PrepTest 131

Incorrect. Price believes that their primary responsibility is to its shareholders, so she agrees with this statement. Albrecht believes a corporation's primary responsibility should be to the employees, but that doesn't mean that it is, or that there isn't a secondary (or lower) responsibility to shareholders, so his opinion on this isn't clear.

Incorrect. Albrecht mentions the employees' welfare, but he doesn't state whether corporations are responsible for it. Price doesn't mention it at all, so this answer is completely out of scope.

Incorrect. Neither speaker discusses whether investors "should" be able to recoup their losses in the case of a bankruptcy, so this answer is completely out of scope.

Correct. Argument or Facts:
Argument/Argument

Valid or Flawed:
Flawed/Flawed

Question Type:
Point at Issue

Stimulus Summary:
P: Shareholder's take the greatest risks, so a corporation is primarily responsible to them.

A: Shareholders have diversified portfolios, but employees don't, so a corporation should be primarily responsible to employees.

Answer Anticipation:
Price and Albrecht focus on different interested parties to a corporation. Price focuses on shareholders, stating that they have the greatest risks and are thus the most important constituency to whom corporations have a primary responsibility to. Albrecht does discuss shareholders, comparing their partial stake in the company to employees stake, which represents their entire livelihood. He concludes that the primary responsibility of the corporation is to these employees.

So they disagree over who has more at stake should a corporation go under, and to whom that primary responsibility should be to, but they focus on different reasons for that (risk vs. proportion of livelihood wrapped up in the corporation). Since the conclusions are the point at issue (who has more at stake, and thus who the primary responsibility should be to), that should be reflected in the correct answer.

Answer Explanation:
Price states that shareholders are the "most important constituency" who take "the greatest risks" and "lose their investment" in case of bankruptcy, thus making a corporation's "primary" responsibility to them, so she agrees with this answer. Albrecht believes that a corporation's "primary" responsibility "should" be to employees, because the corporation represents "their very livelihood," thus committing him to believing that shareholders don't have as much at stake as the employees. This is the point at issue between them.

Key Takeaway:
For Point at Issue questions, focus on the areas of overlap. Frequently, when the two speakers reach opposed conclusions, they do so based on completely different lines of reasoning, meaning that the premises aren't a point at issue between the two—any answer that focuses on one of the premises could therefore be ignored.

Incorrect. Price doesn't discuss livelihood, so this is out of scope of her argument. Albrecht states that shareholders "typically" have diversified portfolios, leaving open the possibility that he believes some don't and are completely dependent on a given corporation, but that's not certain, so we can't commit him to this answer, either.