Stakeholders and social responsibility

Question 1

Agency relationship

Answer 1

A contract by which persons (principals) engage another (agent) to perform a service on their behalf

Question 2

Agency theory

Answer 2

Used to study the problems of motivation and control when the pricipal needs the help of an agent

Question 3

Agent

Answer 3

Usually a director who is interested in personal gain from their employment

Question 4

Principal

Answer 4

Usually a shareholder who is interested in wealth creation from their investment

Question 5

Agency monitoring systems

Answer 5

If principals believe the agency problem to be present they can take. a number of steps.

Request the formation of committees
Hire a consultant
Increase numbers of NED’s
Attend the AGM and question the board

Question 6

The agency solution

Answer 6

The shareholders are able to remove directors from office but this is hard due to time, cost and resources.

As the shareholders know less than the agents it is hard to know the full story. If they impose rules on the directors they have to be designed in a way that doesn’t stop efficiency, which is also challenging.

Ther agency problem can be removed. y aligning the shareholders and directors interests.

Question 7

Stakeholder

Answer 7

Someone who affects or is affected by the actions of entitiy and who has a claim.

There are Direct stakeholders - Those with a voice and communicate with entity.

Indirect stakeholders - Such as animals and plants, overseas suppliers or future generations

Question 8

Stakeholders can be

Answer 8

Internal - Employees, management, the board

Connected - Shareholders, customers, suppliers, lenders.

External - Government, public, pressure groups, media, competition, trade unions.

Question 9

Stakeholders can also be categorised as being

Answer 9

Active - participate in organisations activities, such as managers and employees.

Passive - shareholders, local communities and governemnt

Question 10

Powers and interest

Answer 10

Medelow has done a matrix which shows which stakeholders require what type of relationship.

Goes ABCD.
Key players are in D, and there3fore strategy must be acceptble to them.
C should be kept satisfied as they may end up in D. Large institutional investors may fall into C.
B does not have a great influence on strategy but their views can influence other stakeholders and therefore they should be kept informed. Community representatives and charities.
A - minimal effort.

Can be difficult to measure interest and power and stakeholders positions can move around the map as it’s not static..

Considers power and influence but not legitimacy - the legitimacy of their concerns etc.

Question 11

Fiduciary duty

Answer 11

The duty of care or trust which one party owes another. It can be a legal or ethical obligation.

Conflicts can arise as. a managers role can be to increase shareholder wealth of which can jeaopardise long term profitabilitity which is what the shareholders want.

Question 12

Instramental view

Answer 12

That stakeholders should be ordered. by importance by their economic benefits to the company

Question 13

Normative view

Answer 13

The view that the company has obligations to all stakeholders even those that have a view of non profit.

Question 14

Ecosystems

Answer 14

The partnering and firming of alliances within an ecosystem is central to beuilging cooperative relationships

Question 15

What is the order of Social Responsibility?

Answer 15

Economic - Shareholders wanting dividends/wealth, employees wanting fair employment and customers wanting quality goods.

Legal - Obeying the law although this can create challenges.

Ethical - Acting in a fair way even if the law does not require them to do so.

Philanthropic - Charitable, creates chances for employees to improve their own lives.

Question 16

Sustainability

Sustainable development

Answer 16

Reducing the use of depleting resources so that they can be replenished

Meeting the needs of those today without effecting the needs of the future.

Question 17

What is weak sustainability

Answer 17

A western viewpoint. Focuses on sustaining the human race and that the environment is a natural resource

Question 18

What is strong sustainability

Answer 18

The importance of having harmony with the natural world and sustaining all species not just the human race.

Question 19

Social accounting

Answer 19

The comunication of social and environmental effects of a companies economic actions to stakeholders. The reporting guidlines below have been developed.

Question 20

AA1000 Standard

Answer 20

Produced by AccountAbility.

People - social accounting, for ex charity donations.
Planet - environmental factors such as waste reduction.
Profit - the measure of success but also considering the redistribution to local communities.
Inclusivity - People should have a say in the decisions thatipact them
Materiality - Deciison makers should be clear and identify the sustainability topics that matter
Responsivness - Organisations should act transparently on material sustainability topics.
Impact - Organisations should monitor, measure and be. accountable for how their actions affect their broader ecosysems.

Question 21

gloal reporting Initiative (GRI)

Answer 21

Grew from the need to address failure of current governance structures.

Aims to develop transparency, accountability, reporting and sustainable development..

Vision is that reporting on economic, environmental and social importance. should become as routine and comparable as financial reporting.

Question 22

Eco Management and Audit Scheme (EMAS)

Answer 22

A voluntantary scheme that emphasises targets and improvements, on site inspections and requirements for disclosure. and verification.

Question 23

ISO14000

Answer 23

Provides a general frmework on which a number of specific standards have been based.

Question 24

ISO14001

Answer 24

Prescribes that an environmental management system must comprise:
A policy statement
Assessment of environmental aspects and legal and voluntary obligations
A management system ensuring effective monitoring and reporting on environmental compliance
Internal audits
A public declaration that ISO 14001 is being complied with

Question 25

Integrated reporting

Answer 25

Demonstrate the link between strategy, governance and financial performance and the social, enviornmental and economic context within which the business operates

Question 26

What is integrated thinking?

Answer 26

The active considration by the organisation of. the relationships between it's various reporting and functional units and the capitals that the organisation uses or affects Helps decision thinking. Looks at creating value not just for the short term but also for long term. Focusses on the process not the product.

Question 27

What are the six capitals of integrated thinking?

Answer 27

Financial - Funds availablefor use in production of goods or provisions of services. Manufactured - Objuects used int he production of goods or proviswion of services, including buildings, machinery, equipment and infrastructure. Human - Peoples capabilities, experience and motivation to innovate. Motivation for improvement, ability to understand and implement Strategies. risk management approach. Intellectual - Assets providing a competitve advantage. Patents, copyrights and licences. Organisational capital such as systems and procedures. Brand and reputation. Natural - Inputs to goods and services and natural enviornment on which and organisations activities have an impaqct. Air, Water, land etc. Biodiversity and health of ecosystems. Social - Relationships established within a network to enhance wellbeing. Include trust built with suppleirs, customers and other stakeholders.

Question 28

Auditing

Answer 28

The auditing of integrated thinking deters lip service and actual long temr thought out actions. Helps gain confidence of stakeholders.

Question 29

Social audits

Answer 29

Checking whether an organisation has achieved set targets. Areas checked are: Rationale for engaging in socially responsible activity Checking that environmental programmes and consistent with the mission of the company Assessing objectives and priorities relating to these programmes Evaluating company involvement in such programmes, past present and future. Typically used. by schools and. univerities due to public sector and. a range of individuals and stakeholders.

Question 30

Environmental audits, what are they?

Answer 30

Evaluation of how well management and equipment are performing in regards to safeguarding the environment. Assessing compliance with internal polciies and external regulations. Help to identify possible liabilities and assess the threat of unethical behaviour. Can act as marketing if good to stakeholders sentive to the environment.

Question 31

Environmental audit process

Answer 31

Agreement on metrics to aqssess environmental performance. What should be measured, how. The measurementr of actual performance and the comparison with targets A report from the auditor stating the levels of compliance and variance.