Bags are distributed at no charge in most stores

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bags are distributed at no charge in most stores, people often don’t factor in these externalities. As a consequence, even though plastic bags can be recycled, only 5.2 percent were recycled in 2005 and that amount increased only to 6.7 percent by 2008. However, even when externalities can be anticipated, consumers often cannot correctly factor in the true cost or may not be willing to pay them. For example, the consequences of poor safety controls at a fertilizer plant (explosion, fire, toxic fumes, injury, and death) can be devastating. The question is, can fertilizer consumers correctly assess the costs of a chemical disaster and how much extra they should have to pay to cover the needed safety expenditures? If the answer is “no,” a plant manager will more likely skip the necessary safety practices to keep costs low and enhance profits. Only after a chemical disaster occurs will the impact of the externality (the disaster) be fully appreciated by consumers and, therefore, appropriately priced in the market.B.The Social Responsibility Perspective- The social responsibility perspective argues that society grants existence to firms. Shareholders simply supply risk capital. Therefore, firms have responsibilities and obligations to society as a whole, not just to shareholders. Thus, while the efficiency perspective states that it is socially responsible to maximize the return to the shareholder, the social responsibility perspective states that it is socially irresponsible to
maximize only shareholder wealth because shareholders are not the only ones responsible for the firm’s existence. The most common form of corporate existence is one of limited liability—a privilege granted to corporations by society, not by shareholders. In this form of existence, corporations’ financial liability to others is limited to the company and doesn’t extend to its shareholders. In other words, creditors and people seeking redress (for example, if a chemical disaster occurs) cannot go beyond the assets of the corporation and seek repayment or restitution from the assets of the owners (i.e., shareholders in a public company). Thus, the existence of the firm, in general, and the limited liability existence, in particular, are not solely a function of shareholders and, therefore, the responsibilities of the firm cannot be restricted just to shareholders.STAKEHOLDERS- From the social responsibility perspective, managers must consider the legitimate concerns of other stakeholders beyond just the firm’s shareholders. A stakeholder is an individual or group that has an interest in and is affected by the actions of an organization. Besides an organization’s shareholders, other stakeholders include current and future customers and employees; financiers; suppliers; the media; the communities in which the business operates; and society at large. A firm’s customers have a special place within this set of constituencies because they pay the bills with the revenue they provide. Shareholders are also

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