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Witold Kieżun

The Social Role of an Enterprise

Annales Universitatis Mariae Curie-Skłodowska. Sectio H, Oeconomia 34, 73-78

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A N N A L E S

U N I V E R S I T A T I S M A R I A E C U R I E - S K Ł O D O W S K A L U B L I N - P O L O N I A

VOL. X XX IV SECTIO H 2000

U n iw ersy tet Q uebec, M o n tre al, K a n a d a

W ITO LD K IE Ż U N

The social role o f an enterprise

Społeczne aspekty przedsiębiorstwa

This article analyses relations between the social-political environment and enterprises. The au th or relates the discussion on the social-political role of enterprises between the conservatives and reformers. He also describes the C anadian policy tow ards the USA investors. Finally, he analyses the enterprise counterpow er factors m anifested through the activity o f the state, the unions and pressure groups.

The liberal economic thought also aimed at definite social goals following from the assum ption th at unconstrained development of free competition and the invisible w orking o f the free m arket principles will assure economic developm ent and will lead to the general public wealth. Two trends were engendered by the tw entieth century economic liberalism: that o f neo-liberalism and th at of social democracy. They assumed certain definite forms of state interventionism in the areas of full-time employment, health care, education and - to a lesser extent - in public economic activity. The social role of an enterprise has been the subject of on-going discussions. Two positions can be clearly distinguished: th at o f the reform ers and that o f the conservatives.

R E F O R M E R S m aintain th at defining the social duties of an enterprise is one of the elements o f m anagem ent. Accepting its socio-political obligations, an enterprise acts in its interest as well as in the interest of the society. Enterprise m anagers possess m any years of experience and are thus called to help, through their counsel, in the task o f solving social problems and to participate in state adm inistration. According to the reformers the principle of the social respon­ sibility of an enterprise is legal because it profits all society.

CO N SERV A TIV ES believe th at an enterprise is merely a unit of produc­ tion, and as such, has no socio-political or m oral obligations of any kind. Any decisions th at do not follow from the game o f free competition will cause a decrease in the efficiency o f an enterprise. Experience in m anagem ent is not

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74 W ITO LD K IEŹU N

useful in the field o f socio-politics, for that area requires practical experience of a different professional profile. Socio-political initiatives coming from enter­ prises may lead to an integration of economic and political power, a process which is threatening to democracy.

A contem porary m odel o f active m anagem ent approach assumes that relations between the enterprise and the socio-political milieu should be considered from the point o f view o f m anagement efficiency. New ecological problems, globalization o f industry and trade, emigration problems, inter­ national economic cooperation, em ancipation of women and m any other factors affect the activity o f enterprises, and therefore, they cannot stay beyond the sphere o f the enterprise’s interests. Survival and development o f an enterprise is not merely a m atter o f an efficient economic and technological strategy, but also of the right socio-political attitude.

An enterprise is one o f the social subjects, linked by a union o f solidarity with the interest of other subjects. T h a t’s why it has to develop an ability to react prom ptly to all changes in the socio-political milieu, a skill which requires th at the m anagem ent understand the essence of the relationship between the enterprise and this milieu.

Interaction between the enterprise and the socio-political milieu takes on the forms of: a) exchange, b) governm ent, c) secondary effects. In the process of exchange the enterprise fulfils not only purely m aterial needs, but also the needs o f non-m aterial nature in the area of: aesthetics, confidence as to the product’s reliability or positive attitude tow ards the producer. It also participates in num erous charitable, scientific and artistic activities.

The society m ay grant the enterprise - independently of its m aterial profits - a capital of confidence and good will, a factor which can prove useful on the way to success.

Costs following from the social activity of an enterprise are tax-deductible. Adm inistrative power of an enterprise in the sphere of cultural values as well as its social and technological governm ent consist in forming social and cultural norms and habits as well as a certain life style, following from the use by the society of the products produced by the enterprise. Social control over the enterprise’s personnel finds its expression in the possibility o f forming the personnel’s attitudes; its political power is manifested in the possibility of exerting economic pressures on internal political processes, influencing the direction o f international expansion, even in the decisions involved in m atters o f war and peace.

