Ch 2, 11, 13, 14 Flashcards
what is the alternative viewpoint to shareholder primacy
A corporation should exist not only to increase value for shareholders but also to address
the needs of other stakeholders
what are three names used to address the ideas that promote stakeholder primacy
- SRI – Socially Responsible Investing
- CSR – Corporate Social Responsibility
- ESG – Environmental, Social and Governance
what are hte 5 pressures that have contirbuted to the development and incorporation of ESG
- money flowing into sustainable/ESG investment funds
- ESG related shareholder proposals
- Big institutional investrors such as blackrock have advocated for it
- ESG metrics are being used to rate corporation and stakeholder interaction
- Employee activism
related to the business round table, what was said in relation to the purpose of a corporation (5)
- deliver value to customer
- invest in our emloyees
- deal fairly and ethically with our suppliers
- support communities in which we work
- generate long-term value for shareholders
in what case were stakeholders’ interests addressed in canada
addressed in hte BCE case which created a binding legal precedent
what was considered in the BCE case when a conlcusion was made
the directors should conider the interests of hareholders, employees, creditors, consumers, governments and the environment to inform their decisions
bill c-97 was passed in canada and stated that directors are not limited to acting only in the best intersts of _______ but should also consider the intersts of _________
shareholders, stakeholders
a legal implication in hte US was the delaware law, what was the main idea in this?
directors must make shareholder
welfare their sole end, and that other interests may be taken into account
only as a means of promoting shareholder welfare
what was the opinion of skadden arp, a big US law firm on the Delaware law
the shareholder primacy path does not stop a for profit company in taking interest in social issues as song as those social issues come second to shareholder value maximization
do erliable metrics exist in assessing stakeholder innitiatives and their effectiveness
no
what is the greatest challenge directors face in reporting over ESG
lack of uniform disclosure standards
what are some additional disclosures taht companies prepare for esg at a lack of uniform standards
- sustainability reports
- human capital reports - diversity
- climate chage impact reports
who else might provide stakeholders and shareholders with information or rankings on company’s ESG?
aggregators such as
- bloomberg
- corporate responsibility mag
- ethisphere institute
- furtune
- newsweek
what are three companies that issue esg ratings
- HIP human impact + profit
- TruValue Labs
- Sustainalytics
what does the HIP human impact + profit analyze
32 esg factors such as CEO pay, emissions, gender diversity
what does truvalue tabs analyze
evaluates on 26 dimensions through AI technology
what does sustainaltics analyze
corporate governance risk, material ESG issue risks, and idiosyncratic ESG issue risk
what are 8 issues with ESG ranking and ratings
- no uniform standards
- information is volunteered by companies, not uniformly disclosed
- how is weighting of importance determined
- no clear relationship between ratings and stock perfromcne
- different methodologies of rankinng
- making qualitative factors, quantitative
- no audits
- tying it to executive compensation makes it more of an issue
what are 3 governance ratings methodologies
- institution of shareholder sevices
- MSCI ESG Gov metrics
- MSCI ESG AGR model
what does the institution of shareholder sevices do
scores companies out of 100 on 65 variable put into 8 categories of
- Board of Directors,
- audit, charter and bylaws,
- state in incorporation,
- executive and director compensation,
- qualitative factors,
- equity ownership by management
- Board and director education
what is the MSCI ESG Gov metrics
scores companies on 96 dimensions which are placed into 4 pillars of:
- board
- compensation
- ownership and control
- accounting
what is the MSCI ESG AGR model
the Accounting and Governance Risk model is a rating system based on financial reporting methodolgy and audit integrity whcih measures variation in reporting
scores companies as very aggressive, aggressive, average or conservative
has ceo activism increased in recent years and on which companies is it concenntraed
yes and it is concentrated among the largest US companies
what is the issue with CEO activism
it is a double edged sword depending on what the CEO is advocating for