Question

Describe a personal experience, or find a real life example from the news, when top tier management used the shareholder primacy norm to justify a questionable action.

Answer 1

Ans) Shareholders primacy norms is based on protecting the interest of shareholders above other stakeholders.It gives shareholders power to directly and frequently in corporate affairs.Here from finance perspective we can take an example when the dividend declaration is put on the top priority.The best practical example is of British petroleum or BP an oil and gas giant.Despite of lack of security in drilling offshore oil , the company neglected the initial accidents and is always looking to earn more revenue so as to earn more profit and intern give high dividend to shareholders it was doing cost cutting and stating the reason as shareholders primacy.In the yera 2010 a major explosion took place at the mexican gulf oil rig of BP which resulted in a huge oil spill causing harm to the environment and life.The company was fined by the US government for the negligence and for only focussing on financials , keeping safety aside.