Fill in the Blank Question Firms can perform a cost-benefit analysis to identify actions that will maximize profits while satisfying the demand for corporate responsibility.
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Part II: Businesses’ Private and Social Responsibilities In recent years, businesses have been forced to take a closer look at the environmental impacts caused by their production process. For example, what are the environmental consequences resulting from the process of using inputs and producing output (e.g. ranging from transporting large amounts of raw materials and bringing them into the factory to the creation of waste products and pollution)? Complying with government environmental legislation requires businesses to be increasingly responsible for the pollution they cause. However, many firms were quick to comply with environmental regulations, not initially to ensure compliance with legislation, but to declare their environmental awareness and proclaim a responsible environmental image. As they may gain benefits from being seen as socially and environmentally responsible, consumers may prefer their products, insurance companies may be happier to cover them, and government agencies may be willing to work with them on certain projects. On the other hand, stakeholders may take action against those businesses they perceive to be contravening standards. Now, suppose that the costs and benefits of a firm operating under perfect competition are given in the table below. As shown, its activities create a certain amount of pollution. Assume that the costs of this pollution to society, which the firm incurs, can be accurately measured.
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Wendy, the CEO of an oil drilling company, and her top management team recently discovered that their facilities are damaging a beach in Asia and the local wildlife. They understand that they need to decide if temporarily closing or not closing the facility is unethical. To help them make their decision, they consider the following four questions: "Is not temporarily closing the facility legal? If yes, does this proposed action maximize shareholder value? If yes, is not temporarily closing the facility ethical? If no, would it be ethical to take the proposed action?" Wendy and her top managers are using ____ to help them make their decision.
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