Question Tag: Stakeholders

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  • 8 Marks

BMF – May 2024 – L1 – SB – Q4a – Business and Organizational Structures and Choices

Definition of stakeholders and explanation of internal stakeholders of a company.

a. Define the term “Stakeholder.” (2 Marks)
Explain briefly THREE internal stakeholders of a company. (6 Marks)

a. Stakeholder: A stakeholder is any individual, group, or organization that has an interest in or can affect or be affected by the activities, objectives, and policies of a business. Stakeholders can include both internal and external parties.

Internal Stakeholders:

  1. Employees: Employees are crucial stakeholders as they are directly involved in the day-to-day operations of the company and are affected by its success or failure.
  2. Managers: Managers play a key role in decision-making and steering the company towards its objectives. They are responsible for the efficiency and productivity of the company.
  3. Owners/Shareholders: Owners or shareholders have a financial stake in the company’s success and influence major decisions through voting rights and governance structures.
  • 10 Marks

FA – May 2024 – L1 – SB – Q1a – Users of Accounting Information and Their Needs

Explains how different stakeholders use financial statements and the impact of digital technologies on accounting systems.

a. Explain the information needs of different stakeholders who use financial statements and how financial statements fulfill those needs. (10 Marks)

b. Briefly explain the impact of digital technologies on accounting systems, focusing on machine learning and artificial intelligence, data analytics, mobile accounting, and specialized accounting software. (10 Marks)

a. The following are the stakeholders who make use of financial statements and how financial statements fulfill their information needs:

  1. Owners/Investors: They need accounting information to assess the profitability of the business, evaluate management performance, and make investment decisions. The statement of profit or loss and statement of financial position provide insights into the financial performance and financial health of the business.
  2. Management: They require financial information to plan, monitor, and control business activities. The statement of cash flows, along with profit and loss statements, helps management evaluate operational efficiency and financial planning.
  3. Employees: Employees are interested in the profitability and sustainability of the business, as it impacts their job security and benefits. They use the statement of profit or loss to evaluate how well the company is doing and whether it can continue to offer them employment.
  4. Creditors and Lenders: Creditors use financial statements to evaluate the company’s ability to repay loans and meet financial obligations. They focus on the statement of financial position and the statement of cash flows.
  5. Government/Regulators: The government uses financial statements to determine the tax liabilities of the business and ensure compliance with financial regulations. Tax authorities rely on the statement of profit or loss for this purpose.
  6. Suppliers: Suppliers look at financial statements to assess the company’s liquidity and creditworthiness, ensuring that the company can pay for goods or services supplied. The statement of financial position helps assess short-term liquidity.
  • 10 Marks

CR – May 2018 – L3 – Q5a – Beyond financial reporting

Explain how integrated reporting merges sustainability reporting and financial reporting.

“Integrated reporting advances the proposition that sustainability reporting and financial reporting are inherently linked and thus would benefit from merging.” – Bob Massie, co-founder of the Global Reporting Initiative.

Required:
Explain how integrated reporting merges sustainability reporting and financial reporting.

Explanation of Integrated Reporting:
Integrated reporting combines sustainability reporting and financial reporting into a single, cohesive framework. This allows companies to provide a comprehensive picture of how they create value over time, considering both financial and non-financial factors. Here are the key ways in which integrated reporting merges sustainability and financial reporting:

  1. Linking Financial Performance with Sustainability:
    Traditional financial reporting focuses on profitability, revenues, and expenses, while sustainability reporting looks at environmental, social, and governance (ESG) issues. Integrated reporting brings these together, showing how sustainability initiatives (e.g., reducing carbon emissions or improving labor practices) directly impact the company’s financial performance and long-term value creation. For example, cost savings from energy efficiency improvements can enhance profitability.
  2. Capitals in Integrated Reporting:
    The integrated reporting framework focuses on multiple “capitals,” which are resources and relationships that organizations use to create value. These include:

    • Financial Capital: Traditional financial resources such as equity and debt.
    • Manufactured Capital: Physical assets like plants and machinery.
    • Intellectual Capital: Knowledge-based assets such as patents and proprietary technology.
    • Human Capital: Employee skills, well-being, and motivation.
    • Social and Relationship Capital: Relationships with stakeholders, including customers and communities.
    • Natural Capital: Environmental resources, including water, air, and biodiversity.

    The inclusion of non-financial capitals (e.g., social and environmental factors) alongside financial capital helps to demonstrate the full range of factors that contribute to the company’s success.

