Question

After attending a seminar about corporate social responsibility (CSR), John advised Mary to
focus her investment on those companies with CSR plans. However, Mary argued with John
that maximizing shareholders’ wealth is the only goal of financial management, not CSR. Do
you agree with Mary’s viewpoint? Think of some specific scenarios to illustrate your
arguments and justify your stance. (word limit: 300 words)

Answer 1

I don’t agree with Mary’s viewpoint; maximizing shareholders’ wealth is not the only goal of financial management, they should focus on sustainable development by incorporating corporate social responsibility (CSR) into their strategic plans. Corporate social responsibility is where corporations take the responsibility to contribute towards social cause. It includes any work of corporate which can create a better society, improve environment, health, education, awareness etc. Active participation of the companies through the corporate social responsibility helps it in sustainable development.

It is important for companies to maximize shareholders’ wealth but the corporations should adopt fair, transparent and competitive business practices to maximize their profit in a free economy. They should also incorporate social responsibility into their strategic plans as it will help them in sustainable development and value addition. Environmentally friendly policies of CSR and sustainable development are extremely important and valuable for the society as a whole. By following the corporate social responsibility, the companies can add value to the communities within which they operate their business. The value addition can be measured through the increased customer loyalty and reduction in costs of compliance with regulations. The companies can also benefit from greater cooperation from their communities and gain support from community when their decisions may affect the future business. It will also help the company in its better financial performance in long run.