A "corporation" is defined as “a legal entity created by individuals or
shareholders with the purpose of operating for profit” (Corporate Finance
Institute 2023). For the purposes of
this article, the “B corp.” is going to be the focus rather than the C corp. –
most companies and the S corp. where corporate income and losses are passed to
the limited limit of 100 shareholders. Regardless
a B corp. has rigorous requirements for
approval. B corps in the USA must be
assessed by B Lab of which some of the requirements are as follows: Passing the B Impact Rating System, Interview
with a B Lab staff member, adopting the B Corporation Legal Framework and
completing a Term Sheet (US Chambers 2023).
Corporations are started via a corporate myth the “Articles of Incorporation”
making it a legal fiction. Within the
Articles of Incorporation are details as to how the company is going to
operate. The Articles also give a
depiction of the companies structure.
These Articles of Incorporation are important documents which
essentially serves as the basis for revenue generating activity within the
company. In C corporations and S
corporations, they operate for profit oftentimes making minimal investments to
maximize returns. Oftentimes profit can
be found in surplus value. Surplus value
means that there is an initial investment (the cost), and through that
investment (cost), a profit is generated over a course of time. The cost minus the sum value of the product
created results in what is referred to as surplus value. This is the basis for corporate exploitation
wherein revenue is maximized and costs are low.
In a corporation revenue generating activities and cost generating
activities are conducted with surplus value in mind. This results in shareholder primacy. Shareholder primacy can be defined as
“[corporate decisions made under the Articles of Incorporation are concerned
with] profit maximization for the benefit of the owners and shareholders” (B
corporation 2023). B Labs, the nonprofit
organization in the USA tasked with registering B corps. considers shareholder primacy to be an
impediment to long term value for the owners, shareholder and the community at
large. A B corp. must adopt a stakeholder governance framework
to ensure that they are upholding the requirements of B Labs. B corps.
become B corps. because it
encourages “social responsibility,” “attracts like minded employees,” and “cost
saving [sustainability],” (US chamber 2023).
Social responsibility is what is going to be detailed herein. When your company is a B corp. it holds you and your practices accountable
for social and environmental responsibility. “Consumers are increasingly
interested in sustainable companies and want to be convinced of their social
efforts. By adhering to B corp.
standards that are made transparent, customers can see how the companies
they support are making a difference” (US Chambers 2023). With the aforementioned in mind, B
corps. are accountable and have a social
and environmental responsibility function.
Accountability can come in many forms.
Accountability can be defined as “generally the state of being liable,
answerable” (US legal 2023). This means
that any activity that is conducted by the corporation must be backed by
reason. Reason can be publicized through
a functional strategy of functional area of the value chain as in Public
Relations or PR through scholar and social works which also serve as parts of the structure of the company. In Law this creates estoples.
For example, a publication can be used as a function of Propaganda within the functional area of the value chain of a company. Further, if the Propaganda subpractice Public Relations function is
a part of a Strategic Business Unit, under a business strategy, other functional
areas within the SBU must exist such as “Investment,” “Manufacturing,”
“Espionage,” amongst others. In a B
corp. these business strategies must
adhere to the legal frameworks under the B Labs guidelines. Regardless, the B corp. can have an SBU for societal objectives under
a business strategy and it is possible to have a fully functional value chain
complete with multiple functional areas under it to conduct social
responsibility efforts within the society, therefore, having a degree in
Political Science, Criminology, Sociology, Law etc. is a benefit when considering qualifying for
a B corp.
Henceforth, accountability in a B corporation is entrenched into the corporate strategy of
the company. This means that those
working in B corporations must adhere to stringent processes and
procedures. For example, working for the
government means that the individual must uphold standards that are very
high. This means that B corps and
governments and government bodies and government agencies and government
institutions must operate according to some degree of “strict liability.” Regardless, B corporations and their
framework are made transparent. This
means that customers and employees can see “how,” the company is making a
difference. Regardless, what is
interesting to note here is that within the business strategies of a company,
there could be Strategic Business Units as mentioned. A Strategic Business Unit or short form SBU
can be defined as “an organizational entity of a company that is given the
responsibility to serve the particular demands of one business area and
therefore has its own mission, objectives and business strategy” (MBA brief
2023). Such SBU’s as discussed above can
have functional strategies to cater to different business objectives.
