Corporate Governance and Social Responsibility
Give two quotes about the relationship between executive pay and corporate performance.
"Negative relationship between firm performance and remuneration in the US" - Core et al (1999) "Corporate governance reforms not strengthened the positive relationship between executive pay and corporate performance" - Thompson (2005)
What is shareholder activism? (+reference)
"Shareholder activism refers to a range of actions taken by shareholders to influence corporate management and boards. Actions range from threatening the sale of shares, letter writing, meetings with management. An activist shareholder is a shareholder who tries to change the status quo through 'voice', without a change in control of the firm" - Becht et al (2008)
How much did the McDonald's CEO receive in compensation in 2015? And how was this split up?
$8.6million: Total $1.3million: Base salary $3million: Stock awards $2.1million: Executive's Stock Options $1.85million: Performance-Based Bonus $92,250: Company contributions to a profit-sharing plan $224,235: Other benefits e.g. use of company car, security, etc.
What is a Multinational Company (MNC)
- A business organisation whose activities are located in more than two countries and is the organisational form that defines foreign direct investment - A large MNC can operate in 100 countries, with hundreds of thousands of employees located outside its home country
What is an institutional shareholder?
- A company, mutual fund, insurance corporation, brokerage, or other such group that has a large amount of money or assets to invest - These investors are responsible for a great percentage of the overall volume for stocks, bonds, mutual funds, and commodities, etc. - Example: pension funds, and banks
What is the meaning of 'Market for Corporate Control'?
- A form of governance - "Takeovers represent an important external mechanism whereby shareholders can replace underperforming or opportunistic managers" - O'Sullivan and Wong (2005) - Company can be valued as NPV (Net Present Value) of future income - Stock market provides objective value of current worth - Firm undervalued if current worth less than NPV - Difference may be due to poor management, prompting takeover bid
What is Civil Law?
- A system of codified law based on ancient Roman Law (Code of Justinian) - Written code of law that judges must follow - Civil Law codes are used in most countries in Europe and South America, and some parts of Africa and Asia - Those codes have been modified and modernised at various times - Tends to lessen protection of shareholders' rights, including minority shareholders
What are the broader forms of governance relating to employees?
- ASB (2006): concerns of employee health and safety, recruitment, training, and moral
What are the broader forms of governance relating to community and society?
- ASB (2006): concerns of public health, employee H&S, risks, diversity, local community, indigenous and human rights issues
What are the broader forms of governance relating to the environment?
- ASB (2006): concerns of water and energy usage, waste, and contribution to climate change - ASB (2006): specific measurements for transportation of hazardous materials, CO2 emissions, and packaging - CO2 emissions and landfill taxes - Tax savings for green investments - UK Climate Change Act (2008): specific budgets to reduce carbon emissions by 80% compared to 1990 levels by 2050
What is the Accountability Theory of CSR Reporting?
- Accountability involves two responsibilities for duties: for action (or inaction) and for an account of those actions - Suggest they use CSR reporting to provide a useful basis for accountancy profession that serve the public interest, ensure legitimate and justified corporate reporting and disclosing practices, and to legitimise and justify corporate CR/CSR reporting and disclosure practises
How can shareholder activism be pursued through relational governance involving large institutional investors?
- Activist institutional investors contact company and engage in one-to-one meetings with executive management - In these meetings, they discuss the necessary changes in boards and governance rules
What is Common Law?
- Also known as case law or precedent - A legal system that is largely formed by the decisions previously made by courts and not imposed by legislatures or other government officials - Tends to give greater protection of shareholders' rights, including minority shareholders' rights
What is the impact of takeovers on performance?
- Andrade et al (2001): on takeover announcement, target shares gain significant returns 15-30%
What did the UK House of Commons Treasury Committee Report (2009) say about remuneration
- Argues that bonus schemes in the banking sector are flawed and not aligned with interests of shareholders - Bonus-driven remuneration structure prevalent in financial institutions led to excessive risk-taking - Remuneration committees should include employees and shareholders rather than consultants
What factors help the spread of globalisation/MNCs?
- Availability of natural resources - Low transport costs, low workers costs, etc. - Tax savings, - Low trade barriers - Political stability - Absence of environmental laws, and CG codes
What are the components of executive pay packages?
- Base salary (not related to performance) - Annual bonus - Long-term performance contingent elements: executive share options (ESOs) and long-term incentive plans (LTIPs) - Pension entitlements - Other benefits: car allowance, life insurance, etc.
