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FedEx’s political action committee ranked among the nation’s top ten, making generous donations to hundreds of congressional candidates. Its board was adorned with former political leaders from both major political parties. Its corporate jets regularly ferried of”ceholders to events around the country. All this generosity paid off. In October 1996, when FedEx wanted two words inserted into a 1923 law regulating railway express companies, the Senate stayed in session a few extra days to get it done, even with elections only a month away. A “rst-term senator commented, “I was stunned by the breadth and depth of their clout up here” (Lewis, 1996, p. A17).

A similar coevolution of business and politics occurs around the world:

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No one would dispute that business and politics are closely intertwined in� Japan. As one leading “nancial journalist puts it, “If you don’t use politicians, � you can’t expand business these days in Japan—that’s basic.” Businessmen� provide politicians with funds, politicians provide businessmen with infor- mation. If you wish to develop a department store, a hotel, or a ski resort, you� need licenses and permissions and the cooperation of leading local political� “gures. And it is always useful to hear that a certain area is slated for� development, preferably several years before development starts, when land� prices are still low (Downer, 1994, p. 299).�

The same intertwining of business and politics is even more dominant in China. It is almost impossible to start or build a business without the support of party and government of”cials. Guanxi (relationships) generally matters more than laws and regulations. Negoti- ating the ethical terrain is treacherous in a country where bribes are technically illegal but

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the exchange of cash-“lled “red envelopes” is deeply rooted in a culture that sees gift-giving as basic to building relationships.

Society as Ecosystem On a still grander scale, we “nd society: the massive, swirling ecosystem in which business, government, and the public are embedded. A critical question in this arena is the power relationship between organizations and everyone else. All organizations have power. Large organizations have a lot: “Of the 100 largest economies in the world, 51 are corporations, and only 49 are countries. Walmart is bigger than Israel, Poland, or Greece. Mitsubishi is bigger than Indonesia. General Motors is bigger than Denmark. If governments can’t set the rules, who will? The corporations? But they’re the players. Who’s the referee?” (Longworth, 1996, p. 4).

This question is becoming more urgent as big companies get bigger. In 1954, it took more than 60 companies to equal 20 percent of the American economy; in 2005, it took only 20 companies. “We don’t often talk about the concentration of corporate power, but it is almost unfathomable that the men and women who run just 20 companies make decisions every day that steer one-“fth of the U.S. economy” (Fishman, 2006, p. 22). A number of writers (including Bakan, 2004; Korten, 1995; Perrow, 1986; and Stern and Barley, 1996) emphasize that whoever controls a multibillion-dollar tool wields enormous power. Bakan (2004, p. 2) sees the corporation as “a pathological institution, a dangerous possessor of the great power it wields over individuals and societies.” Korten’s view is similarly dark:

An active propaganda machinery controlled by the world’s largest corpora- tions constantly reassures us that consumerism is the path to happiness, government restraint of market excess is the cause of our distress, and economic globalization is both a historical inevitability and a boon to the human species. In fact, these are all myths propagated to justify pro!igate greed and mask the extent to which the global transformation of human institutions is a consequence of the sophisticated, well-funded, and inten- tional interventions of a small elite whose money enables them to live in a world of illusion apart from the rest of humanity. These forces have trans- formed once bene”cial corporations and “nancial institutions into instru- ments of a market tyranny that is extending its reach across the planet like a cancer, colonizing ever more of the planet’s living spaces, destroying live- lihoods, displacing people, rendering democratic institutions impotent, and feeding on life in an insatiable quest for money (Korten, 1995, p. 12).

