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AC6P04 Current Issues in Accounting and Finance

Published : 27-Sep,2021  |  Views : 10

Question:

Outline making scheme and assessment criteria for write-ups
Clear presentation
An appropriate and coherent structure
Good use of headings, language, grammar and sentence structure
Use of paragraphs for ease of reading and comprehension.
Introduction clearly identifying the nature of the issue/ problem, the context within which the specific issue is being examined and outlining the structure of the write-up
 
Body of the report should critically analyse and evaluate (not simply describe) the issue/problem area with a range of view examined including if appropriate identification of strength and weaknesses.
• Key points clearly stated and linked to the academic literature, empirical research studies, case studies or illustrative examples from company annual reports, theories/issues illustrated with practical examples.
 
Corporate Governance, Corporate failure, business ethics, and audit

Readings and sources
Business source complete
Emerald management
Science direct

Answer:

Introduction:

The paper describes about the reporting to stakeholders and what are the measures which are faced by shareholders. Reporting to stakeholders is a process by which information regarding the company dealings are to be made. The information provided by the company to its stakeholders updates the knowledge base of the stakeholders regarding the company, its status and its network.  The main objective behind reporting to the stakeholders is to increase the level of confidence of the stakeholders for the company, so that they would like to connect with the company for longer period (Probone, 2013).

For better presentation to the topic as reporting to stakeholders, the paper has selected some companies which are as: Origin energy limited, wesfarmers limited, Woolworths limited.

In case of Origin energy limited, the company was founded in 2000, formed as demerger of Boral limited. The company is headquartered in Sydney, Australia. While the wesfarmers limited, the company was founded in 1914, in Australia. The paper has also considered Woolworths limited for analysis; the company was founded in 1924, headquartered in Australia.

In case of Procter and Gamble, the company was founded in 1837, headquartered in United States. The company has a wide range of stakeholders; the number of the employees with the company 105000.

The paper has also considered Anglo American PLC, which was founded in 1917 and headquartered in United Kingdom. The company has above 135000 employees.

Stakeholders

A stakeholder can be an individual or company or a group of individuals and companies. Stakeholders are the one which got influenced by the operations of the company. The examples of stakeholders in case of a company are as: creditors, employees, shareholders, unions, suppliers, accountants and accountants. These are the persons which get something in return from the company in the form of goods and services, dividend, interest, payment in return (Nanfack, 2014).

                                     

Figure 1: Stakeholders

The stakeholders have some direct or indirect stake in the company operations. These are the stakeholders who got affected by the company actions, its policies and objectives. A company has a lot of stakeholders, out of which the management of the company must analyze about the key stakeholders of the company. These are the one which provides maximum return to the company. This shows that all the stakeholder does not treat as equal (Lee, 2007).

For this the company requires to do stakeholder analysis. It is a technique in which key people of the company are found.

For better analysis the paper has done an analysis over the company’s shareholders which hold majority of the shares. Like in case of Origin energy limited, the company has major shareholders as HSBC custody Nominees (Australia) limited, JP Morgan nominees Australia limited and National Nominees limited (Caroll, Brown, & Buchholtz, 2017).

In case of a diversified company such as wesfarmers and Woolworths limited, the management of the company has to report to its stakeholders about the environmental aspects of the business, their relationships with supplier, food safety and ethical resourcing (Wesfarmers, 2017).

Reasons for reporting to stakeholders

Following are some of the importance of reporting to stakeholders for the company:

The major stakeholders provide valuable advices and suggestions to the company in relation to its operations. This helps the management of the company in increasing the quality of the project or the investment. In case the company has some powerful stakeholders, this would lead to increase in the goodwill of the company. Besides this the company would be able to utilize its resources in an efficient manner. Such as in case of Origin energy limited, the company has one of its major shareholders as HSBC bank; this would lead the company to get finance easily (Freeman, 2010).

The above stated benefits can only be achieved if the company does effective reporting to stakeholders. For this, many companies appoints a team secretary whose task is to look after the preparation of report making and compliance to rules and regulations in preparation of the report.

The main objective behind reporting to stakeholders is to conduct an effective communication. This can be understood as the communication cannot be made separately to each stakeholder, hence a common report has to be prepared in which all the required information are mentioned. This helps the stakeholders in getting informed about all the achievements, strength, weakness, opportunity and threats of the company. This is the reason that to communicate with the mass audience, the company prefers reporting to stakeholders (Jepsen & Eskerod, 2013).

