Week 7 Application Assignment - Peggy O'Connor

This week’s reading, specifically Just Good Business: A Special Report on Corporate Social Responsibility (Franklin, 2008), made me curious about whether or not any of the bailed-out banks had responded to government “generosity” with a renewed commitment to Corporate Social Responsibility (CSR).

Franklin’s article notes that while CSR is now ingrained in the way most companies do business, not many of the corporations are doing a very good job in the CSR sector. Franklin writes about some of the reasons why there has been an increase in interest and activity in CSR, not the least of which is that “many companies are having to work harder to protect their reputation – and, by extension, the environment in which they do business” (Franklin, 2008).

Admittedly, my general reaction to the confusing snarl of the last five years’ worth of big bank failures and the succeeding government bailouts, followed by bank repayments (or not) is frustration and a tendency to change the subject. Then I thought: who needs to work harder to repair (and thus, protect) their reputation than banks?

So I sought out some recent popular press for more information and to my surprise, found the website CSRwire, the Corporate Social Responsibility newswire. After searching the site for news of how Goldman Sachs might be protecting its reputation these days, I found an article about Goldman Sachs being chosen to receive the Chairman’s Award given by the Committee Encouraging Corporate Philanthropy (CECP), which calls itself “only international forum of business leaders exclusively focused on raising the level and quality of corporate philanthropy” (http://www.csrwire.com). CECP was also noted in Franklin’s article as one of the organizations increasing the scrutiny of corporate philanthropy by using survey data to measure what has amounted to be a “big gap between aspirations and their actions” (Franklin, 2008).

CECP’s Chairman’s Award is presented annually to a corporation with revenues greater than or equal to US $20 billion. Goldman Sachs was honored for its 10,000 Women initiative, a “five-year, $100 million program that is providing 10,000 underserved women in developing and emerging markets with a business and management education. The program is designed to foster economic growth around the world and was based on Goldman Sachs research highlighting the role that educating and empowering women plays in lifting GDP” (http://www.csrwire.com).

Good, I thought after reading about Goldman Sachs’ impressive initiative. Perhaps Goldman Sachs has gotten the message that after taking so much from the world for so long, it was time to give back. Still, Goldman Sachs (and likely most large corporations) will need to keep focused on developing and implementing meaningful corporate social responsibility programming. That’s because there is always the next news story maligning corporate integrity.

And there was: the second story in my search of Goldman Sachs on the CSRwire? It detailed how Goldman Sachs collected nearly $3 billion from bailed-out U.S. insurer American International Group (AIG) “as a payout on bets Goldman Sachs placed on its own account – with the bulk coming directly from taxpayers after AIG's rescue” ("Goldman Sachs received cash," 2011, p. 1) according to a Financial Crisis Inquiry Commission (FCIC) report.

It looks like – as Franklin’s article suggests – corporations like Goldman Sachs have lots more CSR work to do.

References

Franklin, D. (2008, January 19). Just good business: A special report on corporate social responsibility. The Economist, 1-14

Goldman Sachs received AIG bailout cash. (2011). Retrieved from http://guardian.co.uk/business/2011/jan/27/goldman-sachs-received-aig-bailout-cash

Retrieved from http://www.csrwire.com/press_releases/32326-Goldman-Sachs-and-Bristol-Myers-Squibb-Win-CECP-s-Corporate-Excellence-Awards-in-Corporate-Philanthropy-DonorsChoose-org-in-Partnership-with-Crate-and-Barrel-Receives-the-Nonprofit-Award-for-Corporate-Partnership

Week 7 - Application Assignment - Felipe Camacho

Investor relations departments have, at their root, a very critical role in fulfilling corporate social responsibility. IR departments are responsible for the communications that institutional and individual investors rely on for their investment decisions. Hence their role in CSR has to do with earning and maintaining shareholder trust. The dilemma for IR departments is that they are charged with serving two masters at once, investors on one hand and corporate management on the other. The problem arises when the goals of corporate management are not aligned with the best interests of investors.

One very clear example of this is AIG and their use of their IR department in attempting to conceal the company’s financial troubles. The investor relations department, at the direction of executive management, fielded calls from concerned investors and proceed to assuage those concerns (Allen, 2002) from a stance of corporate self interest. The IR department, in light of the ensuing bailout, obviously failed in their duty of providing factual and truthful information to shareholders.

