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Running Head: HEALTHCARE INFORMATICS AND PATIENT
CARE 1
2
HEALTHCARE INFORMATICS AND PATIENT CARE
Healthcare Informatics and Patient Care
Healthcare Informatics and Patient Care
Managers
In this paper, we will discuss the benefits of having technology
around us and how it can be crucial for the daily operations of
healthcare organization. Some of the benefits of having
technologies are improvement in patient care, operate
efficiently and reduction of cost. To make a healthcare
organization successful, every staff member should know their
role in improving patient care. One of them is a Director of
Admissions, who can utilize technology/system to improve
patient care in many ways. The Director of Admissions “admits
patients by directing the admissions process; developing,
implementing and maintaining revenue-generating strategies;
determining and implementing admissions best-practices;
promoting the hospital; maintaining a satisfied patient base”
(Monster, n.d.).
Patient Care The technology that the Director of Admissions
use to make daily workflow seamless is the Electronic Health
Record (EHR) and admission/discharge/transfer (ADT) system.
An ADT system is “used to input patient registration
information which results in the creation of an automated
master patient index (MPI) database that allows for storage and
retrieval of the information” (Bowie, M. J., 2018). Using these
systems can easily improve patient care because the technology
can allow for an efficient workflow without errors. The
Director of Admissions can manage an HL7 ADT Message
system for the staff to let each department know when a patient
is admitted, discharged or transferred (Health Standards, 2006).
This can be handy to better care of patients by properly
communicating with different departments of the hospital. For
example, if a patient has arrived for his/her minor same day
surgery, upon registration the message can be sent to the
surgery department that patient has been admitted and on the
way. This can expedite the service and patient experience.Cost
and Efficiency
The EHR and ADT systems are safe and can admission
process much easier, efficient, and reduce human errors.
Reducing error can essentially reduce cost. The Director of
Admissions can run daily “admission logs, bed utilization
reports, current charges reports, daily census, daily
discharge/transfer logs, and patient profile (Green & Bowie,
2016, 8-1a). The Director of Admissions can run daily current
charges reports that can help them keep on track with expected
account receivable. The Director of Admissions can track down
who owes the company money, and he /she can forward the
report to organizations account and billing department. This
can help organization collect money. Technology makes this
process easier and elements costly run around and paper trails.
Decision Making
The reports and data collected from the Director of Admissions
can help organization make decisions in different department.
For example, running a daily census report can let certain wards
of the hospital know how busy they are and what kind of
staffing level will be needed to properly care for the patients.
The Director of Admissions has to make sure that the collected
data are sent to all the managers and supervisors of the hospital
to help them make decision.
Reference
Bowie, M. J. (2018). Essentials Health Information
Management: Principle & Practices (4th ed.). Place of
publication not identified: Cengage Learning Custom P.Monster
(n.d.). Admissions Director Hospital Job Description. Retrieved
on November 21, 2018 from https://hiring.monster.com/hr/hr-
best-practices/recruiting-hiring-advice/job-
descriptions/admissions-director-hospital-job-description.aspx
Health Standards (2006 October 5). What is an HL7 ADT
Message? Retrieved on November 21, 2018 from
http://healthstandards.com/blog/2006/10/05/what-is-an-adt-
message/
Fair To All People: The SEC and the Regulation of Insider
Trading
· Introduction
· Pre-Securities Act Common Law Enforcement
· The Securities Exchange Act of 1934 - Principles of Full
Disclosure
· Foundations of Fairness: The SEC Develops Theories and
Rules on Corporate Disclosure
· The SEC Takes Command
· Counterattack From the Supreme Court
· Raising the Stakes
· Power of SEC Resilience
· Rule 14e-3 and the Misappropriation Theory
· United States v. O'Hagan
· Old Debate and New Rules: SEC Regulation of Insider
Trading in the Global Marketplace
· In Recognition
Power of SEC Resilience
United States v. O'Hagan
It took nearly a decade for the Supreme Court to revisit the
applicability of the misappropriation doctrine they had
deadlocked on in Carpenter. That is not to say that the SEC sat
on the sidelines waiting for a case to arise. In fact, after
the Carpenter deadlock, the SEC actively enforced insider
trading cases, urging lower courts to adopt the misappropriation
theory. But the lower courts divided on the issue, and the Eighth
Circuit overturned the conviction of James O'Hagan for
securities and mail fraud and for violation of Rule 14e-3,
because the court found that O'Hagan owed no duty to Pillsbury,
the company in whose stock he had traded. The Supreme Court
resolved to settle the disputes among the circuit courts
in United States v O'Hagan.(53)
O'Hagan, a Minneapolis legal icon, was charged with violating
Section 10 and Rules 10b-5 and 14e-3 by trading on
misappropriated, non-public information he acquired while at
his law firm. O'Hagan was neither a classic nor a constructive
insider, nor could he be held liable under the disclose or abstain
rule. The SEC and the U.S. Justice Department prosecutors
advocated a broad, expansive reading of Rule 10b-5 to cover
any deceit, meaning that for O'Hagan, his misappropriation of
his employer's information was for his personal benefit, in
connection with the purchase or sale of a security. At oral
argument, Chief Justice Rehnquist quizzed Deputy Solicitor
General Michael Dreeban about the SEC theory.
"What bothers me about this case," queried Rehnquist, "is what
is the connection between the ‘deceptive device' and the
‘purchase or sale' of the security" since O'Hagan didn't deceive
anyone who sold him the Pillsbury stock."
The misappropriation theory, replied Dreeban, "had a broader
aim to pick up the cunning devices that people might use." The
issue in O'Hagan, he remarked, was "a unique kind of fraud,
unique to the securities markets" in which a person could profit
from misappropriated information only by trading or tipping
someone else off.
But John D. French, O'Hagan's lawyer, dismissed the SEC
attempt to expand the misappropriation theory. "If Congress
wants to get the misappropriation theory into law, it has to write
it into law." Otherwise, he added, remembering the troika of
Justice Powell-inspired cases from the 1980s, "you cannot
disconnect the misappropriation from the purchase and
sale."(54)
On June 25, 1997, in an opinion written by Justice Ruth Bader
Ginsburg, the Supreme Court upheld the misappropriation
theory as a valid basis on which to impose insider trading
liability. While the Supreme Court acknowledged that
misappropriators had no independent duty to disclose to persons
with whom they traded, the legal obligation under the Securities
Acts was founded on the theory that "a fiduciary's undisclosed,
self-serving use of a principle's information to purchase and sell
securities, in breach of a duty of loyalty and confidentiality,
defrauds the principal of the exclusive use of that information."
So defined, the misappropriation theory thus satisfied the 10(b)
requirement of a "deceptive device or contrivance" used "in
connection with a securities transaction." SEC Chairman Arthur
Levitt Jr. commented that the decision reaffirmed "the SEC's
efforts to make the stock market fair to all people, whether
you're a Wall Street veteran or a Main Street newcomer." The
misappropriation theory was well-tuned to the animating
principle of federal securities law: to insure honest securities
markets and thereby promote investor confidence.
The success of the SEC was the result of a long and persistent
strategy that avoided congressional definitions that it felt would
make actual enforcement more difficult, while advocating for
common law interpretations that promoted a somewhat nebulous
definition of insider trading based on principles of equal access
to market information. Opting for a common law interpretation
while developing administrative rules of enforcement allowed
the SEC to react to market abuses, but not overreact in a way
that might damage its enforcement flexibility or the stability of
the markets. The ideological and legal persistence of the SEC
won the day in 1997, but insider trading issues remain an
ongoing debate.
<< PREVIOUSNEXT >>
Footnotes:
(53) 484 US 19 (1997)
(54) Linda Greenhouse, "S.E.C. Argues Insider-Trade Theory
Before High Court," The New York Times, April 17, 1997, D1.
Related Museum Resources
Papers
FEBRUARY 27, 1997
Brief for the United States, United States of America v. James
Herman O'Hagan
IMAGEPDF (Courtesy of the Library of Congress)
FEBRUARY 28, 1997
Brief of Amici Curiae North American Securities
Administrators Association, Inc. and Law Professors in Support
of Petitioner, United States of America v. James Herman
O'Hagan
IMAGEPDF (Courtesy of the Library of Congress)
MARCH 27, 1997
Brief of Amici Curiae Law Professors and Counsel in Support
of Respondent, United States of America v. James Herman
O'Hagan
IMAGEPDF (Courtesy of the Library of Congress)
MARCH 28, 1997
Brief for Respondent James Herman O'Hagan on Writ of
Certiorari to the U.S. Court of Appeals, United States of
American v. James Herman O'Hagan (begins at Questions
Presented)
IMAGEPDF (Courtesy of the Library of Congress)
APRIL 27, 1997
Reply Brief for the United States, United States of America v.
James Herman O'Hagan
IMAGEPDF (Courtesy of the Library of Congress)
JUNE 25, 1997
Supreme Court of the United States: United States v. James
Herman O'Hagan
IMAGEPDF (Courtesy of the Library of Congress)
JUNE 30, 1997
Letter from Milton V. Freeman to Eric Summergrad with
congratulations on winning the O'Hagan case
IMAGEPDF (Courtesy of the Summergrad Family)
JULY 10, 1997
Letter from Eric Summergrad to Milton V. Freeman
IMAGEPDF (Courtesy of the Summergrad Family)
9 CSR Reporting Standards and Practices
Shironosov/iStock/Thinkstock
Learning Objectives
After reading this chapter, you should be able to:
1. Understand the history of CSR reporting and past attempts to
standardize the process.
2. Explain how to use Global Reporting Initiative standards to
verify CSR and sustainability reports.
3. Summarize the challenges and benefits that organizations
face in creating CSR reports.
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
Section 9.1Financial and CSR Reports
Pretest Questions
1. Firms can legally report company earnings numbers in just
one way. T/F
2. Offering CSR or sustainability reports remains optional in all
industries. T/F
3. Publicity is the major leverage point for externally
motivating corporations to
report CSR. T/F
Answers can be found at the end of the chapter.
Introduction
Customers and other stakeholders (even employees) cannot
usually become aware of socially
responsible behaviors without some effort on the organization’s
part. Thus, accurate and
timely reporting of CSR efforts can engage stakeholders and
provide concrete evidence of
sustainability attempts and successes. However, not all firms
report the same way, and con-
sumers are not always able to protect themselves from false or
misleading reports. Also, some
firm managers still choose to only report financial returns and
don’t discuss the social or
environmental aspects of or contributions to those returns.
This chapter addresses types of financial and CSR reporting. It
discusses reasons why compa-
nies make the effort to report and describe standards and
general practices that, if adhered to,
can help such reports be maximally useful to customers and
other stakeholders.
9.1 Financial and CSR Reports
Today the most common type of corporate reports are financial
reports. Interestingly, com-
panies can legally present investors with two types of financial
reports: (a) those that strictly
adhere to generally accepted accounting principles (GAAP) and
(b) those that include
some simplifications or leave out some facts from the main
body of the report. The first type
is well known to accountants; such reports follow a
standardized format that make them easy
to compare to reports from other companies that use the same
standards. Thus, the GAAP
format enables the financial situation of two or more companies
to be compared. In contrast,
non-GAAP reports feature adjusted figures known as pro forma
or non-GAAP numbers. Com-
pany leaders have significant freedom in reporting such
adjusted numbers, in part because
there are no rules about what they can strip from the reporting.
This allows executives to
paint a simplified or idealized picture of the corporate situation
(Morgenson, 2015). Even
within the same industry, companies can differ on what they
include or exclude from the
nonstandard report. For example, one company may exclude
facts about how employees are
compensated, while another company in the same industry may
include such numbers. When
these differences occur, it makes it challenging for investors or
other stakeholders to compare
companies’ performance.
The existence of such different types of reporting means that
investors and reporters may pay
more attention to the nonstandard and adjusted numbers when
making investment decisions
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
Section 9.1Financial and CSR Reports
(probably because they are typically and purposefully easier to
understand). This has ethical
implications, should people invest money based on what could
be misleading information.
For example, in the case of pharmaceutical company Valeant,
there were dramatic differences
between the company’s real earnings and its adjusted numbers
(and these differences were
more dramatic than differences in competitors’ reports). Under
GAAP reporting, the com-
pany earned $912 million in 2014, but its other report showed
“cash” earnings of $2.85 bil-
lion for the same year (Morgenson, 2015). Valeant stripped out
many expense items from
its non-GAAP revenue reports, including costs related to stock-
based compensation, legal
settlements, and costs associated with acquisitions. In fairness
to the company, Valeant did
present a list of excluded expenses, but not in a format that was
accessible to many investors
(Morgenson, 2015). In the last half of 2015, Valeant’s market
value dropped by almost $60
billion, largely as a result of investor reactions to the discovery
of the variance between the
two versions of the report (Morgenson, 2015).
What are government and exchange regulators doing about this
issue? In 2003, when pro
forma or non-GAAP earnings first became popular, the SEC
instituted Regulation G to help
investors. Regulation G requires companies that use adjusted
non-GAAP figures in regulatory
filings to present comparable numbers calculated using GAAP.
However, the regulation does
not cover news releases, a major source of information for
investors.
According to many, this kind of market deception reflects the
need for transparency and stan-
dardization in reporting, not just for accounting measures
(which are only one part of the
triple bottom line), but also for CSR (Howell, 2015b).
Transparency means being open, hon-
est, and direct about a company’s past, present, and future.
Standardization means using a
common system that allows people to make fair comparisons
between similar corporations.
Transparency and standardization are a foundational element of
sustainability because they
allow companies to fairly measure and compare shareholder
value, return on investment in
finance, and environmental impact and social contributions to
CSR. CSR reports are a rela-
tively new phenomenon, and making sure they are useful
requires understanding the history
of reports, the standards related to reporting, and cases of
reporting use and abuse. Doing so
also helps explain why some firms continue to resist the
practice and why so much variety
exists in how and why firms report. It also illustrates how one
disaster indirectly led to the
creation of a global movement.
History of CSR and Sustainability Reports
On March 24, 1989, an oil tanker named the Exxon Valdez,
bound for Long Beach, California,
ran aground in Prince William Sound, Alaska, spilling 15
million to 40 million gallons of crude
oil into the ocean (Skinner & Reilly, 1989). Considered one of
the most devastating human-
caused environmental disasters in history, the spill eventually
spread to cover 1,300 miles of
coastline and 11,000 square miles of ocean. Prince William
Sound is a remote location acces-
sible only by helicopter, plane, or boat. This isolation made
government and industry response
efforts slow and expensive, which only further devastated local
salmon, seals, and seabird
populations (Skinner & Reilly, 1989). The fishing industry in
that part of Alaska still has not
fully recovered from this disaster. The public’s outrage over the
event grew as investigations
and reports revealed that the crew was overworked and
underrested, and that some safety
monitoring equipment was broken and deemed too expensive to
fix (Skinner & Reilly, 1989).
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
Section 9.1Financial and CSR Reports
The Exxon Valdez became a symbol of how the drive for
profit can conflict with environmental and social respon-
sibility, with devastating results. The short-term media
and social response was significant, and public outrage
and concern continued for years.
Some of the disaster’s long-term implications relate to
corporate transparency. The spill instigated new pres-
sures for firms to report how they were (or were not)
protecting workers and the environment. Groups of
activists began to push for accountability through vol-
untary corporate reporting. One of the leading orga-
nizations responsible for demanding more corporate
transparency was the Coalition for Environmentally
Responsible Economies (Ceres), which was formed in
response to the spill.
The Coalition for Environmentally
Responsible Economies
Ceres was formed by a small group of investors who
believed that if firms like Exxon had to publicly admit
they were overworking people (a social CSR issue),
were failing to invest in safe equipment (another social
CSR issue), or lacked the policies to protect the environment in
the event of an emergency,
they might find reason to fix such irresponsible and
unsustainable behaviors. Essentially, the
founders of Ceres believed that transparency could herald
change.
