Wealth Maximization And Corporate Social Responsibility

Wealth Maximization and Corporate Social Responsibility Ebehi Onakpoma Introduction There has been a lingering argument about the legitimacy and importance of corporate responses to CSR concerns. There are diverse opinions of the role of the firm in the environment and thoughts on whether profit maximization should be the only goal of a corporation. Profit maximization is the goal of any business. It is the process by which profits (EPS) of the business are increased. In other words, all decisions concerning investments, financing, or dividends are focused on boosting profits to an optimal level. Businessdictionary.com defines wealth maximization as a process that increases the current net value of business or shareholder capital gains, with the objective of bringing in the highest possible return. It involves making wide-ranging financial investment decisions which contemplates any risk factors that would compromise or outweigh the anticipated benefits. Corporate Social Responsibility (CSR, also known as corporate conscience, corporate citizenship, stakeholder management or sustainable responsible business) is the duty of a corporation to create wealth in ways that avoid harm to, protect, or enhance societal assets (Steiner and Steiner, 2009). McWilliams and Siegel (2001) describe CSR as â€Å"actions that appear to further some social good, beyond the interest of the firm and that which is required by law. 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Introduction â€Å"Corporate finance theory, teaching and the typically recommended practice at least in the US are all built on the premise that the primary goal of a corporation should be the maximization of shareholder value.† (Krishnan, 2009) One often stumbles upon such statements while reading about shareholders value or maximization of shareholders wealth. This is also a typical answer to questions such as â€Å"what is the best and primary objective of a company in a competitive market†Read MoreObjectives of an Accounting and Finance Manager1143 Words   |  5 Pageswhich can nevertheless be classified into two categories: Objectives of profit maximization, and Objectives of wealth maximization. Still, this identification of the financial and accounting objective is shorthanded by numerous limitations. For instance, the maximization of profit implies the exploitation of workers and consumers and it implies the employment of immoral practices. Then, the maximization of wealth generates disruptions between ownership and management, creating benefits for the