Find ®sl : INTRODUCTION i> enercndgp to elope chtns BAA 3 fers A key question in the formation of jal venture is, “what is the most appropriate form ownership for this venture?”. This question is very important because it determines ownership, powers of owners, growth opportunities of the firm, the duration of existence and indeed, the chances of success of the firm¥The three most popular types of business ownership are as follows: 1. The sole proprietorship 2. The partnership 3. \ The corporationThere are others, and these include the joint-stock company, business trust, joint venture or syndicate, the co-operative + and franchises, all of which exist in limited numbers in Nigeria but are also important. These various forms receive their origin under statutory or code law, or under common law. 2 | The_sole proprictorships and general partnerships have a | common-law beginning. They are non-corporate. This means | that they are not required to have a charter (approval) froma _ f government agency’ to do business. The » corporation on-the-— other hand, is of statute origin, and this implies that a t corporation chartered ina gi country must conform to the corporate laws of that country. Such a company is called = acorporate enterprise to distinguish it from the non-corporate = forms. era FACTORS INFLUENCING THE CHOICE OF | OWNERSHIP FORMS z With the existence of many forms of ownership and their: legal implications, it is important to reflect on the issue’ | before achoice of ownership is made. The following factors | need to be considered in choosing the form of ownership. | i . ' Total amount of capital needed and its availability. . Means by which additional capital can be obtained. Legal ‘status of the firm and jts advantages and disadvantages. " Easé of transferring ownership. Extent of owner’s liability for the firms debts. Ease or difficulty of formation: Extent of government regulation. Stability of existence. . eRe PAID9, Tax advantages and disadvantages. 10. Control of the business. SOLE PROPRIETORSHIP Sole proprietorship is the name given toa ‘and operated by one person. This form is as old as civilization itself, and it is the most common in Nigeria, as well as in many foreign countries whose economies depend upon the small shopkeeper. The proprietor performs both the managerial and the operative duties, and the responsibility 1. for the .success‘or. failure of the’firm rests “entirely om him? Legally, he owns all the assets of the firm and owns all its debts. business owned Advantages and Disadvantages of Sole Proprietorships The advantages of sole proprietorships are as follows. Ease of starting the firm Return of all profits to the owner. Freedom of owner to manage the business. Minimum of legal restrictions. Ease of dissolving firm. Taxation of owner, not the business. Aveene The disadvantages are as follows. 1. Unlimited liability of owner for debts. 2. Difficulty of raising capital. >. Possibility that overall direction ‘may become a burden on owner when business grows. 4. Limited opportunity for employees; since organisation is not permanent. 5. Uncertainty of duration arising from the fact. that the death, imprisonment, or insanity of owner automatically terminates the firm.— {tis obvious that the small proprietorship is, by its nature, well suited to small-scale business, because of its common- law origin, its simple legal structure, and its case of | operation as compared with that of other forms. Indeed, -its | advantages so far outweigh its disadvantages that the’ ‘} | “majority of Nigerian businesses are sole proprietorships. |e fecet Wredostrthe te bop whsats sabia BIE yew ey | PARTNERSHIPS “Partnership, is defined as “an association of two or more “persons to carry on’as cé-oWners “of a” business” for’ profit.”: Although most partnerships are operated for profit, a > fonprofit organisation established as a partnership is also € legal. The partnership was actually devised to overcome - {certain weaknesses inherent in the proprietorship form. The % authority for its creation rests in the common law right of voluntary association. Consequently, there can be nd, partnership relation between _ individuals. without ari; expressed intention on the part of both that a partnership is td. exist. ot | Types of Partnerships fe The law recognizes two distinct types of partnerships! general and limited. In the general partnership, all partners, participate actively in the business, sharing all the responsibilities, including unlimited liability. ‘The distinctive feature of the limited partnership is the limited liability of oné, or more partners. But there must always be at least one partner. Yin a limited partnership who is subject-to unlimited personal (liability. ‘The number of limited partners is not restricted by / law, provided there is at least one general partner in the firm. The withdrawal of a limited partner does not necessarily; dissolve the Tirm, but when a general partner withdraws, the] partnership must be terminated. Limited partners exercise no, }voice in the active management of the business, but they do share in the profit according to the agreement. As a rule, they are prohibited from withdrawing their capital except under unusual circumstances. If no agreement is set up specifying that certain members of the firm are limited partners, all of them are considered to be general partners. Hence when a partnership is formed and announced to the public, it is common practice to state in the annotncement;' which members -are- general, and. which. are, limited partners. Kind of Partners Common and statutory law recognize various types of partners. For example, a silent or dormant partner takes no active part in the business even though he may be known to the public as a partner. A general partner participates in the management of the firm and bear unlimited liability. A limited partner’s liability is limited to his contribution to the business. ‘A nominal partner is not actually one of the owners of the business, but he suggests to others by his words or actions that he is a partner. Under certain circumstances, the other partners may be obligated by the acts of a nominal partner and may become liable for his share of the debts. A general partner who has been with the partnership for a long time and who owns a large share of the business is called a Senior Partner. Junior partners are those who have been with the business a relatively short time and who are not expected to assume great responsibility for major decisions.‘The Formation of Partnerships ‘As with the individual proprietorships, few legal steps are necessary. The proposed business must be a lawful one, of course, and all that is required is an oral or written agreement between the partners. This agreement is known as article of partnership. 3 ‘As in any undertaking that involves more than one person, many questions are likely to arise after a partnership has been formed, Consequently, it is wise to have the partnership ““agreement drawn up in advance by a lawyer’ who-is familiar ~ with partnership law. Although no two written agreements are absolutely identical, the following points are usually covered in the partnership agreement. 1. Name of firm and names of partners. Address of partners. Locations of business. General nature of business. Duration of the agreement. Amount of each partner’s capital. Salaries, drawing accounts of partners and interests allowed on capital invested. 8. Method of distributing profits and losses among partners. iY Procedure for admission and withdrawal of partners. 