A corporation has legal protections in the form of
liability. Corporations have limited liability. This means if their
board members make a decision that is not in favor of the law, the company
itself can be legally prosecuted. A corporation as mentioned is organized
according to Articles of Incorporation. The legal structure of the
company hence is codified to adhere to the rule of law. A corporation can
be organized in different ways. The method that is to be discussed herein
is the "conglomerate." A conglomerate can be defined as “a group of
different businesses which form one corporate group” (Market Business News
2023). With a conglomerate it means that the company can have various SBU’s
under its business strategy which then serve to create revenue for the company. Strategic business units can have multiple
functional areas under the functional strategy of the conglomerate. This
means that the strategic business unit can function at the base of the company
dealing directly with the clientele. Having different and various
strategic business units focusing on different products and business objectives
per the business strategy of the corporate strategy of the conglomerate can
benefit the conglomerates’ ability to be resilient within the macroscopic
economy and domestic environment. Having multiple SBU's creates security
within the structure of the company. For example, a company could have
four or five different SBU's all with different a market focus which results in
different products and high differentiation between products. Let's say
that SBU 1 produces and manufactures food, SBU 2 provides health and medical services, SBU 3 provides products pertaining to Law and
SBU 4 is a clothes and apparel retailer. These SBU's under the corporate conglomerate
release products periodically to remain comparative in the market.
According to Miles and Snow companies can be the following- innovative,
reactive, prospective etc. This means that in business other companies
can launch offensive and defensive moves against the company. If there
are multiple strategic business units, such moves can prevent the other
companies from taking market share from the conglomerate. Further, the
SBU's collectively serve as checks and balances which then such offensive legal
and non legal attacks can be countered. Multiple SBU's form the companies
good will and brand power. If an SBU is attacked by an opposition, the
other SBU's serve as a means by which to counter because of integration.
The security is a defensive measure against infringements. Multiple
SBU's are like a form of encryption. The
SBU's in Erations Conglomerate function collectively through a "Business Program"
which is conjured every 4- 5 years. A Business Program is a detailed casual literature which sets forth the planned trajectory of the company through the business cycle for the next few years with concern of the corporate strategy, business strategy and functional strategies. It emerged as a result of product cycles. For example a certain make of a vehicle is produced. For the next few years the model of vehicle remains fairly unchanged. This means that the Business Program focuses on that product for the stipulated years in a bid to maintain revenue and reduce costs through economies of scale. Essentially it forecast and projects potential revenues and it determines what is next in the succession of products while preparing and budgeting research and development initiatives. It details SWOT and STP of the products and services available and how it stacks to current products and services on market while having a concern for corporate social responsibility efforts and other charitable causes. From an offensive perspective the
SBU's serve to balance deficits. If the balance sheet reflects a deficit
on any of the existing SBU's, revenue can be off-seted via transfer payments under
a functional strategy of “Accounting” within the functional area of the value
chain under the SBU of the business strategy, to rectify the deficit reflecting
a profit so that the value per share increases through shareholder confidence a proponent of shareholder primacy. In short it keeps the value of the SBU affected stable so that the likelihood of the value of share prices increase.
WORK CITED
B
Lab. 2023. Legal Requirements. Retrieved from: https://www.bcorporation.net/en-us/about-b-corps/legal-requirements
Corporate Finance Institute. 2023. Corporation.
Retrieved from: https://corporatefinanceinstitute.com/resources/accounting/what-is-corporation-overview/
MBA
Brief. 2023. What is a Strategic Business Unit. Retrieved from: https://www.mbabrief.com/what_is_strategic_business_unit.asp
US Chambers. 2023.
What is a B corp? Retrieved
from: https://www.uschamber.com/co/start/strategy/b-corp-advantages-and-requirements
US Legal. (2023).
Accountability Law and Legal Definition.
Retrieved from: https://definitions.uslegal.com/a/accountability/
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