ICANBusiness, Management and FinanceBusiness Ethics and Corporate Social Responsibility2021

Stakeholder theory, as advanced by R. Edward Freeman, argues that a corporation's primary ethical obligation is to:

AMaximise shareholder wealth as the residual claimants of the business
BBalance the interests of all parties who affect or are affected by the organisation's activitiesCORRECT
CComply strictly with all applicable laws and regulations, and no more
DPrioritise the interests of employees above all other groups because they create value
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
Freeman's stakeholder theory holds that management has ethical obligations to a broad set of stakeholders—including employees, customers, suppliers, communities, and shareholders—not just to shareholders. This contrasts with the shareholder primacy view associated with Milton Friedman. Legal compliance alone represents the minimum ethical threshold, not the full scope of stakeholder theory, and prioritising employees exclusively contradicts the balanced multi-stakeholder approach.
Want this in Pidgin, Yoruba, Igbo or Hausa? Sign up free →

Practice more Business, Management and Finance questions

ICAN Business, Management and Finance has thousands more questions like this — with Worked answers on every one.

Start practicing free →See all Business, Management and Finance questions