Reinventing the Corporation
October 3, 2001
Week 2
Jeremy Vigil
INSTRUCTOR
Bob Weltzer
The reading I have chosen is Reinventing the Corporation. This reading discusses how businesses have buffered themselves from social and community responsibilities by becoming a joint stock company. Corporations were not always completely buffered from community responsibilities. During colonial days joint stock companies were made responsible for their actions by charters. These charters required the joint stock companies or corporations to keep public interest a top priority. The charters had a time limit and could be revoked if the government determined the company wasn’t living up to their agreement. Up until the early 1900’s, companies followed this practice. Then States wanted more tax revenue so charter laws were eliminated in order to create more joint stock companies. States collected taxes from these companies if they were chartered there. The writer, Jonathan Rowe, argues that the elimination of tough charter laws is the reason for the decrease in companies’ social responsibilities.
I don’t agree with Jonathan Rowe. I believe that the charter is a guideline for corporations to follow but it will not compel corporations to become more socially active. Jonathan Rowe argues that the charter has positively affected the way corporations do business in the past but the people today are different. We are money hungry and time dependent people. In order to change the way corporations deal with public interests we need to change society. Toughening the charter laws will not change business practices by themselves because there will always someone who will find a loophole in the laws or change them to suite themselves. Corporations need to govern themselves
I do agree there is a problem with the charter laws but that is only the first step towards change. We need to teach all “major players” being socially responsible is profitable. A short-term investment in a community gives long term gains for a company. If a company is respected profits will follow. Consumers will buy your products. Many people today will not buy in a store that ignores community concerns. Small businesses have realized that in order to profit they need to be involved in the community. Unfortunately this insight is lost when the larger corporations buy out these individual companies. Smaller businesses live in the community so they are greatly affected by its reputation. Larger corporations are only interested in name recognition. The difference is name recognition applies to your company while your reputation applies to the people. I would rather buy from a friend that lives in my community than from a name on the side of a building.
Shareholders are driving this lack of corporate responsibility buy demanding profits over communities. I don’t believe this is because the lack of caring, but the lack of involvement most shareholders have. When you are the owner working directly with the business, you also work with the community you do business with. This involvement opens your eyes to the community’s concerns. As a shareholder the only involvement you see are quarterly reports and news reports the media chooses to show you. You don’t see the seed planted in a community when you put in the extra effort. The seed you plant can be as small as letting a HOA use your facility for a monthly meeting. This can grow into a permanent relationship so when the business needs help the HOA will step up to the plate by bringing more business. This relates to the example given in the reading. A textile owner’s mill burned to the ground, but instead of moving to Mexico where it is cheaper. He announced without hesitation that he was going to rebuild in the same city. This caused the community to respond with support. This also increases employee morale because the employees are part of the community. This causes a positive domino affect. Employee morale, productivity, and profits increase.
Employees are a major part of a company’s social behavior. Employees are the ones that work directly with the community so they know what community social issues need to be addressed. They are the foundation of the company. Companies need to learn that when there is a financial problem layoffs do not solve it in the long run. Companies will save money during the year of the layoffs. A year later, companies will spend more money trying to train to get back the experience they lost the year before.
Jonathan believes more legislation is needed. I believe legislation is not the only solution. Legislation can create barriers for major corporations. They already lack the ability to quickly adapt to their environment because of their enormous size. Legislation only hampers this affect.
Charters can’t change stakeholders’ perceptions. Stakeholders in the long run are responsible for the social change of a business. Employees must use the chain of command to inform the higher ups of community problems. Consumers must use their buying power to inform companies we only buy from social conscience companies. Shareholders must not be short sighted and stick with the companies for the long haul not the next bad report. Corporations need to believe that the community comes first and shareholders second.