Explain the difference between the shareholder primacy theory and stakeholder theory, and discuss the extent to which the new IFRS-S standards are an example of stakeholder theory Flashcards
What is shareholder primacy theory?
It holds that the primary goal of corporate management is maximizing shareholder returns, focusing on financial performance above broader stakeholder interests.
What is stakeholder theory?
It proposes that corporations have responsibilities to a wider array of stakeholders (employees, communities, environment, etc.), not just shareholders.
How do IFRS S1 and S2 potentially reflect a stakeholder perspective?
By requiring disclosure of sustainability and climate impacts, they acknowledge broader social and environmental factors that influence long‐term success, aligning partially with stakeholder interests.
In what way do IFRS S1 and S2 still lean toward investor (shareholder) interests?
They emphasize enterprise value, ensuring disclosures are geared toward investor decision‐making, as opposed to directly addressing the needs of all stakeholder groups.
Why might some argue that IFRS‐S signals a shift toward stakeholder theory?
Environmental and social issues are inherently stakeholder‐oriented; disclosing them suggests a broader accountability beyond short‐term profit maximization.
Can IFRS‐S standards be considered a hybrid approach?
Yes. They prioritize investor needs (shareholder primacy) but also incorporate sustainability data tied to stakeholder concerns, effectively blending the two theories.
How might Tregidga & Laine discuss integrated reporting in relation to stakeholder theory?
They note that integrated reporting combines financial and non‐financial (ESG) factors, recognizing multiple stakeholders in value creation—aligning with stakeholder theory principles.
