ACCA Applied Knowledge · Business and Technology · Social and demographic factors
Milton Co is criticised by a shareholder who argues that spending on community projects reduces profits and that the only responsibility of business is to its owners. Which of the following best describes the view the shareholder holds, and a valid counter-argument?
The shareholder holds the classic shareholder view that a business's responsibility is to maximise owners' wealth. A valid counter is that social responsibility can strengthen reputation, customer loyalty and staff recruitment, thereby supporting long-term shareholder value rather than simply reducing profit.
- AStakeholder view; counter: owners always prefer lower profits
- BShareholder (Friedman-style) view; counter: good social performance can enhance reputation, customer loyalty and long-term valueCorrect
- CPluralist view; counter: community spending is a legal requirement in all countries
Explanation
The shareholder is expressing the classic view that business exists to maximise owner wealth within the law. A valid rebuttal is that social responsibility can protect brand, attract staff and customers and so support long-term value. The other options mislabel the view or state false counter-arguments.
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