Corporate social responsibility an appeal to enlightened self interest
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Corporate Social Responsibility: An Appeal to Enlightened Self-Interest. CLARG Seminar 24 May 2007 Peter Seidel Partner, Public Interest Law Arnold Bloch Leibler Lawyers and Advisers. Definition and presentation summary. No single definition exists.

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Corporate social responsibility an appeal to enlightened self interest l.jpg

Corporate Social Responsibility: An Appeal to Enlightened Self-Interest

CLARG Seminar

24 May 2007

Peter Seidel

Partner, Public Interest Law

Arnold Bloch Leibler Lawyers and Advisers


Definition and presentation summary l.jpg
Definition and presentation summary

  • No single definition exists.

  • Arguably, involves process of a corporation considering and managing various social and environmental impacts consequent upon it’s activities, balancing need to maximise returns to shareholders with stakeholders’ interests.

  • CSR has corporate decision making and corporate reporting aspects.

  • No single approach to CSR.


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Definition and presentation summary (cont.)

  • Successful CSR does not require specific CSR amendments to the Corporations Act (CA).

  • Mandating by specific legislation CSR into corporate decision making and reporting risks compliance only with minimum standards.

  • Successful CSR requires management approach voluntarily adopted by a corporation because it is in the long-term interest of the corporation and its shareholders - an appeal to enlightened self-interest.


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Common law and statutory fiduciary responsibilities of directors

‘Act In The Best Interests Of The Company’

  • Directors have considerable discretion

  • Not confined to making decisions to maximize short term profits.

    s180 CA - Care, Diligence and Skill (“the business judgement rule”)

  • Degree of skill reasonably expected of reasonably experienced person

  • Informed on subject matter of judgment to extent believes is appropriate; and

  • Rationally believes it’s in best interests of corporation.

    s181 CA - Good Faith

  • Do not act arbitrarily or make improper use of information (see also ss182(1) and 183(1) CA).

  • Do act honestly and in interests of company and do not act for personal advantage (see also s181(1) CA).


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Common law and statutory fiduciary responsibilities of directors (cont.)

Upshot of CA and Common Law Duties

  • Discretion to take non-shareholder stakeholder interests into account if the circumstances are such that it is commercially justifiable to do so.


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Other than via CA, how else is CSR regulated in Australia? directors (cont.)

Discrete legislation and policy

  • Discrete legislation and policy best way of imposing additional CSR obligations on companies and directors e.g.:

    - environmental laws;

    - minimum rates of pay;

    - occupational health and safety;

    - anti-discrimination; and

    • equal opportunity.

  • But law and policy are not immutable. Good law and policy requires strong Government leadership, reflecting and predicting the times to concentrate minds (e.g. Chuck’s suggestion – taxing undesirable activities like pollution).


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Other than via CA, how else is CSR regulated in Australia? (cont.)

CSR Reporting under ASX principles

  • ASX 2003 Corporate Governance Council’s Principles of Corporate Governance and Best Practice Recommendations:

    - Applies to publicly listed companies.

    - Guide for corporate governance practice.

    • Voluntary, but any company that does not follow must explain why to both ASX and investors.


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Other than via CA, how else is CSR regulated in Australia? (cont.)

Media

  • e.g. Indices rating companies according to CSR performance:

    - The Age and SMH have a Good Reputation Index, measuring the performance of Australia’s top 100 largest companies on management and ethics, employee relations and social and environmental impacts etc.


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Commercial drivers/market forces (cont.)

  • Enhances reputation.

  • Helps attract brightest and best.

  • Pressure from NGOs.

  • Pressure from a public becoming increasingly sophisticated in its awareness of corporate social and environmental impacts.

    But if public and private companies

  • Public companies must demonstrate how support for the cause and discharge of company’s CSR responsibilities contribute to how it is perceived, to create a positive image, which contributes to maximising shareholder returns.


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Commercial drivers/market forces (cont.) (cont.)

  • Anonymous giving cannot be justified by public companies. If no one knows about the initiative beyond those immediately benefiting from it, can’t ultimately contribute to shareholder wealth.

  • Cf private/family owned companies.


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Internal drivers (cont.)

  • Positive impact of CSR on motivation, commitment, loyalty, training – helps retain brightest and best.

  • Upskilling.


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Risks of further legislating for CSR (cont.)

  • Compliance approach - risks corporations acting to meet the minimum standards only.

  • Risks subjecting directors to conflicting or competing fiduciary and statutory duties and obligations – what happens if shareholder and stakeholder interests diverge?


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Successful CSR approach (cont.)

  • Consistent with firm’s culture, philosophy, history.

  • Fully integrated into and shapes all aspects of operations.

  • Not merely about compliance.

  • Requires systemic, holistic and cultural “take up” within organisation, particularly by its leaders.


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ABL’s approach (cont.)

  • Principles underlying CSR have traditionally guided ABL both in the management of the firm, motivation of staff, and in the work we do in the community.

    Firm philosophy

  • Right thing to do.

  • Acknowledge mixed motives.


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Choosing clients (cont.)

  • ABL looks for a natural fit of vision and culture with:

  • “Not for profit” Jewish, cultural, social justice causes.

  • Various Indigenous communities and environmental NGOs, in particular.


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Practice strategy at ABL (cont.)

  • Strategy has following features:

    - Work treated, performed, credited in same way as paid work

    - Client, not matter, focussed

    - Relationships, commitment driven

    - Clear support of firm’s leaders

    - Full time, partner co-ordinator

    - Clear policy, guidelines


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Practice strategy at ABL (cont.) (cont.)

  • Targeted to areas of greatest need where firm’s skills, resources can be best utilised.

  • All interested personnel can participate: lies like a transparency over whole firm.

  • Annual audits carried out to formally measure associated benefits and give proper recognition to staff and clients.

  • Occasional reports published.


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Conclusion (cont.)

  • Profit is not compromised by practising CSR; to the contrary.

  • CSR is rational business behaviour.

  • Present legal/political systems, including processes for change, are sufficient to create ideal conditions for CSR.

  • CSR is essential to long-term corporate sustainability – it must be part of any business plan, not a mere “feel good” adjunct to it, on the journey towards enlightened self-interest.


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