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ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation

A company chooses to cut its dividend to fund staff training and community projects, accepting lower short-term returns for shareholders. Which view of the company's purpose is most consistent with this decision?

The decision is consistent with the stakeholder view, which holds that a company should balance the interests of all its stakeholders, not only shareholders. Cutting dividends to fund training and community projects shows wider interests being weighed against short-term owner returns.

  1. AThe stakeholder view, which says the company should balance the interests of all stakeholdersCorrect
  2. BThe shareholder primacy view, which says profit maximisation for owners is the only goal
  3. CThe view that the company has no social responsibilities
  4. DThe view that only legally enforceable duties matter

Explanation

Accepting lower shareholder returns to benefit employees and the community reflects the stakeholder view, which balances several groups' interests. Shareholder primacy would prioritise owners' returns, and the other views deny wider responsibilities.

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