Business Power

• Business has tremendous power to change society, and the extent of this power is underappreciated

• Companies in the past have changed societies by altering all three of their primary elements-ideas, institutions and material things

• Eg. American oil company , Fur company and standard oil trust

Issues

• Too much power are they correct?• What critical thinking can probe to business

pattern ,categories and theories• Is corporate power strong, if ,at what level?• What are the two opposing perspectives?• What are the boundaries that could challenge

managerial power?

What is power

• Force or strength to act or to compel another entity to act

• Sources of power including wealth, position, knowledge, law arms, status and charisma

• Is unevenly distributed and all societies have mechanism to control and channel to for wide or narrow benefit

• Mechanism which are imperfect include government, laws, police, cultural values and public opinion

Business power

• Force behind an act by a company, industry or section

• When society grant authority for convert of resources efficiently into needed goods and services

• In return society gives corporation the authority to take necessary action and permits a profit

• Social contract legitimizes business power by giving it a moral basis

Legitimacy

• Rightful use of power and its opposite is tyranny or the exercise of power beyond right

• Corporations breach the social contract, exercising ‘power beyond right’ when they violate social values, endanger the public, or act illegally

• Business power is legitimate when it is used for the common good grounds of legitimacy vary between societies and over time

Levels and spheres of corporate power

• Corporate actions have an impact on society at two levels and on each level they create change

• Surface level business power is the direct cause of visible , immediate changes both great and small

• Deep level corporate shapes the society over time through the aggregate changes of industrial growth. Corporate create many unforeseen, indirect and invisible effects

Seven business environment Economic power Ability to influence events, activities and people

particularly property Surface level may immediately and visible affect stakeholders eg., by building or closing a factory Deeper level accumulating impact of corporate economic activity has sweeping effects eg., business create wealth to raise living standards

Technological power Ability to influence the direction , rate, characteristics and consequences of innovations Surface level transportation based on internal combustion engine eg., Henry Ford he turned expensive luxury of the rich into a mass consumer product Deeper level development of automob. Created unanticipated consequences ‘house of illegal activities on wheels’

Political power To influence governments surface level corporations give money to candidates and lobby legislatures . Deeper level around the world industrialisation engenders values that radiate freedom and erode authoritarian regimes

Seven business environment Legal power Ability to shape the laws of society surface level big

corporations have formidable legal resources that intimate opponents deeper level laws have shaped by the consequences of industrial activity like constitutional, civil and criminal laws

Cultural power Ability to influence cultural values, habits and institutions such as family .Surface created sentiment that gratitude for mothers should be expressed by a gift on a special day eg. John Wanamaker founder of a department store chain and a master of advertising started Mother’s day in 1990’sDeeper level cumulative impact of advertisement altered society like personal appearance over inner character

Environmental power Impact of business on nature surface level power plant may pollute the air deeper level emission of gases in the burning of wood , coal and oil to power industry has altered the chemistry of earth’s atmosphere

Seven business environment Power over individuals Exercised over employees , managers , stockholders ,

consumers and citizens Surface level corporations determine the work life and buying habits of individuals, at deeper level industrialization sets the pattern of daily lifePeople are regimented living by clocks, moving in routes, fixed by the model of an industrial city with its streets and sidewalks

Perspectives of Business Power• It is agreed that business has great power and

there is considerable disagreement whether its power is adequately checked and balanced for the public good

• Two basic opposing positions –dominance theory holds that business is preeminent primarily because of its control of wealth and that its power is excessive and inadequately checked

• Corporations can alter their environment in self-interested ways that harm the general welfare

Perspectives of Business Power• Pluralist theory holds that business power is

exercised in a society in which other institutions such as markets , government, labor unions, advocacy groups and public opinion also have great power

• Business power is counterbalanced, restricted, controlled and subject to defeat

Perspectives of Business Power• Business abuses the power its size and wealth confer in a

number of ways• Rise of huge corporations creates a business elite that

exercises inordinate power over public policy• Asset creation creates monopoly or oligopoly in markets

that reduces competition and harms consumers • They wield financial and organizational resources

unmatched by opposing interests eg., they use campaign contributions to corrupt politicians, hire lobbyists to undermine the independence of elected officials, employ accountants and lawyers to avoid taxes and run public relations campaigns that shape opinion in their favour

Dominance theory• Corporate asset Concentration• Concentration of economic power• Manufacturing plants doubled -1860

to 1890• Mergers between 1895 to 1904 wave

assembled dominant firms • Caused changes that creates

incentives to combine• Growth of transcontinental rail roads• Transformation from regional

operation to national ones • Small family business broke up• With global production size scale and

number of transnational have grown • Enlarged boundaries aggressive

antitrust enforcement • Power of uncontrollable competitive

forces exceeds the power of even the largest corporations to maintain their dominance

• Elite Dominance • Power elite are small group of

individuals in control of the economy, government and military

• Lieutenants who carried out the elite’s policies

• Exist small number of individuals who by virtue of wealth and position control the nation

• Members are alleged to act in concert and in undemocratic ways

• Has a pyramid of power and status • Large base was composed of a mass

of powerless citizens like feeble groups and associations with little policy impact

Pluralist theory• Is one having multiple groups and institutions

through which power is diffused • No entity or interest has overriding power, and

each may check and balance others• Features: society support because it is infused with

democratic values. America has no history of feudal or authoritarian rule. They adopted natural rights which held that all persons were created equal and entitled with same opportunities and protection which ‘prodigious influence’

Pluralist theory

• Second feature is country is widespread with great mixture of interest

• Third feature constitution encourages pluralism which remarks open political system

• Consumers are permanent feature • Henry J. Kaiser seemed unerring in business , his car

the Kaiser and Frazier were underpowered and over priced

• Because never got cost under control had to negotiate the prices of many parts with competing auto companies

Four major boundaries on managerial power

• Wise managers anticipate despite having considerable influence on governments , markets and public opinion their power can be restricted , challenged , or shared

• Government and laws: channel and restrict operations. Are ultimate and forcefully to blunt the exercise of corporate power

• Social interest : represents segment in society use many methods to restrain business like product boycotts, lawsuits, picket lines, media campaigns lobbying , antagonist

Four major boundaries on managerial power

• Social values: reflected in public opinion and embedded in the law. Managers internalize them. Values like duty , justice , truth , ad piety.

• In 1960s generational values gave film studios license to experiment violence but Walt Disney never did and no financial incentive was enough to make him to forsake his values

• Markets and stakeholders: imposing strong limits. Like suppliers, stakeholders , employees creditors, competitors