Lecture 7 Flashcards
1
Q
what is corporate social responsibility
A
the pursuit of social objectives by private sector firms
2
Q
what is friedmans argument for social responsibility (and why)
A
that the only social responsibilities for business is profit maximization
- social responsiblity leads to less revenue and this higher prices for consumers
- choosing specific groups to be socially responsible towards is not the job of the company
3
Q
when does profit maximization fail? (Kenneth Arrow)
A
1) negative externalities
2) asymmetric information
4
Q
what is stakeholder theory
A
firms have a responsibility to all STAKEholders, not just shareholders
5
Q
what are the four potential solutions to market failure
A
1) regulation
2) taxation
3) legal responsibility
4) social responsibility
STLR
