To what extent do you agree that the main beneficiaries of CSR will always be a firm’s stakeholders rather than its shareholders? Corporate social responsibility has a number of affects for both the stakeholders and shareholders in a business. The effects on both of these will be dependent upon the type of business and the social responsibility programme which they adopt. But who benefits the most? And over time will this always be the same?
All firms need to fulfil the needs of their customers to enable them to remain competitive and function as a profitable business, the employees of a business also need to be happy in the workplace to enable them to be productive and reduce labour turnover. A lot of businesses have a large impact on many things such as the environment and the local community and therefore to keep customers and employees happy they need to take responsibility for their actions.
Therefore corporate social responsibility programmes are designed with stakeholders in mind. For example, Marks & Spencers had aimed to invest ? 200m over five years with the aim to achieve 100 actions and targets within this time with the objective of making M&S’s entire business carbon neutral. Having the entire business being carbon neutral customers will feel like their money is being spent in responsible places and that they are contributing to large investments such as the ? 00m recently spent on CSR. Employees will also be very satisfied by this change as they will be working in a responsible company and I believe that this would lead to a friendly working environment where labour productivity is increased by a large proportion. But who pays for the large investments? Shareholders will have to invest heavily into this and take cuts from their dividends, this could be seen as a huge disadvantage to them as they have high costs and a very little, if any return in the short term.
In comparing small businesses with corporations, the aspects of both types of businesses must be taken into direct consideration. By definition, a small business may be regarded as a business with a small number of employees. The legal definition of “small” often varies by country and industry, but is generally under 100 employees. These businesses are normally privately owned ...
A lot of investors are only interested in a quick return from their profits and uninterested in whether or not the company takes responsibility for their actions; this is very common with banks and other large corporate investors. This could dramatically affect the share price of Marks & Spencer in this situation but would this always be the case? How do they know that they will get any return from their investment even in the long term? Using Marks & Spencer’s ‘Plan A’ you can see that CSR is a high risk investment mostly due to the uncertainty involved.
Three years into the five year project you can see that just over 62 of their 100 actions had been achieved with the next 30 ‘planned’ to be achieved by the deadline with 7 of these behind due to unexpected challenges. Will the project be complete on time? With over ? 50m of retained profit injected into the scheme does this tell us that it is making significant profit? There are a number of factors that shareholders will need to consider and it may be hard to persuade many of them that it will have a benefit to them. So who benefits?
Stakeholders feel good about themselves because they are spending and contributing to Corporate Responsibility and the projects that they are running. Shareholders however are spending large sums of money and possibly taking cuts in their dividends to fund projects that many of them, especially large corporate investors are not interested in supporting. If a shareholder does want to help they could give their money to charities instead and be in full control to where their money is being spent and it will not affect their incomes.
Therefore I believe that stakeholders benefit highly from CSR and at the start of the programme shareholders have minimal if any benefit from it. But is this always the case? A good quality Corporate Social Responsibility Programme will involve very high costs and is likely to be unpopular with shareholders; however this programme will dramatically change the business itself. Employees may become much more productive and happy with their jobs and the media will soon begin to publicise the work that you are doing.
Corporate Social Responsibility (CSR) is a very controversial topic. A question that has been debated for the past few decades is; is it corporately viable to introduce social responsibility as a proposed addition to the work ethic of business organisations. As well as, if adopting the framework of corporate social responsibility would yield positive improvements for those organisations. The ...
If the CSR programme is a success it is likely that the company will become renowned for this and therefore may dramatically increase sales and customer spending as they support your business and want to contribute to the programme. This in the long term could make the business itself far more profitable than previously, a huge benefit to shareholders. Therefore, I agree that firm’s stakeholders will have huge benefits and that at the start of the Corporate Social Responsibility Programme they will be the main beneficiary by far.
However, I disagree that this will always be the case; in the long term a firms shareholders can benefit from large increases in sales and labour productivity, giving the company large opportunities for growth. It is common for a lot of shareholders to be looking for short term returns and therefore CSR can be seen as being bad for them, however those that are looking for a long term return can benefit highly from their investment and once the CSR programme is established and benefitting the company new shareholders can return for short term investments.