Monitoring financial and social conduct Wes, Frank, Mikael, Rod

The case Co-operative bank (UK) will not invest in: Questions… Fossil fuels or unsustainable resources Unnatural chemicals Arms trade Thinks other banks have a responsibility to follow suit Believes that social/environmental reporting is as important as financial reporting Questions… Is the Co-op bank acting ethically? Are the other banks unethical? Should financial accounts include social measures? Who should audit social/environmental behaviour?

Hierarchy of obligations Fundamental Human rights Indisputable fundamentals of ethics Legal aspects Indisputable fundamentals of (the host) society Manage money well Indisputable fundamentals of business Desirable Fairness / taking into consideration the interests of (outside) stakeholders (Customers / employees / suppliers / community / …)

Is the Co-op bank ethical or not Co-op is acting ethically… Respects fundamental moral obligations and seeks to fulfil desirable moral standards it is reflecting the interests of customers and depositors Has clear public position and acts accordingly Is not a monopoly so has no universal obligation Found market niche that respective customers / investors appreciate (differing ethical awareness) …but other banks are not acting unethically Respects fundamental moral obligations Other banks are looking after the needs of shareholders and depositors No difference between behaviour and public position

Should accounts include social measures? One argument – they already do Goods cash Assets liabilities Plus costs of scarce resources Labour Tax / land Water / electricity Pension and redundancy Training & Health Record keeping Balance sheet Resource costs added through society / Government actions Modern P&L

Triple bottom line is a departure Plus of scarce resources CO2 / Air Waste / recycling Social impact …etc Auditing P&L now P&L future Accountants P&L now Accountants Triple bottom line reporting Qualitative social Consultants Pressure groups NGOs Qualitative environment

Pros / Cons Triple line reporting  Co-op worse off Pricing externalities  Co-op better off Pure financial figures remain most important measures Desirable moral standards not measurably / objectively / comparably taken into account Supports sticking to fundamental obligations Stakeholder desirable values discretionary Financial figures reflect how effects of firm’s behavior is valued by society  Aligns individual / company incentives with society’s desirable values