Chapte

1
The Study of Business,
r

Government and Society

 Discusses the importance of understanding the field of
business, government, and society (BGS) and the
interplay of the relationships among these elements.
 Defines BGS and describes how economic, political and
social philosophies or ideologies shape and influence the
nature and scope of the BGS relationship.
 The primary focus is on the interaction of business with
government and society, how it shapes and changes them,
and how it is influenced, in turn, by political and social
pressures.
 Business
 What is business?

 How does business actually work?

 What is its purpose?

 What are its roles and responsibilities to customers,

government, and the wider society?

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 Business
 Business can be defined as actions undertaken by
individuals and/or institutions in their self-interest.

 These actions include management, investment,

finance, accounting, manufacturing, marketing,
services, trade, procurement, and related activities.

 Businesses can either be small (e.g. shop), or large (e.g.

multinational corporation) whose prime purpose is to
make profits by providing goods and services that
satisfy human needs.
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 Business
 Business has to be aware of its role and
responsibilities, especially to its customers who
purchase their goods and services because it is their
most important relationship.
 The relationship has to be effectively managed
because reputational damage can be very costly and
sometimes irreparable (e.g. Volkswagen scandal,
Nissan scandal (2019); Walmart, the largest US arms
retailer, stopped ammunition sales as a result of
public pressure (2019); Me Too Movement exposed
sex scandals (2018).
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 Business
 The relationship between business and government is
equally important and, often contentious, therefore, it
has to be managed effectively because government is the
regulator and arbiter of competing interests.
 The relationship must never become so close that the
public starts to speculate whether the government has
been captured (state capture) by big business (e.g.
corruption scandal involving former South African
president Jacob Zuma and the Gupta family (2019); the
perception that French creoles, known as the one
percent in Trinidad, have close ties to gov’t - You Tube
video by Anthony Bourdain, (2018).
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 Government
 What is government ?

 How does government actually work?

 What is the purpose of government?

 What are government’s roles and responsibilities?

 How much does it cost to run government?

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 Government
 Government exists to serve the needs of the public.
It accomplishes this goal by providing clear
processes, procedures, institutions, and structures for
all aspects of executive management that direct
decisions and allocate resources.
 Its role is to ensure that citizens’ rights are protected
and they are treated fairly based on the law.
 It creates the enabling environment for businesses to
invest and stimulate economic activity. The World
Bank’s Doing Business 2019 Report ranks countries
according to the ease of doing business.
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 Government
 Government’s responsibility is to ensure compliance
with the law based on legislation, procedures, rules,
and regulations. In other words, it regulates business
and society in the public’s interest.
 Government is the final arbiter of social justice in
situations of competing interests. In short, it is
responsible for managing the economy and society
(e.g. in times of market failure involving companies
like CLICO; or social issues such as protecting
personal data from abuse by the largest tech giants
like Google and Facebook (2019).
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 Society
 What is society?

 Society can be defined as a network of human

relations that includes three interacting elements –
ideas, institutions, and material things.

 Ideas are intangible objects of thought that include

ideologies and values.

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 Society

 Ideologies are underlying philosophies that include

democracy and capitalism which comprise values
that provide a worldview.
 Values are enduring beliefs relating to choices in life.
 Institutions are formal patterns of relations that link
people together to accomplish goals. They are shaped
and influenced by ideas and ideologies, and
historical, economic, political, cultural, educational,
familial, legal, religious, environmental, and
technological issues.

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 Society
 Institutions have specific purposes in society. The
function of business is to make a profit by providing
goods and services to consumers at attractive prices.

 Businesses use material things (land, natural

resources, infrastructure, technology) to create new
wealth.

 What are the roles and responsibilities of society?

(Citizens should perform their civic duty, not only
voting, but also holding government to account).
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 Society
 How does society actually operate and what is its
nexus to business and government?

 Societies provide markets for businesses and

government regulates to ensure compliance with the
law and fairness in business practices.

