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Corporate Governance and Corporate Social Responsibility Ownership, Management and Accountability - assessing the challenge for public relations a research paper from PIELLE Consulting Grouppresented at the 7th Annual International Public Relations Research ConferenceMIAMI USAMarch 11 14 2004
Research Supervisor:Peter L. Walker FIPRSenior PartnerPIELLE Consulting GroupMuseum HouseLondon WC1A 1PL+44 (0)20 7323 firstname.lastname@example.org
PIELLE Researchers:Christina Rabini(Warwick University)Lucas Michels(University of Kansas)Aga Naglak(University of Economics Katowice)
Corporate Governance and Corporate Social Responsibility Ownership, Management and Accountabilityassessing the challenge for public relations'Background
Our research study was conducted in the United Kingdom among a self-defined group from the FTSE 350 and international and multi-national firms based in the UK taking or demonstrating a leadership role or position in Corporate Governance and Corporate Social Responsibility.'Clear and consistent selection criteria were used to define these organizations as leaders' including:
membership of Business in the Community and/or Business in the Environment;
personal involvement of board members or the organisation in the Prince of Wales Trust or Business Leaders Forum;
inclusion in the FTSE4Good index; and/or publication of some form of non-financial or social report;
significant public platform or media presence by senior management as exemplars.
Over a six-month period from July 2003 to January 2004 our research was taken forward via an initial postal survey questionnaire addressed to separately Chairman, Chief Executives, Company Secretaries/Corporate Counsel and Directors of Corporate Communication/ Corporate Affairs.This was then supplemented by some telephone and face-to-face interviews.Responses from this over polled and researched group was 28 per cent, responses were individual rather than delegated in all but three cases. One chairman of a major banking and financial services group wrote personally to say his group could not participate board pressures were such that he would not be able to deal with the matter personally and it was too important to pass to anyone else in the organisation'.Our objective was to research, and if possible identify, common approaches to the ownership, management and forms of accountability for both Corporate Governance and Corporate (Social) Responsibility among this bench mark lead group' of companies. At the same time we set out to see whether it was possible to identify:
the extent to which international' operational issues and accountability play a role in the process.
what, if any differences existed between the views/responses of the three distinct groups of executives that participated viz: Chairman/CEO; Company Secretary/Corporate Counsel; Public Relations/Corporate Communications Director/Advisor
We did not set out as part of our research to assess, identify or consider the challenges for public relations practice and practitioners'. Even our attempt to identify differences of view from the responses of the three groups demonstrated that those that were registered were anomalies and statistically insignificant.It was inevitable that the overall research results would identify issues for and the role of public relations in the management and accountability processes. However the continuing attacks on the commitment of business to Corporate Governance and the dismissal of Corporate (Social) Responsibility as a public relations exercise' by the World Council of Churches most recently forced us to revisit our research and assess the specific challenge for public relations.
Headline ResultsWhen the World Council of Churches and others dismiss the CSR Corporate (Social) Responsibility programmes of global corporations as public relations exercises' it is not just public relations professionals that have every reason to be concerned. Their attack goes to the heart of corporate thinking where 69 per cent of leading UK based corporations see CSR as Corporate Governance in Action' and 85 per cent of them have clear and demanding systems in place for measuring ethical and social performance throughout the business.A review of the headline results from our research provides some reasons for their scepticism and an assessment of some of the challenges for public relations.
Every company has corporate governance as part of its operating strategy and conducts some form of governance audit across all its businesses.
There is no clear or consistent ownership' of corporate governance or CSR at board level
EU and national legislation rank equal (28 per cent) with local/national stock exchange listing requirements as the key drivers for corporate governance.Pressure groups (6 per cent) rank below peer company pressure, US corporate reform and international stock exchange requirements for these UK based businesses.
Specialist committees of the board are responsible for corporate governance in only 17 per cent of businesses, In a third of companies the board as a whole takes responsibility while for 45 per cent of businesses either the chairman (21 per cent) or the chief executive (24 per cent) takes the responsibility.
Accountablity to the board for CSR is vested in specialist committees of the board for 23 per cent of businesses and with Corporate Communications or Public Affairs in 24 per cent of business
Ninety three per cent of all businesses had some form of rigorous system in place to evaluate the effectiveness of CSR activities within their organisations. Eighty five per cent of businesses had system in place for measuring ethical and social performance.
