2) The shareholder theory states that the only goal of a business is to maximize profits and increase the shareholder value under the bounds of the law. The only people of consequence in this theory are the ones who have monetary value tied to the company through investments. This obligation has come about due to the immense pressure that shareholders have over a company. Therefore, majority shareholders will be the ones to make decisions that would influence who ever runs the company. The CEO will be attempting to make the shareholders happy, and acquiring money for the shareholders is a great way to do it. Under this theory, the only permissible way to incur a financial loss for the sake of an ethical requirement is if that ethical requirement Although the net that is cast over those considered is large, attempting to appease everyone is not only a noble goal, but a sound one as well. It is not possible to make everyone happy, but the act of trying can alleviate concerns a stakeholder might have. This stakeholder theory shares many similarities to the humanity formulation of categorical imperative. The shareholder theory is using employees and such as only a means to an end whereas the stakeholder also holds these employees as an Something like money is a perfect example of an instrumental object. Intrinsic value is the value an object has for its own sake. An object such as a teddy bear giving to a child during their youth is an object with intrinsic value. CSR can have instrumental value as well as have intrinsic value. Using CSR as instrumentally valuable allows a company to make ethically dubious decisions while acting like a good company. A company may decide to donate to a local community in the form of a new community center or something, and then expect that community to green light an initiative, such as land development, that would have otherwise never be giving the go ahead. The company used the donation to pressure the community to give something back, skipping the normal procedures. The view that CSR is only instrumentally valuable is insufficient for several reasons. For starters, companies who follow CSR policies are doing so only because they have to. They are acting in accordance with duty, and not acting from duty. Because those who act in accordance do so when they don’t want to, they are open to corrupting the duty they are doing. They will begin to try to gain a benefit from the act. Companies should be developing relationships with communities to foster social acceptance and a license to operate. Instead, a company acting in accordance with duty will try to skip the developing part, and
William Evan and Edward Freeman, in their essay “A Stakeholder Theory of the Modern Corporation,” argue that the objective of a company and its managers is not only to maximize profit for its owners and stockholders, but also to balance the benefits received or losses incurred by other stakeholders—employees, suppliers, customers, and the local community, all of whom may be influenced by company decisions. As the owner of MSO, your aim is ostensibly to maximize profits for yourself, but unlike most other indicted CEOs, you have not tried to obtain personal gains at the expense of the stakeholders of your enterprise. Rather, the charges that have been brought against you are for your dealings with another company; in this day and age where investors bemoan the lack of ethics of CEOs who use the power of their position in the boardroom to achieve selfish gains at the expense of their own company and its stakeholders, the charges of insider t...
Corporate social responsibility (CSR) is a when a firm goes beyond compliance and engages in “actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (McWilliams, Siegel & Wright, 2006)...
Furthermore, he believed that any corporation assuming a more socially responsible attitude would be met with economic limitations, rendering them less competitive in the market area (Friedman, 1970). R.E. Freeman’s ‘Stakeholder theory’ is often seen as a better alternative to Friedman’s ‘Shareholder primacy theory’. Both the Stakeholder theory and Shareholder theory are normative theories explaining what a corporations social responsibilities ought to be and both adopt a similar stance on management’s accountability (Smith, 2003). However, the Stakeholder theory states that a manager’s duty is not only to focus on shareholder’s interests, but also to balance them against the interests of the company’s other stakeholders. Freeman believes that managers should take into account their customer’s, supplier’s and employee’s interests, even if it brings about a decrease in shareholder returns (Smith, 2003). This is being expanded on because Freeman believes that if Friedman were alive today, he would be a supporter of his Stakeholder Theory. Simply because, in today’s day and age, globalization and increased competition in the markets has led to corporations having to rely not only their shareholders for support but on all their stakeholders (Makower,
The topic of corporate social responsibility is play a key role to run a business and has become one of the standard business practices of our time. In current, most successful companies whether big or small enterprise for instance Apple, lnc. and Krotron has engaged in CSR because it is a good way for companies to benefit themselves while it also benefiting society. And in order to obtain benefits that can give them the advantage over their competitors.
Davis (1960) assert that concept of CSR is important because businesses are based on trust and foresight. This trust with customers, communities and regulators is not simple and to be successful in long run, a company needs to think beyond what is affecting them today. Thus it is necessary to address changes to technology or the needs of customers taking into account alterations in social, environmental and governance issues (Holme 2010). This essay has made an attempt to explore the role a...
