Corporate Responsibility: The Choice Between Profit and Society

Nicholas Ebert

Olanike Lawore

ENGL 2000-97

11 March 2018

Corporate Responsibility: The Choice Between Profit and Society

        Stockholders and board members incentivize corporate executives to obtain high profits by offering bonuses based on the profit margins they achieve. While increased profits may benefit a corporation, basing executive bonuses on increased profit levels may promote executives to contemplate unethical decisions concerning their legal and ethical responsibilities. The consequences of these unethical decisions include decreased employee safety from cutting corners, and environmental damages caused by pollution. Blinded by bonuses based on profit margins, corporate executives may not appropriately manage the risks relating to their decisions resulting in greater losses than the profits they were attempting to obtain. While cutting corners in the operation processes have the possibility to increase short term profits, increased long term profits may result from shifting the business focus from increasing profits to improving society. Basing corporate executive bonuses on societal impacts, encourages executives to improve society instead of improving the company alone. As a corporation works to improve society, they receive greater public support, strengthening their brand reputation. As corporations become reputable, they receive increased market share, which may result in increased long term profit.

One example of a corporation with a societal focus is Tesla, contrary to British Petroleum who focused more on profit margins.

In the wake of the Deepwater Horizon explosion, British Petroleum faced consequences linked to their decisions to surpass safety regulations, and cut corners in the well capping process.  The consequences of the death of eleven workers and pollution of the Gulf of Mexico (Pallardy Paragraph 2) are direct repercussions of the executive decision to utilize nitrogen gas to expedite the cooling of the concrete well cores. By using nitrogen gas to cool the well cores British Petroleum is able to shorten the overall project length at the cost of hampering well core strength. Due to its diminished integrity the core was unable to prevent a surge of natural gas, allowing the gas to reach the platform where it was then ignited causing the explosion and sinking of the Deepwater Horizon (Pallardy Paragraph 2). Following the compromise of the well core, approximately five million barrels of oil leaked into the Gulf of Mexico damaging the coastal ecosystems. As the oil continued to spread many coastal dependent businesses, such as Louisiana oyster farms, were forced to seize operations (Credbc Paragraph 4). Credbc also states that “44% of respondents thought the oil spill impacts were the same or worse as the 2005 hurricanes”.  To compensate for damaging the economy and environment of coastal areas the U.S. justice department filed for a twenty-billion-dollar settlement, nearly half of the $44 Billion total cost to British Petroleum (Bomey Paragraph 4).  As an attempt to achieve higher profit margins British Petroleum compromised the integrity of the well cores, resulting in the explosion of the Deepwater horizon oil rig. If the executives were incentivized with bonuses based on conserving the environment instead of bonuses based on profit margins, British petroleum may have avoided the forty-four-billion dollar cost to repair U.S. coasts. While cutting corners may reduce costs and increase profit, the risks greatly outweigh the rewards. As British Petroleum pursued increased short term profits, Tesla gained increased long term profits by focusing on society rather than profits.

One other way corporations may increase profits is by focusing on the betterment of society and the environment. When a corporation structures operations around improving society they may receive lower profit margins, but still increase profits through increased sales from the growing public support. Tesla motors is a prime example of a company increasing profits by improving the world around them. Tesla motors is a vehicle manufacturer that produces completely electric vehicles that compete with the leading gasoline powered vehicles, with the mission to “accelerate the worlds transition to sustainable energy” (Tesla Paragraph 1). While tesla struggled in the first few years of operation, they now have market share of over a third of the entire electric vehicle market (McCarthy Paragraph 3). Tesla continues to gain the support from the public and the government with the introduction of cleaner batteries, charging by solar energy, and their new more economical vehicle the Model 3. Tesla proves that a corporation has the ability to increase their profits by focusing on society rather than money.