Business: Sustainability and The Traditional Theory

The term sustainability means to maintain at a certain level in the business.

The topic given is very subjective. Each and every business is formed to earn profits, to fulfill certain goals and objectives and to contribute to the society. But as and when a business grows, the focus shifts from these noble objects to only remain in the business and get and be on the top of the industry to which the business belongs. For this, an enterprise would undertake any activity, be it legal or illegal. And for reasons like these laws like the Corporations Act, Income tax Acts, etc have been developed so that the businesses have a boundary and know their limits. For the same reason, institutions like internal revenue service have been formed so that the defaulting enterprises can be punished. And if the default continues, they can be blacklisted.

If the businesses would have followed rules and procedures without any strict penalties, there would have been no requirement of these laws nowadays.

In traditional terms, some of the economists argue that businesses are no more than money making enterprise, this idea has been deeply embedded in the American capitalist system and leads the companies to generate short term as well as the long term profits and these are then delivered to the shareholder’s. How well a business functions and operates is only decided by the financial figures that are expressed at the end of each and every year.

The traditional theory also says that the companies do not consider the effects of their decisions on the customers, employees and its partner’s; they are just there to earn profits, no matter what is at stake.

What the traditional theory fails to believe or consider is that when they invest their ideas in t...

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...d to an unethical practice of showing inflated revenues, false sales invoices, illegal gains. This led to an increased price of the share of the company. This credit was equally shared by the CPA firm that had conducted its internal audit. Later on, the irregularities were discovered and the company head along with some other member’s was charged with the fraud. The reason that I am quoting this example is that the companies do indulge themselves in illegal activities just to remain in the business.

At the end, I would like to conclude the essay by saying that there is no sure shot answer to the question as to whether company actually contributes to the growth of the shareholder’s value and whether it is true to the legality of the rules, regulations and laws that it claims to abide.

References:

Kanter, 2011: How great companies think differently