ACCA Strategic Professional · Advanced Performance Management · Performance hierarchy

Orlin Pharma is a listed company whose board states its primary objective as maximising shareholder wealth. Its mission also commits to meeting patient needs in low-income countries, which reduces short-term returns. A director proposes treating shareholder wealth as the sole objective and dropping the patient commitment. Which analysis is most consistent with performance hierarchy and stakeholder theory?

Stakeholder and non-financial objectives should be kept as measured secondary objectives supporting the primary shareholder-wealth objective. They protect reputation, legitimacy and long-term value, even if they cost short-term return. Trade-offs should be made explicit, rather than dropping the commitment or letting the mission override financial objectives.

1. ANon-financial and stakeholder objectives can support long-term shareholder value, so they should be retained as secondary objectives with measures, accepting trade-offsCorrect
2. BSecondary objectives are irrelevant because only the primary objective is ever measured
3. CThe patient commitment should be treated as the primary objective because missions override financial objectives
4. DThe mission should be kept confidential to avoid conflict with shareholders