Skip to content

IAI Actuarial Core Principles · Business Finance · Corporate governance and the regulation of companies

Which of the following best describes the stakeholder approach to corporate objectives, as opposed to the traditional shareholder-primacy approach?

The stakeholder approach requires the board to weigh the interests of employees, customers, suppliers and the wider community alongside shareholders, rather than focusing only on shareholder wealth maximisation. It broadens accountability and long-term thinking compared with the traditional shareholder-primacy view.

  1. AThe board should consider the interests of employees, customers, suppliers and the community as well as shareholders when making decisionsCorrect
  2. BThe board should ignore shareholders once the company is listed
  3. CThe board should maximise short-term profit above every other consideration
  4. DThe board should be accountable only to lenders
  5. The board should avoid disclosing information to anyone outside the company

Explanation

Shareholder primacy focuses on maximising shareholder wealth. The stakeholder approach broadens the board's regard to other groups affected by the company, such as employees, customers, suppliers and society. The other options describe positions that no governance framework endorses.

Did you get it right without looking?

One question tells you little. A timed set on Corporate governance and the regulation of companies shows your real accuracy, how long you take and where you lose marks.

Practise Corporate governance and the regulation of companiesFree diagnostic mock

More Corporate governance and the regulation of companies questions