GRE: Corporate executives' responsibility

Question:

"The only responsibility of corporate executives, provided they stay within the law, is to make as much money as possible for their companies."

My answer:

The statement proposes that, so long as it is legal, corporate executives simply need to be responsible for the profitability of the company for which they serve. This perspective is only partially accurate, but mostly flawed. Corporate executives certainly have more responsibilities than that.

It is easy to understand that corporate executives serve companies that, in turn, are usually owned by shareholders. Most shareholders demand profits from companies that they have invested in. Consequently, corporate executives indirectly serve these shareholders and must therefore work towards fulfilling the shareholders' primary demand - profitability. A failure to do so often results in monetary disincentives that are unbearable to many. Hence, making as much money as possible for the company becomes an imperative for these corporate executives.

However, it is becoming extremely obvious that the shareholders of today are becoming increasingly sophisticated. No longer is short-term profitability the only concern; other concerns are becoming important as well. Shareholders today understand the virtues of sustainability and environmentalism. "Corporate social responsibility" is becoming a catch-phrase that certainly demands corporate executives' attention. Aspiring solely for profitability is, hence, an anachronistic management philosophy.

It is also disquieting to see the use of the words "only responsibility" in the statement. It is as if to suggest that these corporate executives live lives that solely revolved around work; nothing else. If one gives a cursory thought about the statement, one quickly realizes that clearly there must exist some degree of personal responsibilities in these individuals' personal lives. Hence, the existence of other personal responsibilities automatically nullifies the accuracy of this statement.

Finally, one should also challenge the usefulness of such money-centred paradigm. The statement seems to exude an impression that focusing on money is the right and only way for corporate executives to behave. However, such mentally has often been argued as one of the main causes of the recent financial crisis. To divest oneself of all other responsibilities, other than to make as much money as possible, is likely to lead to a greedy society. That would certainly be undesirable.

In conclusion, it is easy to empathize what is being expressed by the statement. However, focusing primarily on money-making is a wayward mentality that has since made way for other more well-rounded paradigms. Additionally, shareholders certainly do not have only one responsibility in life; they normally have many more. Lastly, one should also question the validity of such mentality and think about the likely impact it would have on society.

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Guys, thank you so much for taking the time to read my essay. Please give me your most honest and constructive feedback. Thanks once again.

I like the idea of suggesting that shareholders have wider interests as a way of staying within the fiduciary obligation of the corporate officer to serve the interests of the corporation and its shareholders while still suggesting that aims other than short-term profit are acceptable.

However, I worry about your failure to address the real question, which is whether corporate managers in their roles as managers have wider or other obligations than profitability.

You might also look at whether or not the goal of making money is really one that excludes other social concerns, or whether the best way for a corporate managers of making money on a long-term basis involves paying attention to other goals too. Also, the "as long as they stay within the law" is an interesting clause that deserves more attention than you give it. This would presumably include environmental regulations, for instance, and consumer protection laws. Does this imply that non-financial concerns are the primary responsibility of government rather than of corporate executives. That is, does the existence of regulations provide a framework in which other social concerns are presumed to have been already addressed?

Thanks Sean and Simone for those invaluable suggestions.