Aug 25, 2005

Role of business in society

Ian Davis, worldwide Managing Partner of McKinsey & Co writes in the Economist about the role business organizations have to play in society.

Detractors have often successfully portrayed the contract as a one-way bargain that benefits business at society's expense. Reality is much more complex. The activities undertaken by business have clearly brought social benefits as well as costs. Similarly, however, there are two sides to a contract—and business must acknowledge that in return for the ability to function it is subject to rules and constraints.

A starting point may be for CEOs to articulate publicly the purpose of business in less dry terms than shareholder value. Shareholder value should continue to be seen as the critical measure of business success. However, it may be more accurate, more motivating—and indeed more beneficial to shareholder value over the long term—to describe business's ultimate purpose as the efficient provision of goods and services that society wants.

The question that however remains, is when more and more people become free agents and fleas (not my word :-) who would negotiate the contract on their behalf. Or would they be subjected to some version of Anarcho-Capitalism ?

On a related note Dave Pollard quotes Noam Chomsky (his blog is here) who quotes John Dewey having once said that politics is the shadow cast over society by big business, [and he called for a shift] from industrial feudalism [which we still have today] to industrial democracy.