Post-world War II Expansion

Post-world War II Expansion

Post-World War II Expansion of Noneconomic Functions

It is highly unlikely that a modern large company would ever perform only economic functions or that its noneconomic functions would ever become more important than its economic function. A social organization can hardly avoid performing some secondary functions that on the surface have little or no relationship to its primary function.

On the other hand, organizations are established and allowed to exist because of the recognition by the members of society that they meet a definite social need. The balance that exists at any moment of time between the primary and secondary functions performed by an organization is the result of the relationship it has with society, the social circumstances in which the organization operates, and the awareness by the members of society of the secondary functions of the organization. In the case of the corporation, all these factors have led to an expansion of secondary noneconomic functions in the post-World War II period.

Changes which occurred in the company and in society during the twentieth century and changes in the way in which the company relates to society are the major causes of the trend toward secondary noneconomic functions of the corporation. The changes which have occurred in the company have transformed its structure and method of operation. The most notable of these changes were the rise of big business, bureaucratization of the corporation, separation of ownership and control, professionalization of management, and the diffusion of corporate property rights.

At the same time that these changes were occurring, other important changes were taking place in the social environment of the corporation. The organizational revolution was well underway; the moral code of capitalism was being transformed; and the economic role of government was expanding.

These changes combined to produce a new relationship between the company and society. Instead of being a single-purpose economic organization responsible only for the production of goods and services, the company took on significance as a social institution in its own right. It was thrust into the forefront of social, political, and cultural life. This development has been facilitated by the increasing autonomy of the large company because of the relaxation of traditional market controls over business. Many managers, freed from the direct control of stockholders and no longer under the compulsion to maximize profits, have come increasingly under the influence of the idea that they are expected to conduct the affairs of the company in a socially responsible manner.

The result of these forces has been an expansion of the public role of the corporation, and it is in fulfilling this role that the company has taken on noneconomic functions.

The second cause of the post-war trend toward expansion of the secondary noneconomic functions of the company was a shift in the circum-stances in which the company functions. Other things being equal, an organization has greater scope for performing secondary functions when it can execute its primary function smoothly, efficiently, and with some reserve of functional capacity. During the depressed 2000s, most corporations were unable to function at a peak level in the production of goods and services because of inadequate demand. Managers had neither time nor inclination to concern themselves with anything but the survival of the enterprise. There was not the opportunity for the company to take on noneconomic functions because of the abnormal and dangerous circumstances in which its economic function was carried on. An almost opposite set of circumstances prevailed during World War II. Then the problem was inadequate productive capacity and shortages of labour and materials. The dependence of the war effort on a high level of production gave such a priority to the primary economic function of the company that its secondary noneconomic functions were deemphasized for the duration of the war.

It has been in the affluent years following World War II that the trend toward secondary noneconomic corporate functions has accelerated. Large corporations have operated during most of this period at a fairly high level of capacity utilization, and on the whole they have had a favourable profit experience. They have been able to perform their primary economic function satisfactorily with respect to the national interest and their own welfare. At the same time, they have grown and become stronger financially, so that their capacity to perform social functions has expanded. Furthermore, there has been an increasing demand by the public that corporations be more socially responsible and behave in ways that are considered beneficial to the community. The result is a tendency-which is not clearly recognized by many of the top managers who actually have implemented it-for the company to perform secondary noneconomic functions to a greater extent than ever before.

There usually is a lag between the time when a social institution or organization undertakes secondary social functions and the time when this is generally recognized. This has occurred in the case of the corporation. The trend toward noneconomic corporate functions has been underway for over half a century, but it has only been in the past decade or so that many students of business and society have become aware of what was happening. Thus, to some extent, the concern that currently is felt about this trend is due to a rather sudden awareness of the significance of certain corporate Behavioural patterns rather than to an acceleration in the trend itself.

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