generate a lower rate return. Over time, investment funds will gravitate away fromsocially responsible firms toward those that aren’t, since the latter will provide the higher rate return. That might even mean that if all the firms in a particular country—such asthe Unit States—incurred additional social costs because management perceived this to be one of the business’s goals, the survival of entire domestic industries could bethreatened by foreign competitors who chose not to incur such social costs.
In the words of one author in support of the socioeconomic view, “maximizing profits is a company’s second priority, not the first. The first is ensuring its survival.Take the case of the Manville Corporation. Nearly fifty years ago, its senior management had evidence that one of its produces, asbestos, caused fatal lung diseases.As a matter of policy, management decided to conceal the information from affectedemployees. The reason? Profit! In court testimony, a lawyer recalled how, in the mid— 1940s, he had questioned Manville’s corporate counsel about the company’s policy of concealing chest x-ray results from employees. The lawyer had asked, “Do you mean totell me you would let them work until they dropped dead?” the reply was, “Yes”, we savea lot of money that way. This might have been true in the short run, but certainly not inthe long term. The company was forced to file for bankruptcy in 1982 to protect itself against tens of thousands of potential asbestos-related lawsuits. It emerged from lawsuitsand bankruptcy in 1988, but with staggering asbestos-related liabilities. To compensatevictims, Manville agreed to set up a personal injury settlement trust, funding it with $2.6 billion in cash and bonds and up to 20% percent of the company’s annual profits throughthe year 2015. Here is an example of what can happen when management takes short-term perspective. Many workers died before their time, the stockholders lost a great dealof money, and a major corporation was forced into reorganization.A major flaw to the classical view, as seen by socioeconomic proponents is their time frame. Supporters of the socioeconomic view contend that managers should beconcerned with maximizing financial returns in the long run. To do that, they must acceptsome social obligations and the cost that goes with them. They must protect society’s