Vol 11 (2014) - Issue 6

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Transforming Capitalism from Within: A Relational Approach to Company Management and Operations – Part Two

Introduction
Part One of this article outlined some of the issues that have led to society’s loss of confidence and trust in the corporate world. It suggested that the causes of this loss in confidence, and not just the symptoms, need to be understood and addressed. The structure of limited liability companies and the nature of shareholding and trading were examined as at least part of the reason for these difficulties. The article suggested a comprehensive approach that puts relationships between the company and its stakeholders at the heart of company decision-making and operations. This would lead to greater stability, competitiveness and success for companies and would benefit all stakeholders and society generally. It would result in Government and regulatory authorities having to impose fewer new laws and regulations on companies. Furthermore, as the approach to decision-making changed, many such outside requirements would become unnecessary.
There is a growing recognition that major aspects of corporate behaviour need to be addressed. The current piecemeal regulatory approach to addressing specific matters of concern tends to be reluctantly accepted by companies and their directors. Regulation is often seen as a burden on the flexible and entrepreneurial operation of companies and something to be avoided if possible (e.g. the banks working round restrictions on cash bonuses). The question is whether there is another way? In other words, is there a way to introduce change, in a more comprehensive manner, through a relational approach that stakeholders would recognise as being for the benefit of all? Understanding what a relational approach means in practice and how it can be applied in the management and operation of companies and their interaction with stakeholders would lead to a change in culture. This in turn would lead to more responsible, stable, competitive and successful companies. Further, they would become more fulfilling and rewarding places to work, more attractive to contract with as a supplier and customer and more satisfying from a shareholder’s perspective. It would have an added bonus of helping to restore society’s faith in corporate behaviour.
Part Two explains the relational approach in greater detail, how it can be applied in a company context and the attendant benefits. It outlines a method of assessment, through independent means, to measure the extent to which a company has embraced the relational ethos in its operations and decision-making. It concludes by considering how the relational agenda can be pursued in a practical way.

A. Understanding the relational approach
Before considering how to apply a relational approach to the way in which companies operate, it is necessary to understand what the concept actually means. The concept of Relational Proximity2 explains various aspects or drivers of relationships that can be applied to many aspects of society.