10. Procedure for dissolving partnership. Mayen A general partnership is automatically dissolved if one partner : dies, withdraws, or is declared insane, or if the firm claims. Bankruptcy. Because of these limitations, banks are often | reluctant to extend long-term credit to general partnerships. 3 Perhaps, the most serious disadvantage is the joint and” unlimited persona! liability of each general partner for the aevom of each firm. Unless limited by agreement, each parne, a liable for the whole amount of the partnership debts regardicss of the size of his investment. If one partner lacks the personal wealth to assume his full share of the loss or debts, the other partners are required to make good on the deficit. In fact, all acts by partners in the name of the general partnership are binding on all other partners, even though the action may be unknown to them at the time. Advantages and Disadvantages of General Partnerships The. following advantages and disadvantages lie in the use of general partnership form of business ownership. Advantages 1. Better credit standing than sole proprietorships. 2. Opportunity for specialization of managerial skills as well as pooling of partners’ knowledge. 3. Ease of dissolution. 4. Freedom from tax on business income; a partner is taxed as an individual. 5. Minimum of legal restrictions. 6. Probability of larger capital resources than in sole proprietorships. Disadvantages of Partnerships. 1 Limited life. 2. Difficulty in withdrawing money. 3. Unlimited liability of partners. Special Types of Partnership Three special types of partnerships in use today are sufficiently important to warrant investigations. They are the joint venture, the limited partnership and the joint stock company. Thenumber Of each is small when compared with the total of ail forms. | 1. Joint Venture | Itis used today in such ventures as the development and sale of | real estate, in large-scale construction projects, and in the promotion of new enterprises. Two features that all joint ventures have in common are: a. Their termination upon the completion of the often, temporary. or short-lived project for which they are created. meee: b. Unlimited liability. i 2. Limited Partnership The distinctive feature of the limited partnership is the limited & liability of one or more partners. In addition, there must always be at least one partner who is subject to unlimited liability. A written partnership agreement usually is required for filing with a designated government agency. The limited partnership has become an important form of organisation for investment in real estate. In the limited partnership, any number of limited & partners can invest capital and risk no greater liability than the stockholders of a corporation. 3. Joint Stock Company The joint stock company has been defined both as “a securities- issuing partnership,” and a quasi-corporation. Its’ shares of stock may be freely transferred or sold, and its stockholders are \ subject to unlimited liability. The transfer of stock is a feature of the business corporation, and unlimited liability is required as in gencral partnership. The requirement of unlimited liability; tends to divert potential stockholders to the corporation form with limited liability. : * SMMMBE Agents. it hae on «. pec em te eit succenekTHE CORPORATION ‘The corporation is the principal means by which large amounts of capital have been assembled to create the gigantic industrial plants of Wester civilization. The corporate form is found in fields of business activity, but it reaches its greatest size in manufacturing, transportation, utilities, finance, and distribution. Definition In a legal sense, a corporation is an association of persons authorized and..recognized under the law as a. separate-legal entity apart from its owners, to accomplish a particular purpose or purposes. According to a former Chief Justice of ie United States of America, John Marshall (1819), “A corporation is an artificial being, invisible, and existing only in the contemplation of law. Being a mere creature of the law, it possesses only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence.”! In substance, the corporation is an “artificial being” a fiction of law.” Itis created for the purpose of enabling a group of persons to conduct some activity in a more convenient way than would be possible if they retained their identity as individuals. When applied to business ownership, the corporation’s essential difference from’ the proprietorship or partnership is clear. In these latter forms, the business has no legal status apart from its owners. Nor do the owners (with some exception previously noted) enjoy the benefits of limited liability, and the long continuity (even to perpetuity) available to the corporation through its charter.ov Moreover, the corporation is granted many of the rights held.. by-an individual, including such Privileges as the | rights to manage its own affairs, to own, mortgage and | dispose of property, and to sue or be sued in its own name. | The law has given business an instrument of great value in | the corporate form of ownership.gem Types of Corporations There are two types of companies or Corporations: a. The public company b. The private company The Public Company The public company is normally formed to enable the investing public to share in the profits of an enterprise without taking part in the management. It is characterized by the following: ie Its memorandum states that itis a public company. 2. The number of members ranges from seven to infinity, : 35 Free transfer. of. shares among the investing public through the stock Exchange. 4. Issuance of a prospectus to the public to subscribe for shares in the company.. Making public the audit 2 te Soma \¢ audited annual report of accounts of The Private Company ‘The features of a private company include the following: a. The number of persons will not be less than 2 and not more then 50, b. No shares are sold to members of the public, and c. Members cannot transfer shares to others without the consent of other shareholders. * Advantages and Disadvantages of the Corporation The advantages are as follows: Great ease in raising capital Pooling of managerial talents. Growth opportunities. Limited liability of members. Stability of existence. Ease of transfer of ownership. The legal status of the firm. ‘The disadvantages are as follows: Greater legal requirements for formation. Greater amount of capital requirements. Greater government regulation. Sharing of profit among numerous owners. Limited power of owners. Registration of Company ' As specified in the Companies and Allied Matters Deeree- of 4999, the major documents required for the registration ~~ 2020of companies are the memorandum of Association, the Articles of Association and the Prospectus.’ 1, The memorandum specifies the terms under which the company will continue to exist as a corporate entity. It contains information regarding the following: a, Name of company with limited as the last word in the case of private companies and the notation PLC in the case of public companies, “Location of the registered office, © Purpose (Mission) and objectives of the company, and d. Procedure for altering the memorandum. 2. Articles of Association direct the internal functioning of the company and contains such information as: a Conditions for issuing and transferring of shares, b. Power and responsibilities Boards of Directors, ¢. Method of auditing company account. 