Assessment Task 2 

Due Date: 5.00pm Monday 7 August 2017 

Length: 2,000 words total (+/- 10%). Reference list and cover sheet details are  not included in this word-limit total. 

Weighting: 25% of total unit marks  

Assessment Criteria: 

∙ Demonstration of knowledge of the issues and evidence of wide  reading to support your analysis 

∙ Demonstration of your ability to apply the knowledge to identify keys  issues leading to your recommendations 

∙ Evidence of sound reasoning and the exercise of professional  judgement to support your recommendations 

∙ Development and statement of concise recommendations for  presentation to the AICD 

∙ Overall structure and professional presentation of the report to the  AICD  

∙ High quality written communication of concepts and terms in ordinary  English as not all readers of the report can be assumed to be specialists  competent in corporate governance  

Case Study 

'As a separate legal person, a corporation has two basic objectives: To survive and to  thrive. Shareholder value is not the objective of the corporation; it is an outcome of  the corporation's activities. While shareholders entrust their stakes in a corporation  to the board of directors, shareholders are just one audience among others that the  board may consider when making decisions on behalf of the corporation. 

These audiences, typically called stakeholders, may also include other financial  stakeholders, such as bondholders, and nonfinancial stakeholders, such as employees,  customers, suppliers, and NGOs representing various concerns of civil society. In the  face of limited resources, no matter how large the corporation, directors must make  choices regarding the significance of the corporation's many audiences.' 

Source: Robert G Eccles and Tim Youmans (2015) 'Why Boards Must Look Beyond  Shareholders', MIT Sloan Management Review 

Required 

Assume you have been employed as a corporate governance consultant by the  Australian Institute of Company Directors (AICD). The AICD is concerned that many  company directors hold the opinion that the company's board of directors has a  responsibility to place the interests of shareholders above all other stakeholder  interests.  

Your assignment is to prepare a report to be submitted to the AICD evaluating the  evidence that the responsibility of a company director is to place shareholder interests  above those of other stakeholders. Specifically, the AICD has requested that your  report contain evidence, examples and recommendations for company directors that  will guide them when making board decisions so they are responsive to diverse  stakeholder audiences. The AICD has advised you that they intend to make your  report a public document and it will be uploaded to the website so it can be read by  both corporate governance specialists and non-specialists.

Executive summary

Corporate governance is an important area that the board of directors have to take care of. A corporation has various people who have an interest in its work and growth. These interested parties are referred to as stakeholders. Most directors prioritise only the shareholders over all other shareholders, and as a result of many often, there is discontent among other stakeholders. This report showcases the role of various stakeholders that include shareholders, customers, employees, financial institutions, society and governing bodies. Although shareholders have greater power and influence over the conduct of the business, all other stakeholders provide the much-needed support in terms of manpower, finance, credit backing, goodwill and materials for the running of the business. 

Shareholders often get involved in the act of lobbying and use the power of their votes to influence corporate decisions. They provide major financial contribution in terms of capital investment and expect growth and capital gains. Hence, they are definitely the most important stakeholder. But without employees, there would be no conduct of business, and without the support of governing bodies, the conduct of business is impossible. Due to these reasons, every corporate director has to analyse each situation on a case to case basis and prioritise the interests of various stakeholders.

Introduction

Australian Institute of Company Directors (AICD) has asked for evaluating the responsibilities of a company towards all its stakeholders, including the company’s shareholders. While every company that has or intends to raise funds for its business has to keep its shareholders happy, it is also imperative to provide sufficient impetus to other stakeholders such as employees, vendors, customers, governing bodies and the board. This report aims to evaluate and assess the role of various stakeholders in a business and to guide the director about the responsibilities towards the various stakeholders. 

Stakeholders of an organization

Although Shareholders of the organisation occupy the most important position in most companies (Alexander, et al., 2015), stakeholders – those who have an interest in the organisation but do not own a share of it are also important. There are various stakeholders that form part of a business or non-profit entity.

(Some parts of the solution has been blurred due to privacy protection policy)