This, combined with the discovery of accounting malpractices at other firms, i.e. Enron and WorldCom, (Allen, 2002) and the disintegrating mortgage industry had a destructive effect on the whole of the stock market. The DOW, and nearly all exchange listed stocks, suffered a severe devaluation beginning in September of 2008 on through February of 2009, as illustrated in Figure 1. By using the IR department in direct opposition to its intended purpose of serving investor needs, management effectively rendered it irrelevant to investor confidence. There was nothing left to help persuade investors not to turn tail and run from the market.

Figure 1

 

            This lack of trust in the overall market drove down the stock price of even such venerable companies as Berkshire-Hathaway, which by November of 2008 was down by 48 percent from its December 10, 2007 high of approxinately149K (Finkle, 2010). The source of this company’s great reputation is its CEO, Warren Buffet. Under his stewardship and acquisitions strategy, which includes developing stakes in undervalued companies led by honest management, Berkshire-Hathaway’s stock valuation has climbed to incredible heights. His annual letters to shareholders, and the high regards in which they are held, serve as a good example of the positive impact that trustworthy Investor Relations communications can have for a company (Berman, 2010).

           

References

Berman, D. (2010). Warren Buffett's shareholder letter serves a buffet of wisdom. Globe & Mail (Toronto, Canada), B17. Retrieved from http://proquest.umi.com/pqdlink?did=2201490071&Fmt=2&clientId=5239&RQT=309&VName=PQD

Allen, C.E. (2002). Building mountains in a flat landscape: Investor relations in the post-Enron era. Corporate Communications: An International Journal, 7(4), 206-211. doi:10.1108/13563280210449787

Finkle, T. (2010). Warren E. Buffett and Berkshire Hathaway, Inc. Journal of the International Academy for Case Studies, 16(5), 61.  Retrieved from http://proquest.umi.com/pqdweb?did=2201490071&Fmt=7&clientId=5239&RQT=309&VName=PQD

Week 7 - Application Assignment - Ken Hagihara

The article in this week’s reading, titled “Just Good Business,” is particularly timely given the recent uproar regarding Apple and allegations of child labor law violations by its China-based manufacturing partner, Foxconn.  According to Blodget (2012), “the low prices of our iPhones and iPads – and the super-high profit margins of Apple – are only possible because our iPhones and iPads are made with labor practices that would be illegal in the United States.”

Following a number of organized protests at Apple stores around the country, Apple admitted to some human rights issues and launched an investigation into Foxconn and the worker conditions in its factories (Bonnington, 2012).  In addition to the investigations, Apple has bulked up the “supplier responsibility” section of their website to incorporate a large number of visuals and messaging regarding their dedication to labor and human rights such as ending indentured migrant labor, preventing underage labor, addressing excessive work hours, and prohibiting discriminatory policies (Apple, 2012).

Apple’s website also spells out, in detail, other aspects of its CSR policies including its efforts to minimize the company’s effect on the environment.  As explained in this week’s reading, “An ever-expanding army of non-governmental organisations (NGOs) stands ready to do battle with multinational companies at the slightest sign of misbehavior” (Franklin, 2008).  Companies like Apple need to not only be proactive in regards to the communication of their CSR policies, but must be ready to respond for situations like this where their policies are criticized and brought to light in the public arena.

Apple (2012).  Corporate website. Retrieved from http://www.apple.com/supplierresponsibility/code-of-conduct/labor-and-human-rights.html. 

Blodget, H. (2012, January 15). Your iPhone Was Built, In Part, By 13 Year-Olds Working 16 Hours A Day For 70 Cents An Hour. Business Insider.com.  Retrieved from http://www.businessinsider.com/apple-child-labor-2012-1. 

Bonnington, C. (2012, February 13). Apple’s Foxconn Auditing Group ‘Surrounded With Controversy,’ Critics Say. Wired. Retrieved from http://www.wired.com/gadgetlab/2012/02/apple-foxconn-investigations/.

Franklin, D. (2008) Just Good Business: A Special Report on Corporate Social Responsibility. The Economist, January 19, pp.1-14 (full article)

Week 7- Application Assignment- Shanah McKnight

Corporate Social Responsibility (CSR) has definitely moved from optional to an essential business strategy in America. Currently there is such a wide array of undertakings that fall under this CSR category (Franklin, 2008). Every time I turn around another company is employing some sort of effort to demonstrate that they are doing good deeds for society.  Could the employment of women, particularly in prominent positions, also be considered a part of CSR?

McPherson (2012) contends that women are a special asset to organizations and their CRS efforts. Women tend to shine in CSR’s three main areas of “green (sustainability) compassion (philanthropy), and transparency (open, consistent and honest dialogue)”. While I agree that women do tend to be more versed in these areas, is hiring them simply as a competitive advantage the answer? Franklin (2008) talks about how more and more companies have begun to implement CSR strategies and merely donating money isn’t enough anymore. I’d like to think that companies would be intrinsically motivated to make CSR moves, but it is apparent that the financial gains are the primary appealing factor.

