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C&CCM practice questions

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Which of the following is not correct about the shareholder approach vs. the stakeholder approach to corporate governance?

a. While the shareholder approach assumes that managers are self-interested and thus may behave opportunistically to enrich themselves at the expense of shareholders, the stakeholder approach assumes shareholders are self-interested and thus may behave opportunistically to enrich themselves at the expense of other stakeholders.
b. The shareholder approach emphasizes profitability over responsibility, whereas the stakeholder approach stresses that a firm should be profitable as well as socially and environmentally responsible.
c. While the shareholder approach deals with the challenge of principal-agent problems (i.e. minimizing agency costs), the stakeholder approach tries to balance interests among different stakeholders.
d. The shareholder approach sees the firm as an instrument to serve the interests of shareholders, whereas the stakeholder approach conceptualizes the firm as a joint venture to serve the interests of all parties involved in the firm’s business.
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Tilburg University
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