Presentation - Short Version

CO5121 LAW OF BUSINESS ORGANISATIONS PRESENTATION: CORPORATE SOCIAL Xinyu Chen Shannon Frick

GLOBAL FINANCIAL CRISIS (GFC) 

Caused by global imbalances and shadow banking: 

Global Imbalances : countries with high savings rates (Middle East, Asia) pouring money into countries with low savings rates (US).  caused low interest rates and high availability of loans  created a non-sustainable credit boom and housing boom

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Shadow Banking: financial institutions selling loans as middlemen to customers on commission  Shadow banks investigated lenders’ financial history poorly  Created high systemic risk and interdependence – when one institution failed to receive loan repayments, they all failed.

GFC was caused by financial institutions ignoring

CORPORATE SOCIAL RESPONSIBILITY (CSR) 

The Corporations and Markets Advisory Committee (CAMAC) defines a company as being socially responsible if it: “… operates in an open and accountable manner, uses its resources for productive ends, complies with relevant regulatory requirements and acknowledges and takes responsibility for the consequences of its actions.” (Wilson, 2008) 

CSR IN CORPORATE LAW 

Currently no international laws that enforce CSR

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Attempts to draft treaties involving CSR have failed.

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CSR is seen as being a ‘soft law’:   

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It is seen as a set of guidelines followed on a voluntarybasis. This perception of CSR as being “voluntary” has made progress slow and ineffective. Lack of progress is worsening environmental problems such as global warming

Is this a lack of duty of care and diligence on a widespread scale?

CSR: MAKING IT HAPPEN 

Corporate Social Responsibility involves companies engaging appropriatestakeholders and taking them into account when making business decisions.

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Instigating CSR, however, is a huge task: 

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action must be taken by all people and institutions at local, national and international levels

There are two key words that are commonly in discussions regarding corporate social responsibility: 

Sustainability

SUSTAINABILITY AND RESPONSIBILITY 

Sustainable development is at the heart of corporate social responsibility.

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Sustainabilityis the focus on both the internal and external environment with regards to resources that are both tangible and intangible. Under CSR: 

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Tangible assets should be cared for explicitly, and recycled or replaced with more viable alternatives whenever necessary. Intangible assets should be researched and maintained.

The focus on responsibility involves the balance between People, Planet and Profit:   

People, referring to social well-being of the community; Planet, referring ecological quality; and Profit, referring to economic prosperity.

CSR MODEL: PEOPLE, PLANET, PROFIT

CSR MEANS GOING BEYOND PROFIT 

The real challenge for corporations in implementing CSR is going beyond the predominant economic view of profitand take a wider context.

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Irrefutable scientific evidence is pointing to a dramatic decline in natural resources around the world, which has lead to the demand in CSR.

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Society is pressuring businesses to incorporate environmental and social values in their business operations.

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Sustainability aims to halt this decline by promoting environmental management and eco-efficiency in the workplace.

CSR IS HAPPENING RIGHT NOW 

The good news is that most large listed companies are accepting the concept of CSR Such companies are including references to CSR in their media releases and annual reports. Many require consumer approval for successful operations

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Under CSR, mainstream financial institutions should acknowledge that community members are also stakeholders of their companies, regardless of whether or not they own shares in the company.

HOW TO ACHIEVE CSR 

Several remedies have been suggested by our group: 

Change the laws to make companies liable for breaches of CSR eg. CA s.180(2): the duty of care and diligence to include the best interests of the corporation AND community approval

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Government incentives for CSR adoptees eg. Tax breaks, carbon credit schemes…

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Involve the public more in whistle-blowingby providing more public access to information about corporate social and legal responsibility.

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Governments to intervene only when market failure occurs  

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Enforcing CSR could be very expensive, but

CSR AND ORGANISATIONAL THEORY (OT) 

OT is the foundation of modern management and CSR

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OT involves understanding the social phenomenonthat occurs within each corporation/organisation.

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Under OT, Corporations are just organisations of people

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Michael Jensen on Organisational Theory :

To make new rules of corporate governance, understand how an organisation and its people work.  Organisational theory focuses on both the internal structure of the organisation, and the relationships between the organisation and its external environment.  Organisational theory focuses on the motivation and goals of members  The external world affects the organisation’s survival 

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By ignoring CSR, a corporation is ignoring the very foundation of its own existence.

REFERENCES 

Horn, L. (2008) Multinational Enterprises and Sustainable Development. Australian Journal of Corporate Law, Vol 21.

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Smith, B. (2008) No the Baby and the Bathwater: Regulatory Reform for Equality Laws to Address Work-Family Conflict. The Sydney Law Review, 689.

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Wilson, T. (2008) Values Driven Innovation or Inadequate SelfRegulation? The Effective Regulation of Australian Banks as Service Providers to Low Income Consumers. Australian Journal of Corporate Law, Vol 21.

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Jonker J., de Witte M. & de Witte M. (2006) Management Models for Corporate Social Responsibility. Springer.

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The Business Insider: Two ersions of What Caused Our Crisis (2009). Retrieved on July 21st from the Business Insider website at: http://www.businessinsider.com/two-versions-of-what-caused-our-crisis-20 .

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Image taken from Google Image search on July 23rd from the

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Court Dismissed!