Business Corporate Social Responsibility

Today business operate in a market of investors and consumers whose understanding of value derived from a business goes beyond share price, quality services and goods. Many customers, a part from quality services and goods, would want to see a business that takes part in corporate social responsibilities. Research, has in the recent associated better business performance to high ethical standards from stakeholders. This paper basing on Lynn Stout article on Shareholder Value Myth, seeks to examine the views argued against shareholder value and reasons supporting the argument. Further, it considers corporate social responsibility offered therein, as well as, offering a criticism of the proposed position to give an opinion regarding the proposals plausibility or lack of the same. As such reasonable prices were charged for good services but the landscape changed with the inception of the shareholder primacy where focus was on share price maximization.

Secondly, shareholder supremacy championed total ownership of corporates by the shareholders (Quarshie et al. According to shareholder supremacy, managers and corporate directors only serve to advance the interest of shareholders in the corporations and have no stake in the ownership of the corporations. This notion serves to discount the treatment of corporations as legal entities hence are not self-owning. In addition, the shareholder supremacy advances the principal of residual claimant. The theory believes that all investors have one thing in common, profit maximization and that they will do everything to ensure their aim is achieved. Although many corporate businesses implement the shareholder primacy, evidence points to its inability to stimulate commitment of managers to share price maximization. Businesses are viewed today as socially responsibility to a number of stakeholders (McWilliams 3).

A focus on shareholder’s value maximization at the expense of other stakeholders on works to the disadvantage of the corporation. Many scholars view the shareholders supremacy as misleading. The single focus on share price advanced by the shareholder supremacy tends to limit the focus of management to short-term objectives at the expense of long-term goal. As well this makes managers to selectively care for the shareholders whose focus is only short-term while failing to address the interest of shareholders with long-term interests (Singh et al. Although Stout endeavors to offer solution to the shareholder supremacy challenges, his strict perception of regarding corporations as legal entities falls short of reality. Although, legal entities, corporations owe their existence to shareholders investments. As result the ultimate people that bare the risk of corporation’s failures are the shareholders.