Phenoxyethynol is created by treating phenol with ethylene oxide in an alkaline medium. Each ingredient individually does not sound great, but when they react it creates a safe and effective preservative.
Individually many chemicals may harm you, but together they create a beneficial product. For instance, lye alone is extremely dangerous, but after it reacts with oil and water to create castile soap it is harmless and useful. The MSDS for a pure ingredient can cause undo alarm.
As you consider other ingredients that are widely used and safe in cosmetics you will find that the MSDS sounds alarming for them as well. For instance commonly used ingredients like glycolic acid, lye, citric acid, potassium sorbate and even essential oils have MSDS warnings that could be misunderstood and deemed as too dangerous to use in cosmetics. However, we all know that these ingredients are commonly used and safe in cosmetics. The MSDS sheet is designed to inform the end user of how to handle the ingredient properly in an undiluted form.