CORPORATE POWER AND LEGITIMACY
The Concept of Power in Business
Max Weber: defined power as “The probability that one actor within a social relationship will be in a position to carry out his own will despite resistance." Pfeffer: "The potential ability to influence behavior, to change the course of events, to overcome resistance, and to get people to do things that they would not otherwise do." Power is the force or strength to act. Business power is the force behind an act by a company, industry, or sector. Its primary source is a grant of authority from society, stemming from the social contract, to convert resources efficiently into needed goods and services. It is legitimate when it is exercised rightfully, or in keeping with the social contract.
The concept of power needs to be distinguished from authority and influence. Authority is the right to direct others and ask them to do things which they would not otherwise do, but it is legitimate and is exercised in the working of organizations. Authority is different from power because of its legitimacy and acceptance in an organizational contex. Influence is conceived as more broader and it is the ability to alter actions of other people in general ways by changing their satisfaction criteria and thus improve their performance. Leadership is broader than power and indicates a willingness on the part of the follower to follow in the absence of authority.
Corporations have tremendous power of to change society through their actions. Corporate power has an impact on society at two levels. i On the surface level it is the direct cause of visible, immediate changes. ii On the deeper level it shapes society over time through the aggregate, indirect, and unforseen changes of industrial growth.
corporate power is exercised in seven spheres corresponding to the key business environments described in earlier (here power over individuals is included in place of the internal environment). 1 Economic power comes from the use of property and resources to influence events and people. 2 Technological power influences the direction, rate, characteristics, and consequences of innovations. 3 Political power is the ability to influence governments.
4 Legal power is the ability to shape laws and regulations.
5 Cultural power is influence over values, habits, and institutions. 6 Environmental power is the impact of a company on nature.
7 Power over individuals is exercised over employees, managers, stockholders, consumers, and citizens. Theories of business power
Two basic and opposing positions about business power exist.
1 The dominance theory
That business power is preeminent in developed societies eg American society. It is excessive and inadequately checked. E.g, there is excessive corporate power in asset concentration among a few large firms. Similarly, there is corporate power of economic elites. E.g there is a small power elite commanding business, government, and the military and institutional elite composed of individuals who occupy top positions in a wide range of institutions.
2 The pluralist theory
In a pluralistic society such as the United States business power is adequately checked by democratic values, the Constitution, laws, markets, government, labor unions, advocacy groups, and public opinion. Four boundaries on managerial power exist.
i Governments and laws regulate business.
ii Social interest groups represent broad and diverse interests within society and use many methods to restrain business, from boycotts to media campaigns. iii Social values restrain managers. An example is the pervasive belief in equality in America that discourages deference to an aristocracy of corporate wealth. iv Markets and economic stakeholders discipline corporations to channel their power within the limits of the social contract. v Markets also register forces of technological change that bring the rise and fall of dominant industries.
In conclusion, if...
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