What is a friendly takeover?
- Both boards of directors want takeover - Target firm management recommends bid to shareholders - Target firm management may keep jobs/positions
Davis redefined the concept of CSR in 1960, what did he state?
- CSR refers to businessmen's decisions and actions taken for reasons at least partially beyond the firm's direct economic or technical interests - CSR refers to those actions which do not follow the economic logic - Corporation as a responsible actor
How has the legal system influenced ownership structures?
- Common Law system countries tend to have more public companies with widely dispersed ownership - Civil Law system countries tend to have more ownership by families or block holders
What is shareholder capitalism?
- Companies are owned by their shareholders and should be run in their interest to maximise their returns
What is stakeholder capitalism?
- Companies have various stakeholders and they should seek to balance the interests of shareholders with those of other stakeholders, especially employees, customers, and the wider society
What is the IASB Conceptual Framework for Financial Reporting?
- Comprises of six qualitative characteristics to improve the usefulness of the information provided in Financial Statements 1. Relevance 2. Faithful Representation 3. Comparability 4. Verifiability 5. Timeliness 6. Understandability
What are the advantages of the insider system?
- Concentrated ownership means strong shareholder - Strong incentives to monitor management - Managers more likely to maximise shareholder value
What is the Triple Bottom Line?
- Conceptualising the ways in which companies and other organisations create value in multiple dimensions through economic, social, and environmental value added- or destroyed - Covers reporting of: economic prosperity, environmental quality, and social justice
What are some blind-spots business leaders may suffer from?
- Considering 'sustainability' as a new form of religion rather than a new form of value - Business of the business is to create economic value rather than social and ethical value - Avoiding stakeholder demands
What did the Greenbury Report (1995) state about remuneration?
- Creation of remuneration committee - Importance of transparency - Performance-related remuneration
How is non-financial performance measured?
- Customer experience and satisfaction - Market share - Employee satisfaction/staff turnover - Group CO2 reduction
What is the Positive Stakeholder Theory of CSR Reporting?
- Describes what corporations and management actually do - Based on the premise that stakeholders are identified and managed by the corporation - Suggests they use CSR reporting to secure their economic existence and success, enhance their reputations and protect their survival
What is sustainable development?
- Development which meets the needs of the present without compromising the ability of future generations to meet their own needs - Bruntland Report (1987)
On what aspects do the differing systems converge?
- Disclosure - NEDs - Key board committees - Splitting role of chair and CEO - Protecting shareholders including minority interests
What are the disadvantages of the outsider system?
- Dispersed ownership may lead to weak shareholder voting power - Weak control leads to selling of shares, which will result in unstable environment - Free rider problem makes it difficult to monitor management
What are the pillars of sustainability?
- Economic development - Social development - Environmental development - These pillars are interdependent and mutually reinforcing
In the Shareholder View, how can Stakeholders protect their investment?
- Employees, customers, suppliers, bankers and other non-shareholder groups (the stakeholders) also provide firm-specific assets and are therefore entitled to protect their investment in a firm - They can use the following protective instruments: explicit and implicit contracts, judicial interpretations, and government regulation
What are the reasons for CSR Reporting?
- Enhance the corporate image and reputation - Discharge the corporate accountability - Legitimise the corporate existence - Respond to corporate governance and regulations - Mostly developed countries
What is the Carroll's Model of a Corporation's Responsibility?
- Ethical and Philanthropic Responsibilities: desired by stakeholders - Social and Environmental Responsibilities: expected by non-shareholders/stakeholders - Legal Responsibilities: required by Governments - Economic Responsibilities: required by shareholders
On what aspects to the differing systems diverge?
- Extent of disclosure on areas such as executive remuneration - Board structure: unitary or dual - Other differences which may be driven by legal system, culture, economic development, political system, etc.
Why should there be Sustainability Accounting?
- Financial accounting does not represent crucial elements of an organisation's success - such as environmental performances etc. - Making decisions for sustainable development requires a broader perspective and longer timeframes than provided by financial accounting - Part of operationalising sustainability in an organisation
What pressures led to shareholder activism?
- Financial institutions inability to sell their shares - Decline in corporate takeover activities as a means of disciplining poor management - National Association of Pension Funds (NAPF): encouraged boards of companies to enter into dialogue with larger shareholders
What are the three areas of sustainability?
