Primary Objectives of management and Wealth of Shareholders - Example

Primary Objectives of management and Wealth of Shareholders Insert Name Insert Institution Introduction Profits are the chief goals of businesses; however, it is widely known that businesses have a contribution to the society. Proper management and innovation in businesses create employment opportunity hence benefiting the entire society. In this document, I provide an argument that the purposes of businesses are to provide innovation of goods and services generating economic growth to the shareholders and owners without compromising the well-being of the society. Economic growth from the business must have a positive impact on the per capita income of the society hence the business must not major only on profit maximization to the owners and shareholders but to for benefits of all the stakeholders and society as a unit. In addition to provision of income to the community and the owners businesses provide goods and services to the consumers particularly those that are users of the products and services offered by the enterprise. Through effective social responsibility and consideration of the society, firms are in a position to offer greater benefit and goods to the society as a unit. Therefore, this paper argues that businesses should not only factor their beneficial attributes to owners and shareholders but their activities should be beneficial to the society. Discussion Arguments have been there that the main purposes of businesses are for profit creation and beneficial advantages to the owners and shareholders without the consideration of the society. Friedman 1980 argued that companies that did not focus on profits creation were less competitive and did not benefit their owners, employees and the society. Without profits, firms undergo losses and there are possibilities of closure if the situation is prolonged. Hence, it is a fundamental aspect of firms to major on profits since they matter for the well-being of the business. Successful firms’ factor in more than profits in their business models incorporating innovation that lead to creation of employment and significant improvement of the lives of people (Friedman, 2000). First, the argument is that business should be innovative enough to deliver quality products to the world population. The benefits drawn from the businesses to the world population should be the expectation of the consumers and the sole purpose of owners and shareholders. With the mindset that the business has to give beneficial advantages to the consumers, the firms stand out not only for profit maximization but also for benefits to the society. Benefits to the society should be the major expectation of business. Failure to achieve these benefits and expectations of the society develop negative impacts on the business model as whole and may lead to loss of profits. Sustained economic growth of a firm leads to long-term benefits and benefits to all the stakeholders in a business. Secondly, the central goal of businesses should be to develop innovative products beneficial to the society and offering employment to the society and offering products and services to a wide world population. Therefore, a society’s economic growth needs to be large so as to be effective over time. Moderate economic growths are largely imperceptible to the recipients making them look down upon them in certain instances. Gains should be largely observable in the long run and almost impossible to ignore in the end. Small economic growths when compounded in the end can be observable and sustainable in the business model. In addition, small positive economic differential can generate and produce large and surprisingly economic benefits to the society and the business units. Growth in business doe not only make the individuals at the top of the pyramid to be wealthy and well off but its effects should trickle down to all the stakeholders and the society as a unit. Growth is important to the company and the society since small differences over a long period has significant impacts on the lives of people and the financial status of companies. Arguments that profits are the major reasons for operations of companies were relayed by Friedman however presently there are positive illustrations of the benefits of well performing organizations to the wellbeing of the society. It is important to note that if firms do not emphasise on their profits they are able to side track, lose their sole purpose of operation, and undergo losses. Well-managed firms provide far more than just profits to their owners through provision of innovation and quality products hence economic growth and employment creation in the unit. Profits are essential components of management of a business but the sole goal need to be development of innovative new products that offer benefits to a wider population and the society. The society needs economic growth however attention aught direction towards redistribution schemes and macroeconomic management to improve lives of people and the society as a unit. With a steady economic growth, the welfare of world population is improved and sustained in a manner that is not detrimental to all the stakeholders. The current world population is living better lives compared to their parents and grandparents. This is illustrated in the economies of countries like China and India that has a large population moving from the lower bracket to the middle class. This was not observed even in the early development centuries and periods and these improvements in the society have all been attributed to innovation in business models. Growth in economies due to business models that are innovative has provided the world with remarkable improvements in per capita incomes and enhancement of living standards over the past two centuries. Observations of improvements in China, Brazil, India and other low-income countries moving massive populations from poverty levels to middle income levels have marked the previous century. These massive growth in per capita income have been attributed to the business models that have been innovative and sustainable without forgetting their roles to the consumers and stakeholders. These models have not only made the owners and stakeholders to be well off but have factored in the interests of the society hence leading to alleviations form poverty and improving social well-beings. With expansion of economies and increased consumptions, another problem has started dogging the world’s population. The production of green house gases leading to global warming and consumption of energy resources in higher amounts never witnessed in human history. This has therefore shifted the focus of businesses to move from profit