What is the theory of corporate social responsibility?

Profit maximization theory in light of social responsibility?

• Answer:

  The profit maximization theory states that companies or coorporations will place factories where they can achieve the highest total profit. The company will select a location based upon comparative advantage (where the product can be produced the cheapest). The theory takes into account the characteristics of the location site: land price, labor costs, transportation costs and access, environmental restrictions, worker unions, population, etc.. The company will then decide the best location for the factory in order to maximize profits. So in a sense, the companies are not being socially responsible because they are placing their factory somewhere in order to gain the maximum amount of profits. They do not care whether they destroy the land, pay unfair wages, or exploit a country. The only objective is to earn more profits.