Skip to content

ACCA Applied Knowledge · Business and Technology · Governance in business organisations

A director argues that the company should spend only on activities that increase profit, because shareholders own the company and social spending is a misuse of their funds. Which view of CSR does this reflect?

This is the classical or Friedman view. It holds that management, as agents of the shareholders, should focus on maximising shareholder wealth within the law, so discretionary social spending is regarded as an inappropriate use of shareholders' money.

  1. AThe classical (Friedman) view, that the business's main responsibility is to maximise shareholder wealth within the lawCorrect
  2. BThe stakeholder view, that the business must balance the interests of all affected groups
  3. CThe triple bottom line view, that social and environmental results are reported equally with profit

Explanation

The classical view holds that managers act as agents of shareholders and should maximise returns within the law, so social spending is seen as spending others' money. The other two views expand responsibilities to wider groups or measures.

Did you get it right without looking?

One question tells you little. A timed set on Governance in business organisations shows your real accuracy, how long you take and where you lose marks.

Practise Governance in business organisationsFree diagnostic mock

More Governance in business organisations questions