Should Companies Worry About Anyone Other Than Their Shareholders?

Statement

A public company’s first and only responsibility is to its shareholders.

Q1 Analysis

This is a Q1 violation if you think that companies have any responsibility to their customers, employees, neighborhood, or society in general, and may be a violation if you think that certain public companies are exceptions to this rule.

Q2 Analysis

This is not a Q2 violation.

Discussion

Should public corporations donate to charities? Should they attempt to improve the communities in which they do business? Should they favor shareholders over employees? This statement holds that when answering these questions, shareholder value should be the only priority. After all, the shareholders are the company’s owners, and companies exist purely for the benefit of their owners.

Or do they? Are there certain moral principles that apply to companies even if they do not increase profits? For example, is it wrong in and of itself for a company to attempt to defraud its customers, or is customer fraud only wrong because, in the long run, it will likely cause the company — and, by extension, its shareholders — to lose money?

You might argue that an expense (such as a donation to a prominent charity) that improves a company’s image benefits shareholders indirectly. Or you might argue that such expenses are only justified if it can be shown that the return on investment is positive.

Which of the following would you say are good things for a company to do? Do they only benefit shareholders? Are they moral?

You are encouraged to leave your answers to the questions posed in this post in the comments section. This post is based on an excerpt from Ask Yourself to be Moral, by D. Cancilla, available at LuLu.com and Amazon.com. See the 2Q system page for details of the philosophical system mentioned in this post.

Posted on September 24, 2010 at 10:34 am by ideclare · Permalink
In: 2Q

Leave a Reply