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Mainstream, VOL XLVIII, No 50, December 4, 2010

Incorporating Political Theory in the Study of Corporate Management

Sunday 12 December 2010, by Sunita Samal

In the beginning, management education was concerned with industries and corporate bodies. Next, it was dominated by academicians and lastly it emphasised on customer satisfaction and business ethics. Corporate management has been primarily value creation. Managerial problems cannot be segregated under disciplinary boundaries. Politics can be found in all places including corporate management where inter-personal relations are involved. Decision-making by the corporate management is ultimately an art.

In the view of Aristotle, the father of political science, politics means the art of the possible. He recognises that economic activity, which was concerned with maximum utilisation of human and material resources, should be subordinate to politics since economics, according to him, was concerned with single good and politics was concerned with good life as a whole. He wrote extensively about management ethics of the Greek city-state which existed for the good life of the citizens.

Regarding management education, the first fifty years of management education of the world was drivened by industries and corporate bodies, the next forty years by academics and researchers, and thereafter was more about behavioural sciences, customer satisfaction and business ethics.

Recognition of the human capital as a driving force for the new economy has triggered a paradigm shift in the corporate management ethics. Any discussion of corporate management is incomplete without referring to the global political order characterised by neo-liberalism. States achieve cooperation often because it is in their interest to do so. In the 1970s the attack on the government in general and the bureaucracy in particular can be traced significantly to the neo-liberal advocacy of limited government—limited interference in free enterprises.

In the view of David Easton, political science concerns with authoritative allocation of values in a given society. Aristotle’s rhetorical practice might be of value because it promotes greater self-consciousness among administrators (state authorities) about their own values, encouraging them to seek ways of accommodating their values to the values of others, discourages any sense of finality in resolving value conflicts and requires that administrators (state authorities) take account of the concrete specifics of particular practical situations in dealing with value conflicts.

Similarly in recent time, the thrust of corporate management has been primarily on value creation. It prepares men and women for managerial leadership; they have to anticipate and respond to social changes, optimise the human and natural resources available and align business with non-business organisations. We all know that managerial problems cannot be segregated under disciplinary boundaries. The corporate management study should focus on descriptive theory and intuitive thinking. Basic knowledge about economics, political and social environment of an organisation is most important to trigger intuition. Corporate socio-political responsibilities have become a new chapter in business schools. There is an urgent need to integrate the social sector, including the political realm, with resources of the corporate player since it is vital to build trustworthy and sustainable relationship with the community at large. This is because the resources of society are limited and competing claims have to be mediated and resolved and corporate management must hold the balance and make decisions.

Private property and free competition are two pillars of liberal politics. Free competition among corporate houses is only possible in civil society. In the view of the German philosopher, Hegel, civil society is the link between family and state. It creates favourable conditions for free market which is inevitable for corporate management. But in the view of Karl Marx, civil society is oppressive because here one class oppresses another class. The spirit of modern capitalism is ceaseless and rational pursuit of profit. It helps to create a disciplined and dedicated work force without which capitalism, in the view of Max Weber, could not emerge. The successful utilisation of power by the corporate manager depends on the use of political formulas which means an attempt on the part of the managerial class to provide an ethical and legal basis to its corporate power.

Lasswell and Kaplan have defined politics as the study of shaping and sharing of power. The emphasis has been on a shift from state to power politics which has broadened the area of political enquiry and the focus of attention from mere structures and institutions to action and processes. Now, it is a shift to the shaping and sharing of the power of the World Trade Organisation and multinational companies. What differentiates men from other animals is not simply devotion to common good but reasoned deliberation. The end of antagonism is the end of politics. Politics can be found in all places including corporate management where inter-personal relations are involved. It should be solved by the post-modern narrative theory.

Elton Mayo (1926) conducted the Howthorne experiment which proved that performance is better in better social condition. He studied the human angle to all organisational relationships. Every individual has dignity as a human being and allowance has to be made for his sense of self-respect even when he subordinates himself to the service of corporate organisations. The corporate management decision-making is an art. We should not divorce policy from management. It is the art of politics. Corporate managers must be master of the art of human relationships. The art of human relations is primarily an art of developing leadership in an organisation through reasoned deliberation.

The political philosopher, Hobbes, gave a very dark and gloomy picture of human nature. For him, human beings are basically solitary, poor, nasty, brutish, and short. In the view of Machiavelli, the father of modern political science, men always see their own interests. But in the view of the liberal political scientist, John Locke, human beings are basically good in nature, and he gave a bright picture of human nature. The struggle for power and politics arises in the corporate organisations due to the split of leadership in the organisation, when the corporate leader does not happen to be the actual leader of the group. If the formal and informal leaderships fall into different hands, then inter-group conflicts become inevitable. Corporate organisations have a tendency to become self- perpetuating. They begin to consider their procedures and traditional modes of work an end in themselves. The corporate sector develops a monstrous defence mechanism to ward off any criticism from outside the organisation. When a corporate house reaches such a pathological state, then it causes a serious human relations problem for the management. The decision-making approach in political theory is associated with a process or sequence of activities involving problem recognition and search for alternatives. It also takes into account environmental and personality factors which are necessary for any type of corporate managerial function. The game theory aims to deduce outcomes given the players’ preferences and possible moves open to them. While the strategy of consent is used in normal times, the strategy of crises is all about politics. Further, human behaviour is not completely rationalistic. Many a time the corporate management ignores non-rational elements in human nature. Human relations are a very important factor in the successful functioning of oganisations and it is the duty of the corporate management to understand and manipulate these politically for the benefit of the organisations.

