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Identify the theory of corporate governance that is based on the perception that a corporation, for its effective functioning, has to forge a number of relations with different people and institutions including suppliers, consumers, employees, and government.

1. Stewardship Theory
2. Stakeholder Theory
3. Agency Theory
4. Feedback Theory

Correct answer: Stakeholder Theory

Solution

Stakeholder Theory states that a corporation must consider the interests of all groups that affect or are affected by its operations. These include suppliers, customers, employees, government, and society. This matches the description in the question.

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