Over the organization’s 25-year history, its mission has
expanded. It has introduced report-
ing tools to help organizations weave environmental and social
challenges into company and
investor decision making. It has inspired a reevaluation of
companies’ roles and responsi-
bilities as stewards of the global environment when it published
the Valdez Principles, later
named the Ceres principles. These consist of 10 points of
environmental conduct that Ceres
encourages companies to publicly endorse (Lubber, 2014):
1. Protection of the biosphere: How well does the corporation
protect the general bio-
sphere, including by reducing greenhouse gases?
2. Sustainable use of natural resources: Does the corporation
strive to use renewable
resources and reduce the consumption of nonrenewable ones?
3. Reduction and disposal of wastes: Does the corporation
practice lean manufacturing
and seek to reduce or eliminate waste?
4. Energy conservation: Does the corporation conserve energy?
5. Risk reduction: Does the corporation have safety and
accident-reduction programs
in place?
6. Safe products and services: Does the corporation create
products and packaging that
are safe for consumers? Are consumers safe when they use the
product?
7. Environmental restoration: Does the corporation take steps to
renew and restore
the environment when damage is done?
John Gaps III/AP Images
In 1989 millions of gallons of oil
spilled from the Exxon Valdez
tanker, harming the surrounding
water, coastline, and wildlife in
Prince William Sound, Alaska.
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
Section 9.1Financial and CSR Reports
8. Informing the public: Is the corporation transparent and open
in decision making?
Does the corporation alert the public to CSR progress and
setbacks?
9. Management commitment: Is the corporation’s management
and leadership knowl-
edgeable and committed to sound Ceres practices? To general
CSR and sustainability
principles?
10. Audits and reports: Does the corporation audit, report, and
generate data on envi-
ronmental compliance and CSR?
In 1993, after lengthy negotiations, Sunoco (an oil and gas
company) became the first For-
tune 500 company to publicly endorse the Ceres principles.
Since then many others have
signed similar agreements to follow the principles, and Ceres is
now the largest environmen-
tal monitoring data service for companies (Ceres, 2014),
although it is not used by all firms.
The creation of the principles and the requirement for
supporters to publicly declare support
ushered in renewed pressure to make public data on where
companies stand in regard to CSR
and sustainability. Ceres spearheaded a movement to get firms
to publicly report and state
sustainability and CSR goals, progress, and setbacks.
Recent research suggests that 93% of the top global companies
publish CSR or sustainability
reports (KPMG, 2013). The statistic indicates how far
sustainability and CSR reporting have
come, but the journey was not easy. As Bob Massie, Ceres’s
executive director from 1996 to
2002, stated in 2014:
The whole idea of having an environmental ethic, or measuring
your perfor-
mance above and beyond your legal requirements, was
considered completely
insane. Sustainability was considered to be a shockingly
difficult thing that no
company would ever take on as a goal. (Ceres, 2014)
As Ceres pushed reporting, it also spearheaded a worldwide
effort to standardize and system-
atize disclosure on environmental, social, and human rights
performance. In the late 1990s
Ceres launched a separate entity known as the Global Reporting
Initiative (GRI), the aim
of which was to create a standardized and transparent
accountability process that ensures
compliant companies follow the Ceres principles (GRI, 2015).
The Global Reporting Initiative
The GRI is the most widely adopted framework for
sustainability reporting. It was originally
created in 1997 to help leaders and managers navigate the
process of reporting—there were
no standards and very few examples to follow at that time. One
of the first steps organiza-
tional leaders took was to expand the conversation and
terminology so that more industries
could participate in the effort. For example, GRI leaders
broadened the focus beyond the envi-
ronment to also include social, economic, and governance
issues. The addition of more topics
and keywords served to strengthen the relationship between GRI
and basic CSR principles
and enabled more organizations to participate. In 2000 the GRI
published the first official
guidelines for corporate compliance reporting and created a
framework for comprehensive
sustainability reporting. The GRI team offered consulting
services for those who needed
advice on how to provide exemplary reports.
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
Section 9.1Financial and CSR Reports
For the first 3 years, GRI kept track of which firms used the
guidelines and included links to
examples of all types of reports on its website. Over time,
enough firms began offering reports
that GRI stopped keeping track—a sign it had effectively helped
launch a movement.
In response to the GRI guidelines, the leadership at Ceres
decided to spin off the reporting
efforts from the rest of the organization. Thus, GRI became a
separate and independent non-
profit institution in 2001. The organization moved to
Amsterdam and became part of the
United Nations under its environmental program (the UNEP).
That same year, in 2002, the
second generation of guidelines (G2) was unveiled at the World
Summit on Sustainable Devel-
opment in Johannesburg, South Africa. The summit was the
most important international
convention related to climate change, and being part of it was
another sign of the organiza-
tion’s value and prestige.
Over the next 4 years, demand for CSR reporting guidance grew
dramatically, and the third
generation of the guidelines (G3) was launched with the help of
more than 3,000 experts
from multiple sectors, including packaged goods, shipping,
agribusiness, and more (GRI,
2015). However, it was not until 2007 that GRI created a
product for mass consumption and
utility—Pathways I. This publication provides a step-by-step
procedure for report makers. To
create a regional presence and learn how different regions
responded to the document, GRI
set up regional offices around the world, beginning with Brazil.
Today it has offices in many
countries.
To encourage the use and enforcement of the current guidelines
(G4), GRI launched a
60- question multiple-choice exam that enables individuals to
be accredited to use the G4
guidelines. The exam is available in more than 70 countries;
successful participants receive
a certificate and get their name published on the GRI website
for 3 years. While this kind of
recognition may seem narrow, it has significant weight with
environmentally and socially
conscious investors who have come to expect transparent
reporting and this kind of standard
measurement. Also, certified people can go into business for
themselves (or be selected by
employers) to help others create better CSR and sustainability
reports—this provides a way
for CSR and sustainability skills to be turned into financial
benefits. The more people who are
accredited to the GRI standards, the more the GRI brand grows
and the more the reporting
movement gains momentum and standardization. GRI’s vision is
for organizations to con-
sider sustainability throughout their decision-making processes
(GRI, 2015). Such a goal puts
them in partnership with corporate leaders and individuals who
are interested in increasing
CSR and sustainability.
The emergence of Ceres and GRI illustrate how a small group of
individuals can form a collec-
tive and ultimately drive major change. The ability of
individuals to report, support report-
ing efforts, and engage with standardized guidelines has moved
from nonexistent in 1992 to
being the purview of a few experts to being readily accessible
by almost all interested parties.
What have companies done with this ability, and what are the
consumer and competitive
pressures to conform? As stated earlier, data suggests that each
year, more companies report
and that these reports are becoming more accessible, detailed,
and useful to stakeholders.
The following section highlights this progression.
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
Section 9.1Financial and CSR Reports
The Progression of CSR Reports
The three historic phases of CSR reporting clearly show the
gradual mainstreaming of envi-
ronmental issues, which were once seen as the concern of only a
few. Measuring and transpar-
ently reporting environmental impacts in a standardized way has
become common practice.
However, the journey to get to this point featured several
phases, each of which is impor-
tant because they illustrate how CSR efforts move in stages.
This information can encourage
people who want to start a movement related to a different CSR
and sustainability issues.
The phases are also important because they illustrate how
people come to accept new CSR
ideas—and some firms or managers may still be stuck in a
mind-set of an earlier phase. The
ability to recognize how people and ideas mature can help
future leaders and managers work
with people of varied mind-sets.
Phase 1
In the earliest phase of CSR and sustainability reporting,
corporations were more focused on
public image in order to impress shareholders, who mostly
expected annual financial reports.
During the 1970s and 1980s, CSR messages (if they existed at
all) were based on public rela-
tions goals more than truth or adherence to standards. One
important breakthrough came in
1972, when a consulting firm named Abt & Associates added an
unexpected environmental
report to its typical annual financial statements. This pioneering
effort focused strictly on
sharing data on air and water pollution by the company and its
affiliates. Abt & Associates’
financial auditor certified the financial data. But since he was
only trained to evaluate finan-
cial reports, he disclaimed any responsibility for the
environmental data, since no standards
existed for such audits. In response, John Tepper Marlin (1973)
wrote an article for the Jour-
nal of Accountancy suggesting ways accountants could measure
pollution; the article included
a model environmental report, which was subsequently adopted
by a few accounting and
auditing firms around the nation (Marlin & Marlin, 2003). Still,
neither the practice of report-
ing nor the practice of having auditors measure environmental
pollution gained much trac-
tion until the 1980s.
Phase 2
In the second phase of CSR reporting, Mar-
lin continued to innovate and improve on
his original ideas. He found an interested
innovation partner in gourmet ice cream
purveyor Ben & Jerry’s. In a groundbreak-
ing deviation from standard practice, Ben
& Jerry’s commissioned a social auditor to
work with its staff on a report covering the
previous year’s activities. This was unusual
because most firms only hired financial
auditors, not auditors to evaluate social and
environmental practices. For 2 weeks, the
company’s founders gave the social auditor
full access and permission to interview any-
one in the company. The auditor visited not
Toby Talbot/AP Images
Companies such as Ben & Jerry’s, the Body
Shop, and Shell Canada were among the first to
conduct environmental reports.
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
Section 9.1Financial and CSR Reports
only the main ice cream factory but also the smaller facility
where the company made special
products, such as its Peace Pops. The auditor was encouraged to
speak with dairy industry
officials and public and private community representatives—
essentially anyone in the supply
chain or any stakeholders in the industry. In many ways, by
commissioning the audit, Ben &
Jerry’s leadership was requesting a fully transparent 360-degree
view of the company, prior
to the common usage of the term and practice.
The social auditor recommended the resulting document be
titled Stakeholder Report. Schol-
ars suggest that this may have been the first report directed to
and for stakeholders, includ-
ing financial shareholders as well as other stakeholders. That
first stakeholder report was
divided into categories that represented different audiences,
including communities (out-
reach, philanthropic giving, environmental awareness, global
awareness), employees, cus-
tomers, suppliers, and investors (Marlin & Marlin, 2003). This
was notable because it marked
the first time that Ben & Jerry’s considered suppliers to be a
stakeholder. The report was also
a landmark because it was commissioned by Marlin.
This report, as well as others from similarly progressive
companies such as the Body Shop
and Shell Canada, helped introduce a new model of corporate
reporting—a precursor to the
GRI standards. After the first social audit, Ben & Jerry’s
continued to issue social reports,
using different social auditors to refine the concept and practice
of CSR reporting. While these
audits still lacked a set of generally accepted standards by
which to measure CSR, they were
transparent and offered a road map for improvement (and
inspired others).
It is important to note that it was not just awareness and
goodwill that led to the rise in CSR
reporting during the 1980s. Legal issues were also at play in the
United States. The open
records and meeting laws passed in the 1970s as a result of the
Watergate scandal increased
the volume of environmental pollution emissions data that
entered the public record. In 1987
“right to know” legislation was extended by Congress to
establish the Toxic Release Inventory
and the Pollution Prevention Act of 1990, which created a
database that is used by investors
to document environmental progress. It is also a standardized
measurement that shows the
history of compliance (or noncompliance) to environmental
regulation (Katsoulakos, Kout-
sodimou, Matraga, & Williams, 2004).
Phase 3
In the third phase of CSR reporting, the need for third parties to
verify reports emerged as a
requirement (see Chapter 8). Verification bodies such as Ceres
and GRI accredit and certify
organizations’ behaviors, products, and practices using
transparent environmental and social
standards, though these had to be created. This newer phase of
CSR reporting makes the
social auditor stronger and less idiosyncratic and independent,
meaning that social auditing
individuals and teams follow more standards and produce
reports that are more consistent
across and between industries.
The third phase introduced advances that continue to define
CSR reporting. Now, when social
auditors identify a violation, they record the situation, and the
facility has an opportunity to
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Section 9.2CSR Reports and Audits
take corrective action. Violations range from small infractions
such as a minor waste problem
that does not endanger certification, to egregious concerns that
jeopardize the environment
and the possibility of achieving report certification. Auditors
are generally solution oriented
and tend to give the corporation time to address any violations
before the problems affect
certification. Reporting in general, and the role of auditors in
that process, has matured into
an industry where auditors receive standardized training and
follow specific CSR standards
before certifying a company and its reports.
Several agencies and organizations stand out as early leaders in
the final phase of CSR
reporting. Among them is Social Accountability International,
which was founded in 1997
(Marlin & Marlin, 2003). Other auditing pioneers include the
FSC, the International Foun-
dation for Organic Agriculture, and the Fairtrade group.
Together, these groups formed a
larger organization called the International Social and
Environmental Accreditation and
Labelling, which sets reporting standards internationally and
provides uniform training to
thousands of social auditors. This group uses GRI standards as
well as others that change
by industry.
Such agencies help companies assess, measure, and certify CSR
and environmental compli-
ance. The very existence of such a wide number and variety of
certifying organizations indi-
cates how CSR and sustainability reporting has become an
established feature of modern
organizational life. Such reports provide customers, employees,
competitors, governments,
and other stakeholders the ability to evaluate whether firms are
moving toward CSR and sus-
tainability or not. Reports provide a way for people to better
understand and engage with the
CSR journey. However, reports are only valuable if they
represent the truth, and third-party
certification helps ensure such honesty.
9.2 CSR Reports and Audits
Reporting and obtaining certification via an audit is a complex
process that requires sup-
port and expertise. For organizations interested in starting or
dramatically improving
sustainability reports, the GRI offers guidelines on how to start.
As companies begin to
create CSR reports—and as these become more accessible,
valuable, and informative—
new formats and publishing platforms emerge. For example,
most reports are published
on paper, but a company named Symantec published both a
paper and an online CSR
report in 2015.
A detailed outline of how to create and publish a viable CSR
report is outside the scope of this
chapter, but every employee and future leader will likely need a
high-level understanding of
the process (see Figure 9.1).
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Section 9.2CSR Reports and Audits
Figure 9.1: GRI outline for CSR reports
f09_01
Step 1:
Identify
Step 2:
Prioritize
Step 3:
Validate
Step 4:
Review
CSR Report
Principles
Materiality
Stakeholder
Inclusiveness
Sustainability
Context
Completeness
Source: Adapted from “How to Define What Is Material,” by G4
Online, 2013 (https://g4.globalreporting.org/how-you-should-
report/how-
to-define-what-is-material/Pages/default.aspx
To begin, a publisher would focus on the steps of the process—
identification, prioritization,
validation, and review—to determine the organization’s most
significant economic, environ-
mental, and social impacts. The next task is to utilize four
reporting principles that define
report content. These include the following:
1. Materiality: Information must relate to the firm and its
operations and cannot be
unrelated or distracting.
2. Stakeholder inclusiveness: The report must not leave out key
participants in the
value chain or stakeholder set.
3. Sustainability context: Reports need to be clear about what is
and is not included for
evaluation.
4. Completeness: Report authors need to clarify how thoroughly
they followed an issue
or topic (GRI, 2015).
The principle of materiality refers to the data’s relevance to
day-to-day operations. Think back
to the discussion of greenwashing in Chapter 8—when reports
offer interesting but noncen-
tral data, companies end up reporting on nonmaterial aspects of
the business that might be
misleading. The principle of stakeholder inclusiveness is
foundational to the process—recall
how the early report from Ben & Jerry’s revealed to the
company the then radical idea that
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Section 9.2CSR Reports and Audits
suppliers were stakeholders. This type of awakening is possible
in every industry as leaders
fine-tune the definition of stakeholder inclusiveness. The
principle of sustainability context
ensures that reports include how an organization’s performance
influences sustainability
in a wider context (locally to globally). Finally, completeness
ensures the report’s topics are
adequately covered to provide stakeholders with sufficient
information about the organiza-
tion’s economic, environmental, and social performance. The
report should also detail its own
process and methodologies used, as well as mention any trade-
offs or assumptions involved
in creating the report. Once the report is ready, many companies
ask a third-party agency to
verify and validate it.
CSR Report Auditors
Earlier in this chapter, we discussed the way GAAP guidelines
inform the …
6 The Corporation as Steward
Hxdyl/iStock/Thinkstock
Learning Objectives
After reading this chapter, you should be able to:
1. Compare and contrast the responsibilities of fiduciaries and
corporate stewards.
2. Assess the impact on the environment and how a life cycle
assessment can identify a product’s,
process’s, or service’s true cost to society.
