Corporate social responsibility entR.ppt

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1. Corporate Social
Responsibility
McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
1.Understand the importance of the stakeholder approach
2.Explain the continuum of social responsibility
3.Describe a social audit
4.Compare advantages of collaborative social initiatives
5.Explain the 5 principles of collaborate social initiatives
6.Compare the merits of different approaches to business
ethics
7.Global Investment Performance Standards
8.the major milestones in GIPS development
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3. Stakeholder Approach
According to the Stakeholder Approach:
•In defining or redefining the company mission, strategic
managers must recognize the legitimate rights of the firm’s
claimants.
•In addition to stockholders and employees, these include
outside stakeholders affected by the firm’s actions.
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4. Perceived Stakeholders
•Customers
•Government
•Stockholders
•Employees
•Society
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5. Steps to Incorporate Stakeholders:
1.Identification of stakeholders
2.Understanding stakeholders’
specific claims vis-à-vis the firm
3.Reconciliation of these claims
and assignment of priorities
4.Coordination of the claims with
other elements of the company
mission
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6. Dynamics of Social Responsibility
Inside vs. Outside Stakeholders
Duty to serve society plus duty to
serve stockholders
Flexibility is key
Firms differ along:
Competitive Position
Industry
Country
Environmental Pressures
Ecological Pressures
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7. Ex. 3.2 Inputs to the Development of
Company Mission
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8. Types of Social
Responsibility
Economic – the duty of managers, as agents of
the company owners, to maximize stockholder
wealth
Legal – the firm’s obligations to comply with the
laws that regulate business activities
Ethical – the company’s notion of right and
proper business behavior.
Discretionary – voluntarily
assumed by a business
organization.
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9. CSR & Profitability
•Corporate social responsibility (CSR), is the
idea that business has a duty to serve society in
general as well as the financial interests of
stockholders.
•The dynamic between CSR and success (profit)
is complex. They are not mutually exclusive,
and they are not prerequisites of each other.
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10. Factors Complicating a Cost-Benefit Analysis of
CSR:
1.Some CSR activities incur no dollar costs at all. In
fact, the benefits from philanthropy can be
huge.
2.Socially responsible behavior does not come at a
prohibitive cost.
3.Socially responsible practices may create
savings, and, as a result, increase profits.
4.Proponents argues that CSR costs are more than
offset in the long run by an improved company
image and increased community goodwill.
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11. CSR Today
Priority of American businesses
Resurgence of Environmentalism
Increasing Buying Power among
Consumers
Globalization of Business
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12. New Corporate Governance Structure
•Restructuring governance structure in American corporations
•Heightened role of corporate internal auditors
•Auditors now routinely deal directly with top corporate
officials
•CEO information provided directly by the company’s chief
compliance and chief
accounting officers
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13. Ex. 3.8 The New Corporate Governance Structure
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14. CSR’s Effect on Mission Statement
•The mission statement embodies
what company believes
•Managers must identify all
stakeholder groups and weigh their
relative rights and abilities to affect
the firm’s success
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15. Social Audit
•A social audit is an attempt to
measure a company’s actual social
performance against its social
objectives.
•The social audit may be used for
more than simply monitoring and
evaluating firm social performance.
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16. Satisfying Corporate Social
Responsibility
•Conflicting pressures on
executives
•The CSR Debate: centuries old
•There are mutual advantages to
using Collaborative Social
Initiatives (CSIs)
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17. Ex. 3.10 Continuum of Corporate Social Responsibility
Commitments
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18. Five Principles of Successful CSIs
1.Identify a Long-Term Durable Mission
2.Contribute “What We Do”*
*This is the most important principle
3.Contribute Specialized Services to a Large-Scale
Undertaking
4.Weigh Government’s Influence
5.Assemble and Value the Total Package of Benefits
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19. The Limits of CSR Strategies
Some companies have embedded social
responsibility and sustainability
commitments deeply in their core
strategies.
Larger companies must move beyond the
easy options of charitable donations but
also steer clear of overreaching
commitments.
CSR strategies can also run afoul of the
skeptics—the speed of information on the
Internet makes this an issue with serious
ramifications.
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20. The Future of CSR
•CSR is firmly and irreversibly part of the corporate fabric
•Corporations will face growing demands for social
responsibility contributions far beyond simple cash or in-kind
donations
•The public’s perception of ethics in corporate America is near
its all-time low
•Even when groups agree on what constitutes human welfare,
the means they choose to achieve it may differ
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21. Code of Business Ethics
•To help ensure consistence in the application of
ethical standards, an increasing number of
professional associations and businesses are
establishing codes of ethical conduct.
•The following all have ethics codes:
•Chemists
•Funeral directors
•Law Enforcement Agents
•Hockey Players
•Librarians
•Physicians
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22. Major Trends in Codes of Ethics
1.Increased interest in codifying business ethics
has led to both the proliferation of formal
statements by companies and to their
prominence among business documents.
2.Such codes used to be found solely in employee
handbooks.
3.Companies are adding enforcement measures to
their codes.
4.Increased attention by companies in improving
employees’ training in understanding their
obligations under the company’s code of ethics.
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23. Global Investment Performance Standards
(GIPS)
The Global Investment Performance Standards (GIPS) are the ethical standards
followed by investment managers relating to the full disclosure and fair
representation of the results of their investment performance. The CFA Institute
formulated the standards and the GIPS Executive Committee is responsible for the
development and interpretation of the standards.
As of 2018, the latest version of the Global Investment Performance Standards is
the 2010 GIPS Edition. The 2010 edition includes both requirements and
recommendations for investment management firms and investment managers.
Companies must conform to all the requirements defined in the GIPS to claim
compliance with the standards. The (new) 2020 GIPS Edition is expected to be
released in June 2019, with an effective date of January 1, 2020.
Example: An investment firm might say it is "GIPS-compliant,"
meaning it follows those standards when reporting returns.