Reporting to stakeholders bring transparency for the company dealings, by this the confidence and trust of the stakeholders is increased in the company.  It has been analyzed that to do a comparative analysis with the competitors of the company, it has to make some reporting to its stakeholders.

Following are the importance of reporting to stakeholders in terms of stakeholders:

It has been observed that the reporting to stakeholders is done to make easy in comparing the data of the organization from its competitors as well as from its own past records. Therefore it is said that reporting to stakeholders can lead the stakeholders in taking the logical decision.

In case of Anglo American PLC, which is a public company, the reporting to stakeholders is done at a major level. Public companies have to tell their stakeholders in a detailed manner regarding the operations and dealings of the company. This increases the responsibilities of the company towards its stakeholders, as the company has to mention about its diversity decision, risk management strategy, health and safety strategies as adopted by the management of the company (Anglo American, 2017).

It has been analyzed that the effective reporting to stakeholders helps them in getting informed the company’s current operations. It has been analyzed that stakeholders who holds a majority stake in the company, demands such reporting from the company. The reporting to stakeholders helps the stakeholders to become aware of the future dealings of the company (Chinyio & Olomolaiye, 2009).

How reporting to stakeholders is done

The reporting must contain accurate, complete, factual and updated information for the company operations and its dealings. The reporting provides details to stakeholders regarding the status, routine as followed by the company, and the improvements as in the company dealings. Hence the reporting should be made in such a way that it accomplishes the above requirements.

There are no specific standards as to be followed by the company for reporting for the stakeholders. However there are some guidelines which companies are required to follow. These requirements are as: the team secretary and team leader must check that the reporting includes all the relevant details regarding the company such as its status and strategies which the management of the company has planned to be followed by the company.  This can be done by incorporating performances of the company on regular intervals in the report. This would lead to solve the issues that can create a burden on the company (OECD, 2010).

The reporting to stakeholders of the company is to be made by considering that it should be convenient to decode the message which the report wants to convey. For this, the management should select the choice of media very cautiously. The information which the company wants to be conveyed to its stakeholders the reason behind this is the media selection is the base of the information to be transmitted. Hence if the company fails to choose a suitable mode of tool to communicate the message it can lead to non effective communication.  

In case of wesfarmers limited, the company make reporting according to its stakeholders such as for customers, company used to report them in the form of letters, email and website; while in case of shareholders, the company used to conduct annual general meeting for presentation of reporting in front of its major shareholders (Wesfarmers, 2012).

The reporting to stakeholders can be made by the mentioning the required information in the company annual reports, its corporate social responsibility report, general media, email, company official website, and sustainability report. These are considered as a valid source for providing information for the shareholders. The reason behind this is these reports are verified by the internal as well as external team of the company such as team secretary, team leader, internal auditor and external auditor.

In case of Procter and Gamble, the motive of the company is to organize various social and environmental programs. This leads the stakeholders engaged with the company. This brings sustainability and innovativeness among the stakeholders. But due to inbound logistics, the management of the company feels easy to report to stakeholders (Procter and Gamble, 2017).

For effective communication with the stakeholders as a whole, the report must contain a balance between the reporting to be made for the internal as well as for the external stakeholders. The main objective behind this is, the report should not be biased and do not contain major variations in disclosure requirement for the internal as well as external stakeholders (Woolworths holding limited, 2006).

Workloads on stakeholders

It has been observed by analyzing the stakeholders review over their respective companies, that the management of the company is unable to present information over the working of the company such as any new innovation made by the company (Leipziger, 2010).

Besides this, it has been observed that sometimes the stakeholders of the company fails to provide their specific requirements to the company, this creates complexity between the understanding of the company and its stakeholders.

Apart from the above issues it has been analyzed that, reporting to the stakeholders lead to affect the principle of confidentiality of the company. The reason behind this is if the company would start providing all the information to its stakeholders it would lead to affect the competitive position of the company in negative manner (Schaltegger, Bernett & Burritt, 2006).

In case of company as Telstra, it has been analyzed that the company has approximately 35000 employees, 1.4 million of shareholders and a huge count of customers. Hence it is difficult for the company as well as for the stakeholders to keep a match between the offerings of the company in its report and the needs and desires of the stakeholders.

It has been observed that the stakeholders find difficulty in analyzing the information as presented in the reporting issued by the company. The reason behind this is use of less facts, and complex language.

