Question

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 of one of 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.

• ToyCo has just been informed that it’s wooden trains produced in China contain lead paint and can no longer be sold in the United States. However, a distributor offers to negotiate a deal with a foreign company to sell the trains in a South American country that has no laws addressing the presence of lead paint in children’s toys.

Answer 1

I would not advise the corporation to accept this opportunity. Toyco uses lead paint in its wooden trains. Target market for Toyco would be toddlers, who might place these in their month & unknowingly consume the lead painted on the wooden trains. Lead is poisonous for everyone but children with developing bodies are especially vulnerable.

Lead intake can have varied effects on child's development and behavior. Even small quantities of lead may lead to discernible changes in child's behavior & larger quantities of exposure might effect child's overall development. High level of lead intake might cause permanent brain damage and even death.

Death of any child in South America because of this lead exposure might force the company to face bad press and jeopardize shareholder's interests. Even, in case of no casualties, there might still be negative press surrounding questionable ethics of the corporation. Even if the company makes profits in the short-run, in the long-run, it might lead to a situation compromising shareholders wealth. Hence, I advise the company not to accept this opportunity.