ACCA SBL Syllabus B. Governance - Corporate Social Responsibility - Notes ^{3 / 3}

This is concerned with business ethics and accountability to stakeholders.

Companies should look after ALL shareholders and be transparent in its dealings with them when compiling corporate reports

CSR requires directors to look at the aims and purposes of the company and not assume profit to be the only motive for shareholders

Arrangements should be put in place to ensure that the business is conducted in a responsible manner.

This includes environmental and social targets, monitoring of these and continuous improvement

There is pressure now for companies to show more awareness and concern, not only for the environment but for the rights and interests of the people they do business with.

Governments have made it clear that directors must consider the short-term and long-term consequences of their actions, and take into account their relationships with employees and the impact of the business on the community and the environment.

Why prepare a social report?

• Build their reputation on it (eg body shop)

• Society expects it (Shell)

• Long term it will increase profits

• Fear that governments may force it otherwise

How companies interact responsibly with society

• Provide fair pay to employees

• Safe working environment

• Improvements to physical infrastructure in which it operates

Is it against the maximising shareholder wealth principle?

Organisations are rarely controlled by shareholders as most are passive investors. 

This means large companies can manipulate markets - so social responsibility is a way of recognising this, and doing something to prevent it happening from within.

Also, of course, business get help from outside and so owe something back. 

They benefit from health, roads, education etc of the workforce and suppliers and customers. 

This ‘social contract’ means that the companies then take on their own social responsibility

Human Capital Reporting

Sees employees as an asset not an expense and competitve advantage is gained by employees.

The training, recruitment, retention and development of employees is all part of what would therefore be reported

Implications:

• People are a resource like any other and so needs to be effectively and efficiently managed

• Safeguarding of the asset as normal

• Impairment could mean a simple drop in motivation

Human Capital Management reports should:

• Show size of workforce

• Retention rates

• Skills needed for success

• Training

• Remuneration levels

• Succession planning