone nods saying yes we follow those principles but don't listen to their words, look at their actions.

anti that one day off is that per year? You might find that is part of the award or enterprise bargaining agreement along with the caring for relatives leave, sick leave, recreation leave, training leave, graduation leave and so on. I have the same provisions (few days paid leave for community services) and I am nowhere near the banking sector.

 

[Minai]

Companies do have legal responsibilities.
There are statutes such as the Trade Practices Act 1974 (Cth) and Corporations Act 2001 which they must comply with or face legal action.

Companies cannot engage in behaviour that is anti-competitve (such as price fixing agreements) for example, and if they do, they breach the TPA and face damages and/or fines. They have a legal responsibility.

 

[Not-That-Bright]

There's always the tripple bottom-line Dick.

 

[Not-That-Bright]

You can't be a solely profit-run business these days and satisfy your shareholders..... the business world just doesn't work like that anymore which is one reason why it's so hard for small businesses.

Small businesses are required by lots of larger contracting organisations to have like environmental statements n shit like that explaining about their commitment to the environment.... alot of bs if u ask me.

 

[LeftrightOut]

Companies do have legal responsibilities.
There are statutes such as the Trade Practices Act 1974 (Cth) and Corporations Act 2001 which they must comply with or face legal action.

Companies cannot engage in behaviour that is anti-competitve (such as price fixing agreements) for example, and if they do, they breach the TPA and face damages and/or fines. They have a legal responsibility.

If a company can make more profit by ignoring the law and the consequences of such actions would be less costly than implementing them they will. Back to profit we go.

 

[Minai]

If a company can make more profit by ignoring the law and the consequences of such actions would be less costly than implementing them they will. Back to profit we go.

Well, current penalties are pretty hefty these days. I remember one incident where Telstra was fined $10 million PER DAY where it breached the TPA

 

[LeftrightOut]

Well, current penalties are pretty hefty these days. I remember one incident where Telstra was fined $10 million PER DAY where it breached the TPA

But you will notice they will always send in the lawyers first to see if they can keep doing what they are instead of changing straight away just in case it works.

If this was a truly free market economy the entire Australian landscape would be different. the only thing holding back companies from doing as they please right now are the laws, and they continually try and get around those, so they see no major obligation to them.

 

[LeftrightOut]

Theres maccas for example- they adhered to the needs of consumers today, by changing their menu and adding healtier opinions.

? Haven't seen the nutritional statistics on their new healthy meals have you? I would consider it to be more of a response to try and market to the people who have gone on an uninformed health kick which has been the new fad in recent years, if they could make money by selling grease on a stick you don't think they would? What industry do you think McDonalds is in? Where do you think the global giant is making their money from? Their franchisees might be in the fast food business, the global parent company most surely is not.

Then theirs Nike, who used outsoucing for the manufactuering of their products. They also didnt care about distributing to many middle eastern and asian nations, becasue they didnt see a profit there, but they are now doing this becasue they have listened to consumers who decided that the people in these nations welfare was important.

? What does distributing have to do with manufacturing? Are you saying it's ok to exploit people in another country as long as you sell them their own work back? They used sweatshops, they most likely still do, even if it's not in an asian country, Australia has it's fair share of backyard sweatshops too you know. but if you elaborate on what you are trying to say I wil structure an argument to suit.

Theres many more example of businesses that adhere to consumers and societies needs and are far more profitble than their counterparts.

So far you haven't given me one that I would accept as being non-profit motivated.

So in response to this topic. The key word is responsibility. Yes they have a responsibility to their shareholders- to return a profit. But to get this profit they have act responsible to their consumers (who give them the money to make profits), employees (work for them in order to produce products, which are sold to consumers to get a profit). They dont just have the responsibility to their shareholders, but stakeholders- who impact from the businesses activities.

No they don't have to act responsibly at all, like I have said many times with examples.

 

[katie_tully]

After spending the last hour reading up on this stuff (Last time I did anything remotely like this was 9th grade Commerce)...

I live in the bush. As for consumers being looked after? Telstra and other large corporations are a great example of how the consumer is not looked after.
Of course they abide by the legalities, but at the end of the day it really is the shareholder who gets looked after.
Shareholder = money.

The whole objective is to make money, and once you've established yourself as a conglomerate like Microsoft, and you monopolise the industry, employees/consumers are runner up to shareholders.... You don't need to please your staff to make a profit.

 

[LeftrightOut]

I dont eat Mcdonalds. If they could make more money selling grease on a stick, then why did they introduce the salards plus menu. You say its in response to the health kick people have gone on. Isent that adhering to consumers needs. It may still want to make money, but havent they regognised consumers interest by the fact that they have extended their menu. I would say thats acting responsibiliy to consumers.

Because they were noticing that they could make more profit by diversifying. If the profit possibility of the new range would have been low they would not have gone into it. they are acting for their bottom line. Come on you're doing marketing they should have mentioned the 4Ps by now and explained how products get developed, not out of the goodness of their heart, but because there is a possibility of making more money on it.

Distributing and manufacturing are part of the businesses activities, which ive been saying all along. I never said that its ok to exploit. But i did mention that there are laws regarding the responsible treatment of employees.

Not in sweat shop countries there aren't. Also many multi national companies use these countries with less laws to exploit workers and not get prosecuted in their home country. Their argument is the work isn't done in a first world country so they can't be brought to court over it. they are still showing disregard for their employees, which si what my argument is, they have found a cheaper source of labour and are using it, they don't care, they don't have an obligation, there is a cheaper way, they have taken it.

I never said that businesses never have a non-profit motive. I said that there are alot of businesses that see acting responsibly to society is more important, but i never said they dont have non-profit motive. These businesses regonise that in order to make a profit, they have to recognise the needs of consumers and society. The Body Shop for example is one of Australia's most successful cosmetics/personal care companies (whatever category they fit into)...They recognise that acting in compliance to social responsibility, yields more profits. The fact that consumers today are so into the societal marketing approach, is why this company is so successful.

Oh you mean the company that has been alleged to have done the following?

The evidence in my mind is overwhelming. When the company first got started, Anita Roddick," the flamboyant founder, "didn't have any interest in animal testing as an issue. Her cosmetologist, Mark Constantine, insisted on having a no-animal-testing policy, and then she got interested when it made money."

and

As far back as September 6, 1989, the Regional Court of Dusseldorf, Germany, barred The Body Shop from using statements such as, "We test neither our raw materials nor our end products on animals," on grounds this would be misleading advertising. Upon appeal, the verdict was upheld by the Higher Regional Court of Dusseldorf, which found no substantial difference between the animal testing policy of The Body Shop and that of other cosmetics manufacturers.

http://www.animalpeoplenews.org/94/8/body_shop.html
http://www.mcspotlight.org/beyond/companies/bs_ref.html

Whenever you get an ad or PR exercise from a company you can bet it's profit oriented to make you believe in something that may not entirely be true.

Its the fact that consumers today, with the assistance of all the consumer action groups, all the statutes/legislation regarding how businesses conduct their activities, etc etc etc, are so concerned with buying products from compaines that not only meet their personal needs, but also the needs of other stakeholders in society.

You don't seem to realise, a lot of these companies are pulling the wool over your eyes simply because they know they can and it's good PR to help their profit margins.