- Financial, social, and environmental - Highly interconnected - Should not be considered in isolation from each other
What is the Contractrian Thesis?
- Firms as nexus of contracts in which managers' greatest responsibility is maximisation of economic value - Friedman (1970) pursued Adam Smith's economic model - "invisible hand" of marketplace shall protect societal interests - argued that corporations can contribute best to society if they do what they do best - provide high quality goods and services to marketplace and fulfil people's needs and create wealth - Socially responsible initiatives may prove to be undisciplined double tax on firms
What elements can we look at to analyse globalisation in global markets?
- GDP: volume and growth rate - Labour cost and unemployment rate - Population - Poverty and income per capita - Foreign direct investment (FDI) - Local business/economic laws and regulations
What are factors that promote CSR?
- Globalisation - Advances in communication - Sustainable development - Governance - Leadership
What is the Political Economy Theory of CSR Reporting?
- Helps researchers to interpret and explain CSR reporting from the expansive social, political, and economic contexts - Suggest that they use CSR reporting to set and shape the CSR agenda, mediate social conflict, and construct and affect the political and economic environment surrounding the company
What is Corporate Social Responsibility (CSR) and who introduced it?
- Howard Bowen (1953) - CSR refers to the obligation of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society
What International Labour Organisation (ILO) conventions are important in the context of CSR?
- ILO Conventions 29 and 105 and recommendation 35: forced and bonded labour - ILO Convention 87: freedom of association - ILO Convention 98: right to organise and collective bargaining
What is corporate citizenship?
- Implies balancing the strategic orientations of business and social expectations - Programmes can increase profits and foster consumer and employee engagement - Corporate citizenship initiatives are a strategic investment
Will making CSR mandatory help?
- In India CSR mandatory - But cant enforce it when the desire isn't there - Need to embed SR into: individual culture, societal culture, educational system, and organisational culture
What are the advantages of the outsider system?
- Increased financing through capital markets - Managers constantly exposed to discipline of market - High potential for portfolio diversification for risk-adverse investors to invest
What are the main categories of share ownership?
- Individuals - Insurance companies - Pension funds - Other financial institutions - Unit trusts - Others (e.g. public sector, charities, etc.) - Overseas
What is the critique of human rights as a framework for global CSR?
- International human rights are legal instruments and can only be realised through legislative measures - Inappropriate to consider firms at the level similar to states - Conflict with collectivist moralities - Ethics of human rights could introduce a new set of conflicts between the north and the south
What is Social Responsible Investment (SRI)?
- Involves considering the ethical, social, and environmental performance of companies selected for investment, as well as their financial performance
What is the Global Reporting Initiative?
- It is a multi-stakeholder, international undertaking whose mission is to develop and disseminate globally applicable sustainability reporting guidelines 1. Balance Principle 2. Clarity Principle 3. Accuracy Principle 4. Timeliness Principle 5. Comparability Principle 6. Reliability Principle
What is the impact of takeovers on managers?
- Kennedy and Limmack (1996): CEO turnover is 40% in the first year after a successful takeover, and 26% in the second year - this is compared to turnover rates of 6% and 10% in the two years prior to the takeover
What are the reasons for non-CSR Reporting?
- Lack of legal requirements and governance - Lack of code of ethics - Lack of knowledge/awareness - Lack of resources - Mostly developing countries
How are the three areas of sustainability connected?
- Lack of social and/or environmental sustainability can damage economic sustainability - Expanding understanding of sustainability from the economic to the broader interconnected economic, social, and ecological introduces considerable complexity
What are some common mistakes in CSR?
- Lack of vision - Scale of change - Selective hearing - Non-participative management - Failure to see CSR as innovation
What is the Legitimacy Theory of CSR Reporting?
- Legitimacy is a condition or status which exists when an entity's value system is congruent with the value system of larger social systems of which the entity is part. When a disparity, actual or potential, exists between the two value systems, there is a threat to entity's legitimacy - Lindblom (1994) - Suggests that corporations use CSR reporting to be able to continue to operatre, legitimise their relationship with society, communicate with stakeholders and to construct their own 'social imagery'
What are the key characteristics influencing Corporate Governance in the Italy Outsider System?
