Bachelor of General Studies (BGS) Degree Practice Exam

How do corporations that operate under the stakeholder theory create value?

1. By innovating new products.

2. By increasing their stock price.

3. By developing their employees' professional skills.

4. All of the above.

The correct answer is: All of the above.

Corporations that embrace stakeholder theory understand that their responsibilities extend beyond just maximizing profits for shareholders; they consider the interests of all parties affected by the company's actions, including employees, customers, suppliers, and the community at large. Creating value in this context involves a multi-faceted approach. Innovating new products is a crucial way these corporations can create value. By focusing on customer needs and market trends, businesses can develop offerings that attract consumers and fulfill societal demands, leading to both increased sales and enhanced customer loyalty. Increasing stock price is typically associated with shareholder interests, yet under stakeholder theory, it also reflects the overall success of the company in balancing the needs of various stakeholders. A higher stock price can be a byproduct of decisions that benefit a broader group, suggesting that the company is functioning effectively in its marketplace. Developing employees' professional skills creates a more productive and satisfied workforce. This not only enhances individual career prospects but also improves organizational performance. Companies that invest in their employees are likely to experience lower turnover, higher morale, and increased innovation, which collectively contribute to long-term sustainability and profitability. In summary, creating value under the stakeholder theory involves a holistic strategy that includes product innovation, responsible financial practices that benefit shareholders, and investment in employee development. Therefore