The long-held conception that the ‘business of business is business’, attributed to Milton Friedman, has been challenged numerously in recent decades. The role of business organizations has traditionally been seen to be profit maximization for shareholders, through the carrying out of the authorized business of a company.
The above view has however been questioned on many grounds, particularly considering the fact that the operations of businesses directly or indirectly affects other individuals not involved in the business of the company, and by extension, the society as a whole. As a result, businesses are increasingly expected to be more considerate about the effects of their operations on external stakeholders, particularly the community.
Aside from legal and regulatory frameworks put in place by legal systems to govern these concerns, companies have also responded to the above by taking their social responsibilities more seriously and recognizing the link between business and environmental and social phenomena, including human rights. The reasons that can be adduced for this are numerous. Reputational concern is a major factor. Businesses have come to realise the effect of public opinion on the success or otherwise of their operations and in response, have resorted to taking deliberate steps to ‘be in the good books of the public’, as it were. Being sensitive to the needs of society has also been shown to improve investor confidence and increase profits in the long term. To wit, to run a successful business, take seriously your social responsibilities!
The COVID-19 pandemic, currently facing the world, has in the opinion of the writer brought to the fore the intricate link between business and society and has placed the Stakeholder vs. Shareholder debate in its most practical context. This long-standing debate seeks to find an answer to the question, ‘Whose interests should the company serve? That of shareholders or the wider body of stakeholders?’ At one side of the debate is the view that a business corporation is operated primarily for the profit of its shareholders. For others, the corporation should be considered a public institution as private ordering does not always lead to mutually beneficial results. To the latter group, corporate power should not only be exercised for the benefit of shareholders, but also in the interest of other parties who are directly or indirectly affected by the operations of a company.
The coronavirus disease, an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-COV-2) was first identified in Wuhan, the capital of the Hubei province in China in December 2019. Since then, the disease has spread to over 200 countries in the world. The outbreak was declared a Public Health Emergency of International Concern (PHEIC) on 30th January 2020 by the World Health Organisation (WHO) and was subsequently declared a pandemic on 11th March 2020. As at 6th April 2020, 209 countries globally have recorded a total of 1,174,855 confirmed cases with 64,471 confirmed deaths.
The commendable efforts by business organisations globally to fight the pandemic together with other stakeholders raises questions about the proper role of businesses in society. The pandemic has witnessed companies go exceptional lengths to contribute significantly to bringing the pandemic to an end. Aside from numerous donations from companies, some other businesses have had to change their usual business to the production of products necessary to combat the pandemic.
The World Economic Forum (WEF), the international organization for public-private cooperation has set up the COVID Action Platform to mobilise stakeholders, especially global businesses to minimize the effect of the pandemic on public health and limit its potential for further disruption of lives and economies globally. This to the writer is in recognition of the pivotal role played by businesses in global efforts to make life better for all persons.
The WHO together with the International Chamber of Commerce (ICC) have come together to work to ensure timely dissemination of relevant information to the global business community. The WHO pioneered this in recognition of the fact that all businesses have an important role to play in minimizing the likelihood of transmission and its impact on society. As such, early and decisive action would reduce short term risks to employees and long-term costs to businesses and the economy.
Locally, the shortage of hand sanitisers in the early stages of the detection of confirmed cases of COVID-19 in Ghana saw some companies swiftly switch to the production of hand sanitisers to meet increasing demands and curb the shortage. Companies in the private sector have also been contracted by the government to commence domestic production of Personal Protection Equipment (PPE’s) and other necessary health products and equipment.
Many companies have also made donations to the COVID-19 National Trust Fund set up by the government to receive contributions from individuals and organisations towards the fight against the pandemic. Donations have also been made by companies to the Ministry of Health (MOH), health facilities, the security services and the vulnerable in society.
Social distancing being a key preventive measure to fight the pandemic, most businesses have had to almost instantaneously put in place measures to allow their employees to work from home to prevent the spread of the virus.
Similar to the situation in the Second World War where automobile manufacturers shifted production to the making of aircraft and aircraft parts and tanks, some international companies have in the face of the pandemic moved into the production of ventilators, PPE’s and similar much-needed products to assist health workers in containing the pandemic. Other businesses have offered their workspaces to health institutions for use as isolation centres. Some pharmaceutical giants have swiftly produced coronavirus test kits to meet rising demands. The list of interventions is endless, but one can confidently say that most of these extraordinary interventions by businesses in these trying times may hardly be motivated by profit-making, but rather a desire to contribute towards the fight against the pandemic.
Undoubtedly, there would be a myriad of legal issues arising from the pandemic affecting areas such as human rights, labour and employment, commercial contracts and public international law. Already, legal questions are being asked about the huge number of employees some companies may be forced to lay off after the pandemic and what remedies the law may provide in these situations.
Although the future remains somewhat uncertain, it cannot be disputed that businesses are likely to be more compassionate to the plight of society after the pandemic. To the various organs of corporate power, particularly the principal organs, this pandemic may have just provided the opportunity to re-think the proper role of business in society, and to put in place strategies aimed at achieving a fine balance between impermanent value maximisation and long term value maximisation.
It is the writer’s counsel that businesses must inculcate into their administration policies that would ensure they have the betterment of society at heart at all times. Interventions currently being made by businesses must be felt even in normal times and not only when there is a calamity of monumental proportions. This pandemic may be the factor to change the way businesses are perceived and conducted. Maybe, just maybe, the business of business is not only business after all.
The writer, Gertrude Amorkor Armah is a lecturer at the Faculty of Law of the University of Professional Studies, Accra (UPSA) and Associate Counsel at Heritage Law Firm, East Legon. You can contact her on firstname.lastname@example.org).