Conflict of interest Collison (1998:7) states that “ Attention to the interests of shareholders above all other groups isimplicit in much of what is taught to accounting and finance students. The...

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Conflict of interest

Collison (1998:7) states that “Attention to the interests of shareholders above all other groups isimplicit in much of what is taught to accounting and finance students. The veryconstruction of a profit and loss account is a continual, and usuallyun-stated, reminder that the interests of only one group of stakeholders shouldbe maximised. Indeed it may be very difficult for accounting and financestudents to even conceive of another way in which affairs could be ordered,even at the algebraic level, let alone the moral”

1.Do you agree or disagree with Collison, and why

2.If ‘profit’ maximisation is biased towards maximisingthe interest of only one stakeholder group, would you expect that over timethere will be less emphasis on profits and more emphasis on other performanceindicators?

3.What might be some of the alternative measures ofperformance?

4.Would Collison’s comments provide a justification formoves towards profit measures that incorporate ‘full costs’ (considers theexternalities of business)?

Provide some currentexamples of companies that support your point of view.

Collison, D.,1998, Propaganda, Accounting and Finance: AnExploration, Dundee Discussion Papers, Department of Accountancy and BusinessFinance, University of Dundee.

Answered Same DayDec 20, 2021

Solution

Robert answered on Dec 20 2021
3 Votes
1. Do you agree or disagree with Collison, and why?
I agree with Collison that it are the share holders and their interests that get maximum attention
in whole business and all the other stakeholders remains marginal. So their interests remain
implicit. A profit and loss account tells about the profitability of the company during the said
period and this as a common practice, all the businesses in the world tries to maximize their
profits. In any case if the profits of the firm are below the expected level, the management is
found to be in trouble and seen trying their best to achieve that. So keeping the firm profitable is
the most important task in the hands of management. This profit is meant for the shareholders
and they are biggest beneficiary of the profits. So the interests of the shareholders are prime
importance for all the business. That is the reason why I agree with Collison.
2. If „profit‟ maximisation is biased towards maximising the interest of only one stakeholder
group, would you expect that over time there will be less emphasis on profits and more emphasis
on other performance indicators?
It is perhaps not possible that profitability will lose its importance at all. Profitability has been
important and will remain important in future too. But the changing business...
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