Assessing the Role of Financial Reports in Stakeholder Decisions

THE SIGNIFICANCE OF FINANCIAL REPORTS FOR STAKEHOLDERS

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Introduction

The current study presents an in-depth assessment of the means by which financial accounts and other reports of a company can be beneficial to the different associated stakeholders. It is necessary to gather insights to suit their specific business requirements. The company selected for this purpose is Vodafone Plc, which is one of the most renowned telecommunication companies in the UK connecting people and operating in a number of countries quite successfully. In the mentioned context, it upholds a short overview of the entire business along with the major internal and external stakeholders involved. In addition, it also depicts the processes through which the mentioned company regulates the stakeholders effectively. With an introduction to financial accounting, the study further delves into providing an understanding of how Vodafone performs its financial accounting to keep track of its incomes and expenses. Finally, the study displays the means by which different stakeholders make use of the company’s financial reports and other accounts to meet various business requirements. It is conducted to gain an understanding on how the insights of a company can be beneficial to others in the contemporary business environment.

Discussion

Vodafone Group Plc is one of the most renowned telecommunication companies listed in the “London Stock Exchange”, that operates as a “public limited company”. Established in 1991, the company has its main headquarters in Newbury, Berkshire, UK. Not only does the company deal with fixed and mobile telephony, but it also provides other types of services such as broadband, digital television, internet television, IPTV, and others. The company has become a global brand with operating centers in Asia, Europe, Africa, and Oceania (Vodafone, 2023). It is because of the superior performance of the company, that it has been able to earn higher incomes. As viewed from the company’s financial reports in the present year, the revenues earned amount to €45,706 billion, with a total operating income of €14,296 billion and the net income of the mentioned company is €12,335 billion (Forbes, 2023). The company possesses a total asset base of €155.521 billion, with total equity amounting to €64,483 billion. Vodafone also employs a large number of employees in the organization. The total number of employees is about 104,000 as viewed from the reports of the previous year. The growth rate of the company is about 3.7% in the present year (Vodafone, 2023). The company operates in a highly competitive environment and as such the main rivals include Telefonica, MTN Group, Airtel, Orange, and others. It is because of the company’s good performance overall, that Vodafone has been ranked 67th in “Top 100 Digital Companies” in 2019 by Forbes.

Internal stakeholders refer to those individuals, groups, and entities that possess either a direct or indirect interest in the decisions and operations of a company. Such stakeholders remain inside the company and influence the company’s performance and success through active participation. They have closer bonds with the company as a whole. The main internal stakeholders of the company in question include its employees, the management and other executives, and the “Board of Directors”. In addition, the shareholders, unions, HR, R&D innovation teams, supply chain teams, and others are also the major stakeholders associated with Vodafone. Of them all, the most essential are the employees since they are responsible for the daily activities of the business reading to the company’s success (Mäkinen, 2023). Similarly, the management also holds essential leadership posts, while the shareholders own the company by purchasing its shares. The main shareholders of Vodafone include BlackRock Inc., “Vanguard Group Plc”, “Norges Bank Investment Management”, “Capital Group Companies Inc.”, “Qatar Investment Authority” and others. Therefore, it forms a major responsibility for the company to keep the stakeholders satisfied so that the operations can run smoothly.

On the other hand, the external stakeholders of the company are individuals, groups, and other organizations who have stakes or interests in the operations of the business but are not directly associated with the company. Such stakeholders exert considerable influence on the company from outside of the company. They can also influence the decisions and other major activities of the company through considerable fluctuations in their activities. Such stakeholders include the customers of the company, suppliers, investors, government and other regulatory bodies, NGOs, and others (Lehtinen and Aaltonen, 2020). For Vodafone Group Plc, the main external stakeholders include its customers, investors, government, competitors, local communities, advocacy groups, media, creditors, and finally, the industry associations. Hare, the main stakeholders are the customers for whom the products and services are manufactured by the company and who are the main sources of revenue generation (Lehtinen et al. 2019). The government and communities are also essential stakeholders since they exert considerable influence on the CSR policies of the company and the extent to which they abided by them. The external shareholders of the company include “Liberty Global Plc”, with an equity of 4.945%, “Clearstram Banking SA”, with an equity of 1.877%, JPMorgan Securities Plc” with an equity of 0.5800% and others (Vodafone, 2023). Therefore, it becomes extremely crucial for Vodafone to manage the interests of the stakeholders in a more effective manner so that cordial relations can be maintained among all.

