Модуль 5. Правовые формы предприятия. Структура организации. Структура управления. Предпринимательская деятельность. Корпоративная социальная ответственность

Text 1. Legal Forms of Business Organisation

There exist several legal forms of business organisation: sole proprietorship, partnerships, private and public joint stock companies and corporations. The simplest form of business organisation is a sole proprietorship. Sole proprietors own all the assets of the business. They have unlimited liability and are legally responsible for their debts.

In a partnership two or more individuals manage and operate the business. In fact, there exist large partnerships with thousands of partners. Partners are equally and individually liable for the debts from the business. There are two types of partnerships - general partnerships and partnerships with limited liability. Limited partnerships do not receive dividends but enjoy direct access to the flow of income and expenses. The main advantage of this structure is that owners are generally not liable for the debts of the company. As for joint ventures, they act like partnerships but have certain peculiarities. In fact, a joint venture is a cooperation of two or more individuals or businesses to carry out the same project in which the sides agree to share profit, loss and control in a specific enterprise for a finite time. Setting up a joint venture is the most popular form of attracting foreign capital, advanced technology and management expertise from abroad. A venture for one specific project only is called a consortium. It is a temporary alliance of a few companies to perform a contract or to construct a project. Forming a joint venture is a good way for companies to partner without having to merge.

A joint stock company - public or private - is a business entity owned by shareholders. Each shareholder has the portion of the company in proportion to his or her ownership of the company's shares. A private joint stock company is not listed at the Stock Exchange and is not entitled to have public offerings of its stock. It distributes the shares among the founders or participators and has no right to raise capital from selling equities. On the contrary, a public joint stock company is listed at the Stock Exchange. It has public offerings of its stock to raise capital for the company’s development. In modern corporate law, a joint stock company is a forerunner of the modern corporation.

A corporation is a legal entity that is separate and distinct from its owners. A corporation is chartered by the state in which it has headquarters and is monitored by federal, state and local agencies. It has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. The owners of the corporation are its shareholders. They elect a board of directors to oversee the main policies and decisions. A corporation has a life of its own and does not dissolve when ownership changes. In a corporation with limited liability shareholders are accountable only for their investment in stock of the company, while the officers are held liable for the failure to withhold and pay employment taxes. A corporation with limited liability unites a few firms or companies and its main source of capital is public offering of shares or the sales of other securities. As for the closed corporation, it is closed to investment from the general public, shares are held by the owners of the corporation and their families, so when a shareholder dies or wants to liquidate the position, the business will buy back his share.

The ways of raising capital are different under different forms of business organisation. A major difference among organisational forms is the degree to which owners are personally liable for debts of the business. Thus, if a proprietorship fails, creditors can claim the owner’s property to pay off the debts of the business, while a corporation will not dissolve if its ownership changes.

Answer the questions:

1. What legal forms of business organisation can you name?

2. What is a sole proprietorship?

3. What are the main forms of a proprietorship?

4. Why are joint ventures set up??

5. What is a consortium?

6. What types of joint stock companies do you know?

7. How does a public joint stock company raise capital?

8. How does a corporation differ from other forms of business organisation?

9. What a closed corporation?

10. What is the major difference among organisational forms?

Text 2. Corporate Structures

The terms public and private convey very different connotations to ordinary people. Public organisations are often pictured as wasteful large mazes to employ bureaucrats and to create red tape, while private organisations are viewed to be run by hard-nosed managers who worry only about profit and consumers. Management in government is harder than in private sector and there exist many reasons for that. Public organisations are more dependent on government allocations, more constrained by law, more exposed to political influences and more difficult to evaluate than business organisations. However, whether in business or government a dominant form of any administration is bureaucracy.

Bureaucracies are generally defined as organisations which are large, hierarchical in structure, provide each employee with a defined role and area of responsibility, base their decisions on impersonal rules and hire and promote employees taking into account their skills and training related to specific job.

