Compare stakeholder theory with shareholder primacy in guiding organizational ethics and governance.

• A. Shareholder primacy emphasizes balancing all stakeholders, while stakeholder theory focuses only on shareholders.
• B. Shareholder primacy prioritizes returns to owners; stakeholder theory broadens duty to customers, employees, suppliers, communities, and environment.
• C. Stakeholder theory ignores financial performance.
• D. Both theories promote identical governance practices.

Answer: (B)

The main idea here is the difference in how ethics and governance are framed when a company decides whom it owes duties to. Shareholder primacy centers on maximizing value for owners, so governance decisions are judged mainly by how they affect shareholders—think profits, dividends, and stock price. Stakeholder theory, instead, says the organization has responsibilities to a broader group: customers, employees, suppliers, communities, and the environment. Decisions should balance these interests and aim for long-term, sustainable value rather than short-term returns to a single group.

This matches the statement that correctly contrasts the two: the private-ownership focus of shareholder primacy on returns to owners, versus the broader duty in stakeholder theory to multiple groups and the surrounding social and environmental context.

The other options don’t fit as well. It’s not accurate to say stakeholder theory focuses only on shareholders—quite the opposite. It’s also not accurate to claim stakeholder theory ignores financial performance; stakeholders typically care about long-term financial health and sustainability. And finally, the two theories do not promote identical governance practices, since their different emphases lead to different priorities and metrics in decision making.