creation to sustainability and environmental resource conservation. Some firms do not talk directly about restriction of economic gains as a precaution on environmental sustainability but they implement regulations that end up operating and restricting economic gains and developments. Generations have to factor in the issue of sustainability and get solutions that are not detrimental to the sustainability of environmental resources (David A. , 2010). The notion that businesses have the core role in creation of wealth and financial benefits to owners has encouraged managers to engage in unethical and unprofessional practices which has lead to economic recession and global financial melt downs. This is because the attempts to increase profits and incomes are immoral and illegal developed from cooperate greed and goaled for personal gains. The global economic recession has had profound economic effects on the world’s population affecting basic lives of people worldwide. Given the various cases of attempts of cooperates to major on profit creation it is clear that the sole purpose of businesses are not profit creation solely but factor in the benefits to society and social goods have to be factored in. Cooperate social responsibility have the purpose of adding human touch to business models in their objectives of creation of profits. Companies should have compassion with their communities to ensure that they make a difference not just profit. Their footprints should be measurable and positive to the livelihood incorporating compassion into their vision, mission, strategy, goals, culture operations and decisions for the improvement of quality of life through reduction and elimination of global suffering in the society. Companies should have compassionate values as essential components of their core values. These values should become part of their operations and stated in their annual reports of operations for the society to know and understand what the companies stand for in the general operations and business model they profess and implement. Ford company has been compassionate with its consumers and the society as a unit and annual report of 2009 states that it does not only have programs for benefiting the shareholders but it also factors in the needs of the community as a unit. In 2009, its employees through the Ford Mobil food Pantry project donated foodstuff to food banks globally in 44 countries in six continents. The management and employees of Ford Company created a better world by participating in a project that helped needy women, children and children worldwide. This was a clear indication that businesses are not meant to operate for profit making solely but also for the benefit and offering solutions to the society. The present economy is faced by a lot of financial crisis like the recession that has lead to loss of employments and homelessness. Businesses and co operations have a responsibility to humanity just as governments and organizations ensure to make life better (David, 2011). Researches show positive relationship between CSP and CFP (68%) and while sign of no significant relation between CFP and CSP at (26%).Most of the research results show a positive relationship between the two aspects indicating the importance and relationship of the two aspects in relation to success of businesses (Pieter & Tomas, 2008). It is clear from the researchers correlating cooperate social responsibility and cooperate financial performance that the two are interlinked and have a positive influence on the financial performance of a cooperate organization. The major argument of Friedman is that business managers have immediate responsibility to the shareholders and owners’ .Their purposes are to conduct business according to the desires of owners and to satisfy their needs that are profits and sustenance of the business. This ensures that the business makes as much money as possible without conforming to basic rules of the society and ethical obligations. From this approach, profits do not determine the ends in themselves but the reason why objectives ensure profit creation is that that is the only objective of the stockholders. The stockholders do not factor in the issues of profiting and benefiting the consumers and society as a whole. With this approach in running and operating businesses, the executive have to factor and major on monetary value of the business without thinking of the non-monetary gains from the organization. The perception from the notion of Freidman face a challenge that at no time would an organization and its stakeholders have products that would lead to demise and extinction of the human race. Therefore, there are points when stakeholders contribute even if it makes the organization to incur losses and lose their profits. Executives at times make sacrifices that are not for the sake of profit maximization but for non-monetary benefits to the organization and the society. Cooperate social responsibility deals with the obligation of cooperate to the consumers and the society. It affects individuals affected by cooperate rules and legally binding obligations. The actions of cooperate social responsibility may stem from a desire to do good or from an act of self-interest in relation to the managements attempt to attract empathy of the society. The role of cooperate social responsibility is widely called for by different organizations and cooperate set ups to ensure that projects are operating in a sustainable manner. Organizations are advocating for businesses to take wider social responsibility in the business sector. Presently, criticism is on businesses on the far-reaching impacts of failure to offer social services and aids to the consumers and world’s population .Government has failed to solve social problems hence private organizations are called upon to provide solutions that are sustainable and comprehensive to offer the right and appropriate remedies. Terrorist attacks in the USA had effects and change of direction on the perception of people and viewing of role of social cooperate responsibility bringing into the picture need for social equity in the world markets and communities. Business leaders presently feel that cooperate social responsibility is important especially in the current political environment and social climate .GlaxoSmithKline company has come out clearly and categorically that it is not a company that caters for the rich only and is no interested in profits specifically. It indicates clearly that it is in operation to ensure that health services are provided to people from all the sectors of the economy and it provides services to 100s of poor countries. The company has done the right thing in relation to its moral stand and for the benefit