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ACCA Applied Skills · Financial Management · Stakeholders and impact on corporate objectives

Which of the following is the most likely reason why a company might pursue an objective of satisficing rather than strict profit maximisation?

Managers often satisfice because they must balance the competing interests of several stakeholders, such as shareholders, employees and lenders, and so aim for acceptable rather than maximum returns. Nothing in law prohibits profit maximisation, and shareholders rarely control every decision.

  1. AOwner-managers or managers balance the interests of several stakeholder groups and aim for acceptable returnsCorrect
  2. BCompetitive markets force companies to maximise every period's profit
  3. CShareholders have complete control over every management decision
  4. DCompanies are legally prohibited from maximising profit

Explanation

Satisficing means achieving a satisfactory level of performance across competing stakeholder demands rather than maximising one measure. Managers with differing aims from shareholders and several stakeholder pressures often behave this way. There is no legal prohibition on profit maximisation.

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