lecture 3: shareholder vs stakeholders approaches to CSR

Question 1

Shareholder theory (milton friedman)

Answer 1

the social responsibility of business is to increase its profits

“There is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules ofthe game, which is to say, engages in open and free competition without deception or fraud

Question 2

shareholder theory of CSR

Answer 2

businesses have the moral responsibility to maximize the profits of their shareholders within the rule of law

it limits CSR to legal and economic responsibility

Question 3

friedmans view (responsibilty)

Answer 3

only human beings have moral responsibility for their actions
-> corporations are not human beings

2) managers have to act in the exclusive interest of their shareholders

3) the states have to take care of social issues

Question 4

Some reasons for a different CSR

Answer 4

externalities argument: if your business activity harms others without their consent, you have a responsibility to minimize the harm

Power argument: great power entails one way obligations toward society

Government failures: government cannot regulate all socially undesireable business activities

Dependency argument: because business depend on their workers, customer, suppliers, etc, they also have a responsibility towards them

Corporations should recognize the stakeholders

Question 5

stakeholder

Answer 5

an individual or group that in a particular context benefit from, or may be harmed by, the company, or whose rights may be respected or impaired by the company

Internal stakeholders: employees managers and owners

External stakeholders: suppliers, society, government, creditors, shareholders and customers

Question 6

pragmatic motivation

Answer 6

only when everyone cooperates and benefits is the value chain sustainable

Question 7

Stakeholder theory

Answer 7

look at the costs and benefits for all stakeholders and make a decision

What if the interests of shareholders diverge from the interests of other stakeholders?

No unique solution

Shareholders interests can weight more but this doesnt prevent that other stakeholders are taken into consideration

Question 8

Three criteria to weight stakeholders

Answer 8

power: to what extent can the stakeholder affect corporate policy

Urgency: are the immediate needs or interests of the stakeholder under threat

Legitimacy: to what extent are the stakeholders needs and interests within the companys responsibility