ecessary to note that the implementation of CSR would likely cause significant disagreement among shareholders as well. Some of the shareholders would promote CSR. On the other hand, some shareholders would support the sole pursuit of profit. Even if shareholders agreed that CSR were beneficial, they may differ as to where it should be directed. Furthermore, the stakeholders would be competing for the implementation of various CSR programs.stakeholder theory sounds reasonable, it may introduce more problems than it solves. It is practically impossible to serve the interests of each of the stakeholder groups simultaneously. Contrary to the argument, social responsibility may actually provide a competitive advantage. Even if social responsibility results in short-term losses; it can engender loyal employees and communities and consequently reap long-term dividends., proponents of stakeholder theory go too far in their support of discretionary social expenditures. The benefits of profitable CSR initiatives must be balanced with the fact that unprofitable CSR initiatives may put a firm at a competitive disadvantage.
Shareholder Theory
On the other side of the debate, shareholder theory proposes that the corporation should legally maximize long-term shareholder wealth By providing a necessary product or service at a reasonable price, a business is benefiting society. In financial language, shareholder theory advocates that a firm should maximize the present value of all future cash flows. It is unnecessary and unwise to spend shareholder money for unprofitable social causes. The shareholders have made an investment and are dependent on the firm to provide them with a return. Steve Milloy, a mutual fund manager and critic of CSR, proclaimed the following: «Shareholders do not hire CEOs to be the UN, to act like a government or to be a charity. They were hired to make money for shareholders. »Milloy s argument is similar to the reasoning of Adam Smith and Milton Friedman. The business of business is to make money. By serving the needs of shareholders, businesses generate wealth that benefits society. If CSR initiatives increase the bottom line, then shareholder theory advocates recommend implementing such initiatives. However, using shareholder money in an unprofitable manner is wrong. No matter how noble the cause, it is inappropriate to be generous with another s money.the extreme end of shareholder theory are some scholars who believe that CSR should be abandoned altogether. Although they concede that CSR has increased global awareness of business ethics, the concept is no longer practical. For example, Freeman and Liedtka, professors at the University of Virginia s Darden School of Business, argued that CSR has failed and should be forsaken. They claimed that CSR has not delivered on its promise to create the good society. Furthermore, they asserted that the concept of CSR promotes incompetence by prodding business managers to improve society s shortcomings. According to Freeman and Liedtka, businessmen do not have sufficient expertise regarding individuals and communities to alleviate social problems.
A common argument voiced in support of shareholder theory is that social actions are the role of political and social institutions, not businesses. Bill Shaw, former chair of the Philosophy Department at San Jose State University, insisted that the government through its regulations determines the moral responsibilities of a corporation. Business should make decisions based on an objective ethical code in addition to the laws of society. Thomas Mulligan, assistant professor of management at Brock University, emphasized, «Ethics is more fundamental than law. It is more appropriate to use moral principles to test the validity of laws than to invoke laws to test the validity of moral principles ». The findings of this study indicate that the stakeholder and shareholder theories are both incomplete. Firms should maximize long-term shareholder wealth, but not at the expense of stakeholders and ethical guidelines. They should not deliberately harm stakeholders to make a profit, and they should not go out of their way to promote stakeholders interests if doing so does not increase shareholder wealth. Firms can not be profitable in the long term if they have poor relations with their stakeholders. At the same time, firms can not meet all the needs of their stakeholders and remain profitable. Additionally, business decisions should be based on an objective ethical code of conduct.
Having described the basic responsibilities, which companies should obey, and having compared main approaches to corporate social responsibilities we must conclude in general that development of the concept of corporate social responsibility happens as the reply of business community to a problem...