- Main business form: limited liability companies; partnerships - Predominant ownership structure: non-financial/holding companies; families - Legal system: civil law - Board structure: unitary - Important aspect: board of auditors required
What are the key characteristics influencing Corporate Governance in Malaysia
- Main business form: public limited company - Predominant ownership structure: controlling shareholder - Legal system: Common Law - Board structure: unitary - Important aspect: influence of bumiputera shareholders; emphasis on director training
What are the key characteristics influencing Corporate Governance in India?
- Main business form: public limited company - Predominant ownership structure: corporate bodies, families, but institutional investors' ownership increasing - Legal system: Common Law - Board structure: unitary - Important aspect: some aspects of the code are mandatory recommendations
What are the key characteristics influencing Corporate Governance in the Denmark insider system?
- Main business form: public or private companies limited by shares - Predominant ownership structure: institutional investors and foundation ownership - Legal system: civil law - Board structure: dual Important aspects: many shares have multiple voting rights
How can individuals make the difference in social, environmental, and ethical expectations and behaviour?
- Manager social responsibility - Shareholder social responsibility - Employee social responsibility - Consumer social responsibility - Investor social responsibility
What is a 'disciplining underperforming target firms' motivation for takeovers?
- Market identify underperforming firms correctly and replace them - Performance improvement through replacing management and re-allocation of corporate assets
What is the outsider system?
- Market-based or Anglo-American system - No right to representation on boards for insider groups - Controlled by managers, but owned by shareholders - Shareholding easily traded in stock markets - Examples: USA and UK - Legal protection of investors is highly important - Extensive rules to protect minority rights - Market for corporate control more important
What should a future CG system include?
- Mission statement and commitment statement - Clear structure and clear progress of CG practice - Moving towards responsibilities not rights
How do Human Rights tie in as a framework for Global CSR?
- Moon et al (2005) suggested that increasing participation of firms in social partnerships can be viewed as an important practice of the political interaction between firms and communities - This view of corporate citizenship regards corporations as political actors, as they are increasingly performing state-like roles, and regaining power, responsibility and influence
What are the future developments of governance?
- More board/director evaluations - More emphasis on board diversity - More emphasis/clarification on role of independent NEDs - More emphasis on integrity of board and individual directors - Continuing emphasis on directors' remuneration and performance - Emphasis on CSR/Sustainability - Transparency
How can we achieve sustainable capitalism?
- Need more than just environmentally-friendly technologies - Need to address radically new views of what is meant by social equity, environmental justice, and business ethics - Requires bringing industry into harmony with people - Alleviating poverty, stabilising population, empowering women, protecting human rights, and distributing opportunities
What were the impacts of the BP Deepwater Horizon Safety Failure in 2010?
- Negative environmental performance - Paid $40.9billion clean-up cost - $20billion Trust for Claim Funds - $500million, 10 year Independent Research Programme to examine the Long-term environmental impacts - Norwegian Government Pension Fund Global lost more than £824million on its 1.75% stake in BP - Fall in share price - 11 deaths and 17 injuries
What type of information in CSR reports are classified as 'Greenwash'
- Not material (e.g. unimportant information) - Not relevant (e.g. very general information) - Not measured - Not aggregate information for the whole corporation
What can social responsibility achieve to satisfy investors?
- Obligation to make profits for shareholders - Expectation of ethical and moral behaviour - Investors protected by regulation by the securities and exchange commission and state regulations
What is a 'synergistic' motivation for takeovers?
- Performance improvement through economies of scale - Improving performance through economies of scope
What did the UK Corporate Governance Code (2010) state about remuneration?
- Performance related for long-term - Shareholder approval for new long-term incentives - Challenging performance criteria - Only basic salary pensionable
What are the roles of the stakeholder?
- Place conflicting expectations on companies - Stakeholder expectations differ across countries/cultures: measures on health and safety, reduction of CO2, minimum salaries, social welfare, high product quality, low prices, etc.
What are executive share options (ESOs)?
- Popular in UK since 1980s - Promotes alignment of shareholder and director interest - Cons: creative accounting, use of insider information, distort patterns of ownership and market discipline
What is the Minimalist model of CSR?
- Position: Minimalist (premodern) - Responsible To: stockholders/owners - Action: maximises profit
What is the Self-Interested model of CSR
- Position: Self-Interested (premodern) - Responsible To: Stockholders/owners/cost controllers - Action: focus on services that enhance profit and corporate growth
What is the Social Contract model of CSR?
