It is possible to use the stakeholders theory in analyzing the case study ‘Westpac chief admits banks failed in the bush’ by Sid Harris (Deegan 2009, p.326). According to the stakeholder’s theory, the issue of ethics and morality are important in making sure that the managerial decisions of the organization do not negatively affect the stakeholders. Westpac Bank’s decision to close some of its branches in rural areas is both unethical and illegitimate in nature.
However, the illegitimacy of the decision is only emerges when analyzing the case on the perspectives of the community’s. It is clear that the bank presence in the rural areas makes the community a pertinent beneficiary. In addition, the case gives an insight into the interests of other major stakeholders in rural banking.
For example, the case refers to an intense competition between banks and government deregulations common the area. This makes the competitors and the government the major stakeholders. It also makes then gain a significant influence on the bank’s decision. Apart from the bank employees, the case also refers to other major stakeholders such as telecommunication companies.
The purpose of these stakeholders was to offer technology for in-store operations. The stakeholder’s theory states that if the company does not make certain decisions, then its impact on stakeholders, the company and the community will not take place. Therefore, it was necessary to carry out a major assessment on the binding social contract and evaluation by all stakeholders (Friedman & Miles 2006, p. 54).
In one of the health surveys done in Canberra, the stakeholder’s theory supports critical issues affecting the society (Deegan 2009, p. 369). For example, it is evident that people rely heavily on the environment, while its pollution is detrimental to both the business and human health.
Another scenario where stakeholders theory applies is in the article ‘Bank to slash extra 1000 jobs’ by Nicola Webber. Webber’s article investigates and analyses how an unethical decision by Commonwealth Bank to retire its staff affects various stakeholders (Deegan 2009, p. 369).
This decision is unethical, considering that the bank is still gaining high profits. The need for a social charter provides an evidence for a social contract. This acknowledges that corporations are still liable to communities. On the other hand, the case study also shows how other important stakeholders like the consumer advocates, the government and labor unions are key stakeholders in businesses. Ethical considerations are essential in determining the morality of business decisions.
Institutional theory is also applicable in the case study. Institutional theory asserts that certain trends and cultures may have an impact on the institutional or corporate policies, but only if they are relevant to the prevailing environmental conditions or regulations (Tool 2000, p 222). This compliance to the prevailing conditions makes organizations thrive. For example, competition and government deregulation has made the bank pull out of business in rural areas. Businesses normally do this.
A social contract is another form of institutionalism. A social contract is important in ensuring that an organization develops good relations with the community. This form of institutionalism is also evident in the case study ‘Bank to slash extra 1000 jobs’ by Nicola Webber.
In understanding accounting theories, the theory of legitimacy is another important concept. Legitimacy theory depicts that certain obligations bind corporations to ensure the communities in which they operate benefit from their activities (Hoque 2006, p. 169).
From this perspective, a social contract becomes legitimate and an important consideration before starting any business within any given social-setup. In case of the Westpac Bank, the bank already lacked legitimacy because its existence did not benefit the community. It was necessary to challenge the existence of the bank in the rural areas because it was already in a social contract with the local community. The same problem occurs in the case of Commonwealth Bank that failed to protect its staff’s jobs.
The management of the Commonwealth Bank lacks to understand the impact of the loss of 1000 jobs. The bank is supposed to consider the implication the decision will have on the community. Most of those who lost their jobs are vulnerable to antisocial behavior such as crime and drug abuse. The way in which corporations take responsibility in ensuring their operations should not affect the environment.
This is an important way of evaluating the legitimacy of corporations. For example, ensuring that the corporation’s affluent and waste do not pollute the environment is critical. Otherwise, by not protecting and preserving the environment, a corporation is liable to penalties by relevant authorities.
In each case discussed above, there are theories that best define the scenarios. For example, both the stakeholder’s theory and the legitimacy theory best analyze the Westpac’s Bank case. On the other hand, legitimacy theory highly focuses on the environmental impact of some organizational decisions.
Therefore, it is good in analyzing the health survey study in Canberra. Finally, the three accounting theories (institutional, legitimacy and stakeholders’ theory) best analyze the Commonwealth Bank case. The fact that the case has an impact on stakeholders, business culture and the environment provides a justification for the analysis.
References
Deegan, C, 2009, Financial accounting theory, McGraw-Hill, Sydney.
Friedman, A & Miles, S 2006, Stakeholders: Theory and practice: theory and practice, Oxford University Press, New York.
Hoque, Z, 2006, Methodological issues in accounting research: Theories, methods and issues, Sprimus Press Ltd, New York.
Tool, M, 2000, Value theory and economics progress: The institutional economics of J. Fagg Foster, Springer, New York.