Corporate Governance Presentation PDF

CORPORATE GOVERNANCE Corporate Social Responsibility SAG Requirements Learners should display an understanding of and discuss the impact of the following: 1. Corporate Governance The King reports – including any new developments with additional King reports · Triple Bottom line rep...

CORPORATE GOVERNANCE Corporate Social Responsibility SAG Requirements Learners should display an understanding of and discuss the impact of the following: 1. Corporate Governance The King reports – including any new developments with additional King reports · Triple Bottom line reporting aka Integrated reporting and sustainability (responsibility to protect and conserve the environment for future generations; human health and well-being) · Principles of good governance (transparency, independence, accountability, integrity, responsible management, discipline, social issues, fairness in dealing with stakeholders) Duties and responsibility of directors The importance of creating an ethical business culture, good business performance, adequate and effective control, trust & good reputation, · apply AND explain (vs. apply OR explain) 2. FTSE/JSE Responsible Investment Index (Intent, purpose and benefits) 3. GRI (Global Reporting Initiative) (Intent, purpose and benefits) 4. The relationship between management ethics and social responsibility when explaining the concept of corporate social responsibility, as well as its implication for both business and communities. 1. Social Responsibility 1.1 The Concept of Social Responsibility (CSR) CSR is: More than just ethical issues e.g., honesty & integrity To protect & promote the welfare of all stakeholders (financial and otherwise) What are stakeholders? Any individual or group of people that have an interest in or that will be affected by a business 1.2 Corporate Social Investment (CSI) CSI is the actual resources that are invested in these stakeholders, i.e., in the form of money, manpower, products, use of machinery or premises. Financial performance of a business is obviously very important to owners and management, the social performance of the business is equally important to external stakeholders such as customers, suppliers, government, and society in general. The King II Report on Corporate Governance states that there should be a move away from ‘Bottom Line Reporting’ i.e., profit as the only focus point, to ‘Triple Bottom Line Reporting’, which includes the economic (Profit), environmental (Planet) and social aspects (People) of the organisation’s activities. 1.3 Sustainability · Sustainable projects are those where a process is set up to ensure that the project continues. · Donating food, etc fulfils only a short-term aim. · To make a difference in the long term, it is important to set up structures to enable the community to start to become self-sufficient. · Teaching skills that will enable them to get jobs means that they will be able to sustain themselves in the long run. Training and education are sustainable. Employees – Want remuneration / Good working conditions · Have an interest in the financial performance of the business - impacts their remuneration. Suppliers – want payment on time · This may conflict with the businesses interest of delaying payment to create a better cash flow and thus financial performance. This could backfire if the business delays payments to the extent that suppliers cannot survive financially. Consumers– quality product – value for money – safe product · Being socially responsible to consumers goes beyond this, e.g. the business should consider aspects such as the environmental impact on the disposal of packaging, or car emissions. Competitors – no counterfeiting – no copying of patents – no competitive advertising · CSR towards competitors (businesses selling others brands / substitute products) will include not selling counterfeit goods. · When a brand becomes successful it may become the target of counterfeiting activities. · The World Trade Organisation (WTO) defines Intellectual Property as “rights given to individuals over the creations of their minds”. · These rights may be attached to a work of art, literary works or industrial or commercial marks such as trademarks (a name or picture to identify a manufacturer). Government – tax to use for benefit of citizens (infrastructure/healthcare/education etc) · Uses taxes to create infrastructure and an environment that stimulates more business operations. · Broader Government objectives of transformation have also promoted Government to address the issue of Social Responsibility through various pieces of legislation (BBBEE, Employment Equity Act, Skills Development Act, etc). Broader Community - Social issues – The broader community expects a contribution to issues such as: Ecological (green) control and nature conservation without harming local communities. · Sponsorships for sports events· The creation of infrastructure - the private sector also has to contribute.· Upliftment of the poor through training and development initiatives-to improve literacy rates.· Health and safety.