Tag Archives | ESG

Stakeholder Theory: Impact and Prospects

Stakeholder Theory: Impact and Prospects edited by Robert A. Phillips provides a great education in history to those of us who have been using the term “stakeholder” but who have little idea of its origins.

Honoring the twenty-fifth anniversary of R. Edward Freeman’s Strategic Management: A Stakeholder Approach, Phillips assembles a collection of commentaries and critiques by some of the most influential scholars of
stakeholder theory, with concluding remarks from Freeman himself.

The book starts by delving into citations and moves quickly to address three mischaracterizations of the original work:

  1. The assumption that Freeman approves of CSR – sees CSR as actually Continue Reading →
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Review: Economic Governance Matters

Does Economic Governance Matter?: Governance Institutions and Outcomes edited by Mehmet Ugur and David Sunderland. The answer is an unqualified yes! More questionable is if citizens can shape governance to be more efficient to society as a whole.

It does not require immense imagination to see that technically-feasible economic outcomes may remain socially-unfeasible if the existing definition of property rights is not credible due to the existence of a highly intrusive or excessively weak Continue Reading →

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Fracking Done Right: Guide from IEHN and ICCR

The Investor Environmental Health Network (IEHN) and the Interfaith Center on Corporate Responsibility (ICCR), two shareholder coalitions committed to social and environmental justice, released a guide intended to help increase disclosure and mitigate the impacts of natural gas operations using hydraulic fracturing (commonly referred to as “fracking”).

Responding to growing public concern about the environmental and social Continue Reading →

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Review: The Organizational Ombudsman: Origins, Roles, and Operations–A Legal Guide

Charles L. Howard

I heard Charles L. Howard discuss working on ombuds issues and his book The Organizational Ombudsman during panel presentations at the Silicon Valley Chapter of the National Association of Corporate Directors and at Stanford University. With all the advantages such offices offer to corporations I was wondering why more corporations haven’t set up programs.

At the recent NACD Directorship 100 program I asked that question during a panel focused on whistle-blowing and other mechanisms to report and resolve ethical issues. None of the panelists had any experience with organizational ombudsman at the companies they represented. Looking to the audience of several hundred, they too Continue Reading →

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The Folly of a $-Centric Universe

Michael Levin argues cites Milton Friedman and Michael Jensen to support an argument that wealth maximization provides investors and executives with apparently the only clear means of setting priorities they really need.

McDonalds Corporation should treat cattle and chickens humanely if doing so will sell more sandwiches profitably, not Continue Reading →

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No Innocent Shareowners #OWS: The Duty of Care

John Paulson, the hedge fund titan who made billions in the financial crisis by betting against the subprime mortgage market defends the 1%: “The top 1 percent of New Yorkers pay over 40 percent of all income taxes, providing huge benefits to everyone in our city and state.”

“I don’t think we see ourselves as the target,” said Steve Bartlett, president of the Financial Services Roundtable, which represents the nation’s biggest banks and insurers in Washington. “I think they’re protesting about the economy. What’s lost is that the financial services sector has to be well capitalized and well financed for the economy to recover.” (In Private, Wall St. Bankers Dismiss Protesters as Unsophisticated, NYTimes, 10/14/2011)

What’s going on in America right now may be the world’s first genuine social-media uprising. Besides the standard channels of Facebook, whose Occupy Wall St page now has nearly 170,000 fans, Twitter, where the hashtags #occupywallst and #ows spew out dozens of tweets a Continue Reading →

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CalPERS Dumps Mtn Top Removal Project

After pouring $200 million into vineyards across California, Oregon and Washington, CalPERS said this week that it is firing the firm that has been its investment partner and land manager.

The investment has lost 40 percent of its value and was worth $122 million as of March 31, the latest figures available.

The California Public Employees’ Retirement System isn’t bailing out of the wine business. Instead, spokesman Brad Pacheco, said CalPERS is negotiating to bring on a new partner by year’s end…

The partnership paid $28 million for a 20,000-acre forest in the coastal mountains of northwest Sonoma County. The plan: Clear-cut an 1,800-acre tract, known as Preservation Ranch, and plant grapes on it.