  3. Holistic View of Performance:
    Integrated reporting provides a holistic view of a company’s performance by combining both financial and non-financial information. This approach ensures that stakeholders understand how the company’s operations, strategy, and governance are aligned with its sustainability goals and financial objectives.
  4. Future-Oriented Reporting:
    Integrated reporting emphasizes the future, focusing on how a company’s strategy and sustainability practices will impact its ability to create value over the long term. This is in contrast to traditional financial reports, which tend to focus on historical financial performance. Integrated reporting allows companies to communicate their long-term sustainability initiatives and how these initiatives will enhance future profitability and resilience.
  5. Guiding Principles:
    Integrated reporting is based on guiding principles such as materiality, stakeholder inclusiveness, and reliability. This ensures that both financial and non-financial data are relevant and meaningful to stakeholders, promoting transparency and accountability. Stakeholder relationships, risks, and opportunities are reported in a way that links sustainability with financial outcomes.
  6. Strategic Alignment:
    Integrated reporting encourages companies to align their business strategy with sustainability objectives, leading to better decision-making. This alignment helps companies manage risks and capitalize on opportunities related to ESG factors, ultimately improving financial performance.
  7. Improved Communication with Stakeholders:
    By merging sustainability and financial reporting, integrated reports provide a more comprehensive view for stakeholders, including investors, customers, employees, and regulators. It allows stakeholders to understand not only the company’s financial performance but also its broader social, environmental, and governance impacts, helping them make informed decisions.

Conclusion:
Integrated reporting merges sustainability and financial reporting by providing a more complete, future-oriented, and stakeholder-inclusive view of how a company creates value. It emphasizes the interconnectedness of financial performance and sustainability initiatives, demonstrating that long-term success depends on both.

  • 10 Marks

CR – May 2016 – L3 – Q3a – Beyond financial reporting

Discuss principles and key components of the IIRC's Framework for integrated reporting, and concerns about its suitability for assessing entity prospects.

At a recently concluded Annual General Meeting (AGM) of a company, one of the shareholders remarked; “historical financial statements are essential in corporate reporting, particularly for compliance purposes, but it can be argued that they do not provide meaningful information. After having issued a series of environmental and then sustainability reports, it is apparent that although the numbers were allowing a true and fair review of the company’s performance, operations and management they were not necessarily relevant to stakeholders. The International Integrated Reporting Council (IIRC) is calling for a shift in thinking more to the long term, to think beyond what can be measured in quantitative terms and to think about how the entity creates value for its owners” the statement concluded.

Required: Discuss the principles and key components of the IIRC’s Framework, and any concerns which could impede the Framework’s suitability for assessing the prospects of an entity.

The International Integrated Reporting Council (IIRC) has released a framework for integrated reporting. The Framework establishes principles and concepts which govern the overall content of an integrated report. An integrated report sets out how the organization’s strategy, governance, performance and prospects can lead to the creation of value. The IIRC has set out a principles-based framework rather than specifying a detailed disclosure and measurement standard. This enables each company to set out its own report rather than adopting a checklist approach. The integrated report aims to provide an insight into the company’s resources and relationships, which are known as the capitals and how the company interacts with the external environment and the capitals to create value. These capitals can be financial, manufactured, intellectual, human, and social relationship, and natural capital but companies need not adopt these classifications. Integrated reporting is built around the following key components:

(i) Organizational overview and the external environment under which it operates (ii) Governance structure and how this supports its ability to create value (iii) Business model (iv) Risks and opportunities and how they are dealing with them and how they affect the company’s ability to create value (v) Strategy and resource allocation (vi) Performance and achievement of strategic objectives for the period and outcomes (vii) Outlook and challenges facing the company and their implications (viii) The basis of presentation needs to be determined including what matters are to be included in the integrated report and how the elements are quantified or evaluated.

The Framework does not require discrete sections to be compiled in the report but there should be a high level review to ensure that all relevant aspects are included. An integrated report should provide insight into the nature and quality of the organization’s relationships with its key stakeholders, including how and to what extent the organization understands, takes into account and responds to their needs and interests. Further, the report should be consistent over time to enable comparison with other entities. The IIRC considered the nature of value and value creation. These terms can include the total of all the capitals, the benefit captured by the company, the market value or cash flows of the organization and the successful achievement of the company’s objectives. However, the conclusion reached was that the Framework should not define value from any one particular perspective because value depends upon the individual company’s own perspective. It can be shown through movement of capital and can be defined as value created for the company or for others. An integrated report should not attempt to quantify value as assessments of value are left to those using the report. The report does not contain a statement from those ‘charged with governance’ acknowledging their responsibility for the integrated report. This may undermine the reliability and credibility of the integrated report. There has been discussion about whether the Framework constitutes suitable criteria for report preparation and for assurance. There is a degree of uncertainty as to measurement standards to be used for the information reported and how a preparer can ascertain the completeness of the report. The IIRC has stated that the prescription of specific measurement methods is beyond the scope of a principles-based framework. The Framework contains information on the principles-based approach and indicates that there is a need to include quantitative indicators whenever practicable and possible. Additionally, consistency of measurement methods across different reports is of paramount importance. There is outline guidance on the selection of suitable quantitative indicators.

