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BauernOpfer
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SleepyHollow02
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Untersuchte Arbeit:
Seite: 56, Zeilen: 1, 3ff.
Quelle: Mackey et al 2007
Seite(n): 817f, Zeilen: 817: left col.. 1 ff; 819: left col., 1ff.
11. Corporate Social Responsibility and firm performance

General implications

With Mackay, Mackay, Barney debates continue to rage about whether or not firms should engage in socially responsible behavior. On the one hand, traditional economic arguments suggest that managers should make decisions that maximize the wealth of their firm’s equity holders. Managers do this by making decisions that maximize the present value of the firm’s future cash flows. To the extent that socially responsible activities are inconsistent with these economic objectives, traditional financial logic suggests that they should be avoided. Indeed, firms that engage in such activities - especially when they are very costly - may be subject to various forms of market discipline, including limited access to low-cost capital, the replacement of senior managers, and takeovers. On the other hand, some business and society scholars have argued that firms have a duty to society that goes well beyond simply maximizing the wealth of equity holders. These scholars argue that such a narrow focus can lead management to ignore other important stakeholders - including employees, suppliers, customers, and society at large - and that sometimes the interests of these other stakeholders should supersede the interests of a firm’s equity holders in managerial decision making, even if this reduces the present value of the firm’s cash flows. One way to resolve this conflict is to observe that at least some forms of socially responsible behavior may actually improve the present value of a firm’s future cash flows and, thus, may be consistent with the wealth-maximizing interests of the firm’s equity holders. For example, socially responsible behavior can enable a firm to differentiate its products in its product market, can enable a firm to avoid costly governmentimposed fines, and can act to reduce a firm’s exposure to risk. All of these socially responsible actions can increase the present value of a firm’s future cash flows and are therefore consistent with maximizing the wealth of the firm’s equity holders. However, from a broader theoretical perspective, the entire effort to discover how socially responsible activities can increase the present value of a firm’s future cash flows is problematic. After all, the essential point of many business and society scholars is that the interests of a firm’s equity holders sometimes need to be set aside in favor of the interests of the firm’s other stakeholders. That is, according to social responsibility theorists, firms should sometimes engage in activities that benefit employees, suppliers, customers, and society at large, even if those activities reduce the present value of the cash flows generated by the firm. Focusing the study of corporate social responsibility on those actions that increase the present value of a firm’s cash flows fails to address this central theme in the corporate social responsibility literature. In this context, not just examples of socially responsible actions that can have a positive impact on a firm’s cash flows - so-called profit-maximizing “ethics” - are required but, rather, a theory that suggests the conditions under which firms will engage in socially responsible activities, even if those activities reduce the present value of a firm’s cash flows - so-called costly philanthropy. In this paper we propose such a theory. This theory builds on the simple observation that equity holders may sometimes have interests besides simply maximizing their wealth when they make their investment decisions. Sometimes, they may want the firms they invest in to pursue socially responsible activities, even if these activities reduce the present value of the cash flows generated by these firms.

Assumptions and Definitions

Before developing the model, it is helpful to define its key terms and specify its central assumptions. It may be noted that much of the current confusion in the Corporate Social Responsibility Literature is due to a lack of clarity about definitions and assumptions.

Debates continue to rage about whether or not firms should engage in socially responsible behavior. On the one hand, traditional economic arguments suggest that managers should make decisions that maximize the wealth of their firm’s equity holders (Friedman, 1962). Managers do this by making decisions that maximize the present value of a firm’s future cash flows (Copeland, Murrin, & Koller, 1994). To the extent that socially responsible activities are inconsistent with these economic objectives, traditional financial logic suggests that they should be avoided. Indeed, firms that engage in such activities — especially when they are very costly — may be subject to various forms of market discipline, including limited access to low cost capital, the replacement of senior managers, and takeovers (Jensen & Meckling, 1976).1

On the other hand, some business and society scholars have argued that firms have a duty to society that goes well beyond simply maximizing the wealth of equity holders (Swanson, 1999; Whetten, Rands, & Godfrey, 2001). These scholars argue that such a narrow focus can lead management to ignore other important stakeholders — including employees, suppliers, customers, and society at large — and that sometimes the interests of these other stakeholders should supersede the interests of a firm’s equity holders in managerial decision making, even if this reduces the present value of the firm’s cash flows (Clarkson, 1995; Donaldson & Preston, 1995; Freeman, 1984; Mitchell, Agle, & Wood, 1997; Paine, 2002; Wood & Jones, 1995).

One way to resolve this conflict is to observe that at least some forms of socially responsible behavior may actually improve the present value of a firm’s future cash flows and thus may be consistent with the wealth maximizing interests of the firm’s equity holders. For example, socially responsible behavior can enable a

[p. 818]

firm to differentiate its products in its product market (McWilliams & Siegel, 2001; Waddock & Graves, 1997), can enable a firm to avoid costly governmentimposed fines (Belkaoui, 1976; Bragdon & Marlin, 1972; Freedman & Stagliano, 1991; Shane & Spicer, 1983; Spicer, 1978), and can act to reduce a firm’s exposure to risk (Godfrey, 2004). All of these socially responsible actions can increase the present value of a firm’s future cash flows and are therefore consistent with maximizing the wealth of the firm’s equity holders.

However, from a broader theoretical perspective, the entire effort to discover how socially responsible activities can increase the present value of a firm’s future cash flows is problematic. After all, the essential point of many business and society scholars is that the interests of a firm’s equity holders sometimes need to be set aside in favor of the interests of the firm’s other stakeholders (Banfield, 1985; Carroll, 1995; Windsor, 2001). That is — according to social responsibility theorists — firms should sometimes engage in activities that benefit employees, suppliers, customers, and society at large, even if those activities reduce the present value of the cash flows generated by the firm (Mitchell et al, 1997; Paine, 2002; Wood & Jones, 1995). Focusing the study of corporate social responsibility on those actions that increase the present value of a firm’s cash flows fails to address this 2 central theme in the corporate social responsibility literature (Windsor, 2001).

In this context, not just examples of socially responsible actions that can have a positive impact on a firm’s cash flows — so-called profit-maximizing “ethics” (Windsor, 2001) — are required but, rather, a theory that suggests the conditions under which firms will engage in socially responsible activities even if those activities reduce the present value of a firm’s cash flows — so-called “costly philanthropy” (Windsor, 2001). In this paper we propose such a theory. This theory builds on the simple observation that equity holders may sometimes have interests besides simply maximizing their wealth when they make their investment decisions. Sometimes, they may want the firms they invest in to pursue socially responsible activities, even if these activities reduce the present value of the cash flows generated by these firms.

ASSUMPTIONS AND DEFINITIONS

Before developing the model, it is helpful to define of its key terms and specify its central assumptions. Margolis & Walsh (2003) have noted that much of the current confusion in the corporate social responsibility literature is due to a lack of clarity about definitions and assumptions.

Anmerkungen

The source is mentioned at the beginning of the page, but nothing has been marked as citation.

Line 1 is copied from the main title of the source ("Corporate Social Responsibility and Firm Performance".

The author also copies the sentence: "In this paper we propose such a theory."

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(SleepyHollow02), PlagProf:-)

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