ACCA Applied Knowledge · Business and Technology · Stakeholders in business organisations
Which of the following is a common criticism of stakeholder theory when compared with shareholder theory?
A common criticism is that stakeholder theory gives managers no single clear objective. With many conflicting stakeholder interests to balance, performance is hard to measure and managers are harder to hold accountable than under shareholder wealth maximisation.
- AIt ignores the legal rights of employees and customers
- BIt gives managers no clear single objective, making it hard to hold them accountableCorrect
- CIt requires the company to pay all profits to shareholders as dividends
Explanation
Because stakeholder theory asks managers to balance many, often conflicting, interests, there is no single measure of success, and managers can justify almost any decision. The first option is false since the theory emphasises these groups. The third has no link to the theory.
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