Chapter 7 - Corporate Social Responsibility (CSR) Flashcards
What is CSR?
Concept that businesses owe some kind of obligation.
Private corporations ahve responsibilities to society that go beyond the production of goods and services at a profit.
Who doo corporations have constituency to apart from shareholders?
Stakeholders
What are 3 problems concerning CSR?
- Managers are not given guidelines on how to solve social problems.
- CSR does not account for competetive corporate environment.
- Notion of “responsibility” itself.
What is shareholder theory and who advocates for it?
Argues that sole purpose of corporate exectuive is to do whatever is within the law and ethical customs to maximize shareholder wealth.
Milton Freedman
What does shareholder theory find morally impermissable?
Morally impermissable to use company funds allocated for profit for social responsibility such as charities, clean up.
Businesses don’t have responisibilities, people do.
If it isn’t corporations responsibility for correcting social ills whos is?
Government
What is the promissory arguement?
- Management has promised shareholders they would maximize shareholder wealth.
- This is corps obligation
- Stone agrees if promised profits but fails then they are responsible but this isn’t reality
What is wrong with the promissory arguement?
- Few if any people put their money in a corp and expect maximized profit.
- Sometimes there is justification for breaking promises.
If promised maximized profit doesn’t mean it will be at any cost. So arguement fails
What is the agency arguement?
Corporate executives are agents for shareholders: they should act according to their wishes
Stone argues they are not agents and shareholders aren’t only important ones
If they were agents they would find out what they want and act accordingly (not often the case)
What is the role arguement?
Argues that executives are fiduciaries and should not waste corporate assets
Stone thinks it is a stretch that sharehodler would hold executive legally liable for spending money on pollution control.
What is the polestar arguement?
If executives maximize profits it will be best for all of us.
Stone argues that while forces of market law can limit corp power, it is also true that law and forces of market can’t always keep corp under control.
Corp often extend power beyond business (politics)
What is Stakeholder theory and who is it endorsed by?
Endorsed by R.Edward Freeman
Argues that shareholders are one group among others that have interest in corps future.
Deals with corps relationship to society
What are stakeholders?
Any individual or group who can affect or is affected by the actions, decisions, policies, goals of organization.
Consuemrs, Suppliers, government, employees, shareholders
What must corporations take into account?
The consideration of all groups extending outsidwe of shareholders.
What are 2 important points about stakeholder theory?
- Shareholder theory could allow public projects if shareholders voted to spend money on projects not profits
- Taking interests of stakeholders is a good way to maximize profits
