Studies have shown that a favorable evaluation of the company also results in increase in the value of its share prices and less volatility in the share prices during volatile changes in the economy of the environment. Competitive advantage gained by socially responsible companies will help it to gain better market share and hence result in improved profits. Increase in share prices will increase the wealth of the shareholders.
Some ethical decisions of companies towards social responsibility have resulted in direct profits to the companies. For example Shell to fulfill its social obligation towards business has focused its strategies to produce more with less energy and materials. It achieves this by adopting cleaner technologies, reducing emissions, recycling, reusing, minimizing waste and even turning waste into saleable products.
These activities improve the efficiency of its operations, help reduce costs, avoid current and future costs of emissions and even create new income streams (Burnhut, 2002). In conclusion it can be said that in the intensely competitive era of liberalization, privatization, globalization, digital technology and information super highways, corporations have a moral/ethical duty to be socially responsible and pay back to the society through charitable contributions.
Such contributions actually lead to the creation of long-term value and better profits for the shareholders if the companies adopt a strategic approach towards their social responsibility initiatives. Thus companies should treat contribution to charities and other social initiatives not as expense but as an investment to gain long-term profits for the company and a way to maximize shareholder wealth.
Burnhut, Stephen, (2002), Corporate Social Responsibility, with Pratima Bansal, Ivey Management Services, March-April.
Ferrel, O, Fraedrich, John & Ferrel, Linda. (2007), Business Ethics, Houghton Mifflin. Hart, S. (1999), Beyond Greening: Strategies for a Sustainable World, Harvard Business Review, January-February, pp. 66-76. Joyner & Brenda, E. (2002), “Building Values, Business Ethics and Corporate Social Responsibility into the Developing Organization”, Journal of Developmental Entrepreneurship, April Koontz, Harold. & Weihrich, Heinz. (2004), Essentials of Management, NY: McGraw-Hill Publishing Company, p. 36.