rezaee, 2016 Flashcards
Rehbein (2014)
views CSR?ESG as an integral component of business sustainability and often uses CSR?ESG and the five EGSEE dimensions of sustainability performance interchangeably.
agency/shareholder theory
developed by Jensen and Meckling (1976). it addresses firms’ management by suggesting that the interests of principals (owners) and their agents (executives) are often not aligned. it focuses on risk sharing and agency problems, including the three agency costs. moral hazards can occur. the implication is that management incentives and activities often focus on short-term eanings targets which are normally linked to executive compensation and detract from achieving sustainable and long-term performance for shareholders. it focuses on financial economic sustainability performance information.
the three agency costs
monitoring, bonding, and residual.
moral hazards
occur in the presence of information assymetry where agents who act on behalf of the principal and knows more about its actions and intentions than the principal does due to lack of monitoring of the agent.
institutional theory
considers a firm as an institutional form of diverse stakeholder pursuing common goals. it focuses on the role of normative influences in decision-making processes and the social aspects of decision-making, conditions under which the investment decisions on CSR or environmental initiatives are made, and their possible impacts on the environment and society.
legitimacy theory
built on a socio-political view and suggests that firms face social and political pressure to preserve their legitimacy by fulfilling their social contract and gain support from society. it also suggests that social and environmental sustainability initiatives and related performance is desirable by all stakeholders.
signaling/disclosure theory
enables companies to communicate and explain management incentives for achieving all five EGSEE dimensions of sustainability performance and the investors’ reaction to the disclosure of sustainability performance information. it suggests that firms try to signal “good news” through reporting, but their association is still ambiguous. it suggests that firms with superior sustainability performance have more incentive to disclose their performance.
stakeholder theory
stakeholders are classified as internal stakeholders and other external stakeholders. stakeholder welfare maximisation includes the interests of employees, customers, and the broader community in which the firm operates.
stewardship theory
views management as considering the long-term interests of a variety of stakeholders rather than its own self-serving and short-term opportunistic behaviour under agency theory. the two main drivers and aspects of corporate sustainability are long-term orientation and protection of interests of all stakeholders. it considers management’s strategic decisions and actions as stewardship behaviours.
sustainability standards
means providing products and services that satisfy the customer without jeopardising the environment, but also operating in a socially responsible manner and presenting reliable and transparent sustainability reports.
International Organisation for Standardisation (ISO)
provides sustainability standards to certify achievement of EGSEE sustainability performances. it ensures high-quality products, promotes effective corporate governance and compliance with environmental regulations and social standards, and develop uniformity in focusing on all five EGSEE dimensions.
stewardship
the extent to which an individual (management) willingly subjugates his/her personal interests to act in protection of others’ (stakeholders) long-term welfare.
economic performance
reflects the long-term profitability and financial sustainability of the company as measured in terms of long-term operational effectiveness, efficiency, productivity, etc. it is presented in a set of financial statements to assess the risk and return of investments.
governance performance
reflects the effectiveness of corporate governance measures in managing the company to achieve its objectives of creating shareholder value and protecting the interests of other stakeholders. it is usually established by policymakers, regulators, and corporations. it is achieved through board oversight of management, alignment of management interests with shareholders, etc.
social performance
measures how well a company translates its social goals into practice. it reflects how and to what extent a company fulfills its social responsibility by making its social mission a reality and aligning it with the interests of society.