3. The Prospectus gives pertinent information about the company for the guidance of the investing public. Afterall the legal requirements and documentation have been provided, a certificate of incorporation is signed by the registrar of companies and issued to the company. It ‘is required to be displayed at the company's headquarters. OTHER FORMS OF BUSINESS OWNERSHIP There area few other forms of business ownership and these other forms deserve Presentation.Co-operative Societies Co-operatives are drastically different from other forms of usiness in ownership structure and even in operations. A co-operative is owned, managed and controlled by its members. Co-operatives are usually owned by producers, consumers or workers with similar needs and problems who aggregate their resources to solve their problems or satisfy their needs. For co-operatives to operate like | businesses, they must secure the Se, from the overnment in the. same _way business firms do? |... ele ee pcan RISE Mate aT ‘@ co-operative are shareholders in the co- | operative society. Each shareholder has a vote in the | management and decision making situations even though | some members may have multiple shares. Dividends are | however shared according to the number of shares. Co- | operatives are a common feature in Nigeria. They are found in Agriculture, Banks and Retailing and they frequently receive the support of the government. d 1 | Types of Co-operatives | As ali indicated, there are different types of co-operatives. | Among them are consumer co-operatives, producer co- | operatives and agricultural co-operatives. These are discussed below. | Consumer Co-operatives | Consumer co-operatives are established with the sole aim |of reducing the cost of goods and services. The logic is that with the pooling of resources, the goods/services can be purchased in greater volumes and consequently at lower cost 4 structures. Consumer co-operatives are usually formed by retailers, wholesalers and services.* Bn. i :Producer Co-operatives There are two types of producer co-operatives: agricultural co-operatives and worker co-operatives. Agricultural co- operatives are associations of producers or growers. Through the co-operative, they are able to procure resources like fertilizer, improved seedlings, machineries and installations. They also use the co-operative to market the products. The second type of. producer co-operatives are workers co- operatives. The workers combine resources. to. acquire or ease ‘a'factory which they nianage, control, undertake the operational functions and share the profits of the endeavour. Advantages of Co-operatives a. Lower cost of purchases. b. Lower labour cost. c. Greater amount of organisational commitment. d. Little or no taxes. Disadvantages of Co-operatives a. Restrictions in the sales of products. b. Managerial ineffectiveness. e Inability to employ the best workers. Franchises ‘A. franchise is a business arrangement where a business owner known as the franchiser allows another businessman, the franchisee, to use his firm’s trade name or copyright, patent, or trademark for business purposes but under conditions permitted by the franchiser. Once the terms are accepted and the new franchise is in operation, the franchisee is an entrepreneur operating an independent business. A. wre National development of course, means more than economic growth, which is merely concerned with incr ased national income or increased national output. National development means the increase of per capita income and the manifestation of positive transformation in the standard of living and in the } quality of life of the masses. Nctaret beat How can these changes be brought about? It is definitely through business and entrepreneurship. Business (big, medium and small) constitutes the engine of economic development, and economic development is faster in those countries -that practice the free market system than in those that fight it. Businesses are the major creator of innovation in products and y technologies and these expand the frontiers of society and give rise to further development. This explains why businesses are increasingly the major employers of labour in civilized societies, and governments are rather downsizing their once amorphous sizes. THE NATURE OF ECONOMIC SYSTEMS The economic system is defined as the framework through which a country mobilizes its human and material resources for the production and distribution of goods and services to satisfy human wants and needs. The major economic systems of the world are as follows: Capitalism Capitalism represents the economic system where thé means of production are controlled by private individuals. This system is also ‘called the free enterprise system. The United States of America is the strongest proponent of capitalism. Britain, © France, Germany and most other European countries practice a gfeat deal of capitalism. Capitalism is characterised by the~legal right to own private | Property, freedom of contract, competition and the freedom to establish and operate a business enterprise. 3 : : Economic activities under the. capitalist system are conducted “7 through the market mechanism. This implies that the economy is controlled by what Adam Smith called the“‘invisible hands”, and the resources of the natiom are freely traded in the marketplace, and the goods and services would go to those households and firms who are willing to pay the most for them. The major features of a capitalist economy, according to Uzoma are as follows." —— ‘ Individualism oF % Private property Profit incentive Consumer power . Freedom to compete Occupational freedom Freedom of contract Limited role of government SPrIAP AY Ne Socialism Under this economic system, the government owns all the) factors of production and directs all the economic activities in the country. Several companies are owned by the government most of which are established to help the government achieve” its social and other objectives. Under socialism, the mechanism by which government controls the economy is called central planning. Communism Communism can be described as an extreme form of socialismiit’ which the public, represented by the government, owns all the factors of production and also consumes a greater percentage of the goods and services produced by the system {Only wages are paid and profits, rents and interests belong to /the workers, with the state as the custodian. Communism originated in the former Soviet Union. The Mixed Economy System This system is a blend of capitalism and socialism and it is practiced in many third world countries, including Nigeria. In a mixed economy, government owned and private~ sector companies operate side by side. This economic system has some usefulness in the third world countries where the state must establish the infrastructural base: public utilities and other essential industries, which the young, private sector is most often unable to establish. Nigeria operated a robust public sector with many public sector corporations. The Federal Government of Nigeria annually announces the national budget, which sets limits to government spending in each component of the public sector. Nigeria has recently privatized many of its public sector corporations. Indeed the country is gradually wearing the toga of a capitalist state.BUSINESS ETHICS Ethics refer to the study and philosophy of human behaviour and actions, with reference to the determination of rights and wrongs, and it covers such issues as how our decisions affect other people, people’s rights and duties, moral roles and relationships with others.!8 Business organisations should have an interest in promoting and contributing towards an ethical society by practicing