How do you compare shareholder and stakeholder models of CSR?

1 Shareholder model

The shareholder model of CSR is based on the idea that the main purpose of a business is to maximize the profits and returns for its owners or investors. According to this model, businesses should only engage in CSR activities that can increase their financial performance, and avoid any social or environmental costs that may reduce their competitiveness. The shareholder model is often associated with the influential economist Milton Friedman, who argued that the only social responsibility of business is to use its resources and engage in activities designed to increase its profits, as long as it stays within the rules of the game.

2 Stakeholder model

The stakeholder model of CSR is based on the idea that a business has a broader responsibility to consider the needs and expectations of all its stakeholders, not just its shareholders. According to this model, businesses should balance the economic, social, and environmental impacts of their decisions and actions, and create value for all their stakeholders. The stakeholder model is often associated with the influential scholar Edward Freeman, who argued that a business can only be successful in the long term if it manages its relationships with its stakeholders, such as customers, employees, suppliers, communities, and the environment.

3 Advantages of shareholder model

The shareholder model of CSR has some advantages for businesses that adopt it. For example, it can provide a clear and simple goal for managers and investors, which is to maximize profits and returns. It can also encourage efficiency and innovation, as businesses seek to reduce costs and increase revenues. It can also align the interests of managers and shareholders, and avoid potential conflicts or trade-offs between different stakeholder groups.

4 Disadvantages of shareholder model

The shareholder model of CSR also has some disadvantages for businesses that adopt it. For example, it can ignore or harm the interests of other stakeholders, such as customers, employees, suppliers, communities, and the environment, which can damage the reputation and trust of the business. It can also expose the business to legal, regulatory, or ethical risks, as it may violate the rules or norms of the society in which it operates. It can also limit the long-term sustainability and growth of the business, as it may fail to adapt to the changing needs and expectations of its stakeholders.

5 Advantages of stakeholder model

The stakeholder model of CSR has some advantages for businesses that adopt it. For example, it can enhance the reputation and trust of the business, as it demonstrates its commitment and responsiveness to its stakeholders. It can also improve the loyalty and satisfaction of customers, employees, suppliers, and communities, which can increase the sales, productivity, quality, and innovation of the business. It can also reduce the risks and costs of the business, as it complies with the laws and regulations, and minimizes the negative impacts on the environment.

6 Disadvantages of stakeholder model

The stakeholder model of CSR also has some disadvantages for businesses that adopt it. For example, it can complicate the decision-making and management of the business, as it requires the identification and balancing of the diverse and sometimes conflicting interests and expectations of its stakeholders. It can also reduce the profitability and efficiency of the business, as it may involve higher investments and expenditures in social and environmental initiatives. It can also create uncertainty and ambiguity for the business, as it may lack clear and measurable criteria for evaluating its performance and impact.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?