A corporate structure is essentially the layout of the various departments, divisions, and job positions that interact to conduct the business of the company. Generally, a corporate structure is necessary in order to ensure that all important tasks are conducted according to the guidelines of the corporation. Even the smallest of businesses have a corporate structure. A corporate structure usually helps to accomplish three things. First, it helps to define all the areas of responsibility within the company. Thus, the accounting department both in public and private companies must handle all financial matters, such as paying the bills of the company and issuing invoices for services rendered. Then the corporate structure helps to establish a line of communication for employees to utilize. By establishing this line of communication, the corporate structure helps ensure effective interaction to minimize time wasted by information moving through the company in a disorganised manner. Lastly, the corporate structure helps to establish a working chain or line of authority. Corporations often require responsible persons placed at various points in the structure to ensure tasks are handle properly and in accordance with company bylaws. Corporate hierarchy describes the type of power structure in an organisation. Often, the term "corporate hierarchy" is used to show how different positions and departments are arranged from the lowest to the highest on the organisational ladder. Most companies, both private and public, usually have a Chief Executive Officer (CEO) at the helm of affairs followed by vice presidents as the next set of people in the order of the corporate hierarchy.

The determination of the exact placement of individuals in the hierarchy depends on the particular industry and the type of company. For example, the type of corporate hierarchy in a steel production plant will differ substantially from the type of corporate hierarchy in a law firm. Finally, both public and private organisations have a common dilemma - they need stability and change.

Answer the questions:

1. How are public organisations often pictured?

2. Why is management in government harder than in private business?

3. What is a dominant form of any administration?

4. How can bureaucracies be defined?

5. How do bureaucracies hire and promote employees?

6. What is a corporate structure?

7. What does a corporate structure usually help to accomplish?

8. How does a corporate structure help to establish a line of communication?

9. Who is at the helm of affairs in a company?

10. When is the term "corporate hierarchy" usually used?

Text 3. Types of Governance Structures

Governance structures are usually organised in either a centralised or decentralised manner. A centralised organisation typically places decision making authority with in high-level positions. This set up is often called a horizontal hierarchy or a functional structure. A centralised organisation's structure makes front-line staff and managers responsible for implementing the policies and procedures of executive management. However, it allows the least amount of creativity and flexibility for its staff. They are usually not involved in the decision making process.

Centralised organisations assign to each position very specific responsibilities and authority. Positions are also ranked according to supervisory level and importance. Those individuals who hold positions that are higher up in the organisation's hierarchy possess greater amounts of control and decision making ability. The main benefit of this system is clear lines of communication from top to bottom, though it can also be a bureaucratic set up which does not favour speedy decision-making. A wave of restructuring known as delayering has brought a change into traditional hierarchical structures with layers of middle management being removed. This development was driven by new technology and by the need to reduce costs.

In contrast, a decentralised organisation gives lower level employees the authority to make decisions that directly impact the company's customer or the employees' job tasks. They do not have to go up the chain of commands to get approval before acting. A decentralised organisation will directly engage all employees in decisions that might improve business conditions or job task efficiency. Another advantage of decentralised organisations is that the structure encourages more open communication. It also tends to result in higher levels of employee motivation and job satisfaction. Decentralised organisations are also referred to as flat or organic. Decentralised corporations give front-line employees and managers the authority to make and execute strategic decisions. Thus, the leading software developer Microsoft Corporation has a very flat organisational structure. There are no traditional levels between the average software tester and Bill Gates.

More and more manufacturers are organising themselves along product lines, where companies have separate divisions according to the product that is being worked on. In this case the focus is always on the product and on how it can be improved. Microsoft is a good example of a company that well-structured its product lines. Thus, in Ireland where the company is spit up into seven business units, each unit controls the localisation of their specific products and works closely with the designers in Microsoft's Seattle Headquarters.

In matrix structures a business is organised into project teams, led by project leaders to carry out certain objectives. Most corporate governance structures are comprised of a board of directors, an executive management team, and departments that may be organised according to function, division, or a combination of both. The board of directors usually represents the highest level of power, control, and authority in an organisation. It votes on the company's directives and help shape executive strategies.

