As you know, topics related to corporate social responsibility have ascended to the forefront for many stakeholders, and CSR is sometimes viewed to comprise issues related to firearms safety. With the renewed national debate on gun safety, and in light of apparent continued government gridlock, will investors, customers, employees and other stakeholders turn to companies to “do something”? Will they begin to apply more pressure to companies involved with firearms, including retailers and banks, to reexamine their relationships with the gun industry? For the 2019 proxy season (unlike 2018), we did not find any shareholder proposals directly addressing gun safety (although some did indirectly) that were submitted for shareholder votes. Will current events reignite the topic of gun safety as a subject for shareholder proposals in 2020?
The EY Center for Board Matters has identified investors’ top priorities for companies in 2018, based on its annual investor outreach involving interviews with over 60 institutional investors with an aggregate of $32 trillion under management.
When theories collide: what happens when the shareholder preeminence theory meets the stakeholder theory?
Laurence Fink, the Chair and CEO of BlackRock, has issued his annual letter to public companies, entitled A Sense of Purpose. As in prior years, Fink advocates enhanced shareholder engagement and a focus on long-term strategy development. (See this PubCo post and this PubCo post.) What’s new this year is that he is also advocating that companies recognize their responsibilities to stakeholders beyond just shareholders—to employees, customers and communities. Holy smokes, Milton Friedman, what happened to maximizing shareholder value as the only valid responsibility of corporations?
Does inclusion of executive compensation metrics related to corporate social responsibility lead to long-term value creation?
In this recent academic study, Social Responsibility Criteria in Executive Compensation: Effectiveness and Implications for Firm Outcomes, the authors examined the impact of the integration of elements of corporate social responsibility, such as environmental and social performance, into executive compensation performance criteria. In the decision-making process, executives tend to gravitate toward the achievement of short-term goals and to respond more readily to more prominent direct stakeholders, such as customers and shareholders. But CSR metrics typically have a long-term pay-off and involve less direct stakeholders, such as the environment and the local community. The question is: is the inclusion of CSR performance metrics in executive comp programs effective to motivate executives to achieve those longer-term CSR goals, engage with CSR stakeholders and enhance long-term value creation?
by Cydney Posner I love the introduction to this article from The Washington Post: “Business school professors have a knack for finding some pretty bizarre links between the personal lives of CEOs and the professional results at the companies they run. Those who golf more than 22 times a year are linked with lower corporate […]