August 19, 2010
Question: The broad view that corporations are responsible for all areas not just profit maximization or the narrow view that corporations should only maximize profit.
I argue broad view. That corporate social responsibility extends beyond just maximizing profit and that it needs to act as a responsible member of society. But having said this, part of the reason it should act in this way is to support making a profit. Let me explain by way of a couple of examples.
Lots of corporations now place a great emphasis on how their operations effect the environment. Its an issue that doesn’t just impact the company, but society as a whole of which the company is a part of. If the environment collapses and contributes to, e.g. declining population, then there will be less consumers for the company’s products and services, in turn leading to less profit.
Another reason Corporate Social Responsibility (CSR) is an area of growing concern for lots of companies, is that many stakeholders (employees, investors, suppliers and customers) in a corporation now look for it to act more responsibility in many areas the affect society in general. Profit is a motivating factor as with many advancements in the area of business, as those businesses that take on and address these new challenges put themselves at a competitive advantage against their competition, because they are addressing the concerns of more socially conscience consumers.
You can argue that a company’s sole motive should be profit, however this must be put into the context of today’s world. In the end, a business that does not change to address stakeholder and social concerns will see profits dry up, and cease to exist.
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