good ethics in_théir decisions, policies and relationships with employees and stakeholders. Ethical issues are involved whenJe _ a?" —_ company executives demand tribes for the award of contracts or for employment, when a manager instructs a subordinate to act contrary to the official policy or to a moral.rule, or when drug manufactures do not state the contra-indications of drugs. Levels of Ethical Questions in Business ~ There are four levels of ethical questions in business. These levels are the individual level, the internal policy level, the stakeholder level and the societal level. '? The Individual: This asks questions about how people treat others in organisations. How honest, open and caring are we to one another? What obligations do we have as human beings and as workers to our superiors, our work-mates and our subordinates? These questions relate to regular operational relationships. Does the manger simply see the worker as a tool for getting the job done? Is the worker aware that he has an obligation to put in the day’s work? Can we insist on doing only the right things in our workplaces? j The Company: This level of ethical questions concern the nature of a company’s relations with its employees particularly as depicted by its polices and practices. What is the nature of. personnel policies in the firm? Are vacancies advertised? Are internal staff given primary consideration in employments? Are employees paid equitable rates? What are the rights of workers? Such general company matters relating to layoffs, benefits, work rules and leadership style have ethical implications. The Stakeholder: Ethical issues at this level relate to the nature, of a company’s relations with shareholders, customers,suppliers, distributors, community and others. To what extent are the decisions and polices of the firm toward these groups fair? To what extent do firms pay dividends to stockholders? Are company’s payment terms to suppliers equitable? Do companies respect the rights of stakeholders? Are they honest in their dealings with them? These and other such matters are the ethical issues at the stakeholder level. The Society: This fourth level concerns itself with how ethical ~ a company is in its behaviour and actions toward the society. jgpln Nigeria for example, the most glaring ethical question is “corruption. Another is tribalism. What is the firm’s attitude toward corruption? Does the firm roll with the punches? Do firms in South Africa and those in the United States practice racial discrimination in employment? Do Nigerian firms discourage corruption by their actions and practices. Companies that are willing to practice ethical behaviour in their societal-level dealings should desist from corruption, racial and tribal discriminations, extreme disparities in salaries, power and status, and strangulation of suppliers and creditors through delays in payments. Companies can raise societal ethical level by being ethical in their dealings with societal segments. \ The Tools of Ethics Generally, good ethics can be achieved or effected by the use of some mechanisms called the tools of ethics. These important tools of ethics include:”” a. Values, which are the relatively permanent desires that ~ seem to be good in themselves. Examples are’ peace, honesty and excellénce.re! »* ‘eh & velahetet b. Rights, which are appropri and legal entailments of a person or simply “his domain of action. Rights are however rarely absolute aiid unchallenged. The extent of one’s right is limited by.the legitimacy of ‘another's right. For instance, it is your right to speak your mind but not to make slanderous statements against another person. c Moral rules which refer to guides for resolving conflicting or competing interest. An example is respect for seniority in organisations, and . d Human relationships, which are intrinsic and permanent imperatives for organisational functioning. SUMMARY There is a great improvement in the public perceptions of business. Previously, business was perceived in bad light. This is not the case today. This change has occurred because the current owners of the notable private sector businesses are more educated than the general population and command great influence. The Nigerian economy is quickly wearing the toga of a capitalist economy and the private sector firms should be aware of social responsibilities and corporate ethics. an Lean ks csiTHE OBJECTIVES OF BUSINESS It should be clear from t..c foregoing that every business exists to satisfy human wants and- needs and only: by so doi achieve the more personal and more private objectives. It important to understard that profit making is not the purpose of business. The firm must offer and sell something to customers to. make a profit, and so, profit making along with other desires are outcomes of filling societal needs. They are objectives and not the purpose. Objectives of business therefore refer to those results or goals which business organisations seek to achieve through their decisions and operations. The role of objective: therefore, is to transform the broad statement of purpose into concrete, measurable results which are ght by the c-vners and managers of the firm. Examples of business obj -ctives appear beiow. Profitability Market share Growth Efficiency Customer satisfaction Job satisfaction een+ Regular dividends * Market leadership i +7 > Survival *° Social responsibility Profitability Profitability is a major objective of business organisations. It is offen: mistaken as the purpose of business. It is not the purpose of, business. Profit is only achieved when a business organisation has undergone an operating cycle. All business organisations seek to make bountiful profits. To many owners and managers, how much profit a company makes is the final measure *of performance. Profital ility is indeed a very important measure of corporate performance but there are times in the life of a business organisation when profitability ceases fo matter: An cxample is a period of economic depression when most businesses are more concemed with survival Market Share Market share represents the percentage of the total purchase of @ product controlled by a company. For example, if ten million units of electric fans were sold by all the five manufacturers of the:product in Nigeria in the year 2001, and if If one of the five companies, Nigeria Engineering Works (NEW), sold four million of the ten million fans, NEW would be said to have 300 ued 40 Percent of the electric fan market in Nigeria in 2001. NEW’s market share for that year was 40 percent. Most companies are in competitive ‘industries, Each tries to SHuease its share of the product market. company’s market Share is important because it determines the company’s volume * the volume of profit, and therefore the amoone ofmoney that is available as dividends earnings to be ploughed back into the Business Growth Most companies start as small firms because of the sufficient resources to start as big firms. It is natural therefore for these firms to want to grow larger. Growth is important for many other reasons. As a firm grows larger, it is able to take advantage of the economies of scale principle. [ts unit cost operation decreases as volume of business increases. This enables the firm to sell its products and services at more competitive prices and enables the firm to increase profitabilit. Growth increases the capitalisation of the business. A bigger business is worth more money and this is a desirable end Growth is also important for its own sake. Growth is a measure of company performance. Most business