One third of all businesses have no formal system in place to take Governance and CSR audit improvements forward
Every business has an active stakeholder dialogue process in place
The main benefits of an active stakeholder dialogue are in identifying key activities for public affairs or reputation management (30 per cent) and in evaluating and reporting on social performance over time (28 per cent).
It is not difficult to highlight the contradictions evident from these headline results or point to a lack of consistency and cohesion across business in the way that Corporate Governance and Corporate (Social) Responsibility is owned, managed, and accounted. They provide easy targets for the moderately sceptical let alone those whose targets are the free enterprise system itself.Even the introduction by individual countries of some form of statutory Non-Financial-Reporting system seems unlikely to provide anything of the certainty that accounting standards bring to financial reporting.
Behind the headlines
Taking Corporate Governance SeriouslyCorporate Governance is now part of every company's operating business strategy and every respondent business conducted a governance audit of some kind across all its business units Almost two thirds of our group uses an internal audit system to meet their needs (chart 5) inviting the question whether the 39 per cent using an external audit process are anticipating legislation.Over 90 per cent of those businesses surveyed review their corporate governance standards and best practice criteria annually (chart 11).For 43 per cent it is an annual rolling activity; for 50 percent it is part of the business plan review.Only 10 per cent conduct any review on an ad hoc or as needed' basis.But according to this same group, while there is clear ownership of the topic at board level but no consistency (chart 7).
Where does responsibility for corporate governance reside within your organisation?The Board 35%Chief Executive 24%The Chairman 21%Specialist Committee of the Board 17%Company Secretary/Corporate Council 3%
behind the headlines continuedTaking Corporate Governance SeriouslyWhatever the reasons the rate of the pace of change in the importance of corporate governance in business is clear.What importance has corporate governance been in your organisation over the following periods and what will it be in the next five years?1998 Now 2008Very high priority 35 % 70 % 80 %High priority 60 % 15 % 20 %Average priority 5 % 15 %from CORPORATE GOVERNANCE TO CSR - Corporate (Social) ResponsibilityFor the purpose of our research we adopted an inclusive definition for CSR (Corporate Social Responsibility and Reporting):"CSR- Corporate Social Responsibility is about how companies manage the business processes to produce an overall positive impact on society."Corporate social responsibility and social reporting have been defined as corporate governance in action' do you agree or disagree with this statement?0 10 20 30 40 50 60 70 80Disagree Agree.69.0031.00
Is there a clear reporting procedure to the board in placefor corporate social responsibility?92.5 per cent organisations responding answered - YES
Taking Corporate (Social) Responsibility Seriously
Walking the talk, or recognising that we are judged by what we do rather than just by what we say' is no longer the stuff or corporate brochures and mission statement or sound bites from management conferences. Business has invested heavily in sophisticated and systematic measurement and evaluation systems and structures and established clear internal reporting systems for ethical and non-financial reporting to the board.
