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ACCA Strategic Professional · Strategic Business Leader · Agency

Halden Retail's board has been criticised by customers, employees and a local community group after a store closure. A director argues that the board's only duty is to maximise returns for owners, as agents of shareholders. Which view best challenges this position under stakeholder theory?

Stakeholder theory challenges the narrow agency view by arguing that customers, employees, communities and others have legitimate interests and can affect the company's success. Ignoring them risks reputational and long-term value damage, so the board's accountability extends beyond shareholders alone.

  1. AOther groups affected by or able to influence the company have legitimate interests, and ignoring them can damage long-term value and legitimacyCorrect
  2. BOnly parties with a contractual relationship with the company deserve any consideration
  3. CShareholders are the only party that bears residual risk, so no other claim is relevant
  4. DAgency theory is correct because the board's relationships are limited to those with owners

Explanation

Stakeholder theory broadens accountability beyond shareholders to groups affected by or influencing the organisation, and notes that neglecting them can harm reputation and performance. The options restricting duties to owners or contracts reflect the narrow agency view rather than challenging it.

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