Corporations Should Pursue Goals Creating Profit For Shareholders

Social responsibility makes a company more competitive and reduces the risk of sudden damage to the company’s reputation and sales.

Milton Friedman’s shareholder theory of management says that the purpose of a business is to make money for the owner or the stockholders of the business. Friedman says that there is only one social responsibility for the business: to use its resources in order to increase

Businesses, specifically larger corporations, play a major role in what occurs in society therefore, they are responsible to their stakeholders not only to pursue economic goals but the greater social good as well. Corporate social responsibility (CSR) means that a corporation should act in a way that enhances society and its inhabitants and be held accountable for any of its actions that affect people, their communities, and their environment. (Lawrence, 2010). Social responsibility is becoming the norm so much so that some businesses have incorporated it into their business model. There are three components of the bottom line of social

Because corporations are established to profit and shareholders invest money with expectations of a greater return, managers cannot be given a directive to be “socially responsible” without providing specific criteria of checks and balances to which needs to adhere. Therefore, it is imperative to the success of a corporation for managers to not act solely but rather to act within the policies of the shareholders.

The economic nature of private corporations is to be profit-seeking agents whose sole focus is to maximize shareholder value. This is a fair reason and a reason that will always exist. Detractors of privatization and free market systems, argue that

Many believe that business entities should have an ethical duty to be socially responsible, to work towards increasing its positive effects on society while decreasing its negative effects. Many organizations look for opportunities to be socially responsible while also creating shareholder wealth.

The expectation that businesses behave responsibly and positively contribute to society all while pursuing their economic goals is one that holds firm through all generations. Stakeholders, both market and nonmarket, expect businesses to be socially responsible. Many companies have responded to this by including this growing expectation as part of their overall business operations. There are companies in existence today whose sole purpose is to socially benefit society alongside businesses who simply combine social benefits with their economic goals as their company mission. These changes in societal expectations and thus company purpose we’ve seen in the business community over time often blurs the line of what it means to be socially

There are competitive and for that reason they have to do anything for their benefit to reach the top of the ladder. For corporation as being dominant role in the countries the only important agenda is to get expanded and just think of their profit.

Does the maximaization of shareholder value reward socially destructive actions by corporations?Certainly not.A company is not an instrument of shareholders, but a coalition between various resource suppliers, with the intention of increasing their common wealth and hence is contradictory to Mr Al Dunlaps view of share holder primancy.

The company’s stakeholders include primary groups of customers, employees, shareholders, owners, suppliers, etc. and secondary groups of community. All stakeholders have their own self-interests. While employees want secure jobs with high earnings; customers want quality products with cheap prices, which may eventually result in the company and employees’ low income. Being said that, the corporation owes all stakeholders the obligations to meet their interests. That brings in the ethical issue of conflicts of interest, one of key problems at Enron. CFO Andrew Fastow created financial partnership to hide Enron debt, from which he allegedly collected $30 million in management fees. The action obviously made Enron financial data look good, but at the same time deceived the company’s investors about the real performance. Many investors may make their investing decisions based on those false data. And that’s when the collapse begins.

Gathering of increasing wealth at the expense of the common man is immoral. Many of the antitrust cases I reviewed indicated the desire by a company’s brain trust to merely accumulate more wealth. It did not appear the interest of the average consumer was of any concern to the corporation. Evidence of price fixing, collusion and the creation of barriers into a market is common place. It is apparent the corporate sector has forgotten one important fact. The major source of income for any corporation who sells goods and services comes from the everyday consumer.

In light of the recent scandals that rose around big multinationals such as Enron and WorldCom, it has become evident that reform in the traditional corporate operations and objectives was to be encompassed in the organisations corporate strategies. Indeed throughout the years, companies main objectives were defined primarily as being economic objectives, Multinationals developed with sight of profit maximisations regardless to the other incentives, Friedman considered that to be the foundation for a well-managed company, it was further considered that the financing of any other sort of social corporate activities rather unnecessary. The expenses were regarded as expenditures for the owners and investors; this was a time where shareholders rights were regarded as conflicting with other constituents namely the employees, creditors, customers or the community in general. However this interpretation is seen as rather inadequate due to the nature of the amalgamated relation between both constituents. Stakeholders in modern corporate doctrine are considered as a core apparatus for the well functioning of a business. It is however often argued that the only way for a corporation to achieve better results and maximise its profits is to include other people in the process, individuals or organisations with direct or indirect interest in the well performance of the company, that is the reason why modern regulations and codes include a number of stakeholders other than the

The problem with the personification of the corporation was the kind of person it would become. The "best interest of the corporation" concept which is now enshrined in most countries' corporate law pushes the mantra that executives' only goal is to maximize shareholders' profits. This has given the corporation a self-interested, uncompassionate personality that promotes its limitless pursuit of profit and power.

However, to a certain extent, for-profit corporations are limited in their capacity to address social issues as a result of their responsibility to their shareholders to maximize share value. While legal scholars continue to debate this claim, it is generally accepted that shareholders reserve the right to demand that corporations put profits above all else. The Unilever forced buyout of Ben & Jerry’s in 2000 is one notable example often cited as evidence that corporations, even those that have operated with a strong social purpose, can be forced to put share-value first. Even if, as some argue, Ben and Jerry’s was not legally obligated to sell to Unilever, the widespread perception is that they were (Page and Katz, 2015). The implications of this belief have caused socially-minded corporations to either limit in how fully they incorporate social missions into their operations or to reduce or abandon socially conscious objectives when they may reduce financial profitability. Additionally, while societal pressures have encouraged for-profit entities to pay attention to environmental and social causes, the impact of for-profit CRS programs and sustainability efforts is often questionable. More than half of all S&P 500 companies issue annual sustainability reports

“Corporate finance theory, teaching and the typically recommended practice at least in the US are all built on the premise that the primary goal of a corporation should be the maximization of shareholder value.”