MGMT 440 midterm 1 stakeholder management

Implementation of Sustainable investing Thematic Investing:

Focus on themes and sectors dedicated to specific ESG issues.The more material the issue is to the valuation of each company, the more impactful the approach is likely to be onfinancial returns. Ex: climate change adaptation and mitigation

Internal Stakeholders: Owners:Owners

(who in publicly traded organizations can include shareholders) are the individuals who hold significant shares of the firm. Owners are liable for the impacts the organization has, and have a significant role in strategy. Owners often make substantial decisions regarding both internal and external stakeholders.

Business Roundtable Statement (BRS) Scale and impact:

181 chief executives have lent their signatures... from the leaders of companies including JPMorgan Chase, Apple, Amazon and Walmart. endorsed by 181 of the Business Roundtable's 188 CEO members, including the leaders of two of the world's biggest investors: BlackRock Inc. and Vanguard Group Inc. It is a major philosophical shift for the association, which counts the chief executives of dozens of the biggest U.S. companies as its members

External Stakeholders

:Integrating businesses into society results in a wide variety of interactions with a number of different external stakeholder groups. Business are complex pieces in the social ecosystem, both impacted by and impacting a wide variety of groups in the external environment. There are quite a few external stakeholders for businesses to keep in mind when making decisions and carrying out operations.

Environmental, social and governance (ESG)

:refers to the range of factors that are considered by sustainable investors

Shareholder activism Types of activist investors: Hedge funds:

typically has most impact attract big dollars from investors looking for above-average returns. always looking for untapped value. Hedge fund activists often see that untapped value in way a company is run, or strategy pursues. see ineffective management, a stale board, or a company missing out on new opportunities. see potential for a new capital allocation strategy or changes in operations that will increase share value. And when their efforts to engage with executives or directors about these ideas fail, they often try to elect different directors.

Shareholder activism Types of activist investors: Institutional investors

typically has most impact include pension funds, asset managers, mutual funds and insurance companies. normally long-term shareholders.hold their shares in index funds, popular for their low fees. Institutions that provide index funds can't just sell a position if they think a stock is underperforming, or if they believe the company's governance practices hinder it's long- term value. they turn to activism. they can bring attention to their concerns and drive the change that they believe will create long-term value—including through changes in corporate governance practices. such as Vanguard are vocal about their belief that companies with strong corporate governance practices can deliver better value in the long run.

"Vote no" campaigns:

urge shareholders to withhold their votes from director candidates or to vote against a company's say on pay. vote doesn't actually have to fail for a vote no campaign to be a success. Overall shareholder support both for directors and for say on pay is typically above 90%. So if support levels fall to the 60s or 70s, it sends a stark message about shareholder dissatisfaction. generates media scrutiny, and can affect a director's reputation. Directors often serve on multiple boards, and low support levels at one company can affect how that director is viewed at his or her other companies as well.

Diversity programs - three principles Contact: Self-managed teams:

which allow people in different roles and functions to work together on projects as equals. Such teams increase contact among diverse types of people, because specialties within firms are still largely divided along racial, ethnic, and gender lines

Business Roundtable Statement (BRS)

A new Statement on the Purpose of a Corporation signed [on Aug 19, 2019] by 181 CEOs who commit to lead their companies for the benefit of all stakeholders - customers, employees, suppliers, communities and shareholders.

Shareholder activism definition

Activism is about driving change. Shareholders turn to it when they think management isn't maximizing a company's potential. Activism can include anything from a full-blown proxy contest that seeks to replace the entire board, to shareholder proposals asking for policy changes or disclosure on some issue. In other cases, shareholders want to meet with a company's executives or directors to discuss their concerns and urge action. The form activism takes often depends on the type of investor and what they want.

Implementation of Sustainable investing Implementation:

Different ways in which sustainable investing is done by asset managers

Implementation of Sustainable investing Shareholder Engagement

Gives investors additional opportunities to reduce risk and drive change in the direction they want, even within companies that may start off with poor ESG performance, but can potentially improve over time. Whereas restriction screens can be achieved with a passive portfolio, approaches like direct engagement may require a manager that is active, able to engage company management and takes a structured approach to sustainable investing.

Operational activism:

Hedge fund activists used to focus mostly on capital allocation issues, such as dividends and share buybacks. Many then began looking for company combinations and break-ups—mergers, carve outsand spin-offs. Now, there is a greater focus on operational activism, which has more of a long-term focus. Activists join the board (or appoint independent directors), replace members of management and help execute a new strategy. While many hedge funds had been thought of as being too focused on short-term gains, the longer-term operational activism has helped to shift that perception.

