CFA Level I · CFA Level I Exam · Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits
Which statement about stakeholder management and its link to governance is most accurate?
Good stakeholder management can reduce legal, reputational and operational risks over time. Fair treatment of employees, customers, suppliers and communities limits disputes and disruption, which supports long-term shareholder value. It applies to all companies, not only regulated ones, and is not in conflict with value creation.
- AConsidering stakeholder interests is incompatible with shareholder value creation
- BStakeholder management is relevant only to companies in regulated industries
- CGood stakeholder management can reduce legal, reputational and operational risks over timeCorrect
Explanation
Managing relationships with employees, customers, suppliers, creditors and communities lowers the risk of disputes, boycotts and disruptions, supporting long-term value. It is not incompatible with shareholder value and applies to all firms.
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