owners and managers seek growth as it adds value to their efforts and their ego. Efficiency Efficiency refers to the minimization of inputs in the production of outputs. Waste is abhorred in business operations. The more efficient the company, the lower its cost of operation, the lower its prices can be in the marketplace and the more attractive its products and services will be to price- conscious customers. Efficiency can therefore increase sitles volume and profitability Customer Satisfaction The customer is the heart of the business. The business is set up to satisfy him. Those companies that satisty their éustomers will continue to be patronised by them. Those who do not Satisfy their customers will lose their patronage and. theconsequences are sales aecline and conporat satisfaction leads to corperate sucéess, Jeb Satisfaction Job satisfaction refers to the satisfaction and happiness of the worker (emrioyce) in an organ‘sation. Employee satisfaction can be achieved by the payment of fair wages, good conditions of sétvices, good personnel policies, employee participation, promotions, status, recognition, and so on. A satisfied worker “is @’ committed’ worker, and companies - try: to. satisfy: their workers in order tc increese werker ccmmitme productivity. uiure, Customer ‘and corporate Individu: ls join organisations to achieve their personal goals of gaming money, status, associations, etc. They know they kave to help the firm achieve corporate goals in order to achieve théir personal goals. It is the responsibility of managers to integrate the personal goa!s of workers with company goals so thaf thé two are carried alozg simultaneously. Including job Satisfaction as an objective of business is an effort to carry Workers’ neecs and goals alcag w:ih the strictly more corporate goals. Rezular Dividends Dividends are che shares ©" p-ofi's of aa crganisaiion, paid to the owners of the organ‘sation. » ¢ the end of every business yeer, the company determines its profit for the year. There are a cor Denies’ use their profits. They decide what pn 2 use in the p; nt af civ dend to owners and what ae nec earnings’ to be pleughed back ReySome quoted companies (ie. public limited companies) and some large private limited companies do not bother about regular dividends. Since the owners are not the managers in Such companies, itis easy to ignore them, but this is really to the detriment of the company. When companies do not pay llividends regularly, owners and shareholders refuse to provide more money when the firm needs it for further expansion oF modernisation purposes. Market Leadership Some companies aspire to be market leaders. They achieve this by new product research and development. They are. usually the first to introduce new products or product modifications. When they introduce new products, they price the products as they wish and reap great profits for long periods before other companies join the bandwagon. Such market leaders may also want to dominate the distribution channels and lead in promotion. Some other companies are not interested in market leadership. They are followers or imitators. They go into tested lines. They only produce and market products that are already available in the market. They are afraid of the risk of failure involved in innovation Survival Survival is a veritable objective of business organisations. It is pethaps the most enduring objective of all organisations. The firm would have to survive to be able to make profit, grow, control significant market share and satisfy workers and so on. Survival is usually most recognised as a compelling objective during economic depressions and recessions when the purchasing power is low, prices of goods and services arefalling, and company warehouses are filled with unsold stocks of products. At such times, the firm may be running at a loss and owing workers’ salaries some months in arrears The firm’s pre-occupation at this ime is simply survival Social Responsibility ‘ Corporations are part and parcel of society. They exist in the society and are affected by developments in the society. They . _are expected to participate in solving societal problems. Infact, - = stheir role in society should not be passive. It should be active — { and even proactive. The firm has more to loose by the 4 destruction of the society. They have more investments in the | society than any individual. Many companies are today engaging in the provision of social amenities in their areas of operations, sponsoring sporting events, offering scholarships to = prilliant students and much more. This is done in order to * create a good environment for their well-being. This is called enlightened self-interestPUBLIC PERCEPTION OF BUSINESS There has been a shift occurring in about the last thirty years in public perception of business in Nigeria. This change occurred many more years ago in the more developed countries of the world. This subject matter is discussed under (a) the early view and (b) the contemporary view. The Early View The early view of business around the world was completely unwholesome. In the early and middle 1900s in Nigeria, the big business firms were foreign. These included the Royal Niger Company, the Shell D’archy (which later transformed into the Shell Petroleum Development Company), the United African Company (UAC), UNILEVER, SCOA, and so on These early multinationals were seen as appendages of the colonial government and were therefore considered exploitative.' But, inspite of this exploitative outlook, these multinationals were well regarded and their indigenous employees were highly placed.‘This was not the case with the indigenous businesses and entrepreneurs. The word “businessman” did_not representa desirable personality in the early and middle 1900s in Nigeria inspite of the fact that these businessmen wielded financial power in their communities even in those early years. This could be attributed to the fact that the early businessmen were illiterates, and were socially unaware at a time when it was in “ogUE To behave like one of the departing English gentlemen, the educated bureaucrat.” This negative view of the early businessman was not restricted to Nigeria. [t was the case in most parts of the world. It has been indicated that in the early 1900s in the United States, the ascription “businessman” or “entrepreneur” simply meant that “the “individual was overly aggressive and probably not trustworthy.” This early negative view of the businessman in “the United States was particularly noted in the 1964 research report of Collins and Moore,: which reported as follows:* Our study suggests that the carriers of the entrepreneurial values of our society tend paradoxically enough, to be those who are marginal to the established social networks. They are those who for social, psychological, ethnic or economic reasons, cannot make a go of it in existing social structures. The convergence of public perception of business and the businessman around the world was that business meant Predation, exploitation of labour and usurpation of resources. This early negative view began to clear with education, Civilization and modernity. The writings of Adam Smith, loseph Schumpeter and David McCleland among others, helped to clear the debris of negativity about business.It must be recalled that the prior iron cast divide of the world into the capitalist and communist blocs was to a large extent based on the different worldviews of business and the free market system by the two blocs. The communists had seen business as bad and as engendering greed and avarice