Tag Archives | ethics

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: Trust & Control in HRM

Trust and Human Resource Management, edited by Rosalind Searle and Denise Skinner highlight trust as key to human resource management (HRM) from pre-entry to post-employment. The collection will be of great value to academics in the HR field and to practitioners interested in enhancing trust levels in their organizations.

Trust has long been associated with organizational effectiveness, efficiency and performance that can more easily grow in a climate of high motivation, Continue Reading →

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FCPA Liability

Two recent developments bring the potential for individual criminal liability under the U.S. Foreign Corrupt Practices Act (“FCPA”) back into the spotlight. These developments underscore the extensive reach of the FCPA, which can extend criminal liability to U.S. and non-U.S. citizens alike and to circumstances where an individual does not have actual 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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"Large Number" of Proxy Access Bylaws Predicted: Battle Lines Drawn for American Dream & Ownership Society

According to a recent November 15 newsletter from Latham & Watkins LLP, most companies will adopt a “wait and see” approach for now.  However…

If and when a company receives a shareholder proposal recommending board adoption of a proxy access bylaw, the board may respond (and seek to exclude the proposal from the ballot) by (i) adopting a proxy access bylaw (and claiming the Rule 14a-8 exclusion for substantial Continue Reading →

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Pepper Spray as Meme

At the University of California-Davis, a group of student Occupy Wall Street protesters were pepper sprayed by university police for refusing to vacate the campus quad. Thanks to the widespread availability of phones with cameras, the incident was photographed and recorded by dozens of onlookers. As a result, images and videos of the pepper spraying incident have flooded the internet with millions of views.

The image is striking in several ways. First, nearly everyone watching has a camera or cell phone and is documenting the event. Second, there is a strong visual separation of the police and protesters — the police are standing, while the protesters are seated. Third, the police officer who is spraying protesters has a very casual, removed demeanor and stance. There is no Continue Reading →

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Science of Stock Manipulation

Unless current shareowners suffer a penalty for having CEOs who engage in earnings manipulation and insider trading they are likely to encourage such unethical and damaging behavior, finds a study by Ramy Elitzur, since choosing less ethical managers may be in the best interests of current shareholders, but not future ones.

Many accountants believed that markets are efficient and as such, Continue Reading →

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1st Dodd-Frank Whistleblower Report

Even thought the SEC’s final regulations for the Dodd-Frank whistleblower program just became effective on August 12, 2011, the agency has already filed its first report on the whistleblower program. During the first seven weeks of the program, the agency received 334 whistleblower tips.

The SEC itself cautions that “due to the relatively recent launch of the program 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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The Governance Ombuds: SVNACD & Stanford's Rock Center

Why are corporate employees unwilling to report serious misconduct? Why are they also frequently unwilling to share good ideas for improving products, services and business processes? Fear of retaliation is most often cited for the failure to report misconduct; a sense of futility for the failure to suggest improvements. All too often, employees have a low level of trust in both management and the board.

The panel, which met in the morning at SVNACD and in the afternoon at Stanford’s Rock Continue Reading →

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Support Grows for Transparency in Corporate Political Spending

A group of 43 House Democrats is urged the SEC to require public companies to disclose their political contributions. The Council of Institutional Investors also sent a comment letter on a petition (File Number 4-637) filed by prominent law professors.

Rep. Gary Ackerman (D., N.Y.) and 42 other House colleague argue the high court’s ruling in the case, Citizens United v. Federal Election Commission, was “misguided” and left shareholders “completely in the dark, unaware that their money could be funding political attack ads.”

Shareholders cannot hold corporate management accountable for decisions the shareholders never knew were made. The present system is undemocratic and untenable.

