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Chapter 02 - Stakeholders and Social Responsibility - Coggle Diagram
Chapter 02 - Stakeholders and Social Responsibility
I. Principals and agents in governance
Agency relationship:
Underpin any governance situation
Separation of ownership and control of organization
2 parties: principal (shareholders, interested in wealth creation) and agents (directors, interested in personal gain from employment) -> potential for conflict of interest.
** Agency costs:
Monitoring costs (eg. time and expenses to review published info, attend meeting, pay for independent advisers, external audit fee etc.)
Residual loss (compromised trusts in agents)
-> Can be reduced by employing NEDs
** Steps to monitor agency by principals:
Request formation of committees
Employ consultants
Increase number of NEDs
Attend AGM and question board
Stakeholders: Someone affects or is affected by an entity.
**Types of claims:
Direct claim: Make it with their own voices
Indirect claim: Unable to make claim themselves due to some reasons lead to voiceless or inarticulate.
** Stakeholder group:
Internal: management, employees, the board
Connected: Shareholders, customer, supplier, lender
External: Government, public, pressure groups
** Another way of classification:
Active: seek to participate in the organization's activities
Passive: Do not seek to participate in policy making
Mendelow's matrix on stakeholder's mapping:
Power/Level of Interest Low High
Low Minimal effort Keep informed
High Keep satisfied Key players
** Problems:
Difficult to measure stakeholder's power and influence
Map is not static
Based on strategic position rather than moral or ethical
Fail to take legitimacy into account
** Problems with stakeholder's theory:
Instrumental view: only economic benefit
Normative view: Moral obligations towards its stakeholders
II. Social responsibility
CSR (Carroll, 1991): Economic -> Legal -> Ethical -> Philanthropic
Corporate citizenship
** 3 principles for successful corporate citizenship:
Maximize benefits for society
Minimize any harm
Remain clearly accountable and responsive
** Rights of business as a corporate citizen:
Rights to be protected by the law
Rights to receive support of society
** Responsibility: Obey laws, fit in with ethical and social norms
3 perspectives of CSR:
Limited view
Equivalent view (Carroll model)
Extended views
CSR 2.0 (Visser): 5 principles:
Creativity (embracing new ideas)
Scalability (translate them across border)
Responsiveness (the ability to change)
Glocality (Local solutions made on a global scale)
Circularity (recognizing the cycle of events)
CSR viewpoints (Gray et al, 1996): Pristine capitalist (only profit) -> Expedient (social responsibilities may be relevant but must be in business economic interest) -> Proponent of social contract (agreement between organizations and those affected by their decisions) -> Social ecologist (strategies related to pollution must be modified) -> Socialist (treat all equally) -> Radical feminist -> Deep ecologist
Ethical stances (Johnson et al, 2017)
Short-term shareholder interest
Long-term shareholder interest
Multiple stakeholder obligation
Shaper of society
III. Sustainability
Sustainability model: Sustainable by whom? -> For whom? -> What ways? -> How long? -> What costs?
Two approaches to sustainability:
Weak sustainability: only sustaining human species
Strong sustainability: Sustain all species
Environmental footprints:
Depletion of natural resources
Noise and aesthetic impacts
Residual and water emissions
Long-term wastes disposal
Uncompensated health effects
Change in the local quality of life (eg. via tourism)
Social accounting: describing the communication of social and environmental effects of a company's action to stakeholders
AA1000 Standard: Concept of triple bottom lines (3Ps):
People
Planet
Profit
** Principles of AA1000 Standard:
Inclusivity
Materiality
Responsiveness
Impact
Global reporting initiative: Report not only financial but economic, social, environmental importance.
Eco-management and audit scheme:
Requirement for EMAS registration:
Environmental policy with commitments
On-site environment review
An environment management system
Environmental audits
Audit results
A public environmental system
ISO 14000: Environment management system must comprise:
An environmental policy statement
Assessment of environmental aspects and legal and voluntary obligations
A management system ensuring effective monitoring
Internal audits
Public declaration
Integrated Reporting: active consideration of relationships between its various operating and functional units and the capitals that organization used.
Categories of capitals: Financials (funds), Manufactured (building), Human (skills, experience, and motivation), Intellectual (intangible assets), Natural, Social
7 principles of IR to make it meaningful:
Connectivity all relationship that create values
Stakeholders relationship and how they work to create value
Materiality
Reliability and completeness
Conciseness
Consistent and comparable
Social audit: Review the following:
Rationale for engaging in socially responsible activities
All current programs congruent with missions
Assessing objectives and priorities relating to these programs
Evaluating involvement in such programs
Environmental audit: Suitable metrics -> Measurement -> Report
Environmental reporting: Narratives and Numerical. Method: part of annual report or standalone report