in human communities. The communists continued to promote the negative view of business until the collapse of communism in the 1980s. The Contemporary View ‘The old negative view of business has given way to a more positive view, although few individuals (like Nathan in the illustrative case study) and organisations are yet to change their views, Business organisations are now considered central to national ‘development and infact to human existence. Businesses are currently seen to be playing an invaluable role in society. It is the major employer of labour, the builder of the ou of nations, and the creator of newness in products and iechnologies. These facts seem fully understood in modern times. Infact, countries of the communist and socialist world and those of mixed economies who once held tenaciously to state ownership and control of major industries are now changing their positions. There is now a privatisation blitz \ ¢ around the world, an obvious reference to the positive societal perception of business. C Today's Nigerian entrepreneurs command high social position Research in Nigeria has shown that most owners of promising ventures hold higher educational qualification and are socially aware. Research in the United Sates have also shown that the contemporary American entrepreneur represents an educated, successful hard charging, young business executive who had experienced a generally higher than average level of success in LLTHE PLACE OF BUSINESS IN SOCIETY géme reference was made in the last section to the place of pusiness in society. Business has been defined in chapter one gs that arm of society engaged in the production and distribution of goods and services to fill the needs and wants of society for a profit. The important elements in this definition are as follows: a.» Businesses are Creations of Society: This implies that businesses are legitimate. The right to own productive property is constitutional and while one or a group of ; firms, the society gives it further ng it persons own a busine legitimacy by patroni: B. Filling the Needs and Wants of Society: Business makes itself relevant to society by finding a societal need or : want to fill. The business firm must therefore find a niche in order to survive. It is therefore important for everyone to understand that the society relies heavily upon business and it is impossible to separate the business sector form the rest of society in a capitalist or mixed economy system. The society depends on it for food, clothing, shelter, transportation, electricity and power, communication and of course, employment. The government depends on it for revenue from taxes. Infact, the viability of society is tied to the existence and viability of business organisations The other perspective of the place of business in society relates to the contribution of business to national development.National development of course, means more than economic growth, which is merely concemed with increased natic income or increased national output. National development means the increase of per capita income and the manifestation of positive transformation in the standard of living and in the quality of life of the masses How can these changes be brought about? It is definitely through business and entreprencurship. Business (big, medium and small) constitutes the engine of economic development, and economic development is faster in those countries that “practice the free market system than in those that fight it Businesses are the major creator of innovation in products and technologies and these expand the frontiers of society and give rise to further development. This explains why businesses are increasingly the major employers of labour in civilized societies, and governments are rather downsizing their once amorphous sizes. THE NATURE OF ECONOMIC SYSTEMS The economic system is defined as the framework through which a country mobilizes its human and material resources for the production and distribution of goods and services to satisfy human wants and needs. The major economic systems of the world are as follows: Capitalism Capitalism represents the economic system where the means of production are controlled by private individuals. This system is also ‘called the free enterprise system. The United States of America is the strongest proponent of capitalism. Britain, France, Germany and most other European countries practice a * great deal of capitalism. Capitalism is characterised by theal right to own private property, freedom of contra competition and the freedom to establish and operate a business enterprise. Economic activities under the capitalist system are conducted " through the market mechanism. This implies that the economy is controlled by what Adam Smith called the “invisible hands”, and the resources of the nation are freely traded in the marketplace, and the goods and services would go to those households and firms who are willing to pay the most for them, The: major features of a capitalist economy, according to | Uzoma are as follows.” Individualism > : Private property -»« Profit incentive 3 4. Consumer power 5." Freedom to compete 6. Occupational freedom 7. Freedom of contract 8. Limited role of government Socialism Under this economic system, the government owns all the factors of production and directs all the economic activities in the country. Several companies are owned by the government most of which are established to help the government achieve its’social and other objectives. Under socialism, the mechanism. by which government controls the economy is called central planning Communism Communism can be described as an extreme form of socialismin which the public, represented by the governmens. 0 the factors of production and also consumes percentage of the goods and services produced by system. Only wages are paid and profits, rents and interests belong to the workers, with the state as the custodian. originated in the former Soviet Union. greater Communism The Mixed Economy System This system is a blend of capitalism and socialism and it is practiced in many third world countries, including Nigeria. Ina mixed economy, government owned and private’ sector companies operate side by side. This economic tem has some usefulness in the third world countries where the state must establish the infrastructural base: public utilities and other essential industries, which the young, private sector is most often unable to establish. Nigeria operated a robust public sector with many public sector corporations. The Federal Government of Nigeria annually announces the national budget, which sets limits to government spending in each component of the public sector. Nigeria has recently privatized many of its public sector corporations Indeed the country is gradually wearing the toga of a capitalist state., Tan ~The Private Sector ic the Parti BF the natinal oon is net ayned ire donne ein yodes Small businesses they band not-for F (eg welfare poke and neko for mene orsamsatians 4 Naw | | eke a | Oe Pubkic Lecter 1 Ma Dank of Ie mebsinat | Nehensaay sta tt Crenad snd Gotelled be Ta quienlnent: tk inthdes Aatinaliced rolldries, — | | “public Cevpovaction “federal wgenaes ete. these two hector s make. “p Tha eels economy > hewerer toy hone Corbi Simelarities aol Vcifieren ws Jhetseen hem - @ Ufferentos betwee Public and Private ers wlateny opramencork am Cig 4] Pleidbiity And Aclaptiveness Tl Manaqemtnt SHructrk and Covtvel '} Innevetivencse | @ Size ! | The public Seley constitutes « smell poate of Fe etme of most county ris conpored % Ke pretJA | getov- In ther