Some liberal thinkers would argue that we could do this merely with a partnership such as we see with the John Lewis Partnership. Surely people would be rational enough to see that it makes sense to work together and specialise in that sense. However, the issue with this is that it’s likely some workers will be able to just be able to produce more or work harder, thus being more efficient and this is where the difficulty comes. Do they receive more money for producing more output or do they earn the same as everyone else? If the answer was the former, then you have essentially produced a firm, where people rise based upon success and thus they can become the boss. Whilst this is the most efficient way, it does mean some are better off than others. As the John Lewis Partnership shows, you can have a worker owned business but at the end of the day, to be as productive as possible, you have to promote people and pay them more to increase the output of the business as a whole. There is no way that the Chairman, Charlie Mayfield, would work for the same wage as the average shop floor worker, the value he brings to the businesses is much larger and thus he is rewarded. However, if you believe that the workers that excel should earn the same as the less capable workers, then the issue is even larger. In this case, there is no incentives for the workers to work hard as they can’t earn any more money and thus they become disincentivised and the business as a whole becomes less efficient.
The alternative to either of these would be a planned economy. A planned economy is a type of economy that gives the control over the . A planned economy alleviates the use of and the government to everything from to pricing. Planned basically give the government dictatorship type control over the of the country. However, there are many problems with this, most importantly this hints on growth because once again, you are disincentivising workers. Planned economies have traditionally been associated with communist dictatorships and if we look at the economic success of them, it’s quite clear that they simply don’t work as well as the free market mechanism. If we compare the GDP of Chile and Cuba, we can see how this planned, government controlled government inhibits economic growth. They both had long standing dictatorships who controlled the economies throughout the 70s and 80s. The difference came that in 1993, Augusto Pinochet fell from power in Chile and since then, there has been huge GDP growth, meanwhile Cuba is still under the control of Fidel Castro and we can see how far it fell behind. Despite in 1979, their economies having equal GDPs of around $20 billion, by 2008, Chile’s GDP had risen to $180 billion, whilst Cuba could muster barely a third of this with $60 billion thus providing clear evidence that a market economy leads to higher growth. Whilst I do believe in this principle, it has to be said that there are other reasons for the disparity in growth such as Chile having some precious metals as well.
The role of a firm is to please its stakeholders; therefore, whether or not it should have a social conscience is depending on whether or not it would be in the interest of the stakeholders. The most obvious stakeholder is the owner or shareholders. I think in general, they have risen to becoming the owner of a business by being ruthless in business and by having great business awareness. This means that in general, the owners are willing to ignore perhaps moral responsibilities in favour of larger profit margins. This is how businesses rise to the top, brands like Nike, Adidas and Apple wouldn’t be in the privileged situation they’re in if it wasn’t for exploiting cheap labour in South-East Asia. However, this isn’t entirely always the case, especially with small possibly family-run firms. In these cases, we often see that their objectives are as much to serve the community as it is to make a profit e.g. Elphicks department store who are a family run business not making a profit yet refusing to lay off staff. Also, there’s an argument that whilst these workers in sweatshops may be underpaid, they do still get a job and without this big business, they would be unemployed and be living in even worse conditions, therefore it’s possible to argue that big business does have a social conscience.
If we look at the example of Ben & Jerry’s ice cream, we can see that sometimes the owners may have a conscience yet the law can overrule them. Several firms were to buy it. The top bid was from the Dutch conglomerate Unilever. But Ben Cohen and Jerry Greenfield didn’t want to sell to Unilever. They had built the company with the mission of serving what has come to be known as the “triple bottom line” — profits, people and planet. The company offered voter along with its ice cream, paid employees living wages and good benefits, donated 7.5 percent of its profits to charity, and bought Brazil nuts from a cooperative of indigenous Amazon farmers and brownies from a bakery famous for hiring people fresh out of prison. Ben and Jerry worried that a Unilever-owned company would quickly become focused purely on profit. They put together a group called Hot Fudge partners and made a counteroffer. But it could only muster an offer of $38 a share, while Unilever was offering $43.60. It was not enough. The law states that the duty of a business’s directors is to maximize profits for shareholders.
The workers within a company are also classed as a stakeholder and often through their trade unions; they actually have some means of power over a company. When trying to establish whether workers would demand a social conscience, we have to assume that human nature is selfish. Workers may desire a conscience but only when it would come to things such as minimum wage, healthcare benefits and other direct links to them, when it comes to things such as pollution, I would argue that the average worker would rather a firm pollutes and gives the money they would’ve spent disposing of the waste and invests it into the workers instead.
The common view would be that the state as a stakeholder, insists that firms should have a conscience. This is easy to justify in a number of ways. Firstly, companies pay corporation tax, income tax and several other taxes which are then used to help the rest of society by building hospitals, protecting the environment etc. Secondly, the state has employed a minimum wage and this means that no members of society are exploited by firms and thus it reduces the gini coefficiency of a country. Finally there are a number of pollution laws to prevent firms from just dumping their waste which would leave society at a loss. However, there is a counter argument based upon the Ben & Jerry’s example and that is that current financial laws mean that during a transaction, the board of directors are forced to sell to the highest bidder, thus putting profit before social welfare.
To conclude, firms exist because they can act far more efficiently than individual traders, meanwhile historical evidence and public opinion states than governments are also inefficient and handling economies. I do believe firms should have a social conscience but I believe this is fulfilled merely by paying tax. Beyond that, for an economy to flourish, decisions should be taken with economic not social consequences considered. With the revenue from the tax, the government should be able to fix any social issues created by these firms. However, some firms, such as Starbucks and Boots try to avoid paying tax and I believe this is morally and legally wrong.