3. Describe government regulatory agencies in the United
States, the European Union, and the global
environmental movement.
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Section 6.1Corporate Fiduciary Stewardship
Pretest Questions
1. A fiduciary is another term for owner. T/F
2. Unit process data only considers the economic cost of
production. T/F
3. Yellowstone National Park was created during the Industrial
Revolution. T/F
Answers can be found at the end of the chapter.
Introduction
In this chapter, we examine the notion of financial and
nonfinancial stewardship and examine
how the corporation can be a steward of people, profits, and the
environment while managing
and even repairing environmental impact and damage. Firms
interact with (and sometimes
extract from and pollute) the natural environment in multiple
ways. Buildings use wood and
metal from forests and mines; companies require electricity
(from coal, wind, solar, nuclear,
or other sources of energy); and computers use components
from mines and fabrication
plants. Firm employees who drive to work use energy and likely
create pollution in the pro-
cess. Manufacturing companies use natural and human-made
inputs to create new products
for sale.
This chapter examines the relationship between the natural
environment and the corpora-
tion. It addresses the environmental issues introduced in
Chapter 5 and explores the true
social, environmental, and financial cost of certain corporate
activities. Part of addressing
how companies relate to the environment includes discussing
how they comply with legal
regulations, best practices prescribed by nongovernmental
agencies, and international orga-
nizations (such as the United Nations). This chapter describes
analytical tools that allow peo-
ple to identify risks, rewards, and impacts related to creating,
using, and disposing products
and services. These tools also provide data for companies that
want to create less damag-
ing or more restorative products. The discussion then turns to
communitarianism, the green
movement, and the formation of environmental regulatory
agencies in the United States and
European Union. It closes with a short discussion of how
strategic concerns about risk man-
agement and human welfare issues related to water rights and
water supplies may dominate
corporate conversations going forward.
6.1 Corporate Fiduciary Stewardship
Building on the environmental issues described in Chapter 5,
this chapter examines the role
and responsibilities of a corporate leader. Central to this
discussion is a pressing dilemma
of conflicting incentives that leaders in most publicly held
corporations face. By definition,
a publicly held corporation has multiple partial owners who
likely invested to gain a maxi-
mum return on their investment. Return on investment (ROI) is
a tangible, objective measure
of an investment’s quality. ROI measures the amount of return
relative to cost. To calculate
ROI, divide the return or benefit of an investment by its cost.
The result is a ratio that allows
investors to compare different types of opportunities so they can
evaluate the efficiency and
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Section 6.1Corporate Fiduciary Stewardship
effectiveness of each choice and select the most profitable (or
otherwise ideal) option. Most
publicly held corporations are expected to deliver a high ROI;
otherwise, investors will take
their money elsewhere. By law, corporate leaders in public
firms have a legal responsibility to
provide a return on investment in both the short and long term.
This means corporate leaders
are required to manage trade-offs. Specifically, leaders of
public firms manage the trade-off
between protecting and restoring the environment (which can
have costs that reduce ROI in
the short term) and using the environment with less care in
order to improve ROI for owners
in the near term.
A fiduciary refers to a person who holds a legal relationship of
trust with one or more par-
ties (such as shareholders). Typically, a corporate fiduciary
prudently takes care of money or
other assets. Corporate leaders by default become fiduciaries, or
people with a special duty to
owners/shareholders to protect and keep assets safe but also
efficiently and effectively use
assets. By law, a corporate leader cannot profit at the expense
of corporate shareholders; he
or she can also be fired for not managing funds to maximize
profits. In other words, leaders
are morally and legally bound to seek profit on behalf of owners
(Inc., n.d.). Thus, fiducia-
ries are stewards, or caretakers, of the financial side of
business. However, seeking profit for
shareholders is not the only aspect of the complex notion of
stewardship.
Peter Block is a thought leader in the world of business who
spent the past 40 years advocat-
ing for an expanded notion of corporate stewardship; one that
goes beyond fiduciary con-
cerns. Rather than just representing the interests of
shareholders, Block (2013) advocates
that corporations should adopt a stewardship model of
management whereby they treat
people and natural resources as assets to be cared for, nurtured,
preserved, and respected.
Stewardship commonly refers to the responsible care and
management of an asset over time
that allows for sustainability and growth. Some argue that
stewards are caretakers who bal-
ance all interests in the hopes of sustaining the life and value of
an asset (Inc., n.d.). For Block,
stewardship is a mind-set that changes the fundamental way
corporate managers and leaders
behave. Block suggests that not only are managers and leaders
stewards of what happens
within the corporation, they are also stewards of the
corporation’s social and environmental
impacts.
Block (2013) says that corporate leaders are responsible for
ethical communication and for
providing a quality good or service. He challenges corporate
leaders to tend to environmen-
tal issues while simultaneously being fiduciaries of the financial
bottom line. Block makes a
compelling argument that most corporations act in immediate
self-interest and do not have
the capacity to balance long-term environmental needs with
demands for short-term profit.
Stewardship involves listening and weighing multiple interests,
including long-term financial,
social, and environmental interests, in addition to short-term
financial ones.
Religious, social, and environmental movements have long
advocated the notion of steward-
ship over resources, which suggests that human and natural
resources have intrinsic and
long-term value and thus should be viewed with a long-term
mind-set. But Block’s version of
environmental stewardship suggests going one step further—to
restore environments. Such
restorative behaviors include removing trash, planting trees,
leaving nature as you found it,
and actively caring for people and places. Stewards have a wide
range of choices in how to
act and may often feel squeezed between the short-term wants
of people and the longer term
needs of future generations and place or the environment.
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Section 6.1Corporate Fiduciary Stewardship
According to Block (2013), good stewardship often means
choosing service over self-interest
and creating long-term value over short-term gain. He suggests
that stewardship can protect
the earth from harm by making people accountable for the
outcomes of an act or institution,
without forcing, controlling, or taking unwanted charge of
others.
In other words, good corporate stewards commit to the long-
term well-being of their region,
society, and environment. They also recognize the
interdependencies between four spheres:
1. Economy
2. Livable community
3. Social inclusion
4. Governance
Regarding economy, a good steward attempts to take into
account financial factors previously
discussed, such as shareholder investments, expectations, and
profits. But these interests can
best be sustained within a livable community, one that is
capable of providing well-trained
and empowered employees who are able to lead healthy and
productive lives. This means that
good stewards attempt to practice inclusion by involving all
stakeholders in communication,
and they practice, submit to, and attempt to exemplify
appropriate governance.
In order to embody this view, good stewards consider and work
across boundaries of juris-
diction, sector, and discipline to connect these four spheres and
create opportunity for the
region.
It should be noted that people who are not necessarily corporate
leaders are also considered
stewards. For example, educators and students exercise
important stewardship over society,
the environment, and future generations when they study the
world’s various interconnec-
tions. Society also entrusts politicians and civil servants to be
stewards of regions, resources,
and people’s well-being. Citizens can remove these privileges
(by vote or impeachment) if
government leaders do not practice stewardship. Owners can
also remove corporate stew-
ards (managers) if they are not acting in the corporation’s best
interests.
In some way, we all have stewardship roles. To be sure,
corporate leaders have macro stew-
ardship responsibilities, but employees at all levels are
accountable for many of the same
issues. People who work for firms come face-to-face with
stewardship issues if they waste
resources, are asked to dispose of toxic waste inappropriately,
take safety shortcuts, or lie on
a financial report. Stewardship is a shared responsibility. To
better understand our own stew-
ardship responsibilities, it is critical to discuss the concepts of
ownership and responsibility.
Types of Ownership and Responsibility
There are many different conceptualizations of ownership, and
different kinds of owners feel
different levels of stewardship vis-à-vis the organization. The
concept of private and transfer-
able ownership lies at the core of most functioning capitalist
societies. People in functioning
capitalist societies typically understand that a person or entity
who owns something can
transfer that property to another person through a sale or
through inheritance. A person who
owns a piece of property (or a company) also has a stewardship
over that property or firm;
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Section 6.1Corporate Fiduciary Stewardship
such stewardship can be formally trans-
ferred to another person. Essentially, own-
ership carries with it the opportunity to be
a steward.
In a totalitarian state, ownership of private
property is disallowed or carefully con-
trolled—this makes it harder to be an effec-
tive steward because owners usually have
more power than other stakeholders. In
Communist states, such as the former Soviet
Union and contemporary North Korea, the
concept of ownership is totalitarian, and
the state owns most businesses and other
factors of production. In contrast, the United States and
European democracies conceive of
ownership as a state in which assets can be held privately or by
different government entities,
including on national, state, and local levels. For example,
governments may own transporta-
tion systems, such as Amtrak in the United States or British
Rail in the United Kingdom. Many
of the older European airlines, such as Air France, KLM, and
Swissair, began as government-
owned businesses. They have since been privatized or are
semiprivate, which means they are
jointly owned by government entities and private companies.
Partial ownership creates stewardship and legal challenges; it is
difficult to determine who
is responsible for performance when both shareholders and
elected governments own part
of a corporation. This state of affairs is further complicated
when an owner needs to be held
responsible by a court of law. When legal entities hold someone
responsible for environmen-
tal damage, for example, it is difficult to prosecute or defend
owners when the owner is the
same government that manages the regulatory agency.
Extending Ownership and Responsibility
When a corporate stakeholder sees a poorly calculated decision
or one that has a negative
environmental impact, it may not be easy for him or her to
signal concern; nor are such warn-
ings necessarily welcomed. It is clearly documented, for
example, that engineers from the
Morton Thiokol corporation foresaw the failure of the space
shuttle Challenger and tried
unsuccessfully to block its launch (Atkinson, 2012). When the
Challenger exploded on Janu-
ary 28, 1986, all seven astronauts on board were killed.
The first person to convincingly sound the alarm about social
and environmental concerns
(also known as a whistle-blower) serves as an early warning
system for the larger commu-
nity. While many people think of themselves in the role of
steward, many others believe they
are powerless to change systems and organizations. However,
this is not necessarily true, as
many important voices have pointed out. Among them is former
Czech Republic president
Vaclav Havel, who was a political organizer during the Soviet
occupation of his country dur-
ing the 1980s. In 1985 he wrote a compelling essay about the
powers of the seemingly weak.
In it, Havel (1985) argues that even those in the most
oppressive situations have power and
responsibility to change the system for the better. Similarly,
Margaret Wheatley (1996, 2003),
Frank Duenzl/picture-alliance/dpa/AP Images
Amtrak is an example of state ownership.
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Section 6.2The Cost of Failed Stewardship
a thought leader in the world of business and an expert on
complexity theory and leadership,
believes that stewardship resides in everyone, regardless of the
social and leadership envi-
ronment in which they live.
This stance illustrates how some people, such as Wheatley,
consider individual workers and
actors to be quite powerful. Such a mind-set suggests that one
need not wait to have a leader-
ship position or be deeply experienced and highly credible to
guide an organization to sus-
tainability. Everyone has the capacity to be a good steward and
advance the interests of the
organization and the greater good.
How can stewards at all levels of an organization take
appropriate stances on critical con-
cerns? By respecting, encouraging, and considering multiple
voices.
Extending the ideas of Havel and Wheatley, Max De Pree, the
longtime leader of the Her-
man Miller corporation (manufacturers of office furniture),
publicly fostered the idea of an
inclusive corporation, or one in which all voices are heard and
given credence. He wanted
to create a caring organization that was also financially
successful. Because of that belief, he
opposed business ideas that only benefited senior management.
He suggested that good lead-
ers and stewards are open to communication. But most of all, he
was known for talking and
listening to anyone and considering and enacting ideas from all
levels of the company (De
Pree, 1987). Unlike Wheatley and Block, who are consultants
and idea leaders, De Pree was a
manager and corporate actor. His ideas focused less on what a
steward is and more on what
he or she does.
6.2 The Cost of Failed Stewardship
Up to this point, stewardship has been described as both a mind-
set and a set of behaviors
that can be distributed or enacted from inside or outside an
organization. Equally important
to cover are stewardship failures; indeed, examining failures
creates another way to motivate
action. Most instances of failed corporate stewardship go far
beyond harming financial stake-
holders. Such failures impact the social community, the
environment, employees, the legal
system, and the banking system (Clarke, 2004). For example,
the potential failure of the U.S.
auto industry in the 2008 recession triggered Congress to offer
massive financial aid to top
manufacturing companies. The subsequent financial “bailout”
was justified for a variety of
reasons, including to preserve jobs and national security.
However, the same bailout cost tax-
payers; cost the firms in reputational capital; and cost citizens
and investors stress, in terms
of uncertainty and fear.
What are the additional costs when stewardship fails? These can
be seen in the blunder by
Atlas Minerals, a now closed industrial site near the entrance of
the Arches National Park in
Moab, Utah. Driven by a demanding client and a perceived
threat, members of management
did not consider the longer term environmental impacts when
they decided how to mine and
store uranium. Atlas Minerals was not considering
sustainability, which involves meeting the
needs of the current generation without compromising the needs
of future ones.
Arches National Park is a tourist destination for visitors from
all over the world; they come
to see beautiful red rocks that have been hollowed by wind
erosion. But in contrast to these
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Section 6.2The Cost of Failed Stewardship
natural wonders sits Atlas Minerals. When Atlas operated
between 1960 and 1990, it stored
large piles of tailings, or leftovers from the extraction process
from the region’s uranium
mines, at the edge of the Colorado River. The Atlas Minerals
mine and industrial site primar-
ily provided fuel for the nation’s nuclear reactors and helped
create fuel for nuclear weapons
used to defend the United States. As the need for uranium
dwindled, however, scientists and
the general public learned more about the toxicity of the
uranium tailings. Not only was the
dust from the tailings contaminating the population near Moab,
but water seeping through
the tailings was also flowing into the Colorado River, Lake
Powell, and the Grand Canyon.
What was once thought of as an acceptable risk and normal by-
product of manufacturing was
finally seen as an environmental disaster. With such discoveries
and related changes, Atlas
Minerals entered Chapter 11 bankruptcy, and in so doing
dodged liability for undertaking
a massive cleanup that cost many times more than the company
was worth. Since then, the
DOE has taken over the site (Grand County Utah, 2016) and is
now tasked with cleaning up
all such sites that contributed to pollution related to the creation
of nuclear weapons (Yahoo!
Finance, 2016).
After the DOE assumed ownership of the land, it set up a trust
to fund the site’s cleanup.
As of 2016, only 50% of the tailings had been removed.
Trainloads of radioactive tailings
are continuously removed from the site—about 5,000 tons each
week. The tailings are taken
approximately 40 miles away to a location considered less
environmentally sensitive because
it is not at the edge of the Colorado River (Yahoo! Finance,
2016). The project will cost taxpay-
ers many times the amount that Atlas Minerals made in profit
during its years in production.
In fairness, corporate leaders who in the 1950s endorsed the
plan to build a uranium mill and
store tailings near the Colorado River did so with the approval
of, and even encouragement
from, government agencies. They operated using the best
science of the time, although there
were environmental engineers, local workers, and others who
could see the folly of putting
a radioactive tailings pile so close to the Colorado River.
However, their concerns were dis-
missed, ignored, or discounted.
For the sake of short-term cost savings and expediency, and due
to a narrow definition of
impact, a river was polluted, the life expectancy of nearby
humans and animals was reduced,
and the cost of conducting a massive cleanup was passed on to
taxpayers. In contrast, cor-
porate leaders of today and the future, especially those who take
a stewardship mind-set,
research the impacts of location, sourcing, and product
ingredients on current and future
generations before making decisions.
If we agree with Havel, Wheatley, and De Pree, then most (but
not all) of the blame goes to
those who own the corporation. The bad planning, failed
science, poor execution, and bank-
ruptcy are not just the failure of corporate leaders, but also of
regulatory agencies, govern-
ment, and even local citizens and employees. We all share in the
blame for poor stewardship if
we are connected to a community. But as problems get larger
and involve more stakeholders,
it becomes increasingly difficult to reach agreement and take
collective action.