Even if the fundamental goal is financial stability, perhaps the organization can learn a lot from seeking the advice of women. Personally, I would still prefer to be sought out because what I have to contribute is honestly seen as valuable insight, as opposed to being listened to simply because the executives feel my viewpoint would bring the company revenue. However, if the goal is for women to finally be recognized for their innate and unique contribution to an organization, then this could be a positive move for organizations and society as a whole. McPherson (2008) notes that “Companies should look more closely at the ways in which women think, make decisions, and ‘do business’ in order to educate their staffs on how to execute meaningful and successful CSR programs”. This notion comes a long way from the traditional company mentality that only enables a woman with masculine traits to obtain prominent positions within companies. Nevertheless, I think this is a very interesting topic that could use some more attention. McPherson cites a few studies that have already been done on the subject matter, so it seems this is something we will be hearing more about in the future. I, for one, will be looking forward to seeing the developments and possible growth of this theory. 

Franklin, D. (2008). Just good business: A special report on corporate social responsibility, The Economist, January 19, pp.1-14. 

McPherson, S. (2012, March 8). Why every day is international women’s day. Newsweek. Retrieved from http://bx.businessweek.com/corporate-social-responsibility/view?url=http%3A%2F%2Fwww.triplepundit.com%2F2012%2F03%2Fwomen-work-corporate-responsibility-every-day-international-womens-day%2F

Wk 7 Application Assignment - M. Samuels

I’m just curious if anyone else was grinding their teeth while reading about Enron.  This scandal as well as WorldCom and Tyco almost seem quaint as compared to the utter and complete financial meltdown the country (and the world) experienced in 2008.  But for now, I’ll stick to the 2001 crisis.

As a remedy to the Enron et al debacle, Congress enacted the Sarbanes-Oxley Act (SOX) also known as the “Public Company Accounting Reform and Investor Protection Act (Anonymous, n.d.a).”  The law passed with near unanimity in both houses.  Since my company was publicly traded on the New York Stock Exchange at the time, we needed to comply and fell subject to those standards, rules and regulations. 

So now it’s time to name off the number of organizational changes that had to be applied to our company.  Since we just studied these theories, I’ll try to name some of the ones that seem to apply:
·         Contingency Theory
·         Organizational Information Processing Theory
·         Collective Action Theory
·         Sensemaking
·         Boundary Objectives

Various control mechanisms had to be put in place.  At first, in order to comply properly, our company put a “Sarbox” team in place that included CPAs, auditors and other accounting personnel.  Every day processes had to be scrutinized, documented and stamped “SOX”. It felt like we had reverted to a machine bureaucracy (Mintzberg, 1980) in that every process, especially those that we considered standard operating procedure (SOP), was now subjected additional processes such as documentation and authentication.  My company was more than willing to comply; the overall motive was a noble one. But in order to comply properly, it cost our company hundreds of thousands of dollars.  For companies much larger than ours, one can assume millions.

In reading the Allen article, AIG was really patting themselves on the back in 2002 for their establishment of an investors “help desk” (more bruxism) and other feel good, trustworthy actions the company initiated (p.210).  If we were to regard the enactment of SOX as a panacea making all publicly traded companies’ financial management transparent, it can probably be considered a fool’s errand.  In September of 2008, AIG hit the skids as a result of their heavy investment in credit default swaps without backing up the risk with collateral and ultimately had to be bailed out by the Federal Reserve (Anonymous, n.d.b).  Other huge companies under the purview of SOX went down too, so one can only assume that this was one internal control that can be classified under “epic fail.”

Allen, C.E., (2002).  Building mountains in a flat landscape: investor relations in the post-Enron era. Corporate Communications(7)4 206-211. 

Anonymous, (n.d.a). http://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act.  Retrieved March 10, 2012.

Anonymous, (n.d.b). http://en.wikipedia.org/wiki/AIG. Retrieved March 10, 2012.

Mintzberg, H. (1980). Structure in 5's: A synthesis of the research on organization design. Management Science, 26(3), pp. 322-341. Retrieved from http://www.jstor.org.libproxy.usc.edu/stable/2630506 March 10, 2012.

Week 7 Application Assignment - Megan Irish

This week I came across an article exploring Exxon Mobil’s fourth quarter profits. Just as the Merrill Lynch reading from this week explained, many aspects are looked at to see how financially successful and stable organizations are. The article listed many details including net income, value per share, and revenue from previous years. While the article explained that the company made money the previous year, it did state that Exxon did so by raising prices on oil and not by production or investments. This fact lead to questions and uncertainty from investors.