The investors said profit from the vineyard would pay for restoration of the rest of the forest. They also pledged to donate 2,400 acres for a wildlife preserve.

I’m glad CalPERS finally got out of the deal. They should have done so years ago. Preservation Ranch is basically a mountain top removal project. I’ve seen enough of those in West Virginia near where I grew up to know the probable impacts. Instead of digging for coal, Preservation Ranch is leveling mountains to plant grapes. Real “restoration” would be extremely difficult. Read my email of May 25, 2009 on the project.

Read more: CalPERS fires partner in struggling winery investments, Sacbee, 10/14/2011.

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GMI & Si2 Offer Combined ESG Proxy Research

GMI and Si2 announced a strategic partnership to provide seamless
subscription access, account management and special pricing to the firms’ ESG Board Briefing Research, Shareholder Proposal Analysis, and Executive Pay Scorecards. The combination of GMI’s compensation analysis with Si2’s expert insights into key environmental and social issues and proposal analysis may create a vital new resource for Continue Reading →

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Publix, Google & UPS Top CSR List

Publix Super Markets, an employee-owned supermarket chain, earned the No. 1 spot followed by Google and UPS in the 2011 ranking of the 50 companies with the best corporate citizenship reputations among the U.S. public as compiled by the Center for Corporate Citizenship and Reputation Institute.

The CSR Index was developed to understand how companies’ reputations are affected by public perceptions of performance related to citizenship (the Continue Reading →

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Higher CSR Linked to Lower Cost of Capital

Firms that score strongly in terms of corporate social responsibility (CSR) find that their cost of equity capital financing is consistently lower than firms with weaker CSR track records, according to Does Corporate Social Responsibility Affect the Cost of Capital?, winner of the 2011 Moskowitz Prize for Socially Responsible Investing.

The Center for Responsible Business at UC Berkeley’s Haas School of Business announced the winners of the 2011 prize are Sadok El Ghoul, professeur agrégé, Ph.D., MBA, University of Alberta, in Edmonton, Canada, Omrane Guedhami, Moore Continue Reading →

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Shareowner Alienation

I stumbled upon an interesting article in the Vol. 52, No. S3, Supplement to the April 2011 edition of Current Anthropology, which gets to the heart of the schizophrenic way we have organized capitalism. While many of us work to make the world a better place, our investments externalize costs and jeopardize everything we hold dear.

David Wood

Marina Welker, an Assistant Professor at Cornell, and David Wood, Director of the Initiative for Responsible Investment at Harvard, do an outstanding job of examining socially responsible investment, shareholder value, and responsible investment and how those movements address the relationship between shareholder personhood, values, and investments. The article, entitled Shareholder Activism and Alienation also includes a thoughtful comment by Robert A. G. Monks. Socially responsible investors Continue Reading →

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Deadline for Golden Peacock Awards: September 14

If you know of good candidates for the Golden Peacock Awards, instituted by Institute of Directors in 1992, now is the time to get nominations in, since they are due September 14, 2011. Below are the categories:

A.      Golden Peacock Global Awards

  1. Sustainability
  2. Excellence in Corporate Governance

B.       Golden Peacock National Awards

  1. Climate Security
  2. Sustainability
  3. Excellence in Corporate Governance
  4. Innovation Management

The application form cum guidelines can be obtained by sending an Continue Reading →

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Is the President's Position on Climate Change an Issue for Corporate Governance?