- Position: Social Contract (modern) - Responsible To: entities with social and legal contract - Action: commitment to social services
What is the Stakeholder Stewardship model of CSR?
- Position: Stakeholder Stewardship (postmodern) - Responsible To: The whole society - Action: Solutions for social problems
What is the Stakeholder Management model of CSR?
- Position: Stakeholder management (postmodern) - Responsible To: entities that influence direction and fortune - Action: deployment of responsive strategies
What can social responsibility achieve to satisfy society?
- Positive profit - Consumer satisfaction - Societal well-being - Job opportunities - Charitable contributions and service - Contributions to overall economy
What are the tactics for defending against takeovers, as stated by Sudarsanam (1995) (+percentage frequency of use)
- Profit Reports (59%) - Promises of increased dividends (45%) - Utilisation of a 'white knight' of a friendly company to launch a counter bid (24%) - Argue against the bid on anti-trust grounds (37%)
What can social responsibility achieve to satisfy the general public?
- Public health issues - Protecting the environment - Recycling - Developing the quality of the workforce - Corporate philanthropy
What is stakeholder activism?
- Refers to a range of actions taken by shareholders and non-shareholders to influence corporate management and boards - Becht et al (2009)
What did HPC say about the poor link between corporate performance and executive pay?
- Remuneration packages are too complex - Common background of directors and independent directors who sit on remuneration committees leads to benchmarking of high salaries
What is a 'Managerial Hubris' or 'Over-Optimism' motivation for takeovers?
- Rolls (1986): 'Hubris' hypothesis suggests that self-confident managers over-estimate synergies and their ability to manage the combined businesses - Managers make systematic valuation errors - Takeovers take place because of these errors
How is financial performance measured?
- Sales growth - Assets turnover - Working capital ratios - Share prices - Earnings per share
How can shareholder activism be pursued through annual or extraordinary general meetings?
- Select firms to be targeted - Privately contact top management indicating intention to present a proxy proposal at AGM - Submit proxy proposal, estimating the probability of success - If submitted, all shareholders vote to adopt or reject - Monitor implementation of the proposed changes
What groups are included in the rights to representation of stakeholder engagement?
- Shareholder activist groups - Workers and lower level directors - Stakeholder activist groups - Responses to stakeholders' feedbacks and concerns - Support workers directors with broader changes in governance within workplace
What are the measurements used to determine bonus payments?
- Shareholder returns - Share price - Return on capital employed - Earnings per share - Individual director performance
What is The Shareholder View?
- Shareholders notionally own the corporation and therefore are not responsible for corporate behaviour or actions - Managers and directors do not own the assets and have fiduciary (involving trust) responsibility to protect the investment of the shareholders - Corporations enter a contractual relationship with shareholders who become the residual risk and benefit bearers as they provide the most crucial firm-specific assets - The objective of the Corporation is to protect the investment and interests of shareholders
Does poor performance prompt takeovers?
- Shrieves and Stevens (1979): takeover targets had stronger symptoms of bankruptcy - Meeks (1997): suggested targets performed better - Levine et al (1981): no distinguishing performance differences - Mixed and inconclusive findings
What are the CSR Reporting Theoretical Frameworks?
- Social Contract Theory - Legitimacy Theory - Stakeholder Theory - Political Economy Theory - Accountability Theory
What does Bowen's definition of CSR suggest?
- Social values and objectives are the source of articulating the responsibility of businesses - Introduces the relativistic premise given that societies have different values and objectives - Emphasises the obligation of human agency
Why is there the need for CSR reporting?
- Societal interest in social and environmental issues as become increasingly mainstream - The development of the CSR field generally - Advances in communication technology - Declines in the levels of trust afforded to some institutions
What is an insider system?
- Sometimes known as relationship-based system - Owned by a small number of major shareholders - Major shareholders may be founding families, banks, other companies, or the State - Other insider groups, such as employees, may be entitled to representation on boards - Example: Germany - large shareholders and banks predominate - Large investors and banks finance and monitor - Less reliance on legal protection
What is the Stakeholder Concept?
- Stakeholders are individuals and groups that can affect or are affected by an organisation such as political groups, governments, owners, financial community etc.
Who is responsible for comprehending human rights, and how?
- States are responsible for releasing human rights through legal measures
Why did Friedman (1962) critique the formulation of the concept of CSR?
