The information needs of employees
It is a popular view that the interests of employees are in direct conflict with those of the firm, and in particular with those of management. Unless employees are able to share in the profits of business organizations, they are effectively dissociated from their activities if we suppose that the objective of business organizations is to maximize profits and maximize returns, to shareholders. This classical concept of the objective of business enterprises is being replaced as a result of the social changes taking place in our society, and there is a broadening view of the social and economic responsibilities of management. It is recognized that employees have a vested interest in the outcome of management decisions of every kind. Improvements in industrial democracy through employee participation in management decisions have important implications for the supply of information to employees. A number of firms are already investigating this question. As regards the settlement of wage disputes, the question of profit sharing between employees, shareholders and management can only properly be settled on the basis of a full disclosure of the relevant facts.
The immense importance of good industrial relations, of harmony between management and employees, is acknowledged already in the literature of management science. It is quite evident that there must be eventually a symmetry of treatment between shareholders, management and employees in respect of the accounting information which each group requires and receives. We may say therefore, that the economic and social role of accounting in this particular context has not yet been properly explored. We touch upon these issues in Part 4.
The information needs of shareholders and investors
Historically, business accounting developed to supply information to those who had invested their wealth in business ventures. Financial accounting, as it is now known, emerged in the 19th century as a result of the need to protect investors in Joint Stock Companies trading under limited liability. It has been evident for a long time that the information needs of investors are not adequately met by published balance sheets and income statements. In Part 2, we shall examine the nature of the information disclosed to shareholders and investors,... see: The Information Needs of Shareholders and Investors