According to the stakeholder theory of a firm, which stakeholders' interests should a firm consider as true and relevant to its decision-making?

• A. Only customers and suppliers
• B. Only government regulators
• C. Only shareholders and top management
• D. Shareholders, employees, customers, suppliers, and the broader community

Answer: (D)

Verified step by step guidance

1. Understand the stakeholder theory of the firm, which states that a firm should consider the interests of all parties that are affected by its actions, not just a single group.
2. Identify the key stakeholders typically involved in a firm’s decision-making process: shareholders, employees, customers, suppliers, and the broader community.
3. Recognize that unlike shareholder theory, which focuses only on shareholders, stakeholder theory emphasizes balancing the interests of multiple groups to ensure long-term success and ethical responsibility.
4. Analyze why limiting consideration to only customers and suppliers, only government regulators, or only shareholders and top management is insufficient under stakeholder theory.
5. Conclude that the firm should consider the interests of shareholders, employees, customers, suppliers, and the broader community as true and relevant to its decision-making.