The Social Impact of Business Decisions

The impact of management’s decisions on society is not just public responsibility but is inextricably interwoven with management’s responsibility to the enterprise. Still it is a responsibility of management to the public interest as such. This is based on the fact that the enterprise is an organ of society and that its actions have a decisive impact on the social scene.

The first responsibility to society is to operate at a profit and only slightly less important is the necessity for growth. The business is the wealth creating and wealth producing organ of our society. Management must maintain its wealth producing resources intact by making adequate profits to offset the risks of economic activity. And it must besides increase the wealth creating and wealth producing capacity of these resources with them the wealth of society.

It may seem paradoxical that the responsibility of management is most clearly recognized in the Soviet Union. Profitability is the first and absolute law for Soviet management and the essence of what the Russians proudly proclaim to be their great economic discovery management by the Ruble. But a source which the Kremlin would hardly admit as authority has said as much.

This responsibility is absolute and cannot be abdicated. No management can be relieved of it. Managements are in the habit of saying that they have a responsibility to the shareholder for profits. But the shareholders, at last in a publicity owned company, can always sell his stock. Society however, is stick with the enterprise. It has to take the loss if the enterprise does not produce adequate profits, has to take the impoverishment if the enterprise does not succeed in innovation and growth.

For the same reason management has a public responsibility to make sure of tomorrow’s management without which the resources would be mismanaged would lose their wealth-producing capacity and would finally be destroyed.

Management is responsible for conducting the enterprise so as to undermine our social beliefs and cohesion. This implies a negative responsibility: not to usurp illegitimate authority over citizens by demanding their absolute and total allegiance.

In a free society the citizen is a loyal member of many institutions; and none can claim him entirely or alone. In this pluralism lies its strength and freedom. If the enterprise ever forgets this, society will retaliate by making its own supreme institutions the state and omnipotent.

The tendency today of so many, especially of larger enterprises to same paternal authority over their management people and to demand of them a special allegiance, is socially irresponsible usurpation, indefensible on the grounds alike of public policy and the enterprises self interests. The company is not and must never claim to be home family, religion life or fate for the individual. It must never interfere in his private life or his citizenship. He is tied to the company though a voluntary and cancelled employment contract, not through some mystical and indissoluble bond.

But responsibility for our social beliefs and cohesion also has a cohesive component. At east in this country it imposes on management the duty to keep open the opportunity to rise from the bottom according to ability and performance. If this responsibility is not discharged the production of wealth will, in the long run, weaken rather than strengthen our society by creating social classes, class hatred and class warfare.

There are other areas in which responsibilities can be asserted. It is a responsibility of the management of the large company to develop a capital-expenditure policy which tends to counteract the extremes of the business cycle (with Automation such a policy becomes a business necessity. Management has a responsibility to develop policies that will overcome the deep-seated hostility to profits, for the simple reason that this is threat to our economic and social system. Any business, in the present world situation, has the responsibility to make its best contribution to the defensive strength of its country.

But what is most important is that management must realize that it must consider the impact of every business policy and business action upon society. It has to consider whether the action is likely to promote the public good, to advance the basic beliefs of our society, or contribute to its stability, strength and harmony.