What systems do you have in place for measuring ethical and social performance?None 14.29Triple bottom line 35.71reporting 50OtherThe organisations that answered other, specified it as:
Annual CSR report
Disclosure of corporate donation and activities
Social reporting, both centrally and at end market level
Dedicated board committee, targets and reporting
Moving towards triple bottom line reporting
Balanced business scorecard
What internal systems are in place for ethical/social/non-financial reporting to the board?Annual strategic review 42%Part of a routine monthly or quarterly reporting process 24%Other 24%Stand alone 5%None 5%The organisations that answered other, specified it as:
Regional corporate social committees and board CSR committees
Dedicated board committee, targets and reporting
Annual via social reporting process
Taking Corporate (Social) Responsibility SeriouslyAt the same time measurement and reporting standards for making internal judgements on activity, the being judged by what we do' dimension is just as rigorous.Where does accountability for CSR activities rest within your organisation?Specialist committee of the board 23%Corporate communications/public affairs 24%The board 19%Chief Executive 14%The chairman 10%Operating management 10%How does your organisation evaluate the effectiveness of CSR programmes?Through an external social audit 35%By appraisal 18%The audit procedures are evaluated against a competency framework 14%Against pre-determined outcomes/measures 11%By continuously tracking a project 11%There is no formal evaluation 7%Other 4%Of those organisations that answered other, methodologies identified included:
Using an AA1000 process
an external independent audit
For the majority of businesses formal systems exist to drive improvements that result from the social audit' through the organisation. The only surprise is that there is such a significant minority of businesses with no structures or systems in place to respond to audit identified issues.Are there formal systems in place in order to drive improvements through the organisation following the results of the social audit?No 69.25Yes 30.75Taking Corporate (Social) Responsibility Seriously
There is no question of information being for internal consumption only stakeholder dialogue is a pro-active process for every company surveyed
Is your stakeholder dialogue proactive?100 % of organisations answered YES to this question. and the methodologies used are, in the main, impressive.How is stakeholder dialogue in your company encouraged?Formal planned meetings 20%Website 18%The annual report 17%Regular briefing 15%Informal planned meetings 15%A tailored/customised report 12%Other 3%The organisations that answered other cited
Social reporting processes (unspecified)
Several formal consultative bodies
We have assumed that the 18 per cent of businesses that encouraged dialogue through their website did not use it as the only channel for communication. If that were the case they could be accused of having either a supreme confidence in technology or the 21st century version of the cavalier approach that was part of a different era in industrial and employee and community relations.None of this investment of time, resources and professional expertise in stakeholder dialoguing is made without a clear identification of the benefits for the organisation.What do you see as the main benefits of stakeholder dialogue for your organisation?Identify key activities for public affairs, areas of reputation management 30%Other 28%Evaluate and report on social performance over time 28%Influence Benchmarking 14%Stakeholder dialogue is kept to a minimum with all groups except shareholders 0%Stakeholder dialogue is always to a minimum 0%Those that answered other, listed:
Enhancement of long-term shareholder value
Ability to learn and respond to needs of stakeholders
Advancing the corporate reputation
Identify changes to policy and practice in order to meet stakeholder expectations
Over half the main benefits of stakeholder dialogue feed straight into public relations strategy and planning and nearly a quarter of all businesses make the corporate communication or public affairs function to be accountable to the board for Corporate (Social) Responsibility CSR. It could be suggested that the World Council for Churches was both reflecting reality and the challenge of perception in correlating CSR with Public Relations.Assessing the challenge for public relations...Our research was directed at establishing the patterns of ownership, management and accountability for Corporate Governance and Corporate (Social) Responsibility and reporting in leading international businesses based in the UK. Any assessment of the resulting challenges for public relations is based on our extrapolation and interpretation of the research results we have highlighted in this paper.
WCC trivialised the CSR activities of multi-nationals by describing them as public relations exercises.Is public relations robust enough to demonstrate that only those CSR activities that are public relations exercises' are likely to provide real benefit to civil society.?
Despite all rigorous, sophisticated and systematic auditing and internal reporting of CSR programme effectiveness almost a third of companies reporting had no formal system in place to drive improvements from the results of a social audit through the organisation.Is public relations able to make the contribution to operational management to ensure that the feedback loop and the resulting activity is effective?
Only a quarter of all companies put the responsibility for accountability to the board for CSR activity in the hands of public relations (public affairs/corporate communication).Is this a reflection of the pace of development of public relations into a management role beyond those of media, relationships and events?
The systems used for measuring ethical and social performance and evaluating the effectiveness of CSR programmes included; the balanced business scorecard, triple bottom line reporting, board committee set targets, evaluation against competency frameworks.Is the public relations professional as well equipped as his or her colleagues in management to use and interpret these audit and evaluation tools or introduce them into their organisations?
An annual report is identified as one of the systems for measuring ethical and social performance and for communication with stakeholders by a third of businesses. A look back over three years at the Social Reports' published by a random selection of our surveyed businesses provides a detailed but different project report approach each year unlike the continuous updated performance report provided in the standard annual financial and operational report.Is public relations able to introduce and manage consistent and coherent reporting on CSR and/or non-financial issues and indicators to the same standard as their counterparts in accounting?
This is not a finite list our research was intended to contribute to the debate against a background of national governments in Europe and elsewhere wrestling with formulating future legislative and regulatory frameworks for non financial accountability.
PIELLE Consulting Group 2004 all rights reserved