- States that business of a business is business - Used the Contractrian Thesis to develop the critique of CSR
What are the disadvantages of the insider system?
- Strong ownership and voting power reduces fluidity in capital markets - Lower portfolio diversification possibilities in markets - Managers not disciplined by external markets - Large shareholders abuse power
What are some reasons for the failure of takeovers?
- Successful defence by target management - Intervention by regulatory authorities - Voluntary withdrawal by bidder - Reject of bid by target shareholders
What is the Normative Stakeholder Theory of CSR Reporting?
- Suggests and describes what corporation should do and how management should deal with its stakeholders - Based on the concept of the social contract which provides rights for all stakeholders who affect or are affected by the activities of the corporation - Suggests that corporations use CSR reporting to be able to discharge their accountability, keep parties informed of their activities, and support the general public
What is the impact of takeovers on employees?
- Summers et al (1988): employees are willing to make firm-specific investments in terms of their human capital in return for an implicit promise of job security
What is a hostile takeover?
- Target firm management does not recommend bid - Target firm management may be removed
What are the implications of the Shareholder View?
- The domination of financial performance leads to short termism, resulting from the operations of financial markets and stock markets which require corporations to provide immediate return to their shareholders - This leads to aggressive accounting methods and unrealistic valuation methods - This could cause a massive build up of debt and the value destroying acquisitions, demonstrating the incompetence of management
What is corporation voluntarism?
- The means that organisation on its own will undertake to satisfy its key stakeholders - Freeman (1984)
What can social responsibility achieve to satisfy customers?
- The right to be safe - The right to be informed - The right to chose - The right to be heard
What is the Social Contract Theory of CSR Reporting?
- The social contract would exist between corporations and individual members of society. Society provides corporations with their legal standing and attributes and the authority to own and use natural resources and hire employees. The organisation has no inherent rights to these benefits and in order to allow their existence, society would expect benefits to exceed the costs to society - Mathews (1993)
What is globalisation in terms of OECDs?
- The spread of; manufacturing services, markets, culture, lifestyle, capital, technology, and ideas across national boundaries and around the world
What is a secondary stakeholder?
- Those that can impact the organisation, but the organisation will still be able to continue its business as usual
What is a primary stakeholder?
- Those without whose cooperation the organisation cannot continue operating
What are horizontal mergers?
- Type of change in ownership - Acquirer and acquired firms in same line of business and market - Example: Vodafone and BT
What are Management Buy-Ins?
- Type of change in ownership - Acquisition by shareholders to provide new management: takeover of a firm, or division of a firm, by a small group of shareholders
What are Management Buy-Outs?
- Type of change in ownership - Acquisition from management within: takeover of a firm, or division of a firm, by its existing management team
What is a merger?
- Type of change in ownership - Combining together two or more firms into a single business on a basis that is mutually agreed by firms' managements and approved by their shareholders
What are vertical mergers?
- Type of change in ownership - Companies at different stages of production in the same industry - Example: Disney and ABC
What are conglomerate mergers?
- Type of change in ownership - Companies in unrelated lines of business, allowing risks to be spread - Example: Shell and Philips
What is divestment?
- Type of change in ownership - Disposal of asset - Selling or exchanging assets - Selling of or closing down one or more of a business's operating activities
What are acquisitions?
- Type of change in ownership - May involve firms of markedly different sizes - E.g. larger firm taking over a smaller one (except in situations of reverse takeovers)
What are long-term incentive plans (LTIPs)?
- Used as an alternative to ESOs - Advantage: linked to broader performance that just share options
What role do corporations play in human rights?
- Vital role in organising globalisation - Their influence impacts on individuals, societies and nations - Have been transforming the global domain of human rights
What factors affect the success of shareholder activism?
- Whether or not shareholder activists can present proposals as aligned with management's interest - Proportion of passive shareholders - Whether shareholders are individuals or institutions - Whether shareholders have a short-term outlook
What factors affect the success of takeover bids? (+references)
- Wong and O'Sullivan (2001): chance of takeover success reduced if target is hostile - Wong and O'Sullivan (1999): if hostile takeover target has greater levels of independent institutional owners and unaffiliated block holders, takeover is more likely to be resisted
What can social responsibility achieve to satisfy employees?
- Workplace safety - Quality of life issues - Ensuring equal opportunity on the job - Age discrimination - Sexual harassment and sexism
Should future CG systems respect stakeholder interests?