woyds, the pala Lect bs rect | size and hence [es aehvibes, tana’ fect on he entire “ree URES ae Public Seco a aden sie if eh a ooned a sf ry pra Se cher a stig wade got, priiate’, simply: ae by vieliv idilals, groups laXe Lape ike ©) CB TECTWE | Busines Ss and Corporates ant Ufies Who ifm from feck of “he prblate Lecter aes mes Col | ren! WA in oo ele tapi vintcn me Ros soit fore et ane leks merked mainte oe oa { | driver rahty Tey are Miitiess driven ou MAgKET CombiTien. He private SeCloy mavkat is high. npc ie uch! prose secley fim. Sain ee pl lait merkeet , the cotta hand, Setter Aims are oa mms edebine piles A There holders | able se, iprren.cins us ee RZ bd getany Drovision ef: ment C fa, when Ba apne ee ea pokstt chevert eres, 2 gectes ihe By reteset nel profiled AEX BI Ty And ADAPTIVE SE <<: The pubke sectlev ts often, le dedcribad 4 s‘bureducaht! fin fe Five sense. ff fe Conbidotad ae | Slow meviiy ys nid, Kuearchicelt Stem wil ee Sel depiitmusts dy. otte Gecan dora vgets L 4 Griivast 2 priate stfler Ls meee chy namic form neh pints Bea aul? [Ae diy din, of Prbler te dior rrrpr K On the Cntr: eta Secor fms ave. Manas Board of Wasted etae bog Be foes Tees aa ee Lecisinrmabiving Ab aistomsidershle f | bel of hac emy for mentgement:. la, mest (nges, prea Seetoy 2 ph bettie GEillad mann gers Theat pabee se eter D Irae pe MESS ea proce kin ep SLOG Seley t mere \innev the sly Ses tsy + Iamevatian ae tex. cereiep ment aud Im, Semana of ets tt, | Sends preiedures C eercEhes eet. 5 ay ferent from etuiting snd ae prradsterhesteny > anys Change trash Geel its: High ope [innwudttivennss {5 whet makes prrvete Lata Dyan | Sty aoflrt wacpote of Sef rnp tion \ | @ - |p fen") Soni, Stein Pablinbect sacl ancl ce \ (be of milaritna Bes ton The pbb sen sod ane SeCtiy clade ab. | Employment Op ert . shih w Eat ne cot " ©) Adminishakien © fey ke eranid Attivit (@) Addu nel Pinsireial 2 portin (f) lect fos wet psa Fnwivermental 003500 i ngs Gh ee Rees ee o) a Expancury (3) Instititindliced Strudoie( 1 ( EMPLOYMENT oppoRTunrpa: ! att < g SRR pb tetley and Tha pribate setisy fr mp “ployment: avenue. for BR ctiseuny {pth Deron cos UTA Ss Lacy Throws. acorn finemink andl £0 rly sy Prdlie Sectov agents” shape ha Elem, Trt Pivcte. | Sete combed nt us elicoah te pubic. Se ffst. fro Tr bfom ce, Keg. cor whe EDP Thay hencning eterna e Balyenctinge ® © Adm ee 7RATIN | 4 . | BP publ and. privale Seite ent adbminic— [Crate aletwites inisbratos tt RZ management |orgmuzction, aluahinr and Smttyel of resmstas C | Aditls Contd Be. tmuman Dorey Or matey TL). im, order ©} sthuive om Sete d ebhithse Eogmant TK the eer | | Provpese of the orgecste, , PLE~ORENTED The grods and Sermées prrclaced by Prieta k¢lei Crash Git mand te taken t) i ® mest Ke reeds ©, fe eeple. Ermilertly y ther wtilchies amd Gpocial— J Sermds prev ided hy Tre. c Sehsy ogehexs se sy oe Hag alse filled 6 ward sin nage byes of The | peoples, Mere Sree NGO! (noi profit ).alao Nndey ome nee TP’? Senias { | Accomm TABILITY AMD Bs aco Rpm IW? | Boh The prbe and He ta Seee [obCeme nts And fon mere As wthabin. Bs [leery Perferinence oer a 4 acegin firianenl Yemr Ths 05 I keep The naar foc 4 Comnt wbeclity ir Nn acssphlie BES Epo parchEAe D Actwrneg:HGAL RESP NC BUT y ; jf oat bide Te pbc Sechov 5 Pvt sect fm, lone Thay neva AGfwhis, aler exhibit Lome vel Seal neg, i ‘ | C Sb Ubdey Corby thitnin t6.d 4 alg | 4 oe uch ag coder sidepacw, nartesrial Cacthopal |Arcepmnts (4, Osta’, cchlanehips ae) He BD) EAUKA MEA TAL pene | Bot The Me f Prieta Sacto and Ry Pubhe se ttey 5 1 co het wperzte in a vacuum 4 se Dram Bnicronmeht and ad sath Rar a&tvrhi 5 | ere Inf Qrenwel hivectty oy Indirectly nq hese | 2gramic tational oy eMteyanl verinhles whith etd OF ether Controllable ov unin ollrble NAW CE te private sect ding o> evdr 2 rehime may 1) PLANE POR EX Panscien) All the Liters, both public ancl pyivale have dest aad plans fy expansion Ae pris Te Letts ims let wp medals & enable te wy / Bxpand Meri production of Govde Ghawrte, Be pabbe acted Dlen trnarde Sxpaneling LF pryjeche amd Bcbsihe> Werder te Prnde Thar denied B mocinen, ws tafy th order Keech move people TUTIENALUEA STRUCTURE Bet bar prota A Pub kerr ane made of of fims, Oraanrashs ' 2 AGenves sete whi are 3 Citra lised traci s Aimed at achicrrry PORES Gam ed TSO fre realy of wud Semices feeke bad maker BD JingTHE MAJOR RESOURCES OF BUSINESS ORGANISATIONS Business organisations are not started in a vacuum. Some resources are needed to start and operate a business. These Tesources are as follows: 1. Manpower: This is a very essential resource of business Organisation. Infact, individuals are the building blocks of Organisations and no organisations are formed without people. People (or manpower) are needed in the form of factory workers, sales persons and for such other needs. Manpower is indeed very essential and must be properly managed. sta os sss cine2. Money) Money 13 a very essential requireme for starting and running a business. Money must be avuilat in the required proportion . Generally sees of money for starting a business in Nigeria ineiv "personal savings, money in the form of loans or gifts from tnends or relatives, loans from banks and other financial institutions and monetary incentives from government agencies 3 Machines: Machines in the form of _ factory installations, operating machineries, and other machines for undertaking an assortment of business tasks are essential for a firm. 4. Materials: Materials in the form of raw materials and components for production, consumables such as paper, pen, glue, etc. and other types of materials are needed for business operations whether the business is in the manufacturing or in the service sector 5. Management. — Management as_ separated from manpower is very essential for the starting and operation of business organisations. The manager must coordinate the other resources for them to be useful to the firm. The resources of manpower, money machines, materials and information are not self-directing. They only perform when coordinated or used by the manager. The manager may be the owner of the business or a professional manager employed to manage the enterprise ©. Information: Information has lately become recognized as avital resource of organisations. This is indeed ‘necessary because of the rapid changes enveloping mankind. The rapid changes in technology, in the economy, globalization, severecompetition and the shifting base of human wants and needs, are all factors affecting business opportunities and threats. Information is required to determine _ business opportunities and for managing existing businesses. The viability of the business organisation is a function of the quality of its decisions which in turn, is a function of the information it gathers and uses. This is the age of information explosion and this calls for the expenditure of money for the acquisition of information-related machines, gadgets and other resources for the effective management of business organisations. The increased size of today’s business organisations and the Breater level of interdependence of organisational parts are all factors calling for greater information. The advent of information and communication technology have added additional status to the factor of information, engendered the information revolution and created “a world without borders”. Information is not only a corporate resource, but a compelling imperative to the global village.