Do you believe that the firm's social responsibilities conflict with the ultimate goal of shareholder's wealth maximization? Consider issues such as the protection of the environment and the creation of jobs.
As we discuss social responsibility and ethics this week, is it possible that certain decisions and actions can conflict with the goal of shareholder wealth maximization?
In finance, what would we call this conflict?
Ethics
It's easy for us to study ethics and often play "arm chair quarterback" after an issue has become public. Put yourself in this situation... You determine that your boss's boss (let's call him Steve the Vice President) is building false documents to help the company get a loan. You follow the chain of command and talk to your boss who simply tells you to stick to your job and not Steve's. What do you do next? Remember unemployment is still running around 7.0% or so and your youngest child needs braces. Umm... come to think of it your other children need school clothes, supplies and the entire family likes to eat. Your job also pays well above average.
If you were the HR manager, what would you do if someone came to you with this issue?