{"id":1972,"date":"2019-12-06T04:18:23","date_gmt":"2019-12-06T04:18:23","guid":{"rendered":"https:\/\/delaneysilva.com\/blog\/?p=1972"},"modified":"2019-12-12T01:27:51","modified_gmt":"2019-12-12T01:27:51","slug":"shareholder-v-stakeholder-a-social-responsibility-debate","status":"publish","type":"post","link":"https:\/\/delaneysilva.com\/blog\/shareholder-v-stakeholder-a-social-responsibility-debate\/","title":{"rendered":"Shareholder v. Stakeholder: A Social Responsibility Debate"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">On September 13, 1970, Dr. Milton Friedman, professor of economics at the University of Chicago, published an article in the <em>The New York Times<\/em> magazine titled <em>The Social Responsibility of Business is to Increase Its Profits<\/em>.  As the title indicates, Friedman asserts that an efficient business  manager not only has the obligation to see that his or her business is  profitable, but has the responsibility to do so <em>at all costs<\/em>. This  position led to the theory known as the \u201cshareholder view\u201d since, under  this view, the fiduciary duty owed to shareholders to maximize profits  takes priority over everything else.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It wasn\u2019t until 1984 when R. Edward Freeman published his book, <em>Strategic Management: A Stakeholder Approach<\/em>, that a new theory was put forth: it is not <em>only<\/em>\n shareholders that depend on and influence business; rather, there are \nother individuals or groups that are also affected by the company. These\n stakeholders \u2014 in addition to shareholders \u2014 include customers, \nemployees, suppliers, creditors, the community, and the government, \namong others. The argument is that the performance of the business has a\n direct or indirect impact on all of them.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Friedman\u2019s shareholder view suggests that only profitable businesses  have the capacity to create jobs, pay taxes and contribute to  the economy in general; so, the fiduciary duty owed to the shareholders  alone is where their responsibility to society ends. This is a very  narrow definition that predominated an entire decade in which companies  defended now-questionable business conducts in order to be &#8220;socially  responsible.&#8221;\u00a0For example, during the 1970\u2019s, commercial  discrimination, labor exploitation, overworked and underpaid workers,  unreasonable exclusivity agreements, price fixing, low-quality  materials, poor-safety standards and environmental pollution, among  others, were common business practices that sought to reduce costs in  order to increase the earnings of the company. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Freeman\u2019s stakeholder approach, on the other hand, states that while company directors <em>do<\/em>  have a fiduciary duty to their shareholders, a company\u2019s ethical and  responsible operation must take into account the interests of <em>all<\/em>  its stakeholders, without giving priority to any one over the rest. As  Freeman states, an efficient business manager is the one who is able to  \u201c\u2026keep the relationships among stakeholders in balance\u201d. Under the  stakeholder approach, it is in this balance where the social  responsibility of the company resides.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>&#8220;Corporate social responsibility has become an emblem in modern-day business, in which companies have become aware of their unique position to contribute and give back to the community.&#8221;<\/strong><\/p><\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">The current definition of social responsibility stems from Freeman\u2019s  stakeholder approach and is much more expansive. Today, it requires  commitment to all of the company\u2019s stakeholders, including even  competitors and the environment. Corporate Social Responsibility has  become an emblem in modern-day business, in which companies have become  aware of their unique position to contribute and give back to the  community. In this sense, modern-day corporate social responsibility  practices rely greatly on voluntary measures taken by the company  through its own initiative, recognizing that the purpose of business is  not limited only to complying with the fiduciary duty to their  shareholders, but also covers a general obligation to all stakeholders  and to society as a whole.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" width=\"537\" height=\"493\" loading=\"lazy\" src=\"https:\/\/i0.wp.com\/delaneysilva.com\/blog\/wp-content\/uploads\/2019\/12\/CSR3.jpg?resize=537%2C493&#038;ssl=1\" alt=\"\" class=\"wp-image-1974\" srcset=\"https:\/\/i0.wp.com\/delaneysilva.com\/blog\/wp-content\/uploads\/2019\/12\/CSR3.jpg?w=537&amp;ssl=1 537w, https:\/\/i0.wp.com\/delaneysilva.com\/blog\/wp-content\/uploads\/2019\/12\/CSR3.jpg?resize=300%2C275&amp;ssl=1 300w\" sizes=\"auto, (max-width: 537px) 100vw, 537px\" \/><figcaption>Eucalyptus sapling growing from coins<\/figcaption><\/figure><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Corporate social responsibility has become an emblem in modern-day business, in which companies have become aware of their unique position to contribute and give back to the community.<\/p>\n","protected":false},"author":1,"featured_media":1973,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"_uag_custom_page_level_css":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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social responsibility has become an emblem in modern-day business, in which companies have become aware of their unique position to contribute and give back to the 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