2. Stakeholders and Social Responsibility

Question 1

What is the definition of a stakeholder?

Answer 1

Any individual/group with an interest in the entity.

Question 2

Why would we not put equal effort into all stakeholders?

Answer 2

Each type of stakeholder has different needs.

Question 3

What is the agency problem?

Answer 3

Agency theory assumes that the agent and the principal will act in their own self-interest which may not be aligned.
The agency problem is that the shareholders can not always trust their agents to run the business how they would want to.

Question 4

Name and briefly describe the three categories of stakeholder.

Answer 4

1. Internal - employees, management, board (anyone with an employment contract)
2. Connected - Shareholders, customers, suppliers, lenders (anyone with a non-employment contract to the organisation)
3. External - Anyone else…. Local & national govt, public, pressure groups, media, competitors, regulators, trade unions.

Question 5

What are the two axes in Mendelow’s Matrix?

Answer 5

Level of Interest & Level of Power

Question 6

In an exam how would you approach defining the level of interest of a stakeholder when using Mendelow’s Matrix?

Answer 6

If stakeholder has looked at the co’ and is happy t carry on, they have low interest.

If stakeholder has looked at the co’ and wants to alter (start, stop, change or get more involved in something) then there is a high level of interest.

Question 7

In an exam how would you approach defining the level of power for categorising a stakeholder in Mendelow’s Matrix?

Answer 7

How much impact the stakeholder can have on the business.

Question 8

Which two factors can mean that a stakeholder’s power is more influential?

Answer 8

1. Legitamacy - whether the co’ perceives the stakeholder’s claim to be valid
2. Urgency - whether the stakeholder claim requires immediate action.

Question 9

What are the four outcome categories of Mendelow’s Matrix.

Answer 9

A: Low Interest, Low Power - Minimal Effort

B: High Interest, Low Power - Keep Informed

C: Low Interest, High Power - Keep Satisfied

D: High Interest, High Power - Key Players

Question 10

What are the disadvantages of Mendelow’s Matrix?

Answer 10

1. It can be difficult/subjective to measure each stakeholders power and influence.
2. The map is not static. Stakeholders positions on the map may change as circumstances change also.
3. Based on the idea that strategic positioning should govern an organisation’s attitude to stakeholders rathen than moral or ethical positioning.
4. There may be uncertainties in the organisations future if there are a number of key players with conflicting views.
5. Legitimacy of claims is not taken into account.

Question 11

Define the term ‘Fiduciary Duty’.

Answer 11

Is a duty of care and trust which one person or entity owes to another. It can be a legal or ethical obligation. Managers have a fiduciary duty to maximise shareholder wealth.

Question 12

Describe the two motivations for considering stakeholders that managers may use to justify their actions.

Answer 12

1. Instrumental View: Considering stakeholders purely on the basis of the economic benefits to the company. Everything else is of secondary importance.
2. Normative View: Based on the idea that the company has moral obligations towards all of its stakeholders, including those with non-profit aims.

Question 13

What is CSR?

Answer 13

Corporate Social Responsibility is the concept on which organisations consider the interests of society by taking responsibility for the impact their activities have on wider society and the environment.

Question 14

What are the four levels of CSR according to Carroll? (remember we ask why is the organisation there? what does it exist for?)

Answer 14

Philanthropic (Benefits All): Charity donations, help to communities, help employees improve their own lives.

Ethical (Not harming anyone): Act fairly even if the law doesn’t compel them to.

Legal: Compliance can impose a greater burden in some societies than others.

Economic (Do good things if makes economic sense): to s/h wanting dividends/gains, employees wanting fair employment, customers wanting good quality.

Question 15

What are the four ethical stances on CSR by Johnson et Al?

Answer 15

1. Short term shareholder interest (MNE’s annual profit): Companies exist purely to make money pay taxes and provide jobs. Everything else is upto government.
2. Long term shareholder interest (MNE’s strong consumer focus):
   Investing in the future for staff and communities. Corporate image is enhanced by engaging in wider activities.
3. Multiple Stakeholder obigations (public sector):
   Consider all stakeholders in their approach eg. suppliers, employers and customers.
4. Shaper of Society (financial issues are secondary):
   Universities for example. Needs visionary leadership to pursue social and market change.

Question 16

What is the Corporate Citizenship model by Matten & Crane? (remember What do companies need to do to make things better?)

Answer 16

• Limited View: Business Self Interest
  Engages with local communities & employees
• Equivalent View (similar to Carrol’s view of CSR)
  CSR is partly voluntary & partly imposed
• Extended View
  Good working conditions, promote civil rights, promote political causes, philanthropic activity.

Question 17

What are the 7 CSR Viewpoints by Gray et al?

Answer 17

1. Pristine Capitalist (Profit maximisation is the only aim).
2. Expedient (Employ CSR only if it benefits the co, and disadvantages other competitors).
3. Proponent of Social Contract (change only allowed if it can be accommodated by all connected parties i.e. BBC, Govt & license payers)
4. Social Ecologist (Natural resources used up through normal business activity to pursue profits. organisations are more socially responsible about their resource usage).
5. Socialist (Promote equality and treat all parties the same)
6. Radical Feminist (promote feminine value such as co-operation and empathy over masculine values such as aggression and conflict to achieve more socially desirable outcomes rather than just profit).
7. Deep ecologist (Environment should should not be destroyed and animals should not be pursued at all, let alone for profit).

Question 18

What does Visser suggest in CSR 2.0?

