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The Meaning of Large Companies‘ Corporate Social Responsibility for Enterprise Management, Economic Success and Social Balance in Globalising Europe

von Martin Schelberg, PhD

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[1.] Msc/Fragment 062 01 - Diskussion
Zuletzt bearbeitet: 2014-12-23 22:06:05 WiseWoman
BauernOpfer, Fragment, Gesichtet, Mackey et al 2007, Msc, SMWFragment, Schutzlevel sysop

Typus
BauernOpfer
Bearbeiter
SleepyHollow02, PlagProf:-), WiseWoman
Gesichtet
Yes.png
Untersuchte Arbeit:
Seite: 62, Zeilen: 1 ff.
Quelle: Mackey et al 2007
Seite(n): 832f, Zeilen: right col.: 22 ff., 833: left col., 1ff
[More recently, various business scandals may have increased demand for socially responsible activities, as investors look to put their money into companies whose management they respect] and trust. Firms can also create their own “exogenous hocks” [sic] by becoming more international in scope. While equity holders in one country market may have one set of preferences for investing in socially responsible firms, equity holders in a second country market may have a different set of preferences. By beginning to trade in different markets, firms may have to adjust their social responsibility policies to be more consistent with the preferences of the new stockholders they are trying to attract. Of course, this could mean that a firm will become either more or less socially responsible, depending on the preferences of equity holders in the markets into which it is entering. Estimating changes in supply and demand for socially responsible investment opportunities is likely to be more challenging when these parameters evolve slowly over time in an economy. In these settings it would not be surprising to see managers change their policies toward social responsibility only very slowly and incrementally. In this way firms can estimate the total demand for and supply of socially responsible investment opportunities in an economy and adjust their own policies accordingly.

Changing the demand for socially responsible investment opportunities

Finally, this model also has implications for those interested in increasing the level of socially responsible firm activities in the economy. Thus far, we have assumed that the demand for socially responsible investment opportunities was given, and the task facing firms was to estimate that demand and the relevant supply of these investment opportunities in determining their strategic actions. However, the actionsof [sic] various individuals and groups in an economy could have an impact on this demand. Successful efforts to increase the demand for socially responsible investment opportunities would have the effect of making it in the valuemaximizing [sic] interests of more firms to make such investments. According to the model developed here, the task facing those interested in seeing the level of socially responsible investments made by firms in an economy increased is to engage in activities that change the preferences of potential investors. Marketing campaigns that highlight the social responsibility failures of some firms, the social responsibility successes of other firms, and how investment dollars are used to either help or hurt society may have the effect of increasing the number of people looking for socially responsible investment opportunities in an economy over time. When demand for these investment opportunities increases, value-maximizing managers will find it in their self-interest to begin to make these investments, even if doing so reduces the present value of their cash flows. The model also suggests that direct appeals to managers to increase their level of investment in socially responsible activities without a corresponding increase in demand for these kinds of investment opportunities are unlikely to be successful. Managers have the market enforced responsibility to maximize the market value of their firm. While the model developed here demonstrates that engaging in socially responsible activities that reduce the present value of a firm’s cash flows can sometimes increase a firm’s market value, it can only be expected to do so when demand for these investment opportunities is greater than supply. In this sense, increasing the overall level of demand for these investment opportunities is likely to precede firm decisions to increase socially responsible activities, especially when those activities reduce the present value of a firm’s cash flows.

Results

In the beginning it could be argued arguing [sic] that efforts to examine how socially responsible activities can increase the present value of a firm’s cash flows do not address a central issue in the corporate social responsibility literature - that sometimes firms should invest in socially responsible activities, even if those activities reduce the present value of a firm’s cash flows. This examination provides an explanation of when investments in these kinds of socially responsible activities will occur. In developing this theory, it is to be suggested that some inves-[tors may have interests besides wealth maximization in making their investment decisions.]

More recently, various business scandals may have increased demand for socially responsible activities, as investors look to put their money into companies whose management they respect and trust.

Firms can also create their own “exogenous shocks” by becoming more international in scope. While equity holders in one country market may have one set of preferences for investing in socially responsible firms, equity holders in a second country market may have a different set of preferences. By beginning to trade in different markets, firms may have to adjust their social responsibility policies to be more consistent with the preferences of the new stockholders they are trying to attract. Of course, this could mean that a firm will become either more or less socially responsible, depending on the preferences of equity holders in the markets into which it is entering.

Estimating changes in supply and demand for socially responsible investment opportunities is likely to be more challenging when these parameters evolve slowly over time in an economy. In these settings it would not be surprising to see managers change their policies toward social responsibility only very slowly and incrementally. In this way firms can estimate the total demand for and supply of socially responsible investment opportunities in an economy and adjust their own policies accordingly.

[p. 833]

Changing the demand for socially responsible investment opportunities. Finally, this model also has implications for those interested in increasing the level of socially responsible firm activities in the economy (Waddock, 2006). Thus far, we have assumed that the demand for socially responsible investment opportunities was given, and the task facing firms was to estimate that demand and the relevant supply of these investment opportunities in determining their strategic actions. However, the actions of various individuals and groups in an economy could have an impact on this demand. Successful efforts to increase the demand for socially responsible investment opportunities would have the effect of making it in the value-maximizing interests of more firms to make such investments.

According to the model developed here, the task facing those interested in seeing the level of socially responsible investments made by firms in an economy increased is to engage in activities that change the preferences of potential investors. Marketing campaigns that highlight the social responsibility failures of some firms, the social responsibility successes of other firms, and how investment dollars are used to either help or hurt society may have the effect of increasing the number of people looking for socially responsible investment opportunities in an economy over time. When demand for these investment opportunities increases, value-maximizing managers will find it in their self-interest to begin to make these investments, even if doing so reduces the present value of their cash flows.

The model also suggests that direct appeals to managers to increase their level of investment in socially responsible activities without a corresponding increase in demand for these kinds of investment opportunities are unlikely to be successful. Managers have the market-enforced responsibility to maximize the market value of their firm. While the model developed here demonstrates that engaging in socially responsible activities that reduce the present value of a firm’s cash flows can sometimes increase a firm’s market value, it can only be expected to do so when demand for these investment opportunities is greater than supply. In this sense, increasing the overall level of demand for these investment opportunities is likely to precede firm decisions to increase socially socially responsible activities, especially when those activities reduce the present value of a firm’s cash flows.

CONCLUSION

We began this paper by arguing that efforts to examine how socially responsible activities can increase the present value of a firm’s cash flows do not address a central issue in the corporate social responsibility literature — that sometimes firms should invest in socially responsible activities, even if those activities reduce the present value of a firm’s cash flows.

This paper provides an explanation of when investments in these kinds of socially responsible activities will occur. In developing this theory, we suggest that some investors may have interests besides wealth maximization in making their investment decisions.

Anmerkungen

The source is given on pp 58 ff.

Sichter
(SleepyHollow02), PlagProf:-)


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