IN any society there is a minority of population which takes major decisions in society and rules over the majority. Elite theorists like Pareto say that greater parts of human actions have their origin not in logical reasoning but in sentiment. The governing elite justify the actual exercise of power by resting it on some universal principle that may be in political ideology. While Pareto examines the psychological make-up of the elite, Brunham concentrates on economic resources. It is the economic control which gives rise to political power. But Mosca and Michel emphasised on organizational abilities. According to Robert Michels, the very structure of the modern organised society gives birth to the elite. In the view of Karl Marx, in every society, except the most primitive one, political power is unevenly distributed. This concentration of political power is based upon the pattern of ownership of the means of production. There is a perpetual conflict between the ruling class and those who are ruled by them. While elite theorists agree with Marx that political power is unevenly distributed in a society, they discard the Marxist idea of inaccessibility of the ruling class, leading to polarisation of the ruling and ruled classes and believe in continual circulation of the elites. Similarly corporate managerial positions should be continually circulated so that they cannot be authoritarian. Democratic leadership recognises human dignity, and fosters satisfying social environment.

The means of production are property and also property enables man to acquire the means of production. For Aristotle, acquiring property is the natural instinct of man. The social character of property enabled John Locke to defend a limited constitution based on the rule of law and consent. Locke’s theory of property and labour was fully developed by Adam Smith and Ricardo. Adam Smith shows that the division of labour and circle of exchange reache certain stages of development that increases the dependence of the individual to the rest of society. That is what corporate managements deal with by creating what Emile Durkheim called organic solidarity. The primitive society is characterised by a low division of labour and the individuals enjoy very little autonomy in political and other spheres. In the developed corporate society, the individual is autonomous and very much dependent on society due to greater division of labour. The rise of the industrial society has been seen as a consequence of technological advancement which in itself is regarded as an increase in the division of labour and specialisation. Durkheim rejected the purely economic interpretation of division of labour and applied it as a phenomenon having ramifications for the whole of society and politics.

Market systems have demonsrtated them-selves to be superior to the centralised government planning systems and so neo-liberalism has commanded significant power and influence over the affairs of nations. Neo-realism is created for helping to create a race to the bottom as corporations move operations to places with the least restrictive environmental laws, the weakest labour standards and cheapest natural resources. Inequality in wealth and power thus increases when the policy is guided by the neo-liberal political philosophy. In political theory, neo-liberalism translates into a desire for transparency, flexibility and adaptability on the one hand and dismantling of government regulations on the other. The new genre of management picked up steam in the Reagan Administration in the USA and the Thatcher administration in Great Britain. There is a promise of less red tape and emphasis on performance and effectiveness rather than emphasis on administrative rules.

Social constructivism helps to realise that the corporation is not so concrete and fixed as a closed system model has assumed. The corporation is not a natural sign in the market-place of ideas. It has no objective existence outside the human social interactions. Some courts have gone so far as to give the corporations the right of speech and right to influence elections as if they are citizens. Treating the corporations as citizens has helped to solve public disputes. In the 1837 Supreme Court case of Charles River Bridge v Propietors of Warren Bridge, organisations (corporations) were granted legal status equal to that of individual citizens for most purposes. A corporation created by sovereignty is permitted to make contracts with another, and to sue in its courts and the same law of comity prevails among the several sovereignties of this union. The American legal system from that point overtly recognised entities such as the corporations as citizens, for most intent and proposes.

Another defect of the definition of politics solely in terms of power and influence is that it misses the importance of authority and legitimacy. Almond defines the political system as a special system of interaction that exists universally in all societies performing the function of integration and adaptation by means of employment or threat of employment of more or less legitimate physical compulsion. World bodies like the WTO and MNCs prove their political power through integration and adaptation by using physical or other compulsion. In the era of globalisation the focus of activity has moved from the Atlantic Rim to the Pacific Rim with the rapidly growing powerful economies of India and China. The aggressive corporate style of neo-liberalism, with its strong powerful government supported by international political institutions, is deployed to make the world safe for free enterprises. Neo-liberalism and globalisation are often mentioned in the same sentence.

A management theory that posits an adminis-tration which is separate from politics fails to convey the relational practices of power. Neo-liberal reform pushes forth a one-dimensional instrumental rationality and seems unable to abide by a multi-dimensional value plurality. In the view of Karl Deutsch, the communication theorist, the differences between the behaviour of living things and that of social organisations have greatly narrowed down because of the new development in communication. So it is difficult to distinguish between individual political identity and its corporate identity. Running the government like business has become another sign of hyper-reality characterising business values. The contemporary era is in danger of developing a politics of simulation or virtual reality, useful as a spectacle of entertaining diversion but of not much help in tackling the problem of governance. The virtual reality would disintegrate under norms of democratic deliberation, where challenges could be offered and claims could be judged against the standards agreed upon. The interaction between the modernist politics of manipulation of symbols and post-modernist politics of virtual reality is worth investigating with regard to corporate management.

BIBLIOGRAPHY

1. Kenneth Minogue, 1995, Politics: A Very Short Introduction, Oxford University Press.

2. Josua S. Goldstein and Jon C. Pevehouse, 2008, International Relations, Pearson Education.

3. Sushila Ramaswamy, 2003, Political Theory: Ideas and Concept, Macmillan Press.

4. A.R. Tyagi, 1989, Public Administration: Principle and Practice, Atma Ram and Sons, Delhi.

5. SteveBruce, Sociology: 1999, A Very Short Introduction, Oxford University Press.

6. Hugh T. Miller and Charles J. Fox, 2007, Post-modern Public Administration, Prentice-Hall of India, New Delhi.

Dr Sunita Samal, a Ph.D from Jawaharlal Nehru University, New Delhi, is currently an advocate based in Bhubaneswar.

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