In addition, it may seem difficult to foresee the impacts of
large-scale corporate activities
on future generations. However, several tools can help assess
the environmental impact of
a product, process, plant, or any other activity in which an
organization may engage. One is
the life cycle assessment (LCA), which provides a way to
measure a corporation’s environ-
mental impact and includes energy costs and material usage
information. An LCA describes
the process of evaluating the social and environmental
implications associated with creating,
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Section 6.2The Cost of Failed Stewardship
consuming, and disposing of a product, process, or activity
(American Center for Life Cycle
Assessment, 2016).
The LCA allows corporations to examine waste, reduce costs,
and innovate products and ser-
vices. In other words, it can lead to both short-term and long-
term fiscal and environmental
benefits if firms utilize its data to innovate.
It is often assumed that LCA projections are approximate and
should be adjusted when more
exact information becomes available. However, leaders should
not avoid LCAs or leave them
half finished due to lack of perfect information—instead,
leaders should make solid assump-
tions, state what these are, and continue with the LCA process.
LCAs can be extensive, comprehensive, and therefore costly,
depending on their level of detail
and accuracy. But they can also be enlightening, even in their
simpler and less expensive forms.
Whether extensive or simplistic, such analyses evaluate energy
inputs, environmental emis-
sions, and the social implications of business operations. In
contrast, the cost of not doing an
LCA can also be extensive, as seen in the Atlas Minerals case;
it can result in firms mistreating
stakeholders, wasting resources, incurring internal expenses, or
receiving bad publicity. Run-
ning an LCA would help managers identify and address weak
spots and risky areas.
When managers do not assess impacts, they may fail to see risks
as well as opportunities to
evolve products to mitigate environmental and social impacts.
For example, after performing
an LCA, Levi Strauss & Company implemented changes to
mitigate the environmental impact
of its jeans.
CSR and Sustainability in Action: Levi Strauss & Company
An LCA done by Levi Strauss & Company in 2016 showed that
approximately 1,003
gallons of water are used to make a single pair of jeans.
Producing the material accounts
for 680 gallons, and the washing and cleaning of machines and
manufacturing facilities
account for the rest. Almost 70 pounds of carbon dioxide are
produced to create each
pair of jeans, mostly during fabric production. The LCA, which
follows the product from
birth to end of use, also found that Americans wash jeans, on
average, after wearing
them 2 times. Europeans wear them 2.5 times, while Chinese
wear them 4 times before
washing. The LCA suggested that if consumers wear their jeans
10 times before washing
them, they could reduce the environmental impact of jeans by
77%. Using cold water
and air-drying them would further reduce jeans’ environmental
footprint (Levi Strauss &
Co., 2016).
Using these findings, Levi Strauss implemented the Project
WET Foundation to train
employees to save water and educate others on ways to conserve
water. The company
also used the LCA results to partner with Goodwill and
implement a special tag on
Levi’s products encouraging consumers to consider the planet
before washing the item.
The tag also suggested which washing settings to use to reduce
environmental impact
and encouraged those who buy jeans to donate clothes rather
than throwing them out.
Because of the LCA findings, Levi Strauss found innovative
ways to reduce its product’s
environmental impact and to encourage others to become
stewards of the environment.
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resale or redistribution.
Section 6.2The Cost of Failed Stewardship
The LCA Process
While there are several different approaches to undertaking an
LCA, the cradle-to-grave
assessment (the approach used by Levi Strauss) offers
comprehensive data and is most accu-
rate, because it looks at the complete process of making a
product. Cradle-to-grave is a term
that refers to the time from initial manufacture or “birth” of a
product or service to its dis-
posal or “death.” The cradle period for a car, for example,
involves the extraction of metals,
chemicals, and minerals for car parts and electronic
components, and the extraction of petro-
leum for plastics and the gasoline or electricity that will power
the car. Performing an LCA
for a car also means considering its end-of-life destination,
which for many cars is either a
junkyard, a landfill, or a recycling facility, where some or all of
the parts are extracted and
reused. As another example, consider the cradle-to-grave LCA
of a newspaper. Harvesting and
grounding trees into pulp is an energy-intensive process. Paper
is produced from the pulp;
the paper is shipped to suppliers and then sent on to printing
facilities that print ink on it. The
same facilities fold and prepare the paper to ship to vendors.
The paper is then delivered to
homes and offices in cars and trucks that produce pollution and
are powered by fossil fuels. At
this point, the paper has left the cradle stage and is now moving
through the life stage, where
it is consumed (read). It is then disposed of and heads toward
the grave stage. Newspapers
(those that still exist in this digital age) can be burned, used as
wrapping or protective cover,
be recycled, or thrown away to decompose in landfills. The
impacts of each grave can also be
analyzed. If papers are recycled, one possible outcome is to
create cellulose insulation, which
can be installed in homes and offices. It is also possible to
calculate the fossil fuel savings
from the insulation, along with the effects of most other steps in
the life cycle. Conversely, if
the papers are burned, then the release of carbon can also be
measured and assigned to the
product LCA measurement tally.
When recycling costs and benefits enter the picture, some
people suggest that the LCA
becomes a cradle-to-cradle analysis. Cradle-to-cradle was
discussed in Chapter 5.3; the term
was coined by design advocate Bill McDonough, who suggested
that when the output of one
cycle can be the input for another cycle, then materials need
never enter landfill or junkyard
“graves.” When the process of making and using a newspaper
ends with landfill expenses and
impacts, then the analysis is a cradle-to-grave analysis. If,
however, the analysis includes data
on recycling and finding alternative uses for the product, then it
begins to resemble a cradle-
to-cradle analysis (McDonough & Braungart, 1998).
Note that there is an entire industry of firms and practitioners
interested in conducting LCAs.
As these needs have increased, so has the need to standardize
and develop processes that
enable comparisons and ensure accuracy. There are widely
accepted standards in place that
are managed by the International Organization for
Standardization (ISO). Specifically, stan-
dards such as ISO 14040 and 14044 explain how to conduct
LCAs. Both sets of standards
recommend that the process include four distinct phases (as
illustrated in Figure 6.1). These
phases, or steps, are interdependent, which adds to the
complexity of the analysis. Further
complicating matters is the back-and-forth nature of this
process, where, for example, changes
in goal and scope impact inventory analysis, and changes in
inventory analysis impact goal
and scope.
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Section 6.2The Cost of Failed Stewardship
Figure 6.1: Major components of a life cycle assessment
f06_01
InterpretationInventory
Analysis
Goal and Scope
De�nition
Impact
Assessment
Phase 1: Goal and Scope
An LCA begins with the statement of scope and a goal for the
study. The statement establishes
the context for the study and explains what added value to
expect from the project—it gives
the project a framework, purpose, and context. Some managers
might want to do an LCA to
understand carbon-related issues, while others might want to
understand labor, landfill, or
water-use concerns. Thus, all parties …
3 Looking Inward: Employees, Suppliers, Investors
Monkeybusinessimages/iStock/Thinkstock
Learning Objectives
After reading this chapter, you should be able to:
1. Understand the three ways to become “vested” in a company
and differentiate between the three kinds
of stakeholders.
2. Analyze employee types, strategies to motivate employees,
and employees’ rights as described by inter-
national agreement and U.S. law.
3. Describe the various kinds of suppliers, ways to motivate
suppliers, and suppliers’ rights.
4. Summarize the types of investors, ways to motivate investors,
and the rights of shareholders and
owners.
5. Summarize shareholder activism.
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Section 3.1Vesting and Corporate Ownership
Pretest Questions
1. Suppliers are not internal to a company and are therefore not
“vested” in the
corporation. T/F
2. Research shows that employees of companies with employee
stock ownership plans are
more committed to their company. T/F
3. Suppliers are solely motivated by profit margin in deciding to
whom they will sell. T/F
4. An investor cannot be an employee. T/F
5. A B corporation is a simple tax designation for a type of
corporate structure. T/F
Answers can be found at the end of the chapter.
Introduction
Chapters 1 and 2 introduced the idea of stakeholders and
stakeholder analysis and showed
how corporate social responsibility can originate from or spread
through social networks.
This chapter examines stakeholders who are internal to the
corporation. Specifically, it
focuses on three different kinds of stakeholders: employees,
suppliers, and owners/market
stockholders. To reflect the complex nature of business, the
chapter also addresses how the
lines blur between different types of stakeholders who are
financially or emotionally con-
nected to the modern corporation. For example, some employees
are also owners, and some
owners are also suppliers. These arrangements can create
complex governing problems for
the corporation. Such complexity increases when owners and
employees have certain legal
rights. To illustrate how CSR includes—and sometimes begins
with—taking care of internal
stakeholders, the chapter examines how various regulations and
laws currently protect both
owners and employees. In order to deal with the complexities of
corporate governance and
the desire for many corporate stakeholders to create more than
just wealth, we also examine
different corporate offerings. Specifically, we look at programs
such as employee stock own-
ership plans that enable employee-owned firms, and we
investigate benefit corporations as
a new form of corporation. These two options alter the
corporate governance scene and the
way that firms relate to communities and stakeholders. Taken
together, the information in the
chapter begins to define the current context for CSR and
sustainability efforts and reveals key
CSR and sustainability opportunities for leaders and managers.
3.1 Vesting and Corporate Ownership
What does it mean to “vest” in a company or to “have a vested
interest”? A vested inter-
est refers to having personal stake or involvement in a firm.
Often, having a personal stake
means being or becoming an owner or part owner. Of course,
anyone working with or for a
firm can have a vested interest if the person has a chance to
benefit when the firm succeeds.
For example, employees and suppliers can have a vested interest
in a company because they
receive payment or another benefit from the company. However,
to be vested in a firm has an
additional meaning that is typically associated with purchasing
stock. Most large companies
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Section 3.1Vesting and Corporate Ownership
are publicly traded—meaning that small pieces of company
ownership in the form of stock
can be exchanged in return for cash. In such cases the many and
varied individuals and insti-
tutions that own shares in the company actually own the
company together.
Before the rise in new employee incentives related to stock
ownership, there were only two
kinds of stakeholders vested in corporations: financial investors
and owners. Now, in the age
of globalization and with an increase in firms where managers
reward employees with a mix-
ture of wages plus the promise of staged future ownership with
stock options, there are at
least three categories of people vested in corporations:
employees, owners/investors, and
suppliers (see Figure 3.1).
Figure 3.1: Three types of corporate ownership
f03_01
SuppliersEmployees
Investors
Such ownership distinctions matter in a book on sustainability
and CSR for several reasons.
First, by definition, people vested in a firm tend to care more
deeply about how it behaves.
Secondly, people who are vested in a firm become partially
responsible (legally and mor-
ally) for how it behaves. Some people (typically employees)
have a vested interest in the firm
even if they do not technically own the firm outright or have
stock or stock options. Finally,
people vested in a firm also comprise key stakeholders (see
Chapter 2), so considering their
voice is part of running a sustainable and socially responsible
business. The following sec-
tions describe different types of vested stakeholders.
Vested Employees
Employees constitute the first type of people vested in a
corporation. One way employees vest
in the corporation is by bringing talent, skills, labor, time, and
in the best cases, loyalty and
commitment to the workplace. Another way employees vest in a
corporation is by purchasing
stock, a topic discussed later in this chapter. Most companies
pay employees every 2 weeks
or monthly, with bonuses paid out quarterly, annually, or
semiannually. The anticipation of
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Section 3.1Vesting and Corporate Ownership
future benefits (financial, social, reputational, learning, or
other) allows employees to commit
to giving their time and talent to a commercial enterprise.
Vested Suppliers
Suppliers represent another type of entity that can become
vested in a company. A supplier
is another company or corporation that provides the company
with the appropriate parts,
inventory, and/or service inputs required for the company to
create its products and services.
It may sound surprising to suggest that a supplier would be
vested in a client, but this is cer-
tainly the case if you follow the financial logic. The supplier
vests in the future of a client’s
company in anticipation of ongoing financial reward in the form
of continued sales, increased
sales, or sales referrals. Suppliers (or the parent companies that
own and manage supplier
companies) can purchase a formal stake in the future of the
companies they serve by buying
large amounts of stock or by forming legally binding
partnerships. Thus, suppliers have a
range of options in terms of their degree of vested interest; but
by definition, any supplier to
a firm has a vested interest in it.
Vested Owners or Investors
Another way individuals develop a vested interest in a company
relates to investing money
as owners, part owners, or nonequity investors (investors with
no ownership rights but with
other rights as negotiated at the time of investment). Investors
provide a business or project
with funding or other resources, and in return they expect a
financial benefit. An owner of
a company invests in the company for a variety of reasons, but
the most common relates to
securing rights to future financial benefits in the form of
increased stock price. Investors and
owners provide capital, absorb risk, and over time expect a
return on that investment. Inves-
tors also provide resources because they believe in the
company’s mission or vision or its
product or service, and they want to see the venture succeed—
not every investor is focused
solely on financial returns.
One defining feature of CSR and corporate sustainability relates
to how both topics expand
the idea of “value” and “responsibility” to spheres beyond the
financial. As mentioned, inves-
tors, employees, and suppliers invest in, work for, or supply a
firm for financial reasons, or for
nonfinancial reasons such as believing in the mission, the
management, or the technology or
service. In many businesses, owners and investors work in the
business, or at the very least
actively advise the firm. A typical image of an investor is a
Wall Street tycoon, distant from
the place where work is done. However, most businesses in the
United States are small busi-
nesses, and owners and investors often work alongside
employees to enhance the business’s
product or service.
Each category of person possibly vested in a corporation differs
in relationship to the com-
pany, and perhaps in terms of the amount invested or the ease of
access to speak with and
influence management. In the following sections, we look at the
unique relationships each
group has with the corporation; the relationships differ by
category, and thus the opportunity
and best ways to engage each one differs too.
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Section 3.2Employees
3.2 Employees
In the 21st century, corporate managers view workers
differently than they typically did
in the past. Also, employees increasingly have different types of
commitments to firms. For
example, in technology firms and many new nontechnical
startups, employees are seen as
family, essential members of a work community. Employees
often feel the same way about the
firm (AFL-CIO, 2015). Modern companies show more
commitment to employees than they
did in previous decades, in part because there are fewer choices
for substitutes—at least in
sectors that employ skilled workers. Many technological
problems require specific technical
expertise that is rare or unavailable in the broader market.
Consider the skills of computer programmers, coders, and
systems engineers—these skills
are specialized and not evenly distributed among the job-
seeking population. Other indus-
tries face similar situations: Medical personnel have technical
training and are currently in
high demand by employers. Over time, specific industries create
specialists and subspecial-
ists, and employees and employers in these industries develop
new interdependencies—one
worker can no longer be easily substituted for another.
Employees in such situations also per-
sist in working for the company’s success, because the
employee’s financial future depends on
it—especially when his or her specialization is so specific that
the employee cannot find other
work without significant retraining. The employer needs the
relationship to persist because
firms cannot easily or inexpensively find a replacement in the
labor market. For example,
many software companies and medical service firms continually
adjust to market needs by
training current employees on anticipated future needs and
providing employees with incen-
tives to stay at the company.
Types of Employees
Most firms categorize employees in ways that relate to federal
employment regulations. In
most firms there are four basic categories of employees: full-
time, part-time, independent
contractors, and informal employees.
Full-Time Employees
Full-time employees work either hourly or on a salary. Hourly
employees in the United States
are typically required by law to spend 30 to 40 hours a week
performing their work duties.
Salaried full-time employees differ from hourly full-time
employees in that they have a con-
tractually defined responsibility. They must manage that
responsibility and complete asso-
ciated tasks in exchange for a monthly paycheck no matter how
many hours they work—
sometimes they might be able to complete requirements in under
30 to 40 hours a week,
and at other times they may work more than this amount. Unlike
hourly employees, salaried
employees generally do not track work time in any formal way
and typically cannot earn more
by working more hours. Another difference between the two
relates to the fact that full-time
salaried employees generally receive health, retirement, and
other benefits paid for or par-
tially subsidized by the company.
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Section 3.2Employees
Part-Time Employees
The second kind of employee is a part-time employee; he or she
is generally paid by the hour.
Part-time employees generally work less than 30 hours per week
and do not receive com-
pany-provided or company-subsidized benefits, although there
are some exceptions. For
example, the Starbucks Corporation has received significant
press coverage for its decision to
offer health benefits and tuition reimbursement to part-time
employees. Part-time employ-
ees have a variety of reasons for choosing to work part time,
including preferring the work
arrangement and the flexibility or wanting to sample work
environments at different places.
