Introduction
Business is an essential part of society, as it provides people with products and services. However, the relationships between business and society are reciprocal, as companies are affected by the interests of various groups. Shareholders invest money that allows the organization to conduct its operations and grow. They also have interests and expectations that a corporation should fulfill to maintain its financial support.
The interests of shareholders are affected by various macro environment factors, which companies should be mindful of. If the company cannot fulfill the expectations of shareholders, they can file a lawsuit against the organization. Such a legal mechanism is meant to protect the interests and rights of shareholders and control the company’s actions. It is an extremely useful instrument that helps corporations conduct socially appropriate and meaningful activities.
Business and Society
The Definition of Business
Business and society relationships have generated a multidimensional impact associated with all spheres of social functioning. Carroll et al. (2022) propose a definition of business as “the collection of private, commercially oriented (profit oriented) organizations, ranging in size from one-family proprietorship to corporate giants” (p. 5). The study of the relationships between business and society tends to focus on large companies.
Companies from developed economies, such as the United States, Canada, Australia, and the United Kingdom, are also considered to have more influence on various sides of social life (Singh and Misra, 2021). It can be explained by the fact that bigger companies from larger markets possess increased power, which keeps them at the center of social attention. While small enterprises outnumber large ones, they do not influence society sufficiently (Carroll et al., 2022). Therefore, large companies define the relationships between business and society.
Additionally, some industries are more visible than others due to higher social impact. Manufacturing industries that have an immense impact on the environment generally attract higher social attention (Carroll et al., 2022). Large companies from visible industries gain increased criticism due to their activities.
There are also industries that are visible due to their advertising or products and services that are related to public health (Singh and Misra, 2021). Therefore, the discussion of the relationships between business and society is often reduced to large enterprises in well-known industries. However, the activities of small and medium-sized companies have recently gained increased attention in terms of social responsibility practices.
The Definition of Society
The definition of society is critical in the discussion of the relationships between it and business. Society represents a community or group of people with common traditions, values, and interests (Carroll et al., 2022). Society can have many different layers comprising groups of various scales. Therefore, the relationships with businesses can be considered multidimensional. The discussion may concern relationships between a company and the local community, a company and the state, or a company and a particular stakeholder group. The relationship between business and society as a whole concerns the interests of different groups of people of various formalizations (Carroll et al., 2022). Such complexity may lead to conflicts and clashes of interests, which is especially evident in the case of large companies, which penetrate the sphere of interest of numerous groups at a time.
Macro Environment
Both society and business operate in a broader macro environment, which consists of various factors. First of all, social environments include demographics, social values, and lifestyles that are present in society and influence the operation of companies (Singh et al., 2021). Economic factors comprise all the indicators of economic activity, which also have a significant effect on business operations (Singh et al., 2021).
The political environment defines laws and regulations passed, of which taxation and regulatory practices are of great concern for enterprises (Singh et al., 2021). Finally, the technological environment is a set of all technological advances in the possession of society, which defines the manufacturing power of companies and shapes the demand (Singh et al., 2021). All four elements are interrelated, stem from social activities, and have a significant impact on the operations of companies.
The Role of Shareholders
Companies cannot operate without support in the form of external investments. Shareholders are the owners of a company’s shares and recipients of dividends that an organization pays from its profits (Newman et al., 2020). Shareholders invest money into the company by buying its shares, which gives them the right to pursue their own interests in gaining profits from these investments and influence the operations of the organization to some extent. Basically, shareholders are the owners of the company, and they have a significant impact in terms of decision-making (Newman et al., 2020). The interests and expectations of shareholders can be impacted by the macro environment, which is formed by transformation occurring in society.
Shareholders Lawsuits
Shareholders may engage in confrontation with the management of the company if their interests and values are ignored. A shareholder lawsuit is “a lawsuit brought by a shareholder or group of shareholders on behalf of the corporation against the corporation’s directors, officers, or other third parties who breach their duties” (Shareholder derivative suit, n.d). Shareholders may file a lawsuit if they are sure that the company violates the duties of loyalty, care, and good faith. Otherwise, the law protects the board from being sued for making bad decisions (Bouchoux, 2022). Therefore, shareholders are required to present evidence of wrongful actions performed by the corporation’s board.
There are two types of shareholder lawsuits that are meant to defend the rights of shareholders. Direct lawsuits are aimed at proving personal harm caused by the corporation to shareholders (Bouchoux, 2022). Such lawsuits often involve hundreds and thousands of shareholders who were affected by the actions of the board. Derivative lawsuits are directed against particular officials within the company whose actions brought harm to the corporation as a whole (Bouchoux, 2022). Shareholders are required to provide evidence that individuals in the company ignored a problem that was pointed to them.
Shareholder Power
Therefore, shareholders have particular power over the decision-making process inside the company. They invest money to fund the organization’s operation and can oversee its activities. It is important for modern companies to be aware of corporate responsibility and meet the expectations of society. Strauss (2022) underlines that shareholders’ attention to the environmental activities of companies has been growing, learning of the rise of lawsuits related to corporate failure to contribute to the environmental agenda. Organizations cannot operate without support from society as they need external investment and customers. The inability to fulfill the expectations of various interest groups may lead to business failure.
Conclusion
The relations between business and society are reciprocal because enterprises provide services and products while society ensures the demand. However, the elements of the macro environment have a significant impact on social values and interests. It also influences the shareholders to invest money into corporations and enterprises. Shareholders have a particular power that can control the activities of companies. If the organization cannot meet the expectations of shareholders, they can file a lawsuit.
Therefore, companies should be aware of their relationships with society and strive for compliance with social needs and tendencies. If corporations are unwilling to follow the values of society and support its traditions, they can lose customers. At the same time, customers have limited power over corporations due to increased influence. Shareholders can act as society representatives by requiring companies to fulfill social expectations and comply with its norms. They can also pursue the desire to gain solely economic benefits.
References
Carroll, A. B., Braun, J. L., & Buchholtz, A. K. (2022). Business & society ethics, sustainability, and stakeholder management. Cengage Learning.
Newman, C., Rand, J., Tarp, F., & Trifkovic, N. (2020). Corporate social responsibility in a competitive business environment. The Journal of Development Studies, 56(8), 1455-1472. Web.
Shareholder derivative suit. (n.d). Legal Information Institute. Web.
Singh, K., & Misra, M. (2021). The evolving path of CSR: Toward business and society relationship. Journal of Economic and Administrative Sciences, 38(2), 304-332. Web.
Singh, R., Sarangal, R. K., & Singh, G. (2021). The impact of micro and macro environment on entrepreneurial success: Case of J&K MSMEs. FIIB Business Review, 11(1). Web.
Strauss, E. (2022). Climate change and shareholder lawsuits. Duke Law School Public Law & Legal Theory Series, 41. Web.