The secondary effect relations are characterized by structural transfor­ m ations in the area o f social development and in the area of form ing the attitude o f activity and industriousness. Pathological secondary effects are linked with the negative results of activities that as such, are seen as basically positive. Such negative results are hard to foresee.

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T H E SOCIA L R O LE O F AN EN TE R PR ISE 75 The various faces o f the power of enterprises are certainly one of the more im portant elements form ing the life style in m arket economy. Particular societies try to oppose the inordinate power o f enterprises and to m aintain a balance am ong the various forms of social dominance. Thus, various forms of counter-pow er arise, the m ost significant ones being: the activities o f the state, of the unions and o f pressure groups.

The state limits the power o f enterprises by m eans o f a num ber of corrective laws as well as by an appropriate preventive activity of the police and the law, especially with respect to the possibility of the enterprises’ corruptive influence on the adm inistration. There is a substantial anti-monopoly legislation created to control the process o f lobbying by companies which dictate prices on the m arket; there are laws controlling the stock exchange, customs regulations and regulations defining the principles of cooperation with foreign investors on the dom estic m arket.

The governm ent of C anada created a special D epartm ent of Foreign Investm ent C ontrol, which regulates the activity of foreign investors in order to avoid any conflict between the national and the corporate interests. These regulations are targeted m ainly a t the US corporations which are willing to invest in C anada because of the cheaper labour and the good, under-invested m arket in th at country. T he following table provides a list, elaborated by the above- -mentioned departm ent, of the potential areas o f conflict of interest between the governm ent o f C an ad a and the foreign investors.

Twelve G overnm ent o f C anada Principles to Regulate the Activity of Foreign C orporations (defined in anticipation of suspected inappropriate moves on the part of corporations whose headquarters are located in the United States)

Activity Instructions (what to do)

Potential M isapplications (what not to do)

1. Full realization in C anada o f tasks following from the growth of the corporation; realization in C anada of the corporation’s operational potential.

1. C orpo ratio n planners in the headquarters located in the US define c o rpo ratio n ’s developm ent plans or determine its activity limits without considering the plans and aspirations o f Canada.

2. C anadian branch of the corporation should be an independent, vertically integrated unit, fully responsible for at least one production function.

2. C anadian branch is used mainly for putting together of the imported parts or C anadian branch is merely a distributor of goods produced elsewhere, so that its activity could be easily stopped or transferred.

3. Develop m axim al m arkets for C anadian exports.

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76 W ITOLD K1EŻUN

provisions located in the US profits the American, and not the C anadian m onetary budget.

4. Increase the level o f raw m aterials processing in C anada, with the possibly highest num ber o f stages.

4. The least possible level o f raw m aterials processing in C anada aimed at the minimization o f the C anadian political influence.

5. A dopt the policy o f the same sale prices abroad and within the corporation. 5. C anadian branches of Am erican corporations establish negotiated or incentive prices in order to avoid paying Canadian taxes. 6. Solve the problem of suppliers in C anada.

6. Preference is given to suppliers from the US or third countries because such choices are m ore convenient for the corporation or because they help the co rporation’s pressure tactics.

7. Include in the activities of the C anadian branch research and development (R&D) tasks as well as the tasks related to product design and amelioration.

7. C oncentration o f the R&D tasks and product design activities in the US m eans th at these skills will never get developed in Canada.

8. Put aside an im portant p art of profit for further growth o f the corporation in Canada.

8. Profits acquired in C anada are not left in the country to finance developm ent o f the C anadian branch.

9. Select Canadians for im portant positions o f m anagers and high-level functionaries.

9. High-level functionaries and m anagers are brought from the US to prevent form ation o f the local views in m atters o f planning and production.

10. Encourage the participation o f C anadian private investors as the co rporation’s share-holders.

10. C reation of corporate branches which are fully owned by the original corporation m akes it impossible for the Canadians to decide their own policies and salary levels.

11. M ake financial reports public.

11. Including activity reports from C anada in the financial reports o f the original co rporation or keeping secret all essential inform ation.

12. Support C anadian cultural and charitable organizations.

12. Lack o f support for local actions such as ’’United A ppeal” while generous backing is given by the original corporation for similar actions in the US.

