Tuesday, March 17, 2009

Short-sighted Business Relations

"Business relations are infected through and through with the disease of short-sighted motives. We are so concerned with immediate results and short-term goals that we fail to look beyond them."

Assuming that the term "business relations" can refer to the decisions and actions of any organization-for instance, a small family business, a community association, or a large international corporation-explain the extent to which you think that this criticism is valid. In your discussion of the issue, use reasons and/or examples from your own experience, your observation of others, or your reading.


It is said that if envy is the biggest vice of socialism, greed is that of capitalism. This is the first thought that comes to my mind after reading this criticism. I agree that business relations in our organizations, the back-bone of our capitalistic societies, are indeed infected through and through with the disease of short-sighted motives. So much so that they fail to look beyond immediate results and short-term results.

The doubting souls need not look any further than the nearest bank. The current financial crisis engulfing the world is a stark reminder of the extent of damage short-sighted decision can do. One of the columnists in Financial Times, in their recent series of articles on "Future of Capitalism", attributes the obsession with short-term results to the culture of "increasing" shareholder value spawned by GE's Jack Welsch in early 80's. Jack Welsch claims people misunderstood what he said. Nevertheless, since then people have been more concerned with increasing profits from quarter-to-quarter rather than taking a long-term perspective. This has skewed business planning grossly in favour of short  term gains. Hence, driven by profit, banks lent to people who they knew would not be able to pay. Institutional investors, lured by higher profits and fooled by rating agencies, bought into these debts without doing due diligence. In each case, the focus of business relations was on increasing profitability immediately rather than taking a fundamentally strong decision.

Deteriorating environmental conditions are another proof of callous, short-sighted business relations. Strong environment laws are needed to deter businesses from polluting environment. Left to their own device, most business organizations give two hoots about disappearing rain forests or greenhouse effect. As long as the current cycle is profitable, it is acceptable to most of them to pollute environment and they fight tooth-and-nail any new environmental legislation that can affect profit.

Lastly, we also see that corporates are often willing to do business even with dictatorial, genocidal regimes as long as it is profitable. Shell will happily work in Nigeria or Venezuela and Chinese business would back Sudan,  no matter if that wealth goes to coffers of an inept politician or dictator who exploits its citizens ruthlessly. Conversely, businesses will steer clear of any such regime like Burma if there is nothing of interest to be had. This complete lack of social responsibility among business organization fail to take a long term perspective of geopolitical events as they are too busy to get the profits in for the next quarter.

Concluding, the disease of short-sighted motives is a very real and concrete problem afflicting business relations throughout the world. The current financial crisis is the biggest example of its manifestation. The readiness of organization to, in absence of concrete laws, do business with rogue regimes or pollute environment recklessly also point in the same direction.

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