The responsibility of the directors of a corporation is to provide a return to shareholders on their financial investment in the corporation; in other words, shareholders expect to make money on their investment. Corporations such as Facebook, Google, and Apple are financed through the sale of billions and billions of dollars in shares purchased by investors. Sometimes, however, the duty to maximize profits runs contrary to legal, but still questionable, business opportunities.
Assume that you’re the director the corporations listed below and have been presented with the business opportunity described in the scenario. Would you advise the corporation to accept the opportunity? Make sure to fully explain your answer, considering both the financial return expected and any related ethical concerns.
- After producing 10 million versions of its new smartphone, PhoneLand discovers that due to a manufacturing oversight, some of the phones may catch fire if left in a car on a hot day. While the worst case financial impact from the phones catching fire is $10 million in damages, recalling and repairing the phones will bankrupt the company.