csr and corporate governance
TRANSCRIPT
CSR and Corporate Governance
The Convergence
Bolaji Okusaga
1. Cases and Causes
Global Corporations and the 2008 – 2009 Economic Meltdown
FROM BIG SUCCESS TO BIG
CRASHES
• Leyman Brothers, AIG, Bernard L. Madoff Investment Securities LCC, Washington Mutual, General Motors and Saab Auto-mobile were huge global enterprises before the crash due to quasi- lassie-faire mind-set
The Nigerian Financial Crisis
With democracy Nigeria’s economy opened up to the world via more for foreign investments and the policy of
trade liberalization.
And as the gains gradually started to trickle in, another plan for
strengthening of the Financial System and the deepening of the Capital
Market was also vigorously pursued
A wave of recapitalization followed with the consolidation of the banking industry and reduction of number of operators within the banking system from seventy-nine (79) to twenty-five
(25)
Suddenly, the banks were returning billions of naira in profits.
The return on investment from stocks traded on the Nigerian stock
exchange was not only elephantine but peculiarly humongous and attractive such that the Banks
continued to throw in depositors fund on the market without checking
the risks.
The Consequence - Global
THE CONSEQUENCE OF PROFIT FOR PROFITS SAKE
A situation where sub-prime mortgages became a trend because it
had a money-minting potential without a consideration of the moral foundation and long-term social basis of the profits procured led to the fall
of Wall Street
Erstwhile global giants like AIG and General Motors, badly affected, while
others such as Leyman Brothers, Bernard L. Madoff Investment
Securities, Washington Mutual, General Motors, Saab Automobile,
Zavi, and Woolworth died
The Consequence - Local
THE CONSEQUENCE OF Greed and Lack of Regulation
Financial Crisis leading to the sacking of Managing Directors of 5 Bank and
application of a bail=out to save the Banking Industry
Stock Market Crash and big Margin trading liabilities for Stock market players
2. Reactions and Refocus
Emerging Trends in Corporate Practices
CORPORATE REFORMS
Corporate governance reforms has given rise to more social
and environment responsibility
EMERGENT TREND
There is now a emergent trend towards a focus on companies
off balance sheet environmental and social
impacts
THE MOVE TOWARDS
CONVERGENCE
Consequently, this trend has fueled a debate regarding the
degree and nature of convergence between
corporate governance and corporate social responsibility.
Drivers of ConvergenceStakeholders• Stakeholders are becoming more
aware and are demanding accountability beyond profits
Employees• The changing nature of Employer /
Employee relationship – from Master-Servant to partnership that is mutually reinforcing and beneficial
Reputation• Corporate Reputation and Trust are
beginning to count more for business success than efficiency and product / service quality
Globalisation• Globalisation is helping to
universalize standards across the globe
Leadership• Leadership are coming under more
scrutiny than at any time in history.
Drivers of Responsible Investment
Respect for Globally accepted Values• Fight against Corruption• Respect for Human Rights
The need to professionally manage listed companies in order to protect shareholders investments• Issues of Corporate misdemeanors
endangering Trillions of Dollar Investments
Shareholder activism: • Development of Shareholder activism
as a reaction to Board and Executive excesses
Influence corporate reporting and disclosure requirements• Need for disclosures
New rules on CSR reporting• ISO 2600• Global Reporting Initiative (GRI)
3. Finding the Meeting Point
Defining the Concepts – CR and CGRESPONSIBILITY
• The concept of corporate responsibility is essentially about ensuring a better conversation between business and society.
• Aside from the symbiotic relationship and consequent benefits derivable from the conversation, the dialogue between business and society is underpinned by the principle of accountability which presupposes the need for periodic scrutiny by immediate and remote interests.
GOVERNANCE• On the other hand, corporate governance seeks to create the context for advancing this
conversation and creating trust, progress and continuity there-from, through the setting of the background against which conversation is expected to take place, while building the limits against which judgments are made and decisions taken in a bid to sharpen the moral planks of the conversation.
From Relationship to Accountability
RELATIONSHIP
While Corporate Responsibility strives to forge relationships,
corporate governance helps to define the basis of the
relationships and sets the rules.
