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Mervyn King´s presentation on World PR Forum.
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Stakeholder Relationships in the New Economy
WORLD PUBLIC RELATIONS FORUM14 June 2010
Prof Mervyn E King SC
Corporate Legal Advisers
Caretaker
Darwinian or biblicalSuperior beingTaken care?Transient in universal contextNot owners of planet earth
Corporate Legal Advisers
Inheritance
The trouble with our timesYour children and their childrenIndividual the driverOf all entitiesEcological overshootMore in urban areasIT and shareholder revolutions
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London
Corporate Legal Advisers
Not in a Vacuum18th and 19th centuriesMid‐20th centuryLast decades of 20th centuryIntegral to society – linkGreatest pools of human and monetary capitalThe 100 largest economiesChanged its identity
Corporate Legal Advisers
Parallel Crises
Financial crisis, spilling over into the economyClimate change crisisEcosystem/natural resources crisis – two thirds of our most important ecosystems –like tropical forests, farm land, fresh water and marine resources –used beyond nature’s capacity to regenerate them
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Yesterday’s Economic Model
Yesterday’s economic model was based on the false assumptions :
that there were limitless resources in nature and that nature had an infinite capacity to absorb waste
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Planet Inn
100 years ago1 billion people1945 – just under 2 billion2010 – 6.5 billion2050 – 9.5 billionNo vacancies
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100 Years
Take, Make and WasteNatural capital at no costAs a result, natural resources depleted, water polluted and greenhouse gasses (GHG) into open sewer in the skyBusiness cannot be conducted as usual
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InseparableGood governanceStrategySustainabilityGovernance, strategy and sustainability have become inseparableCoca Cola
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Measuring Company’s Economic Value
market value $ 105,586 mil
20 % ?
67%Brand value $ 70,453 mil (Interbrand)
13%Book value $ 13,560 mil
source: SAM
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Integrated Reporting
Corporate Legal Advisers
The New Economy
Business as unusualMaking more with lessProcter & GambleCoca ColaGoogleGovernance, strategy and sustainability are inseparable!
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Five Essential Capital Aspects
Financial capitalHuman capitalNatural capitalSocial capitalManufactured/technology capitalCritical interdependencies
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The Governance Regime
Mid 19th centuryLimited liability company – incapacitatedWealthy families – shareholders and directorsPrimacy of shareholdersGrowth of companies – “agency problem”Stakeholder – inclusive approach
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The Inclusive Approach
PurposeValue drivers – cultureStakeholder groupingsInterests and expectationsTake account ofGuided by best interests of company
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Principles of the Inclusive Approach
Responsibly and responsivelyAccountability – account to, but ofFairness – the right thing to doTransparency – withering effectIntellectual honesty
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Corporate Reputation – Brand
Intangible assetsStakeholders’ aggregate perceptionsEqual overall assessment of companyResults in formation of the reputationMeasurement :performance compared withinterests and expectations
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Legitimate Interests and Expectations
A reasonable and informed bystanderValid and justifiableLegal basisMoral or ethical basis
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Who are Stakeholders?
Group that can affect operationsGroup affected by operationsBy contractBy tort (delict)By statuteBy codes
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Board’s Duty
Identify the stakeholder groupingsTheir interests and expectationsRelevant to company’s long‐term goalsDelegate to management to communicateBoard agenda item: The Relationships
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Governance Framework
A
Federations/codesindustry norms
M E
C
S
C
ExternalStakeholders
Internal StakeholdersConsultants &Advisors
Government
EmployeesTradeUnions
Shareholders
CorporateGovernanceGuidelinesCustomers
AuditorsSuppliers
LocalCommunities
TradeAssociations
Environ‐mentalists
BusinessPartners
Media
StockExchange
Lenders ofMoney
Directors
Management
Board
AM E
C
S
C
External Stakeholders
Internal StakeholdersConsultants &Advisors
Government
EmployeesTradeUnions
Shareholders
CorporateGovernanceGuidelines
Customers
AuditorsSuppliers
LocalCommunities
TradeAssociations
Environ‐mentalists
BusinessPartners
Media
StockExchange
Lenders ofMoney
Directors
Management
Board
InternationalNationalLocal
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Licensors to Operate
Company
Individual attitudes: Customers, Suppliers, Consumers, Employees,
Investors and Community
Pressure GroupsMedia
Industry Reputation
Public Opinion/ Confidence
Political Opinion Industry and Market Standards
Law/Regulation
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The Moat
Stakeholders
The Company
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The Gap
Company performanceCompany reportingStakeholder interests and expectationsStakeholder perceptions
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Actions
What company doesHow it makes its moneyWhat and how it communicatesBridges actual and perceived gaps
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The CRO
Corporate reputation officerCommunicates with stakeholdersInforms managementEmployee or independentStrategic communication
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Reporting
Electronic communicationWebsite, blogging, etcStakeholder associationsAdvertisingPress releases
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Caveats
Information in public domainNot in public domainPrice sensitive informationDo not make stakeholder an insider
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Content
Substance over formTransparentEffective communicationUnderstandable languagePositives and the negatives
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Annual Report
The company’s stakeholder policyIdentify stakeholder groupingsInformation highlightsStakeholders’ views, events, issues or trends
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Alternative Dispute Resolution (ADR)
Disputes with stakeholdersBuilding relationshipsDispute can destroy relationshipAlternative dispute resolution clause
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Integrated Report
Holistic and integrated representationOf the company’s performanceFinancially, socially and environmentallyDisclosure of stakeholder policyStakeholder groupings and relationship
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What Can Business Do?Change mindset with changed identityBusiness as unusualProduce more with lessIntegrated reports, including stakeholder relationshipsInformed assessment of sustainability of companyGood, hardnosed business, inclusive approachFulfilling our duty to those who come after usIncapacitated good corporate citizenRight thing – essential thing
Corporate Legal Advisers
How Report Performance?Financial information alone?Not sufficient for informed assessmentsHow has the company positively and negatively impacted on a community economically, socially and environmentally through its operations during the year under review and related to its stakeholders?How is the company going to improve the positive aspects and eradicate or ameliorate the negative aspects in the financial year ahead and improve its stakeholder relationships?Clear and understandable languageCorporate reporting not what it used to be
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CSR
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A Journey
Step by stepAn ascending pathThere is no endPersonal achievementThe Age of Stupid 2010
Thank You
Prof Mervyn E King SC