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IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers

A company's board argues that its CSR programme is justified because it enhances reputation, helps recruit staff and reduces the risk of regulatory or community conflict, so that long-term shareholder value rises. Which view of CSR does this argument best represent?

The board is using the enlightened self-interest view: CSR is justified because benefits such as reputation, recruitment and lower conflict risk raise long-term shareholder value. It differs from pure shareholder primacy, which rejects CSR spending beyond what maximises profit directly.

  1. AThe enlightened self-interest (stakeholder-based, long-term shareholder value) viewCorrect
  2. BThe pure shareholder primacy view that CSR is never justified
  3. CThe view that CSR should be done only if legally compelled
  4. DThe view that CSR is philanthropy unrelated to business results
  5. The view that managers should ignore stakeholders other than lenders

Explanation

Justifying CSR through reputation, recruitment and reduced conflict, leading to long-term shareholder value, is enlightened self-interest. Pure shareholder primacy rejects CSR beyond profit, and the other options either ignore business benefits or stakeholders.

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