Corporations have a lot of influence over the economy, the community, and people. The traditional view of corporate responsibility is that a corporation has no additional social responsibility beyond making a profit for its shareholders. In more recent years, arguments have arisen with the belief that corporations have a high degree of social responsibility to people affected by the corporation’s decisions.
Case Example: Phishy Pharmaceuticals is a corporation that recently kicked off the sale of its new weight-loss pill, Lose It Fast. After three months of sales, the management team has received some troubling reports of some unanticipated side effects caused by the pill. The management team asks the accounting department to run some numbers to determine how much it would cost to recall Lose It Fast, to suspend manufacturing, and to conduct more tests to determine the pill’s safety and other possible side effects.
After running some numbers, the accounting department states that it would be more cost-effective to leave the product on the market shelves and propose settlement proceedings with anyone who is injured and initiates a lawsuit.
The corporate attorney has advised that the product states on the package that the pill is not FDA approved, and off-the-record has stated that everyone who buys a weight-loss product knows there are some risks involved, so it is likely that the majority of injured consumers will not initiate a lawsuit.
If you recall the product, it will result in a delay of dividends paid to shareholders and a loss in revenue, affecting shareholder profit. Consider the following questions regarding this example:
What would you do, and why?
Would you leave the product on the shelves because you feel your duty as a corporate manager is to maximize shareholder profits?
Would you recall the product because you feel the corporation owes a duty to the public, consumers, and the government in terms of social responsibility?
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