of human without compromising its chore role of making profits and staying in business. Business and cooperation need to note and acknowledge that there existence banks on the commitment and cooperation of the society of which a large extent of compromise exists their very existence face threat of crumbling and failure. To understand the relationship and responsibility played between organizations, co-operations, and the society then there is the case of General Motors and the society. General Motors holds the society responsible for providing conditions for its survival. In this case what does the society hold General motors’ responsible for? From this the two can develop their terms of contract and each party to adhere to the terms respecting and playing their respective roles without compromising and breaching their respective terms. The simplest way to factor and look into the contract is checking and factoring in what a business needs from the society and what the society needs from the business (Craig, 2003). Many firms are in situations where they try maximization of profits and consider their social responsibilities. They have to act wisely rather than get coerced into performing social responsibility at the disadvantage of its business model lack or failure of sustenance. The maxim of social responsibility of businesses as to maximize profits as portrayed by Fried man has received a number of criticisms from scholars in this sector. The arguments are unconvincing since with such an approach businesses will ensure profits and benefits at the detriment of the society and consumers who are the lifeblood of the very existence of enterprises. However, the argument gets weight when it is viewed that social responsibility may not be compatible with profit maximization but in real application, it does not mean that businesses will undergo losses. Even in case a business performs its social responsibility efficiently it still, can be successful in relation to profits it provides to stakeholders and the owners in a manner that is sustainable and accommodating all the involved parties herein (Bryan & Jose, 2006). The argument of Friedman at a point when analyzed comprehensively and with a wider view of the needs of the society can be found that under certain conditions, social responsibility and profit maximization are congruent self-supportive. However, it is logically impossible to maximize one aspect of the two unless there is a transformation that is monotone to the other. Factoring the constraints in business running it is quite clear that profits and social responsibility cannot get maximization at the same time without compromising the operations of a business. Always there is a trade off between profit maximization and social responsibility of businesses. Organizations plan that projects in the social sector need to create profits to the business even if they are not direct but at least have value addition in relation to incomes of the business unit (Shaw, 2008). There is a possibility of managers maximizing cooperate responsibility and value for the shareholders in a free competition without deception and fraud. The few freely elected individuals can go a mile in meeting their personal demands in a manner that is unsustainable and unfavourable to the entire business process. Regulations by governments have failed to implement projects and rules for cooperate responsibility of business and their programs to assist the society in a manner that does not compromise sustainability. The measurement of social output of a project will depend on the outcomes of a project. For example, an environmental project would lead to reduction in pollution or a scholarship project by a firm will increase the number of educated people in an area (Friedman M. , 1970). With Cost Benefit Analysis the programmes when measure will definitely lead to an improvement of the lives of the community (Becker, 1976). Finally, the firm is an economic agent with a primary objective of profit maximization. For the achievement of its primary objective, it draws resources from the society in relation to land, labour and capital. Growth and sustainability of a firm is affected by the stability of the society in which it carries its operations. Therefore, the society can form or impose externalities to the survival of a firm that may lead to losses or to some extent complete closure of an enterprise. The business hence has to factor in the importance of the society on its survival and recognize that its main purpose is not just profit maximization but consideration of the society that serves as its main reason for operation and survival. Conclusion There are several lessons learnt in relation to viewing and analyzing of social responsibility of firms and their attempts for profit maximization. Firms need to act in a strategic manner not reacting to coercive political and environmental forces. Strategic approaches will also lead to enhanced social output of firms in relation to coerced social responsibility uptakes. Managers have to acknowledge that their businesses have wider roles to play beyond the maximization of profits. The ethics of business require that managers have responsibilities and obligations for various circumstances hence fulfilling fiduciary duty, running successful business, and on the other hand not compromising the livelihoods of other constituents. Therefore, Businesses should not major on the maximization of profits only but also perform its role in the well-being of the society and consumers (William, 2008). References Becker, G. (1976). Altruism, egoism, and genetic fitness: economics and sociobiology. Journal of Economic Literature , 817-826. Bryan, W., & Jose, J. (2006). Taking Friedman Seriously: Maximizing Profits and Social Performance. Journal of Management Studies , 1-18. Craig, S. (2003). Cooperate Social Responsibility:Whether or How? Carlifornia Management Review , 52-57. David, A. (2010). Innovation and Growth: How Business Contributes to Society. Hong Kong: Chinese University of Hong Kong. David, B. (2011). Compassion as the New Philosophy of Business. Journal of Relationship Marketing , 2-7. Friedman, M. (1970). The Social Responsibility of Business is to Increase its Profits. New York: New York Times Magazine. Friedman, T. (2000). The Lexus and the Olive Tree:Understanding Globalization. New York: Anchor Books. Pieter, B., & Tomas, G. (2008). The Worth of Values :A literature Review of the Relationship of Cooperate Social Responsibility and Financial Performance. Journal of Business Ethics , 408-412. Shaw, W. (2008). Business Ethics. Belmont: Words Worth CA. William, H. (2008). Marxism, Business Ethics, and Corporate Social Responsibility. Journal of Business Ethics , 1-13. Read More