Corporate Social Responsibility & Stakeholder Theory

Businesses have traditionally not involved themselves in tackling the social challenges that countries face and for a long period, this was seen as a role of government.

Occasionally, a business, in very isolated cases would involve itself in some sort of philanthropy trying to solve some of these problems. The concern with the philanthropy perspective is that it was considered after the bottom line of the company and was also seen as an extra cost to the business at the expense of the shareholders.

The solving of social problems by business was seen to have direct implications to their economic results. The reason for this is that, traditionally the role for business has been to maximize profits. For example, under the neoclassical economics and several management theories, it has been assumed that the role of a business is to maximize economic gains for its shareholders.

In the recent past the shareholder’s theory is being replaced by the stakeholder’s theory. Stakeholder’s theory advocates that there are other parties involved in the business ecosystem which includes the likes of government, civil society and NGOs, trade unions, communities, financiers, general public, suppliers, employees and customers.