FIGURE 1.1 MAP OF CORPORATE STAKEHOLDER ACCOUNTABILITY Shareholders Activists Governments Lenders & Creditors Competitors Suppliers Customers Employees Corporation Others, including the Media, who can be affected by or who can affect the achievement of the corporation’s objectives

Shareholders versus Stakeholders Company executives wrestle with the balance between commitments to a company’s obligations to its owners and obligations to an ever broadening group of stakeholders. Stakeholders claim legal and ethical rights to the company's resources. Shareholders claim that the value of their shares are to be maximized. Increasingly, large companies are demonstrating direct responsibility not just to shareholders, but also to employees, communities and the environment. serve/

FIGURE 1.3 DETERMINANTS OF REPUTATION CredibilityReliability TrustworthinessResponsibility Corporate Reputation Fombrun, p. 72

Unbridled greedSubprime lending fiasco, CEO over-compensation PhysicalQuality of air and water, safety MoralDesire for fairness and equity at home and abroad Bad judgmentsOperating mistakes, executive compensation Activist stakeholdersEthical investors, consumers, environmentalists Environmental RealityEnvironmental degeneration, need for sustainability EconomicWeakness, pressure to survive, to falsify CompetitionGlobal pressures Financial malfeasanceNumerous scandals, victims, greed Governance failuresRecognition that good governance & ethics risk assessment matter AccountabilityDesire for transparency, corporate social responsibility (CSR) SynergyPublicity, successful changes Institutional reinforcementNew laws – environment, whistle-blowing, recalls, U.S. Sentencing Guidelines, OECD anti-bribery regime, Sarbanes-Oxley Act (SOX) reforms, professional accounting reform, globalization of standards (IFAC, IFRS) and principles (Caux), Dodd-Frank Wall Street Reform & Consumer Protection Act TABLE 1.1 FACTORS AFFECTING PUBLIC EXPECTATIONS FOR BUSINESS BEHAVIOUR

Stakeholder Analysis Preview: Ranking stakeholders is the first step. Shareholders are stakeholders but not the only stakeholders in the operations of a company. Corporate charters direct the management of a company to look after shareholders and outside laws, regulations and “pressures” require a company to consider the company’s rights and obligations to others besides shareholders. Insight and detailed analysis of the principles of stakeholder management can be found at CORPORATE SOCIAL RESPONSIBILITY: Across the globe, business leaders are struggling to balance conflicting demands from communities, government, advocacy groups, and others about the role they play in economic advancement, environmental improvement, and social development. No longer is it acceptable simply to make good products that satisfy customers while complying with laws and regulations. Businesses are now called upon to consider – and, indeed, intentionally to manage – the wider social and environmental consequences of their actions, beyond the requirements of the legal and regulatory settings in which they operate.

Ethics versus Morals Ethics and morals relate to “right” and “wrong” conduct. Many times they are improperly interchanged. They are different: Ethics refers to rules provided by an external source, e.g., codes of conduct in workplaces or or principles in religions. Morals refer to an individual’s own principles regarding right and wrong.

A hypernorm is a value that is almost universally respected by stakeholder groups. Therefore, if a company’s activities respect a hypernorm, the company is likely to be respected by stakeholder groups and will encourage stakeholder support for the company activities. Hypernorms involve the demonstration of the following basic values: Honesty Compassion Predictability Fairness Integrity Responsibility Source: R. Berenbeim, Director, Working Group on Global Ethics Principles, The Conference Board, Inc., 1999 TABLE 1.2 HYPERNORMS (BASIC VALUES) UNDERLYING STAKEHOLDER INTERESTS

Risk is the chance of something happening that will have an impact on objectives. Risk Management includes the culture, processes, and structures that are directed towards the effective management of potential opportunities and adverse effects. Risk Management Process includes the systematic application of management policies, procedures, and practices to the tasks of establishing the context, identifying, analyzing, assessing, managing, monitoring, and communicating risk. Source: Managing Risk in the New Economy, AICPA & CICA, 2001, p. 4 TABLE 1.4 IMPORTANT RISK MANAGEMENT TERMS

Health and SafetyEnvironmental Performance/Impact SustainabilityCorporate Social Responsibility (CSR) PhilanthropyWorkplace Responsibility TABLE 1.6 STAKEHOLDER REPORT TOPICS