Business Social Responsibility :: Social Responsibility Essays

According to Riahi (2009), organisations (FirstGroup plc etc) can in fact be deemed as social units deliberately constructed to seek specific goal. In such respect, further resonating catalytic for pro and pessimistic dialogue: Milton Friedman argued within a 1970 New York Times magazine article that the only â€Å"social responsibility of business,† is to â€Å"increase its profits.† â€Å"The corporation,† he wrote in his book, Capitalism & Freedom, â€Å"is an instrument of the stockholders who own it, if the corporation makes a contribution, it prevents the individual stockholders from himself deciding how he should dispose of his funds.† (M. Porter, M. Kramer, 2003). Accordingly to their view, companies such as FirstGroup plc and Emerlad Energy plc would be undeniably misusing the resources entrusted to them as they engage in corporate social responsibility. In utter contrast, Heilbroner, on the other hand, suggests stockholder’s as no longer a significant source of venture capital, ‘merely a passive holder of certificate of varying degrees of risk & potential return, with little knowledge of the real performance of â€Å"his† corporation. Surely the other stakeholders deserve some return?’ (N. Smith, 1990) further underpinning businesses and its proprietors to comply with societal values & take an active role on society as this is in line with the long term interest of business ( P Griseri, N. Seppola, 2009) for e.g. whether it could be suggested as FirstGroup’s  £1.8 million community contribution, particularly, training of the local indigenous population can in some factor be deemed as a rather integral part of the company’s strategic CSR – focal objective of the firm’s differentiation strategy. In addition, studies linking strategic investment to CSR (in particular, the resourced based view) have previously suggested that specialised skills or capabilities related to i nvestment in CSR can lead to firm specific competitive advantages ( J. Frynas,2009) findings suggest firms with socially responsible practices have higher valuation and lower risk as investment in improving responsible employee relations, environmental policies, and product strategies contributes substantially to reducing firms’ cost of equity (Ghoul et al 2010). The capital market equilibrium model of Merton (1987, p. 500) implies that increasing the relative size of a firm’s investor base will result in lower cost of capital and higher market value for the firm. In a similar vein, Heinkel et al. (2001) develop an equilibrium model that implies that when fewer investors hold the stock of a firm, the opportunities for risk diversification are reduced and hence the firm’s cost of capital will be higher.