Managing in Teh Global Environment

Managing in the Global Environment
Summative Assignment
MGEV_Z0934571

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Table of Contents
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Introduction

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The Classical View of Economics

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What Does Profit Maximisation Look Like

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Principal Agent Dilemma

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The Socially Responsible Organisation – a Case for CSR and Sustainable Development

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Summary – the case for inappropriateness

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Bibliography

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Table of Diagrams
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Diagram 1 Profit Maximisation

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Diagram 2 Monopoly Diagram

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Diagram 3 Principal-Agent Dilemma

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Diagram 4 Pressures on Companies to be More Socially Responsible

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Introduction
The objective of this essay, through demonstration of an understanding of economics literature, is to
critically appraise whether the following is an appropriate statement for a company executive to
make?

“However much we might regret the effect of our actions on the welfare of employees,
or the effect on the environment, or the impact on our reputation, our obligation is to
maximise returns to our shareholders.” (cited in Kay, 2013)
In order to answer the question this paper will first consider the relevant economic theories presenting
firstly the classical view of economics, including what is meant by the maximisation of shareholder
returns means, followed by a review of the more modernist neo-classical perspective including a
critical analysis of such concepts as ‘principal – agent’ dilemma, moral hazard theory, brought about
by the divorce of ownership in many modern organisations before concluding with an insight into the
modernist perspective of ‘sustainable business development’ and how this fits with modern
organisations. Having reviewed and critically analysed this information the paper then will summarise
by arguing that the above statement is inappropriate in today’s global community presenting the
evidence to support this argument.
The Classical View of Economics
Adam Smith, known affectionately as the...