Fiduciary Responsibility vs. Corporate Social Responsibility

1. Fiduciary Responsibility vs. Corporate Social Responsibility Getting a Seat at the Table Kevin M. Brett April 16, 2013

2. A Seat at the Table? Executives are hired to maximize profits; that is their responsibility to their company’s shareholders. Even if executives wanted to forgo some profit to benefit society, they could expect to lose their jobs if they tried—and be replaced by managers who would restore profit as the top priority,” – Arneel Karnani, University of Michigan associate professor of strategy, Wall Street Journal, August 23, 2010.

3. Spirit Airlines to Dying Flyer: You’re Not Getting a $197 Refund “Still, at the end of the day, companies have actual real people as employees. And if you're the type of person who thinks most people are decent, you might assume those employees want the place they work to be interested in doing the right thing – even if it means sacrificing a little profit now and then.” – Yahoo Finance, May 4, 2012

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5. Carl’s Memphis BBQ BurgerNYSE: CKR • 1,030 Calories; 500 Calories from Fat

6. Fiduciary Duty Fides =faith Fiducia =trust Fiduciarius = (holding) in trust A legal or ethical relationship of confidence or trust regarding the management of money or property between two or more parties.

7. A Vote for Fiduciary Responsibility “It is hard in this world to do well. It is hard to do good. When I hear a claim that an institution is going to do both, I reach for my wallet. You should too.” – Harvard Professor and former Treasury Secretary Lawrence Summers.

8. Corporate Social Responsibility CSR is a form of corporate self-regulation integrated into a business model. • Sustainable responsible business • Corporate conscience • Corporate citizenship • Social performance

9. A Vote for Corporate Social Responsibility (CSR) • “Right now, the public is more likely to view greed as a deadly sin than an engine of economic growth,” Edward Glaeser, Harvard Economist, New York Times, January 6, 2009

10. A Vote for CSR “Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit.” – Arneel Karnani, University of Michigan associate professor of strategy.

11. Doing Well Doing Good Multiple stakeholders Giving back Heightened trust Benefit of the doubt Creative capitalism Counter to NGOs No green washing No pink washing • ERISA mandate • Investors expect returns • Employees expect returns • Need to stay in business • Board oversight • Possible securities litigation

12. Fiduciary vs. CSR: Topic No. 1 McDonald’s Corp. (NYSE: MCD) introduced grilled chicken salads, fruit smoothies and other healthier foods, while continuing to serve Big Macs, fries and shakes. Corporate social responsibility Fiduciary responsibility Both?

13. Fiduciary vs. CSR: Topic No. 2 Toyota Motor Corporation (NYSE: TM) introduced the hybrid Prius, enhancing fuel mileage and reducing air emissions. Corporate social responsibility Fiduciary responsibility Both?

14. Fiduciary vs. CSR Topic #3 • Subway Restaurants’ “Jared” campaign uses Jared S. Fogle, “The Subway Guy,” to emphasize the low-calorie, low-grams of fat benefits of Subway sandwiches • A. Corporate Social Responsibility? • B. Fiduciary Responsibility? • C. Both?

15. CSR: Ethics Question No. 1 KFC (NYSE: YUM) unveiled its “Buckets for the Cure” benefitting the Susan G. Komen Foundation and featuring the firm’s grilled chicken offerings. Are there ethical questions for: • KFC? • Susan G. Komen Foundation?

16. CSR: Ethics Question No. 2 • Corporate Responsibility (CR) ranks Altria Group Inc. (NYSE: MO) No. 20 of its 100 best Corporate Citizens for 2013. k • According to the CDC, 443,000 Americans die each year from cigarettes. • Should Altria Group Inc. champion its CSR program?

17. Fiduciary vs. CSR Takeaways • Fiduciary and CSR are not mutually exclusive • Fiduciary and CSR complement each other • Fiduciary honors shareholder/employee ownership • CSR reflects a company’s obligations to its stakeholders, including local communities and the environment

18. CSR Assignment Due April 18 • Prepare a one-page memo from your chosen corporation CEO to company employees • Provide an overview of the company’s CSR philosophy and activities • Don’t Forget Fiduciary Responsibility • Use bullets as needed to highlight activities

19. One-Page Memo Guidelines • Single Space • Flush Left • Subheads? • Bullets? • Use Corporate Responsibility (CR) Best 100 Corporate Citizens for 2013 • http://www.thecro.com/files/100Best2013_web.pdf