Current issues faced by stakeholders

The issues which are faced by the stakeholders are the obstacles which the company faces because of not performing of some required polices by the management. these issues are as: lack of use of proper language in the reporting for the stakeholders, lack of timeline with the company for providing the required information, legal issues or obstacles, inability of the management to inform the required information to the management in a desired manner, the data with the management of the company is not in an structured manner. There can be other factors which lead to obstacles for the shareholders to get informed about the company (Woolworths holding limited, 2012).

Such as in case of Origin energy limited, the company has its major stakeholders as HSBC bank. Therefore while reporting to stakeholders; the company would be requiring to report all about its financial structure and operations which lead to affect the principle of confidentiality.

Furthermore, it has been analyzed that the company does not provides complete and accurate information regarding the dealings of the company. This creates a major burden on the stakeholders who held a major stake in the company. To avoid such situation it has been observed that the company prepares different report so to present in front of stakeholders, this leads to introduction of biasness and partiality concept in the reporting (Origin, 2016).

Recommendations:

It has been analyzed by doing an analysis over the paper on reporting to stakeholders that, the company should use a simple language to make the stakeholders understand regarding the dealings of the company. The reason behind this is, the stakeholder’s word has a wide meaning which involves general layman to big banks. Besides this it is advisable for the companies to use more if factual data to make easy for the stakeholders analyze the future aspects of the dealings of the company (Belal, 2016).

Conclusion:

By analyzing over the report it has been analyzed that the reporting to stakeholders is a routine process that is adopted by the company.  It has also been observed that reporting to stakeholders lays a considerable duty for the company which works at big level or are some public authorities. The reason behind this is, in such organization the trust of stakeholders is more. Hence to fulfill the requirements of the stakeholders of the company, the management of the company should make proper arrangements in complying with the policies and regulations.

References:

Anglo American,. (2017) About us [online]. Available on http://www.angloamerican.com/about-us/at-a-glance (accessed on 24th April, 2017)

Belal, A, R,. (2016) Corporate social responsibility reporting in developing countries: the case of Bangladesh, United Kingdom, Routledge

Caroll, A. Brown, J & Buchholtz,. (2017) Business and society: ethics, sustainability and stakeholders management, USA, Cengage learning

Chinyio, E & Olomolaiye, P,. (2009) Construction stakeholder management, United Kingdom, John Wiley & Sons

Freeman, R, E,. (2010) Strategic management: a stakeholder approach, USA, Cambridge university press

Jepsen, A, L & Eskerod, P,. (2013) Project stakeholder management, England, Grower publishing

Lee, T, A,. (2007) Financial reporting and corporate governance, John Wiley & sons, England

Leipziger, D,. (2010) The corporate responsibility code book- second edition, United Kingdom, Greenleaf publishing

Nanfack, R, B,. (2014) Stakeholder management: The sustainable management of Nestlé’s cocoa supply chain in the Ivory coast, Germany, GRIN verlag

OECD,. (2010) Corporate governance accountability and transparency: A guide for state ownership, OECD publishing

Origin,. (2016) Shareholders review [online]. Available on https://www.originenergy.com.au/about/investors-media/reports-and-results/shareholder-review.html (Accessed on 21th April, 2017)

Probone,. (2013) Sustainability reporting- challenges and benefits [online].  Available on https://probonoaustralia.com.au/news/2013/02/sustainability-reporting-challenges-and-benefits/ (accessed on 21th April, 2017)

Procter and Gamble,. (2017) Overview [online]. available on http://www.pg.com/en_balkans/sustainability/overview.shtml (Accessed on 24th April, 2017)

Schaltegger, S. Bernett, M & Burritt, R,. (2006) Sustainability accounting and reporting, London, Springer science & business media

Wesfarmers,. (2012) Wesfarmers sustainability report 2012 [online]. Available on http://media.corporate-ir.net/media_files/IROL/14/144042/wesfarmers_sr/wesfarmers/engaging.html#collapseTwo (Accessed on 21st April, 2017)

Wesfarmers,. (2017) Stakeholder engagement [online]. Available from http://sustainability.wesfarmers.com.au/our-approach/stakeholder-engagement/ (Accessed on 21st April, 2017)

Woolworths holding limited,. (2006) Stakeholder engagement [online]. Available from http://www.woolworthsholdings.co.za/investor/annual_reports/ar2006/sr/stakeholder.asp (Accessed on 21st April, 2017)

Woolworths holding limited,. (2012) Stakeholders [online]. Available from http://www.woolworthsholdings.co.za/investor/annual_reports/ar2012/integrated/business/our_stakeholders.asp (Accessed on 21st April, 2017)

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