WHAT IS SOCIAL RESPONSIBLE CORPORATE?

AN ANALYSIS BASED ON ECONOMICS

MAO YUSHI UNIRULE Institute of Economics

SRC SUMMIT CONFERENCE 2014.11.03 SHANGHAI

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.

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.

•

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.

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.

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.

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.

Thank You