Corporate Social Responsibility Essay Example | Topics and Well Written Essays - 1500 words

Corporate Social Responsibility - Essay Example These can include (but may not be limited to) employees, customers, suppliers, community oraganaizations, local neighborhood and shareholders.'-Wikipedia.CSR entails that corporations should contemplate the actual and impending effects of their decisions on other stakeholders as well. It is correlated with the principles of sustainable development, which propagate that social, environmental and other consequence of business decisions should be taken into consideration. These two aspects can be better understood by examining the shareholders and stakeholders theories. The main ideas of the two theories are juxtaposed under the following heads. Director's fiduciary duties: The Shareholder's theory advocates that value maximization should be the governing corporate objective. It makes a plea that the interest of the shareholders should precede over that of other constituents, based on the presumptions of capitalism. The supporting view is that, the directors fiduciary duty is to run the company in the interest of the shareholders.Tradional property rights are cited as a justification for this argument. The shareholders are the owners of the company, therefore they hold property rights. ... The chief proponents of the stakeholders' theory are Donaldson and Preston. According to this school of thought, directors should have multi fiduciary duties towards all the stakeholders. Stakeholders are the people who affect and are affected by the company. The stakeholders view of strategy is an instrumental theory of the corporatin, integrating both the resource based view and the market based view, it is opposed to the view where the company solely tries to increase the value for shareholding. The stakeholder group should not be treated as a mean to some end but must be participative in detreming the direction of the company in which they hold stake. Basis for determining business relationships: As per the shareholders' theory, business relationships are determined by legal contracts. Thus, it recognizes accountability towards those parties with whom explicit legal contacts have been signed. It follows Sternberg's argument that such contracts are made under 'libertarian free contracting". This vastly limits the scope of the corporation's obligations. On the other hand, the stakeholders' model advocates social and moral obligations towards all those who affect or get affected by the company, these obligations may be become binding on the company via legal or implied contracts. Both the theories accept that the firm is a nexus of contacts but differ about the basis for determing those contacts. Objective of wealth creation: The two theories take different stands about the nature of these contracts. Kay's work in strategic management (Kay1993), show that managing contracts on collaborative, 'relational' basis can lead to competitive advantages directly benefiting shareholders. Thus, shareholder's theory acknowledges that contacts should be