University Accounting Assignment: ACC5AAI Question 1 Analysis

This assignment solution addresses Question 1 from the ACC5AAI Advanced Accounting Issues course. The solution focuses on stakeholder theory, analyzing why a bank should prioritize the concerns of small businesses and regional communities. It explains the stakeholder theory's principles, contrasting it with shareholder-centric approaches. The assignment highlights the importance of considering all stakeholders, including customers, employees, and the community, for long-term business success. The solution emphasizes the potential negative impacts of ignoring stakeholder interests, such as the bank's decision to centralize operations, and how this restructuring could affect relationships with clients and employees. The analysis incorporates references to academic literature supporting the stakeholder theory perspective.

Question 1 1
Question 1
by Student’s Name
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Professor’s Name
University Name
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Question 1 2
Question 1
The bank ought to care about the concerns of the small business sector and the regional
business communities because they are part of stakeholders, which the bank needs to satisfy. In
the stakeholder theory, the goal of the organization should be to create value for all its
stakeholders, unlike the traditional approach that a profit-making entity should pursue only the
interest that maximizes the shareholder's wealth (Fontaine, et al., 2006). According to
stakeholders theory, a firm has obligation to maximize the value of other stakeholders besides
the company shareholders (Baumfield, 2016). A stakeholder is a firm or person including
communities that are affected by or affects the objectives of an organization. In this case, the
bank ignored the interest of its small business and regional clients in pursuit of profit
maximization. The stakeholder approach follows a wider perspective compared to the
shareholder approach as it looks beyond just the interest of the shareholders (Alia & Abdelfettah,
2016). This all rounded approach has the benefits since most of the stakeholder interest may be
directly or indirectly linked to the achievement of the shareholders’ interests (Nwanji & Howell,
n.d.). For example, minding the interest of other stakeholders such as customers, employees,
suppliers, communities, and the government may create a good relationship between them and
the company increase productivity and acceptance of the firm to the stakeholders (Harrison, et
al., 2015).
If the bank applied the stakeholders approach, it should have listened to other stakeholder
and consulted them about the idea of centralizing it operations and restricting with an aim of
cutting costs. The bank would have realized what their clients in the small business sector and
regional business communities feel about the idea of transferring managers to the capital offices
or laying them off and removing the element of face to face communication. The bank would

Question 1 3
have realized maybe their clients value personal relationships, which would be greatly affected
by this cost-cutting restructuring. Additional the bank also failed to consider the concerns of its
employees who were being laid off or transferred and even those who were retained as their
workload was set to increase significantly.
References
Alia, A. & Abdelfettah, B., 2016. An overview on stakeholder theory perspective: towards managing
stakeholder expectation. International Academic Journal of Accounting and Financial Management, 3(3),
pp. 40-53.

Question 1 4
Baumfield, V. S., 2016. Stakeholder theory from a management perspective: Bridging the
shareholder/stakeholder divide. Australian Journal of Corporate Law, 31(1), pp. 187-207.
Fontaine, C., Haarman, A. & Schmid, S., 2006. The Stakeholder Theory. s.l.:s.n.
Harrison, J. S., Freeman, R. E. & Abreu, M. C. S. d., 2015. Stakeholder Theory As an Ethical Approach to
Effective Management: applying the theory to multiple contexts. Review of Business Managemnt,
17(55), pp. 858-869.
Nwanji, T. I. & Howell, K. E., n.d. The Stakeholder Theory in the Modern Global Business Environment.
International Journal of Applied Institutional Governance, 1(1), pp. 1-9.