Answer the questions:

1. How are governance structures usually organised?

2. How does a centralised organisation typically act?

3. What are the benefits of centralised organisations?

4. What has delayering brought to companies?

5. What opportunities do decentralised companies give to average employees?

6. How is the structure of the decentralised companies often called?

7. What is a product line organisation made of?

8. How is Microsoft Corporation organised?

9. How is business organised in matrix systems?

10. What are corporate governance structures comprised of?

Text 4 . Entrepreneurial Activities

A business also known as company, enterprise, or firm is a legally recognized organisation designed to provide goods, services, or both to consumers or tertiary business in exchange for money.^. The owners and operators of private, for-profit businesses have as one of their main objectives the receipt or generation of a financial return in exchange for work and acceptance of risk. We can emphasis the following primary profit-generating activities of a business:

Agriculture and mining businesses are concerned with the production of raw material, such as plants or minerals.

Financial businesses include banks and other companies that generate profit through investment and management of capital.

Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packaged software companies.

Manufacturers produce products, from raw materials or component parts, which they then sell at a profit.

Real estate businesses generate profit from selling, renting, and development of properties, homes, and buildings.

Retailers and distibutors act as middle-men in getting goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services.

Service businesses offer intangible goods or services and typically generate a profit by charging for labour or other services provided to government, other businesses, or consumers. Organisations ranging from house decorators to consulting firms, restaurants, and even entertainers are types of service businesses.

Transportation businesses deliver goods and individuals from location to location, generating a profit on transportation costs.

Utilities produce public services, such as heat, electricity, or sewage treatment, and are usually government chartered.

Enterprises can also be profit and non-for profit or state-owned. There is a special position in state-owned and public organisations known as a policy entrepreneur. Policy entrepreneurs play a special role in public administration. These individuals are appointed to perform specific programmes and exist at all levels of an organisation. There role requires conceptual leadership and strategic planning.

Answer the questions:

1. What do we call a business?

2. Why does a business provide goods and services?

3. Why is acceptance of risk necessary for a businessman?

4. What businesses are concerned with the production of raw materia?

5. What do financial businesses generate?

6. What does information business generate profits from?

7. What do manufacturers sell at a profit?

8. What kind of goods do service businesses offer?

9. What services do utilities produce?

10. What are policy entrepreneurs responsible for?

Text 5. Corporate Social Responsibility

Corporate Social Responsibility (CSR) is a special concept in the business world. In the late 20th century, a growing number of corporations began to think about their impacts on society at large, primarily because consumers became more aware of corporate activities around the world. Many of these corporations decided to embark on Corporate Social Responsibility programmes designed to offset some of their effects on the world while also generally improving corporate practices. CSR has both fans and detractors, as one might imagine. The fact that the issue has become so publicized is viewed as a positive start by many people on both sides.

A company which has decided to establish a Corporate Social Responsibility programme generally includes a discussion of the programme in its mission statement, making the existence of the programme transparent to stockholders and other interested parties. Most corporations also have a CSR department, which manages the company's social programmes and make sure that the company's efforts in the field of Corporate Social Responsibility remain in the eyes of the public.

The scope of a Corporate Social Responsibility programme tends to be most varied. Many corporations start at home, by trying to include improved conditions for their employees, with offerings like higher wages and health benefits. The next step often addresses corporate suppliers, both at home and abroad, with a focus on creating production without the use of child labour and other ethically questionable practices. Many corporations also add a charitable aspect to their Corporate Social Responsibility programmes. For example, an oil company might contribute to habitat restoration in the area historically used for resource extraction. Other companies simply donate large amounts of funds to charities, usually commonly tied in with their own work.

Fans of CSR suggest that these voluntary efforts on the part of corporations show a genuine desire to do business in an ethical and responsible way. Some more cynical fans also point out that corporations known for their CSR programmes tend to retain employees longer. Furthermore, companies which tout Corporate Social Responsibility programmes often perform well on the market, with consumers actively seeking out their products. Detractors believe, however, that Corporate Social Responsibility is simply a smokescreen or window dressing which covers up more egregious issues. By putting their ethical initiatives at the forefront, companies can bypass a great deal of consumer concern.

Answer the questions:

1. What is Corporate Social Responsibility?

2. Why did corporations begin to think about their impacts on society?

3. Why did corporations choose CSR programmes?

4. What steps do corporations usually take to establish a Corporate Social Responsibility programme?

5. Who usually manages the company's social programmes?

6. What do corporations try to offer to their employees?

7. What other aspects do corporations add to their programmes?

8. What do CSR fans suggest?

9. What do detractors think of CSR programmes?

10. What is your personal attitude to CSR programmes?