MBA 503.

Social Responsibility and Good Governance

Miembro, Jomin Dennis M.

Assignment: Read the attached E - Book of CSR and prepare a short reaction on the recent study
conducted in relation to corporate social responsibility.
Chapter 3 -  
From Shareholders to Stakeholders: Portraying an Ambiguous Corporation
Page 61-76

Reaction paper
The study by Corinne Gendron published year 2019 is a study discussing the need for a
renewal in the beliefs implemented by the firm to help resolve the social and ecological
challenges experienced by the company. According to the abstract, the firm's economic view is
incompatible or not fitted with the social responsibility theories. Social responsibility theories
indicates that a firm must aim to provide positive benefits in the society instead of negative
effects. The main points in this literature involves the main reasons that calls for the need to
evaluate the corporation's weaknesses in terms of their compliance to the social responsibility
theory and analysis of the corporation's history and progression. It also includes the elaborate
comparison and contrast between the theories relating to the definitions of the corporation.
First subtopic under the paper states about the analysis of the concept "The Corporation as an
Object: The Ownable Firm". In the study they analyzed this concept which means that the
corporation is an object under possession and it is conflicting with the citations including the
citation of Puterman in 1997 stating that the corporation is not an object owned by someone
because there are human workers in the firm, and this group of people cannot be managed
similar to the ways of managing a modern market economy. It also highlights the statement of
Berle and Means which says that the generalization of the publicly held corporation is an
important evolution which lead to confusion with the real definition of being a shareholder. This,
however, is given explanation by Stout (2002) as he explained that shareholders own stocks
instead of the corporation. Another source cited explains that there is a misconception with the
statement that the industrialist who managed production through personal funds own the action.
“An industrial who owns the machinery was not the owner of the activity performed.”
Second subtopic of the study analyzes the theory that the corporation is a relationship. This part
compares the theories by Berle and Means (1932) and Coase (1937) with the contradiction by
Alchian and Demsetz (1972) and by Jensen and Meckling (1978). In this part, the authors argue
that the firm is not an object but a relationship, wherein if the shareholders are the owners of the
corporation, the network representation of the firm is mainly acknowledged. It cites that the view
of economists see the corporation as a collective rather than individual worker. On the opposite
hand, Alchian and Demetz and Jensen and Meckling states that the firm is a market and it is
where balance is made from varying opinions of individuals. In this part, the stakeholder theory
is also discussed. Freeman states in this theory that there should be a broader perspective of
the environment of a firm, meaning aside from considering the state, competitors and
shareholders in its actions, the firm must also give attention to stakeholders which are the
parties that can be affected by the company’s actions. It is also in this theory where Freeman
states that stakeholders should be treated equally with shareholders.
The last subtopic of the study views the conceptualization of the corporation as an institution.
Jensen and Meckling disproves the idea of treating a firm as a person as it is treated as a center
for contracting relationships, and they disregarded the idea that a firm has a different goal aside
from making profit for the shareholders. However, according to Berle and Means, there is a
separate role for shareholders and directors further stating that there is a wide variety of goals
or agenda being achieved in a firm. It states that ‘the corporation must be analyzed not as a
business enterprise but as a social organization'.
As a conclusion, this study focuses on providing critical analysis through sources about the
different ideas of scholars as well as the literature and their comparisons. This study overall
explains contradicting ideas and their grounds about the characteristics of a corporation or a
firm. However, the writer states in her abstract that the following information is not enough to
contradict the dominant idea about firms in the present.