Assessment Task 2 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: ·...

WHY BOARDS MUST LOOK BEYOND SHAREHOLDERS
ASSESSMENT TASK 2
Executive Summary
The cu
ent report ponders upon the issues that arise out of the conflict between the interests of the shareholders to that of the stakeholders of an organisation. In order to make the approach more comprehensible to ordinary populace, ample details about the role of shareholders, stakeholder and the role of an organisation is provided. In addition, the theories such as the shareholder theory, stakeholder theory is discussed as well. In the following section of the theoretical discussion, relevant issues, that are evident in recent time are identified and based on that issues, suitable suggestions are made in the next following segment. Lastly, an apt conclusion is provided so that readers can reach a standpoint and make their own assessment.
Table of Contents
Introduction    4
Significance of Shareholders and Stakeholders in the Context of Organisational Priorities    4
Role of Shareholders    4
Role of Stakeholders    4
Role of an Organisation    5
Issues of Placing Shareholders’ Interest over Stakeholders’ Interest    5
Inconsistent Quality Refinement    5
Lesser Profit Making and Increased Dependency on Shareholders    6
Tarnished Social Image for Relying on Fa
icated Reports    6
Rationality behind Placing Stakeholders above Shareholders in an Organisation    7
Stakeholders Provide Consistency    7
Stakeholders make Organisations, Self-independent    7
Stakeholders Contribute to Society    7
Suggestions for Resolving Issues arising out of Prioritising Shareholders over Stakeholders    8
Developing Financial Statement, Justifying the Ratios of Profit Distribution    8
Conclusion    9
References    10
Introduction
The formation of an organisation depend largely on the amount of monetary resources invest in it, by its shareholders. The organisation generates and sustains its operational powers through its employees, investors, customers, collectively termed as the stakeholders. As the organisation casts more importance to its shareholders at the time of making decisions, the interest of the stakeholders are overlooked in many cases, leading to organisational issues that are placed in the category of Corporate Social Responsibilities (CSR). The lack of emphasis on the interest of the stakeholders, impact the consistency of the organisation and undermines the organisation’s true potential. In the cu
ent report, an in-depth and evidence based argument is framed, from the perspective of the corporate governance consultant of Australian Institute of Company Directors (AICD).
Significance of Shareholders and Stakeholders in the Context of Organisational Priorities
Role of Shareholders
Shareholder may not provide consistent support to an organisation; however, it does help in its formation. As stated by Eccles and Youmans (2016), shareholders are people, who invest heavily in an organisation, providing it with the monetary resources it requires to accumulate human resource, manufacture products, conduct research and development, structure of the organisation and most importantly generate the power that give the organisation the initial push required for entering the market. In an organisation, shareholders mainly restrict their activities within the framework of financial investment. As opined by Harford et al. (2018), despite the limited control, shareholders exert over the decision making of an organisation, shareholders influence the entire process of decision making. As example, the management of an organisation decides what type of advertising mode it would use, without considering its shareholders recommendations; however, it does modify its suggested advertising means depending on the capacity of the stakeholders’ capacity of investment.
Role of Stakeholders
Stakeholders do not possess the same amount of importance, when seen from the perspective of massive monetary investments, structure formation and development; however, stakeholders do have their specific role in an organisation. As assessed by Bouzon et al. (2018), stakeholders provide an organisation with functional stability, consistency and yield the power to sustain in the market. Considering aspect of financial aspect, stakeholders are of two types, non-financial stakeholders and financial stakeholders. The non-financial stakeholders, such as employees of the organisations, and customers does not provide financial support however, they do ensure the flow of cash towards the profitability of the organisation. The financial stakeholders, namely the bondholders do provide ample financial stability helping in making consistent profit. As example it can be seen that although the stakeholders does not have any power to influence or contribute in the decision making of an organisation, they do provide the power that enables any adopted decision to be functionalised.
Role of an Organisation
The role played by an organisation derives its priorities from selection of one out of two contradictory theories – the shareholder theory and the stakeholder theory. As comprehended by Vargas-Hernandez and Gonzalez (2018), shareholders theory places the shareholders of an organisation above its stakeholders, as profit making and satisfying the interest of the shareholders is placed as the primary goal of any business. In case of fund based businesses, such as in banking sector, the shareholders are given more priority than that of stakeholders. As the infrastructural changes and market investment requires huge amount of monetary funds, shareholders are marked as the primary support to the organisation and given more importance. However, in retail organisations, the stakeholder theory proves to be more appropriate. As affirmed by Ba
y (2018), stakeholder theory focuses on the organisational abidance to the cause of the stakeholders, who contribute manual power in the...