Top 5: Discuss the view that only purpose of private sector businesses is to make profit, not to purpose CSR [12]
Posted: Mon Mar 25, 2024 9:59 am
Topical Q5: Discuss the view that only purpose of private sector businesses is to make profit, not to purpose corporate responsibility objectives. [12]
Topical Past Papers: 9609/11/MJ 2013/ Q7
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Solution:
Point 1:
[KN] The traditional view holds that the primary purpose of private sector businesses is to generate profits for shareholders. According to this perspective, businesses exist to maximize shareholder wealth and create value for investors.
[AN+APP] For example, proponents of this view argue that profit maximization is essential for ensuring the sustainability and growth of businesses, attracting investment capital, and driving economic prosperity through job creation, innovation, and wealth generation.
[AN+] Moreover, they contend that businesses have a fiduciary duty to their shareholders to prioritize profit-making activities and allocate resources efficiently to maximize returns on investment.
[AN+] Additionally, they argue that corporate social responsibility (CSR) objectives, such as environmental sustainability, social welfare, or ethical business practices, should be pursued only to the extent that they contribute to long-term profitability and shareholder value.
Point 2:
[KN] However, an alternative view emphasizes the importance of corporate responsibility objectives beyond profit maximization, recognizing the broader social, environmental, and ethical impacts of business activities.
[AN+APP] For instance, proponents of this view argue that businesses have a responsibility to consider the interests of all stakeholders, including employees, customers, suppliers, communities, and the environment, not just shareholders.
[AN+] Moreover, they contend that businesses operate within a broader societal context and have a duty to act ethically, contribute positively to society, and minimize harm to people and the planet.
[AN+] Additionally, they argue that pursuing CSR objectives can enhance long-term business sustainability, reputation, and competitive advantage by building trust and loyalty among stakeholders, attracting and retaining talent, and mitigating risks associated with social and environmental issues.
Point 3:
[However] Critics of the view that profit maximization is the sole purpose of private sector businesses argue that it overlooks the potential negative consequences of prioritizing short-term financial gains over broader societal interests.
[AN+] For example, focusing solely on profit-making activities may lead to unethical behavior, such as exploitation of workers, environmental degradation, or disregard for consumer safety, which can damage reputation, erode trust, and expose businesses to legal and regulatory risks.
[AN+] Moreover, the pursuit of profit at all costs may exacerbate social inequalities, exacerbate environmental degradation, and undermine the well-being of communities, ultimately undermining long-term business sustainability and societal welfare.
[EVAL]
[SOL] One solution to reconcile the tension between profit maximization and corporate responsibility objectives is to adopt a balanced approach that integrates financial performance with social and environmental considerations, aligning business goals with broader societal interests.
Another solution could involve promoting stakeholder capitalism, where businesses prioritize the interests of all stakeholders, including employees, customers, communities, and the environment, alongside shareholders, in decision-making processes and resource allocation.
[External Factors] Factors to consider before making a final decision include:
1. Regulatory environment: Compliance with laws, regulations, and industry standards related to corporate governance, transparency, and CSR is essential for private sector businesses to mitigate legal and reputational risks and maintain public trust and confidence.
2. Consumer preferences: Understanding the values, preferences, and expectations of consumers can help businesses identify opportunities to differentiate themselves, enhance brand reputation, and build customer loyalty by aligning their products, services, and practices with societal and environmental concerns.
3. Investor pressure: Increasingly, investors are considering ESG (environmental, social, and governance) factors in their investment decisions, seeking opportunities to invest in companies that demonstrate strong ethical and sustainable practices. As a result, businesses may face pressure from investors to prioritize CSR objectives alongside profit-making activities to attract capital and enhance shareholder value over the long term.
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Disclaimer: This is the possible answer with some extra information to make you understand better, the wordings must be managed according to the time allocated for each 12 marker.
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Topical Past Papers: 9609/11/MJ 2013/ Q7
-----------
Solution:
Point 1:
[KN] The traditional view holds that the primary purpose of private sector businesses is to generate profits for shareholders. According to this perspective, businesses exist to maximize shareholder wealth and create value for investors.
[AN+APP] For example, proponents of this view argue that profit maximization is essential for ensuring the sustainability and growth of businesses, attracting investment capital, and driving economic prosperity through job creation, innovation, and wealth generation.
[AN+] Moreover, they contend that businesses have a fiduciary duty to their shareholders to prioritize profit-making activities and allocate resources efficiently to maximize returns on investment.
[AN+] Additionally, they argue that corporate social responsibility (CSR) objectives, such as environmental sustainability, social welfare, or ethical business practices, should be pursued only to the extent that they contribute to long-term profitability and shareholder value.
Point 2:
[KN] However, an alternative view emphasizes the importance of corporate responsibility objectives beyond profit maximization, recognizing the broader social, environmental, and ethical impacts of business activities.
[AN+APP] For instance, proponents of this view argue that businesses have a responsibility to consider the interests of all stakeholders, including employees, customers, suppliers, communities, and the environment, not just shareholders.
[AN+] Moreover, they contend that businesses operate within a broader societal context and have a duty to act ethically, contribute positively to society, and minimize harm to people and the planet.
[AN+] Additionally, they argue that pursuing CSR objectives can enhance long-term business sustainability, reputation, and competitive advantage by building trust and loyalty among stakeholders, attracting and retaining talent, and mitigating risks associated with social and environmental issues.
Point 3:
[However] Critics of the view that profit maximization is the sole purpose of private sector businesses argue that it overlooks the potential negative consequences of prioritizing short-term financial gains over broader societal interests.
[AN+] For example, focusing solely on profit-making activities may lead to unethical behavior, such as exploitation of workers, environmental degradation, or disregard for consumer safety, which can damage reputation, erode trust, and expose businesses to legal and regulatory risks.
[AN+] Moreover, the pursuit of profit at all costs may exacerbate social inequalities, exacerbate environmental degradation, and undermine the well-being of communities, ultimately undermining long-term business sustainability and societal welfare.
[EVAL]
[SOL] One solution to reconcile the tension between profit maximization and corporate responsibility objectives is to adopt a balanced approach that integrates financial performance with social and environmental considerations, aligning business goals with broader societal interests.
Another solution could involve promoting stakeholder capitalism, where businesses prioritize the interests of all stakeholders, including employees, customers, communities, and the environment, alongside shareholders, in decision-making processes and resource allocation.
[External Factors] Factors to consider before making a final decision include:
1. Regulatory environment: Compliance with laws, regulations, and industry standards related to corporate governance, transparency, and CSR is essential for private sector businesses to mitigate legal and reputational risks and maintain public trust and confidence.
2. Consumer preferences: Understanding the values, preferences, and expectations of consumers can help businesses identify opportunities to differentiate themselves, enhance brand reputation, and build customer loyalty by aligning their products, services, and practices with societal and environmental concerns.
3. Investor pressure: Increasingly, investors are considering ESG (environmental, social, and governance) factors in their investment decisions, seeking opportunities to invest in companies that demonstrate strong ethical and sustainable practices. As a result, businesses may face pressure from investors to prioritize CSR objectives alongside profit-making activities to attract capital and enhance shareholder value over the long term.
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Disclaimer: This is the possible answer with some extra information to make you understand better, the wordings must be managed according to the time allocated for each 12 marker.
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