Implementation of Sustainable investing Restriction Screening:

Intentionally avoids investments generating revenue from objectionable activities, sectors or geographies. Such strategies can provide downside protection and risk-mitigation benefits depending on the nature of the screen. If restriction screens lead to avoiding company-specific risk, they can play a positive role in maximizing risk-adjusted returns.

stakeholder meaning

People or organizations with a legitimate interest in a given situation, action, or enterprise. A stakeholder is any group, individual, or community that is impacted by the operations of the organization, and therefore must be granted a voice in how the organization functions.

is a person diverse? how a co is diverse

Person is not diverse, no matter how many norms or glass ceilings they shatter. No matter how outside of the norm I am, I am not a "diverse person". Diversity is about a collective or a group and can only exist in relationship to others. To be a diverse organization simply means that you have the presence of differences of identity (e.g., gender and people of color) throughout your organization

Implementation of Sustainable investing ESG Integration:

Proactively considering ESG criteria alongside financial analysis. This is in line with the role of risk and return as important drivers of the move toward sustainable investing, since integration tends to be focused on identifying long-term risks and capturing opportunities arising from sustainability trends.

Proxy access:

Proxy access allows certain shareholders to include their director nominees in the company's proxy Statement. Proxy fights are long, expensive and draining for a company. There is greater recognition that the directors nominated by activists can sometimesadd real value to the boardroom. So for many companies, it's just not worth the cost and distraction of a proxy fight.

Diversity programs - three principles Contact: Cross-training:

Rotating management trainees through departments is another way to increase contact. Typically, this kind of cross-training allows people to try their hand at various jobs and deepen their understanding of the whole organization. But it also has a positive impact on diversity, because it exposes both department heads and trainees to a wider variety of people.

Business Roundtable Statement (BRS) Supersedes decades-long assertions of shareholder primacy

Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance. Each version of the document issued since 1997 has endorsed principles of shareholder primacy- that corporations exist principally to serve shareholders. new Statement supersedes previous statements and outlines a modern standard for corporate responsibility. Updated Statement Moves Away from Shareholder Primacy, Includes Commitment to All Stakeholders

Sustainable investing Motivators Risk/costs:

Sustainable investing has enabled investors to think more systematically about risks of unexpected, costly issues arising from ESG factors that can hurt long-run returns. Incorporating these criteria as a value-added part of the investment process provides an element of downside protection.

Implementation of Sustainable investing Impact Investment

The practice of allocating investments to enterprises or funds structured to deliver specific social or environmental impacts.The opportunistic nature of impact investing approaches is perhaps unsurprising given the bespoke nature of such strategies and potentially more limited availability of investment products.

Diversity programs - three principles Social accountability

The third tactic, encouraging social accountability, plays on our need to look good in the eyes of those around us. Business practices that generate social accountability:

examples of external stakeholders

These include but are not limited to customers, suppliers, creditors, communities, governments, and society at large. Think of external stakeholders as every other entity that interacts with the organization, apart from the three internal stakeholders

Business Roundtable Statement (BRS) Timing and criticality:

This is tremendous news because it is more critical than ever that businesses in the 21st century are focused on generating long-term value for all stakeholders and addressing the challenges we face, which will result in shared prosperity and sustainability for both business and society"

Diversity programs - three principles Engagement:

When someone's beliefs and behavior are out of sync, that person experiences what psychologists call "cognitive dissonance." Experiments show that people have a strong tendency to "correct" dissonance by changing either the beliefs or the behavior. So, if you prompt them to act in ways that support a particular view, their opinions shift toward that view. When managers actively help boost diversity in their companies, something similar happens: They begin to think of themselves as diversity champions

Internal Stakeholders: Employees

are primary internal stakeholders. Employees have significant financial and time investments in the organization, and play a defining role in the strategy, tactics, and operations the organization carries out. Well run organizations take account employee opinions, concerns, and values in shaping the strategy, vision, and mission of the firm

Sustainable investing Motivators Returns/benefits:

benefits of sustainable investing may accrue through positive corporate reputation, reduced operating costs, new market opportunities or ethical management practices. consumer trends point toward greater returns for sustainable companies. Nearly nine in 10 (87%) U.S. consumers say they will purchase a product because of a company's stance on an issue they care about, and 78% say they want companies to address important social issues. Among millennials, this is even more pronounced. Millennials are more than twice as likely as other generations to purchase products from companies they view as sustainable.