There are additional concerns over the ability to assess future disclosures, and there may be a need for confidence intervals to be disclosed. The preparation of an integrated report requires judgment but there is a requirement for the report to describe its basis of preparation and presentation, including the significant frameworks and methods used to quantify or evaluate material matters. Also included is the disclosure of a summary of how the company determined the materiality limits and a description of the reporting boundaries. A company should consider how to describe the disclosures without causing a significant loss of competitive advantage. The entity will consider what advantage a competitor could actually gain from information in the integrated report, and will balance this against the need for disclosure.

  • 5 Marks

CSEG – Nov 2015 – L2 – Q4a – Organisational mission and objectives

Outline five common elements included in most mission statements.

A mission statement describes an organization’s basic purpose and what it is trying to achieve. It can play an important role in the strategic planning process. There is no standardized format for mission statements. However, there are common elements included in most mission statements.

Outline any FIVE (5) of these elements. [5marks]

Common elements in mission statements

  1. Stating the purpose of the organization
  2. Stating the business areas in which the organization intends to operate
  3. Providing a general statement of the organization’s culture
  4. Acting as a guide to develop the direction of the entity’s strategy and its goals/objectives
  5. Customers. Who are the enterprise’s customers?
  6. Products or services. What are the firm’s major products or services?
  7. Markets. Where does the firm compete?
  8. Technology. What is the firm’s basic technology?
  9. Concern for survival, growth, and profitability. What is the firm’s commitment towards economic objectives?
  10. Philosophy. What are the basic beliefs, values, aspirations, and philosophical aspirations of the firm?
  11. Self-concept. What are the firm’s major strengths and competitive advantages?
  12. Concern for public image. What is the firm’s public image?
  13. Concern for employees. What is the firm’s attitude toward employees?

(Any 5 @ 1 mark) (5 marks)

Note: Any student who approaches this question from the Ashridge College model perspective should earn the full mark. Find below

  1. Purpose: Why does the company exist? Who does it exist for?
  2. Values: are the beliefs and moral principles that underlie the organisation’s culture.
  3. Strategy: provides the commercial logic for the company (the nature of the organisations business), and so addresses the following questions. ‘What’s our business? Or, what should it be?’ What are our elements of sustainable competitive advantage?
  4. Policies and standards of behavior: provides guidance on how the organistaion’s business should be conducted.
  • 4 Marks

CSEG – May 2016 – L2 – Q6b – Strategy evaluation and control

Explain the term stakeholders and identify two groupings of stakeholders, focusing on their importance in corporate strategy formulation.

One of the important tasks in the formulation of corporate strategy is stakeholders’ analysis.

Required: Explain the term stakeholders and identify TWO groupings of stakeholders. (4 marks)

A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization’s actions, objectives and policies.

Groupings of stakeholders When identifying stakeholders it is not enough to focus on the formal structure of the organisation. It is necessary to have a look at informal and indirect relationships too. There are a number of ways of classifying stakeholders according to criteria based on how stakeholders relate to organisational activities. A useful model for this purpose is to visualize the stakeholder environment as a set of inner and outer circles. The different classifications of organisational stakeholders are:

  1. Internal and external stakeholders
  2. Narrow and wide stakeholders
  3. Primary and secondary stakeholders
  4. Active and passive stakeholders
  5. Voluntary and involuntary stakeholders
  6. Legitimate and illegitimate stakeholders
  7. Financial and Non-financial stakeholders
  8. Internal versus external stakeholders Here, stakeholders are distinguished depending on whether they are part of the organisation – i.e. have a formal working relationship with the organisation – or are external to the organisation. Internal stakeholders include employees, management and board of directors, and possibly trade unions. External stakeholders include customers, competitors and suppliers. It could also include all other groups which do not form part of the internal organisation’s structure.
  9. Narrow versus wide stakeholders This classification describes the degree to which the stakeholder group is affected by the activities of the organisation.

Narrow stakeholders are used to describe stakeholders who are most affected or who are most dependent on organisational output. Examples of such stakeholders include shareholders, employees, management, customers and suppliers.

Wide stakeholders, on the other hand, refer to those who are less affected or dependent on the organisation’s output. This category includes government and its agencies, the wider community and non-dependent customers.

  • 4 Marks

BCL – May 2020 – L2 – Q3b – Employment Law

Discuss the stakeholders in a sexual harassment case and the impact of employees' prior knowledge on their right to claim.

‘Las Panas’ is a successful chain of restaurants and bars that features female waitresses in white spaghetti tops and very short red skirts. Five former waitresses filed a class action lawsuit, alleging that the atmosphere ‘Las Panas’ created in its restaurants allowed them to be sexually harassed by customers, cooks, and managers. Ama Smith, one of the waitresses, noted on a radio super morning show program that the ‘Las Panas’ mandatory uniforms caused them to be sexually harassed. Meanwhile, ‘Las Panas’ continues to enjoy great success, and it recently received an award as the Best Marketing Company.

