What is the Role of the Business Agent in Society?

The problem to be investigated is the conflict of interest that is produced when business executives feel that they have "social responsibilities." The conflict is produced when their professional responsibilities, which are defined by the principles of the company that they work for, contradict the personal responsibilities that the executive has defined for herself (Jennings, 2009). In this situation the business executive can easily misjudge what behaviors and decisions are professionally ethical, as their concept of business ethics may be skewed by the false assumption that an effective free market society requires the management staff of corporations to take on "social responsibilities" (Jennings, 2009). As a result, the business executive can make decisions that go against their professional responsibilities.

The Social Responsibilities of Business

According to Dr. Friedman in Jennings's text (2009), the discussion on the "social responsibilities of business" is extremely contradictory. The primary problem that he presented was that any discussion that business executives have about their so-called "social responsibilities" is contradictory to the free enterprise theories that are supposedly being supported (Jennings, 2009). A free enterprise market is defined by the competition between companies that is allowed to occur organically. This competition produces a wide-variety of business strategies that promote innovation, product improvements and pricing differentiations, that benefit customers by offering those customers lower prices and more choices (Sheshinski, Strom & Baumol, 2007). Socialism, on the other hand, operates more like a monopoly, the antithesis of a free-enterprise economy, which means that it has no self-regulating features, competition or other features which reward individual achievement and innovation. This leads to fewer options for consumers and a less stable market environment (Bowman, 2005). This is a negative system for the country to adopt, as it impedes the ability of the country's entrepreneurs to exist and to function effectively. As a result, the adoption of socialism philosophies by business executives will inevitably lead to the limitation of their company's principles to realize profit, which is against the professional responsibilities of the business executive.

Roles Executives Play

The primary role that a business executive plays is that of an agent. A business agent is an individual who interacts with a third party on behalf of a principle (Bledsoe, 1902). In most cases the principle is the owner of the business; however, in some cases the principle can be stockholders (Jennings, 2009). To fulfill their job responsibilities the business agent is granted a limited amount of authority which enables him to do everything that the principle would do to ensure business success. This authority, on the other hand, is limited by the principle (Bledsoe, 1902). What this means is that the agent cannot pursue transactions or interests in the name of the principle that go against the specified goals and objectives of that principle. When the principle is the owner of a business then the goals and objectives will most likely be to make money and to keep the operation of the business within the bounds of the law (Jennings, 2009); however, when the principle is a group of stockholders then the goals and objectives may also include social agendas (Jennings, 2009). In most cases, stockholders will want their agent to focus on what will keep the business profitable, as their interest in the business is to make money and not to improve society.

While a business executive may be an agent for their employer, they are also individuals. As individuals they are in essence an agent of their culture, family or religion. In this role they do have social responsibilities that require transactions that are not based on financial profits, but rather on social improvements and integrity. In order for the business executive to meet the requirements of their role as an agent for their social group as well as for their employer, she needs to segregate her agent responsibilities so that conflicts of interest do not occur. To do this the business executive will need to focus on professional responsibilities while being paid by her employers, and focusing on social responsibilities on her own time (Jennings, 2009). This enables the executive to bypass situations that can impede effective decision making processes, as well as to avoid unethical professional and social behaviors.

Conflicts of Interest

Dr. Friedman (as cited in Jennings, 2009) drew an interesting analogy between trade union wages and corporations' decisions based on social responsibilities. He presented that basing corporation decisions on social responsibilities was just like trade union wages being based upon a "general social purpose" as opposed to the best interest of the union members (Jennings, 2009, p. 77). This analogy again draws upon the nature of the relationship between the agent and the principle.

In order for this relationship to be productive and mutually beneficial, the agent needs to be loyal to the goals and missions defined by the principle. If the principle is interested in making the most money possible while still upholding the laws that govern the business, then the agent must comply with these boundaries for their business activities (Jennings, 2009). If the principle, on the other hand, is interested in more philanthropic goals and missions, such as helping the poor, the environment or other special demographics, then the agent is bound by their contract with the principle to engage in business activities that further these goals and missions (Jennings, 2009). The actions of the agent, therefore, contractually have to be focused on the provisions established by the principle, regardless of personal interests and social pressure.

Conclusion

The behaviors of a business executive are directed by the responsibilities imposed upon them by the contracts that they have entered into, e.g. the professional contract with their employer and the social contract with their social group. In order to act ethically, the business executive has to follow the rules established by each group in which he is a member. Since social groups and corporate groups have dramatically different foci, a conflict of interest is inherent to the integration of the responsibilities established by these two groups. If the business executive wants to be ethical in the eyes of both principles, he has to be respectful of each role that he plays. This means that when he is engaged as a business professional that he focuses his activities and behaviors on the goals and missions established by his employer, and when he is engaged as a private citizen that he focuses on behaviors and activities that further the goals and missions of his social group. If the business executive is morally opposed to the business activities that he has to engage in, then he needs to correct the situation through a private initiative, such as terminating his employment with the organization. Only in this manner, can true professional and personal ethics be maintained.

References

Bledsoe, A.J. (1902). Business law for business men: A reference book for daily use in business.

San Francisco, CA.

Bowman, J.L. (2005). Socialism in America, 2^nd ed. Lincoln, NE: iUniverse.

Jennings, M.M. (2009). Business ethics: Case studies and selected readings, 6^th ed. Mason, OH:

South-Western Cengage Learning.

Sheshinski, E., Strom, R.J. & Baumol, W.J. (2007). Entrepreneurship, innovation, and the growth mechanism of the free-enterprise economies. Princeton, NJ: Princeton University Press.