Many people complain about corporations, but
there are also those whose criticism goes further and
who hold corporations morally to blame for many of
the problems in Western society. Their criticism is not
(5) reserved solely for fraudulent or illegal business
activities, but extends to the basic corporate practice of
making decisions based on what will maximize profits
without regard to whether such decisions will
contribute to the public good. Others, mainly
(10) economists, have responded that this criticism is
flawed because it inappropriately applies ethical
principles to economic relationships.

It is only by extension that we attribute the quality
of morality to corporations, for corporations are not
(15) persons. Corporate responsibility is an aggregation of
the responsibilities of those persons employed by the
corporation when they act in and on behalf of the
corporation. Some corporations are owner operated,
but in many corporations and in most larger ones there
(20) is a syndicate of owners to whom the chief executive
officer, or CEO, who runs the corporation is said to
have a fiduciary obligation.

The economists argue that a CEO’s sole
responsibility is to the owners, whose primary interest,
(25) except in charitable institutions, is the protection of
their profits. CEOs are bound, as a condition of their
employment, to seek a profit for the owners. But
suppose a noncharitable organization is owner
operated, or, for some other reason, its CEO is not
(30) obligated to maximize profits. The economists’ view is
that even if such a CEO’s purpose is to look to the
public good and nothing else, the CEO should still
work to maximize profits, because that will turn out
best for the public anyway.

(35) But the economists’ position does not hold up
under careful scrutiny. For one thing, although there
are, no doubt, strong underlying dynamics in national
and international economies that tend to make the
pursuit of corporate interest contribute to the public
(40) good, there is no guarantee—either theoretically or in
practice—that a given CEO will benefit the public by
maximizing corporate profit. It is absurd to deny the
possibility, say, of a paper mill legally maximizing its
profits over a five-year period by decimating a forest
(45) for its wood or polluting a lake with its industrial
waste. Furthermore, while obligations such as those of
corporate CEOs to corporate owners are binding in a
business or legal sense, they are not morally
paramount. The CEO could make a case to the owners
(50) that certain profitable courses of action should not be
taken because they are likely to detract from the public
good. The economic consequences that may befall the
CEO for doing so, such as penalty or dismissal,
ultimately do not excuse the individual from the
(55) responsibility for acting morally.

1. Which one of the following most accurately states the main point of the passage?

(A) Although CEOs may be legally obligated to maximize their corporations’ profits, this obligation does not free them from the moral responsibility of considering the implications of the corporations’ actions for the public good.
(B) Although morality is not easily ascribed to nonhuman entities, corporations can be said to have an obligation to act morally in the sense that they are made up of individuals who must act morally.
(C) Although economists argue that maximizing a corporation’s profits is likely to turn out best for the public, a CEO’s true obligation is still to seek a profit for the corporation’s owners.
(D) Although some people criticize corporations for making unethical decisions, economists argue that such criticisms are unfounded because ethical considerations cannot be applied to economics.
(E) Although critics of corporations argue that CEOs ought to consider the public good when making financial decisions, the results of such decisions in fact always benefit the public.



2. The discussion of the paper mill in lines 42–46 is intended primarily to

(A) offer an actual case of unethical corporate behavior
(B) refute the contention that maximization of profits necessarily benefits the public
(C) illustrate that ethical restrictions on corporations would be difficult to enforce
(D) demonstrate that corporations are responsible for many social ills
(E) deny that corporations are capable of acting morally



3. With which one of the following would the economists mentioned in the passage be most likely to agree?

(A) Even CEOs of charitable organizations are obligated to maximize profits.
(B) CEOs of owner-operated noncharitable corporations should make decisions based primarily on maximizing profits.
(C) Owner-operated noncharitable corporations are less likely to be profitable than other corporations.
(D) It is highly unlikely that the actions of any particular CEO will benefit the public.
(E) CEOs should attempt to maximize profits unless such attempts result in harm to the environment.



4. The conception of morality that underlies the author’s argument in the passage is best expressed by which one of the following principles?

(A) What makes actions morally right is their contribution to the public good.
(B) An action is morally right if it carries the risk of personal penalty.
(C) Actions are morally right if they are not fraudulent or illegal.
(D) It is morally wrong to try to maximize one’s personal benefit.
(E) Actions are not morally wrong unless they harm others.



5. The primary purpose of the passage is to

(A) illustrate a paradox
(B) argue for legal reform
(C) refute a claim
(D) explain a decision
(E) define a concept