Corporate social responsibility is globally defined as operating a business in a way that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. The concern of CSR has drastically increased over the last two decades. It has enhanced interactions between governments, businesses, society and internationally. In the past, businesses primarily focus themselves with the economic results of their decisions. Now, businesses must also reflect on the legal, ethical, moral and social consequences of their decisions. Corporate Social Responsibility is no longer defined by how much money a company contributes to charity, but by its overall involvement in activities that improve the quality of people’s lives.
Corporate Social Responsibility (CSR) is a concept whereby organizations consider the wellbeing of the public by taking responsibility for the effect of their actions on all stakeholders; customers, employees, shareholders, communities and the environment in every aspect of their operations. This responsibility is seen to extend beyond the statutory obligation to comply with legislation and sees organizations willingly undertaking additional steps to improve the quality of life for employees and their families as well as for the local community and society at large.
In contrast , the shareholder theory organisations or organisation's decision-makers only have the responsibility to their shareholders by increasing the organisation profits and should only make the decisions to increase as much as possib...
An organization needs to adhere to ethics in order to effectively implement its mission, vision, and objectives in a way in which offers a solid foundation to management and their subordinates to properly develop and implement its strategies. By doing so, the organization as a whole is essentially subscribing to one commonality that directs all of the actions of the employees of the organization. Additionally, it assists in preventing such employees from divergence in regard to the proposed strategic guideline. Ethics additionally ensures that a strategic plan is developed in accordance to the interests of the appropriate stakeholders of the organization, both internal and external (Jin & Drozdenko, 2010). Likewise, corporate governance that stems from various regulatory parties makes it necessary for organizations to maintain a high degree of ethical standards; this is done by incorporating ethics within the organization’s strategic plan so as to foster a positive corporate image for the stakeholders and general public (Min-Dong Paul, 2009).
McWilliams and Siegel (2001) define CSR as, “actions that appear to further some social good, beyond the interests of the firm and that which is required by law.” (p. 117) Corporate social responsibility is considered both strategic, in that it yields a firm benefits, and non-strategic, in that it encompasses an observed behavior (Burke and Logsdon 1996). There is also a perception that CSR encompasses a zero-sum trade-off with the economic interests of the business. It is somewhat accepted that accepting CSR strategies will be a more long-term payoff, while entailing short-term costs, leading modern businesses to abandon it in order to appease the interests of shareholders.
In reference with the stakeholder hypothesis, as per moral contemplations, the meaning of stakeholders ought to be isolated into two classifications; that is one
When discussing profit maximization and maximization of shareholder equity (i.e. wealth) we must take into account that shareholder equity is responsible for all of the difficulties of the environment. To whereas, profit maximization does not, in other words the profit maximization deals with revenues, it is a measure of business operations. On the other hand shareholder equity deals with or is responsible for the value maximization and the net present worth, therefore, its goal is to provide
Stakeholders are those groups or individual in society that have a direct interest in the performance and activities of business. The main stakeholders are employees, shareholders, customers, suppliers, financiers and the local community. Stakeholders may not hold any formal authority over the organization, but theorists such as Professor Charles Handy believe that a firm’s best long-term interests are served by paying close attention to the needs of each of these stakeholders. The modern view is that a firm has responsibilities to all its stakeholders i.e. everyone with a legitimate interest in the company. These include shareholders, competitors, government, employees, directors, distributors, customers, sub-contractors, pressure groups and local community. Although a company’s directors owes a legal duty to the shareholders, they also have moral responsibilities to other stakeholder group’s objectives in their entirely. As a firm can’t meet all stakeholders’ objectives in their entirety, they have to compromise. A company should try to serve the needs of these groups or individuals, but whilst some needs are common, other needs conflict. By the development of this second runway, the public and stakeholders are affected in one or other way and it can be positive and negative.
A corporation’s primary focus for many years has been its shareholders. As corporations have broadened their focus, the needs of the stakeholder have a greater priority. Some corporations have neglected their external stakeholders. Chinese companies show more interest in internal stakeholders, shareholders and employees, and seldom consider the external shareholders (Liu and Liu, 2009, p. 79).
CSR and Corporate governance initiatives are good for communities, because they help elevate the community and they bring growth to the communities. CSR does reach their aims and their need. Like the Kids in Parks initiatives by Pick n Pay, they help the young generation to break out of the cycle of poverty. And CSR is good because it helps promote the image and goodwill of the business: Pick n pay is a perfect example.