    According to the article Exxon’s production fell 9 percent and the company has spent over $20 billion a year since 2007 searching for new sources causing investors to worry. While Exxon claims that long-term investment will pay off, this concern from investors has caused stock prices to drop. This seems to be an example of the importance of investors in an organization. Because they are so vital, investor relations must be examined. Christopher E. Allen’s article “Building mountains in a flat landscape: investor relations in the post Enron era,” does just that.

    Allen explores the importance of clearly and quickly reporting finances to investors. He claims that after Ernon, investors are not as willing to invest in an organization based on vague details. Clear communication to investors must be a focus for a company. Allen stated that any company assumed to use deceptive accounting practices were scrutinized after Enron. Examples were given to show how these deceptive practices can lead to investor worry.

Perhaps Exxon should respond to investor worry in a similar way as AIG and GE in the article. Both companies welcome investors to look more closely at the organization and specially financial information. By implementing similar methods for informing investors of activities in the organization, more informed decisions could be made and less speculation would occur. Such a system may be exactly what Exxon Mobile needs.

References:

Allen, C. (2002) Building Mountains in a Flat Landscape: Investor Relations in the post-Enron         Era, Corporate Communications: An International Journal, Volume 7 (2), pp. 206-211

Kahn, C. (January 31, 2012). Higher oil prices lift Exxon’s 4Q profit. HuffingtonPost. Retrieved             fromhttp://www.huffingtonpost.com/huff-wires/20120131/us-earns-exxon-mobil/

Shane Collins - Week 7 - Investor Relations and CSR

"For most of the companies engaged in sustainability projects, like Nike, P&G, Coca-Cola, and Walmart, sustainability has been an effective toolset to squeeze out costs, increase employee morale and stoke innovation." - (Werbach, 2011)

 

While reading about corporate social responsibility (CSR), one may be immediately drawn to the recent advertising campaign by PepsiCo. The Pepsi Refresh Project was created for two reasons: to increase declining sales, which slipped more than 9.8 percent over the last decade, and to increase exposure of the company’s CSR. This demonstrates both CSR and investor relations at its best. (Bauerlein, 2011).

The Refresh Project was created as an advertising campaign aimed at providing funding to projects or organizations voted on by the public. Bauerlein (2011) explained that PepsiCo came up with the concept in order to enhance its corporate responsibility in a way that also increases sales.

Advertising messages were placed on cans and incentives on bottle caps drove visitors to the campaign’s Web site where consumers were able to vote for projects. Pepsi gave awards of $5,000 to $250,000 to winning ideas. Further, the campaign garnered strong public relations for the company (Bauerlein, 2011).

In an historic battle with rival Coca-Cola for market shares, Pepsi hoped its CSR would rejuvenate the brand and position it as a product of the future. Additionally, facing slumping sales PepsiCo needed a way to break through to consumers on an emotional level in hopes to drive revenue and increase brand loyalty (Werbach, 2011). This investment demonstrates how communication on a consumer level can directly effect communication on an investor level.

Werbach (2011) suggested that the CSR move was a great branding technique, but didn’t necessarily drive up the numbers the company hoped for. In the first year of the project, more than 80 million votes were cast on the Web site, and Pepsi gave out $20 million to more than a thousand ideas. However, sales continued to slump for Pepsi and Diet Pepsi, down 4.8 percent and 5.2 percent respectively.

Over time investors have warmed up to the Refresh Project – after all, many companies such as Nike, Coa-Cola and Walmart have CSR campaigns. Despite initial sales declines, PepsiCo slowly saw gain in the 2011, with pretty consistent stock price increases in 2012 (Werbach, 2011).

Corporate social responsibility is a tool in the marketing toolbox that doesn’t show immediate sales results. Great tactics to stay ahead of the industry curve and to be a forward thinking company, CSR campaigns is initiated for company sustainability (Werbach, 2011).

References:

Bauerlein, V. (2011). Pepsi hits 'refresh' on donor project. The Wall Street Journal

online. Retrieved from

http://online.wsj.com/article/SB100014240527487048327045761141713

99171138.html

Werbach, A. (2011). Pepsi vs. Wall St.: Why should a soda company try to be 'good

for you'? The Atlantic online. Retrieved from

http://www.theatlantic.com/business/archive/2011/07/pepsi-vs-wall-st-why-should-a-soda-company-try-to-be-good-for-you/241347/