Corporate Social Responsibility
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
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
Skills needed for success