The Impression of Corporate Social Responsibility (CSR) on Corporate Financial Performance (Cfp) & the Concept and Role of Agency Theory
14 Pages Posted: 3 Aug 2020
Date Written: July 6, 2020
The primary goal of an organization/company need to maximize its owners’ value, but a proprietor’s goal could be quite different. Consider Larry Jackson, ‘The proprietor of a neighborhood sports equipment stock. Jackson is in business to generate money, but he likes to require time without work to play golf on Fridays’’. He also incorporates a rare employee who aren't any longer very productive, but he keeps them on the payroll out of friendship and loyalty. Jackson is running the business in a very way that's in step with his own personal goals. He knows that he could make more cash if he didn’t play golf or if he replaced a number of his employees. But he's comfortable along with his choices; and since it's his business, he's liberal to make those choices. In contrast, Linda Smith is CEO of an over-sized corporation. Smith manages the company; but most of the stock is owned by shareholders who purchased it because they were searching for an investment that might help them retire, send their children to varsity, acquire a long-anticipated trip, so forth. The shareholders elected a board of directors, which then selected Smith to run the corporate. Smith and also the firm’s other managers are engaged on behalf of the shareholders, and that they were hired to pursue policies that enhance shareholder worth. Throughout this book, we focus totally on publicly owned companies; hence, we operate the belief that management’s primary goal is shareholder wealth maximization. At the identical time, the managers know that this doesn't mean maximize shareholder value “at all costs.” Managers have a responsibility to behave ethically, and that they must follow the laws and other society-imposed constraints that we discussed within the opening vignette to the current chapter. Indeed, most managers recognize that being socially responsible isn't inconsistent with maximizing shareholder value. Consider, for instance, what would happen if Linda Smith narrowly focused on creating shareholder value, but within the process, her company was unresponsive to its employees and customers, hostile to its area people, and indifferent to the consequences its actions had on the environment. Altogether likelihood, society would execute a large range of costs on the corporate. It’s going to find it hard to draw in top notch employees, its products could also be boycotted, it should face additional lawsuits and regulations, and it's going to be confronted with negative publicity. These costs would ultimately cause a discount in shareholder value. So clearly when taking steps to maximize shareholder value, enlightened managers have to also mind these society imposed constraints. It’s at now where the researcher spreads an application of literature review onto testing Corporate Social Responsibility and its IMPRESSION on Financial Presentation. Subsequently, the researcher also stresses on the importance and implications of agency theory within the context of monetary management.
Keywords: Owner, Shareholder, Goal, Wealth, Responsibility, Financial, Agency
Suggested Citation: Suggested Citation