Social Irresponsibility in Management



situations where one party gains at the expense of another. This argument is discussed further in Nason
and Armstrong [50].

Managers’ Viewpoints on What Role They Should Follow. The stockholder role is advocated by
the legal system. This role is also supported by schools of management. Furthermore, it is the position
that is publicly adopted by most firms. Do managers feel that they should follow the stockholder role?

In a survey of executives (Lorig [39] ), respondents stated that they owed first allegiance to the
stockholders. Barksdale and Darden [1], in a survey of executives from
Fortune’s directory of the 500
largest U.S. corporations, reported over 40% of the respondents agreeing with the statement that, “In
event of a conflict between consumer orientation and profit objectives, profits would be the overriding
consideration.” A survey of subscribers to the
Harvard Business Review [20] found about 40% of the
responses were consistent with the stockholder role. A replication of Ewing’s survey [35] yielded a
somewhat stronger orientation toward the stockholder role. Nichols [52], in a survey of British
managers, found that 68% of the respondents believed in some form of profit maximizing.

The surveys indicate that although a substantial proportion of managers believe in the stockholder
role, many managers question this role. For example, in Ewing’s study, only 2% of the respondents
selected the most extreme position that “a corporation’s duty is to its owners and only to its owners.”
Similarly, in Baumhart’s [2] survey of subscribers to the
Harvard Business Review, 83% of the
respondents agreed that “for corporation executives to act in the interest of shareholders alone, and not
also in the interest of employees and consumers” is unethical.

Expected Behavior under the Stockholder Role. What type of behavior might be expected from a
manager who believes in the stockholder role? How would he act in an extreme situation in which the
stockholder gains by harming other interest groups and in which the whole system is worse off? A
variety of evidence was examined: laboratory experiments, field experiments, attitude surveys, and
documented case histories.

Laboratory Experiments The most relevant set of studies were the “obedience to authority” studies in
social psychology. The basic design of these studies was for someone in a position of legitimate
authority to command a subject to harm a third party. Most subjects showed a high level of obedience.

There are many variations to the obedience studies, but the most widely known design is Milgram’s
[42]. Here, one accomplice and one naive subject arrived for what was ostensibly a “learning
experiment.” Each subject was paid $4.50 at the start and was told that the payment is theirs no matter
what happens. A rigged random drawing was then held to see who would be the “teacher” and who
would be the “learner.” The naive subject was always the teacher. This subject was instructed to teach
the learner a list of paired associates, to test him on the list, and to administer punishment whenever the
learner erred. Punishment was administered in the form of an electric shock to the learner, who was
strapped in an electric chair. (No shock was actually administered.) According to a specified plan, the
learner provided 30 wrong answers and the teacher was instructed to increase the shock from 15 to the



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