Question

In: Accounting

You work for an international gas exploration company whose shares are listed on the Australian Securities...

You work for an international gas exploration company whose shares are listed on the Australian Securities Exchange. Recently the company made an application to the New South Wales government to commence coal and gas exploration operations in the Hunter Valley, New South Wales. Therefore, the company is keen to manage its stakeholders to ensure that the exploration licence is granted and there is no negative publicity associated with the operation. Required

(a) Identify four stakeholders the company needs to consider. Justify why each is a stakeholder.

(b) Identify and explain a relevant theory for each stakeholder. Justify why the theory is relevant.

Key stakeholder Discussion why a key stakeholder
1.
2.
3.
4.
Identification of relevant theory for stakeholder Explanation of the relevant theory Why theory is relevant for the stakeholder
1.
2.
3.
4.

Solutions

Expert Solution

a)

1. Suppliers

Suppliers are people or businesses who sell goods to your business and rely on you for revenue from the sale of those goods.

In addition to looking out for their own revenue-generation, suppliers are also often concerned with safety, since their products can directly impact your business’ operations.

A supplier is an external  indirect secondary stakeholder

2.Investors

Investors can include owners but they can also be outside vendors who typically have a right to accurate and timely information such as regular financial statements. Investors may also have the right to approve or reject major decisions like mergers and acquisitions.

An investor does more than just bring you funding to pursue projects that help your business grow. They also can:

  • Contribute ideas and give you advice
  • Bring connections
  • Motivate you

Help promote and improve your business image

An investor is an external primary direct stakeholder

4.

Media

Every business needs media publication relationships to spread the word about their brand. Businesses often need to interact with press to make an important announcement or advertise their product.

The media is an external secondary indirect stakeholder.

4.

Customers

Customers are the people who buy business products. Customers expect to buy the best quality from that business but at a fair price.

A business doesn’t exist without customers. Customers get products from businesses, and because of that, they are interested in how a business performs. In turn, businesses need to make conscious efforts to relate to customers and meet their needs.

Customers expect the business to provide efficient and high-quality products and services. In general, meeting the customers’ needs is an extremely important area of concern for ensuring the success of any business.

Customers are directly impacted by the product quality a business gives.

customers are an external primary direct stakeholder.

The customer is the most important stakeholder of all.Peter Drucker makes this point in his book, The Practice of Management.

b)

Stakeholder Theory is a theory of management that concerns itself with matters related to morals and ethics in running a business. Ian Mitroff, in his 1983 book “Stakeholders of the Organizational Mind,” originally laid out the concept. R. Edward Freeman’s book “Strategic Management: A Stakeholder Approach” points out the groups which are the stakeholders of an organization. Stakeholder theory suggests that a business must seek to maximize value for its stakeholders.

It emphasizes the interconnections between business and all those who have a stake in it, namely customers, employees, suppliers, investors and the community. The business to serve the needs of the stakeholders, and not just the shareholders. Freeman’s can best serve the interests of the stakeholders. Since increasing the wealth of shareholders is not a sustainable goal for businesses in general, many theorists have taken an interest in Stakeholder theory since its rise in the 1980s’.

Donaldson and Preston have argued that there are three aspects of Stakeholder theory. The descriptive approach describes and explains the features and actions of organizations. This includes the process of management, how managers approach managing and the nature of the organization.

In today’s global economy, Professor McDonald says, consumers should be prepared to pay the real price for goods. He speaks of a hypothetical manufacturer of a popular product, which is sold around the world, though primarily in the Americas and Europe.


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