Which theory states that management has a duty of care to the wider community of interest or stakeholders?

Stakeholder theory asserts that management has a duty of care to a broader group of individuals and entities that are affected by a company's actions, not just the shareholders. This perspective emphasizes the importance of considering the needs, interests, and well-being of all stakeholders, including employees, customers, suppliers, and the community at large, in decision-making processes.

The framework encourages businesses to create value not only for shareholders but also for these other groups, recognizing their rights and contributions. By addressing the interests of multiple stakeholders, the theory promotes a more ethical and sustainable approach to management, ensuring that the business operates in a socially responsible manner.

Understanding this theory is essential for future accountants and business professionals, as it shapes ethical considerations and corporate governance practices in today’s business environment.