Final answer:
The presence of a shareholder model in a business prioritizes the economic responsibility of management to focus on the interests of shareholders, which is true. This concept is contrasted with the stakeholder theory, which considers the interests of all parties involved with the firm. The role of the board of directors is to align the firm's operations with shareholder interests, though executives often influence board nominations.
Step-by-step explanation:
The statement 'The shareholder model of a business makes management economic responsibility to the firm a priority' is generally considered to be true. The shareholder model, also known as shareholder primacy, is rooted in the philosophy that the main obligation of a firm's managers is to act in the best interests of the shareholders. It emphasizes the duty of management to focus on maximizing shareholder wealth. However, this model contrasts with the stakeholder theory, which suggests that a firm's management should also consider the interests of other stakeholders, such as employees, customers, suppliers, and the community.
In the context of corporate governance, the board of directors is charged with ensuring that the firm is operated in the interests of the shareholders, the true owners of the company. Nonetheless, it is often the case that top executives have significant influence over who is nominated to the board, which can impact how closely the board's actions align with shareholder interests. Over time, with increased transparency and availability of information about a company's performance, outside investors like bondholders and shareholders are more apt to invest capital in a firm, even without personal knowledge of its managers.
The historical backdrop of workplace safety in the United States, including the establishment of OSHA and earlier laissez-faire attitudes, illustrates the complex relationship between business operations, stakeholder interests, and regulatory oversight. In early capitalism, minimal government interference was advocated by economists like Adam Smith, but the harsh conditions of the Industrial Revolution eventually led to reforms and increased protections for workers.