2.2 Stakeholder Theory
For both Stage one and Stage two of this research, IAS 12: Income Taxes, stakeholder theory
is one of the perspectives used to analyse the findings. A stakeholder may be a consumer,
employee, investor, researcher, a community or pressure group, government regulator, or
simply an interested individual; and so the term challenges the contention that the
corporation’s primary responsibility is to deliver profits to shareholders (Friedman 1970;
Mitchell et al. 1997). Stakeholder theory assumes that to achieve maximum organisational
potential, a “firm” will take the broader stakeholder interest into account (Reich 1988).
Freeman’s (1984, p. 46)definition of a stakeholder is:
Any group or individual who can affect or is affected by the achievement of the
organisation’s objectives.
The theory will assist in the analysis and understanding the ‘firm’. For example, in this article
the firm is the jurisdiction that converges or harmonises its national accounting taxation
standard to IFRS. The stakeholders are the professional bodies, educational institutions,
practitioners, investors or other entities, which are affected by the change process. The
Mitchell et al. (1997) dynamic stakeholder model which proposes that stakeholder
importance can be identified by possession of some, or all, of the following attributes: (1) the
stakeholder’s power to influence the firm; (2) the legitimacy of the stakeholder’s relationship
with the firm; and (3) the urgency of the stakeholder’s claim on the firm. The theory is
applied by first considering a stakeholder’s power to influence standard setters in their
jurisdiction. Then the legitimacy of a stakeholder’s relationship with the standard setter to
lobby for modifications or change is reviewed; and finally