The concept that businesses should be actively concerned with the welfare of society at large.
The same societal pressures that have encouraged consumers to buy products of companies that they believe to be socially responsible have also led some investors to search for ways to limit their investment to only those firms that they deem to be socially responsible. Indeed today there are a large number of mutual funds that only invest in companies that meet specified social goals. Many of these funds also avoid investments in companies that are involved with alcohol, tobacco, gambling and nuclear power. Investment performance varies among funds from year.
Actions that maximize stock price also benefit society.
- Stock price maximization requires efficient, low cost businesses that produce high-quality goods and service at the lowest possible cost.
- Stock price maximization requires the development of products.
- Service that consumers want and need, so the profit motive leads to new technology, to new products and to new jobs.
- Stock price maximization necessities efficient.
- Courteous service adequate stocks of merchandise.
- Well-located business establishments –these are the factors that lead to sales, which in turn are necessary for profits.
Most actions that help a firm increase the price of its stock also, benefit society at large. This is why Profit-motivated, free-enterprise economies have been so much more successful than socialistic and communistic economic systems.
Since financial management plays a crucial role in the operations of successful firms and since successful firms are absolutely necessary for a healthy, productive economy. Finance is important from a social welfare standpoint.