The factors that determine the extent to which a business is socially responsible

Each of the stakeholders of a business will all have different amounts of power and interest over a business; some have more power than others. The firm’s decision makers are more likely to take into account the social responsibility that the most powerful stakeholder’s would like to implement. The shareholders in a company are seen to be the most important stakeholder becasue they have risked their money in the business and have power over decision as they can vote at shareholder meetings. The shareholders must seek to keep shareholders happy with high dividends and profits so that they don't sell shares and so therefore making the company vulnerable to takeover. Each of the senior managers will have a different view about corporate social responsibility and whether they should incorporate it in their business strategies.


One factor that affects the extent to which a firm is responsible is legislation that is imposed. Abiding by legislation is the minimum requirement for firms however it can be the most influential factor determining the responsibility accepted by firms. This is to make sure businesses are socially responsible to the minimum extent; however it is down to firms to accept the responsibility and go beyond this. Many businesses only accept CSR in compliance with the law, however there are some very good firms that accept CSR in excess of the minimum required by law. If a firm goes beyond the law then they are increasing the amount of CSR thet they implement in their company.

However somtimes firms try to sidestep the law or seek to try and avoid regulation by a change in strategy, an example of this is having an offshore bank account in order to reduce tax liability. When firms sidestep the law then their activity is illegal and so fines would be imposed in order to try and make businesses comply with the law and to try and stop it happening again. However when firms try to exploit loopholes in the law then they aren't technically breaking the law; however many believe that even though the firm isn't breaking the law their activity is still unethical and so still unnacceptable of a socially responsible company. In order to try and combat the problems with the law is to make sure that there isn't loop holes so that people can get away with things that are still morally wrong.


There are many mixed views about CSR between the Public and Private sector. Businesses in the private sector there is conflict between the stakeholders and whether their objectives should be profit or social responsibility. The shareholders of the business would generally want the main objectives of the business to be profit maximisation as they want a high return on their investment. Even though being more socially responsible presents a higher intial cost in the long run it will improve the brand image of the firm as they will be diversified, meaning they will be generating more profits in the long run. However other stakeholders such as the local community and consumers may want the business to be more socially responsible.  However business in the Private sector are more likely to have the objective of social responsibility. Public sector organisations such as the BBC accept CSR by raising £127m for Comic Relief. lso not for profit organisations such as Nationwide Building Society try to reduce thir carbon footprint through suppliers etc, also by supporting people who are homeless or who have housing issues and also encouraging and supporting sustainable living and housing.

Overall Private sector businesses are generally more likely to focus on profit as their shareholders have power over them and so can influence whether they accept CSR or not. However firms in the public sector will have objectives to incorporate social responsibility into their business as they are in the not for profit sector.
 
The type of legal structure that a firm has may affect the extent to which a firm is socially responsible. This may be due to the limited liability status and the accountability to shareholders. Many unincorporated business such as sole traders and partnerships have limited liability and so the are limited to the amount of money that they can invest into a business, however this would be protected if the business was to ever be liquidated. As a limited companies accounts are open to scruitiny then this means that companies are more willing to adopt more socially responsible methods. However as sole traders and partnerships are owned by the individual owners and Private Limited companies are owned by the shareholders this means that they only have to meet the standard of CSR that is desired by the private owners. Even though they have laws which firms are required to meet they only have a few that require them to report accounts to the public. Partnerships and Private limited companies have to produce a an annual report and account to the Companies House, however this isn't available to the public. This doesn't mean that they don't incorporate CSR methods, however the owners or shareholders can decide the amount of CSR that is accepted as the public can't see the accounts.

 Whereas Public limited companies have an obligation to produce all CSR productivity in the annual report. This means that they may accept CSR methods as the public and shareholders can see the reports and so CSR may benefit profits and possibly investments. As Public Limited companies are run by directors who report to the owners, the shareholders for the company demand return on their investment, for example in dividends. This means that the company may not have the money to use for using more CSR methods, unless this is suggested by the shareholders and all agree that this would be worthwhile for the business. Under the Companies Act 2006 business have to take into account the wider communit of stakeholders.

The Companies Act states that the business should be run in the interest of the shareholders and the objectives should still remain that of profit seeking and shouldn't be distracted by consideration of corporate social responsibility for other shareholders. Also it states that the director should act in a way that is most likely to promote succces for the company. This includes taking into account the company's employees, suppliers and customers, the impact of the businesses operations on the environment and the need to maintain high standards of business conduct. The act suggests that directors should incorporate CSR methods aswell as creating a high return on investment.