Comment on the Corporate Duty to Warn Consumers of Potentially Dangerous Products and How It Conflicts with the Corporate Obligation to Maximize Return on Shareholder Investment, A
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Authors
Reinbrecht, William L.
Issue Date
1992
Type
Journal Article
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Keywords
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Abstract
INTRODUCTION|Corporations today have a variety of responsibilities to consumers, to the community, and to shareholders. Shareholders have the right to expect that the corporation will act in their best interest. The interest of the shareholders is in corporate maximization of profits because the profit is then paid to shareholders as dividends. The corporation also has a duty to warn consumers of product dangers that may injure persons or property. Yet, providing consumers with product warnings may result in fewer sales. Fewer sales means less profit will be earned, resulting in smaller dividends for the shareholders. Logically, balancing corporate responsibility to the shareholders and responsibility to consumers is one of the most difficult problems confronting corporate management. Corporations have been important in establishing an efficient national economy. Large corporations are social organizations, as well as asset managers. Modern corporations provide beneficial goods and services, pay salaries, disperse dividends, and are active in community affairs. Over time, society has grown to expect corporations to provide social leadership and not merely to provide products. Corporations provide important services to numerous groups in the community, and corporate executives are often aware of the important role that they play in the community. Corporate executives have the same ethical duty of care that every other individual owes to the community. Indeed, studies indicate that executive judgments are regularly influenced by ethical factors. Yet, many times these ethical factors reduce the wealth of the firm and the shareholder return on investment...
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Citation
25 Creighton L. Rev. 1387 (1991-1992)
Publisher
Creighton University School of Law