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ACCA Strategic Professional · Strategic Business Leader · Reporting to stakeholders

Tamsin Retail's board argues that voluntary social and environmental disclosure is pointless because investors only care about profit. The company secretary proposes continuing it. Which argument best supports the company secretary's view from a legitimacy and stakeholder perspective?

The best argument is that disclosure helps maintain the organisation's social licence to operate and manages relationships with stakeholders who influence long-term success. This reflects legitimacy and stakeholder perspectives. It is not universally mandatory, does not guarantee short-term profit and does not replace financial audit.

  1. ADisclosure helps maintain the organisation's social licence to operate and manages relationships with stakeholders who can affect its long-term successCorrect
  2. BDisclosure is legally required in every jurisdiction so there is no choice
  3. CDisclosure will automatically increase short-term profit
  4. DDisclosure replaces the need for any financial audit

Explanation

Legitimacy theory holds that organisations need society's approval, their social licence, to operate, and stakeholder theory says that stakeholders can affect long-term success. Disclosure supports both. The other options overstate: it is not universally mandatory, does not guarantee profit, and does not replace financial audit.

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