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IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers

A company's board argues that it should consider the interests of employees, customers, lenders and the local community, not only shareholders, when taking decisions. Which view of business responsibility does this describe?

This is the stakeholder view, under which a company is responsible to all groups affected by its decisions, including employees, customers, lenders and the community, rather than to shareholders alone. It contrasts with shareholder primacy, which focuses on owners' wealth.

  1. AThe stakeholder viewCorrect
  2. BThe pure shareholder primacy view
  3. CThe agency cost minimisation view only
  4. DThe legal compliance only view
  5. The efficient markets view

Explanation

The stakeholder view holds that a business owes responsibilities to all groups affected by its actions, not just owners. Shareholder primacy and legal-compliance-only views limit the duty to owners or to the law. Agency cost and efficient markets are not theories of responsibility.

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