Required:

i) Identify the key stakeholders in this case.
(2 marks)

ii) Supposing the women knew of the problems when they agreed to work at ‘Las Panas’, what bearing should such knowledge have on their right to the alleged harassment?
(2 marks)

 

i) Key Stakeholders:

  • Las Panas: The restaurant chain is central to the issue due to its policies and the working environment it created.
  • Former Waitresses (Plaintiffs): They are directly involved as the individuals alleging harassment.
  • Customers, Cooks, and Managers: These groups are implicated in the harassment allegations.
  • General Public and Media: As influencers of public perception and amplifiers of the issue through media coverage.

(2 marks)

ii) Impact of Prior Knowledge (Volenti Non Fit Injuria):

  • Volenti Non Fit Injuria: This legal principle implies that if the waitresses knew of the potential for harassment when they agreed to work at ‘Las Panas’, they may have consented to the risk associated with the work environment.
  • Legal Bearing: The principle suggests that individuals who voluntarily expose themselves to known risks may have limited grounds for claiming compensation for resulting harm. However, this does not absolve the employer of responsibility if the work environment was inherently unsafe or the harassment exceeded reasonable expectations.

(2 marks)

  • 10 Marks

BMIS – Nov 2021 – L1 – Q1b – The business organization and its stakeholders

Classify organizational purposes under profit-oriented and non-profit-oriented categories.

Two organizations operate in your locality, one operates as profit-oriented and the other as non-profit-oriented. They all have varying purposes.

Required:
You are required to categorize the following purposes under the two types of organizations:

  1. To expand product range to include children’s clothing.
  2. To expand social protection interventions to include girls between the ages of 15-18 years.
  3. To ensure that visitors to public parks pay an entry fee of GH¢1.00 for its maintenance.
  4. To create high quality, high demand products to maximize shareholder value.
  5. To provide excellent client services to enhance public goodwill, which will in turn, attract more government funding.
  6. To increase after-tax profits to attract more investors to invest in the organization.
  7. Provide customers with the opportunity to benefit from the company’s profits by offering periodic prizes for the purchases they make.
  8. Increase annual dividends by 3% of the current amount paid.
  9. Install vending machines at strategic points to sell non-alcoholic beverages to visitors.
  10. Market facility on the internet to attract global patronage.

Categorization of Organizational Purposes

Non-profit Organization Profit-oriented Organization
1. To expand social protection interventions to include girls between the ages of 15-18 years. 1. To expand product range to include children’s clothing.
2. To ensure that visitors to public parks pay an entry fee of GH¢1.00 for its maintenance. 2. To create high quality, high demand products to maximize shareholder value.
3. To provide excellent client services to enhance public goodwill, which will in turn, attract more government funding. 3. To increase after-tax profits to attract more investors to invest in the organization.
4. Install vending machines at strategic points to sell non-alcoholic beverages to visitors. 4. Provide customers with the opportunity to benefit from the company’s profits by offering periodic prizes for the purchases they make.
5. Market facility on the internet to attract global patronage. 5. Increase annual dividends by 3% of the current amount paid.

(1 mark each for any correct categorization: 10 × 1 mark = 10 marks)

  • 4 Marks

PSAF – May 2018 – L2 – Q1a – The context of public financial management

Identify four stakeholders of public sector financial statements and describe their information needs.

Financial reporting is very important to the media because it assists them in making analysis. It also helps them to know how government financial information impacts on all aspects of the economy as well as for advocacy where the need arises.

Required:
Identify FOUR other stakeholders who use public sector financial statements and their information needs.

Other stakeholders or users of public sector financial statements and their information needs are as follows:

Stakeholder/Users Information Needs
Parliament – Assessing accountability and stewardship of public managers and agencies
– Assessing compliance with the legally adopted budget and other enactments
– Assessing the economy, efficiency, and effectiveness of operations of public sector entities
– Monitoring and evaluating public financial performance of government
Citizens (taxpayers and voters) – Assessing the cost of public services
– Assessing accountability and stewardship of government
– Making voting decisions to some extent
Loan creditors (IMF, World Bank, etc.) – Assessing creditworthiness of the country
– Determining the extent of compliance with debt conditions and terms
Investors in government securities – Assessing coupons and the ability of government to honor repayments and coupons
Donors and sponsors – Seeking accountability for donor funds and compliance with donor terms and conditions
Auditor General – Auditing purposes and accountability in general
Financial analysts/Rating agencies – Financial advisory purposes for their clients
Employee groups/Trade unions – Wage negotiations and security of jobs
Government statistician – National accounting purposes
Pressure groups/Civil society groups – Demanding accountability, performance, and compliance to rules from government

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