- Yes - Self-interested opportunistic shareholders need accountability and monitoring in order to deliver value to stakeholders - Internal governance for institutional shareholders - Disclosure of sustainability performance
What are the three types of privatisation process?
1. Mass Privatisation Model - Voucher Privatisation method - Example: Czech Republic and Russia 2. Management and employees (insiders) buy company assets - Example: Poland 3. Selling majority control to outside investors (outsiders), often foreign investors - Example: Hungary and Estonia
What are the UN Global Compact's six core values in human rights and labour standards?
1. Support and respect the protection of human rights 2. Make sure they do not abuse human rights 3. Uphold the freedom of association 4. Elimination of all forms of forced and compulsory labour 5. Abolition of child labour 6. Elimination of discrimination
What are the AccountAbility Principles?
1. The Foundation principle of Inclusivity 2. The Principle of Materiality 3. The Principle of Responsiveness
What was discussed at the Rio Earth Summit (1992)
1. The framework of sustainable development 2. Biodiversity and deforestation 3. Climate change 4. Fragile ecosystems, and hazardous waste 5. Indigenous knowledge 6. Poverty, responsible entrepreneurships and investments
What are the dimensions of sustainability accounting?
1. Timing 2. Location of impact 3. Type of impact
What two dimensions of freedom are implicit in the contents of human rights conventions?
1. freedom from fear 2. freedom from needs
How did Scholte (2005) define globalisation?
A process which diminishes the necessity of a common and shared territorial basis for social, economic, and political activities, processes, and relations
When did the United Nations appoint a Commission on Human Rights and what did it produce?
April 1946 Produced the Universal Declaration of Human Rights, which has since been used as the basis for initiating, defining, drafting, and formulating international human rights treaties and protocols
What is the impact of shareholder activism (+reference)
Becht et al (2008) analysed a unique dataset on private engagements, their results suggest that shareholder activism brings substantial benefits in the form of significant share price gains
How did the European Commission (2001) define CSR?
CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis
What is CSR Reporting?
CSR reporting provides information to the public regarding corporate activities that relate to the society and environment, such as: - Reducing environmental impact - Improving waste management - Reuse, reduce and recycle - Health and safety conditions
What is environmental quality?
Involves taking into account both the critical natural capital (essential for life and healthy eco-system) and renewable, replaceable, or substitutable natural capital
What is economic prosperity?
Involves taking into account the natural and social capital along with physical, financial, human, and intellectual capital
What is social justice?
Involves taking into account the social capital (trust between businesses and society) - the key to sustainable capitalism is social justice
What is a corporation?
Legal status: corporations exist independently from those who establish, manage, work, and benefit from them Ownership of assets: corporation itself own it assets
What are the effects that globalisation have on corporate social responsibility?
Race to the Bottom Effect: - Increased mobility of firms in search of low wages, reduced costs, reduced taxes, and weak trade unions Regulatory Vacuum Effect: - Involvement of firms in creating transnational problems which a single national government cannot solve International Law Effect: - Is designed to regulate relations among states but is inadequate to deal with the firms while national laws are geographically bounded and their application follows the economic and political interests of the national government
What is The Entity Concept?
The corporate accounts are produced for a business entity that is separate from the owners and managers
What is the 'right' amount to pay an executive?
The minimum amount it takes to attract and retain a qualified individual
What is accounting for human and labour rights?
The process of identifying and measuring data about human resources and communicating this information to the interested parties
How did the IMF define globalisation?
The process through which an increasingly free flow of ideas, people, goods, services, and capital leads to the integration of economies and societies
Why do we need CSR Reporting Guidelines?
They provide: - A framework indicating what information might be of interest to users - A direct guidance to reporters on why, what, and how to report - A chance to increase the comparability of CSR performance - A guidance to increase the usefulness and credibility of CSR reporting
The ethics of human rights can transform firms how?
Transform into proactive contributors to: - Strengthening democracy - Alleviating poverty - Reforming institutions - Providing support to disadvantaged groups, communities, and countries - Enhancing Human Wellbeing
Provide two examples of shareholder activism
[May 2003] GlaxoSmithKline shareholders vote to reject remuneration report - Keasey et al (2005) 72% of girms targeted by CalPERS accepted proposals and made subsequent corresponding changes to governance structure - Carleton et al (1998)
