Tarek Abadou Eng: 098/099 Summer 2020 Professor Sotiria koui Profits Should not Only drive companies they Should Also Strive to Demonstrate Social Responsibility. The motive of most investors in companies is to make profits from the business and operations the company will be involved with. In most cases, the activities in these companies revolved around making more profits. However, some scholars argue that companies’ motives should not only revolve around making profits but should also demonstrate specific levels of social responsibility. In my opinion, companies should be not only profit-oriented but also show social responsibility to expand their customer base, improve their competitive advantage, and attract potential investors. First of all, social responsibility increases the potential of expanding the customer base in the market. However, most companies think that since the company’s objective is to make a profit, extending its operation to social responsibility will dilute the company's goals and objectives. In addition, in the article “Companies Should Maximize Shareholder Welfare Not Market Value,” Oliver and Luigi wrote: "companies should maximize profit or market value, which commands wide acceptance among economists and lawyers today. It can even be seen as providing the intellectual foundation for the “Shareholder value” revolution" (Oliver & Luigi 1997). Lastly, taking part in social responsibility activities involves the use of company cash, making most companies see it as a loss. On the other hand, I think that it is not ethical for companies to be profit-oriented as it breaks the codes of ethics that exist in the business environment. Besides, focusing only on profits makes companies radical and blindfolded in accepting change. Moreover, prioritizing in making profits makes the company hype the prices of their products to make more profits. As a result, it will lose more customers who opt to go to companies with low prices. It can also dent the company’s name and the generic brand. Secondly, a company that is involved in social responsibility increases the chances of creating a competitive advantage. On the contrary, many companies will think that spending their capital on social responsibility activities reduces the company's financial muscle. Also, companies that focus solely on profits will account for this as a loss rather than expenses (Sydnor et al. 2014). In my opinion, the success of a company in the business world is through creating a competitive advantage; it also ensures that the company is in a pole position to woo more customers than the rival companies. Therefore, taking part in social responsibility, customers will feel attached to the company, and more customers will prefer being part and parcel of the company (Sydnor et al., 2014). Furthermore, customers will not complain about paying premium prices on products as they feel that it will trickle down to them again through social responsibility projects. For instance, free parking services in shopping malls lure more customers to purchase commodities. A similar approach by companies will earn them more willing buyers due to the extra services offered. For example, if a company starts a project to build a bridge, customers of the region will not complain about an additional price attached to the product's price as they think it is an option used by the company to leverage the capital employed in the project. From my point of view, more customers will prefer the company services. Also, the company will be competitive in winning more customers than rival companies. Finally, investing in preceding profit maximization and focusing on social responsibility projects can attract more investors. However, most company owners think that investors are attracted by companies making more profits and have financial depth. In fact, Murdiono, in his article"The Influence of Corporate Social Responsibility (CSR) Disclosure Towards Company Stock Return Moderated By Profit. KnE Social Sciences" says:" the perceptions taken by company owners do not correlate to what attracts most of the investors" (Murdiono, 2018). Most investors look for companies that have real integrity, passion, and intent to help society. Furthermore, a company’s commitment to oversee social change places it in a position to achieve long-term goals. According to Murdiono, "investors look for a company that can maximize profit and as well expands the market"(Murdiono, 2018). When a company decides to focus on social responsibility, it can create a balance required between profit-making and social initiatives. In light of this, the Company will have all the necessary factors to attract investors. Subsequently, the company will gain financial momentum from the investments directed in it. Most companies focus on making profits. Ideally, this is a legitimate claim as the company’s primary goal is to make a profit and achieve financial muscle to continue with its operations. However, there are other operations related to profit maximization that companies need to engage in. Social responsibility is one of the many activities that companies need to participate in. Engaging in such activities is coupled with a series of advantages. As discussed above, the company will be able to expand its customer base in the market, create a competitive advantage against rivals, and also be able to attract more investors. Therefore, my opinion is that companies should not only focus on profits but also engage in social responsibility projects. Worked Cited Murdiono, A. (2018). The Influence of Corporate Social Responsibility (CSR) Disclosure Towards Company Stock Return Moderated By Profit. KnE Social Sciences, 3(3), 457. https://doi.org/10.18502/kss.v3i3.1903 Sydnor, S., Day, J., & Adler, H. (2014). Creating Competitive Advantage and Building Capital through Corporate Social Responsibility: An Exploratory Study of Hospitality Industry Practices. Management and Organizational Studies, 1(1). https://doi.org/10.5430/mos.v1n1p52 Oliver, H & Luigi, Z. (July,2017). Companies Should Maximize Shareholder Welfare Not Market Value 2(3), 33. https://scholar.harvard.edu/files/hart/files/should_.july16_2.03.16_pm_2 .04.33_pm.pdf
