Corporate Ethicist: A company's board of directors has a fiduciary duty to act in the best interests of the corporation's shareholders. Recent surveys show that the vast majority of our shareholders are highly interested in seeing immediate, aggressive expansion into emerging markets. Therefore, to fulfill their fiduciary duty, our board of directors must pursue this aggressive expansion strategy.
Which of the following most accurately describes a flaw in the corporate ethicist's reasoning?
- AIt infers a causal relationship from a mere correlation between corporate expansion and shareholder preferences.
- BIt confuses a condition that is logically necessary for acting in the shareholders' best interests with one that is sufficient for doing so.
- It illicitly relies on two different senses of the word "interest."Answer
- DIt erroneously infers that what is true of a large group of shareholders must also apply to the corporate board.
- EIt draws a rigid conclusion about all shareholders based on survey evidence that relates only to a subset of them.
Answer
The argument is flawed because it illicitly relies on two different senses of the word "interest."
The correct answer accurately identifies that the argument commits the fallacy of equivocation. It starts by using 'interests' to mean 'that which is advantageous or beneficial' (fiduciary duty), but then uses 'interested in' to mean 'having a preference or curiosity for.' Giving people what they want (their desires) is not always the same as giving them what is good for them (their welfare).
Step-by-Step Solution
Key Concept
Equivocation (Uncertain Use of a Term)