Stakeholders, Disclosure and Transparency
This domain tests who counts as a stakeholder, how companies engage them, and what a listed company must disclose, when, and to whom. The examiner wants quality of disclosure, not page count.
Stakeholders
Stakeholder salience is often explained through power, legitimacy and urgency (Mitchell, Agle and Wood, 1997). Engagement mechanisms include shareholder meetings, investor relations programmes, employee councils, supplier codes and community consultation. Materiality determines what deserves board attention and disclosure.
Disclosure obligations
- Annual report: directors' report, financial statements under SLFRS, corporate governance report, directors' remuneration, related party transactions, risk and internal control statements.
- Continuous disclosure of price-sensitive information to the CSE without delay, with equal access for all investors and no selective briefings to analysts.
- Shareholder meetings: proper notice, accurate explanatory material, and honest answers to questions.
- Related party transactions: identify the relationship, disclose the terms and value, obtain independent approval and require the conflicted director to recuse.
Transparency
Transparency means relevance, accuracy, timeliness and comparability. Frameworks such as integrated reporting, GRI and climate-related disclosure standards help structure narrative reporting, but they do not replace the obligation to explain significant judgements and bad news plainly.
Worked example
A listed company's chairman controls a private company that leases a building to the issuer. The annual report discloses the lease exists but gives no terms and no approval process. The correct treatment is to disclose the nature of the relationship, the amounts and terms, and the independent approval obtained, with the chairman absent from that decision and from the vote.
Traps that cost marks
Equating transparency with volume. Burying adverse information in the notes. Assuming the market already knows. Treating related parties as directors only, forgetting key management personnel and close family. Overlooking the prohibition on selective disclosure and insider dealing.