Karnani's article makes a number of misleading assumptions. First, it assumes that the only purpose of the firm is maximizing profits for investors. It is not. Firms also need to manage their relationships with stakeholders who contribute to them. Second, it assumes that markets are efficient, but there is considerable evidence that even financial markets, never mind the oligopolistic, marketing-driven “real” goods markets, are not efficient. Third, the “business case” is not the only reason for CR, though CR can provide a firm with business benefits. Fourth, there is a great deal of evidence that falsifies the claim that managers who manage their firms responsibly will penalize their shareholders. Finally, while regulation is clearly needed, it is often difficult to achieve.
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