A Typical Company Has Many Types of Shareholders, from Individuals

question 17

Multiple Choice

A typical company has many types of shareholders, from individuals holding a few shares, to large institutions that hold very large numbers of shares. How does a financial manager ensure that the priorities and concerns of such disparate stockholders are met?

• A) The financial manager should seek to make investments that do not harm the interests of the stockholders.
• B) The decisions taken by the financial manager should be solely influenced by the benefit to the company since, by maximizing its fitness, he or she will also maximize the benefits of that company to the shareholders.
• C) The financial manager should consider the interests and concerns of large shareholders a priority so the needs of those who hold a controlling interest in the company are met.
• D) In general, all shareholders will agree that they are better off if the financial manager works to maximize the value of their investment.

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Definitions:

Social Influence

The effect that the words, actions, or mere presence of other people have on an individual's attitudes, beliefs, or behavior.

Perceptions

The way individuals interpret and understand their sensory information from the world around them.

Group Dynamics

The study of the behavior, interactions, and psychological processes that occur within a social group.

Risky Shift

The phenomenon where groups tend to make riskier decisions together than individuals would make on their own.