When Rick Perry says global warming is an unproven theory  — in defiance of mainstream science — he seems to be pandering to the “tea party” faithful that he needs for the GOP nomination. Nearly 8 in 10 Democrats believe that global warming is happening, as do just over 7 in 10 independents. Just over half of Republicans share that view. But only 34% of tea partiers accept the notion. (Perry’s climate views shared by ‘tea party’ faithful, survey says, LATimes, 9/9/2011)

Perry went on to compare himself, or those who agree with him, to 17th century astronomer Galileo Galilei, who in Perry’s words also “got outvoted for a spell” when he adopted a minority opinion on a scientific issue. It would be far more accurate to compare Perry to Pope Urban VIII, who put Galileo on trial for heresy in 1633 because his conclusions that the Earth revolved around the sun contradicted Scripture. (Is it reasonable to compare Rick Perry to Galileo?, LATimes, 9/9/2011)

OK, Perry and the Tea Party don’t believe scientists. What about insurance companies? In the United Sates, (re)insurers are strategizing for the potential onslaught of climate change-related claims. Two and a half years ago the U.S. National Association of Insurance Commissioners (NAIC) mandated (re)insurer disclosure of financial risks due to climate change and actions taken to mitigate them. (Climate Change, Part IV: (Re)Insurance Industry Response)

Do companies that support Perry have their head in the sand on the most important risk issue we face or are they just rationally hoping to externalize costs a few years longer in what is possibly the next administration? Should this be a corporate governance issue? Personally, I think that companies supporting Perry face reputational risk, especially if they are already seen as climate change deniers.

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Review: The Corporate Objective

Although large public companies dominate the world, there is no unanimity as to their objective. Andrew Keay tackles this very important topic with skill and in considerable depth. First, he examines the two most dominant theories, shareholder primacy and stakeholder theory. Unsurprisingly, he finds them falling short and goes on to propose the inelegant but well thought out “Entity Maximisation and Sustainability Model.”

Under his EMS model, directors are to endeavor to increase the overall long-term value of the corporation, while ensuring the corporation survives. While I find the objective rather uninspiring, Keay does an excellent job of building upon, if not Continue Reading →

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Impact Investing

The Fall issue of Cliff Feigenbaum’s Green Money Journal has an interesting article on “impact investing,” the term used to describe direct investments that that explicitly seek to achieve both financial return and social impact.

A November 2010 report by JPMorgan and the Rockefeller Foundation, titled Impact Investments: An Emerging Asset Class, estimates the size of this market segment at between $400 billion and $1 trillion in five sectors alone: housing, rural water delivery, maternal health, primary education, and financial services.

B Lab, the non-profit that certifies companies as B Corporations has already rated 200 companies and 25 funds in its beta phase through its Global Impact Investing Rating System (GIIRS).

A great read for investment advisors and potential investors alike. Check out How Can You Have More Impact with Your Money? Use the new GIIRS.

See also, Impact Investing and Social Entrepreneurship: A Way Forward, Forbes, 8/29/2011.

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Next ShareOwner Proposal Hot Topic: Climate Change Risk Assessments at Insurance Companies

Only 11 of 88 major insurers surveyed recently have formal policies in place to deal with growing climate change risks, according to a major new report issued today by Ceres.  The report was to have been delivered at a conference of the National Association of Insurance Commissioners (NAIC) that was cancelled due to Hurricane Irene.

The new report, Climate Risk Disclosure by Insurers: Evaluating Insurer Responses to the NAIC Climate Disclosure Survey, analyzes what 88 leading U.S. insurers are saying about climate change in public filings with state insurance commissioners – and the extent to which they’re factoring it Continue Reading →

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Will 2011 be a Watershed Year for Activism?

2011 was the first proxy season in which companies were required to provide advisory votes on executive compensation. Corporate governance advocates, mindful of the fact that annual compensation for CEOs at S&P 500 companies increased by 35% in 2010, might well find themselves agreeing with James McRitchie of CorpGov.net, who told SocialFunds.com in June, “2011 could be a watershed year if next year people look back and wonder why the hell they didn’t do anything.”

…board declassification, a majority voting standard, an independent board chair, and reporting on political spending, received more than Continue Reading →

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Review: Business Ethics and Corporate Sustainability

Business Ethics and Corporate Sustainability contains fourteen essays examining mainstream business models with the aim of designing more sustainable systems with regard to corporate responsibility issues, such as the environment and human rights, while reducing overall risk profiles and increasing legitimacy.

