Corporate Social Responsibility represents a company’s voluntary commitment to address the ethical, social and environmental factors associated with its operations. Despite its potential for furthering social needs, there are cogent arguments against Corporate Social Responsibility and may come under severe pressure in terms of its financing.
Required:
Discuss FOUR limits of Corporate Social Responsibility. (10 marks)
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- If managers do this, they are generally speaking, spending the owners’ money for purposes other than those they have authorized; sometimes it is the money of customers or suppliers that is spent and on occasion, the money of employees. By doing this, the manager is in effect, both raising taxes and deciding how they should be spent, which are functions of government, not of business. There are two objections to this:
Managers have not been democratically elected (or selected in any way) to exercise government power
Managers are not experts in government policy and cannot foresee the detailed effect of such social responsibility spending. - Businesses do not have responsibilities, only people have responsibilities. Managers in charge of corporations are responsible to the owners of the business, by whom they are employed.
- These employers may have charity as their aim, but generally their aim will be to make as much money as possible while conforming to the basic rules of the society, both of those embodied in ethical custom.
- Maximizing wealth has the effect of increasing the tax revenues available to the state to disburse on socially desirable objectives.
- If the statement that a manager has social responsibilities is to have any meaning, it must mean that he is to act in some way that is not in the interest of his employers.
- Many company shares are owned by pension funds, whose ultimate beneficiaries may not be wealthy anyway.