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WHAT IS SOCIAL RESPONSIBLE CORPORATE?
AN ANALYSIS BASED ON ECONOMICS
MAO YUSHI UNIRULE Institute of Economics
SRC SUMMIT CONFERENCE 2014.11.03 SHANGHAI
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A Society is divided into three sectors
• To satisfy the needs of material welfare a society is divided as: producers (firms), consumers (households), and regulator (government).
• Some kinds of public service is better provided by group of people than by government. So NGO emerged.
• Some firms produce commodity or service, at the same time provide social good, called SRC.
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There is a Great Future for SRC
• A lot of social capital not looking on profit maximization, but for social good as well.
• These SRC have developed very quickly in recent years.
• But what is the exact nature of SRC is not very clear. Thus hinder the development of SRC.
• This PPT is devoted to make clear the nature of SRC based on an analysis of economics.
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The Nature, Legal status, and Performance of SRC
• SRC is a firm, and must produce commodity or service and make a profit.
• SRC can be listed on stock market as an ordinary firm. Their stock can be circulated .
• Share holders can earn their dividend. • The difference from the ordinary firm is
shareholders are not looking for maximum profit, but on social good.
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Defining SRC by Economic Terms
• The Objective function of a SRC is to Maximizing social good.
• Under the constraint of minimum return rate. • The minimum return rate must be a little higher
than inflation rate by a few percentage. • After satisfying the minimum return rate the
remaining resource of the firm should be diverted to maximizing social good.
• As the social good can hardly be quantified, usually we use effectiveness to replace it.
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Who are SRC?
• Private schools, supermarkets, hospitals, etc specifically for serving the poor people are SRC.
• Businesses who help protect environment are SRC, such as producing solar heaters.
• Businesses who produce positive externality are SRC.
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What SRC can do, and can’t do
• Share holders can earn dividend. • They can’t receive social donation, which will
become their net profit and distributed to shareholders.
• Shareholders assume the earning and loss due to change of stock price.
• Weather they can enjoy tax exemption depends on how much social goods they produce.
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Thank You