The Text Provides an Example of Stakeholder Power in the Investment

question 80

Multiple Choice

The text provides an example of stakeholder power in the investment banking industry.In 2007,the net income of the top five U.S.investment banks was roughly $10 billion.This sounds pretty good until you find out that in this same year the salary and bonuses paid to their employees was FOUR times that amount ($40B) .This is an example of what?

• A) Strong internal stakeholders capturing the value that would otherwise go to others (such as stockholders).
• B) Strong external stakeholders having an undue influence on managerial decisions inside the firm.
• C) Weak internal stakeholders not getting inducements commensurate with their contributions to the firm.
• D) In the end, all stakeholder groups are rewarded well if the firm is successful.

---

Definitions:

Marginal Utilities

The increased contentment or value obtained by a consumer through the consumption of one extra unit of a good or service.

Diminishing Marginal Utility

The principle that as a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

The change in demand for a good that results from a change in its price, making consumers more likely to purchase more of a less expensive alternative or less of a more expensive one.