Accounting Theory and Practice

Article 2 – Warnings Job Keeper Payments Could Boost Company Profits and Executive Bonuses

Sydney Morning Herald, July 3, 2020

With the recent Covid-19 pandemic situation, the job keeper payments were a well-needed lifeline for many businesses across Australia. This payment saw businesses receive $1500 a fortnight for each eligible employee. To be eligible the business had to demonstrate a 30% to 50% decline in revenue. This scheme saw companies such as the footwear retailer Accent Group receiving upwards of $30 million. This had a material impact on their financial reports, leading to their profits and share prices for this year to be at least 10% higher than the previous year. Such things happening to businesses all over Australia have mounted the concern around executive remunerations being arterially stimulated at the expense of the taxpayers. This led to regulatory boards such as ASIC releasing a statement advising companies to take significant discretion with remuneration for the year, and make sure to avoid unintended variable pays as a result of Covid-19.

Stakeholder Theory – Managerial Branch (Positive Theory)

Stakeholder theory explores the business world examining the interconnected relationships between customers, investors, suppliers, employees, businesses, and all others connected to the organization. This theory argues that the organization should create value for all stakeholders, not just the shareholders (Freeman, 2010, P.1-50). There are two branches in stakeholder theory these are the ethical or normative branch and the positive/managerial branch. This report will be focusing on the managerial branch of stakeholder theory. This theory attempt to explain when corporate management will be likely to consider the expectations of the stakeholders. Ullman (1985, P.540-557) goes on to explain that the greater the importance of the individual stakeholder to the organization the greater the chance that the stakeholder's option will be incorporated into the organization's goals. This point is explored in further detail by Gray, Owen, & Adam (1996, P.47-77) where they discussed how this theory has an organization centered perspective. Leading to the analysis of all stakeholders grouped within the society and how they should best be managed if the organization is to survive. According to Haque, Deegan & Inglis (P.7-9), the stakeholders influence 3 things, power, legitimacy, and urgency. Powerful stakeholders pressurize the organization and influence its rules, practices, structures, decisions aiming for their profits, but that has fallen with time. The theories that confirm these views are institutional theory and coercive isomorphism, which overlap with the stakeholder theory-managerial branch.


Haque, Deegan & Inglis (P.7-9), stated that the stakeholders are the ones who influence the companies' practices, structures, and their decisions. Also, the companies are responsible to answer to the stakeholders of the company. Eventually, the companies stop telling everything to the stakeholders as they were more focused on their profits rather than the company's operations and profits. It also hampers the companies' accountability, creates an information gap, benefits of the stakeholders, and their power in the companies.

In the article, the stakeholders include the government and its officials (here, the Australian government, chief investment officer at ESG-focused fund U Ethical ASIC, ACSI), shareholders of the Accent, and many other companies, executives, are the ones that are related to the organizations, and government and its officials are the powerful stakeholders that influence the organizations' structures, decisions.

Due to Covid-19, the government introduction of the JobKeeper program made every company apply for its benefits, which are used by the big companies like Accent to provide bonuses to its executives, and earned profits before tax and improved its share-price as well. Shareholders being a part of the organization deserves to know that the executives are earning bonuses from JobKeeper, and they are the ones who can influence the corporations' practices as they have the power to pressurize them.

The government officials have warned the companies to come clean on the program's benefits and made aware of the companies' doings to the investors and to keep close eyes on the executives' salaries. Also that in the coming times, there will be a restraint in the executives' pay.


The article 2 is more related to the stakeholder theory in the managerial branch as well as the coercive isomorphism theory as the latter one is more related to the managerial branch of stakeholders' theory.

Article 5 - Australia's Top Polluter AGL Faces Push to Accelerate Coal-Fired Power Exit

Sydney Morning Herald, August 5, 2020

AGL, the heaviest GHG emitter in Australia, emits 8.1% of Australia’s emissions and was responsible for more than 42mt of emissions in 2019. AGL operates coal-fired generators along with gas-fired and renewable resources ones. The Australian Centre for Corporate Responsibility group of shareholders and its Director and the activists have pressurized the firm to close its coal-fired stations to prevent climate harm. AGL considered the notices and has become the major ASX company to invest in climate-protecting projects, that is, towards renewable sources. Also, the company is planning to operate the coal stations till their technical lives (by 2048), irrespective of the increasing maintenance costs that the company is facing, then this makes the investors notice AGL close the stations by 2036. Norwegian Government Pension Fund Global has dumped its shares of AGL by 0.46%. AGL said that if customers are ready to pay more, we are ready to provide green operators.

