Santos is one of the largest oil and gas companies in Australia. The company is hit by a push from the investors for taking action regarding climate change. The shareholders of the company are demanding commitment to tougher rules for reducing the emission and for reviewing fossil fuel lobbyists. Around 43% of shareholders are in favor of a resolution put forward by an ethical investment group to curb emission defying the board. Another resolution that has been passed by 46% of shareholders to Santos is to assess its climate position with its industry associates for knowing whether the climate position was inconsistent. The push of investors has made Santos face immense pressure over climate-related issues. The company’s plan for increasing its production of gas 60% was out of step.
Stakeholder’s theory (Managerial)
Stakeholder refers to any person who has its interest in the business or the project of any organization. They can be in the organization as investors or out of the organization like the climate committee that is affected by the functioning of the organization. They can influence everything of a project or in any organization (Maryani, 2018, pp. 164-172). The stakeholder theory managerial branch asserts the power of the stakeholders in influencing the management or the board of the organization due to the control stakeholders have over the resources that are required by the organization. Within this branch of stakeholder theory, it is expected by the organization to meet the needs of the group as they help the organization in achieving its goals (Nijoroge & Mugambi, 2018, pp 197-215). Stakeholders have the potential to control the returns of the company and through this power, they can influence the functioning of the organization. Stakeholder's theory suggests that organizations should meet the needs of stakeholders for attaining the maximum financial returns.
Stakeholder's theory suggests that investors can push a company which means that investors can influence the functioning of the company (Yuesti, Novitasari & Rustiarini, 2016, pp. 98-119). In the article, Santos an Oil and Gas company is being pushed by the investors for tougher rules in reducing the emissions. The shareholders that were supporting the resolution were around 43%. It is nearly the half of shareholders who want the company to take any action regarding its carbon emission policy. If 2 of the biggest shareholders of Santos named ENN ecological and Hony capital are excluded than the resolution ha a support of 60% shareholders. Also, another resolution has been pushed that was given by the 46% stakeholder for assessing industry associates. The shareholders will pass a motion to bring changes in the constitution of the company. This describes that stakeholders have the power and can influence the company is changing its actions by making changes in the overall constitution of the organization.
It is required by the organization that they adhere to the influence of shareholders as they hold resources for the company. In the article, by the push of resolution, the company is facing a huge amount of pressure over the risks that are related to climate from the institutional investors because the investors push comes as resources for the company. This means that investors are holding resources for the company.
In theory, it has also been mentioned that organizations should focus on the needs of investors for achieving maximum benefits. In the article, it has been mentioned as a statement by Emma Herd who is the chief executive of Investor Group on Climate change that investors are getting aware and are expecting companies to address the changes in climate. Also, the chairman of Santos, Keith Spence has provided a statement that the company is following the emission reduction cause concerning the Paris Climate Change treaty. This shows that organization is focusing on what is needed by the investors as they play a role in their functioning and attaining maximum results as per the theory. Also, stakeholders can affect the functioning of the company that means they can change how a company can operate. In the article, shareholders are hinging on passing the motion for changing the constitution. Once the motion is passed by the majority of shareholder's company is required to change its functionality as per the amended constitution. In this manner, stakeholders influence the functioning of the organization.
As depicted above, the stakeholder's theory is the one that relates to the article. The managerial perspective of the theory is satisfied by the article in reading.
Ted baker a fashion chain has warned that the value of the stock has been overestimated and a law firm has been hired by the company to do a comprehensive review. The Director of Finance who has been appointed recently has stated that the estimated value of the inventory that has been held in the Balance Sheet is overstated from £20 million to £25 million. It is based on the preliminary analysis that has been conducted. The error was related to the preceding year and has no impact on the recent year. The share prices of the firm reduced by 15% when the news came out but later the loss was at 8.5%. 3 profits warning were issued by the company. Last year the shares were at £15.5 while in the year there is a loss of around 363.82 p for the company.
Efficient Market Hypothesis
The efficient market hypothesis or efficient market theory states that the prices of shares reflect all the information about the company (Rossi & Gunardi, 2018, pp. 183-192). According to the theory the stocks trade on the fair value at exchanges that makes it impossible for the investor in purchasing the stocks that are undervalued or to sell the stocks that are there for inflated prices. The theory makes it impossible for the investor to outrun the market and the only way higher return can be obtained by the investor is through purchasing riskier returns. There are three versions of the theory weak, semi-strong, and strong. According to the weak hypothesis, the prices of stock reflect all the data of the past and technical analysis will not help the investor in making trading decisions. While the semi-strong hypothesis suggests that all the information that is public for the company has been utilized in the calculation of stock prices (Patel, Savani & Poriya, 2017, pp. 108-121). While the strong version of the theory suggests that all the information that is publicly accounted for and the information that is not publicly accounted for has been inculcated in the stock prices of the company. So, as per the theory stock prices depicts the appropriate value of the firm and there is no scope for the investor to make profits through technical analysis.
According to the theory share prices of the company reflect all the information available and trade on the fair value at the exchange. In the article, it has been stated that there are overstatements of inventory by 5 million pounds. Instead of depicting the inventory at 20 million pounds, the inventory was depicted at 25 million pounds. This information was based on the preliminary analysis. The news created an impact and the share prices of the company reduced by 15%. The share prices were trading higher but as the news came into light, the value declined and prices fell by 15%. This shows that the efficient market theory rule has been followed. Share prices after the news and decline will depict the real prices of the company.
Also, it has been stated that an error was conducted in the last year and will create no impact concerning the financial year of the company. This brought changes and cut the loss by 8.5%. Share prices inculcated all the information that was available in the public domain. The company has appointed a law firm for the review might have generated a relief due to which the losses were cut in the share market for the company. According to the semi-strong hypothesis of efficient market theory, it has been stated that it is believed that all the information that is in the public domain has been utilized in the calculation of the stock's current price. Investors cannot gain insight in any manner and earn higher returns than that are prevailing in the market. In the article, as the news came out, share prices fell significantly. Also, when it came to light that it was an error that was conducted in the previous year, some of the losses were cut down. This shows that all the information was incorporated in the stock prices of the company and the loses for all the investor was equal once the news came into light and no higher returns were generated by the company.
According to the analysis, it can be concluded that the article follows the semi-strong efficient market hypothesis theory. The aspects of semi-strong efficient market theory has been fulfilled in the article.
Maryani, M. (2018). Regaining Company Reputation: What is a Brand and Who Cares about Them? The Case of Qantas. Jurnal Ilmiah ESAI, 7(3), 164-172.
Njoroge, M. N., & Mugambi, F. (2018). Effect of electronic banking on financial performance in Kenyan commercial banks: Case of Equity Bank in its Nairobi Central Business District branches, Kenya. International Academic Journal of Economics and Finance, 3(2), 197-215.
Patel, P., Savani, J., & Poriya, N. (2017). Semi-Strong Form of Market Efficiency for Dividend and Bonus Announcements: An Empirical Study of India Stock Markets. ANVESHAK-International Journal of Management, 6(1), 108-121.
Rossi, M., & Gunardi, A. (2018). Efficient market hypothesis and stock market anomalies: Empirical evidence in four European countries. Journal of Applied Business Research (JABR), 34(1), 183-192.
Yuesti, A., Novitasari, L. G., & Rustiarini, N. W. (2016). Accountability of non-government organizations from the perspective of stakeholder theory. International Journal of Accounting and Taxation, 4(2), 98-119.
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