Company policies dictate the frequency in the implementation of its social responsibilities. Some factors, however, determine the effectiveness of corporate social responsibility (CSR), including societal cultures, era, and traditions. CSR has significant roles to its stakeholders and stockholders. In the contemporary business world, regulatory and management controls should be enhanced to ensure the viability of the social responsibilities used by companies. Stakeholders and stockholders in both private and public sectors are continuously developing suitable solutions that will help in mitigating the increasing societal risks and concerns.
Primarily, social responsibility is referred to as the ethical obligation of an individual or corporation in benefiting society as a whole. Companies, therefore, have a duty of developing innovative and sustainable programs that help the community. Generally, a company has four levels of social responsibility. First, it has an economic obligation, which is to ensure that the corporation is profitable and hence capable of paying its employees and suppliers. Second, a company has a legal responsibility to follow the set laws that govern that industry, for instance, tax regulations. Thirdly, corporations have an ethical obligation to not only obey the law but also to conduct their operations ethically. It may include treating employees right and creating environmentally-friendly working conditions. Fourth, the philanthropic duties are evaluated by their carbon imprints, such as their role in pollution.
Delegate your assignment to our experts and they will do the rest.
Companies are, therefore, advised to give back to society. It is a critical element of social responsibility since it may influence whether investors collaborate with the firm. The main difference between a stockholder and a stakeholder is that the former owns stocks in a firm. At the same time, the latter has a significant interest or is affected by the operations of the company. Principally, there are diverse roles of stakeholders. For instance, the employees’ primary responsibility is to ensure the success of the business, whereas customers buy the company’s products. In contrast, stockholders have the right to vote in annual general meetings and taking the financial risk of acquiring shares in a company.
The stockholder theory is mainly referred to as the shareholder approach. Primarily, the model stipulates that managers have an obligation to stockholder returns. Mostly, shareholders want managers to increase the value of their investments. This framework relates to the enlightened egoism philosophy that states that people who act to facilitate the interest of others serve their self-interests. This viewpoint indicates that managers will increase their benefits if they identify and respond to the needs of the community. Saha (2014) states that in the theory of egoism, actions are considered to be ethical if they improve an individual’s benefits in a way that does not intentionally hurt others. Additionally, the philosophy helps the company to raise and maintain its market share, attract and retain its personnel, and ensuring that they gain raw materials for future projects. Enlightened egoism encourages for corporate philanthropy. For instance, firms involved in numerous CSR activities are reputable for responsibility among customers and thus urges them to form a definite opinion on the brand. Furthermore, corporations tend to offer progressive forms of employments to retain and attract high performing personnel. Notably, enlightened self-interest helps the company to reduce the effects of the operations on the environment. For instance, companies can participate in environmental programs, and consequently, they can have minimized enforcement actions from regulators that could potentially harm their reputation. In the long run, managers gain profits, which are used to increase stockholders’ investments.
The stakeholder approach depicts that corporate managers have an ethical responsibility to the company’s shareholders, groups, and individuals that contribute to the firm’s profits and operations. It also includes those entities that are likely to benefit or get harmed by the activities of the company. The stakeholder approach relates to the utilitarianism theory that evaluates an operation by its consequences (Saha, 2014). The primarily utilitarian model aims to achieve the happiness of the majority of society and stakeholders, and thus, actions are considered ethical if they cause favorable outcomes. This viewpoint, therefore, assesses the stakeholders’ net costs and benefits on an individual level. The effect that provides the highest profits at the lowest value is considered ethically right. According to Saha (2014), utilitarianism should evaluate the impact of a company’s operations and strategies on the community. Critically reviewing the stakeholder theory, the utilitarianism approach aims to examine each entity’s interests individually during decision making. Additionally, in a set of alternatives, utilitarianism assesses the most ethical option that balances the benefits over harms gained by a majority of stakeholders.
In the contemporary world, stakeholders have an immense impact on corporations’ influences on issues such as the environment and overall economic growth. Consequently, corporate stakeholders, such as customers, government, suppliers, shareholders, and employees, are demanding that the firms should identify broader scopes of responsibilities regarding such problems. Corporate governance is defined as the structures and operations that control a firm. Corporations must enhance stakeholder engagement. Generally, these entities can influence the failure or success of a corporation on various levels. Aggarwal (2011) stipulates that a company’s high governance standards are not only attained by directors ensuring the implementation of better risk management but also by the demand for competent authority by institutional stakeholders. Firms, therefore, must ensure that they build critical relationships with their stakeholders, which subsequently helps the company to understand their concerns and perspectives on vital issues.
Another role of corporate governance is transparency and accountability. These elements provide the firm with critical tools relevant to respond to legitimate stakeholder concerns that may include social development and a sustainable environment. The company acquires various benefits from engaging stakeholders in their social responsibilities. They help the firms to make better corporate decisions. They also assist in bringing diverse perspectives that facilitate growth, which aids in driving, ensuring long term sustainability. Additionally, it contributes to employment opportunities and encourages new investments. Importantly, corporate governance helps the business to avoid mismanagement, mitigate risk, improve access to investors, and safeguard stakeholders.
I believe that companies must involve their stakeholders in their decision making to ensure that optimal recommendations are made. Aggarwal (2011) suggests that in the modern business world, corporate governance is associated with public policies and business strategies that are generally stakeholder-friendly. In addition to making profits, corporations should develop programs that benefit the community. The aspects of corporate governance, business ethics, and social responsibilities are interrelated as they ensure the proper functioning of a corporation (Tayşir & Pazarcık, 2013). According to these authors, CSR is increasingly focusing on corporate governance as a method of incorporating environmental and social concerns when making decisions (Tayşir & Pazarcık, 2013). The approach benefits not only the stockholders and financial investors but also the stakeholders, who include the employees, communities, and customers.
The analysis of corporate governance and social responsibilities provide critical insights on how companies deal with their shareholders and stakeholders. Importantly evaluating the utilitarianism and the enlightened egoism helps in assessing the impacts of the various frameworks that affect a corporation. Companies must, therefore, fulfill their economic, legal, and ethical obligations before engaging in philanthropic duties. A company that participates in social responsibilities gains various benefits, including enhanced brand, profit maximization, and proper management of resources.
References
Aggarwal, S. S. (2011). Corporate governance, social responsibility, and business ethics. Journal of Business and Retail Management Research, 5(2).
Saha, B. (2014). The analytical study of the application of the ethical theories in business governance. https://thescholedge.org/index.php/sijbpg/article/view/82
Tayşir, E. A., & Pazarcık, Y. (2013). Business Ethics, Social Responsibility, and Corporate Governance: Does the Strategic Management Field Care about these Concepts? Procedia - Social and Behavioral Sciences, 99, 294-303. https://doi.org/10.1016/j.sbspro.2013.10.497