Agency theory

Agency theory is one of the important theories that are used in management and accounting research. It has 2 main factors, one is principal and the other one is agent, where the principal is the owner who hires the agent, and the agent is the one who acts on the behalf of the principal. Lambert (2007, p. 247-268) also stated that the risk of the activities is born by both the principal as well as the agent. It also acknowledged that the theory constitutes the incentives of both the people and the problems related to the theory as well. In management terms, the investors are the principals who hire managers, that is, the agents to work and take decisions on behalf of them, aiming the benefits of the shareholders while taking decisions (Archer, 1998, p.149-170). Panda & Leepsa (2017, p.74-95) also stated that the investors are the risk lovers as the higher the risks, the higher the benefits and the managers or company is the risk-averse, because of these different preferences of risks, the agency problems develop such as asymmetric information, conflicts, frauds, and so on. It also constitutes some remedies such as monitoring the agents to keep disciplined and work for the principals' interests. The problems can also arise between principals, where there are major ones and some are minor ones.


As the agency theory states that the agents are hired by the principals to work on their objectives on their behalf and take decisions accordingly. In the article 5, the principal is the investors who are more environment sustainability-oriented and the shareholders’ group of activists called as Norwegian Government Pension Fund Global, whereas, AGL is the agent who works for the investors as the investors are the ones who bear the most of the risks and reduces their profits.

The investors aim to achieve the goals along with the environment protection, and fewer pollution emissions, whereas the AGL, the agent, is planning to continue the coal-fired plants till their lives, that is, 2048, even after the company has to bear the increasing costs of maintaining those plants, which they could use in the less-pollution emitting plants of renewable resources. This created a conflict between the investors and the AGL, where the investors have noticed the AGL close those plants at max by 2036. Although the AGL has considered the notice of the investors and working towards less carbon emission goals, there is an agency problem, which is asymmetric information regarding the closure of the plants that AGL is planning. Also, the goal of the principal, investors, and the agent, AGL are conflicting. As a result, the major wealth fund has withdrawn its 0.46% shares of AGL, as AGL is the highest pollution emitter across Australia, which constitutes 8.1 of the emissions of Australia.


There is an agency problem and having conflicts in interests of the AGL, agent, and the investors, and need to use some remedies such as monitoring the AGL.

References for Agency Theory and Management Accounting

Arieh A. Ullmann, 1985: Data in Search of a Theory: A Critical Examination of the Relationships Among Social Performance, Social Disclosure, and Economic Performance of U.S. Firms. AMR, 10, 540–557,

Archer, S., Karim, R.A.A., & Al-Deehani, T. (1998). Financial contracting, governance structures, and the accounting regulation of Islamic banks: An analysis in terms of agency theory and transaction cost economics. Journal of Management and Governance. 149-170. DOI: 10.1023/A:1009985419353

Freeman, R. (2010). Strategic management. Minnesota: Cambridge University Press.

Gray, R., Owen, D. & Adams, C., Eds. (1996) Accounting and Accountability: Changes and Challenges in Corporate Social and Environmental Reporting. Prentice-Hall, London.

Haque, S., Deegan, C. & Inglis, R. (n.d.) Climate change-related corporate governance information: an explanation of the difference between the supply of and demand for such information. School of Accounting. Melbourne: RMIT University. Retrieved from:

Lambert, R.A. (2007). Agency theory and management accounting. In Chapman, C.S., Hopwood, A.G. & Shields M.D. (Eds.). Handbook of Management Accounting Research (247-268). Elsevier Ltd.

Panda, B. & Leepsa, N.M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian Journal of Corporate Governance. 10(1), 74-95. Retrieved from:

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

Get It Done! Today

  • 1,212,718Orders

  • 4.9/5Rating

  • 5,063Experts


  • 21 Step Quality Check
  • 2000+ Ph.D Experts
  • Live Expert Sessions
  • Dedicated App
  • Earn while you Learn with us
  • Confidentiality Agreement
  • Money Back Guarantee
  • Customer Feedback

Just Pay for your Assignment

  • Turnitin Report

  • Proofreading and Editing

    $9.00Per Page
  • Consultation with Expert

    $35.00Per Hour
  • Live Session 1-on-1

    $40.00Per 30 min.
  • Quality Check

  • Total

  • Let's Start

500 Words Free
on your assignment today

Browse across 1 Million Assignment Samples for Free

Explore MASS
Order Now

My Assignment Services- Whatsapp Tap to ChatGet instant assignment help

Collect Chat