Profit maximization and Corporate Social Responsibility (CSR)

  • Category:
    Management
  • Document type:
    Essay
  • Level:
    Undergraduate
  • Page:
    3
  • Words:
    1825

Profit maximization and Corporate Social Responsibility 7

Profit maximization and Corporate Social Responsibility (CSR)

Introduction

The debate about whether organizations ought to mean to augment their benefits paying little mind to the outcomes to society is being held in scholastic and business circles. Though numerous scholastic journalists trust that it is sufficient for organizations and financial specialists to be contented with satisfying productivity, there are others in the educated circles who take the perspective that organizations exist to make benefits for their proprietors and thusly should endeavor to accomplish benefit boost, at each expense (Opper, Wong, & Yang, 2012). Disregarding this, there is no denying the way that a definitive obligation of organizations is to make benefits for their proprietors. It is the arrival of such speculation that serve as appreciation for entrepreneurs, urging them to put resources into endeavors that likewise give the items and administrations devoured by the general population. Taking the legitimately earned cash from financial specialists without their endorsement is flighty and that organization fretting about different endeavors with the attempts of altering the issues of society for the sake of Corporate Social Responsibility (CSR) engagement are misleading themselves (Lerzan, et al., 2008). There is no contention that even in the cutting edge business environment, any association that does not work in a monetarily feasible sense is destined to come up short, and that incorporates non-profit making organizations (Opper, Wong, & Yang, 2012). Therefore, this essay will analyse the concept of corporate social responsibility with a view of Milton Friedman and from classical and social economic perspectives.

Profit motive

Benefit amplification which expands shareholder riches is the suitable objective of a business in an entrepreneurial society (Bilych, 2014). At the point when a firm applies benefit boost or profit maximization, it is fundamentally saying that its essential center is on benefits, and it will utilize its assets exclusively to get the greatest benefits conceivable, paying little respect to the outcomes or the dangers included. By going out on a limb and putting resources into a business, the prizes connected with the danger ought not to be denied the financial specialist. This is the soul of an enterprise which drives business enthusiast in an industrialist or capitalist economy (Bilych, 2014).

Intense times imply that everybody, contenders or competitors and clients alike, are hoping to strike the best arrangement they can. On the off chance that organizations are not working to their most extreme potential, they will fall and finally collapse. Whenever the business fails, it is not failure to the shareholders only, but also to the investors, both potential and existing, because it means that their investment is also lost (Lerzan, et al., 2008). In today’s dynamic and competitive environment, business managers and leaders need to aim at maximizing a return on investment for both the shareholders and the investors as a way of rewarding them for the risk associated with their investment. There is no sense in parting with large business deals for the business when the business itself can’t make any profit at all. In my view, it is important that business operations don’t engage in too many activities that are aimed at benefiting the community at the expense of the company, especially if the company is in its growth stage, and further, that there is no proof to justify the spending. Therefore, the most important concern of business enterprises is to maximize profit rather that engaging in those activities that make a diversion of shareholders’ resources (Bilych, 2014).

Analysis

As of now, organizations, both small and enormous multinationals, are currently all anxious to participate in deeds that are not as a matter of course a portion of their center business exercises, and in this manner, occupying critical measures of cash towards projects that utilize up significant parts of their benefits with the goal of being seen as great corporate natives (Phillipp, 2009). The present business position affirms that associations now acknowledge the way that the corporate world now depends on trust and goodwill of the overall population to thrive and enhance their odds of long haul survival. Consequently, organizations today will do whatever it takes to win the trust the public who won’t acknowledge anything not exactly certified endeavors by organizations to add to society and receive supportable practices by contributing some of their benefits towards attempts that advance the greatness and prosperity of groups where they work (Opper, Wong, & Yang, 2012).

In the business world today, it is normal that the obligations of a business are currently much more extensive than simply serving the enthusiasm of their shareholders (Opper, Wong, & Yang, 2012). Business associations have different partners and should consider their necessities to make maintainable progress. As to the partnership idea, it is trusted that organizations today are so associated with the more extensive society that it must serve the enthusiasm of all gatherings, and in this manner increase business advantage as well. Anita Roddick broadly said that in business doing great is great businesses and that acting morally and taking care of the enthusiasm of the more extensive society likewise bodes well (Phillipp, 2009).

Arguments for CSR

Proponents of CSR are in line with the socioeconomic view of organizational management, which believe that the sole responsibility of the organization is beyond profit maximization. Organizations like Unilever, Marks and Spencer and Google have been known to really go past making proclamations about working together morally and make an interpretation of those words practically on form of actions (Lerzan, et al., 2008). Organizations should not just advance moral business measures and practices inside, however, they should surpass lawful consistence essentials and shape future industry benchmarks by presenting best practices today (Bilych, 2014). For instance, the achievement of organizations like Google have not been because of their benefit but rather because of their center estimations of corporate social responsibility (CSR) which have contributed fundamentally to their quick development and worldwide achievement. It in this manner demonstrates that the aspect of profit maximization must not constitute the most important thing in the world situation though care must be taken not to give up everything for the sake of boosting benefits (Bilych, 2014).

