Question

What should corporations do to reform their governance towards creating a mutual benefit for their firms and stakeholders? Provide some ideas.

What are some of the social and environmental issues that Benefit Corporations could address in a positive way?

Provide an example (but not a company mentioned in-depth in the articles) of a Benefit Corporation. Explain how the organization operates and makes it unique from a “traditional” company.

Answer 1

What Are the Principles of Corporate Governance?

One of the main principles of corporate governance is to equally recognize all shareholders regardless of how big or small their ownership is. All shareholders should have a voice at the annual general meeting. Board directors should be on the same page as shareholders with regard to the company’s mission, vision, values and culture.

All boards are required to have a code of conduct and to ensure that there are no conflicts of interest. Boards should regularly practice good ethical behavior and display a high level of integrity at all times. Board directors should be responsible to model the company’s values as part of the corporate culture. Practicing good governance keeps companies honest, compliant and out of trouble.

Good governance requires boards to consider the input, concerns and interests of all stakeholders. A good and honest relationship with stakeholders will improve the company’s reputation, better its relationship with the community, and enable it to be accurate and responsible in handling requests by the media.

There can’t be enough said when it comes to the transparency of financial records and earnings reports. All financial documents should be clearly and accurately stated and should be accessible and available for review.

Why Corporate Governance is Important to Shareholders

Boards should be prepared to answer the many questions that shareholders might present. Shareholders expect the chairman of the board to be a different individual than the CEO. Shareholders may also inquire how many other boards their board directors are serving on, so they know that each board director has adequate time to devote to their duties. At this time, shareholders can reasonably expect that most, if not all, board directors will be independent.

Shareholders may ask questions about how much ownership each board director has in the company and whether there are any conflicts of interest or interpersonal relationships between the board and management. It’s common for shareholders to want information about how boards structure management’s pay and how they disclose it, as well as how much the board pays itself. Shareholders will also want assurance that the board didn’t approve overly generous stock options that could dilute their investment later.

They may also ask questions about the independence of the audit committee and whether any audits have been challenged.

Modern Governance Addresses Shareholder Concerns About Responsible Governance

Modern governance accounts for a governance deficit. A governance deficit means that boards lack the information they need to ask the right questions at the right time. Today’s leaders need the ability to engage in the industry at the company level, across the industry, and to gain insight into whatever the future brings.

Security is a major issue and will continue to be for the foreseeable future. Corporate board directors and senior leaders need digital tools that allow them to communicate, collaborate and share sensitive data without fear of any of it being compromised.

Diligent Corporation developed a host of digital governance tools, including Diligent Boards, Governance Cloud and tools for Nominations and Governance, to provide today’s boards with the right tools to support good governance and to maximize shareholder value.

Business benefits of corporate social responsibility

Guide

Corporate social responsibility (CSR) has many advantages that can apply to any business, regardless of its size or sector.

Benefits of corporate social investment for businesses

The potential benefits of CSR to companies include:

• better brand recognition
• positive business reputation
• increased sales and customer loyalty
• operational costs savings
• better financial performance
• greater ability to attract talent and retain staff
• organisational growth
• easier access to capital

Responsible business reputation

Corporate social investment can help you to build a reputation as a responsible business, which can, in turn, lead to competitive advantage.

Companies often favour suppliers who have responsible policies, since this can reflect on how their customers see them. Some customers don't just prefer to deal with responsible companies - they insist on it.

Costs savings

By reducing resource use, waste and emissions, you can help the environment and save money too. With a few simple steps, you may be able to lower your utility bills and achieve savings for your business. See how to reduce your business waste to save money.

Finding and keeping talented staff

Being a responsible, sustainable business may make it easier to recruit new employees or retain existing ones. Employees may be motivated to stay longer, thus reducing the costs and disruption of recruitment and retraining.

Other benefits of CSR to companies

By acting in a sustainable, responsible way, you may also find it easier to:

• access finance - investors are more likely to back a reputable business
• attract positive media attention - eg when taking part in community activities
• reduce regulatory burden - good relationships with local authorities can often make doing business easier
• identify new business opportunities - eg for the development of new products or services

Sustainability and corporate social responsibility examples

Some of the most common examples of CSR include:

• Reducing carbon footprints.
• Improving labor policies.
• Participating in fairtrade.
• Charitable giving.
• Volunteering in the community.
• Corporate policies that benefit the environment.
• Socially and environmentally conscious investments.

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