Skill: AACSB: Ethics 3) In the socioeconomic view of organizational social responsibility, maximizing profits is not a company's only priority. Answer: TRUE Diff: 2 Page Ref: 93 Topic: What Is Social Responsibility? Skill: AACSB: Ethics 4) Socially responsible businesses tend to have less-secure long-run profits. Answer: FALSE Diff: 3 Page Ref: 95 Topic: What Is Social Responsibility? Skill: AACSB: Ethics 5) One argument against businesses championing social responsibility issues is that businesses already have too much power.
Conversely, for-profit industries focus on the needs of the marketplace, offering whatever may be needed to create a lucrative profit and “choosing to distribute profits between owners, employees, shareholders and the business itself.” (Ingram). The idea of social business has become an increasingly sustainable and profitable model in today’s economy. In his book, Creating a World without Poverty: Social Business and the Future of Capitalism, Muhammad Yunus discusses two types of social business. The first focuses on businesses dealing with social objectives only, and second type is any money-making business that is owned or managed by the disadvantaged people. The social idea is
Hermes believed in successful stewardship involving using its vote in approving the board of directors. Its aim is to lead in promoting better management and intervening in companies which were failing to resolve critical issues such as board structure, strategic direction, capital structure, and corporate governance, problems in company’s management. Their objective is to maximize the returns to its shareholders. The company is concerned about governance, ensuring that the board of the company had the right mix of entrepreneurship, expertise and independence to maximize the company’s values. They possess the necessary resources to build the monitoring capabilities and have better access to information.
Thus, if an entity has a “stake” in a corporation, managers are more likely to view that stake as legitimate. The second reason for using the word “stakeholder” is that it deliberately sounds like the word “stockholder” (or “shareholder”) which is meant to create a sense that both terms are equal and to be taken seriously in the same way (Newton & Ford, 2007). Stakeholder Theory Stakeholder theory has been identified by scholars as a prime conceptual framework for reviewing Corporate Social Responsibility (CSR) (Jamali & Mirshak, 2007) and managerial responsibility impacting a corporation and societal well-being (Donaldson & Preston, 1995). A review of the literature pertinent to the relationship between CSR and stakeholder theory
In his article The Social Responsibility of Business is to Increase its Profits, economist Milton Friedman argues that the main responsibility of corporate executives is to use the resources available to them to maximize profits, as long as it is within the “rules of the game,” which he defines as “free competition without deception or fraud.” Friedman claims that the presence of “social responsibilities” in corporate culture is detrimental to the shareholders, as corporate social conscience contradicts the inherent nature and function of capitalism and corporations. Friedman states that because corporate executives are simply agents of the shareholders who carry out the operations of the corporation, their main objective should be to meet the desires of the shareholders, which he believes, is profitability. When social responsibilities are introduced and corporate executives begin to make decisions with them in mind, Friedman believes that the managers are effectively imposing a tax on the shareholders, as they are spending money/foregoing additional profits to achieve a general social interest. Such behaviour defies the employer-agent relationship (becomes more of a public servant), as they are acting against the interests of his/her employers. In addition, Friedman states that managers are often ill-equipped to be making decisions regarding social interests as they lack the necessary expertise to do so.
Computed by deducting the cost of capital from the after-tax profit, it is said to be the best measure of the true profitability of an enterprise because it is tied to cash flow and not earnings per share. Many analysts would agree that EVA is more positively associated with a company’s stock price than ROE or EPS. Keith confirmed his findings with an industry analyst, which posed him with the decision of whether of not to implement this calculation into OSI accounting practices. Furthermore, would it be a beneficial tool to be used for evaluating the new manager’s incentive compensation plans? The EVA trend seems to be almost mandatory for the larger companies, but there is no reason that it shouldn’t work just as well for their smaller firm.
I think anybody can be a good leader, my mom, she is a very good leader. She is an accountant, but she is also a leader of a company. Why I said my mom is a good leader and she impact me a lot, because she has the motivation to prevent harm to anyone. If she need to manage everybody in the company and make people obey her, she has to wear their shoes and think on their side. I am not the person that if you tell me to do something, then I have to do it.
(Carrol & Buchholz, 2006).” These two definitions are complete opposites but do tie in social responsibility. The first definition of course describes what social responsibility means in a business world, while the second definition ties into what social responbilities main purpose is towards society. In today’s society businesses must maintain ethical practices to be successful. In (Kaliski, 2001) explanation on Social Responsibility and Organizational Ethics, the author states that businesses can use ethical decisions or responsibilities to strengthen their business in three ways. The first way is stated by increasing businesses productivity.
Ethical egoism is the prescriptive doctrine that all persons ought to act from their own self-interest (Philosophy.lander.edu, 2001). Based on agency theory, it is the management’s responsibility of Union Carbide by acting as an agent to act in the best interest of the shareholders. As an egoist point of view, it is therefore ethical for the corporation to cut cost in order to maximise the shareholders’ wealth. Utilitarianism is a philosophy that bases the moral worth of an action upon the number of people it gives happiness or pleasure to. In utilitarianism, an action is considered to have utility only to the extent that it contributes to the overall good (Investopedia, n.d.).
The stakeholder theory focuses more on who is being affected and that the leaders have an obligation to other stakeholders. Corporations who make a large profit should contribute to the improvement of society. The theory of stockholders was created by Milton Friedman. His theory was based on the idea that shareholders are the only types of stakeholders that matter. The main purpose of a corporation is to make a profit and increase shareholder value.