Question

Critically evaluate the following statement: “The only accountability owed by a business is to its shareholders”

Address the following in your answer: a) A discussion of the above statement from a “business case” perspective, including what this perspective tells us in relation to the purpose of business, and who businesses should be accountable to.

b) A discussion of the above statement from a “stakeholder accountability” perspective, including what this perspective tells us in relation to the purpose of business and, who businesses should be accountable to. Use at least TWO different stakeholder groups as examples to support your discussion.

c) In your opinion, which of the above perspectives (business case OR stakeholder accountability) do you think best addresses the objective of accounting to provide useful information to users? Explain why.

Answer 1

A. Business case is advocating that the business should always be trying to maximize the shareholders worth because share holders are the ultimate individuals who are owning the business and they are providing the required funds to the business and the prime focus of the business must be upon the shareholder to maximize their wealth. This perspective tells us that businesses should be accountable to the shareholder because shareholders are the ultimate individuals who are owning the business and they are providing with the required assistance to the business and they are also providing the business the required liquidity to maximize its value in the long run.

B. Stakeholders accountability perspective of the business advocates that the business have various other stakeholders apart from the shareholders and it should be accountable to protect the interest of all of the stakeholders and it should always try to work in value maximization of the business in the long run by protecting the interest of various stakeholders such as society along with government and other employees. Businesses should be accountable to various stakeholders and to different stakeholders group will be Government and employees as businesses should always work in adherence to the government regulation and its should always try to protect the interest of its employees.

C. I think stakeholders accountability perspective is the best perspective for governing a business in the long run because it is adopting the principle of value maximization by protecting the interests of the stakeholders and it is trying to focus upon the long-term sustainability of the business by providing and importance to all of these stakeholders and it is providing an opportunity for the business to sustain and survive in the long run and hence I will have a preference for stakeholders perspective rather than share holders perspective.