Managerial responsibilities on the micro level - activities managers should perform

Business Horizons, July-August, 1991 by LaRue Tone Hosmer

It is possible to think of the responsibilities of corporate managers on either the macro level - accountable to whom - or the micro level - accountable for what. Discussions of managerial responsibilities on the macro "to whom" level have been ongoing for years, certainly since Berle and Means (1936) first noted the replacement of company owners by professional managers, without reaching a widely accepted conclusion. Perhaps instead of continuing those discussions it would be well to move back a step, or down a notch, and begin to consider the micro, "for what" responsibilities of management. What activities should corporate managers be held accountable to perform, and to perform well?

Before starting to discuss the activities we can reasonably expect the managers of business firms to perform, and perform well, let me make a few comments about the problem of reaching a widely shared conclusion on the responsibilities of management at the macro level. It is a basic tenet of commercial law that managers are accountable primarily to the owners of the business. It is a basic principle of neoclassical economics that managers are accountable solely to the stockholders of the firm. People who adopt the very logical thought structures - the "ways of looking at the world" - of either the legal system or the market paradigm are not easily going to give up one of their most crucial underlying assumptions. We may disagree - and by "we" I mean the normative ethicists and social philosophers who are contributing articles to this special edition of Business Horizons - but that does not mean that we will be able to convince attorneys or economists. Most of us in this issue believe that the macro responsibilities of corporate managers have to be extended to the society of which the company is a part, rather than be limited to a small segment of owners within that society. Most of us think that a substantial number of compelling arguments have been presented in support of that view (Stone 1975, Velasquez 1982, DeGeorge 1982, Hosmer 1984, McCoy 1985, Bowie 1991). Most of us recognize, however, that we have not convinced advocates of the rule of law or of the power of markets; had we done so this special edition would not be needed.

My suggestion, given that lack of success, is that we should move from the "to whom" issue on to the "for what" question. This article is a first step in that direction. Others may have tried this approach-it is certainly the basis for managerial control (Anthony, Reece, and Welsch 1985) - but I am not conscious of any earlier efforts that looked at ethical rather than financial accountability. If it is indeed a first step, then I would hope that readers will tolerate a few rough edges along the way.

I would argue that the basic activities we can legitimately expect managers to perform, and perform well, can easily be identified by examining the curriculum at a series of reputable schools of business administration, and by considering the content of a number of reputable texts on business management. I would further argue that this set of activities can be roughly divided into strata reflecting the assignment of those tasks to the different levels of management in a hierarchical structure. And I would lastly argue that the activities within each stratum can be generally associated with a set of reasonably explicit performance criteria, or responsibilities.

There is nothing very new here and, I would hope, nothing very controversial. All I am saying is that we can identify a different set of managerial activities at each level within an organization, that we can set up a different set of performance criteria for each level, and that we can reasonably expect to hold managers accountable to those criteria. I have proposed five strata and 15 criteria. You might prefer four and 12, or six and 18. The numbers are not important. The belief that we can identify, assign, and measure the performance of different managerial activities is important. I would hope that we all are willing to accept that belief for now.

I said that there was nothing very new in the concept of a hierarchy of managerial activities within a business firm, with a set of performance criteria or managerial responsibilities associated with each level within the hierarchy, and I assume that is correct. I recognize, however, that there is something new in placing a set of "ethical" activities and responsibilities at the apex of that hierarchy rather than in diffusing them throughout all levels of the organization (see Figure 1), and I understand that this placement may appear controversial to some.

My argument in support of that placement, which I should like to summarize very briefly here, is that we - and once again by "we" I mean the normative ethicists and social philosophers who are concerned that business firms and business people operate in a manner that can be described as "right" and "proper" and just" - have downplayed the importance of our field of study. We have looked upon our theories as peripheral to the management of the firm rather than as central to that management, as corrections to wrongful behavior rather than as directives for rightful action.