Tima Bansal

Even though ethical arguments [for social responsibility] are morally appealing, they do not apply well to the practical realities of modern western social and economic systems. First, the ethical argument lacks clear measures for evaluating the success or otherwise of socially valuable activities. It is difficult to compare one activity with another without a baseline measure of value.

Second, firms have many stakeholders. Is a decision successful if all stakeholders are satisfied, or merely if their degree of dissatisfaction is minimized? Do some stakeholders take precedence over others? Which ones? Many businesses prioritize their activities, and find that they succeed in some areas, with some stakeholders, and are less successful in others. Does this make them irresponsible?

Finally, the legal entity of the corporation was created to allow resources to be jointly owned. Shareholders expect to earn an income on their capital. If they don’t they will move that capital elsewhere, or not invest it at all. If the purpose of the corporation shifts from one of efficient production to stakeholder satisfaction, then corporations cannot engage in the very act for which they were designed, ultimately compromising productivity and quality of life.

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