Employers who take better care of part-time (and full-time)
employees can become employ-
ers of choice and can likely select from a large applicant pool.
Independent Contractors
The third kind of employee is an independent contractor. An
independent contractor works
when contacted for a specific skill or project. He or she works
for a specific amount of time
and for a specified salary or hourly wage; there is typically no
expectation that the employ-
ment arrangement will extend past the life of the project or
specified time.
Note that when someone builds a house or other structure with a
specific builder, the builder
then contracts (or subcontracts) with skilled people (or many
different ones) to complete
the various specialized tasks related to building the structure
within a specified time frame
and quality level. In most cases, no builder can possibly
perform all required tasks with equal
skill, speed, and precision as what can be accomplished by
various specialists hired for the
tasks. The same logic applies to building a corporation or other
organization, and the rea-
sons a corporation might seek contract employees are the same:
Some people have a specific
skill set for doing a certain job, and they should be paid to
perform that job but not remain
associated with the company once the job is complete. A
contract employee is not consid-
ered an employee in current U.S. legal terms, but in modern
(nonconstruction) firms, contract
employees may provide accounting, payroll, janitorial,
marketing, consulting, or other spe-
cialized services. An independent contractor might also be
someone who works seasonally.
Informal Employees
The fourth and final kind of employee is the informal
consenting employee. This person might
be a friend, spouse, intern, or volunteer. Regardless of the
relationship, the informal employee
also comes to the corporation to help complete a task. Informal
employees are not legally
considered employees, and thus have fewer rights and
protections than formal employees.
Note that informal employees are not the same as illegal ones.
Illegal employees are those
who do not have legal documentation to work in the United
States or the country of interest.
Therefore, any firm that accepts, demands, or pays for such
labor is breaking the law. Often,
informal employees with legal documentation do not receive
wages (such as in the case of
unpaid internships, where people work in exchange for
experience rather than money), or
they receive minimal wages. Informal employees may receive
nonwage benefits such as insur-
ance coverage (as is the case with volunteer firefighters in most
U.S. states) or benefits such
as experience and industry exposure or positive personal
references (common benefits of
unpaid internships).
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Section 3.2Employees
Every type of employee has a differ-
ent relationship with the corpora-
tion, and the working assumption is
that the closer and more financially
direct the relationship with the
employee, the deeper the engage-
ment. It can generally be assumed
that the full-time employee has a
deeper engagement with the corpo-
ration and that a part-time, infor-
mal, or contract worker has less of a
commitment to the corporation’s
future. Full-time employees tend to
stay longer, be paid more, and have
financial and promotion futures
more directly tied to the future of
the corporation.
Figure 3.2 shows the range of rela-
tionships that corporations have
with the types of employee stake-
holders vested in the corporation.
As the figure indicates, many dif-
ferent options exist. An employee
might be a partial owner. A contract
employee might also be a supplier.
A part-time employee might have a
spouse or partner who is employed
full-time at the same place. It is
important people understand the wide number of options that
now exist in the modern work
environment. Anyone interested in CSR and sustainability,
particularly regarding employees
and employee rights, needs to keep a close eye on the many
different ways firms define the
concept of “employee” and “owner.”
Motivating Employees
Corporate managers understand the importance of motivating
their highest quality workers
to have a long-term commitment to the firm. The costs to attain
new talent vary by job and
industry type, but the costs associated with turnover can be
avoided when committed people
stay with the firm. Similarly, many workers prefer a stable,
reliable, and involved connection
with a firm. In some ways, many corporate actions that fall into
the category of being socially
responsible or sustainable stem from this mutual desire to
increase the quality, reliability,
and longevity of the connection between employee and
employer. One innovation that results
from this mutual interest relates to experiments and innovations
with employee ownership.
Figure 3.2: Types of Employee Stakeholders
and Typical Engagement Levels
f03_02
Higher
Employee owner
Employee stockholder
Employee (with bene�ts)
Part-time employee
Contractor/supplier
Intern or informal worker
Lower
Engagement
Level
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Section 3.2Employees
Employee Stock Ownership Plan
In 1956 the owners of Peninsula Newspapers wanted to exit
from ownership of the company;
at the same time, the employees wanted to become owners
themselves to be more tightly
coupled to the organization. Political economist Louis Kelso
enabled the employees to pur-
chase the company by creating a legal category known as an
employee stock ownership
plan (ESOP). As the idea of the ESOP emerged, it required
authorization through legislation
and tax code changes. In the United States an ESOP is a
qualified pension plan (another way
of saying it offers a type of retirement benefit). Because of this
designation, employees do not
need to pay taxes or any contribution to the firm until they
“cash in” on their vested amount
when they leave the company. When employees cash in, they
can also roll over any ownership
shares into an individual retirement account if they qualify
(Doucouliagos, 1995). In refer-
ence to stock options, vesting is the amount of time employees
must wait to exercise or fully
own their stock options (which is known as being fully vested).
Stock options usually come
with terms that provide more ownership or more stock the
longer an employee stays with a
firm. Usually, the terms include milestones related to time. For
example, if an employee stays
5 years, he or she can be 25% vested in the amount of stock in
question; in 7 years he or she
can be 50% vested in the amount of stock in question; and so on
(the exact time and percent-
ages vary by company and industry).
Over time, employees with vested interest in their company can
become fully vested as part
owners. Initially, employees’ small compensation in stock won’t
give them much say in the
company’s operations. However, over time, employees with
options could amass consider-
able influence in its future and governance.
The philosophy behind an ESOP includes at least three parts:
broaden ownership of capital,
create financial security and incentives, and urge better
employee productivity. The California-
based National Center for Employee Ownership (2016) claims
that 13 million employees in
the United States work in places where they are encouraged to
participate in ESOPs. In some
cases, employees own and manage these companies, and there
are no external investors. In
other cases, employees own a smaller portion of the corporate
stock shares, and external
nonemployee investors have greater control. ESOPs are common
in the service industry but
can be found in many other industries too. Several high-profile
companies that have ESOPs
include United Airlines and W. L. Gore and Associates (Gimein,
Lavelle, Barrett, & Foust, 2006;
Paton, 1989).
Why do companies go through so much trouble to create a plan
that allows employees to
become owners? Scholars have studied this idea extensively,
and their conclusions are not
always clear. Some studies suggest that ESOP programs make
the company more profitable
and competitive because employees are more dedicated and
have a stronger sense of commit-
ment to it (Gates, 1999; Blais, Kruse, & Freeman, 2010). Other
studies show that ESOP com-
panies are in fact more successful than comparable firms and
offer more competitive salaries
(Hoffmire, 2015). Perhaps ESOP companies attract a higher
quality of worker because the
benefits are better.
However, there are some potential downsides to ESOPs. The
first is that employees tend to
have a large portion of their retirement tied to a single
company. This is contrary to the long
accepted principle of investment diversification. If an employee
has most of his or her net
worth tied up in a single company, he or she is vulnerable if
that company fails, performs
poorly, or is at a low value when the employee needs to sell the
stock. One study showed that
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Section 3.2Employees
ESOP participants generally had about 60% of their retirement
savings invested in a single
employer (Rosen, Case & Staubus, 2005; Cornforth, Thomas,
Spear, & Lewis, 1998).
Another criticism of ESOPs is that they are excessively
ideological, whereas the marketplace
is more practical. For example, companies that are forced to
downsize because of changes
in the marketplace often lay off workers—such decisions make
financial sense and help the
organization survive for the remaining employees and
customers. However, if through an
ESOP an employee participates in the company’s management,
then he or she is put in a posi-
tion to protect employee jobs, making it less likely the company
will take the cost-cutting/
job-cutting steps that are sometimes needed to survive.
Managing ESOP companies can thus
occasionally become problematic (Stumpff & Stein, 2009;
McDonnell, 2000).
Other Stock-Related Options
In the United States there are other ways that companies can
reap the advantages of ESOPs
without completely changing the company’s legal structure. One
way is to offer stock to
employees under very specific conditions. While these are
mostly found in highly competi-
tive sectors, it is also true that progressively minded companies
such as Starbucks use stock
options to benefit employees. In such companies workers do not
have management control
associated with the highest levels and type of stock ownership
(there are various levels), but
they do have a long-term financial tie to the company created by
the option to purchase stock
at a fixed price.
Other companies allow employees to directly purchase shares in
the company on their own.
In some countries, including the United States, tax-qualified
plans allow employees to buy
stock at a discount or with matching contributions from the
company, which means that
employees can purchase stock at an employee price that is set
below the normal market price.
The employee can make the purchase with cash or with money
the company provides that
can only be used for stock purchases.
Non-Stock-Related Options
Non-stock-related benefits offer another
way for corporations to engage their
employees in a benefit under the company
umbrella. For example, most life sciences
companies (such as Procter & Gamble, Nike,
and Johnson & Johnson) and many fast-
moving consumer goods manufacturing
companies operate company stores where
employees can buy products created by
that company at a deeply discounted price.
Other companies extend travel discounts to
employees or allow them to use company
facilities for exercise or social service. All
of these benefits are designed to enhance
the employee’s life and deepen his or her
commitment to the corporation. Some firms
Photodisc/Thinkstock
The ability to work from home is one exam-
ple of a benefit that companies can offer to
increase employee engagement.
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resale or redistribution.
Section 3.2Employees
motivate and retain employees by offering flexible hours, work-
from-home telecommuting
options, and unlimited no-questions-asked time off and sick
leave.
Many employees work for the promise of future income and
bonuses, but many people select
employers based on nonfinancial criteria too. Employers of
choice tend to be places where
the culture supports learning, work–life balance, health and
wellness, flexibility, growth, a
supportive work environment, safety, and a sense of purpose or
meaning (Dill, 2015). Thus,
a firm’s employment policies and the general way it treats its
workers (its human resource
policies and practices) influence employee engagement and
become a point of consider-
ation when candidates apply for jobs and when firm managers
build or rebuild policies and
practices.
Employee Rights
Thus far, we have discussed employees and some options
provided to those employees fortu-
nate enough to quality for certain benefits. This section
examines the rights and protections
that government regulations and social standards provide for all
employees. While employee
rights vary, there is general agreement on the basic rights of
workers, despite the fact that
enforcing these rights differs by region and industry. The most
basic rights include safety,
freedom of participation, collective bargaining, free speech,
protection from honesty tests,
and protection and privacy of information.
The Right to Safety
The first right covers basic workplace safety while
acknowledging that different industries
have different safety concerns. Certainly, almost all work has a
reasonable risk associated
with it. For example, flying in an airplane is generally safe, but
there are occasions when acci-
dents occur. Likewise, truck drivers, taxi drivers, emergency
services workers, factory work-
ers, farmers, and many others absorb a certain amount of risk
when they enter the workplace.
All workers should ask themselves what level of risk they are
willing to absorb, and every
manager and owner should determine whether they are
providing the safest possible work
environment. All safety issues are associated with a cost–
benefit analysis, and it is under-
stood that perfect safety can rarely be achieved. There are
always limited resources within
which companies operate that affect the amount they can spend
on safety procedures. But
worker safety is and should always be an overriding question
and pursuit in any workplace.
Workers, labor unions, managers, leaders, owners, and investors
should ask if all reasonable
risk is being illuminated and properly managed. An important
law that protects worker safety
is the Occupational Safety and Health Act of 1970, which
regulates the safety and health con-
ditions of the majority of industries. This act and its associated
department, the Occupational
Safety and Health Administration (OSHA), protect workers
from unsafe conditions—OSHA
violations are expensive and can result in a firm’s closure.
The Right to Participate in Work
The second basic right is related to participation in the
workplace. Issues related to these
rights include the age at which it is appropriate for people to
begin or stop working; what
constitutes child labor or taking advantage of the elderly; and
how can everyone be treated
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Section 3.2Employees
fairly in the workplace. Broadly framed, these are issues that all
stakeholders in the work-
place should consider. There is not necessarily a right answer,
but work conditions are gener-
ally better when all parties engage in an ongoing dialogue about
them. In other words, these
questions will likely not ever be settled, but should rather
produce an ongoing discussion.
