What is the Business–
Government– Society Field?
 Business – broad term encompassing a
range of actions and institutions.
 Government – refers to structures and
processes in society that authoritatively
make and apply policies and rules.
 Society – a network of human relations that
includes three interacting elements:
 Ideas
 Institutions
 Material things
1-1
How Institutions Support Markets
1-2
Why is the BGS Field Important to
Managers?
 To succeed in meetings its objectives a business
must be responsive to both its economic and its
noneconomic environment.
 Recognizing that a company operates not only
within markets but within a society is critical.
 A basic agreement or social contract exists
between the business institution and society.
 Managers must respect and adhere to society’s
expectations.
 This contract defines the broad duties that
business must perform to retain society’s
support, but these duties are often ambiguous.
1-3
Four Models of the BGS Relationship:
The Market Capitalism Model
1-4
Four Models of the BGS Relationship:
The Market Capitalism Model
(continued)
 The market capitalism model depicts
business as operating within a market
environment, responding primarily to
powerful economic forces.
 The market acts as a buffer between
business and nonmarket forces.
 History and nature of markets
 Adam Smith, The Wealth of Nations
 Capitalism
 Managerial capitalism
1-5
Four Models of the BGS Relationship:
The Market Capitalism Model
(continued)
 Important assumptions of the market capitalism
model:
 Government interference in economic life is
slight (laissez-faire).
 Individuals can own private property and freely
risk investments.
 Consumers are informed about products and
prices and make rational decisions.
 Moral restraint accompanies the self-interested
behavior of business.
 Basic institutions such as banking and laws
exist to ease commerce.
 There are many producers and consumers in
competitive markets.
1-6
Four Models of the BGS Relationship
The Market Capitalism Model
(continued)
 Critiques of the Market Capitalism Model
 Increased prosperity comes at the cost of
increased inequality
 Results in base values being energized and
virtue being eroded
 The BGS relationship according to the Market
Capitalism Model:
 Government regulation should be limited.
 Markets discipline private economic activity to
promote social welfare.
 The proper measure of corporate performance
is profit.
 The ethical duty of management is to promote
the interests of shareholders.
1-7
Four Models of the BGS Relationship:
The Dominance Model
1-8
Four Models of the BGS Relationship:
The Dominance Model (continued)
 Business and government dominate the
great mass of people, which results in the
enrichment of a few at the expense of
many.
 Populist reform movement opposed the
dominance model.
 Marxism emerged in Europe about the
same time.
 Most accurate in the 1800s, but is being
resurrected due to the fear of transnational
corporations in a global context.
1-9
Four Models of the BGS Relationship
The Countervailing Forces Model
1 - 10
Four Models of the BGS Relationship
The Stakeholder Model
1 - 11