 Some businesses operate as monopolies and

government seeks to ensure regulations are enacted to
provide fairness and equity (e.g. CCJ decision in
favour of Hard Rock Cement vs T’dad Cement Ltd.).
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 Four Models of the BGS
Relationship
 There are four basic models or perspectives which
present different worldviews that can be used to
describe and prescribe or explain how the BGS nexus
works in theory and practice.
 The market capitalism model depicts business as
operating in a market environment responding to
powerful economic forces but sheltered from direct
impact of social and political forces.
 In order to better understand this model, it is
important to know the history and nature of the
market economy and the explanation of it works.
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 Four Models (continued)
 Basic assumptions drive the market capitalism model
which lead to the following conclusions:
 (1) government regulation should be limited,
 (2) markets discipline private economic activity to
promote social welfare,
 (3) the proper measure of corporate performance is
profit, and
 (4) the ethical duty of management is to promote the
interests of shareholders.
 This model has many critics, however, who cite its
inherent flaws.
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 Four Models (continued)
 The dominance model depicts the dominance of the
political economy by big business.
 In this model, business and government dominate the
society and so there is a perception that business
corporations and a powerful elite control a system that
enriches a few at the expense of the masses.
 This model focuses on the inefficiencies of capitalism
which allow for the insulation of businesses from
pressures that can hold them accountable, weak
government regulation, and inadequate market forces to
ensure ethical behaviour.

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 Four Models (continued)
 The control of the political government by a powerful
corporate elite is akin to state capture or the control of a
parasitic oligarchy.
 The fear of transnational corporations is the most recent
manifestation of this phenomenon.
 The notion of ‘too big to fail’ is associated with this model
because conglomerates are so large and powerful that
they are risks to government, economy and society (e.g.
Too Big to Fail ; Commission of Enquiry into The Global
Financial Crisis; Inside Job; Disaster Capitalism; Commission
of Inquiry into Failure of CLICO and Hindu Credit
Union,,Trinidad and Tobago).
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 Four Models (continued)
 The countervailing forces model depicts the BGS
relationship as the interplay of interactions among the
major elements of society.

 This model highlights multiple or pluralist forces and

the power of competing interests, and the influence
of leaders.

 It shows that business is integrated into the wider

economic, social, political, cultural, and environmental
context in which it operates.
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 Four Models (continued)
 Business is a major initiator of change in society
through its interactions with government, production
and marketing activities, and its use of technology.

 Public support of business depends on its adjustment

to economic, social, political, cultural, and
environmental forces.

 BGS relations continuously evolve as changes occur

in relation to ideology, institutions, and processes in
the society.

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 Four Models (continued)
 The stakeholder model situates the corporation at
the center of mutual relationships with persons,
groups, and entities called stakeholders.
 There are two sets of stakeholders – primary and
secondary.
 Primary stakeholders comprise stockholders,
customers, employees, communities, and
governments, and depending on the corporation,
may include suppliers or creditors.
 Secondary stakeholders comprise activist groups,
trade associations, and schools.
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 Four Models (continued)
 The stakeholder model changes the priorities of
management away from those in the market to the
welfare of each stakeholder based on an ethical theory
of management.

 Managers have a duty to consider the interests of

multiple stakeholders and so the interests of
shareowners are not primary and never exclusive.

 This perspective goes beyond profits to respond to a

wider range of ethical and moral values.
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 Four Models (continued)
 However, there is no clear or objective measure to
evaluate the combined ethical and economic
performance of a corporation.

 Despite this challenge, however, in practice, many

large corporations have adopted methods and
processes to analyze their stakeholders and engage
them.

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 Concluding Observations
 The BGS field is multidimensional in nature and
scope. Thus, we focused our attention on the theory
and practice of the discipline, models and case
studies.
 There is no single theory to integrate the field and so
we focused on describing how corporations interact
with stakeholders.
 We also focused on the ethical duties of corporations
and managers as well as corporate social
performance and how it can be measured.

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