Should companies be socially responsible?
- two major perspectives who I want to provide value to? which stakeholder?
- Business is to create value
- who are we are creating value for?
—> Shareholder (Friedman) or Stakeholders(Responsibility, human rights, environment etc.)?
Agency Theory: Key flaws
Agency theory: shareholders own the corporation and have ultimate authority over its business and may legitimately demand its activities be conducted in accordance with their wishes
Agency theory’s flaws
Agency theory and corporate law: shareholders are not owners and managers are not shareholders’ agents
Inexistent incentives to exercise care in managing the corporation: anonymity and temporality of shareholdership
Moral hazard: shareholders are not accountable
Too much alignment between shareholders and managers skews company’s focus
Inexistent shareholder uniformity
What is the nature of social responsibilities?
- have economic responsibilities (profit making does not mean profit maximising)
- second layer of responsibilities: legal, have to do economic goals in a legal frame
- third layer: ethical responsibilities → doing the right thing, acting according to certain principles (according to what is expected from society (certain norms)). There are some connections between legal and ethical, but there is a dynamic talk between what is ethical and legal (sweat shops - social view on the topic, was legal)
- philanthropic responsibilities: participate as a good corporate citizen → participate in projects that are good for society / benefit society
Last changed2 months ago