Part of the job of an informed employee and a socially
responsible leader is to ensure that
such conversations take place and that all interested and
affected parties are aware of the
conversations and are included in them. …
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Running Head HEALTHCARE INFORMATICS AND PATIENT CARE12HE.docx

  • 1. Running Head: HEALTHCARE INFORMATICS AND PATIENT CARE 1 2 HEALTHCARE INFORMATICS AND PATIENT CARE Healthcare Informatics and Patient Care Healthcare Informatics and Patient Care Managers In this paper, we will discuss the benefits of having technology around us and how it can be crucial for the daily operations of healthcare organization. Some of the benefits of having technologies are improvement in patient care, operate efficiently and reduction of cost. To make a healthcare organization successful, every staff member should know their role in improving patient care. One of them is a Director of Admissions, who can utilize technology/system to improve patient care in many ways. The Director of Admissions “admits patients by directing the admissions process; developing, implementing and maintaining revenue-generating strategies; determining and implementing admissions best-practices; promoting the hospital; maintaining a satisfied patient base” (Monster, n.d.). Patient Care The technology that the Director of Admissions
  • 2. use to make daily workflow seamless is the Electronic Health Record (EHR) and admission/discharge/transfer (ADT) system. An ADT system is “used to input patient registration information which results in the creation of an automated master patient index (MPI) database that allows for storage and retrieval of the information” (Bowie, M. J., 2018). Using these systems can easily improve patient care because the technology can allow for an efficient workflow without errors. The Director of Admissions can manage an HL7 ADT Message system for the staff to let each department know when a patient is admitted, discharged or transferred (Health Standards, 2006). This can be handy to better care of patients by properly communicating with different departments of the hospital. For example, if a patient has arrived for his/her minor same day surgery, upon registration the message can be sent to the surgery department that patient has been admitted and on the way. This can expedite the service and patient experience.Cost and Efficiency The EHR and ADT systems are safe and can admission process much easier, efficient, and reduce human errors. Reducing error can essentially reduce cost. The Director of Admissions can run daily “admission logs, bed utilization reports, current charges reports, daily census, daily discharge/transfer logs, and patient profile (Green & Bowie, 2016, 8-1a). The Director of Admissions can run daily current charges reports that can help them keep on track with expected account receivable. The Director of Admissions can track down who owes the company money, and he /she can forward the report to organizations account and billing department. This can help organization collect money. Technology makes this process easier and elements costly run around and paper trails. Decision Making The reports and data collected from the Director of Admissions can help organization make decisions in different department. For example, running a daily census report can let certain wards of the hospital know how busy they are and what kind of
  • 3. staffing level will be needed to properly care for the patients. The Director of Admissions has to make sure that the collected data are sent to all the managers and supervisors of the hospital to help them make decision. Reference Bowie, M. J. (2018). Essentials Health Information Management: Principle & Practices (4th ed.). Place of publication not identified: Cengage Learning Custom P.Monster (n.d.). Admissions Director Hospital Job Description. Retrieved on November 21, 2018 from https://hiring.monster.com/hr/hr- best-practices/recruiting-hiring-advice/job- descriptions/admissions-director-hospital-job-description.aspx Health Standards (2006 October 5). What is an HL7 ADT Message? Retrieved on November 21, 2018 from http://healthstandards.com/blog/2006/10/05/what-is-an-adt- message/ Fair To All People: The SEC and the Regulation of Insider Trading · Introduction · Pre-Securities Act Common Law Enforcement · The Securities Exchange Act of 1934 - Principles of Full Disclosure · Foundations of Fairness: The SEC Develops Theories and Rules on Corporate Disclosure · The SEC Takes Command · Counterattack From the Supreme Court · Raising the Stakes · Power of SEC Resilience · Rule 14e-3 and the Misappropriation Theory · United States v. O'Hagan · Old Debate and New Rules: SEC Regulation of Insider
  • 4. Trading in the Global Marketplace · In Recognition Power of SEC Resilience United States v. O'Hagan It took nearly a decade for the Supreme Court to revisit the applicability of the misappropriation doctrine they had deadlocked on in Carpenter. That is not to say that the SEC sat on the sidelines waiting for a case to arise. In fact, after the Carpenter deadlock, the SEC actively enforced insider trading cases, urging lower courts to adopt the misappropriation theory. But the lower courts divided on the issue, and the Eighth Circuit overturned the conviction of James O'Hagan for securities and mail fraud and for violation of Rule 14e-3, because the court found that O'Hagan owed no duty to Pillsbury, the company in whose stock he had traded. The Supreme Court resolved to settle the disputes among the circuit courts in United States v O'Hagan.(53) O'Hagan, a Minneapolis legal icon, was charged with violating Section 10 and Rules 10b-5 and 14e-3 by trading on misappropriated, non-public information he acquired while at his law firm. O'Hagan was neither a classic nor a constructive insider, nor could he be held liable under the disclose or abstain rule. The SEC and the U.S. Justice Department prosecutors advocated a broad, expansive reading of Rule 10b-5 to cover any deceit, meaning that for O'Hagan, his misappropriation of his employer's information was for his personal benefit, in connection with the purchase or sale of a security. At oral argument, Chief Justice Rehnquist quizzed Deputy Solicitor General Michael Dreeban about the SEC theory. "What bothers me about this case," queried Rehnquist, "is what is the connection between the ‘deceptive device' and the ‘purchase or sale' of the security" since O'Hagan didn't deceive anyone who sold him the Pillsbury stock." The misappropriation theory, replied Dreeban, "had a broader aim to pick up the cunning devices that people might use." The issue in O'Hagan, he remarked, was "a unique kind of fraud,
  • 5. unique to the securities markets" in which a person could profit from misappropriated information only by trading or tipping someone else off. But John D. French, O'Hagan's lawyer, dismissed the SEC attempt to expand the misappropriation theory. "If Congress wants to get the misappropriation theory into law, it has to write it into law." Otherwise, he added, remembering the troika of Justice Powell-inspired cases from the 1980s, "you cannot disconnect the misappropriation from the purchase and sale."(54) On June 25, 1997, in an opinion written by Justice Ruth Bader Ginsburg, the Supreme Court upheld the misappropriation theory as a valid basis on which to impose insider trading liability. While the Supreme Court acknowledged that misappropriators had no independent duty to disclose to persons with whom they traded, the legal obligation under the Securities Acts was founded on the theory that "a fiduciary's undisclosed, self-serving use of a principle's information to purchase and sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of that information." So defined, the misappropriation theory thus satisfied the 10(b) requirement of a "deceptive device or contrivance" used "in connection with a securities transaction." SEC Chairman Arthur Levitt Jr. commented that the decision reaffirmed "the SEC's efforts to make the stock market fair to all people, whether you're a Wall Street veteran or a Main Street newcomer." The misappropriation theory was well-tuned to the animating principle of federal securities law: to insure honest securities markets and thereby promote investor confidence. The success of the SEC was the result of a long and persistent strategy that avoided congressional definitions that it felt would make actual enforcement more difficult, while advocating for common law interpretations that promoted a somewhat nebulous definition of insider trading based on principles of equal access to market information. Opting for a common law interpretation while developing administrative rules of enforcement allowed
  • 6. the SEC to react to market abuses, but not overreact in a way that might damage its enforcement flexibility or the stability of the markets. The ideological and legal persistence of the SEC won the day in 1997, but insider trading issues remain an ongoing debate. << PREVIOUSNEXT >> Footnotes: (53) 484 US 19 (1997) (54) Linda Greenhouse, "S.E.C. Argues Insider-Trade Theory Before High Court," The New York Times, April 17, 1997, D1. Related Museum Resources Papers FEBRUARY 27, 1997 Brief for the United States, United States of America v. James Herman O'Hagan IMAGEPDF (Courtesy of the Library of Congress) FEBRUARY 28, 1997 Brief of Amici Curiae North American Securities Administrators Association, Inc. and Law Professors in Support of Petitioner, United States of America v. James Herman O'Hagan IMAGEPDF (Courtesy of the Library of Congress) MARCH 27, 1997 Brief of Amici Curiae Law Professors and Counsel in Support of Respondent, United States of America v. James Herman O'Hagan IMAGEPDF (Courtesy of the Library of Congress) MARCH 28, 1997 Brief for Respondent James Herman O'Hagan on Writ of Certiorari to the U.S. Court of Appeals, United States of American v. James Herman O'Hagan (begins at Questions Presented) IMAGEPDF (Courtesy of the Library of Congress) APRIL 27, 1997
  • 7. Reply Brief for the United States, United States of America v. James Herman O'Hagan IMAGEPDF (Courtesy of the Library of Congress) JUNE 25, 1997 Supreme Court of the United States: United States v. James Herman O'Hagan IMAGEPDF (Courtesy of the Library of Congress) JUNE 30, 1997 Letter from Milton V. Freeman to Eric Summergrad with congratulations on winning the O'Hagan case IMAGEPDF (Courtesy of the Summergrad Family) JULY 10, 1997 Letter from Eric Summergrad to Milton V. Freeman IMAGEPDF (Courtesy of the Summergrad Family) 9 CSR Reporting Standards and Practices Shironosov/iStock/Thinkstock Learning Objectives After reading this chapter, you should be able to: 1. Understand the history of CSR reporting and past attempts to standardize the process. 2. Explain how to use Global Reporting Initiative standards to verify CSR and sustainability reports. 3. Summarize the challenges and benefits that organizations face in creating CSR reports. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for
  • 8. resale or redistribution. Section 9.1Financial and CSR Reports Pretest Questions 1. Firms can legally report company earnings numbers in just one way. T/F 2. Offering CSR or sustainability reports remains optional in all industries. T/F 3. Publicity is the major leverage point for externally motivating corporations to report CSR. T/F Answers can be found at the end of the chapter. Introduction Customers and other stakeholders (even employees) cannot usually become aware of socially responsible behaviors without some effort on the organization’s part. Thus, accurate and timely reporting of CSR efforts can engage stakeholders and provide concrete evidence of sustainability attempts and successes. However, not all firms report the same way, and con- sumers are not always able to protect themselves from false or misleading reports. Also, some firm managers still choose to only report financial returns and don’t discuss the social or environmental aspects of or contributions to those returns. This chapter addresses types of financial and CSR reporting. It discusses reasons why compa-
  • 9. nies make the effort to report and describe standards and general practices that, if adhered to, can help such reports be maximally useful to customers and other stakeholders. 9.1 Financial and CSR Reports Today the most common type of corporate reports are financial reports. Interestingly, com- panies can legally present investors with two types of financial reports: (a) those that strictly adhere to generally accepted accounting principles (GAAP) and (b) those that include some simplifications or leave out some facts from the main body of the report. The first type is well known to accountants; such reports follow a standardized format that make them easy to compare to reports from other companies that use the same standards. Thus, the GAAP format enables the financial situation of two or more companies to be compared. In contrast, non-GAAP reports feature adjusted figures known as pro forma or non-GAAP numbers. Com- pany leaders have significant freedom in reporting such adjusted numbers, in part because there are no rules about what they can strip from the reporting. This allows executives to paint a simplified or idealized picture of the corporate situation (Morgenson, 2015). Even within the same industry, companies can differ on what they include or exclude from the nonstandard report. For example, one company may exclude facts about how employees are compensated, while another company in the same industry may include such numbers. When these differences occur, it makes it challenging for investors or other stakeholders to compare
  • 10. companies’ performance. The existence of such different types of reporting means that investors and reporters may pay more attention to the nonstandard and adjusted numbers when making investment decisions © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 9.1Financial and CSR Reports (probably because they are typically and purposefully easier to understand). This has ethical implications, should people invest money based on what could be misleading information. For example, in the case of pharmaceutical company Valeant, there were dramatic differences between the company’s real earnings and its adjusted numbers (and these differences were more dramatic than differences in competitors’ reports). Under GAAP reporting, the com- pany earned $912 million in 2014, but its other report showed “cash” earnings of $2.85 bil- lion for the same year (Morgenson, 2015). Valeant stripped out many expense items from its non-GAAP revenue reports, including costs related to stock- based compensation, legal settlements, and costs associated with acquisitions. In fairness to the company, Valeant did present a list of excluded expenses, but not in a format that was accessible to many investors (Morgenson, 2015). In the last half of 2015, Valeant’s market
  • 11. value dropped by almost $60 billion, largely as a result of investor reactions to the discovery of the variance between the two versions of the report (Morgenson, 2015). What are government and exchange regulators doing about this issue? In 2003, when pro forma or non-GAAP earnings first became popular, the SEC instituted Regulation G to help investors. Regulation G requires companies that use adjusted non-GAAP figures in regulatory filings to present comparable numbers calculated using GAAP. However, the regulation does not cover news releases, a major source of information for investors. According to many, this kind of market deception reflects the need for transparency and stan- dardization in reporting, not just for accounting measures (which are only one part of the triple bottom line), but also for CSR (Howell, 2015b). Transparency means being open, hon- est, and direct about a company’s past, present, and future. Standardization means using a common system that allows people to make fair comparisons between similar corporations. Transparency and standardization are a foundational element of sustainability because they allow companies to fairly measure and compare shareholder value, return on investment in finance, and environmental impact and social contributions to CSR. CSR reports are a rela- tively new phenomenon, and making sure they are useful requires understanding the history of reports, the standards related to reporting, and cases of reporting use and abuse. Doing so
  • 12. also helps explain why some firms continue to resist the practice and why so much variety exists in how and why firms report. It also illustrates how one disaster indirectly led to the creation of a global movement. History of CSR and Sustainability Reports On March 24, 1989, an oil tanker named the Exxon Valdez, bound for Long Beach, California, ran aground in Prince William Sound, Alaska, spilling 15 million to 40 million gallons of crude oil into the ocean (Skinner & Reilly, 1989). Considered one of the most devastating human- caused environmental disasters in history, the spill eventually spread to cover 1,300 miles of coastline and 11,000 square miles of ocean. Prince William Sound is a remote location acces- sible only by helicopter, plane, or boat. This isolation made government and industry response efforts slow and expensive, which only further devastated local salmon, seals, and seabird populations (Skinner & Reilly, 1989). The fishing industry in that part of Alaska still has not fully recovered from this disaster. The public’s outrage over the event grew as investigations and reports revealed that the crew was overworked and underrested, and that some safety monitoring equipment was broken and deemed too expensive to fix (Skinner & Reilly, 1989). © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 9.1Financial and CSR Reports
  • 13. The Exxon Valdez became a symbol of how the drive for profit can conflict with environmental and social respon- sibility, with devastating results. The short-term media and social response was significant, and public outrage and concern continued for years. Some of the disaster’s long-term implications relate to corporate transparency. The spill instigated new pres- sures for firms to report how they were (or were not) protecting workers and the environment. Groups of activists began to push for accountability through vol- untary corporate reporting. One of the leading orga- nizations responsible for demanding more corporate transparency was the Coalition for Environmentally Responsible Economies (Ceres), which was formed in response to the spill. The Coalition for Environmentally Responsible Economies Ceres was formed by a small group of investors who believed that if firms like Exxon had to publicly admit they were overworking people (a social CSR issue), were failing to invest in safe equipment (another social CSR issue), or lacked the policies to protect the environment in the event of an emergency, they might find reason to fix such irresponsible and unsustainable behaviors. Essentially, the founders of Ceres believed that transparency could herald change. Over the organization’s 25-year history, its mission has expanded. It has introduced report- ing tools to help organizations weave environmental and social challenges into company and
  • 14. investor decision making. It has inspired a reevaluation of companies’ roles and responsi- bilities as stewards of the global environment when it published the Valdez Principles, later named the Ceres principles. These consist of 10 points of environmental conduct that Ceres encourages companies to publicly endorse (Lubber, 2014): 1. Protection of the biosphere: How well does the corporation protect the general bio- sphere, including by reducing greenhouse gases? 2. Sustainable use of natural resources: Does the corporation strive to use renewable resources and reduce the consumption of nonrenewable ones? 3. Reduction and disposal of wastes: Does the corporation practice lean manufacturing and seek to reduce or eliminate waste? 4. Energy conservation: Does the corporation conserve energy? 5. Risk reduction: Does the corporation have safety and accident-reduction programs in place? 6. Safe products and services: Does the corporation create products and packaging that are safe for consumers? Are consumers safe when they use the product? 7. Environmental restoration: Does the corporation take steps to renew and restore the environment when damage is done? John Gaps III/AP Images
  • 15. In 1989 millions of gallons of oil spilled from the Exxon Valdez tanker, harming the surrounding water, coastline, and wildlife in Prince William Sound, Alaska. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 9.1Financial and CSR Reports 8. Informing the public: Is the corporation transparent and open in decision making? Does the corporation alert the public to CSR progress and setbacks? 9. Management commitment: Is the corporation’s management and leadership knowl- edgeable and committed to sound Ceres practices? To general CSR and sustainability principles? 10. Audits and reports: Does the corporation audit, report, and generate data on envi- ronmental compliance and CSR? In 1993, after lengthy negotiations, Sunoco (an oil and gas company) became the first For- tune 500 company to publicly endorse the Ceres principles. Since then many others have signed similar agreements to follow the principles, and Ceres is now the largest environmen- tal monitoring data service for companies (Ceres, 2014), although it is not used by all firms.
  • 16. The creation of the principles and the requirement for supporters to publicly declare support ushered in renewed pressure to make public data on where companies stand in regard to CSR and sustainability. Ceres spearheaded a movement to get firms to publicly report and state sustainability and CSR goals, progress, and setbacks. Recent research suggests that 93% of the top global companies publish CSR or sustainability reports (KPMG, 2013). The statistic indicates how far sustainability and CSR reporting have come, but the journey was not easy. As Bob Massie, Ceres’s executive director from 1996 to 2002, stated in 2014: The whole idea of having an environmental ethic, or measuring your perfor- mance above and beyond your legal requirements, was considered completely insane. Sustainability was considered to be a shockingly difficult thing that no company would ever take on as a goal. (Ceres, 2014) As Ceres pushed reporting, it also spearheaded a worldwide effort to standardize and system- atize disclosure on environmental, social, and human rights performance. In the late 1990s Ceres launched a separate entity known as the Global Reporting Initiative (GRI), the aim of which was to create a standardized and transparent accountability process that ensures compliant companies follow the Ceres principles (GRI, 2015). The Global Reporting Initiative The GRI is the most widely adopted framework for
  • 17. sustainability reporting. It was originally created in 1997 to help leaders and managers navigate the process of reporting—there were no standards and very few examples to follow at that time. One of the first steps organiza- tional leaders took was to expand the conversation and terminology so that more industries could participate in the effort. For example, GRI leaders broadened the focus beyond the envi- ronment to also include social, economic, and governance issues. The addition of more topics and keywords served to strengthen the relationship between GRI and basic CSR principles and enabled more organizations to participate. In 2000 the GRI published the first official guidelines for corporate compliance reporting and created a framework for comprehensive sustainability reporting. The GRI team offered consulting services for those who needed advice on how to provide exemplary reports. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 9.1Financial and CSR Reports For the first 3 years, GRI kept track of which firms used the guidelines and included links to examples of all types of reports on its website. Over time, enough firms began offering reports that GRI stopped keeping track—a sign it had effectively helped launch a movement. In response to the GRI guidelines, the leadership at Ceres
  • 18. decided to spin off the reporting efforts from the rest of the organization. Thus, GRI became a separate and independent non- profit institution in 2001. The organization moved to Amsterdam and became part of the United Nations under its environmental program (the UNEP). That same year, in 2002, the second generation of guidelines (G2) was unveiled at the World Summit on Sustainable Devel- opment in Johannesburg, South Africa. The summit was the most important international convention related to climate change, and being part of it was another sign of the organiza- tion’s value and prestige. Over the next 4 years, demand for CSR reporting guidance grew dramatically, and the third generation of the guidelines (G3) was launched with the help of more than 3,000 experts from multiple sectors, including packaged goods, shipping, agribusiness, and more (GRI, 2015). However, it was not until 2007 that GRI created a product for mass consumption and utility—Pathways I. This publication provides a step-by-step procedure for report makers. To create a regional presence and learn how different regions responded to the document, GRI set up regional offices around the world, beginning with Brazil. Today it has offices in many countries. To encourage the use and enforcement of the current guidelines (G4), GRI launched a 60- question multiple-choice exam that enables individuals to be accredited to use the G4 guidelines. The exam is available in more than 70 countries;
  • 19. successful participants receive a certificate and get their name published on the GRI website for 3 years. While this kind of recognition may seem narrow, it has significant weight with environmentally and socially conscious investors who have come to expect transparent reporting and this kind of standard measurement. Also, certified people can go into business for themselves (or be selected by employers) to help others create better CSR and sustainability reports—this provides a way for CSR and sustainability skills to be turned into financial benefits. The more people who are accredited to the GRI standards, the more the GRI brand grows and the more the reporting movement gains momentum and standardization. GRI’s vision is for organizations to con- sider sustainability throughout their decision-making processes (GRI, 2015). Such a goal puts them in partnership with corporate leaders and individuals who are interested in increasing CSR and sustainability. The emergence of Ceres and GRI illustrate how a small group of individuals can form a collec- tive and ultimately drive major change. The ability of individuals to report, support report- ing efforts, and engage with standardized guidelines has moved from nonexistent in 1992 to being the purview of a few experts to being readily accessible by almost all interested parties. What have companies done with this ability, and what are the consumer and competitive pressures to conform? As stated earlier, data suggests that each year, more companies report and that these reports are becoming more accessible, detailed,
  • 20. and useful to stakeholders. The following section highlights this progression. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 9.1Financial and CSR Reports The Progression of CSR Reports The three historic phases of CSR reporting clearly show the gradual mainstreaming of envi- ronmental issues, which were once seen as the concern of only a few. Measuring and transpar- ently reporting environmental impacts in a standardized way has become common practice. However, the journey to get to this point featured several phases, each of which is impor- tant because they illustrate how CSR efforts move in stages. This information can encourage people who want to start a movement related to a different CSR and sustainability issues. The phases are also important because they illustrate how people come to accept new CSR ideas—and some firms or managers may still be stuck in a mind-set of an earlier phase. The ability to recognize how people and ideas mature can help future leaders and managers work with people of varied mind-sets. Phase 1 In the earliest phase of CSR and sustainability reporting, corporations were more focused on public image in order to impress shareholders, who mostly expected annual financial reports.
