Table of Contents
Statements between shareholders and stakeholder view of corporation.
Impact on ESG factors.
Implications on American Companies.
Impact and Undertaking the role.
The aim of the report is to analyze the statement published by Business Roundtable on August 2019 on the purpose of the corporation. 181 CEOs has signed a new statement on the purpose of a corporation announced by Business Roundtable. All the CEO commits to lead their companies in order to provide benefits to shareholders, communities, suppliers, employees, and stakeholder customers (Business Roundtable 2019). Corporate responsibility plays a very important role in the success of business. The report will situate the statements within the ongoing debate between the shareholder view and the stakeholder view of the corporation. It will identify how this statement will impact the growing discussion around environmental, social and governance (ESG) factors that are increasingly being used to make investment decisions. In addition, it will also identify the implications of this debate for the boards of major Australian listed companies. The report will also identify the impact of this debate as a director of such a company.
Jamie Dimon, chairman of business roundtable stated that that the American dreams is alive but fraying. He stated that the most of the employers are investing in communities and work because according to them it is the only way to get long term success. It will help in pushing the economy that serves all the Americans. Whereas Alex Gorsky, chairman of business roundtable corporate governance committee stated that that meeting the needs of all stakeholders will help in improving the society. Former CEO of Vanguard, Bill McNabb welcomes the statement on the purpose of a corporation by saying that, as a result of it boards will be able to focus on better serving to customers, suppliers, communities, employees and investors, and also help in focusing on creating long term values (Business Roundtable 2019). On the other hand, President of the Ford Foundation, Darren walker stated that that it is the best way to address the challenges faced by the stakeholders and this will help in generating long term values which will result in sustainability and prosperity for society and business.
Besides this, President and CEO of Progressive Corporation, Tricia Griffith commented that it is the most promising way of building long term values as CEOs work for shareholder in order to return values and generate profit but the bust run companies do more because they put their communities, customers and employees first and also do investment on them (Forbes 2019). The statement on the purpose of a corporation commits that American companies will lead the way in meeting the customer needs and delivering values to the customers (Business Roundtable 2019). Investment on employees will be done by providing them important benefits along with providing support to them by developing new skills through education and training. Besides this, Ethical and fair deal with suppliers will be demonstrated for better relationship in order to meet the mission of the organization. The statement commits to support communities in which they work by respecting community people and protecting environment through implementing sustainable practice in business. Moreover, it also commits to generate long term values for shareholder by effective and transparent engagement with them as they provide capital to companies in order to innovate, grow and invest (Business Roundtable 2019).
Environmental, social and governance (ESG) factors are used by investors to invest in the company. These factors play very important role as they sets a standard for company operations. The statement will add to these factors as companies will move towards corporate social responsibilities. As per the statement on the purpose of corporation, community and society will be taken into consideration in which the business is working. Business will incorporate CSR and will more focus on satisfying its customers and employees. Investors will be more attracted towards the business following the new statement on purpose of corporation (Ruggie 2019) (Andrew 2019). The statement will make companies to carry out sustainable activities along with considering ethical behavior. However, consumers may rely on companies for goods and services, the level of opposition allows consumers to choose based on excellent an organization is doing outside of the workplace and how they are positively impacting their community. This helps in creating a brand image and good will for the company (Harrison, Phillips and Freeman 2019). It is a sort of free advertising for companies which help in increasing profits and makes efforts to provide better product to the end users. The investors will more focus on the activities which are carried out by the business such as, does the business incorporate corporate responsibility or not. The investing decisions will be largely affected by this statement on the purpose of corporation (Forbes 2019).
Business plays an important role in boosting the economy of a country as business creates number of jobs, provides goods and services, and foster innovation. The statement on purpose of a corporation has a huge impact on the big American companies. Business is only successful when it is able to satisfy its customers, employee, suppliers and stake holders. If a business in unable to satisfy its customers, the business will automatically fail (Forbes 2019). Same goes with employees, community, suppliers and stakeholders. However, f major Australian listed companies are considered, leaders are facing challenges and pressure in rethinking the role of business in society. The raising need of investors, customers and expectation from employees are changing very fast as social norms are changing. However, for long term values and profit, this statement has a positive impact on the companies as it has overtaken the previous one that was focused on shareholder primacy only (Andrew 2019). Considering all the essential elements that boost the business and help it to grow will have positive results for long terms.
As an implication, Australian companies has to focus on corporate responsibilities too. However, before these companies were only focused on shareholder primacy. Companies needs to make changes by focusing on overall development. Corporate social responsibility is about giving back to the society. Most companies embrace CSR in order that they help the needy and the vulnerable in the society. These could be people who are living below the poverty line. Companies in the USA for example, give a good percentage of their income to charitable and philanthropic organizations. Corporate social responsibility is the prerogative of most companies today (Andrew 2019). It could also means participating in volunteer activities or programs. Some of these programs could be participating in volunteer programs like cleaning the environments, visiting children homes and visiting the sick in the hospital and speaking words of encouragement and hope. This helps to restore their confidence and give them new hope and meaning to life (Forbes 2019).
