Professional Documents
Culture Documents
OTHER ISSUES:
SOCIAL RESPONSIBILITY INVESTMENT
CORPORATE SOCIAL RESPONSIBILITY
ETHICS
Learning objectives
To be aware of the origins of socially
responsible investment
To appreciate the role of institutional investors in
socially responsible investment
To Explain corporate social responsibility (CSR)
To emphasize the importance of establishing a
positive relationship between CSR and corporate
social performance.
To define ethics, and explain how organizations
specify standards for ethical behavior.
Mallin: Corporate Governance 4e
Organizational Stakeholders
Owners
Employees
Governments
Customers
Social Activist
Groups
Community
Competitors
2. Preference
Fund managers work to a list of guidelines that trustees
prefer companies invested in to meet.
3. Screening
Trustees ask for investments to be limited to companies
selected (screened) for their ethical behavior.
Pyramid of CSR
Philanthropic Responsibilities
Be a good corporate citizen.
Ethical Responsibilities
Be ethical.
Legal Responsibilities
Obey the law.
Economic Responsibilities
Be profitable.
Consumer
Confidence
Interest
Rates
Governance
Regulation/Policy
Economic
Climate
Change
Waste
Corruption
Environment
Social
Biodiversity
Resource
Use
Human
Rights
Communities
Labour/
Workplace
Sustainable Development
Many definitions describe CSR as the business pursuit of
sustainable development.
Sustainable development: development that meets the
needs of the present without compromising the ability of
future generations to meet their own needs. (1987
Brundtland Report).
Like CSR, sustainable development is also recognised as
having three fundamental pillars: economic development,
social development and environmental protection.
Environmental impact
The effect of the actions of the corporation upon its geophysical
environment.
Organizational culture
The relationship between the corporation and internal
stakeholders
Finance
An adequate return for the level of risk undertaken.
Mallin: Corporate Governance 4e
Accountability
This is concerned with an organization
recognizing that its actions affect the external
environment, and therefore assuming
responsibility for the effects of its actions.
Accountability necessitates the development of
appropriate measures of environmental
performance and the reporting of the actions of
the firms.
Transparency
Transparency, as a principle, means that the
external impact of the action of the
organization can be ascertained from that
organization reporting and pertinent facts are
not disguised within that reporting.
Benefits of CSR
Benefits of a CSR approach include:
Improved business reputation
Ability to attract customers
Ability to recruit quality employees
Easier to attract ethical investors
Competitive advantage
Improved employee motivation
Drawbacks of CSR
Drawbacks of adopting a CSR approach include:
Additional costs
It can be argued that the main responsibilities
firms have are to their shareholders
Efficiency may be reduced by acting in a socially
responsible manner
ETHICS
What is Ethics
the principles by which people
distinguish what is morally right.
4-31
Justice approach
An approach to decision making based on treating
all people fairly and consistently when making
business decisions.
Code of Ethics
Corporate Credos
Ethical Policy
Statements
Managing Ethics
Ethics Training
Ethical Structures
Whistleblower
Policies
6. Consider your
character and
integrity.
issues.
3. Identify the affected 7. Think creatively
about potential
parties.
actions.
4. Identify the
8. Check your gut
consequences.
feelings.
5. Identify your
obligations.
2. Define the ethical
4-38
CSR in Malaysia
In an effort to instill CSR culture into business, the
Malaysian Government requires all PLCs disclose their
CSR activities in their annual report to the Securities
Commission (SC)68, starting in 2007.
This new requirement affects over 1,000 companies in
Malaysia.
Bursa Malaysia published a reporting framework for PLCs,
which outlines potential CSR initiatives in the categories of
environment, community, marketplace and workplace.
The guidelines are flexible and require minimum
disclosure to understand whether a company undertook
CSR activities or not.
Mallin: Corporate Governance 4e
CSR in Malaysia
The overall goal of the regulatory authority is to raise
the awareness of CSR and encourage PLCs to
integrate the practice of CSR as part of the way they
work and think.
Chapter 9, appendix 9C (Part A, paragraph 29) of the
Listing Requirements, A listed company is required
to provide a description in its annual report of the
corporate social responsibility activities or practices
undertaken by listed company and its subsidiaries or
if there are none, a statement to that effect.
Regulatory body
Public listed
companies (PLCs)
Government
Linked Companies
(GLCs)
Putrajaya Committee
on GLC High
Performance (PCG)
No reporting requirements
Companies
Commission Malaysia
(SSM)
No reporting requirements
Reporting
requirement
Limitations
Workplace
Marketplace
Community
Environment