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Tuesday, June 14, 2005

Of Social Contracts, commitments and corporations

Last Saturday, over dinner conversations with a good friend turned towards outsourcing, offshoring and social contract between corporations and its employees.

His contention was outsourcing and offshoring was hitting hard at the very "soul" of business. According to him businesses in the past have had a social contract with its employees - you work hard for us and we will take good care of you. And, with this contract being broken corporations are bound to fail.

And, then came the media blitz on how Microsoft China (actually, MSN China) was censoring words like "freedom", "democracy" etc...How Microsoft is not doing everything it can to promote free speech.

Of course, we have in the past heard arguments on how Wal-Mart is bad for the community etc...

This left me thinking about whether corporations should have a social contract with its employees. And, whether companies should involve in promoting "political" agendas. What if you manufacture and earn profits in a country outside of where you are HQ'ed. Are you expected to have a social contract with your employees in the HQ at the expense of the folks who manufacture, sell and earn profits...?

I think companies have no social contract with its employees. If you think there is one, it is a figment of your imagination. As long as the firm pays you competitive wages and benefits in safe work environment, it is fine. If the employee wants better wages/ job security he or she should find a better place. After all, corporations like Wal-mart (which is often blamed for paying very low wages) are not forcing you to work for them. You work for them because you can't find a better place to work.

The only contract a corporation has is with its shareholders - to maximize their profit. And, to achieve this corporation has to develop a contract with its customers - one based on the principle - first do no harm, then try to add value.

Similarly, it is not Microsoft's business (or, Google's or Yahoo's) to promote free speech in China or for that matter in any other part of the world. It is their job to follow the nation where they operate (and, they have been doing a great job). If you want to promote free speech in China try getting your government to boycott interactions with China, impose tariffs on firms that deal with China or boycott products made in China. You have a choice. But, corporations have to do what is best for their shareholders. And, unless all shareholders tell them to give China the middle finger they should do the best to maximize profits from China. Asking corporations to take a political stance is a slippery slope.

That is just my 2 cents...

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