What Would You Do?
Imagine that you are the head of a company that manufactures secondary wood products for the construction industry.Recently, there have been many reports of a plywood subflooring product that has been failing in a number of commercial locations resulting in several complaints about ruined floor coverings and, in one instance, partial collapse of a third floor, which injured three people.Your head of research and development has asked you to stop selling the product and wants to run tests on the product to determine the problem.However, third-quarter earnings reports are due out in two weeks and public knowledge of problems with a lucrative product may delay the financing of the company's expansion plans and also lower stock price.Your dilemma: Do you delay or refuse the product research, thereby enhancing the expansion plans but risking other damage and public safety, or do you immediately stop sales of the product and run the necessary tests, thereby risking the expansion plans?
-Refer to What Would You Do? (Scenario).As you think about your options, you review what you know about the arguments supporting the socioeconomic view.They include all the following EXCEPT ________.
A)the time frame argument which contends that managers should be concerned with maximising financial returns over the long run
B)it is managers' responsibility to protect society's welfare by not polluting, not discriminating, not engaging in deceptive advertising
C)when managers decide on their own to spend their organisation's resources for the 'social good', they are adding to the costs of doing business
D)the classical view flies in the face of reality.Modern business organisations are no longer merely economic institutions
E)modern society expects and even encourages businesses to become involved in social, political and legal issues

Question

Quizplus · Accepted Answer

The arguments supporting the socioeconomic view include the time frame argument, responsibility to protect society's welfare, and the expectation/encouragement for businesses to get involved in social, political and legal issues. The classical view is the opposing view, which states that a company's only responsibility is to maximize profits. Therefore, option D is incorrect. Based on the situation presented, the best choice would be to immediately stop sales of the product and run the necessary tests. Although this may delay the financing of the expansion plans and lower stock prices in the short term, it is the responsible decision to ensure public safety and prevent further damage or harm. As responsible corporate citizens, it is imperative to prioritize the welfare of society over profits. Option C is incorrect because managers spending organization resources for the social good is not necessarily adding to the cost of doing business, as it can also have long-term benefits such as building goodwill and enhancing reputation.