Exploring the Role of Business in Society

Vol 23, No 4; Article by Trilochan Sastry; December 2011

The role of business in society has recently come under much greater scrutiny than before. The experiences around the world in recent decades have thrown up several issues. These include impact on the environment, sustainability, impact on consumers, and moral and ethical issues. Scholars and practitioners have responded by examining the role of business, and there is a range of views on the subject. One view is that business is run by agents who work on behalf of shareholders. Their proper role is to maximise shareholder wealth within the legal framework and without deception or fraud. Any diversion of shareholder wealth to social causes is not correct, perhaps not even ethical. Other scholars provide alternate supporting arguments. They say that a business serves society best by producing goods and services that customers value. By focusing on other measures like triple bottom line, or corporate social responsibility (CSR), they do a disservice to themselves and to the society. Society gains much more from business than from philanthropy. Others have departed from shareholder wealth maximisation to argue for CSR and using a part of the profits for social good. More recently, there has been an explicit recognition of the role of business in society. Not only scholars, but industry and employer associations, sponsored industry studies and governments have argued that business can no longer ignore society. Some of these responses stem from a concern for the environment and for sustainability; others from a concern for the moral and ethical issues thrown up by business scams, market meltdowns and the growing nexus between business and government. Perhaps one important issue missing in the writings from the West has been the role of business in displacing people or even harming the interests of people. In India and other developing countries including China, this is a serious issue. Scholars have argued that it is possible to do well by doing good if customers are willing to pay more, or that by using a concept of shared value, society as a whole can benefit along with shareholders. The need for outright philanthropy has also been stressed. In India, along with the impressive growth of business, there is a growing disparity between the rich and the poor. There are also growing protests against the government and various businesses, particularly those involved in recent scams or in displacing people. Perhaps as a result of this, the voice of civil society has also become much stronger. Behind all these differences, is a key question: to whom does the wealth created by business belong? While everyone agrees that wealth creation is required, there is no agreement on how it should be shared, or even on how it should be created. While there are unlikely to be universally acceptable answers to the question, the way each society or nation evolves a shared norm or value in response to this question, will determine the role of business in society.

A note on the scholarly and practitioner perspectives on the subject is followed by a discussion of the issues by a panel of representatives of the corporate sector and civil society comprising Nikhil Dey, Co-Founder, Mazdoor Kisan Shakti Sanghatan and Co-Convener, National Campaign for People's Right to Information; Vishnu Dusad, Founder, MD and CEO, Nucleus Software Exports; and Kiron Shah, Founder, MD and CEO, Velankani Group.