Under Friedman’s logic, which of the following would not fail to violate shareholder primacy if and only if shareholder interests include non-financial goals which do not explicitly contradict profitability but also aren’t required for it?

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Question restatement: Under Friedman’s logic, which option would not fail to violate shareholder primacy if and only if shareholder interests include non-financial goals that do not explicitly contradict profitability but aren’t required for it?

Option a: Executives funding climate initiatives with anticipated ROI. This action ties climate initiatives to expected financial returns, so it can be justified within a profit-maximization framework. It does not inherently introduce non-financial goals that contradict profitability, and if ROI is clear, it aligns with shareholder value. However, the key phrase emphasizes non-financial goals that aren’t required for profitability, so this option remains close to profitability-driven activity and doesn’t clearly hinge on non-financial aims that coexist with profitability by acceptance.

Option b: Boards enforcing diversity policies not tied to profit margins. Here, the policy is a non-financial goal not connected to profitability. Under Friedman’s view, pursuing such goals could be seen as beyond the firm’s primary duty to maximize profits, thus it could be viewed as a violation of shareholder primacy unless such goals are explicitly tied to profitability. It introduces an explicit non-financial aim without a profitability link, making it more likely to violate shareholder primacy.

Option c: CEOs making donations to charities without board consent. This action clearly bypasses board oversight and fiduciary duties focused on shareholder value. Donating to charity without authorization does not relate to profitability and represents a personal or philanthropic deviation from the firm’s primary objective, making it a robust violation of Friedman’s primacy.

Option d: Firms disclosing ESG metrics to appeal to value-aligned investors. This activity signals attention to non-financial considerations (ESG) while still aiming to attract investors whose preferences align with profitability and broader value considerations. Crucially, such disclosure does not require sacrificing profitability, nor does it mandate non-financial initiatives that contradict profitability. In Friedman’s framework, this can be compatible with shareholder value, provided the non-financial goals do not conflict with profitability and are used as a communicative signal to attract suitable investors. This is the option that would not fail to violate shareholder primacy under the stated condition, because it can coexist with profitability and does not impose non-financial mandates that contradict or undermine it.

In sum:
- Option a may be construed as profitability-aligned due to ROI, not clearly introducing independent non-financial aims.
- Option b introduces non-financial goals not tied to profit, risking violation.
- Option c bypasses governance and fiduciary constraints, clearly violating.
- Option d strategically communicates non-financial considerations without sacrificing profitability, aligning with the condition that shareholder interests include non-financial goals that don’t contradict profitability.

Therefore, option d is the one that would not fail to violate shareholder primacy under the described nuance, while the others present clearer forms of deviation or breach of fiduciary duties.

25_2 PHL4100 M Philosophy od Enterprise

Under Friedman’s logic, which of the following would not fail to violate shareholder primacy if and only if shareholder interests include non-financial goals which do not explicitly contradict profitability but also aren’t required for it?

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