As a director, the debate on this statement on purpose of corporation will have impacted in positive way. As this new statement has superseded the previous statement that was only focus on serving the shareholder. Focusing on overall development and corporate responsibility, the statement has provided a chance to businesses to do something for their employees and society. The role will be undertaken by focusing the implementation of this new statement in the business for long term profitability. Stakeholders are a vital part of a business and thinking for their benefit will definitely lead to success and profit (Harrison, Phillips and Freeman 2019). Corporate responsibility can support a business by avoiding business risk, gaining access to capital, attract and retain talented employees, create customer loyalty and gain acceptance by local communities. They further argue that the increase in ethical consumerism awareness such as being environmentally friendly and providing fair treatment to workers, imposes pressures on companies to adopt corporate responsibility practices to keep being attractive in the eyes of the consumers.
Corporate responsibility in HRM terms would imply not only complying with the regulations regarding basic working conditions, but also by going beyond those minimums and really caring for the employees and considering them the company’s most important assets, a higher HR outcome can be achieved (Gartenberg and Serafeim 2019). This increased HR outcome may give companies a strong competitive advantage. Corporate responsibility has so many positive effects, many companies fail to understand the benefits of implementing it and therefore have a tendency of losing the balance between all four corporate responsibility areas. It seems to be a conceptual gap between economical and ethical aspects. In order to fill this gap the organizations need to discover the competitive matter, but there are also several strategic benefits of engaging in corporate responsibility. The role will be undertaken by doing the following activity.
Defining a goal: Chasing a goal despite of running blindly behind different goal. Making a checklist in which the tasks are listed according to their priority. Completing one goal and moving forward to other rather than striking two different goal simultaneously. Finding the cause that resonate to the business culture and researching the support required for it and then sticking with it (Andrew 2019).
Involving the customers: Taking the opinions of customers for change in the existing services or products. Taking customers help through the website and social media platform of the company. Making a list of changes and implementing the change which is in favor of company profit and customer satisfaction (Gartenberg and Serafeim 2019). Moreover, providing a feedback option on the company’s website for improvements will be effective. Making customers as a priority and launching new products. Sending update massages to them on occasions like Christmas. Rewarding them and providing offers to them in festival seasons. Using technology to stay connected with them in order to find their needs and desires from the company.
Creating a scorecard: It will help the company in find that the goal is achievable and measurable or not. It will help in tracking the progress. It should be visible in the website of the company so as to make work transparent.
Use of social media: Make customers aware about the company’s new services and products without disturbing them (Taylor 2019). Make the customers to invest in the idea of the company by giving them the experience of new service through social media and internet. Here, multiple digital platforms can be used such as Facebook, Instagram, Twitter, Company’s website, and YouTube. Advertisements can also be used for the same purpose.
Partnership with third party: Making a good relationship with non-profitable organization lead the company towards helping the society (Gartenberg and Serafeim 2019). Making social comments and helping the ones in need will improve the brand recognition and new opportunities will open. It will also offer the company to blend networks and customers. Customer base will be improved with opportunity of making profit.
Seek Publicity: Investing and conducting activities for community and reaching out to media to present green topic will help the company to create a positive image. Brand reputation will be enhanced in media (Andrew 2019).
Expanding company’s definition of CSR: To become a responsible company, it is important to take environment into consideration. Company should operate in such a way that it protects the environment and society. It can be done by standing up for social justice issues, creating products and services that ensures the wellbeing of an individual and investing in causes of local community around the world (Taylor 2019).
Measuring ROI of company’s corporate responsibility: It is important to measure CSR programs especially when initiatives can span many different departments such as human resources, marketing, sustainability and compliance. To do this, the organization should develop a framework for reporting. This will help the company to know whether the company’s performance is affected by the VSR efforts or not. Implementing strategies and activities which support in drive cost savings, new customer acquisition, and brand awareness (Taylor 2019).
Building core competence strategies and recognizing the issues within the organization will improve the working efficiency. Providing benefits to employees and awarding them for their contribution in the company will increase their loyalty. Organization session, coaching and training sessions for employees to increase their productivity will also help the company to grow. Focusing on developing the skills of the employees so that they become profitable for the company in future (Gartenberg and Serafeim 2019). Moreover, training employees will enable themselves to upgrade to a new position in the organization. Besides this, it is also important those stakeholders are aware about the company’s strategies and goals. Informing and taking there feedback on new strategies and products is also important. Making shareholder to take part in decision making process of the company and involving them through the process or plan will result in better outcomes for the company.
It can be concluded that the report has analyzed the statement published by Business Roundtable on August 2019 on the purpose of the corporation. It has situated the statements within the ongoing debate between the shareholder view and the stakeholder view of the corporation. The statement on the purpose of a corporation commits that American companies will lead the way in meeting the customer needs and delivering values to the customers along with ethical relationship with suppliers, long term values to shareholders, support to communities and investment in employees. The impact of this statement on the growing discussion around environmental, social and governance (ESG) factors that are increasingly being used to make investment decisions has also been carried out. The investors will more focus on the activities which are carried out by the business such as, does the business incorporate corporate responsibility or not.
The investing decisions will be largely affected by this statement on the purpose of corporation. In addition, it has also identified that implications of this debate are positive for the boards of major Australian listed companies as business is only successful when it is able to satisfy its customers, employee, suppliers and stakeholders. If a business in unable to satisfy its customers and stakeholders, the business will automatically fail. The report has also identified the impact of this debate as director of such a company. Focusing on overall development and corporate responsibility, the statement has provided a chance to businesses to do something for their employees and society.
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