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IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers

Which statement best describes the stakeholder view of corporate social responsibility, in contrast with the traditional shareholder-primacy view?

The stakeholder view says managers should weigh the interests of all affected groups, such as employees, customers, suppliers and communities, rather than only shareholders. This contrasts with shareholder primacy, which focuses on maximising returns to owners within the law.

  1. AManagers should consider the interests of employees, customers, communities and others affected by the firm, not only shareholdersCorrect
  2. BManagers should maximise short-term profit and leave social matters entirely to government
  3. CSocial spending is justified only when it has a legally fixed return
  4. DOnly the largest shareholders have claims on the firm's decisions
  5. CSR is relevant only for unlisted companies

Explanation

The stakeholder view holds that the firm owes responsibilities to all groups affected by its actions. The shareholder view, associated with profit maximisation, is the one described in the second option. The other options misstate either view.

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