Shareholder Concept versus Stakeholder Concept: The Impact of Corporate Social Responsibility on Profit maximization

Table of Contents1. Introduction:12. Literature Review42.1.Ethics in today's business environment and CSR42.1.1.Business ethics and professional code of conduct42.1.2.Corporate Social Responsibility (CSR)62.1.3. The Stakeholder theory:82.2. Profit Maximization102.2.1.Profit maximization: a technical and behavioural perspective102.2.2. Shareholder theory of profit maximization:122.3. Business Ethics and Profit Maximization: A Relationship142.3.1. The impact of business ethics and CSR on profit maximization142.3.2. The impact of stakeholder interests satisfaction on shareholder satisfaction162.3.3. Integrating business ethics in strategic decision making:183. Methodology…………………………………………………………………………204. Conclusion……………………………………………………………………………245. References……………………………………………………………………………26Abbreviation ListTermAbbreviationCorporate Social ResponsibilityCSRCorporate Social PerformanceCSRProfessional Ethical StandardsPESMarginal RevenueMRMarginal CostMCMultinational CompaniesMNCs1. Introduction:In today's business environment, firms are facing mounting pressures from different stakeholder groups to adopt socially responsible practices (McWilliams & Siegel, 2001, p. 117). This issue has aroused fierce debate to whether these practices have an adverse impact on the firm's ability to meet its obligations towards its shareholders (i.e. to maximize profits). Firms reacted in various ways adopting one of two opposing theories to conduct their business through; the shareholder theory and the stakeholder theory (Whitehouse, 2006, p.

English: Chart depicting the major kinds and inter...

English: CSR approaches CSR framework

Journal of Business Ethics

284). The shareholder theory argues that the ultimate aim of the business is profit maximization and that a business should adopt only those practices that contribute to this goal (Friedman, 1970). Conversely, the stakeholder theory takes a more ethically appealing stance holding that the responsibility of the firm goes beyond maximizing profits reaching discretionary responsibilities of serving the interests of the whole community (Aragndona, 1998, p. 1093).

Corporate social responsibility and the stakeholder theory are considered hot topics in strategic management and the context of ethics today (Marens & Wicks, 1999, p. 273). Even though the definition of CSR remains under academic debate, several firms have come to establish some consensus definition upon which they have based detailed CSR actions and practices as part of their code of conduct (Whitehouse,