Certified Financial Management Specialist Practice Exam

Which model suggests a strong involvement of both internal and external parties in company governance?

1. Shareholder Model

2. Stewardship Model

3. Anglo-American Model

4. Continental Model

The correct answer is: Continental Model

The correct response highlights the Continental Model, which emphasizes a more collaborative approach to governance. This model posits that effective governance requires the active participation of multiple stakeholders, including internal parties like management and employees, as well as external parties such as customers, suppliers, and the community at large. The idea is that when various stakeholders are involved in shaping company decisions, it leads to more balanced and socially responsible governance, ultimately benefitting the company and its wider community. In contrast, other models tend to focus on narrower perspectives. For instance, the Shareholder Model primarily emphasizes maximizing shareholder value, often sidelining the interests of other stakeholders. The Stewardship Model does acknowledge the importance of internal managers acting in the best interest of the organization, but its focus is more on aligning the interests of managers and shareholders rather than involving external parties. Similarly, the Anglo-American Model is traditionally more aligned with the interests of shareholders and often prioritizes their say in company affairs over broader stakeholder engagement. The Continental Model stands out precisely because it actively integrates diverse viewpoints into the governance framework.