Question

Q.6. Why, according to stakeholder theory, is it in
companies' best interests to pay attention to
their stakeholders? ​

Answer 1

The skate holder theory was given by  Milton Friedman,

Explanation:

• According to his theory, that shareholders are like the shareholders fo the company
• A company must make profit and pay attention to its shareholders as they are the strength of the company
• Without shareholders, a company cannot stand for long
• The shareholders have the power to either make or break the country

Answer 2

a. If firms only act in their own self-interest employees may feel exploited

b. If firms only act in their own self-interest government might put more regulation on them

c. If firms only act in their own self-interest customers might not like the image that the company portray

d. If firms only act in their own self-interest and inflict harm on stakeholders then society might withdraw its support

ANSWER: d. If firms only act in their own self-interest and inflict harm on stakeholders then society might withdraw its support

Explanation:

Stakeholders are those groups of people who are impacted  by an organisation. The theory deals with

• The responsibilities that the the organisation owe toward its stakeholders
• In what way  must the organisation decide between its responsibilities to 2 or more stakeholders in case they demand different things from the organisation.
• The criteria that the organisation must use when deciding which stakeholder group’s interest it must prioritise.
• What legitimate interests validate a group of people being considered as a stakeholder in the organisation?

Primary stakeholders of the business are

- Employees selling labour

- Stockholders investing capital

- Creditors lending money

- Suppliers selling materials

- Customers buying products

- Retailers distributing products