Stakeholder Theory of Corporate Governance - Explained

The video discusses the stakeholder theory, which expands the focus of corporate officers and directors beyond just the corporation and its shareholders to include all stakeholders. Stakeholders are defined as anyone with an interest in the corporation's success, including local communities, governments, and suppliers. The video emphasizes the importance of considering the interests of these third parties in corporate decision-making.

What is the primary difference between traditional corporate governance and stakeholder theory?

• Traditional governance includes environmental concerns.

• Stakeholder theory focuses only on shareholders.

• Traditional governance considers all stakeholders.

• Stakeholder theory includes a broader range of interests.

Who are considered stakeholders according to the stakeholder theory?

• Only the suppliers of raw materials.

• Anyone with an interest in the corporation's success.

• Only the shareholders of the corporation.

• Only the employees of the corporation.

Which of the following is NOT typically considered a stakeholder?

• Suppliers of energy

• Local community

• Local government

• Competing businesses

What should corporate decision-makers primarily consider according to the stakeholder theory?

• Only the interests of the local community

• The interests of the corporation, stakeholders, and third parties

• Only the interests of the shareholders

• Only the interests of the corporation

Why is it important for decision-makers to consider third-party interests?

• Third parties are not affected by corporate decisions.

• Third parties are only interested in profits.

• Third parties are viable interest holders in the corporation.

• Third parties have no impact on the corporation.