Corporate Social Responsibility and Corporate Governance

•External:

1.Shareholders/ Stockholders

2.Local/national governments

3.Stock exchange

4.Auditors

• Provide entepreneurial leadership -- Deterimine Mission and strategy 
• Annual preformance reviews of self and board 
• Establish board commitees (audit, remuneration and appointments)
• Establish internal control systems 
• Decide on matters to be discussed by board 
• Fullfill obligations to shareholders including reporting company sults 
• Select and appoint board members 
• Review abilities / work of senior management 

•BoD Diversity: having a range of people that are different from each other:

•Professional qualification

•Knowledge, skills, expertise, experience

•Age

•Race

•Gender

•Life/ personal experiences

•More effective decision making

•Better utilisation of talent pool

•Enhancement of reputation and investor relations by establishing the company as a responsible corporate citizen

1. Risk role: Financial systems are accurate and risk management is robust 
2. Strategy role: Contribute to development of strategy 
3. Scrutinising role: Reviewing the preformance of management in meeting objectives
4. People role: Decide remuneration of board and ensure appropriate succession planning 

•Limit powers of executive directors

•Specialist knowledge & experience

•Independence

•Rotation

•Directors’ remuneration packages must be sufficient to attract, motivate & retain the appropriate persons

•Remuneration committee should be comprised of non-executive directors only

•Nominations committee responsible for succession planning on BoD

•Ensure BoD has requisite skills, training, expertise, experience, independence & objectivity

•Comprised of both executive & non-executive directors

•Risk committee (function may be performed by audit committee) have responsibility for the risk management strategy & process within an organisation

•Comprised of both executive and non-executive directors

•Composition: Minimum 3 independent non-executive directors

•Objectives:

1.Increase public confidence in reported financial information

2.Liaise with internal and external auditors

3.Contribute to more reliable internal control, risk mgt., financial reporting systems

• Review company and strategy risk appetite 
• Implement internal audot recommendations for internal control 
• Discuss effectiveness of internal controls with management 
• Review assesments / effectiveness of internal control systems 

• Review company´s internal financial controls 
• Review company´s internal control / risk management systems 
• Approve statements in annual port for internal controls 
• Rceive reports from internal audit on tests of internal controls 

• Monitor and assess effectiveness
• Review adn assess the annual internal audit work plan 
• Approve the appointment or termination of head of internal audit 
• Preserve indpendence 
• Check efficiency 
• Ensure recommendations are actioned 
• Ensure accountable to the audit committee

• Recommend to oard appointment of external auditor 
• "Oversee" selection process for new external auditors 
• Approve terms of engagement / remuneration of external auditors 
• Ensure external auditors are independent and objective 
• Review scope of audit with external auditor 
• Review plans for audit at beginning of annual audit 
• Carry out post - completion audit report 

•Oversight, assessment and review of the functions and systems in the company.

•Review the company’s internal financial controls

•Review all the company’s internal control and risk management systems, unless this is done by a separate risk committee.

•Give approval to the statements in the annual report relating to internal control and risk management.

•Receive reports from management about the effectiveness of the control systems it operates.

•Receive reports on the conclusions of any tests carried out on the controls by the internal/ external auditor.

•Act as an intermediary between management and the internal/ external auditor to enhance the auditor’s independence.

•Advise management on the appointment, re-appointment and dismissal of the external auditor and comment on the adequacy of the auditor’s remuneration.

•Meet at least once a year with internal/ external auditors, independently of management, to discuss risk management and control issues.

•Independent

•Professional accountancy/ similar qualification

•Industry knowledge

•Business knowledge

•Time availability

•Freedom from relationships that create conflicts of interest

•Allows objective assessment & decision making

•Familiarity – personal relationships

•Self interest – directorships/ high salaries/ shares & share options etc

•Fresh pair of eyes

•Re-assure shareholders

•Assist company with compliance

•Increase shareholder confidence in competence of the BoD

•Role requires knowledge of finance

•Liaising with external auditors requires knowledge of accounting & auditing

•Risk assessment: internal controls, financial risks etc – requires financial knowledge  

•Lack of expert assessment of internal controls/ risk management & financial reporting systems

•Lack of ability to liaise with external auditors

•Lack of assurance for shareholders in reliability of systems, reduced risk, competent management

•Shareholders unwillingness to invest

1. Duties to society as a result of the license from society.

2. Comply with relevant laws and regulations.

3. Comply with societies norms of behaviour.

4. Legal, ethical and economical decisions by company and shareholders.

5. Still creating shareholder wealth and long term value.

1. Right to exist as a seprate legal entity.

2. Right to earn out of its lawful busienss.

3. Protection from society in order to develop, expand and succeed as a business.

Corporate Social Responsibility refers to an organisation considering and managing their impact on a variety of stakeholders.

1. Environment.

2. Employees.

3. Shareholders.

4. Suppliers.

5. Customers.

6.Local Community.

Companies are so large and their imoact on society so pervasive that they should be accountable to many more sectors of society than solely their shareholders.

1. Shareholders and employees 

2. Customers and suppliers 

3. Creditors and communities 

4. Governments and general public/world/society 

5. Environment, animal species and future generations 

1. Agency Theory is a form of stakehlder theory 

2. The only stakeholder in the Agency Therory is the "shareholder"

1, Stakeholder Theory means that there are many more stakeholders such as customers, the government, etc...

2. Agency theory only focuses on shareholders.

Both theories however involve a contract, the purpose of which is to align divergent interests between the directors and the share/stakeholders.

1. Seen/unforseen liabilites for breach of regulations and damages 
2. Customers un/willingness to buy products/services 
3. Suppliers terms and conditions 
4. Investors unwillingness to invest (eg. Green Economy)
5. Growing conceirns over lack of ethics/moral behaviour by organisations 
6. Possible future stakholders reporting requirements

1. Time consuming/expensive 
2. Culture clashes 
3. Conflict between company and stakeholders
4. Difficult to obtain consensus between stakeholders
5. Stakeholder independence compromised 
6. Stakeholder may be acceptable to the wider public 

The social responsibility of a busienss encompasses the economic, legal, ethical and discretionary expectaions that a society has of an organisation at a given point at time.

A concept whereby companies integrate social and environmental conceirns in their busienss operations and in their interaction with their Stakeholders on a voluntary basis. 

1. Economic responsibilites (Shareholders, employees, customers)
2. Legal Responsibilities (Laws codify society´s moral views)
3. Ethical responsibility (fair and just ways)
4. Philantropic responsibilities (Charitable donations, contributions to local communities

Key Players-Strategy must be acceptable 

1. Legitimate / Illegitamate 
2. Direct / Indirect
3. Recognized / Unrecognized
4. Narrow / Wide
5. Primary / Secondary 
6. Active / Passive 
7. Voluntary / Involuntary 
8. Known / Unknown 

1. Difficult measuring the power and influence of each stakeholder 
2. Stakeholder "map" is not static, therefore Stakeholder positions on map can be moved with events 
3. The map considers the organisational managers, the Stakeholders with no influece (Low/Low) based on strategic positions being the most importatnt objective. It does not take into account any moral or ethical considerations.
4. The map does not help an organisation when determening how to adress the needs of any key players.

1. Expect fair and proper returns on their investments 
2. Company should provide this return and information on how shareholders investement is managed 

1. Suppliers attempt to provide quality goods on time 
2. Company should pay invoices promptly
3. Select suppliers on known criterias such as "fair trade" 

1. Company affects society as a whole 
2. CSR report explains how comapny treats wider community 

Company has responsibility to produce quality goods and services at a resonable price.