· Air (factory emissions), water (pollution by mines), noise pollution (especially near living areas). Government often lacks the manpower to enforce them, with the result that it becomes a moral responsibility of the corporate sector to act in a socially Positives Negatives Positives Negatives 1.CSR in South Africa Various factors have contributed to the need for CSR in South Africa: The inequalities of the past, especially in education, As a dualistic economy with a large portion of the population still living third-world circumstances, we are in the process of growth and building infrastructure and unable to provide adequate housing, medical care or quality education to all citizens at present. Years of apartheid resulted in funds being poured into various political issues (‘the struggle’) rather than economic issued. Economic boycotts also prevented Foreign Direct Investment (FDI) and imports coming into the country, which had a detrimental effect on the economy. South Africa has limited water supplies with only about 12% of the land being arable. Technological advancement worldwide has resulted in many menial jobs being automated, The ‘global village’ phenomenon, with increased imports, has made it cheaper to import products rather than to produce them locally. It is often difficult to break the cycle of poverty A culture of crime and violence The crippling effects of the HIV/AIDS epidemic Effects of Covid-19 and the economic lockdown (job losses and businesses closing). What is Triple bottom line In economics, the triple bottom line (TBL) maintains that companies should commit to focusing as much on social and environmental concerns as they do on profits. TBL theory posits that instead of one bottom line, there should be three: profit, people, and the planet.  Understanding Triple bottom line This element is a business's impact on the natural environment and ecological systems with the goal to do the least harm with the most benefit business L enhance the well-being of individuals and communities within society can include an organization's contributions to social well-being, environmental health as well as employee well being A company must ensure it earns its income in ethical, fair manners. It must make a profit to be responsible to its investers/share olders so they make a ROI  Understanding Triple bottom line L This element is a business's impact on the natural environment and ecological systems with the goal to do the least harm with the most benefit  Understanding Triple bottom line L Triple Bottom Line (TBL) reporting encourages businesses to focus on people, planet, and profit. For a clothing business, the "People" element means ensuring fair labor practices, such as fair wages and safe working conditions; promoting employee growth and well-being; and fostering diversity and inclusion within the workforce. These actions demonstrate a commitment to positive social impact and responsible business practices. fair and beneficial business practices the community where the company operates 9no dumping /exploiting and CSR towards community  Understanding Triple bottom line A company must ensure it earns its income in ethical, fair manners. It must make a profit to be responsible to its investors/shareholders so they make a ROI auditing of finanial L records /budgeting / Companies need to grow and develop if they are investing with resonable to be successful. Companies need to report on risk management/pre profits, growth, and contributions to social empt financial risk equity. ·Companies need to actively look for strategies that work in protecting the next generation.  The Principles of Corporate Governance · King Code Accountability, transparency, and openness have always been demanded of SA company directors. · However, before 1994 businesspeople had no clear guidelines except for common law which wasn’t accessible to them. The King Committee (named after chairman Mervyn King) made recommendations regarding ethical trading practices through the following reports: It is not legally binding but has become part of corporate culture. Some companies and governments favour those companies that are complying. This has therefore become a competitive advantage when competing for tenders, contracts and other business dealings. The Principles of Corporate Governance Fairness Transparency Accountability social Responsibility Discipline responsibility of directors  Transparency This does NOT mean that everybody needs to know what decision was made or how it was made some details need to remain confidential transparency regards that the decision was taken according to a set of rules that everyone is familiar with and understood by everyone transparency is important for accountability as we cant be accountable with out transparency eg: publicly shares information about each factory it works with, including the location, conditions, and fair wages provided to workers. breaks down the costs of each product, showing customers how much goes into materials, labor, duties, and transport.  