There has been a growing interest over time in the way democracy and capitalism relate. Some of the remarkable contributions on this subject include Robert Reich's article on "super capitalism", and Warren Letter to Shareholders 2004 and 2015. The above paper seeks to outline Robert Reich’s and Warren Buffett concerns on the relations amid democratic citizenship and corporation.
According to Robert Reich, democracy and capitalism are in a growing conflict (MacKenzie 381). He, however, argues that the inconsistency was not present in the period between 1945 and 1975. This situation is attributed to the fact that there was almost a balance in the essentials of business, government, and labor. The above paper seeks to outline Robert Reich’s and Warren Buffett concerns on the relations amid democratic citizenship and corporation.
However, there was the advent of sophisticated technologies coupled with a growing and dynamic economy in the 1970s – the situation Reich calls Supercapitalism (MacKenzie 381). From the perspective of the society as a consumer and an investor, this was a step in the right direction. Consumer power was bloated thanks to mass retailers who had the bargaining power from millions of customers that they commanded. They used this to obtain great deals from suppliers. Reich also points out that supercapitalism brought about increased investor power, which he attributed to the availability of the major mutual funds. Thus, increased consumer and investor power resulted to aggregated corporate power.
Consequently, there arose corporate competition, which gradually got into politics. Companies have since then been fighting hard to have regulations that favor them over their competitors put in place. Organizations responsible for the protection of what citizens cherished have reduced significantly and so has labor unions and regulation agencies (MacKenzie 381). Therefore, Reich is on the argument that aggregated corporate power is not healthy to citizens.
Reich is also of the opinion that for a long time, companies have exceedingly been after profits thereby harming the public in the process. Such corporations will seek to prevent the government from exercising its policing role. Reich suggests that government should without any influence stop these companies for there is growing proof that good corporate citizenship can lead to long-term profits. Reich also laments the pressure being put on laborers to take lower wages and salaries by large corporations in a bid to lower the cost of doing business. This by itself undermines democracy and good corporate citizenship as companies seek huge profit margins at the expense of their workers.
According to Reich, democratic citizens are capable of curbing the social costs emanating from super capitalism. This will be achieved through having the real value of the goods and services that they acquire as minimal as possible. Hence, citizens should be serious with their roles given that they double up as the consumers as well as the investors. Finally, Reich criticizes the tendency of corporations to indulge in social responsibility programs in which they lack the real competence or authority to accomplish and only do it for the advancement of competitive standing.
On the other hand, Warren Buffet in his letter to shareholders is in support of the participative approach by shareholders in the allocation of funds to charitable organizations of their selection. This is in the view that the interests of a company's management may not always be in line with those of the shareholders (Cunningham 1). For instance, in many corporations, management will designate part of the company's profit to charitable courses. These charities are chosen on a basis often not related to the corporate interests or the interests of the shareholders. However across Buffet's management team, each has a charitable program that they donate resources to (either money or time) thus enhancing corporate citizenship in each of the businesses.
Buffet also points out that given the increasingly dynamic nature of the world's economy, political and environmental challenges, corporations need to focus on communities and the environment (Cunningham 1). Investments should be centered on these two major elements of profitability since with responsible use of natural resources; communities will be supported. This will ultimately enable corporations attain sustainable competitive advantage and effectively satisfy their customers. Thus, Buffet is of the opinion that according to respect to the environment is vital to a company's sustainability and a valuable feature of good corporate citizenship.
I fully support Reich's argument that supercapitalism has significantly eroded good corporate citizenship. This is because with large companies opting to influence government policies so as to win in the ever-growing competition, both the community and the environment have suffered to a great extent. Corporations have ignored the need to lift the living standards of communities and environments they operated in and chosen to maximize their profit margins instead. As a result of super capitalization, companies have also ended up lowering their employee benefits in a bid to cut on production costs. This measure has adverse effects on the employees who also double up as consumers. Also, I join Reich in advocating against income tax imposed on these employees by the government which further deprives them of good and improved living standards.
Recently, a Chinese contractor involved in the Standard Gauge Railway construction in Kenya was at logger's heads with environmentalists. Ideally, the company should have given good corporate citizenship and take lead in advising the government on the adverse effects the project would have in the event this project proceeded along a national reserve’s wildlife migration routes. Our argument as wildlife activists was that such projects should not be allowed to interfere vastly with valuable natural ecosystems. Being citizens, we appreciate the benefits of the project, but as both Reich and Buffet seem to come to a consensus, such ventures should not be at the expense of the communities or the environment in which these corporations operate.
Buffet also seems to bear the same sentiments with Reich, and this is attested by his strong advocacy on corporations to have social responsibility programs engrained in their management systems. He, for instance, encourages charitable courses as well as environmentally friendly ventures by companies, which in his view is imperative for the corporation's sustainability in the long run. I completely concur with Buffets opinion given that every democratic citizen ought to have respect to the natural resources that are made to benefit the public to ensure equity.
Corporate Social Responsibility is a measure by companies with the aim of improving corporate citizenship. However, I have witnessed cases whereby the underlying motive of the program is contrary to the principle reason as to why it should be conducted. For instance, I took part in a hygiene sensitization/hand washing program sponsored by a Multi-national organization that manufactures soap. My concern was the community the corporation targeted, which seemed to be entirely the high-end communities or the middle income earning communities. It was ironical since poor hygiene is not an issue in these communities. It is a course that should have been targeted to the poor community where deplorable hygiene is rampant. In my opinion, the entire program was a mere product promotion exercise. This explains why Buffet advocates for shareholders participation in choosing the charity programs to which corporations will commit resources.
Works Cited
Cunningham, Lawrence "Berkshire's Blemishes: Lessons for Buffett's Successors, Peers, and Policy." Columbia Business Law Review 16. (2016): 1. Web.
MacKenzie, D. W. “Supercapitalism – by Robert Reich.” American Journal of Economics and Sociology 67.2 (Apr. 2008): 381–389. Print
