Deciphering the Domain of Corporate Responsibility

1. Deciphering the Domain of Corporate Responsibility Jesse Dillard Portland State University

2. Why are we here ? • Share ideas and experiences • Understanding the world differently • Choose to • live our lives differently, • to do business differently, • to practice accounting differently • An enlightening, enabling, and transforming effect on our world

3. What Is Ours To Do? • The professional part of our world comprises the study and practice of business, in its broadest sense • Therefore the possibility exists for changing the understanding and practice of business and accounting • The challenge, and that of any society, is to act, based on a value set that increases the societal welfare rather than the interests of only a subset of society • This is where we happen to be involved at this point in our lives

4. Corporate Responsibility

5. ECONOMIC VIABILITY SOCIAL SUSTAINABILITY CORPORATE RESPONSIBILITY LEGAL COMPLIANCE ENVIRONMENTAL SUSTAINABILITY WORKERS’ RIGHTS PHILANTHROPY HUMAN RIGHTS

6. Market Dominated Systems Economic Markets

7. Sustainable Systems markets

8. Corporate Responsibility Corporate Responsibility Context Time

9. SOCIAL DOMAIN Norms and Values Representational Schemes Human & Material Resources SOCIAL INTEGRATION Mediating Social Systems SOCIAL ACTION SPACE Mediating Individual Systems AGENT’S PSYCHOLOGICAL MAKEUP Discursive Consciousness Practical Consciousness Unconscious Motives Change

10. Societal Place of Business

11. Markets Business

12. What is the purpose of economic institutions (business) in society?

13. Providing Goods and Services to the Members of Society

14. Act in the Public Interest

15. Business in Society • Purpose • Provide material means (work, goods, and services) for the citizens of the society. • Role • Responsible member of an ongoing community • Rights • Use of society’s economic assets

16. Economic Organizations’Social Responsibility • a central role in the long-term viability of a democratically governed society • grounded in • justice • equality • trust • supported by a sustainable economic system.

17. Corporate Management’s Responsibility While all members of society have a moral responsibility to act in the public interest, corporate management is specifically granted fiduciary responsibility over society’s economic resources (natural resources, financial assets, human assets, and technology). 

18. Responsible Member of an Ongoing Community • Observed outcomes • Anticipated actions • Solidarity • Accountability

19. An Ethic of Accountability

20. Corporate Management Expectation of giving an account Responsible to others for something Answering to, for Answerability Representation Society Expectation of receiving an account Criteria Feedback Rewards/sanctions Expose and constrain abuse of power Duality of Accountability

21. Accountability What activities matter? How much? To Whom? EVALUATION OF ACTIVITIES/ ACTIONS ACTIVITIES/ACTIONS REPRESENTATIONS OF ACTIVITIES EVALUATION CRITERIA

22. Management’s Character In order to fulfill its charge as a trustee of society’s economic resources, corporate management must maintain high standards of integrity, responsibility, and accountability.

23. Information/Accounting Professionals’ Responsibility • Assist management in carrying out their fiduciary responsibilities. • By assuring the efficacy and integrity of the related information and administrative systems and those who design, implement, and utilize them. • Nested accountability

24. Academic Accounting • Develop and disseminate expert knowledge and professional responsibilities to current and future professionals • Facilitate and engage in an ongoing conversation among stakeholders regarding public interest responsibilities associated with the ethic of accountability • Act as conscience and critic of profession, organizational management, and society

25. Accounting and Accountability • Accountability is the linchpin of any legitimate and just economic system • Accounting resides at the critical interface between those who control the economic assets (corporate management) and the society that they benefit • An ethic of accountability • is a key component in implementing corporate responsibility • provides a contextual framework wherein we all can carryout our responsibilities

26. From a Rather Ideal World to a Somewhat More Practical One

27. Brief History of Corporate Responsibility • Industrial revolution –shift of power and population • Limited liability corporation emerged • Late 1800s – amassed significant wealth and power – trusts/monopolies • Early 1900s – trusts busting by the state • WWI – business left to its own devices • Great depression – 1930s business blamed • Mid 20th century – society best served if businesses are state controlled • Late 20th century – privatization and globalization

28. What’s In Store for the Early 21st Century Given the Recent and Frequently Reoccurring Market Failures? • Dot.com bubble • Corporate defaults • Banking crisis