In the company, the 360 million customers are the most essential stakeholders and as such have high power and interest just like the regulatory bodies. Similarly, it has been viewed that the partners and proprietors have high powers but lesser interests. On the other hand, the employees and suppliers have less power and high interest, while the trade unions and associations have lower power and interest (Moll and Yigitbasioglu, 2019). Therefore, all these groups of stakeholders are treated differently. The company is mainly customer-oriented with all the services directed to their customers. These people are engaged through digital channels such as apps and websites to provide better values, reliable data, and data transparency (Vodafone, 2023). The employees, on the other hand, are engaged through regular meetings, “executive committee discussions”, “employee speak-up channels”, “Internal websites”, live webinars, and others. The suppliers are also engaged through autism assessments and safety forums. Similarly, the government and NGOs are involved with industry meetings, transparency in the “European Roound Table meetings for Industries” and others (Vodafone, 2023). Likewise, the investors are also kept in tune with the business for aiding personal meetings, road shows, digital communication, annual reports, and presentations along with “investor perception Study” and others.

Financial accounting is defined as recording, summarizing, and reporting a company’s financial transactions and performance to provide it to external parties or stakeholders. The main aim is to provide accurate information so that it can be used properly (Pedrini and Ferri, 2019). It is based on different principles like “accrual basis”, “matching principle”, materiality, and “historical cost principle”. Additionally, it is governed by different standards including “Generally Accepted Accounting Principles” and “International Financial Reporting Standards”.

The company in question performs financial accounting through the preparation of various financial statements such as income statements, balance sheets, and “cash flow statements” to develop a well-extensive report of its financial statements. In addition, Vodafone, being one of the major companies enlisted in the “London Stock Exchange” adheres to accounting based on the “country of incorporation and stock exchange’s requirements”. Therefore, it follows the “Generally Accepted Accounting Principles”. The accounting of the financial statements is also undertaken by independent external auditors with an accrual basis, stating why expenses were incurred. Double entry is focused on by the company with materiality and consistency (Hassan and Marston, 2019). Finally, after the completion of all the above-mentioned procedures, the final accounts and reports are published online so that the same can be utilized by different stakeholders.

Different types of internal and external stakeholders utilize the financial reports and accounts of Vodafone to meet their required needs. Investors and shareholders like BlackRock, Vanguard, Capital Group, and QIA utilize the reports to assess Vodafonme’s financial performance, profitability and growth. These are measured by these people and groups through proper measurement of “earnings per share”, “return on equity” and others. While the creditors and lenders evaluate the creditworthiness and market stability of the company. It is done through an analysis of the debt levels and equity. The employees utilize the annual reports to estimate the company’s financial health and performance so that insights can be obtained into the business strategies and goals. These enable them to have ideas about their performance and job security. The governments utilize the same to gain ideas about accounting standards, reporting requirements, and the extent to which the company is transparent in its actions. The suppliers are able to assess the company’s stability and the media can also gain an essential understanding of the strategic initiatives and others. The customers can also avail the same to develop their loyalty base in favor or against a company so that the business decisions can be influenced properly.

Conclusion

Therefore, based on the above-formulated discussion it has been quite evident that both the internal and the external stakeholders are extremely essential for any company since they exert considerable influence on the overall performance of the company and are themselves impacted as well. All these stakeholders have certain specific needs from the company and as such to facilitate the same, the companies publish annual reports and accounts annually. “Vodafone Group Plc”, the company chosen here, also performs the same and through its reports and others, the different types of stakeholders are able to gather information on the company’s health, performance measures, stability, resource allocation, and others. In addition, the government and other regulatory bodies are also able to identify and assess the ethicality of the company and the amount of transparency maintained. Through the published accounts and others, the stakeholders are able to gain an idea of the financial and non-financial performance of the overall company that can be further utilized to gain financial ideas on the company.

References

Journals

Hassan, O.A. and Marston, C., (2019). Corporate financial disclosure measurement in the empirical accounting literature: A review article. The International Journal of Accounting, 54(02), p.1950006.

Lehtinen, J. and Aaltonen, K., (2020). Organizing external stakeholder engagement in inter-organizational projects: Opening the black box. International Journal of Project Management, 38(2), pp.85-98.

Lehtinen, J., Aaltonen, K. and Rajala, R., (2019). Stakeholder management in complex product systems: Practices and rationales for engagement and disengagement. Industrial marketing management, 79, pp.58-70.

Mäkinen, S., (2023). Internationalisation in challenging times: practices and rationales of internal and external stakeholders. European Journal of Higher Education, 13(2), pp.126-141.

Moll, J. and Yigitbasioglu, O., (2019). The role of internet-related technologies in shaping the work of accountants: New directions for accounting research. The British accounting review, 51(6), p.100833.

Pedrini, M. and Ferri, L.M., (2019). Stakeholder management: a systematic literature review. Corporate Governance: The International Journal of Business in Society, 19(1), pp.44-59.