Source: M organ, G. (1997)

In 1984 the above regulations were given up to m ake C anada m ore attractive to foreign investors. T hus, the dilemm a created by the presence o f international corporations in the country is not at all easy to solve. The above guidelines, however, have created appropriate relationships of equal cooperation and in spite o f the fact th at the form al principles as such were abolished after several

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T H E SOCIA L R O L E O F AN E N TE R PR ISE 77 years o f staying in pow er, the assum ptions they were based on have become a C anadian ritual o f a kind.

A nother factor contributing to the creation of counter-power aimed at limiting the co rp o rate empire are the unions. The basis here is the so-called socio-political approach which assumes th at in every enterprise is a territory of a perm anent conflict between the m anagem ent as the personnel, a conflict which concerns the relationship between the duties and the pay. A substantial body of legislation has been created to regulate these relationships taken as a whole.

The starting p o in t here is the recognition of the union’s right to represent the interest o f the employees and to negotiate their demands with the employer. In this way, a specific bilateralism of two opposing forces in the structure o f the enterprise is accepted: the force of the m anagem ent and the force of the union. The conflict o f interests between the two becomes a legal means of regulating work relations. T he procedure o f solving the conflict is well defined by appropriate norm ative acts, form ulated on the assum ption that conflict is a hidden form o f cooperation.

Form al and inform al pressure groups are an im portant factor in the counter-pow er against the enterprises. The form al ones include, e.g. custom er protection associations, groups for protecting the rights of women, the rights of national and sexual m inorities, environm ent protection associations, etc. As their m ethods they use propaganda, dem onstrations, road-blocks, boycott. Their activity is often very fruitful.

The inform al pressure groups are sporadic and never officially registered. But they also act using the m ethod of boycott or street dem onstrations often organized against certain activities o f the enterprises. One can quote here the successful action against the Shell corporation targeted at the liquidation of the oil dig in the N o rth Sea.

The efficiency o f the counterpow er against the enterprises which brutally aim at big profits thereby creating pathological social situations is one of the essential problems in free-m arket economy. These problems are often difficult to solve because o f the ever- growing philosophy o f the totalitarian liberalism which is based on the principle: “ Forbidding is forbidden” .

B IB LIO G R A PH Y

Brus W., Laski K . (1991): F ro m M arx to the M arket. Oxford University Press, United K ingdom . D aly H erm an E. (1991): F o r the Com m on G ood. Beacon Press, New Y ork Committee for Economic D evelopm ent (1971): Social Responsibility of Business C orporation. C ED , W ashinghton, D . C. Erez M . , Early Ch. (1991): C ulture, Self-Identity and W ork. Oxford Press, New Y ork.

Friedm an M . (1970): T he Social Responsibility of Business is to Increase its Profit, “Time M agazine” , 13 Septem ber, New York.

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78 W ITO LD K IEŻU N

Pasquero J. (1988): L’E ntreprise et Son Environm ent Socio- Politique. In: M iller R.: La D irection des Entreprises. M cG raw -H ill, M ontréal R ap o rt de la Commission Royale D ’enquête sur les G roupem ents de Sociétés (1978). M inistere des Approvisionnements et Services, O ttaw a La Réform e de L’entreprise. R ap o rt du Comité Sudreau (1075): La D ocum entation Française et U nion G énérale.

STRESZC ZEN IE

A utor analizuje relacje pomiędzy społeczno-politycznym otoczeniem przedsiębiorstwa a samym przedsiębiorstwem . N aw iązuje do dyskusji, ja k a m a miejsce między konserwatystam i (uwzględ­ niającymi tylko aspekty ekonomiczne), a reform atoram i (biorącymi pod uwagę - oprócz aspektów ekonom icznych - również społeczne aspekty funkcjonow ania przedsiębiorstw). A naliza ta oparta jest o dośw iadczenia przedsiębiorstw am erykańskich funkcjonujących na rynku kanadyjskim . P onadto, poddaje analizie działalność państw a, związków zawodowych oraz różnych grup nacisku w ykorzystujących słabe punkty przedsiębiorstwa w dążeniu do osiągnięcia swych celów.

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