REFINING THE ROLE OF THE CORPORATION: THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON SHAREHOLDER PRIMACY THEORY

Evidence indicates that we may be witnessing a redefinition of traditional theories of the role of the corporation. Traditional shareholder primacy theory contends that a corporation is primarily responsible to its shareholders to maximise wealth, consequently social factors should not interfere in a corporation's business operations. In the modern business setting however, a company's core objective of profit maximisation must be underpinned by a proactive approach to corporate social responsibility in order to manage and mitigate a broader array of risk factors. Managing risk via community engagement and the implementation of socially responsible strategies is increasingly linked to business success and stakeholder confidence. Intangibles such as trust, ethics, corporate culture, employee satisfaction, environmental behaviour and community responsibility are increasingly relevant to consumers, business partners, governments, special interest groups, existing and potential employees and investors.