Post on 25-Dec-2015
MANAGEMENT’S PRIMARY GOAL
STOCKHOLDER WEALTH MAXIMIZATION.
SOCIAL RESPONSIBILITY
EMPLOYEES CUSTOMERS SUPPLIERS COMMUNITIES
ETHICAL RESPONSIBILITY
PROVIDE SAFE WORKING ENVIRONMENT
AVOID POLLUTING AIR / WATER PRODUCE SAFE PRODUCTS
SOCIALLY RESPONSIBLE ACTIONS HAVE COSTS AND IT IS QUESTIONABLE WHETHER BUSINESSES WOULD INCUR THIS COST VOLUNTARILY.
ANY VOLUNTARY SOCIALLY RESPONSIBLE ACTS THAT RAISE COSTS ARE VIRTUALLY IMPOSSIBLE TO IMPLEMENT IN INDUSTRIES THAT ARE SUBJECT TO KEEN COMPETITION.
HOW ABOUT OLIGOPOLISTIC FIRMS WITH PROFITS ABOVE NORMAL LEVEL?
WILL INVESTORS AVOID SOCIALLY ORIENTED FIRMS BECAUSE RETURNS WOULD BE LOWER THAN OTHER FIRMS ?
EVEN HIGHLY PROFITABLE FIRMS THAT ARE PUBLICLY OWNED ARE CONSTRAINED FROM TAKING UNILATERAL COST INCREASING SOCIAL ACTIONS.
COST INCREASING ACTIONS ASSOCIATED WITH SOCIAL RESPONSIBILITY WILL HAVE TO BE PUT ON A MANDATORY RATHER THAN A VOLUNTARY BASIS.