By organizations practicing CSR, organizations are said to be prioritizing the interests and needs of the society which leads to high returns, as evidenced in the modern business world (Bilych, 2014). Many business organizations have benefited and are still benefiting from the engagements of CSR. For instance, Mark and Spencer decided to undertake an initiative to protect the universe by undertaking responsible sourcing, waste reduction and extending a help to the communities. Consequently, as a result of the noble decision, the company’s cost of packaging was reduced by close to 20%, efficiency of energy increased by 19% and overall profitability increment was estimated at $50 (Bilych, 2014).

A number of organizations perceive CSR as a noble course with businesses performing exceptionally well by doing CSR (Özler, 2012).
Unquestionably, during a time where supportability is being seen as a means of accomplishing hierarchical suitability, business associations can’t stand to overlook their corporate social responsibility accreditations for the sake of benefit amplification (Lerzan, et al., 2008). Friedman’s idea of free market endeavor concentrates on an obligation to shareholders alone, however the partner idea and the guideline of the triple main concern depends on the thought that organizations, particularly huge open companies, have an obligation to all stakeholders, not simply shareholders (Özler, 2012). In any case, one can’t help suspecting that these societal advantages, great as they seem to be, may not be authentic purposes behind associations to endeavor resources and cause harm to the very elements of creation or production that will be utilized for the advantage of future eras. Society won’t acknowledge it and the present era will dismiss any association that disregards its obligation to nature and acts in apparently unaware way to the impediment of society and to the desires of its own clients (Saeed & Arshad, 2012). 

Arguments against CSR

Opponents of CSR argue from the classical perspective of organizational management, which believes that the sole reason an organization exists is to maximize profits (Özler, 2012). In as much as the proponents of CSR argue the CSR increases organizational performance in the long run, the opponents of CSR have a different view (Lerzan, et al., 2008). Critics of CSR like Milton argue that the organizational core reason of existing is profit maximization. When organizations undertake CSR’s, it is assumed that the money being used belongs to the shareholders. CSR opponents further argue that organizations can undertake CSR by distributing profits to shareholders who in turn give to the society through practices they feel fit .

Conclusion

In the modern business world where buyers are turning out to be progressively aware of the environment and economical production, any association that disregards its obligation to the environment and regards groups as superfluous does such at its own risk. The reliance of business and society is a power that organizations can’t stand to overlook. Society needs business, organizations likewise require society to make request and to make accessible open resources and framework that permit them to work and flourish (Lerzan, et al., 2008). This is in accordance with Porter’s rule of making shared worth where business and society perceive their association and cooperate to give items and administrations that address societal issues. The significance of the benefit or profitability must not reduce the essentialness of CSR engagement. Indeed, by understanding and accepting the fact that CSR implies doing admirably great, it pays to take part in the CSR rationality. One can’t help thinking that present day consumerism will at last constrain organizations to carry on in a moral manner; and CSR with respect to enormous corporate associations and in addition SMEs might be the street to profit maximization. In such manner, profit maximization concept may have been elegant in the period of Smith, yet the world has proceeded onward from this time and it carries on organizations to change with it (Özler, 2012).

References

Bilych, G. (2014). The theory of justice and profit maximization. Business and Economic Research, 4(1), 188-210. http://dx.doi.org/10.5296/ber.v4i1.5139

Lerzan, A., Timothy L. and David, B. (2008). Profit Maximization through customer relationship marketing: Measurement, prediction and implementation. Routledge: London.

Opper, S., Wong, S. & Yang, Y. (2012). Sales maximization or profit maximization? How state shareholders discipline their CEOs in China. Asia-Pacific Journal of Financial Studies, 41(3), 347–375.

Özler, Ş. (2012). Adam Smith and dependency. The Psychoanalytic Review, 99(3), 333–358.

Phillipp, S. (2009). The business case for Corporate Social Responsibility: Understanding and Measuring Economic Impacts of Corporate Social Performance. Springer Science & Business Media: Munich.

Saeed, M. M. & Arshad, F. (2012). Corporate social responsibility as a source of competitive advantage: The mediating role of social capital and reputational capital. Journal of Database Marketing & Customer Strategy Management, 19, 219–232. doi:10.1057/dbm.2012.19

Wilton, N. A. & Toh, W. (2012). Determinants of entrepreneurship: A framework for successful entrepreneurship. World Review of Entrepreneurship, Management and Sustainable Development, 8(3), 285-296.