24. Components of the GIPS
1. Provisions of the GIPS
The provisions section includes the main requirements and recommendations
regarding compliance, input data consistency, calculation methodology, composite
construction, disclosure, and presentation and reporting.
In addition, this section also comprises the specific requirements and
recommendations for companies operating in real estate and private equity, and
the holders of wrap fee/Separately Managed Account (SMA) portfolios.
2. GIPS Valuation Principles
The second part of the GIPS is devoted to the applicable valuation principles. This
section includes the GIPS definition of fair value, as well as the valuation
requirements and recommendations. The valuation principles ensure that
performance calculations are transparent and meaningful.

25. 3. GIPS Advertising Guidelines
The advertising section defines the requirements for advertising options that
mention a company’s compliance with the GIPS. The requirements include the
elements that must be incorporated in any materials distributed to prospective
clients.
4. Verification
The last section of the GIPS defines the verification procedure of the GIPS status
and the requirements for the procedure. Although the verification process
validates the credibility of the company’s claim of compliance with the GIPS, it is
not a mandatory procedure.

26. The benefits of GIPS
GIPS ensure fair representation and full disclosure of investment performance. In
other words, GIPS lead investment management firms to avoid misrepresentations
of performance and communicate all relevant information that prospective clients
should know in order to evaluate past results.
Asset managers: By claiming GIPS compliance, a firm assures prospective clients
that the historical “track record” they report is both complete and fairly
presented. Also achieving and maintaining compliance strengthens a firms’ internal
controls over performance-related processes and procedures. It also enhances
the credibility of the investment manager.
Prospective clients: Clients have a greater level of confidence in the integrity of
performance presentations of a GIPS compliant firm. It also enhances the ability to
compare the performance of strategies among managers

27. The structure of GIPS
GIPS are divided into nine sections:
1) Fundamentals of compliance.
2) Input data.
3) Calculation methodology.
4) Composite construction.
5) Disclosure.
6) Presentation and reporting.
7) Real estate.
8) Private equity.
9) Wrap fee / Separately managed account (SMA) portfolios.

28. GIPS Is Needed in Business Ethics
•Transparency
•Fair Comparison
•Investor Protection
•Global Accountability
An investment firm might advertise a 12% return. Without GIPS, it
might exclude poor-performing accounts from that average. Under
GIPS, it must include all relevant data, preventing manipulation and
ensuring ethical reporting.