Corporate Social Responsibility (CSR) Practice Test

What is a classical economic argument against corporate social responsibility?

1. It promotes global collaboration

2. It enhances business purpose

3. It dilutes a business's purpose

4. It leads to cost savings

The correct answer is: It dilutes a business's purpose

The classical economic argument against corporate social responsibility centers on the notion that engaging in CSR activities can detract from a company's primary purpose of maximizing shareholder value. According to this perspective, businesses should focus solely on financial performance and profitability. The idea is that when companies allocate resources to social initiatives or environmental causes, they divert funds and attention away from their core business operations, which can lead to lower profitability. This perspective argues that the primary responsibility of a corporation is to its shareholders, and any actions that do not directly contribute to financial performance are seen as unnecessary or counterproductive. By prioritizing social good over financial results, companies may end up diluting their business purposes, which could ultimately undermine their economic viability. The other options, such as promoting global collaboration, enhancing business purpose, and leading to cost savings, do not align with the classical economic argument. Instead, they reflect the potential benefits or alternative views of CSR, suggesting that it can lead to a more holistic approach to business that balances profit with social responsibility.