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Governance as Stakeholder Responsibility


Governance as Stakeholder Responsibility James E. Post Prepared for the Advancing CSR Theory: An Intercontinental Dialogue Montreal, CANADA – PowerPoint PPT presentation

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Title: Governance as Stakeholder Responsibility

Governance as Stakeholder Responsibility
  • James E. Post
  • Prepared for the Advancing CSR Theory An
    Intercontinental Dialogue
  • Montreal, CANADA
  • 12-15 October 2006

  • Perspective 30 years of CSR teaching, research,
    and practical experience.
  • Our field is a mixture of theory and practice
    we need both to build.
  • We need realism as well as idealism
  • Hewlett-Packard as a case example
  • How do we know we are not being fooled?

Challenge we face
  • Governance is about authority
  • Who has authority to make decisions?
  • What is the source of that authority?
  • How is authority legitimately exercised?
  • This intercontinental dialogue will explore the
    implications of these issues.

A Sobering Story
  • Hewlett-Packard leaking scandal
  • Ethics standards H-P Way
  • Every member of the H-P community (including
    directors, executives, managers, employees,
    business partners) must adhere to the highest
    standards of business ethics and comply with all
    applicable laws.
  • What went wrong?
  • Do the ends justify the means?

From Halos to Horns
H-P Board Chair, P. Dunn
  • I do not accept responsibility for what happened
    . (Testimony)
  • I am not an investigator or a lawyer .
  • H-Ps lawyers and counsel said pretexting was
    legal (or not illegal).

H-P Mark Hurd
H-P CEO, Mark Hurd
  • I accept personal responsibility to get to the
    bottom of this and fix it
  • This was not the CEOs No. 1 priority.
  • The CEO cannot be the backstop for every process
    in the company. (Testimony)
  • Processes break in two ways. They break because
    they dont have the right checks and balances and
    because they dont have the right execution.
    This one broke down on both fronts. Like
    anything else we need to go fix it. (CNN
    Money/Fortune interview)

Just Because You Are Paranoid Doesnt Mean
Hewlett-Packard Is Not Spying On You
Roots of CSR Theory Research
  • Disasters/crises (such as H-P case)
  • Externalities ecological, consumers, etc.
  • Growth of giant business enterprise
  • Labor-management relations, unions, and social
  • Competition policy market abuses

Development of CSR Field
  • All research begins with a good question
  • CSR questions
  • To whom is the corporation responsible?
  • For what?
  • How can we evaluate progress and performance?

Canadian Social Performance
  • Royal Commission on Corporate Concentration -
  • The concept of corporate social responsibility
    is still a relatively new and therefore an
    evolving determinant of corporate behaviour in
  • R. T. Mactaggart, et. al., Corporate social
    performance in Canada, Study 21, RCCC, 1978.
  • Focus on how the social contract was evolving
    between MNCs and Canadian society.

Normative theory - CSR 1
  • CSR 1 is the theory of how the modern
    corporation should exist and interact with
    people, institutions, and all segments of
  • CSR -1 is normative how the corporation ought
    to act
  • Normative state Define ideal or proper state
    of relations between the corporation and society

Grounded theory - CSR 2
  • CSR 2 is the theory of how the modern
    corporation formulates and implements policies,
    programs, and practices that accomplish the
    normative goals.
  • CSR -2 is process-oriented (responsiveness). How
    does the corporation translate policy ideas into
  • CSR 2 is a grounded theory actual practice.

Policy and Action CSR 3
  • CSR-3 Critical ethical and management issues of
    our time human rights, environment, labor
  • Corporate policy rooted in moral correctness
  • Corporate social rectitude
  • Legitimacy of governance as the key issue for
    corporate and governmental institutions
  • Age of Accountability

Traditional view of governance
  • Traditional property rights view emphasizes that
    the owner of property has dominion over it.
  • Three rights
  • To use as the owner wishes.
  • To transfer as the owner wishes.
  • To set conditions for others to use it.
  • New realities affect those rights however.

PAC Newsletter - headline
  • Corporate social responsibility is undergoing a
    huge transformation because of new realities.
  • Public Affairs Council, Sept. 2006
  • Point The community is no longer geographically
    defined . Even for small companies, the
    community is now the globe.
  • Recommendation Corporate community activity
    should be based on your organizations key
  • Example -- UPS - transport logistics during
    Katrina, UPS was among the most effective

New realities
  • The nature of assets has changed (intangibles).
  • The modern firm is not factories railroad cars.
  • It is composed of networks of voluntary
  • Culture and history support more open
    approaches to authority and power.
  • Governance requires legitimate processes of
    leadership and accountability

CSR at a Crossroads
  • Old-style corporate social responsibility seems
    to be morphing into new models.
  • PR model good works at the margin of the
    business/ philanthropy (Buffet, Gates, Branson)
  • Integrate the concerns supply chain,
    subcontractors, transparency, reputation
  • Corporate re-design for the 21st century
  • Corporation 2020 project

Integration Respected Companies
  • Barrons financial journal, September 11, 2006
  • 85 institutional investors evaluated 100 largest
    companies in terms of respect.
  • respect is intangible, which may be why its
    so important. Barrons
  • Top ranked
  • Johnson Johnson, General Electric, Procter
    Gamble, Toyota, Berkshire-Hathaway, Pepsico,
    Exxon Mobil, Goldman Sachs, Honda, Amgen

5 Factors considered
  • Factor Most important 2d most
  • Strong mgt 31 24 (55)
  • Sound bus. strgy 27 25 (52)
  • Consistent sales
  • profit growth 22 6 (28)
  • Ethical bus. practice 15 25 (40)
  • Competitive edge 4 12 (16)

Re-design model 21st c. Principles
  • 1. The purpose of the corporation is to harness
    private interests to serve the public interest.
  • 2. Corporations shall accrue fair profits for
    shareholders, but not at the expense of the
    legitimate interests of other stakeholders.

Redesign principles
  • 3. Corporations shall operate sustainably to meet
    the needs of the present generation without
    compromising the ability of future generations to
    meet their needs.
  • 4. Corporations shall distribute their wealth
    equitably among those who contribute to its

Redesign principles
  • 5. Corporations shall be governed in a way that
    is participatory, transparent, ethical, and
  • 6. Corporate rights shall not supersede or weaken
    rights of natural persons to govern themselves.
  • Source ltwww.corporation2020.orggt

The Business School Research Project
  • To learn how leading business schools are
    addressing social and ethical issues in
    curriculum, research, and community.
  • To assess faculty resources and related support
    for these areas.

Key findings
  • Social and ethical issues are now taught in five
    distinct sub-areas ethics, social enterprise
    (CSR), social entrepreneurship, corporate
    governance, and sustainability.
  • Leading schools use one or more of these areas as
    key focal points for MBA program activity.
  • Dominant focus on ethics and social
    entrepreneurship as organizing themes for
  • Leading schools are innovating and using these
    areas as springboard to public awareness and

  • Governance is about stakeholders
  • Who matters? Why? What is the proper way to deal
    with stakeholders?
  • Responsibility is understood through answers we
    develop to these fundamental questions
  • To whom is the corporation responsible?
  • For what?
  • How do we measure performance and progress?

Social Enterprise
Social Entrepreneurship
Corporate Governance
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