29. Fundamental Issue (Re)Distribution of wealth generated through the power of socialized production

30. Ongoing Dialectical Process • Corporate autonomy or control by the state • Abuses aroused social concern • Power and wealth concentrations brought calls for accountability and redistribution • Ideological models • Liberal – individual equality and liberty • Nationalist/mercantile – economic activities subordinated to goals of the state • Communist/socialist – investment and enterprise are controlled by the state

31. Western Democratic Capitalism(Socio-economic Political Context) • Liberal model • Utilitarian philosophy • Dominant economic focus • Markets as primary mechanism for wealth distribution • Economic well being synonymous with social well being • Markets provide a just and sustainable society • Totality of corporate responsibility can be specified through an economic calculus

33. CORPORATE RESPONSIBILITY

34. Corporations Economic Markets

35. WITH GREAT POWER

36. COMES GREAT RESPONSIBILITY

37. Corporate Responsibility

38. Corporate Responsibility • Realignment of perspective • Responsible entity shifts from individual to corporation • Resource use shifts from narrow, private interests to broad, social ends • Requires • Linking responsibility to power • Being open to pubic scrutiny • Considering noneconomic costs and benefits in decisions • Involving corporations in social affairs

39. Establishing Parameters • Voluntary – imposed • Normative – practical theories • Citizen – lesser legal entity • Consequentialism – nonconsequentialism • Basis for Responsibilities • Economic, legal, ethical, discretionary • For whom • Stockholders, management, workers, business stakeholders, nonbusiness stakeholders • What rights • Life, liberty, property, justice, equity, human rights, education, happiness, dignity, health

40. Current Focus • Issues having broad social and environmental implications – global warming, human rights, economic growth, poverty reduction • Economic benefits associated with social and environmental actions • Business attitudes, awareness and practices related to nonfinancial operations • Implications of corporate actions on nonbusiness stakeholders • How different segments of society conceptualize and practice corporate responsibility

41. Current Challenges • Focus on financial factors/results diverts attention away from social and environmental costs and benefits that cannot be easily converted • Little evidence to support or refute economic benefits • Linking actions to outcomes • Major measurement problems and few benchmarks • Assessing collective local, regional, systemic implications (multi-scale, multi-entity) • Imbedding in management, reporting and control systems

42. Fundamental Questions • Capitalism’s ability to cure capitalism’s ills • Market’s ability to self regulate and allocate • Validity of the business case • Sustainability of transnational corporations • Corporation’s responsibility for nonfinancial objectives • Role of government and civil society • Should, how, and by whom should corporations be held accountable to for their nonfinancial performance

43. Issues On the Corporate Responsibility Agenda Acting in the Public Interest Facilitating a democratically governed society Supported by a sustainable economic system

44. ECONOMIC VIABILITY SOCIAL SUSTAINABILITY CORPORATE RESPONSIBILITY LEGAL COMPLIANCE ENVIRONMENTAL SUSTAINABILITY WORKERS’ RIGHTS PHILANTHROPY HUMAN RIGHTS

45. Reality Checks • Possible future/alternative directions • Contribute to or exacerbate problems • New initiatives • Reconceptualizations needed • Evolve and transform into more integrated agenda

46. Macro Issues • Political influence of corporation in directing the responsibility conversation and avoiding responsibilities (e.g., taxation) • Capital markets’ influence on corporations • Implications for small and medium sized organizations

47. Specific Issues • Corporate governance • Public reporting • “stakeholder” involvement/management • Internal implementation • Embedded within managing structures • Management, reporting, and control systems • Internal audit function • Improved information systems and external reporting media

48. Specific Issues • Professional service firms • Their responsibility for responsibility • Allegiance • Fee structure and compensations schemes • Desired source and level of regulation and oversight • Supply chain influence • Right to impose values and systems • Upon whom • Effective processes and procedures • Information systems use and control

49. Specific Issues • Universality of standards • Content • Cultural differences • Economic disparities • Political demands • Implementation • Financial accounting model • Uniform accounting and reporting standards • Who sets standards • Who monitors compliance

50. Specific Issues • Changing investor values • Changing customer values • Alternative organizing arrangements • Social enterprises • Social entrepreneurship • Sustainable production • Sustainable consumption