Introduction
Corporate social responsibility (CSR) is highly relevant to the corporate scene, but companies must synchronize them with their shareholder interests in order to increase their chances of survival.
Position on Aaron Feuerstein’s views
In the current business environment, it is not wise to hold such a view. Business landscapes have become ruthlessly competitive. If a CEO embarks on a venture that will benefit the larger community without creating a direct positive effect on profits, then other companies will run it out of business. They will be in a position to offer lower prices for their goods than the concerned firm, thus making it less attractive to consumers.
If such endeavors continue in the long run, then the company may be forced to shut down. As such, the organization would be unable to safeguard either the community’s interests or the shareholders’ interests.
For self preservation, companies must prioritize shareholder value over and above corporate social responsibility (Carrillo, 2007). If managers fail to do this, then the external environment will make that decision for them. The company may either be taken over by a stronger firm, or consumers will simply buy products from the competition.
Most CEOs have the primary responsibility of enhancing shareholder value. If they do not achieve that, then they face the risk of removal by these very shareholders. Such a reality may not be true for family-owned businesses; however, most corporations in the world today have numerous shareholders who have the power to oust or retain a CEO.
If one chooses to engage in a corporate responsibility initiative that does not add shareholder value, then that person is already making the decision for shareholders on how to spend their money. This is definitely not a CEO’s call.
Therefore, I would say that corporate social responsibility should come second to shareholder interests. No CSR strategy should erode shareholder value. Nonetheless, if the initiative can co-exist or even enhance shareholder value, then companies should embrace it.
Jack Welch’s vision versus Feuerstein’s vision
At this point in time, profit maximization is what Malden Mills requires. The firm needs to focus on becoming competitive again. Therefore, Welch’s philosophies are more appropriate for the organization. Firms ought to improve social well being while serving their own interests. If taking care of the community or employees will create a fatal effect on shareholder value, then the former strategy should be forfeited.
In Malden Mill’s industry, it is clear that a ruthless approach to profitability is necessary because failure to focus on this aspect is what led to Malden’s problems in the first place. Social welfare is not unimportant, but in the current corporate climate, it should enhance shareholder value. Several firms have embraced corporate social responsibility primarily because it is profitable to do so (Hsieh, 2009).
For instance, manufacturing companies chose to use green energy because conventional energy prices soared. Therefore, they increased profits and also enhanced social well being through decreased pollution.
These two strategies need to be in alignment with each other. Malden Mills went bankrupt and can only stretch its research and development strategies so far. It needs to take a bold approach to cost cutting and profit optimization.
Conclusion
Jack Welch’s vision will take this company because it has stagnated and even gone bankrupt owing to excessive CSR leanings.
References
Carrillo, E. (2007). Corporate governance: shareholder’s interests and other stakeholders’ interests. Corporate Ownership and Control 4(4): 222-235
Hsieh, N. (2009). Corporate social responsibility and the priority of shareholders. Business Ethics Journal 88: 553-560