General Electric (GE) should disclose its operations to its stakeholders at all times. This includes their investment activities which the firm engages in mainly because the stakeholders’ capital will always be at stake whenever the management seeks to make such investments. Indeed, the Securities and Exchange Commission (SEC) has always moved in to protect investors by forcing the firms wishing to raise capital to make disclosures in the prospectus in order to give the investors an opportunity to make rational decisions. Despite the fact that the firm had greatly earned from the stock investment, disclosing this to its employees and investors should be emphasized.
The management should also remember that not all investments turn out well. So in case of any loss incurred during the firm’s investment, failure to disclose will end up generating mistrust between the stakeholders and the management. Considering that the GE management opted to invest in a different territory, it will be wiser if it explains to the stakeholders why it decided to make such an investment. And since the aim was to maximize the stakeholder’s wealth, the disclosure will enhance mutual trust between the company management and its stakeholders.
Considering the risks involved in the stocks, the GE management should understand that the employee’s careers will be at stake if the stocks prices went down instead. The investors on the other hand have the right to know how the management actually invests their capital. This is because they stand to lose or gain after all. Failure to disclose the investment areas can greatly ruin the relationship between the parties concerned. The GE management may also be accused of breaching their duty which requires them to act with utmost good faith when managing the stakeholder’s funds.