CRG650 TOPIC 5 CSR & ACCOUNTABILITY

1. TOPIC 5

2. LEARNING OUTCOME
Describe Modern Governance & Accountability
Explain Corporate Governance & Accountability
Understand The Importance Of CSR
Understand The Motivation For CSR Reporting

3. MODERN GOVERNANCE AND ACCOUNTABILITY
(NEW EXPECTATION – NEW FRAMEWOK TO
RESTORE CREDIBILITY)
 Stakeholder give impact on corporation markets, capital markets and support offer to the
corporation.
 Any boycotts, reduced revenue, profit streams or turn down by recruiting employee give
effect to corporation’s reputation
 Therefore, Director and Executives found that stakeholder was essential to the optimal
achievement of medium-term and long-term corporate objectives.
 How to get support from stakeholder ?
 = a new governance and accountability framework is developed with new tool & new
technique
 How to restore the credibility of corporation & Profession Accountants and capital
market ?
 By reform Sarbanes-Oxley Act ( SOX)
 as the standard and framework used around the world

4. ACCOUNTABILITY TO SHAREHOLDER OR
STAKEHOLDERS ? (Pg 221-222)
 Company legally accountable Shareholder
 Strategic accountable Stakeholders
 The SOX is designed to refocus on responsibility of directors on their
fiduciary duty beyond their own self-interest to shareholders as a whole and
to the public interest.
3 Types of Fiduciary
Obligation for
directors
Duty to
obedience
- To avoid
committing
act beyond
the scope
Duty of loyalty
- Must act good
faith
- not allow
personal interest
over the interest
corporation
Duty to care
Director have
to be diligent
and prudent in
managing the
corporation’s
affair

5. GOVERNANCE FOR BROAD STAKEHOLDER
ACCOUNTABILITY
( Governance Process Based on Stakeholder Interests)
 Stakeholder Accountability Oriented Governance Process
Governance process should be based on Stakeholder interests
According to Stakeholder-accountability oriented governance process
(SAOG), BOD must take all stakeholder interests into account and embedded
into company’s vision, mission, policies, codes, practices, compliance &
feedback arrangements.

6.  Identifying organizational values through the foundation of behaviour & integrity
 Shareholders & stakeholders interests are incorporated and integrate into the
company strategies, planning and decision making
This will ensure risk identified can be managed through the establishment of
company’s vision, mission, strategies, policies & procedures
 To incorporate or embedded the cultural values & hypernorms values
to ensure that all important values are included as an acceptance and respect is
guaranteed in dealings with many culture values

7. THREATS TO GOOD GOVERNANCE &
ACCOUNTABILITY
1) Misunderstanding objectives & fiduciary role
2) Failure to identify & manage ethic risks
3) Conflict of Interests
4) Management to avoid & minimize consequences
5) Agency Theory, Ethics & Sears
6) Chinese Wall/Firewalls
7) Forensic Experts & Evidence: 20/60/20 rule
8) GONE Theory
9) Duty depends on a person’s role

8. THREATS TO GOOD GOVERNANCE &
ACCOUNTABILITY
Misunderstanding
objective & Fiduciary
duty
Lack of proper guidance
or reporting mechanism.
As a result director and
personnel do not
understand their
fiduciary duties
For example :
Director looking their own
interest and not protecting
interest shareholder,
stakeholder
Failure to identify &
Manage Ethics Risks
The increasing complexity,
volatility, and risk inherent in
modern corporate interests and
operations, has led to the
requirement for risk
identification, assessment, and
management systems.
- Internal auditors will examine the
company’s assets and ensure its
compliance with policies
- External auditors examine the FS
and see that internal controls are
in place that will ensure accurate
financial reports.
Conflict of
interest
occurs when the independent judgment
of a person is swayed, or might be
swayed, from making decisions in the
best interest of others who are relying
on that judgment.
An employee is expected to make
judgments in the best interest of the
company
A director is legally expected to make
judgments in the best interest of the
company and its shareholders and benefit
to stakeholders and the public interest.
A professional accountant is expected
to make judgments that are in the public
interest.

9. How to avoid & Minimize Conflict of interest
Management of the
conflict interest so that
the benefits of the
judgement made
outweigh the costs
Disclosure to those
stakeholder relying on
the decision
Avoidance

10. KEY ELEMENTS OF CORPORATE
GOVERNANCE & ACCOUNTABILITY
DEVELOPING, IMPLEMENTING& MANAGING AN ETHICAL CORPORATE CULTURE
 Directors, owners and senior management are in the process of realizing that they and their
employees need to understand that :
i. Their organizations will consider the interests of stakeholders, not just shareholders.
ii. Consider ethical value when made decision making
 This can be achieved by ensuring commitment to the ethical principles or values
considered appropriate for the organization, and for that, the top management must
be fully supportive and that such support is evident throughout the organization’s
governance system.
 To ensure an effective understanding and commitment to the organization’s ethical
principles, many companies design an ethics program.

11. CORPORATE CODES OF CONDUCT
 PURPOSE , FOCUS & ORIENTATION
 Company business ethics principles stress 2 objectives:
a) Improving employee capability for decision making in accordance with policy & legal
requirements
b) Provide concrete expression towards company’s mission through duties &
responsibilities
 An effective code is the embodiment of an organization’s values.
 It represents the major organizational structure in which to implement ethical policy
and to signal and communicate behavioral expectations and culture, as well as to
provide strategic and legal positioning for the organization.
 It is an essential part of a modern system of internal control.

12. CORPOROTE CODES OF CONDUCT
The development
and maintenance
of an ethical
corporate culture
An effective
internal control
system
Effective
empowerment for
employees to make
ethical decisions
Sending proper
signals to
external
stakeholders
A due diligence
defense for
director and
officers
Effective
implementation:
A properly
functioning code is
essential to the
following

14. CORPORATE SOCIAL RESPONSIBILITY
(CSR)
 CSR means that an organisations must behave ethically and with
sensitivity toward social, economic and environmental issues.
 Striving for social responsibility helps individuals, organisations and
governments have a positive impact on development, business and
society with positive contribution to bottom-line results (PLANET,
PEOPLE, AND PROFIT).

15. IMPORTANT OF CORPORATE SOCIAL
RESPONSIBILITY
Corporate
Reputation
Create and maintain a good image of the organisation.
May boost up the profit of the organisation.
Sustain
Environment
Preserve the environment for next generation.
Prevent the environmental issue from arise.
Respect
Human Right
Fair and equitable treat to the employees, customers, also society.
Motivate
Employees
CSR will improve the quality of the work in order to give a good
quality of service to the customer.
Retain
Customer
Trust & Loyalty
Customer tends to choose our product or services.
Create trustworthy relationship between customer & companies.

16. THE PYRAMID OF CORPORATE SOCIAL
RESPONSIBILITY

17. PERFORMANCE
-DRIVEN CSR
• A company
practice CSR for
financial returns &
competitiveness in
the market.
VALUE-DRIVEN CSR
• Corporate value or code of
conducts ethically guides
company’s behaviour
(decision making)
STAKEHOLDER-
DRIVEN CSR
• To treat them fairly
in order to retain
loyalty & trust.
• Maintain corporate
reputation.
MOTIVATION FOR CSR REPORTING

18. FOUR DIMENSION OF CSR
(Bursa Malaysia)