The author argues that managers who sacrifice profit for the common good are in

Question

The author argues that managers who sacrifice profit for the common good are in effect imposing a tax on their shareholders and arbitrarily deciding how that money should be spent. Even if executives wanted to forgo some profit to benefit society, they could expect to lose their jobs if they did so in a meaningful (i.e., high cost to profits) manner. They are, after all, paid to achieve business objectives, not use shareholder money to engineer the public good (assuming there is agreement on what, exactly, that is.) Before responding to the questions below ask yourself the following: 1) is it true that “…doing what's best for society necessarily means sacrificing profits,” 2) are shareholders the only important and influential stakeholders in deciding how best to pursue corporate objectives, and 3) is government regulation, supplemented by self-regulation and civil society, the most effective way to strike a balance between profits and the public good? Based on your individual conclusions regarding the above, answer the following questions: Are profits and the general welfare basically incompatible? Why or why not? If you believe CSR requires the sacrifice of some amount of profit, what amount is appropriate? Is that amount the same for all firms in all industries? How should the CEO decide?

Explanation / Answer

Are profits and the general welfare basically incompatible?

Organization which believes in general welfare and development of society will not have to sacrifice profit. As they work towards the benefit of society it help to grow the company in multiple direction as it attracts respect of the employees working with the organization also they become capable of getting high potential resources , local government tend to relax tax norms and help to provide improved infrastructure which further helps the organization to grow hence profit and general welfare needs to be managed simultaneously by the organization and it will always add to its development.

If you believe CSR requires the sacrifice of some amount of profit, what amount is appropriate?

CSR requires the sacrifice of some amount of profit to maintain the entire activities however the same should not be viewed as and expense with not output, as mentioned above the same will attract respect for the organization in the employees and non-employees and will attract best resources, it will also attract government attention to help growing the organization in various ways. 2% is the ideal amount to be invested in CSR activities.

Is that amount the same for all firms in all industries? How should the CEO decide?

As per the corporate laws in various countries the same is mandated by regulatory bodies to ensure that the organization are working not only towards earning revenue however also to develop the society. In India 2% is a mandate by every domestic and international organization having its operations in India to invest in CSR activities however the organization may decide to invest more than the minimum threshold depending on its current strength.

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