Module

-2

The Study of Business,

Government, and Society

The Study of Business, Government, and

Society
This chapter provides an overview of the
business government society field of study by:
Defining basic terms
Discussing the fields importance to
managers
Introducing the four basic models of the
business government-society relationship

What is the Business

Government Society Field?
Business broad term encompassing a range
of actions and institutions.
Government refers to structures and
processes in society that authoritatively make
and apply policies and rules.
Society a network of human relations that
includes three interacting elements:
Ideas
Institutions
Material things
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Why is the BGS Field Important to

Managers?
To succeed in meetings its objectives a
business must be responsive to both its
economic and its noneconomic environment.
Recognizing that a company operates not only
within markets but within a society is critical.
A basic agreement or social contract exists
between the business institution and society.
Managers must respect and adhere to societys
expectations.

Four Models of the BGS Relationship

The Market Capitalism Model

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Four Models of the BGS Relationship

The Market Capitalism Model
(continued)

The market capitalism model depicts business

as operating within a market environment,
responding primarily to powerful economic
forces.
The market acts as a buffer between business
and nonmarket forces.
History and nature of markets
Adam Smith, The Wealth of Nations
Capitalism
Managerial capitalism
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Four Models of the BGS Relationship

The Market Capitalism Model
(continued)

Important assumptions of the market capitalism model:

Government interference in economic life is slight
(laissez-faire).
Individuals can own private property and freely risk
investments.
Consumers are informed about products and prices
and make rational decisions.
Moral restraint accompanies the self-interested
behavior of business.
Basic institutions such as banking and laws exist to
ease commerce.
There are many producers and consumers in
competitive markets.
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Four Models of the BGS Relationship

The Market Capitalism Model
(continued)

Market capitalism model perspective

conclusions about the BGS relationship:
Government regulation should be limited.
Markets discipline private economic activity
to promote social welfare.
The proper measure of corporate
performance is profit.
The ethical duty of management is to
promote the interests of shareholders.
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Four Models of the BGS Relationship

The Dominance Model

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Four Models of the BGS Relationship

The Dominance Model (continued)
Proponents of the dominance model believe
that corporations and a powerful elite control a
system that enriches a few at the expense
of many.
Populist reform movement opposed the
dominance model.
Marxism emerged in Europe about the same
time.

Most accurate in the 1800s, but is being

resurrected due to the fear of transnational
corporations in a global context.
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Four Models of the BGS Relationship

The Countervailing Forces Model

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Four Models of the BGS Relationship

The Countervailing Forces Model
(continued)

Countervailing forces model conclusions:

Business is deeply integrated into an open society and
must respond to many forces, both economic and
noneconomic.
Business is a major initiator of change in society
through its interaction with government, its production
and marketing activities, and its use of new technologies.
Broad public support of business depends on its
adjustment to multiple social, political, and economic
forces.
BGS relationships continuously evolve as changes take
place in the main ideas, institutions, and processes of
society.
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Four Models of the BGS Relationship

The Stakeholder Model

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Four Models of the BGS Relationship

The Stakeholder Model
Stakeholders are those whom the corporation
benefits or burdens by its actions and those
who benefit or burden the firm with their
actions.
Primary stakeholders
Secondary stakeholders

Debate about how to identify who or what is a

stakeholder.
Stakeholder model is an ethical theory of
management in which the welfare of each
stakeholder must be considered as an end.
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Four Models of the BGS Relationship

The Stakeholder Model (continued)
Criticism of the stakeholder model:
It is not a realistic assessment of the power
relationships between the corporation and other
entities.
There is no single, clear, and objective measure
to evaluate the combined ethical/economic
performance of a firm.

Advocacy for the stakeholder model:

A corporation that embraces stakeholders
performs better.
It is the ethical way to manage because
stakeholders have moral rights that grow from
the way powerful corporations affect them.
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