Christopher J. Cowton, for example, examines the moral status of corporations, their collective responsibility and systems of blame distribution. While it makes sense to blame a corporate entity as a first approximation, that should be only the first step in determining blameworthiness. Leaving blame as resting with BP for the Gulf oil spill, risks failing to identify and blame culpable individuals. Cowton moves us away from reified notions of corporate moral agency, to focus on methods of tracing responsibility in detail to specific individuals according to governance and responsibility frameworks. People are moral agents; corporations are not.  Johan Wempe advances this notion further, examining notions of role responsibility.

Kevin T. Jackson retraces Aristotelian notions of generosity as a moral virtue and ends with a promising direction in his discussion of venture philanthropy, which in some respects, harkens back to businesses during the Middle Ages. Wouldn’t it be great if entrepreneurs started measuring themselves not by how much money Continue Reading →

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Reframing Corporate Social Responsibility

Reframing Corporate Social Responsibility: Lessons from the Global Financial Crisis, edited by William Sun, Jim Stewart, and David Pollard, is volume 1 in an important new series: Critical Studies on Corporate Responsibility, Governance and Sustainability. Disclosure: I’m on the Editorial Advisory and Review Board of the series at the request of William Sun, who I’ve already identified as an important voice in corporate governance. See my review of his How to Govern Corporations So They Serve the Public Good: A Theory of Corporate Governance Emergence.

This new volume reflects on corporate responsibility (CSR), focusing on what role, if any, it played in the financial crisis and, perhaps more importantly, how such events might be avoided in the future by more fully integrating CSR into mainstream corporate practices. The editors argue that business discourse and values are currently viewed as Continue Reading →

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Risks of Fracking

The companies most likely to be trusted by investors and most readily welcomed by local communities will be those that:

• Have an across-the-board, transparent record of voluntary actions to reduce the quantity and toxicity of chemicals;

• Develop innovative methods for reducing use of fresh water — for example, recycling fracturing waste waters or using saline or industrial waste waters for fracturing;

• Systematically inventory and reduce air emissions from operations, including using green completions where appropriate and substituting closed waste storage structures for open pits;

• Closely oversee their contractors to prevent shoddy well construction and demonstrate rapid emergency response capability;

• Know what’s in their waste and what happens to it;

• Anticipate and respond to local community noise, road damage, and other nuisance concerns; and

• Acknowledge regulatory transgressions and lessons learned from them.

via The Real Story About the Risks of Fracking, Richard Liroff, GreenBiz.com, 7/18/2011.

Good advice from a trusted source.

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Video Friday: 6 Degrees Warmer: Mass Extinction?

Will we actually be frightened enough to do something more than install solar panels on our roof, buy a Prius and recycle our garbage?

It doesn’t take an economist to understand the basic economic principle that you can’t grow an asset if you have destroyed the asset base. This fundamental principle seems to make perfect sense to us when we are talking about money, so why do we continually fumble with the equation when it comes to the natural asset base that our economic activity and human welfare depends on? What am I talking about? Well let me explain… (Growing from what?, CSRWire.com, 7/14/2011)

During an ice age, the most probable climate sensitivity is six to eight degrees Continue Reading →

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CalSTRS Advance Board Diversity

CalSTRS withdrew all eight of its board diversity shareholder proposals filed during the 2011 proxy season after successfully engaging companies to consider diversity in director searches.

In recent years, the issues of board of director leadership and oversight roles have taken on increased significance to long-term investors, such as CalSTRS. Today’s economic challenges highlight the importance that board diversity plays in enhancing value and providing companies with a full range of fresh talent and experience. According to Anne Sheehan, CalSTRS Director of Corporate Governance:

We’ve advanced the ball in the name of board diversity and are committed in our conviction that corporate boards and their nominating committees consider diversity in the larger context of improving shareholder value. One lesson from the financial crisis was the role corporate board group-think played in fostering management short-term priorities that proved detrimental to sustainable value creation. We think improved board diversity will address that problem.

