The Primary Goal of a Firm Has Been Held Out to Be Shareholder Wealth Maximization Which Translates to Maximizing Stock Prices. in Light of This Statement, Do You Think Firms Have Any Responsibility to Society?

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MBC 703 –CORPORATE FINANCE & ACCOUNTS ASSIGNMENT:

The Primary goal of a firm has been held out to be shareholder wealth maximization which translates to maximizing stock prices. In light of this statement, do you think firms have any responsibility to society?

BY

Akanji Emmanuel olusegun

BSU/MS/MBA/08/3104

FACULTY OF MANAGEMENT SCIENCE

MASTER OF BUSINESS ADMINISTRATION (MBA)

BENUE STATE UNIVERSITY MAKURDI.

AUGUST,2010

1.0 Introduction:

The fundamental economic role of business is to make profit and to maximize shareholders wealth. Therefore, this primary objective is carried out in the society. Firms Operations are not performed in a vacuum but in an environment. Business Organizations are open system that must interact and respond to the environment. The performance of the Firm therefore is influence by the environment. The environment of business is made up of all the elements that are relevant to an organization’s operation though outside its control. This means that to survive in business environment, firm must anticipate, interact, act and react to environments to utilize the opportunities (maximizing Shareholder wealth) and avert the threats of not getting involve in(corporate social responsibilities) protect the interest of the societies.

1.1 What is Corporate social responsibility?: Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance, CSR is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure its support to law, ethical standards, and international norms. The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. CSR may be based within the human resources, business development or public relations departments of an organisation, or may be given a separate unit reporting to the CEO or in some cases directly to the board. Some companies may implement CSR-type values without a clearly defined team or programme. Consequently, business would embrace responsibility for the impact of its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, CSR-focused businesses would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honouring of a triple bottom line: People, Planet, Profit. Free market theory founded on liberal business ethos, presumably from Adam Smith: In the free marketplace, the essential (and ethical) aim for business leaders is to relentlessly pursue capital for their shareholders. The sole responsibility of business becomes simple: to facilitate the efficient allocation of economic resources and maximize shareholder wealth (i.e., become and remain as profitable as possible). Thus wealth creation transformed from selfish pursuit to “moral act.”

Organized corporate responsibility programs not core function of business but seen ancillary to essential goal of profit-making

This includes not only activities such a philanthropy, civic volunteerisms, and the like, but also “people centered” strategic public relations, such as Identifying and building mutually beneficial relationships with publics, or Establishing and maintaining a favorable public reputation Sacconi(2004).

2.0 CSR and Value Assertion

Bansal(2000) stated that Corporate social responsibility are more than philanthropy, not just extraneous...
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