Question

If a firm's managers narrowly focused on creating shareholder value, but in the process the company was unresponsive to its employees and customers, hostile to its local community, and indifferent to the effects its actions had on the environment; then in all likelihood society would impose a wide range of costs on the company, and this would ultimately lead to a reduction in shareholder value? True or false?

a) True, as societal backlash and negative consequences may negatively impact the company's value.
b) False, as shareholder value is the sole determinant of a company's success and other factors are irrelevant.
c) True, but only if the company's actions directly violate legal regulations.
d) False, as long as the company remains profitable, other societal considerations are inconsequential.

Answer 1

If a firm's managers narrowly focus on shareholder value at the expense of other stakeholders, society may impose costs on the company, leading to a reduction in shareholder value.

Step-by-step explanation:

False. If a firm's managers narrowly focused on creating shareholder value at the expense of employees, customers, the local community, and the environment, society is likely to impose a wide range of costs on the company, which can ultimately lead to a reduction in shareholder value.

Shareholder value is certainly important, but it is not the sole determinant of a company's success. Other factors, such as a company's reputation, customer loyalty, employee satisfaction, and environmental impact, can also have significant effects on the company's long-term success.

Therefore, it is important for companies to consider the interests and well-being of all stakeholders, including employees, customers, the local community, and the environment, in order to maintain their overall value and sustainability.