Answer 18

Due to enormous amounts of GREED that is perceived,
levels of PHILANTHROPY have failed or are not effective.
MARKETING is becoming effective in people wishing they are doing better than they are and ignoring the impact the organisation is having on society
MANAGEMENT of this problem is failing and people are more motivated by their own GREED.

Question 19

What are the 5 principles that Visser suggests to deal with the modern CSR problem/

Answer 19

1. Creativity (embracing new ideas)
2. Scalability (translating these ideas across borders)
3. Responsiveness (ability to change to new ideas)
4. Glocality (local solutions made on a global scale)
5. Circularity (recognising the cycle of events)

Question 20

What is sustainability?

Answer 20

Limiting the use of depleting resources to a level that can be replenished.

doing something to have success now whilst ensuring we can have success in the future.

Question 21

What is sustainable development?

Answer 21

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Question 22

What is a key issue in sustainability?

Answer 22

Generational equity. Ensuring that future generations can enjoy the same environmental conditions and welfare is maintained or increased per capita.

Question 23

What is social accounting?

Answer 23

A concept describing the communication of social and environmental effects of a company’s economic actions to stakeholders.

Question 24

What are the four standards of social accounting?

Answer 24

1. AA1000: Triple bottom line reporting - People, Planet, Profit
2. Global Reporting Initiative
3. ISO 14000: Environmental Management Standards
4. EU EMAS: Targets & Improvements

Question 25

What is the goal of the AA1000 standard?

Answer 25

Describes the goal of CSR by encouraging an organisations activities to be accounted for in less obvious ways than financial reporting terms.

Question 26

What are the three elements of the AA1000 standard?

Answer 26

People - social accounting, i.e how many charity donations the co’ has made.

Planet - focus on environment performance such as waste management and recycling bags.

Profit - measures the success of the business but considering the redistribution of wealth which bring benefit to the community i.e. education schemes, community projects.

Question 27

What is the Global Reporting Initiative?

Answer 27

Framework aims to develop transparency, accountability, reporting and sustainable development. The vision of this framework is that economic, environmental and social importance should be as routine and important as financial reporting.

Question 28

What is the Eco-Management & Audit Scheme (EMAS)?

Answer 28

A voluntary scheme emphasising targets, improvements, inspections and requirements for disclosure and verfication.

Question 29

What are the 6 requirements for EMAS registration?

Answer 29

1. Policy of commitments to comply with legislation and to pursue continued environmental performance improvement.
2. On-site environmental review
3. Env. management system based on the review & env. policy.
4. Env. audits conducted every three years at least.
5. Audit results form basis of setting env. objectives and revision of policy to acheive these obj.
6. A verified public env. statement containing detailed disclosures about policy, management systems and performance.

Question 30

What is ISO 14000?

Answer 30

General framework based on specific standards.

Question 31

What are the 5 elements to ISO 14000?

Answer 31

1. Policy statement
2. Legal, voluntary and environmental aspects assessments.
3. Management system for env. compliance.
4. Internal audits & reports to senior management.
5. Public declaration that ISO 14000 is complied with.

Question 32

What is integrated reporting?

Answer 32

IR includes and adds to financial reporting.

Question 33

What is the aim of integrated reporting?

Answer 33

Demonstrate the link between strategy, governance and financial performance and the social, environmental and economic context within which the business operates.

Question 34

What are the benefits of integrated reporting?

Answer 34

Helps businesses make more sustainable decisions as IR helps inform effective allocation of scarce resources.

Can help investors understand how a business is really performing by assessing long term viability of the business.

Simplify accounts with excessive detail being removed and critical info highlighted.

Question 35

Why does integrated reporting differ from other forms of reporting?

Answer 35

It focuses on the process, not the product and uses capitals to illustrate how an organisation creates value for all stakeholders.

Question 36

What are the 6 investment categories of the capitals of Integrated Reporting?

Answer 36

1. Financial Capital (Funds)
2. Manufactured Capital (Non Current Assets)
3. Human Capital (Investing in skills, experience and motivation)
4. Intellectual Capital (Intangible/Virtual Assets & IP)
5. Natural Capital (Impact on Environmental Footprint)
6. Social Capital (Relationships between stakeholders/community)

Question 37

What are the limitations of using only financial statements?

Answer 37

• only financial info
• little narrative/context to the numbers
• historic data

Question 38

What are the 7 characteristics that an organisations’ integrated reporting must have in order to be deemed meaningful?

Answer 38

1. Strategic & forward looking
2. Connected data
3. Stakeholder relationships create value
4. Materiality
5. Reliability and completeness
6. Conciseness
7. Consistency & comparability of data.

Question 39

What is a social audit?

Answer 39

An audit that checks whether an organisation has achieved set targets surrounding;

• programme congruency with company mission
• rationale established for engaging in social activity
• objectives and priorities relating to their programmes
• company involvement in programmes

Question 40

What is an environmental audit?

Answer 40

An evaluation of how well an organisation is performing in regards to safeguarding the environment through its policies and procedures.

Question 41

What is the point of an environmental audit?

Answer 41

• identifies possible liabilities
• assesses threat of unethical behaviour
• acts as a form of marketing for certain sensitive investors.

Question 42

What are the three stages to an environmental audit

Answer 42

1. Agree suitable metrics (what & how should be measured… fits idea of footprint)
2. Measure actual performance vs. targets
3. Auditor’s report detailing compliance/variance levels.