To assist boards in the enhancement of diversity on corporate boards and of shareholder value, CalSTRS and CalPERS launched the Diverse Director DataSource, known as “3D,” by announcing the selection of corporate governance vendor Governance Metrics International to develop and operate the DataSource. 3D is expected to go live later in July and begin accepting nominations from board candidates. The database will offer shareholders, companies and other organizations a valuable resource for identifying candidates.

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Call for Papers: Ethical Finance & Governance

A December 16, 2011 on Ethical Finance & Governance is planned for Paris, chaired by H. Jemel (Amiens School of Management & LEM UMR 8179, Fr), JM. Sahut (HEG Geneva, Ch & CEREGE EA 1722-Univ. Poitiers, Fr) & F. Teulon (IPAG LAB, Fr). Guest speaker at the conference will be Z. Sardar, a Visiting Professor at City University London and the editor of the forecasting and planning journal, Futures. He is also a member of the UK Commission on Equality and Human Rights. His journalism appears most often in The Guardian and The Observer. He has written or edited 45 books over a period of 30 years, like “Islamic Futures.”

The Paris workshop aims to consider the development of financial activities in an ethical perspective and problematic of corporate governance. The conference will focus on opportunities within sustainable and ethical finance arenas considering, in particular, Islamic finance as a sub-sector of ethical finance. Topics for this conference include, but are not limited to: Ethic and Continue Reading →

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Corporate Valuation

From Enron to Lehman Brothers and the subprime financial disaster, we’ve seen the worst decade ever in my lifetime for equities, down 3.3%. Is it time to start stuffing our money into the mattress or is it time to learn something about corporate valuation from two experts?

Corporate Valuation for Portfolio Investment: Analyzing Assets, Earnings, Cash Flow, Stock Price, Governance, and Special Situations by Robert A. G. Monks and Alexandra Reed Lajoux will inevitably be compared with Security Analysis: The Classic 1934 Edition by Benjamin Graham and David Dodd. Corporate Valuation comes out favorably.

Yes, we have learned a lot during the last seventy years; Monks and Lajoux take readers on a tour Continue Reading →

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California to Allow Corporations to Blend Mission and Profit

A California bill, SB 201, authored by state senator Mark DeSaulnier, proposes a new corporate form that blends money and mission.

The idea is to allow social enterprises, which are often organized as either non-profits or for-profit/non-profit hybrids, to access capital from mainstream investors. As a Flexible Purpose Corporation (Flexible Corp.), a company could make profits while pursuing at least one do-good purpose akin to the charitable missions traditionally pursued by nonprofits, or promote the interests of employees, suppliers, customers, creditors, community or public interests like the environment.

via Responsible Investor, March 6, 2011.

One basic idea is to relieve directors of the obligation to maximize long-term Continue Reading →

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Ontario to Require ESG Disclosures of Pensions

The Canadian province of Ontario is scheduled to become the first in the country to oblige its pension plans to publish a Statement of Investment Policies and Procedures (SIPP) and publicly state whether the SIPP takes ESG (environmental, social and governance) issues into account. The SIPP introduction could act as a major boost to the take up of responsible investing in Canada…

via Responsible Investor, 3/30/2011. I hope this requirement spreads to the U.S. as well.

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EU Offers Prize for ESG Integration

The overall objective of this call for proposals is to enhance market reward for sustainable and socially responsible enterprises, so facilitating the transition towards a sustainable economy.

The specific objective is to build the capacity of mainstream investment actors to better integrate environmental, social and governance information into their valuations of enterprises. This call for proposals is also an opportunity for the investment community to further align its practices with the expectations of European public policy.  Latest news from DG Enterprise and Industry.

Yes, the European Unions wants to drive ESG into the heart of investing considerations. The deadline for responses is set for May 20. Can anyone imagine the United States offering a prize of over $350,000 to prompt the integration of environmental, social and governance issues into the valuations of mainstream institutional investors? Please let me know when you see it. Hat tip to SHARE newsletter. Don’t miss out; subscribe now.

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