ACCOUNTABILITY
Corporate governance therefore is a platform for ensuring that rules adopted in pursuit of the need for an accountable enterprise are not
only applied but also made to govern business and social
conversations
Corporate Governance – Views from the Top
COLGATE PALMOLIVE
Corporate governance is about “the practices, principles and
values that guide a company and its business every day, at all levels of the organization”.
AIR BERLIN
Corporate governance is “code of behaviour that define guidelines for the transparent management
and control of companies. It creates transparency,
strengthens confidence in the company management and in
particular serves the protection of the shareholders”.
Accountability as Point of Convergence
CORPORATE RESONSIBILITY AS ACCOUNTABLE INVESTMENTS• The search for a goodwill
platform for social and environmental investments creating a sustainable enterprise
CORPORATE GOVERNANCE AS ACCOUNTABLE ACTIONS• Instances of corporate
irresponsibility leading to colossal corporate and / or national economic value attrition
CREATING A BASIS FOR A SOUND BUSINESS• Accountable decision
making in the selection of corporate priorities
There are hard-worn linkages which sets a basis for the conversation between business and society.
4. Reputation as Radar
Reputation Metrics – Companies and Investments
Transparency Accountability Good Governance
Strong Management
Strategic Vision
Corporate Performance
Social Responsibility
Corporate Values
Risks FactorsPERCEPTION
• Increasingly shareholders seeking financial rewards are recognizing CSR issues can act on share price and want to know what companies are doing about their CSR risks.
• Mainstream financial analysts are also becoming aware that CSR issues are not marginal but have materiality for a company, necessitating more strategic thinking about CSR.
MATERIALITY
• The materiality of some CSR issues is becoming so significant that individual managers and departments are unable to resolve them on their own and seek board guidance.
• Governments are regulating in some CSR areas such as environment and labour issues, making it ill-advised not to stay abreast if not ahead of these issues.
REGULATORY SCRUTINY
• New regulations requiring more robust risk reporting compel companies to be more mindful of non-financial issues, thereby driving CSR into corporate governance and accounting processes.
• Legal liabilities and class action law suits create challenges with financial implications resulting in a jolt effect on the architecture of what gets counted.
• A number of CR risks are sector-dependent — in some sectors certain CSR issues can
• affect business survival and as such become central to the way business is managed.
Corporate Governance Practices Deriving from CSR
Risk Management Oversight
This is a major convergence point - A key board duty is
the consideration of long term corporate
risks
Diversity in Board Composition
The need for diversity and
inclusion on boards is another
convergence point
United Nations Initiatives
UN Global Compact UN Principles for Responsible Investment
UNEP Equator Principles ILO Tripartite Declaration of Principles concerning
Multinational Enterprises and Social Policy (MNE Declaration)
UNHCHR Business and Human Rights
UNODC Anti-corruption UNCTAD Corporate Responsibility Reporting, World
Investment Report
Implications for Enterprises
Expanding sphere of influence
Application of Code of Conduct to value chain CSR management: value chain management = compliance management
Development of Codes of Conduct and CSR reporting
New social and product liability patterns
CSR Drivers
Implications for Enterprises: CSR Management
Addressing socio-environmental & legal
compliance issues
Policies - Code of Conduct
Systems - Compliance Management
Reporting - Accounting and Reporting
CSR Management Process
• Needs Assessment
Plan
• Build Intervention Map and Activate
Do • Impact Assessment
Check
• Social Reporting
Review
Stakeholder Dialogue
Organisation’s Response
Independent Study
Stakeholder Dialogue
Thought On Convergence of Corporate Governance and CSR
Values School• Ethical considerations in
business decision making are critical to fostering community connection and cooperation in the wealth creation process.
• This believes that CSR cuts across the entire Business Cycle
Operations School• Corporate social
responsibility is only connected to corporate governance at the operational risk level.
• According to this school, corporate social responsibility is an operational risk issue.
Conclusion• Dislocations in the global economy in recent history which has called
into question the place of capitalism in guaranteeing global peace and prosperity
• The dearth of a deep-seated understanding of how social and environmental factors shape business outcomes and affect organizational success has been at the heart of most corporate failures and systems collapse