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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
When a company decides to execute a strategic decision, the decision will concern its stakeholders, either through the making of the decision itself or through implementation of the decision. Although strategic decisions are generally made "to attain superior performance" (Hill, Charles) improving the welfare of the internal stakeholders, the attainment of this goal may cause the entity to disregard their notion of right and wrong moral principles in order to achieve that goal.
Jones, T.M., (1995). Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics. Academy of Management Review, 24, 206-19.
Hence, the stakeholders which are described as those who are affected by the organisation performance ,actions and duties and those actions includes employees, clients, local community and investors as well. The theory of stakeholders also suggests that it is the responsibility of firm to make sure no rights of stakeholders are dishonoured and make decisions in the interest of stakeholders which is also the purpose of stakeholder theory to make more profit and balancing it while considering its stakeholders (Freeman 2008 pp. 162-165). In the other words organisation must also operates in a more socially accountable approach by carrying out corporate social responsibility as (CSR) activities.
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.
Evan, W. M., & Freeman, R. E. (1988). A stakeholder theory of the modern corporation: Kantian
Stakeholder theory, on the other hand, states that a company owes a responsibility to a wider group of stakeholders, other than just shareholders. Stakeholders first meant ‘those groups without whose support the organization would cease to exist’ such as shareholders, employees, customers, suppliers and so on. With continuous evolution, a stakeholder is, pursuant to Professor R. Edward Freeman, ‘any group or individual who can affect or is affected by the achievement of the organization’s objective’. Widely defined, stakeholders are ‘groups or individuals who benefit from or are harmed by, and whose rights are violated or respected by, corporate actions’.
I begin this essay by defining CSR, there are many definitions for this term by various different theorists, and EU says that CSR is "A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis." On the other hand, Sloman et al. define it as "The concept in which a firm takes into account is the interests and concerns of a community rather than just its shareholder". Davis and Blomstrom (1966), say it "Refers to a person’s obligation to consider the effects of his decisions and actions on the whole social system". These definitions differ from one another in many ways but they agree that CSR involves taking the environment into account and therefore, one must look take social responsibility.
A minority shareholder does not have voting control for who are hold not more than 50% interest in a company. Minority shareholder can often suffer oppression and abuse in the fact of dominant majority shareholders. The main objective of minority shareholders’ remedies is to provide a mechanism to protect and enforce their rights when they have reasonable grounds to believe that they have been violated by the directors or majority shareholders.
Maximisation of shareholders’ wealth is globally accepted as main goal of a firm. Shareholder wealth maximization is seen beneficial not only from the stockholders ' perspective, but also as for the society. Most corporations are owned by stockholders and within the construct of these companies are managers who are positioned with the one of the principal idea of maximizing shareholder wealth and increasing the growth of the intrinsic share value. Generally Shareholders are not involved in daily operations so they empower the managers to make decisions that are in best interest of the firm and consistent with the firm’s goal of wealth maximisation. However, sometimes the division of ownership and control in the organisations results in potential
Benefit from CSR can somehow encourage corporations to adopt CSR. Many enterprises realize that they must deal with CSR issues to ensure their position on the market and maximum marking share. She thought that involving in CSR can bring intangible interests such as employee loyalty and good reputation for companies (Gazzola, 2012). Moreover, firms can also avoid crisis. Therefore, those benefits may promote CSR among companies (Gazzola, 2012).
Stakeholders are interest of an individual or groups that directly or indirectly affected by the organisation’s activities, policies and objectives (Henry Frechette, 2010). Stakeholders can be divided as internal (managers and employees) and external (shareholders, customers, and suppliers) (BPP F9). Different stakeholders may have common interests or conflict interests with company. Company board members or management must take care about stakeholders’ interest. They can’t make the decision based on their own interest or their relation with others organisation. Conflict of interest will arise when interests of organisation act in concert with managers’ personal interests or interests of another person or organisations, (Anon, no date).
CSR is defined in Investopedia (2014) as non financial benefit action exercise by a company who wishes to take accountability on the natural resources and public wellbeing. Baker (2004) defined CSR as how companies run their business that give positive impact to the public. Stakeholders’ interest is to know whether certain companies give positive impact to the surroundings and public.
According to Lee (2008), there have been two main trends of the concept of CSR over the decades. First, researchers have moved from ‘discussing the macro social effects of CSR to organisational-level analysis’ whereby the effect of CSR on financial performance and profit is discussed. Secondly, researchers have moved from ‘explicitly normative and ethics oriented studies, to implicitly normative and performance-oriented managerial studies’.
It is important to understand the importance of corporate social responsibilities. If Corporate Social Responsibility is properly maintained and emphasized by companies, it can benefit the society, economy and corporate sustainability. It can also be cost efficient to companies. also the environment . But above all effect (CSR) varies companies to companies. Where some corporates seem to make all sorts of benefits from their coporate social responsibilities but few of them are also having loss by trying to maintain CSR without properly evaluating their resources. (Porter and Kramer 2006) has said The inferences where corporates need to evaluate their CSR actions to figure out if they add
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.