Question

Karishma and Stephen, co-owners of Roundtree Corporation, are discussing a new benefits package they are considering for their employees. The proposed plan is more expensive for the company than the current plan but will offer better benefits to the employees. Stephen wants to decide based solely on the effect on the owners of the corporation, while Karishma’s position is that the employees should be taken into consideration as well. Stephen is more concerned with the _____________ theory of management, and Karishma is more concerned with the __________ theory of management.

Answer 1

Stephen should be more concerned with the shareholder management theory and Karishma should be more concerned with the stakeholder management theory.

The following information should be considered:

For shareholder:

• It is the owners of the company,
• It could be equity or preference shareholder.
• It should be considered when they are limited by shares.

For stakeholder:

• They are not the owners but have an interest in the company.
• Each company contains the stakeholder.
• It includes the creditors, government, etc.
• It should be considered for the performance of the company.

Therefore we can conclude that Stephen should be more concerned with the shareholder management theory and Karishma should be more concerned with the stakeholder management theory.

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