Question

Here's what I'd like you to do. In your initial post, I'd like you to address the historical understanding of a corporation's purposes and objectives. What has been the traditional approach to the objectives and purposes of corporations? Then, I'd like you to consider if, in our present age, those are the only objectives and purposes of corporations. As time has gone on, are there other objectives and purposes of corporations that society (and courts) now accept? If so, what are they, and what leads you to that conclusion? And ultimately, what do you think about those potentially expanded objectives and purposes of corporations? Are they proper objectives and purposes? Should those expanded objectives and purposes be imposed on corporations? Is it the obligation of corporations in our society to embrace those expanded purposes and objectives? Are those (potentially) expanded objectives and purposes fair to those who own corporations (the shareholders)? You don't necessarily have to answer all these questions, but I wanted to throw some things out there to get you thinking.

Answer 1

Historically corporations used to study their competitors only and the only stakeholders they used to serve were the shareholders, their board of directors and the employees. Firms previously used to remain very much concentrated on increasing their revenues and profits with consideration of social causes. With the passage of time, nowadays firms have to consider very judiciously their use of resources and the locations where they choose to set up their plants and how they operate. Another big difference is the evolution of the public relations role in corporations. Now let's look at each of these closely -

• Stakeholder theory - from just their shareholders, firms now have to define their stakeholders as anyone who is directly or indirectly linked to the firm. These include shareholders, management, the board of directors, employees, vendors and other social bodies dependent on them. This is very important in a developing economy as this ensures none of the parties are placed at an unfair role where the corporations could ignore them altogether.
• Ecology and Environment - from an environmental perspective if firms had continued to expand without thinking about their surroundings the world would have become a much worse and different place. Also from a corporate perspective firm know that people like companies which not only are money hungry but also give back to society. So this is important as well.
• Public Relations and CSR - firms nowadays understand that the common public has access to the internet and hence they can very well do the research for themselves. Any allegations or internal development which the firm needs to clear out has now become compulsory for them to do so. Hence they need to maintain their public image and they do so by their public relations department and the CSR acts.