| STRETIOG & Mew Susiys ce | Ais wavelves g ets | musk Le, : =e ee es ofa hee ba] [ve tel anes qiogiaat ee a \e To Calnen of conSunw node i s Sanimnmork | Hi Rocarrainind Ws resorcis ay WR 5) Cask Lemsfk awclyas +— 7On 8 ARs product ako Leake Care a eS aban ° = pete i eset ey. : 2. ROM ASS OF BUSWWESs TAULOVMET Ward 1 AWS 2 Geel examinedhion Of J= q WADATIOD OF THE Bucw Wess igen \ Asn a ESS nea + fe Mt enue how : Tegaaie ie Dhak are fegek Ge Whe do (seit bd eee oot Tomi are thes! At Shek pate ee Tg HO a ond Eta pa able mol dounwl pase suk quiches Wu toast ye Vey yee A ASCE? TAIOING THE Cesoueces CAPT _ReQucemsc ts —\ntiums resources, Obs anal whet Vent orn cles Hee type ef SHO meakenais to Use crcl tts “hag CoS of Lryeind Mas CSO OS enti — Se Ha nui of wots, nck fs amok of morsy sed ~—a_Stewbef tha buswaass SESS be cousibored: E unvnlves porters | person may Wart Gyptet ave St lecos? wohak are the Ui Nera PES Non pers} fe ger? \f tro Gene fts out} | wens: fing Cask tee buses wl cower, uk fF tt cost oak weighs AOS. \anfis, teenk Letownest dos i fot ables” — =)marty WUIILY LY WWya UE state. SOCIAL RESPONSIBILITIES OF BUSINESS Social responsibility of business refers to the societal expectations of business organisations to aid in the solution of societal problems as they (businesses) * pursue their purposes and objectives. This implies that society recognises businesses as part and parcel of society and therefore expects businesses to partake in societal life through conttibutions to societal oenot the-nature of the Original social contract betw business and society.’ Social contract refers to a setof = way understanding that defines the telationship between aisjor institutions, in this case, business and society. The soit contract may be articulated through’ the laws and regulations that society has established for business operations, and ! operationalized through the shared values, harmonious ~ relationships and the manifest appreciation of each others role. The role of business in the original social contract was that of production and distribution of goods and services for a profit and within the context of fair prices, safe and quality products, and safe workplaces.’ Society now expects more of business firms than were contained in the original social contract. It has superimposed additional expectations and these have altered the social contract in significant ways. What are these new expectations of society from business? They include community development, contributions to national educational , development, equal opportunity in employment, compliance with national aspirations, and so on. Exhibit 2.1 presents the major segments of society that make these demands and the demands so made Exhibit 2. Societal Segments and Their Expectations From Business Firm: Societal Segments and Expectations is Owners . a. Solvency and efficiency of operations b. Adequate return on investments2. 3. 4. 5. 6. c. Growth of investments d. Good assets management e. Provision of status information. Workers a. Fairness of wages and salaries b. Security of employment c. Protection against accidents and old age d. Information about the firm. ~~" Customers a. Affordable princes for goods and services. b. Availability of goods and services c. Adequate quality and utility of products Community a. Employment of community members b. Provision of infrastructural facilities c. Support of educational and sporting activities d. Being a good corporate citizen. Suppliers a. Prompt payment for supplies. b. Profitable prices for supplies c. Continuation of business relationship d. . Cordial relationship. _ Creditors a. Prompt settlement of credits b. Good management of firm ¢. Growth of businessLer B's os : Distributors . 1. Good eredit'policy 2 Cordial relationship ; g Growth and sustenance of firm 3, Government ‘ ";, Prompt payment of taxes and levies » p. Growth and sustenance of firm c. Employment of citizens “qd. Support of government economic aspirations, Being a good'corporate citizen. * The notion of corporate social tesponsibility is therefore an out- | growth of these extra-ordinary expectations and alterations of ; the original social contract. These new- expectations have occurred because of the following reasons: * Education and Increased Awareness: The general level of education, affluence, and awareness is higher than it was! earlier. Society therefore wants more values fiom) institutions, products/services, and wages and dividends! among others. It also sees business as a major partner that} should contribute to societal harmony and growth. * Fear of Exploitation: The large firms in Nigeria and other developing countries which are mainly multinational Corporations, have had a long reputation for the exploitation of the nations and communities where they are located. These firms have not been perceived as enlightened and ‘nevolent operators but as notorious exploiters whose only Gbiective is profit maximization.'® Some of the societal “mands may be designed to neutralise this exploitation. . s i oor. Poverty. Nigeria and other. developing countries are P'Besides, the national budget is often embezzled by Politicians and strategically placed public servants. As a result, poverty is acute and infrastructure are either non- existent or ill maintained, and communities of location turn {0 major corporations with additional demands and expectations, Views about Social Responsibility Many scholars, institutions and business executives belong to different® sides’ of the- ‘debate’ ‘on’ the “appropriateness or inappropriateness of corporate social responsibility. It is considered worthwhile to present some of these views for a broader appreciation of the concept. Views Against Social Responsibility Some scholars, institutions and business executives have taken a position against social responsibility. The most notable of these antagonist is the renowned economist, Milton Friedman.'! The views of Friedman and other antagonists are summarised below: a. Businesses and their managers have one responsibility: to maximize the wealth of their owners. Social matters therefore should be resolved by the workings of the free market sysem.'? b. © Managers are economically and production oriented and have no expertise in the social skills for handling social problems. : b. The cost of social responsibility is borne by the same society needing help. It is factored into production costs and subsequently into prices of goods and services.Pt ere SS eS EXT - pie y wields enorm ; ysiness already wield }OUS power ~ ; a. Ppmological. and. environmental? Shoutg business te joaded with additional powers? tt would be made si werful ant this will become upcomfortéble for the society. | Se ‘ jews For Social Responsibility Many equally strong arguments have been Presented in support ot onsbility are Peter Drucker and social responsibility. Among the Proponents of social the classical economist, join Maynard Keynes.'* The summary of: these views for x a cial responsibility are presented below. Mey Che rroblenst hat My oak hut Industrial society is hampered by serious human and social problems caused largely by the rise of large’ corporations, and managers.must conduct the affairs of these corporations in ways that solve or lesson these problems. '* It is in the enlightened self-interest of business to be socially responsible. If business cultivates today, a healthy climate for the future, its long-term viability will be assured, Society retains the prerogative to sanction business and if business does not use its pesition in the way society Wants it used, the privilege and power of business will be withdrawn. Business must assume a socially responsible role to 122° off future government intervention and regulations.