MANAGEMENT’S PRIMARY GOAL STOCKHOLDER WEALTH MAXIMIZATION.

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MANAGEMENT’S PRIMARY GOAL STOCKHOLDER WEALTH MAXIMIZATION.

Transcript of MANAGEMENT’S PRIMARY GOAL STOCKHOLDER WEALTH MAXIMIZATION.

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MANAGEMENT’S PRIMARY GOAL

STOCKHOLDER WEALTH MAXIMIZATION.

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SOCIAL RESPONSIBILITY

EMPLOYEES CUSTOMERS SUPPLIERS COMMUNITIES

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ETHICAL RESPONSIBILITY

PROVIDE SAFE WORKING ENVIRONMENT

AVOID POLLUTING AIR / WATER PRODUCE SAFE PRODUCTS

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SOCIALLY RESPONSIBLE ACTIONS HAVE COSTS AND IT IS QUESTIONABLE WHETHER BUSINESSES WOULD INCUR THIS COST VOLUNTARILY.

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ANY VOLUNTARY SOCIALLY RESPONSIBLE ACTS THAT RAISE COSTS ARE VIRTUALLY IMPOSSIBLE TO IMPLEMENT IN INDUSTRIES THAT ARE SUBJECT TO KEEN COMPETITION.

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HOW ABOUT OLIGOPOLISTIC FIRMS WITH PROFITS ABOVE NORMAL LEVEL?

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WILL INVESTORS AVOID SOCIALLY ORIENTED FIRMS BECAUSE RETURNS WOULD BE LOWER THAN OTHER FIRMS ?

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EVEN HIGHLY PROFITABLE FIRMS THAT ARE PUBLICLY OWNED ARE CONSTRAINED FROM TAKING UNILATERAL COST INCREASING SOCIAL ACTIONS.

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COST INCREASING ACTIONS ASSOCIATED WITH SOCIAL RESPONSIBILITY WILL HAVE TO BE PUT ON A MANDATORY RATHER THAN A VOLUNTARY BASIS.