**3. Re-thinking the purpose of business**

Accordingly, in addition to promoting various socially and environmentally responsible business practices, if we are concerned about the trends discussed

#### *Corporate Social Responsibility*

above, then we must also consider if there are acceptable alternatives to the currently almost universally taken for granted financial model for conceiving of the business of business. We must acknowledge that some proposed alternatives, such as state ownership of enterprises, would not in many countries be acceptable either politically or economically. Acceptable alternatives must in some ways be in accord with widely shared values, traditional practices, and existing realities. And they must be practical.

In the remainder of this essay I will make the following argument. Business enterprises ought to operate in keeping with the stakeholder model as proposed by the Business Roundtable both because operating in keeping with this model will go a long ways in reducing the adverse impacts described above and because this model more accurately describes what businesses actually do and how businesses produce what they produce. Accordingly, the social responsibility of businesses can best be represented not as the mandate to make profits but as the mandate of enterprises to make productive use of natural and human resources in order in diverse and fitting ways to add value to their stakeholders and thereby to the larger society and to use the resources of the Earth respectfully and sustainably. Furthermore, enterprises can and should measure how their interactions with their several stakeholders add and erode economic value in diverse ways. They can undertake these assessments using increasingly more sophisticated measures developed over the past several decades. In order to realize the advantages of the stakeholder model and thereby protect and increase productivity, righty understood, governance practices of many enterprises must be adjusted and reformed so that governing boards have a vested interest in enhancing the well-being of the enterprise as a whole rather than the wellbeing of particular, privileged stakeholders, such as investors. Finally, in order to realize these several objectives, it will be necessary in many countries to introduce some corresponding legal changes facilitating and supporting these objectives. For the most part, it is possible to find examples of these kinds of legal changes that have already been introduced in a number of countries. The aim overall is to maintain and enhance the productivity of business enterprises, rightly understood, in ways that benefit these enterprises as a whole and thereby the larger societies in which they operate and the Earth whose resources they count on and utilize.

To begin, then, we know that the financial model represents only one of several alternatives ways of understanding the business of businesses. For example, producer cooperatives have been organized to maximize the benefits for workers and retail cooperatives have been established to maximize the benefits for consumers. These are genuine alternative models although probably relevant only to a small number of firms. So long as they were able to meet their expenses, many businesses traditionally have seen their purposes largely as providing particular goods and services they have taken pride in providing and in providing good employment for their workers. For many years many businesses were organized in this manner [1, 2]. Certainly, many professional businesses – whether they have been offering medical care, architectural services, legal assistance, or educational opportunities – continue to see themselves in these lights. So, there are viable bases for considering alternative ways of understanding the purposes of business.

It is time to re-consider the viability of the financial model of business enterprises not only because there seems to be a correlation between acting in keeping with this model and the rise in disturbing environmental, social, and economic consequences, but also because this model provides a distorted account of how businesses in fact operate. This model provides an imbalanced view of what businesses do, over emphasizing the financial agenda and focusing less attention on the many other goals that business enterprises seek to realize.

#### *What is the Business of Business? Time for Fundamental Re-Thinking DOI: http://dx.doi.org/10.5772/intechopen.94482*

Businesses are complex organizations best described not as things but as sets of overlapping and interacting activities. Oliver Williamson once argued that business enterprises are most fittingly characterized as the nexus of treaties or contractual relationships [16]. While this characterization is indeed helpful, it is not quite accurate because the relationships of businesses with some of their more vital constituents, such as retail customers and some affected community groups, are frequently not strictly contractual. In addition, Williamson's model does not focus enough on the activities by which businesses engage in business. Utilizing the sociological perspective associated with Symbolic Interaction, we can I think more fittingly observe that business enterprises are the nexus of usually negotiated, often legally recognized, value-adding interactions with diverse constituencies (1). Depending on the particular enterprise, the number and the importance of these diverse stakeholders vary. Nonetheless, each of these interactive relationships - whether they be with employees, supplier, creditors, investors, competitors, or other constituencies – function both to create and to reduce value for the enterprise as a whole, contingent upon the benefits and costs associated with these relationships. To be sure, those managing enterprises work at managing effectively so that each of these sets of interactions become more value-adding than value-decreasing. At the same time, each of these interactive relationships exposes particular constituents to different kinds of characteristic risks. Moreover, based on expectations variously spelled out in negotiated contracts, laws, and/or changing societal mores, each of these constituencies are in position to make particular kinds of claims on business enterprises in relation to the character of their interactions (2).

Viewed from this perspective, it is not quite correct to argue that business enterprises *have* stakeholders. Using this kind of language makes it seem as if these constituencies were external to business enterprises. Rather, it is more accurate to acknowledge that business enterprises are constituted in the first place by establishing interactive relationships with several different stakeholders. Without these interactive relationships, they would not be in business.

While it is useful to think of business enterprises as nexus of value-creating interactions, and correspondingly to recognize that the boundaries of businesses are often porous and flexible [17], it is important to add that business enterprises are entities. They are indeed complex, interactive entities. They are also inherently productive entities. By utilizing natural and human resources, business enterprises produce goods and services to meet the needs and wants of consumers. As entities, correspondingly, the core responsibility of businesses is to promote the wellbeing of their overall operations and not only and not even primarily the well-being of particular stakeholders, whether these be their investors or employees. The good of business is to promote the good of this complex, interactive entity as a whole. Beginning two centuries ago, courts in the United States affirmed this view by regarding business enterprises as if they were – not real but – legal persons: that is, as distinct kinds of legally-recognized social beings. The current interest in assessing businesses in relation to integrated standards, like the Global Reporting Initiative, take account of the overall ways businesses add and erode value and also reflect this insistence on regarding business as a whole.
