Solution for Business and Professional Ethics 7th Edition Chapter 5, Problem 2

by Leonard J. Brooks, Paul Dunn
592 Solutions 9 Chapters 73130 Studied ISBN: 9781285182223 Ethics 5 (1)

Chapter 5, Problem 2 : 2.Explain why corporations are legally responsible to shareholders...

2.Explain why corporations are legally responsible to shareholders but are strategically responsible to other stakeholders as well.

Step-By-Step Solution

2.Corporations are created under the laws of a particular jurisdiction (Country, state, province …) and the directors, as agents of the shareholders’, must account to those shareholders and must follow the laws of the jurisdiction in which they are incorporated as well as where they operate.  In addition, according to stakeholder theory, corporations need the support of their stakeholders to reach their strategic objectives on a continuing and sustainable basis.  This support can best be obtained it the corporation take into account the interests of stakeholders when building and implementing its strategy.  Consequently, corporations are legally responsible to shareholders and strategically responsible to a broader set of stakeholders.

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