Question

WEEK 1: Discussion Prompt #1 - For all organizations, especially public-traded companies, one of the main goals of the organization is to maximize the value of the firm. For part one of this discussion, discuss if maximizing the value of the firm is an appropriate goal. For part two, consider an organization’s CSR program. Does maximizing the value of the firm come at the cost of the CSR program? When forming your thoughts for part two, consider Apple and Microsoft. Apple is a company that does not have a rigorous CSR program. Instead, they focus on maximizing the most profits possible. On the other hand, Microsoft and Bill Gates is one of the most “giving” companies in the business world today. Which scenario is better for society and the organization?

Answer 1

According to principles of management, maximizing the value of firm i.e making more and more profits, alone is not an appropriate goal, there are other factors as well which affect the firm which includes environmental factors, shareholders of the company, customers etc. An appropriate goal for any firm should be wealth creation for shareholders with profit generation keeping in view that they maximize their profits and minimize the costs, compete in the market and grow in the business environment.  

For public trading company especially, CSR activity is considered essential and mandatory as their market capitalization is high and they utilize most part of the resources which are scarce and therefore should return to the environment what they are utilizing. Maximizing the firm value should not come at the cost of CSR program as society needs the support and what is taken from it. Considering a company like Apple, it has always focused on generating a brand name, maximizing profits and creating value for the firm. Unlike Apple, Microsoft did create a brand name, profits, value for the firm with indulging itself in rigorous CSR activities as well. Comparing these two companies, it's clear that CSR activities add on the value of the firm and helps society to grow and nourish itself and this scenario is best for the society and the organization.