  • 21. During the 1970s and 1980s, CSR messages (if they existed at all) were based on public rela- tions goals more than truth or adherence to standards. One important breakthrough came in 1972, when a consulting firm named Abt & Associates added an unexpected environmental report to its typical annual financial statements. This pioneering effort focused strictly on sharing data on air and water pollution by the company and its affiliates. Abt & Associates’ financial auditor certified the financial data. But since he was only trained to evaluate finan- cial reports, he disclaimed any responsibility for the environmental data, since no standards existed for such audits. In response, John Tepper Marlin (1973) wrote an article for the Jour- nal of Accountancy suggesting ways accountants could measure pollution; the article included a model environmental report, which was subsequently adopted by a few accounting and auditing firms around the nation (Marlin & Marlin, 2003). Still, neither the practice of report- ing nor the practice of having auditors measure environmental pollution gained much trac- tion until the 1980s. Phase 2 In the second phase of CSR reporting, Mar- lin continued to innovate and improve on his original ideas. He found an interested innovation partner in gourmet ice cream purveyor Ben & Jerry’s. In a groundbreak- ing deviation from standard practice, Ben & Jerry’s commissioned a social auditor to work with its staff on a report covering the previous year’s activities. This was unusual
  • 22. because most firms only hired financial auditors, not auditors to evaluate social and environmental practices. For 2 weeks, the company’s founders gave the social auditor full access and permission to interview any- one in the company. The auditor visited not Toby Talbot/AP Images Companies such as Ben & Jerry’s, the Body Shop, and Shell Canada were among the first to conduct environmental reports. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 9.1Financial and CSR Reports only the main ice cream factory but also the smaller facility where the company made special products, such as its Peace Pops. The auditor was encouraged to speak with dairy industry officials and public and private community representatives— essentially anyone in the supply chain or any stakeholders in the industry. In many ways, by commissioning the audit, Ben & Jerry’s leadership was requesting a fully transparent 360-degree view of the company, prior to the common usage of the term and practice. The social auditor recommended the resulting document be titled Stakeholder Report. Schol- ars suggest that this may have been the first report directed to and for stakeholders, includ- ing financial shareholders as well as other stakeholders. That
  • 23. first stakeholder report was divided into categories that represented different audiences, including communities (out- reach, philanthropic giving, environmental awareness, global awareness), employees, cus- tomers, suppliers, and investors (Marlin & Marlin, 2003). This was notable because it marked the first time that Ben & Jerry’s considered suppliers to be a stakeholder. The report was also a landmark because it was commissioned by Marlin. This report, as well as others from similarly progressive companies such as the Body Shop and Shell Canada, helped introduce a new model of corporate reporting—a precursor to the GRI standards. After the first social audit, Ben & Jerry’s continued to issue social reports, using different social auditors to refine the concept and practice of CSR reporting. While these audits still lacked a set of generally accepted standards by which to measure CSR, they were transparent and offered a road map for improvement (and inspired others). It is important to note that it was not just awareness and goodwill that led to the rise in CSR reporting during the 1980s. Legal issues were also at play in the United States. The open records and meeting laws passed in the 1970s as a result of the Watergate scandal increased the volume of environmental pollution emissions data that entered the public record. In 1987 “right to know” legislation was extended by Congress to establish the Toxic Release Inventory and the Pollution Prevention Act of 1990, which created a database that is used by investors
  • 24. to document environmental progress. It is also a standardized measurement that shows the history of compliance (or noncompliance) to environmental regulation (Katsoulakos, Kout- sodimou, Matraga, & Williams, 2004). Phase 3 In the third phase of CSR reporting, the need for third parties to verify reports emerged as a requirement (see Chapter 8). Verification bodies such as Ceres and GRI accredit and certify organizations’ behaviors, products, and practices using transparent environmental and social standards, though these had to be created. This newer phase of CSR reporting makes the social auditor stronger and less idiosyncratic and independent, meaning that social auditing individuals and teams follow more standards and produce reports that are more consistent across and between industries. The third phase introduced advances that continue to define CSR reporting. Now, when social auditors identify a violation, they record the situation, and the facility has an opportunity to © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 9.2CSR Reports and Audits take corrective action. Violations range from small infractions such as a minor waste problem that does not endanger certification, to egregious concerns that
  • 25. jeopardize the environment and the possibility of achieving report certification. Auditors are generally solution oriented and tend to give the corporation time to address any violations before the problems affect certification. Reporting in general, and the role of auditors in that process, has matured into an industry where auditors receive standardized training and follow specific CSR standards before certifying a company and its reports. Several agencies and organizations stand out as early leaders in the final phase of CSR reporting. Among them is Social Accountability International, which was founded in 1997 (Marlin & Marlin, 2003). Other auditing pioneers include the FSC, the International Foun- dation for Organic Agriculture, and the Fairtrade group. Together, these groups formed a larger organization called the International Social and Environmental Accreditation and Labelling, which sets reporting standards internationally and provides uniform training to thousands of social auditors. This group uses GRI standards as well as others that change by industry. Such agencies help companies assess, measure, and certify CSR and environmental compli- ance. The very existence of such a wide number and variety of certifying organizations indi- cates how CSR and sustainability reporting has become an established feature of modern organizational life. Such reports provide customers, employees, competitors, governments, and other stakeholders the ability to evaluate whether firms are
  • 26. moving toward CSR and sus- tainability or not. Reports provide a way for people to better understand and engage with the CSR journey. However, reports are only valuable if they represent the truth, and third-party certification helps ensure such honesty. 9.2 CSR Reports and Audits Reporting and obtaining certification via an audit is a complex process that requires sup- port and expertise. For organizations interested in starting or dramatically improving sustainability reports, the GRI offers guidelines on how to start. As companies begin to create CSR reports—and as these become more accessible, valuable, and informative— new formats and publishing platforms emerge. For example, most reports are published on paper, but a company named Symantec published both a paper and an online CSR report in 2015. A detailed outline of how to create and publish a viable CSR report is outside the scope of this chapter, but every employee and future leader will likely need a high-level understanding of the process (see Figure 9.1). © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 9.2CSR Reports and Audits Figure 9.1: GRI outline for CSR reports
  • 27. f09_01 Step 1: Identify Step 2: Prioritize Step 3: Validate Step 4: Review CSR Report Principles Materiality Stakeholder Inclusiveness Sustainability Context Completeness Source: Adapted from “How to Define What Is Material,” by G4 Online, 2013 (https://g4.globalreporting.org/how-you-should- report/how- to-define-what-is-material/Pages/default.aspx To begin, a publisher would focus on the steps of the process— identification, prioritization,
  • 28. validation, and review—to determine the organization’s most significant economic, environ- mental, and social impacts. The next task is to utilize four reporting principles that define report content. These include the following: 1. Materiality: Information must relate to the firm and its operations and cannot be unrelated or distracting. 2. Stakeholder inclusiveness: The report must not leave out key participants in the value chain or stakeholder set. 3. Sustainability context: Reports need to be clear about what is and is not included for evaluation. 4. Completeness: Report authors need to clarify how thoroughly they followed an issue or topic (GRI, 2015). The principle of materiality refers to the data’s relevance to day-to-day operations. Think back to the discussion of greenwashing in Chapter 8—when reports offer interesting but noncen- tral data, companies end up reporting on nonmaterial aspects of the business that might be misleading. The principle of stakeholder inclusiveness is foundational to the process—recall how the early report from Ben & Jerry’s revealed to the company the then radical idea that © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution.
  • 29. Section 9.2CSR Reports and Audits suppliers were stakeholders. This type of awakening is possible in every industry as leaders fine-tune the definition of stakeholder inclusiveness. The principle of sustainability context ensures that reports include how an organization’s performance influences sustainability in a wider context (locally to globally). Finally, completeness ensures the report’s topics are adequately covered to provide stakeholders with sufficient information about the organiza- tion’s economic, environmental, and social performance. The report should also detail its own process and methodologies used, as well as mention any trade- offs or assumptions involved in creating the report. Once the report is ready, many companies ask a third-party agency to verify and validate it. CSR Report Auditors Earlier in this chapter, we discussed the way GAAP guidelines inform the … 6 The Corporation as Steward Hxdyl/iStock/Thinkstock Learning Objectives After reading this chapter, you should be able to:
  • 30. 1. Compare and contrast the responsibilities of fiduciaries and corporate stewards. 2. Assess the impact on the environment and how a life cycle assessment can identify a product’s, process’s, or service’s true cost to society. 3. Describe government regulatory agencies in the United States, the European Union, and the global environmental movement. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 6.1Corporate Fiduciary Stewardship Pretest Questions 1. A fiduciary is another term for owner. T/F 2. Unit process data only considers the economic cost of production. T/F 3. Yellowstone National Park was created during the Industrial Revolution. T/F Answers can be found at the end of the chapter. Introduction In this chapter, we examine the notion of financial and nonfinancial stewardship and examine how the corporation can be a steward of people, profits, and the environment while managing and even repairing environmental impact and damage. Firms interact with (and sometimes extract from and pollute) the natural environment in multiple
  • 31. ways. Buildings use wood and metal from forests and mines; companies require electricity (from coal, wind, solar, nuclear, or other sources of energy); and computers use components from mines and fabrication plants. Firm employees who drive to work use energy and likely create pollution in the pro- cess. Manufacturing companies use natural and human-made inputs to create new products for sale. This chapter examines the relationship between the natural environment and the corpora- tion. It addresses the environmental issues introduced in Chapter 5 and explores the true social, environmental, and financial cost of certain corporate activities. Part of addressing how companies relate to the environment includes discussing how they comply with legal regulations, best practices prescribed by nongovernmental agencies, and international orga- nizations (such as the United Nations). This chapter describes analytical tools that allow peo- ple to identify risks, rewards, and impacts related to creating, using, and disposing products and services. These tools also provide data for companies that want to create less damag- ing or more restorative products. The discussion then turns to communitarianism, the green movement, and the formation of environmental regulatory agencies in the United States and European Union. It closes with a short discussion of how strategic concerns about risk man- agement and human welfare issues related to water rights and water supplies may dominate corporate conversations going forward.
