Stakeholders and social responsibility Flashcards
Agency relationship
A contract by which persons (principals) engage another (agent) to perform a service on their behalf
Agency theory
Used to study the problems of motivation and control when the pricipal needs the help of an agent
Agent
Usually a director who is interested in personal gain from their employment
Principal
Usually a shareholder who is interested in wealth creation from their investment
Agency monitoring systems
If principals believe the agency problem to be present they can take. a number of steps.
Request the formation of committees
Hire a consultant
Increase numbers of NED’s
Attend the AGM and question the board
The agency solution
The shareholders are able to remove directors from office but this is hard due to time, cost and resources.
As the shareholders know less than the agents it is hard to know the full story. If they impose rules on the directors they have to be designed in a way that doesn’t stop efficiency, which is also challenging.
Ther agency problem can be removed. y aligning the shareholders and directors interests.
Stakeholder
Someone who affects or is affected by the actions of entitiy and who has a claim.
There are Direct stakeholders - Those with a voice and communicate with entity.
Indirect stakeholders - Such as animals and plants, overseas suppliers or future generations
Stakeholders can be
Internal - Employees, management, the board
Connected - Shareholders, customers, suppliers, lenders.
External - Government, public, pressure groups, media, competition, trade unions.
Stakeholders can also be categorised as being
Active - participate in organisations activities, such as managers and employees.
Passive - shareholders, local communities and governemnt
Powers and interest
Medelow has done a matrix which shows which stakeholders require what type of relationship.
Goes ABCD.
Key players are in D, and there3fore strategy must be acceptble to them.
C should be kept satisfied as they may end up in D. Large institutional investors may fall into C.
B does not have a great influence on strategy but their views can influence other stakeholders and therefore they should be kept informed. Community representatives and charities.
A - minimal effort.
Can be difficult to measure interest and power and stakeholders positions can move around the map as it’s not static..
Considers power and influence but not legitimacy - the legitimacy of their concerns etc.
Fiduciary duty
The duty of care or trust which one party owes another. It can be a legal or ethical obligation.
Conflicts can arise as. a managers role can be to increase shareholder wealth of which can jeaopardise long term profitabilitity which is what the shareholders want.
Instramental view
That stakeholders should be ordered. by importance by their economic benefits to the company
Normative view
The view that the company has obligations to all stakeholders even those that have a view of non profit.
Ecosystems
The partnering and firming of alliances within an ecosystem is central to beuilging cooperative relationships
What is the order of Social Responsibility?
Economic - Shareholders wanting dividends/wealth, employees wanting fair employment and customers wanting quality goods.
Legal - Obeying the law although this can create challenges.
Ethical - Acting in a fair way even if the law does not require them to do so.
Philanthropic - Charitable, creates chances for employees to improve their own lives.
Sustainability
Sustainable development
Reducing the use of depleting resources so that they can be replenished
Meeting the needs of those today without effecting the needs of the future.
What is weak sustainability
A western viewpoint. Focuses on sustaining the human race and that the environment is a natural resource
What is strong sustainability
The importance of having harmony with the natural world and sustaining all species not just the human race.
Social accounting
The comunication of social and environmental effects of a companies economic actions to stakeholders. The reporting guidlines below have been developed.
AA1000 Standard
Produced by AccountAbility.
People - social accounting, for ex charity donations.
Planet - environmental factors such as waste reduction.
Profit - the measure of success but also considering the redistribution to local communities.
Inclusivity - People should have a say in the decisions thatipact them
Materiality - Deciison makers should be clear and identify the sustainability topics that matter
Responsivness - Organisations should act transparently on material sustainability topics.
Impact - Organisations should monitor, measure and be. accountable for how their actions affect their broader ecosysems.
gloal reporting Initiative (GRI)
Grew from the need to address failure of current governance structures.
Aims to develop transparency, accountability, reporting and sustainable development..
Vision is that reporting on economic, environmental and social importance. should become as routine and comparable as financial reporting.
Eco Management and Audit Scheme (EMAS)
A voluntantary scheme that emphasises targets and improvements, on site inspections and requirements for disclosure. and verification.
ISO14000
Provides a general frmework on which a number of specific standards have been based.
ISO14001
Prescribes that an environmental management system must comprise:
A policy statement
Assessment of environmental aspects and legal and voluntary obligations
A management system ensuring effective monitoring and reporting on environmental compliance
Internal audits
A public declaration that ISO 14001 is being complied with
Integrated reporting <IR></IR>
Demonstrate the link between strategy, governance and financial performance and the social, enviornmental and economic context within which the business operates
What is integrated thinking?
The active considration by the organisation of. the relationships between it’s various reporting and functional units and the capitals that the organisation uses or affects
Helps decision thinking. Looks at creating value not just for the short term but also for long term.
Focusses on the process not the product.
What are the six capitals of integrated thinking?
Financial - Funds availablefor use in production of goods or provisions of services.
Manufactured - Objuects used int he production of goods or proviswion of services, including buildings, machinery, equipment and infrastructure.
Human - Peoples capabilities, experience and motivation to innovate. Motivation for improvement, ability to understand and implement Strategies. risk management approach.
Intellectual - Assets providing a competitve advantage. Patents, copyrights and licences. Organisational capital such as systems and procedures. Brand and reputation.
Natural - Inputs to goods and services and natural enviornment on which and organisations activities have an impaqct. Air, Water, land etc. Biodiversity and health of ecosystems.
Social - Relationships established within a network to enhance wellbeing. Include trust built with suppleirs, customers and other stakeholders.
Auditing
The auditing of integrated thinking deters lip service and actual long temr thought out actions. Helps gain confidence of stakeholders.
Social audits
Checking whether an organisation has achieved set targets.
Areas checked are:
Rationale for engaging in socially responsible activity
Checking that environmental programmes and consistent with the mission of the company
Assessing objectives and priorities relating to these programmes
Evaluating company involvement in such programmes, past present and future.
Typically used. by schools and. univerities due to public sector and. a range of individuals and stakeholders.
Environmental audits, what are they?
Evaluation of how well management and equipment are performing in regards to safeguarding the environment.
Assessing compliance with internal polciies and external regulations.
Help to identify possible liabilities and assess the threat of unethical behaviour.
Can act as marketing if good to stakeholders sentive to the environment.
Environmental audit process
Agreement on metrics to aqssess environmental performance. What should be measured, how.
The measurementr of actual performance and the comparison with targets
A report from the auditor stating the levels of compliance and variance.