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Greatest Hits from Organization Studies Hit Number 2: Jeffrey Pfeffer and Gerald Salancik, The External Control of Organizations (New York: HarperCollins, 1978)

Pfeffer and Salancik’s book fell out of print for several years and is little known outside academic circles, but scholars love it; it occupies the second rung in our ranking of most-cited works. As its title suggests, the book’s principal theme is that organizations are much more creatures than creators of their environment. In the authors’ words: “The perspective [in this book] denies the validity of the conceptualization of organizations as self-directed, autonomous actors pursuing their own ends and instead argues that organizations are other- directed, involved in a constant struggle for autonomy and discretion, confronted with constraint and external control” (p. 257). The authors follow Cyert and March (1963) in viewing organizations as coalitions that are both “markets in which in”uence and control are transacted” (p. 259) and players that need to negotiate their relationships with a range of external constituents.

Pfeffer and Salancik emphasize that organizations depend on their environment for inputs that they need to survive. Much of the job of management is to understand and respond to demands of key external constituents whose support is vital to survival. This job is made more dif!cult by two challenges:

• Organizations’ understanding of their environment is often distorted or imperfect (because organizations act on only the information they’re geared to collect and know how to interpret).

• Organizations confront multiple constituents whose demands are often inconsistent.

Organizations comply where they have to, but they also look for ways to increase their autonomy by making their environment more predictable and favorable. They may merge to gain greater market supremacy, form coalitions (alliances, joint ventures) to gain greater in”uence, or enlist government help (by seeking subsidies, tax breaks, or protective tariffs, for example). But there is a dilemma: every entanglement, even as it garners greater in”uence over a part of the environment, also produces erosion of the organization’s autonomy. There’s no free lunch.

Pfeffer and Salancik describe three roles for managers, two political and one symbolic: (1) a responsive role in which managers adjust the organization’s activities to comply with pressures from the environment; (2) a discretionary role in which they seek to alter the organization’s relationship with its environment; and (3) a symbolic role arising from the widely accepted myth that managers make a difference. If a team is losing but you can’t change the players, you !re the coach, creating the appearance of change without actually changing anything (an important idea that we address in the next chapter).

Do sophisticated consumer marketing “rms create and control consumer tastes, or do they simply react to needs created by larger social forces? Critics like Korten (1995) are

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convinced that the advantage lies with the corporations, but Pfeffer and Salancik (1978) see it the other way around, as do many proponents of “the marketing concept”:

The marketing concept of management is based on the premise that over the longer term all businesses are born and survive or die because people (the market) either want them or don’t want them. In short, the market creates, shapes, and de”nes the demand for all classes of products and services. Almost needless to say, many managers tend to think that they can design goods and services and then create demand. The marketing concept denies this proposi- tion. Instead, the marketing concept emphasizes that the creative aspect of marketing is discovering, de”ning, and ful”lling what people want or need or what solves their life-style problems (Marshall, 1984, p. 1).

Proponents of this view note that even the most successful marketers have had their share of Edsels—products released with great fanfare and huge marketing budgets that !uttered brie!y and then sank like stones. Consumers, in this view, are in charge because they can buy what they want and walk away from what they don’t want.

Slee (2006) provides a contrary view. He uses game theory and the concept of market failures to argue that, even though consumers generally make rational choices in terms of the options they have, their collective behavior can lead to a world that is worse for everyone. If, for example, Walmart opens a store on the outskirts of a medium-sized community, consumers may !ock to it for the low prices and wide variety of merchandise. At “rst everyone is happy. But then, downtown merchants who can’t match Walmart go out of business, throwing employees out of work and making the town center bleak and empty. Not all the newly unemployed can get jobs atWalmart, and those who do get paid less. Some of the wealth that used to circulate in the community now !ies away to Walmart headquarters in Arkansas. The community as a whole may be worse off, even though everyone still likes Walmart’s low prices.

Are large multinational corporations so powerful that they have become a law unto themselves, or are they heavily constrained by the need to respond to customers, cultures, and governments? An ecological view suggests that the answer is some of both. Ecosystems and competitors within them rise and fall. Power relations are never static, and even the most powerful have no guarantee of immortality. Of the top twenty-“ve U.S. companies at the beginning of the twentieth century, all but one had dropped off the list or vanished altogether when the century came to a close. The lone survivor? General Electric.

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