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James Heal
James Heal, Financial Advisor
Category: Finance
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Experience:  15 years expertise in all ares of personal finance, including credit cards, mortgages, real estate.
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Considering the fact that the primary objective a firm is to

Customer Question

Considering the fact that the primary objective a firm is to increase shareholder wealth, do you think there is also room to be socially resonsible? What if there are considerable costs involved? For example, should a power company purchase filters that can reduce pollution even though they are expensive and not required?
Submitted: 8 years ago.
Category: Finance
Expert:  James Heal replied 8 years ago.

Thanks for the question.


Social responsibility is a situation that our society is currently dealing with and trying to find solutions and it's not a cut and dry solution or answer. We're currently trying to clean up the aftermath of extraordinary greed and mismanagement from the banking and investment industries, and prior to that it was a similar situation with the Enron collapse. At some point, we're going to have to put ethics and social responsibility at the forefront or our society and economy will collapse. Greed has gone too far and it resonates in every part of our society - Congress, Wall Street, and corporate America are so infected, we may never recover.


Companies need to do the right thing. Ford and Firestone tried to slide by using cheaper controls with the Explorer and as a result many people died and the shareholders ultimately lost. The same will happen if a Power company didn't use filters which would reduce pollution - It would harm people then it would ultimately would bring the company to it's knees via lawsuits and negative media.


Obviosuly the costs involved need to be weighed, but doing the right socially responsible things will enable a company to grow and do well over time. Investors need to be more socially responsible as well and realize that if a company is just out to line the shareholder's pockets - it will die.


I hope this helps - Good Luck !

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