Diversity programs - three principles Social accountability Diversity managers:

boost inclusion by creating social accountability. When people know they might have to explain their decisions, they are less likely to act on bias. So simply having a diversity manager who could ask them questions prompts managers to step back and consider everyone who is qualified instead of hiring or promoting the first people who come to mind

Diversity programs - three principles Contact:

contact between groups can lessen bias. Business practices that generate contact:

what does the accountability theory suggest

having a task force member in a department will cause managers in it to ask themselves, "Will this look right?" when making hiring and promotion decisions. Task forces are the trifecta of diversity programs. In addition to promoting accountability, they engage members who might have previously been cool to diversity projects and increase contact among the women, minorities, and white men who participate

Diversity programs - three principles Social accountability Corporate diversity task forces

help promote social accountability. CEOs usually assemble these teams, inviting department heads to volunteer and including members of underrepresented groups. task forces look at diversity numbers for the whole company, for business units, and for departments to figure out what needs attention. After investigating where the problems are—recruitment, career bottlenecks, and members come up with solutions, then take back to their departments. notice if their colleagues aren't volunteering to mentor or showing up at recruitment events. Accountability theory suggests that having a task force member in a department will cause managers in it to ask themselves, "Will this look right?" when making hiring and promotion decisions. Task forces are the trifecta of diversity programs. In addition to promoting accountability, they engage members who might have previously been cool to diversity projects and increase contact among the women, minorities, and white men who participate

Sustainable investing Motivators Mission alignment:

in an era of big data and transparency, mission-aligned asset owners are better able to understand and tailor what they own—whether in the form of equity, bonds, real estate or any other asset class—in a way that genuinely reflects their mission statements. Clarification: this is the mission of the investment company (such as mutual funds) and not the mission of the company they are investing in.

Shareholder activism Types of activist investors: Individual:

individual investors who put their own money. Individual investors may submit lots of shareholder proposals, but they usually lack the backing to drive real change.

Shareholder engagement: prior and now

institutional investors concerns, start by engaging one-on-one with company. prior years, engagement was mostly between portfolio manager and the company's investor relations team or members of management, focused largely on company performance. Today, investors' corporate governance teams are often driving meetings—sometimes alone and sometimes in combination with portfolio managers. times shareholders ask to meet directors. may have identified issues in the company's executive compensation plans, its governance policies or practices, or its strategic plan. Other times, shareholders are looking to lay the foundation of an open dialogue with the directors. when issues do arise in the future, they have an existing relationship upon which to build.

Internal Stakeholders:

internal stakeholders are individuals or groups who are directly and/or financially involved in the operational process. This includes employees, owners, and managers. Each of these groups is potentially rewarded directly for the success of the firm.

Inclusion

is about folks with different identities feeling and/or being valued, leveraged, and welcomed within a given setting (e.g., your team, workplace, or industry). You can have a diverse team of talent, but that doesn't mean that everyone (particularly those with marginalized identities women and people of color) feels welcome or are valued, is given opportunities to grow, or gets career support from a mentor. Inclusion is not a natural consequence of diversity.

Equity:Equity

is an approach that ensures everyone access to the same opportunities. recognizes that advantages and barriers exist, and that, as a result, we all don't all start from the same place. a process that begins by acknowledging that unequal starting place and makes a commitment to correct and address the imbalance. processes seek to identify these imbalances and then create processes where the disparate outcomes wouldn't exist.

Diversity programs - three principles Engagement: Mentoring:

is another way to engage managers and chip away at their biases. In teaching their protégés the ropes and sponsoring them for key training and assignments, mentors help give their charges the breaks they need to develop and advance. The mentors then come to believe that their protégés merit these opportunities—whether they're white men, women, or minorities. That is cognitive dissonance—" Anyone I sponsor must be deserving"—at work again.

stakeholder Organizational management

largely influenced by the opinions and perspectives of internal and external stakeholders. External stakeholders have no financial stake in the organization, but are indirectly influenced by the organization's operations.

Internal Stakeholders: Managers:Managers

play a substantial role in determining the strategy of the organization, and a significant voice in operational decisions. Managers are also accountable for the decisions made, and act as a point of contact between shareholders, the board of directors, and the organization itself.

Diversity:

presence of difference within a given setting. diversity of identities, like race and gender (the current hot topics), and, in some cases ethnicity, religion, nationality, or sexual orientation. HR folks may think of these identities as protected classes—identities that have received (and still receive) systematic discriminatory treatment, and create advantages and barriers to opportunity and resources.

Shareholder proposals:

some cases, institutional investors submit—or indicate they plan to submit—a proposal if direct engagement with the company and its directors doesn't produce changes. Other investors view a shareholder proposal as a way to begin the conversation with a company. proposals often focus on governance practices or policies, executive compensation, or the company's behavior as a corporate citizen. Proponents watch how the major institutional investors are voting on issues, and have a sense of which shareholders may be likely to support their proposal going in. Investors also often reach out to other shareholders to encourage support for their measure.

Diversity programs - three principles Engagement: College recruitment programs:

targeting women and minorities. Our interviews suggest that managers willingly participate when invited. That's partly because the message is positive: "Help us find a greater variety of promising employees!"And involvement is voluntary

Sustainable investing

the practice of making investments in companies or funds that aim to achieve market-rate financial returns while considering positive social and/or environmental impact.