INDEPENDANCE · Independence refers to the avoidance of any undue influence by interested stakeholders as well as being completely free of any constraints that may affect the correct course of action needed for the success of a company. · It is the ethical ability to stand one side, and to make correct and uncontaminated decisions on matters concerning a company. · Independence ranges from “total” to “zero” independence. Each affects decision-making/corporate governance. Regulatory NOT using adiscipline supplier because you get a kickback or they are a friend accepting a bribe / being influenced by an outside stakeholder that is not the the best decision for the business /not putting the biusiness interests first  Fairness means to be treated with equality and avoiding bias towards a particular group or entity as compared to others. Difficult for a company to do sometimes as it has a financial or another type of impact on the success of the company. Methods such as the corporate governance rating system or the fairness options could be used to assess fairness. 1.Fair Labour Practices 2.Equal Opportunity Employment 3.Clear and Fair Return Policies.  INTEGRITY Integrity is about doing business in a manner that is honest and truthful. It is an essential way to measure how those involved in companies are accountable to those that are affected (positively and negatively) by their decisions.  Accountability Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et refers to a person taking responsibility for action, i.e., how/why, and what happened. dolore magna aliqua. Ut enim ad minim veniam A business showing accountability increases customer confidence. Integrity is connected. Honesty will be part of decision-making if businesses know they will have to account for what happened. If you are held accountable, you will have to explain. this could be in the integrated report where you explain your contribution to pollution and say why and what you plan to do why actions were taken eg poor financial performance must be able to explain why it happened. defective products or bad press all facts and explain how it happened and what is in place to measure it doesnt happen again. with accountability = some has to utimatly has to take the blame as it was thier responsability this is often the CEO  Social responsibility Risk Acceptance Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam If a business follows process good explotation of natural corporate governance they will be resources like soil/cotton responsible towards social issues reducing carbon footprint avoid child labour /paying fair wages= living wage vs minimum wage support of skill training and community support /local suppliers  Discipline the motivation and constrait to do the right thing always , stick to rules ,procedures Discipline is the practice of making people obey rules or standards of behaviour, and punishing them when they do not. Self discipline Market discipline Regulatory discipline  Responsibility of directors King Code promotes responsible management, and King 3 elaborates on directors' responsibilities and duties. The board of directors are a key driver of the ethics and direction of a business. Fines and jail time act with SKILL and are measures for not acting in the stakeholder's best CARE when interest...this lessens corruption Don’t abuse power formulating policies of position – use it to enhance business and procedures Customer Responsibilities act in good faith and ethical leadership Pre-empt risk and Don’t abuse power – honesty in the best set up audit proper risk use it for enhancing committees intrest of the business business and ethical management. ensure triple bottom FIDUCIARY DUTY culture line reporting NOW called FTSE/JSE Responsible Investment Index The key objectives of the JSE SRI: · To identify companies that are listed on the JSE that subscribed to triple bottom line reporting and conducting business with a view of sound governance in mind. · To provide a sound tool with criteria which could be used to assess the company’s holistic alignment to both global and local corporate social responsibility. · To contribute to the development and growth of sound business practice in South Africa and beyond. The SRI is founded on the principles of the triple bottom line and good corporate governance and is structured with the following categories: environmental, social and governance and related sustainability concerns (ESG). Companies that form part of the FTSE/JSE All share The SRI criteria are continuously being developed to be Index will automatically be assessed against the above- more in line with global benchmarks while remaining mentioned criteria, other companies will need to apply reflective of local developments. Lorem ipsum dolor sit amet, consectetur to form elit, partsed of the adipiscing do SRI. eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam · GRI is an independent institution that has made it their mission to develop an acceptable guideline on sustainable reporting which focusses on: · The GRI guidelines are there to assist companies to report on activities to different stakeholders to show their understanding andconsectetur Lorem ipsum dolor sit amet, contributions to a adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut sustainable environment. enim ad minim veniam · The GRI sustainability-reporting model is a holistic framework that addresses the broad performance of a company which is flexible and thus can be used in different sectors and geographical contexts.