THE ROLE OF CORPORATE SOCIAL RESPONSIBILITY, CITIZENSHIP AND SUSTAINABILITY IN MODERN CORPORATE GOVERNANCE The concept of corporate governance The concept of corporate social responsibility Corporate citizenship Sustainability
Arguments for Corporate Social Responsibility a) It is in the company s long term interest b) It will lead to retention of good quality staff c) It will lead to better risk management d) It will facilitate a brand differentiation e e) It will avoid government and regulatory intervention by demonstrating the capacity of the company to observe the norms of good practice f) It will help to divert attention from negative aspects of the f) It will help to divert attention from negative aspects of the company s business as a matter of public relations
The Case Against Corporate Social Responsibility a) Traditional i focus on the law and the entity and its shareholders. b) Economic arguments about shareholder wealth maximisation. c) Difficult to monitor management performance c) Difficult to monitor management performance because of confused objectives.
Factors Influencing the Debate The UK Changes Companies Act 2006 Section 172(1). This provides: 172 Duty to promote the success of the company (1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as whole, and in doing so have regard (amongst other matters) to-
a) The likely consequences of any decision in the long term, b) The interests of the company s employees, c) The need to foster the company s business relationships with suppliers, customers and others, d) The impact of the company s operations on the community and the environment, e) The desirability of the company maintaining a reputation for high standards of business conduct, and f) The need to act fairly as between members of the company
Australia - The James Hardie Debate 1. Report of the NSW Special Commission Inquiry 2004 2. Report of the Corporations and Markets Advisory Committee 3. Report of the Parliamentary Joint Committee 3. Report of the Parliamentary Joint Committee on Corporations and Financial Services
The emerging g Australian and New Zealand positions Australian position will retain self-regulation in light of developing international practice Similar arguments about sustainability Focus in New Zealand more on environment and sustainability, less on corporate social responsibility
The Securities Commission s Principles of Corporate Governance (1) and (9) International Verification
THIN ON TOP A COMPARISON OF THE AUSTRALIAN AND NEW ZEALAND APPROACHES TO CORPORATE GOVERNANCE The Concept of Corporate Governance The Legal and Self Regulatory Background Contrast between the New Zealand Companies Act 1993 and the Australian Corporations Act 2001.
ASX Corporate Governance Principles and Recommendations 2007 New Zealand Securities Commission s Principles Key Comparisons The role of the board Section 128(1) Companies Act 1993 Section 198A(1) Australian Corporations Act 2001
ASX Corporate Governance Council s Corporate Governance Principles and Recommendations Delegation g and Reliance Sections 130 and 138 Companies Act 1993 Sections 198D(1), 190 and 189 Australian Corporations Act 2001
Duties Below Board Level The need for clarification of board composition and performance The role of independent directors. The definition of independence. Advantages of independent directors Disadvantages
Do Independent Directors Add Value? Audit Committees Nomination Committees Reporting and Disclosure Remuneration Remuneration or Compensation Committees
Conclusion New Zealand and self-regulation much more permissive and relies on private enforcement which does not take place The Australian legislation and self regulation is more detailed and more resources are put into enforcement New Zealand should consider adopting more of the Australian approach