Websites

Forbes, (2023). Vodafone. Available at: https://www.forbes.com/companies/vodafone/?sh=dbf1b3a7dfb6

Vodafone, (2023). Annual Reports, 2023. Available at: https://investors.vodafone.com/sites/vodafone-ir/files/2023-05/vodafone-fy23-annual-report.pdf

Vodafone, (2023). One Strategy. Available at: https://www.vodafone.com/content/dam/vodcom/sustainability/pdfs/2007-08_vodafonecr.pdf

Vodafone, (2023). Results, reports, and presentations. Available at: https://investors.vodafone.com/reports-information/results-reports-presentations

Vodafone, (2023). Shareholder Privacy Statement. Available at: https://investors.vodafone.com/individual-shareholders/shareholder-privacy-statement

Vodafone, (2023). Vantage Towers. Available at: https://www.vodafone.com/

POSTER

Company Overview

The company selected here is Vodafone Plc, which is one of the most renowned global telecommunication companies. Established in 1991, the company’s main headquarters are located in Newbury, Berkshire, UK. It provides services such as broadband, digital television, internet television and IPTV. Based on the annual reports, the revenues earned in 2023 are €45,706 billion, with an operating income of €14,296 billion and net profits of €12,335 billion. The total assets amount to €155.521 billion, with equity amounting to €64,483 billion (Forbes, 2023). The company has an employee base of 104,000 and it is growing at the rate of 3.7%. The main competitors are Telefonica, MTN Group, Airtel, Orange, and others. It has been ranked 67th in the “Top 100 Digital Companies” in 2019 by Forbes.

Stakeholders involved

The company has a number of internal and external stakeholders associated with it. The internal stakeholders involve employees, the management and other executives, the “Board of Directors”, the shareholders, unions, HR, R&D innovation teams, and supply chain teams (Amadi et al. 2020). The external stakeholders, on the other hand, include customers, investors, government, competitors, local communities, advocacy groups, media, creditors, and finally, industry associations (Freeman, 2020). The customers are the most essential stakeholders. The main shareholders include BlackRock Inc., “Vanguard Group Plc”, “Norges Bank Investment Management”, “Capital Group Companies Inc.”, “Qatar Investment Authority” and others. Whereas, the external shareholders are “Liberty Global Plc”, with an equity of 4.945%, “Clearstram Banking SA”, with an equity of 1.877%, JPMorgan Securities Plc” with an equity of 0.5800% and others.

Administration of stakeholders

A number of methods are used by the company for the management of Vodafone’s stakeholders. The customers are engaged through digital means like apps and websites to provide better value and data. The employees, on the other hand, are engaged through regular meetings, “executive committee discussions”, “employee speak-up channels”, “Internal websites”, live webinars, and others (Vodafone, 2023). The suppliers are involved through safety forums assessments, while the Government and other regulatory bodies are managed by maintaining transparency and displaying their stance in the “European Round Table meetings for Industries”. The investors are also engaged through personal meetings, road shows, digital communication, annual reports, and presentations along with “investor perception Study” and others.

Significance of Financial reports of Vodafone Plc

Vodafone performs financial accounting by preparing different statements such as income statements, balance sheets, and “cash flow statements”. It adheres to the “country of incorporation and stock exchange’s requirements”. The regulatory principle abided incorporates “Generally Accepted Accounting Principles”. Audits are performed by external auditors. These are used by investors to measure Vodafone’s profitability, growth, and performance by measuring “earnings per share” and “return on equity” (Derakhshan et al. 2019). The creditors evaluate the creditworthiness and employees understand the stability of the company and the strategies implemented. Finally, governments use them for evaluating accounting standards, and transparency, and suppliers use them to view the company’s stability. The customers also view the same to generate a loyalty base and media requires financial reports to spread awareness about the company.

Reference

Journals

Amadi, C., Carrillo, P. and Tuuli, M., (2020). PPP projects: improvements in stakeholder management. Engineering, Construction and Architectural Management, 27(2), pp.544-560.

Derakhshan, R., Turner, R. and Mancini, M., (2019). Project governance and stakeholders: a literature review. International Journal of Project Management, 37(1), pp.98-116.

Freeman, R.E., (2020). The stakeholder approach revisited. Wirtschafts-und unternehmensethik, pp.657-671.

Websites

Forbes, (2023). Vodafone. Available at: https://www.forbes.com/companies/vodafone/?sh=dbf1b3a7dfb6

Vodafone, (2023). Annual Reports, 2023. Available at: https://investors.vodafone.com/sites/vodafone-ir/files/2023-05/vodafone-fy23-annual-report.pdf