Shortly after the decision, Rep. Gary Ackerman (D-NY) introduced the Corporate Politics Transparency Act, which would require corporations 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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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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Occupy Wall Street

The NY Transit Workers Union (TWU) Local 100 voted to join the protestors in the financial District of New York City, and so have the Verizon union members. Other unions, including the Teamsters (yes, those Teamsters who once supported Ronald Reagan) have issued public statements of support for Occupy Wall Street (OWS) protests… includes video of Tony Bologna pepper spraying. (“Occupy Wall Street” Is Getting Huge — But Where Are the Democratic Politicians?, AlterNet)

The young heroes on Wall Street today baffle the world because they have issued no demands. The villains of Wall Street had their demands — insisting upon a massive bailout for themselves in 2008, while they pocketed million dollar bonuses. The Wall Street protesters are not seeking a bailout for themselves; they are working to bail out democracy. (Van Jones, Wall Street Protests: Which Side Are You On?, Huffington Post, 9/30/2011)

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Anonymous Analytics Examines Corporate Governance

Anonymous is “a decentralized network of individuals focused on promoting access to information, free speech, and transparency. The group has made international headlines by exposing The Church of Scientology, supporting anti-corruption movements in Zimbabwe and India, and providing secure platforms for Iranian citizens to criticize their government.”

Anonymous Analytics, a faction of Anonymous has moved the issue of transparency from the political level to the corporate level. To this end, we use our unique skill sets to expose companies that practice poor corporate governance and are involved in large-scale fraudulent activities.

Anonymous researchers–who include unnamed and unnumbered “analysts, forensic accountants, statisticians, computer experts, and lawyers”–will base their investigative reports on information “acquired through legal channels, fact-checked, and vetted thoroughly 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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Inspiration: Many CEOs Don't Recognize It

CEOs are six times more likely than employees to believe they work in a company where people are inspired. Instead, employees see themselves as coerced (84%) or motivated (12%) by “carrots and sticks,” rather than a commitment to mission and purpose (4%). Are CEOs just deceiving themselves… or employees deceiving their CEOs?

How important is a values base for a company? For all of us, it can collectively mean the difference between salubrious and a toxic environment. For the company and its shareowners it can mean Continue Reading →

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McKenna's Insights into Berkshire Hathaway

Francine McKenna isn’t afraid to take on the big four auditing firms or the rich and powerful. Look for her column, Accounting Watchdog at Forbes.com. The following is an extended excerpt from a recent post, The Berkshire Hathaway Corporate Governance Performance. “Buffett judges the investments he makes ruthlessly, but allows his operating companies to run on autopilot.” That decentralized structure allows plausible deniability when anything goes wrong.

I encourage reading the entire article and getting familiar with McKenna’s work. It is good to see such an expert willing to speak truth to power. As a Berkshire Hathaway shareowner, her analysis certainly makes me nervous and it is hard to imagine shareowners taking on such an iconic figure through governance initiatives successfully.

…Before leading the Treadway Commission, before the savings and loan scandals of the 1980’s, before Enron and the rest of the scandals of the 90’s such as WorldCom, Tyco, Adelphia, HealthSouth, and many Continue Reading →

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When the CEO Really Must Go

It is often said that “the most important function of a board is to hire and fire the CEO.” Yet the experience of many is that boards do a pretty good job on the hiring front and a not-so-good job on the “exit.” An exciting SVNACD session in Palo Alto focused on the pitfalls of CEO changes and how to avoid them. The panel couldn’t have been more timely. (Bartz fired at Yahoo…may have violated disparagement clause: Kathleen Peratis, Outten & Golden)

This program, like all SVNACD programs, was subject to the Chatham House Rule: “Participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.” In this case, the panelists had already been identified publicly.

As with many SVNACD events, the audience was frequently as informative as panelists. My report will give you just a flavor of what went on. To get the whole meal, you’ll have to 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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Why Would Anyone Invest in China?

Francine McKenna writes that Deloitte Shanghai refuses to turn over workpapers and documents relevant to the SEC in their investigation of Longtop.

“Chinese law prohibits Deloitte China from providing the requested documents directly to a foreign regulator,” said spokesperson Lauren Mistretta. “Deloitte China is caught in the middle of conflicting demands by two government regulators, and DTTL hopes that this matter will be resolved in a timely and sensible matter.” McKenna concludes:

The S.E.C. must consider how much longer they will allow companies to list in the U.S. if they honestly and clearly tell you they are out of the reach of U.S. courts when something goes wrong.

The PCAOB must consider how much longer they will allow foreign-based audit firms to produce audit opinions if the PCAOB can not inspect them and if home countries refuse to cooperate with U.S. regulators.

U.S. courts must consider how seriously to take claims by global audit firms that they were “duped” by foreign fraudsters when they 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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