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CFA Level I · CFA Level I Exam · Investors and Other Stakeholders

A manufacturer's board is deciding whether to close a plant. Under the stakeholder management framework, which approach is most appropriate for the board?

The board should identify the affected groups, weigh their interests and conflicts, and choose the action that balances them while supporting long-term firm value. Deferring to one shareholder or chasing short-term profit alone ignores the wider stakeholder relationships the framework emphasizes.

  1. AFollow only the instructions of the largest shareholder.
  2. BIdentify the groups affected, weigh their interests and conflicts, and choose the action that best balances them with long-term firm value.Correct
  3. CChoose the option that maximizes short-term accounting profit regardless of other groups.

Explanation

The framework asks management to identify stakeholders, understand their interests and manage conflicts, balancing them against the firm's long-term viability. Following one party or only short-term profit ignores the other stakeholders.

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