What is the Business–Government– Society Field? Business – broad term encompassing a range of actions and institutions. Government – refers to structures and processes in society that authoritatively make and apply policies and rules. Society – a network of human relations that includes three interacting elements: Ideas Institutions Material things

How Institutions Support Markets

Why is the BGS Field Important to Managers? To succeed in meetings its objectives a business must be responsive to both its economic and its noneconomic environment. Recognizing that a company operates not only within markets but within a society is critical. A basic agreement or social contract exists between the business institution and society. Managers must respect and adhere to society’s expectations. This contract defines the broad duties that business must perform to retain society’s support, but these duties are often ambiguous.

Four Models of the BGS Relationship: The Market Capitalism Model

Four Models of the BGS Relationship: The Market Capitalism Model (continued) The market capitalism model depicts business as operating within a market environment, responding primarily to powerful economic forces. The market acts as a buffer between business and nonmarket forces. History and nature of markets Adam Smith, The Wealth of Nations Capitalism Managerial capitalism

Four Models of the BGS Relationship: The Market Capitalism Model (continued) Important assumptions of the market capitalism model: Government interference in economic life is slight (laissez-faire). Individuals can own private property and freely risk investments. Consumers are informed about products and prices and make rational decisions. Moral restraint accompanies the self-interested behavior of business. Basic institutions such as banking and laws exist to ease commerce. There are many producers and consumers in competitive markets.

Four Models of the BGS Relationship The Market Capitalism Model (continued) Critiques of the Market Capitalism Model Increased prosperity comes at the cost of increased inequality Results in base values being energized and virtue being eroded The BGS relationship according to the Market Capitalism Model: Government regulation should be limited. Markets discipline private economic activity to promote social welfare. The proper measure of corporate performance is profit. The ethical duty of management is to promote the interests of shareholders.

Four Models of the BGS Relationship: The Dominance Model

Four Models of the BGS Relationship: The Dominance Model (continued) Business and government dominate the great mass of people, which results in the enrichment of a few at the expense of many. Populist reform movement opposed the dominance model. Marxism emerged in Europe about the same time. Most accurate in the 1800s, but is being resurrected due to the fear of transnational corporations in a global context.

Four Models of the BGS Relationship The Countervailing Forces Model

Four Models of the BGS Relationship The Stakeholder Model