(a) It may be argued that managers and owners of a business may not have the same interests because of the divorce between ownership and control. In many organisations, the shareholders will have very little influence over the day-to-day operations and management of a business. Managers will be aware of the need to seek to maximise the wealth of their shareholders, but at the same time, they may be equally concerned to serve their own needs/interests.

For example, shareholders may be highly risk-averse, looking only for a reasonable and steady income from their investment. By contrast, a manager may by nature be more of a risk-taker, because he considers that his career may progress faster if he is successful in the risks taken. In such a scenario, if the manager follows his instincts in selecting business opportunities, then the shareholders’ objectives are not being met. The reverse situation may be equally true, whereby shareholders believe that management are excessively cautious in their selection of business opportunities, but management are wary of taking risks as they wish to avoid any large-scale losses which might threaten their personal position. In both instances, there is a gulf between the objectives of the managers and owners.

Another example of where objectives might conflict is in the case of mergers and take-overs. If a company has been reporting poor results and becomes the victim of a take-over bid, the shareholders are likely to be pleased as they will see an increase in the value of their investment. In contrast, the managers of the victim company may well be very unhappy, as they sense the risk of redundancy.

It has been suggested that many of the aims of managers actually work in direct conflict with those of owners, because managers look for perquisites and self-aggrandisement, which add to company costs. Shareholders may be happy if managers owned Ford Mondeos for the company cars. The managers may well seek to have Mercedes instead! Similarly, having a large office and many staff to supervise is good for a manager’s self-esteem, but they may not be essential to the efficient running of the business: owners may be better off without them.

One key area where owner-manager objectives may conflict is in terms of the time horizon used to judge success. Owners are often looking long-term in setting their objectives, whereas a manager may need to have short-term successes in order to further his/her career prospects.

(b) Corporate social responsibility can be defined in a number of ways, but the term refers, in general, to the ways in which a privately owned company needs to be aware of and respect the needs of the wider community. The responsibility to shareholders is reasonably clearly defined and monitored by the financial markets and company reporting systems. Corporate responsibilities to customers, employees, and the community at large are less likely defined.

A company may be regarded as having responsibilities to its customers in terms of providing them with a quality product, at an appropriate price, which is supplied in a timely and efficient manner. The duty to the general public involves a responsibility not to endanger the public in any way, to respect the environment, and to support the local community where possible. Social responsibility also extends to creditors, who should expect to be paid accurately and promptly. In some countries, there have been calls for legislation to restrict the period of credit which can be claimed from small companies.

National and local government are also affected by the activities of businesses and hence come under the remit of areas of social responsibility. Companies have a duty to pay their taxes as due, and comply with national and local laws, e.g., planning/health and safety regulations. Lastly, companies have a responsibility to take care of their employees, ensuring a safe working environment and paying fair wages.

In conclusion, it is no longer sufficient for a company to think that it need only serve the interests of its shareholders. It is now regarded as good practice to look to the needs of the broader stakeholder group and so take on a wider social responsibility.

(c) Public sector organisations differ from those in the private sector in a number of important ways which impact on their objectives. Public sector organisations do not have a profit motive and are instead motivated by a broader range of concerns. The objectives of public sector organisations include the following:

• To provide public goods and services for all citizens regardless of the ability of citizens to pay. For example, health care provision.
• To provide public goods and services that require a centrally planned organisation for the whole of the citizenry. This would include maintaining a military force.
• To create and maintain national economic and social infrastructure and to provide a benefit to everyone within socially acceptable norms.
• To correct existing group inequalities within a country and ensure national minimum standards in areas such as healthcare provision.

The main objective of organisations in the private sector is usually finance-related, such as to maximise the wealth of shareholders. However, they may also have other objectives, for example, an environmental objective to reduce their carbon footprint or achieve net zero greenhouse gas emissions.