  • 32. 6.1 Corporate Fiduciary Stewardship Building on the environmental issues described in Chapter 5, this chapter examines the role and responsibilities of a corporate leader. Central to this discussion is a pressing dilemma of conflicting incentives that leaders in most publicly held corporations face. By definition, a publicly held corporation has multiple partial owners who likely invested to gain a maxi- mum return on their investment. Return on investment (ROI) is a tangible, objective measure of an investment’s quality. ROI measures the amount of return relative to cost. To calculate ROI, divide the return or benefit of an investment by its cost. The result is a ratio that allows investors to compare different types of opportunities so they can evaluate the efficiency and © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 6.1Corporate Fiduciary Stewardship effectiveness of each choice and select the most profitable (or otherwise ideal) option. Most publicly held corporations are expected to deliver a high ROI; otherwise, investors will take their money elsewhere. By law, corporate leaders in public firms have a legal responsibility to provide a return on investment in both the short and long term. This means corporate leaders are required to manage trade-offs. Specifically, leaders of public firms manage the trade-off
  • 33. between protecting and restoring the environment (which can have costs that reduce ROI in the short term) and using the environment with less care in order to improve ROI for owners in the near term. A fiduciary refers to a person who holds a legal relationship of trust with one or more par- ties (such as shareholders). Typically, a corporate fiduciary prudently takes care of money or other assets. Corporate leaders by default become fiduciaries, or people with a special duty to owners/shareholders to protect and keep assets safe but also efficiently and effectively use assets. By law, a corporate leader cannot profit at the expense of corporate shareholders; he or she can also be fired for not managing funds to maximize profits. In other words, leaders are morally and legally bound to seek profit on behalf of owners (Inc., n.d.). Thus, fiducia- ries are stewards, or caretakers, of the financial side of business. However, seeking profit for shareholders is not the only aspect of the complex notion of stewardship. Peter Block is a thought leader in the world of business who spent the past 40 years advocat- ing for an expanded notion of corporate stewardship; one that goes beyond fiduciary con- cerns. Rather than just representing the interests of shareholders, Block (2013) advocates that corporations should adopt a stewardship model of management whereby they treat people and natural resources as assets to be cared for, nurtured, preserved, and respected. Stewardship commonly refers to the responsible care and
  • 34. management of an asset over time that allows for sustainability and growth. Some argue that stewards are caretakers who bal- ance all interests in the hopes of sustaining the life and value of an asset (Inc., n.d.). For Block, stewardship is a mind-set that changes the fundamental way corporate managers and leaders behave. Block suggests that not only are managers and leaders stewards of what happens within the corporation, they are also stewards of the corporation’s social and environmental impacts. Block (2013) says that corporate leaders are responsible for ethical communication and for providing a quality good or service. He challenges corporate leaders to tend to environmen- tal issues while simultaneously being fiduciaries of the financial bottom line. Block makes a compelling argument that most corporations act in immediate self-interest and do not have the capacity to balance long-term environmental needs with demands for short-term profit. Stewardship involves listening and weighing multiple interests, including long-term financial, social, and environmental interests, in addition to short-term financial ones. Religious, social, and environmental movements have long advocated the notion of steward- ship over resources, which suggests that human and natural resources have intrinsic and long-term value and thus should be viewed with a long-term mind-set. But Block’s version of environmental stewardship suggests going one step further—to restore environments. Such
  • 35. restorative behaviors include removing trash, planting trees, leaving nature as you found it, and actively caring for people and places. Stewards have a wide range of choices in how to act and may often feel squeezed between the short-term wants of people and the longer term needs of future generations and place or the environment. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 6.1Corporate Fiduciary Stewardship According to Block (2013), good stewardship often means choosing service over self-interest and creating long-term value over short-term gain. He suggests that stewardship can protect the earth from harm by making people accountable for the outcomes of an act or institution, without forcing, controlling, or taking unwanted charge of others. In other words, good corporate stewards commit to the long- term well-being of their region, society, and environment. They also recognize the interdependencies between four spheres: 1. Economy 2. Livable community 3. Social inclusion 4. Governance Regarding economy, a good steward attempts to take into account financial factors previously
  • 36. discussed, such as shareholder investments, expectations, and profits. But these interests can best be sustained within a livable community, one that is capable of providing well-trained and empowered employees who are able to lead healthy and productive lives. This means that good stewards attempt to practice inclusion by involving all stakeholders in communication, and they practice, submit to, and attempt to exemplify appropriate governance. In order to embody this view, good stewards consider and work across boundaries of juris- diction, sector, and discipline to connect these four spheres and create opportunity for the region. It should be noted that people who are not necessarily corporate leaders are also considered stewards. For example, educators and students exercise important stewardship over society, the environment, and future generations when they study the world’s various interconnec- tions. Society also entrusts politicians and civil servants to be stewards of regions, resources, and people’s well-being. Citizens can remove these privileges (by vote or impeachment) if government leaders do not practice stewardship. Owners can also remove corporate stew- ards (managers) if they are not acting in the corporation’s best interests. In some way, we all have stewardship roles. To be sure, corporate leaders have macro stew- ardship responsibilities, but employees at all levels are accountable for many of the same
  • 37. issues. People who work for firms come face-to-face with stewardship issues if they waste resources, are asked to dispose of toxic waste inappropriately, take safety shortcuts, or lie on a financial report. Stewardship is a shared responsibility. To better understand our own stew- ardship responsibilities, it is critical to discuss the concepts of ownership and responsibility. Types of Ownership and Responsibility There are many different conceptualizations of ownership, and different kinds of owners feel different levels of stewardship vis-à-vis the organization. The concept of private and transfer- able ownership lies at the core of most functioning capitalist societies. People in functioning capitalist societies typically understand that a person or entity who owns something can transfer that property to another person through a sale or through inheritance. A person who owns a piece of property (or a company) also has a stewardship over that property or firm; © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 6.1Corporate Fiduciary Stewardship such stewardship can be formally trans- ferred to another person. Essentially, own- ership carries with it the opportunity to be a steward. In a totalitarian state, ownership of private
  • 38. property is disallowed or carefully con- trolled—this makes it harder to be an effec- tive steward because owners usually have more power than other stakeholders. In Communist states, such as the former Soviet Union and contemporary North Korea, the concept of ownership is totalitarian, and the state owns most businesses and other factors of production. In contrast, the United States and European democracies conceive of ownership as a state in which assets can be held privately or by different government entities, including on national, state, and local levels. For example, governments may own transporta- tion systems, such as Amtrak in the United States or British Rail in the United Kingdom. Many of the older European airlines, such as Air France, KLM, and Swissair, began as government- owned businesses. They have since been privatized or are semiprivate, which means they are jointly owned by government entities and private companies. Partial ownership creates stewardship and legal challenges; it is difficult to determine who is responsible for performance when both shareholders and elected governments own part of a corporation. This state of affairs is further complicated when an owner needs to be held responsible by a court of law. When legal entities hold someone responsible for environmen- tal damage, for example, it is difficult to prosecute or defend owners when the owner is the same government that manages the regulatory agency. Extending Ownership and Responsibility When a corporate stakeholder sees a poorly calculated decision
  • 39. or one that has a negative environmental impact, it may not be easy for him or her to signal concern; nor are such warn- ings necessarily welcomed. It is clearly documented, for example, that engineers from the Morton Thiokol corporation foresaw the failure of the space shuttle Challenger and tried unsuccessfully to block its launch (Atkinson, 2012). When the Challenger exploded on Janu- ary 28, 1986, all seven astronauts on board were killed. The first person to convincingly sound the alarm about social and environmental concerns (also known as a whistle-blower) serves as an early warning system for the larger commu- nity. While many people think of themselves in the role of steward, many others believe they are powerless to change systems and organizations. However, this is not necessarily true, as many important voices have pointed out. Among them is former Czech Republic president Vaclav Havel, who was a political organizer during the Soviet occupation of his country dur- ing the 1980s. In 1985 he wrote a compelling essay about the powers of the seemingly weak. In it, Havel (1985) argues that even those in the most oppressive situations have power and responsibility to change the system for the better. Similarly, Margaret Wheatley (1996, 2003), Frank Duenzl/picture-alliance/dpa/AP Images Amtrak is an example of state ownership. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution.
  • 40. Section 6.2The Cost of Failed Stewardship a thought leader in the world of business and an expert on complexity theory and leadership, believes that stewardship resides in everyone, regardless of the social and leadership envi- ronment in which they live. This stance illustrates how some people, such as Wheatley, consider individual workers and actors to be quite powerful. Such a mind-set suggests that one need not wait to have a leader- ship position or be deeply experienced and highly credible to guide an organization to sus- tainability. Everyone has the capacity to be a good steward and advance the interests of the organization and the greater good. How can stewards at all levels of an organization take appropriate stances on critical con- cerns? By respecting, encouraging, and considering multiple voices. Extending the ideas of Havel and Wheatley, Max De Pree, the longtime leader of the Her- man Miller corporation (manufacturers of office furniture), publicly fostered the idea of an inclusive corporation, or one in which all voices are heard and given credence. He wanted to create a caring organization that was also financially successful. Because of that belief, he opposed business ideas that only benefited senior management. He suggested that good lead- ers and stewards are open to communication. But most of all, he
  • 41. was known for talking and listening to anyone and considering and enacting ideas from all levels of the company (De Pree, 1987). Unlike Wheatley and Block, who are consultants and idea leaders, De Pree was a manager and corporate actor. His ideas focused less on what a steward is and more on what he or she does. 6.2 The Cost of Failed Stewardship Up to this point, stewardship has been described as both a mind- set and a set of behaviors that can be distributed or enacted from inside or outside an organization. Equally important to cover are stewardship failures; indeed, examining failures creates another way to motivate action. Most instances of failed corporate stewardship go far beyond harming financial stake- holders. Such failures impact the social community, the environment, employees, the legal system, and the banking system (Clarke, 2004). For example, the potential failure of the U.S. auto industry in the 2008 recession triggered Congress to offer massive financial aid to top manufacturing companies. The subsequent financial “bailout” was justified for a variety of reasons, including to preserve jobs and national security. However, the same bailout cost tax- payers; cost the firms in reputational capital; and cost citizens and investors stress, in terms of uncertainty and fear. What are the additional costs when stewardship fails? These can be seen in the blunder by Atlas Minerals, a now closed industrial site near the entrance of the Arches National Park in
  • 42. Moab, Utah. Driven by a demanding client and a perceived threat, members of management did not consider the longer term environmental impacts when they decided how to mine and store uranium. Atlas Minerals was not considering sustainability, which involves meeting the needs of the current generation without compromising the needs of future ones. Arches National Park is a tourist destination for visitors from all over the world; they come to see beautiful red rocks that have been hollowed by wind erosion. But in contrast to these © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 6.2The Cost of Failed Stewardship natural wonders sits Atlas Minerals. When Atlas operated between 1960 and 1990, it stored large piles of tailings, or leftovers from the extraction process from the region’s uranium mines, at the edge of the Colorado River. The Atlas Minerals mine and industrial site primar- ily provided fuel for the nation’s nuclear reactors and helped create fuel for nuclear weapons used to defend the United States. As the need for uranium dwindled, however, scientists and the general public learned more about the toxicity of the uranium tailings. Not only was the dust from the tailings contaminating the population near Moab, but water seeping through the tailings was also flowing into the Colorado River, Lake
  • 43. Powell, and the Grand Canyon. What was once thought of as an acceptable risk and normal by- product of manufacturing was finally seen as an environmental disaster. With such discoveries and related changes, Atlas Minerals entered Chapter 11 bankruptcy, and in so doing dodged liability for undertaking a massive cleanup that cost many times more than the company was worth. Since then, the DOE has taken over the site (Grand County Utah, 2016) and is now tasked with cleaning up all such sites that contributed to pollution related to the creation of nuclear weapons (Yahoo! Finance, 2016). After the DOE assumed ownership of the land, it set up a trust to fund the site’s cleanup. As of 2016, only 50% of the tailings had been removed. Trainloads of radioactive tailings are continuously removed from the site—about 5,000 tons each week. The tailings are taken approximately 40 miles away to a location considered less environmentally sensitive because it is not at the edge of the Colorado River (Yahoo! Finance, 2016). The project will cost taxpay- ers many times the amount that Atlas Minerals made in profit during its years in production. In fairness, corporate leaders who in the 1950s endorsed the plan to build a uranium mill and store tailings near the Colorado River did so with the approval of, and even encouragement from, government agencies. They operated using the best science of the time, although there were environmental engineers, local workers, and others who could see the folly of putting a radioactive tailings pile so close to the Colorado River.
  • 44. However, their concerns were dis- missed, ignored, or discounted. For the sake of short-term cost savings and expediency, and due to a narrow definition of impact, a river was polluted, the life expectancy of nearby humans and animals was reduced, and the cost of conducting a massive cleanup was passed on to taxpayers. In contrast, cor- porate leaders of today and the future, especially those who take a stewardship mind-set, research the impacts of location, sourcing, and product ingredients on current and future generations before making decisions. If we agree with Havel, Wheatley, and De Pree, then most (but not all) of the blame goes to those who own the corporation. The bad planning, failed science, poor execution, and bank- ruptcy are not just the failure of corporate leaders, but also of regulatory agencies, govern- ment, and even local citizens and employees. We all share in the blame for poor stewardship if we are connected to a community. But as problems get larger and involve more stakeholders, it becomes increasingly difficult to reach agreement and take collective action. In addition, it may seem difficult to foresee the impacts of large-scale corporate activities on future generations. However, several tools can help assess the environmental impact of a product, process, plant, or any other activity in which an organization may engage. One is the life cycle assessment (LCA), which provides a way to measure a corporation’s environ-
  • 45. mental impact and includes energy costs and material usage information. An LCA describes the process of evaluating the social and environmental implications associated with creating, © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 6.2The Cost of Failed Stewardship consuming, and disposing of a product, process, or activity (American Center for Life Cycle Assessment, 2016). The LCA allows corporations to examine waste, reduce costs, and innovate products and ser- vices. In other words, it can lead to both short-term and long- term fiscal and environmental benefits if firms utilize its data to innovate. It is often assumed that LCA projections are approximate and should be adjusted when more exact information becomes available. However, leaders should not avoid LCAs or leave them half finished due to lack of perfect information—instead, leaders should make solid assump- tions, state what these are, and continue with the LCA process. LCAs can be extensive, comprehensive, and therefore costly, depending on their level of detail and accuracy. But they can also be enlightening, even in their simpler and less expensive forms. Whether extensive or simplistic, such analyses evaluate energy inputs, environmental emis-
  • 46. sions, and the social implications of business operations. In contrast, the cost of not doing an LCA can also be extensive, as seen in the Atlas Minerals case; it can result in firms mistreating stakeholders, wasting resources, incurring internal expenses, or receiving bad publicity. Run- ning an LCA would help managers identify and address weak spots and risky areas. When managers do not assess impacts, they may fail to see risks as well as opportunities to evolve products to mitigate environmental and social impacts. For example, after performing an LCA, Levi Strauss & Company implemented changes to mitigate the environmental impact of its jeans. CSR and Sustainability in Action: Levi Strauss & Company An LCA done by Levi Strauss & Company in 2016 showed that approximately 1,003 gallons of water are used to make a single pair of jeans. Producing the material accounts for 680 gallons, and the washing and cleaning of machines and manufacturing facilities account for the rest. Almost 70 pounds of carbon dioxide are produced to create each pair of jeans, mostly during fabric production. The LCA, which follows the product from birth to end of use, also found that Americans wash jeans, on average, after wearing them 2 times. Europeans wear them 2.5 times, while Chinese wear them 4 times before washing. The LCA suggested that if consumers wear their jeans 10 times before washing them, they could reduce the environmental impact of jeans by
  • 47. 77%. Using cold water and air-drying them would further reduce jeans’ environmental footprint (Levi Strauss & Co., 2016). Using these findings, Levi Strauss implemented the Project WET Foundation to train employees to save water and educate others on ways to conserve water. The company also used the LCA results to partner with Goodwill and implement a special tag on Levi’s products encouraging consumers to consider the planet before washing the item. The tag also suggested which washing settings to use to reduce environmental impact and encouraged those who buy jeans to donate clothes rather than throwing them out. Because of the LCA findings, Levi Strauss found innovative ways to reduce its product’s environmental impact and to encourage others to become stewards of the environment. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 6.2The Cost of Failed Stewardship The LCA Process While there are several different approaches to undertaking an LCA, the cradle-to-grave assessment (the approach used by Levi Strauss) offers comprehensive data and is most accu- rate, because it looks at the complete process of making a product. Cradle-to-grave is a term
  • 48. that refers to the time from initial manufacture or “birth” of a product or service to its dis- posal or “death.” The cradle period for a car, for example, involves the extraction of metals, chemicals, and minerals for car parts and electronic components, and the extraction of petro- leum for plastics and the gasoline or electricity that will power the car. Performing an LCA for a car also means considering its end-of-life destination, which for many cars is either a junkyard, a landfill, or a recycling facility, where some or all of the parts are extracted and reused. As another example, consider the cradle-to-grave LCA of a newspaper. Harvesting and grounding trees into pulp is an energy-intensive process. Paper is produced from the pulp; the paper is shipped to suppliers and then sent on to printing facilities that print ink on it. The same facilities fold and prepare the paper to ship to vendors. The paper is then delivered to homes and offices in cars and trucks that produce pollution and are powered by fossil fuels. At this point, the paper has left the cradle stage and is now moving through the life stage, where it is consumed (read). It is then disposed of and heads toward the grave stage. Newspapers (those that still exist in this digital age) can be burned, used as wrapping or protective cover, be recycled, or thrown away to decompose in landfills. The impacts of each grave can also be analyzed. If papers are recycled, one possible outcome is to create cellulose insulation, which can be installed in homes and offices. It is also possible to calculate the fossil fuel savings from the insulation, along with the effects of most other steps in the life cycle. Conversely, if
  • 49. the papers are burned, then the release of carbon can also be measured and assigned to the product LCA measurement tally. When recycling costs and benefits enter the picture, some people suggest that the LCA becomes a cradle-to-cradle analysis. Cradle-to-cradle was discussed in Chapter 5.3; the term was coined by design advocate Bill McDonough, who suggested that when the output of one cycle can be the input for another cycle, then materials need never enter landfill or junkyard “graves.” When the process of making and using a newspaper ends with landfill expenses and impacts, then the analysis is a cradle-to-grave analysis. If, however, the analysis includes data on recycling and finding alternative uses for the product, then it begins to resemble a cradle- to-cradle analysis (McDonough & Braungart, 1998). Note that there is an entire industry of firms and practitioners interested in conducting LCAs. As these needs have increased, so has the need to standardize and develop processes that enable comparisons and ensure accuracy. There are widely accepted standards in place that are managed by the International Organization for Standardization (ISO). Specifically, stan- dards such as ISO 14040 and 14044 explain how to conduct LCAs. Both sets of standards recommend that the process include four distinct phases (as illustrated in Figure 6.1). These phases, or steps, are interdependent, which adds to the complexity of the analysis. Further complicating matters is the back-and-forth nature of this process, where, for example, changes
  • 50. in goal and scope impact inventory analysis, and changes in inventory analysis impact goal and scope. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 6.2The Cost of Failed Stewardship Figure 6.1: Major components of a life cycle assessment f06_01 InterpretationInventory Analysis Goal and Scope De�nition Impact Assessment Phase 1: Goal and Scope An LCA begins with the statement of scope and a goal for the study. The statement establishes the context for the study and explains what added value to expect from the project—it gives the project a framework, purpose, and context. Some managers might want to do an LCA to understand carbon-related issues, while others might want to understand labor, landfill, or water-use concerns. Thus, all parties …
  • 51. 3 Looking Inward: Employees, Suppliers, Investors Monkeybusinessimages/iStock/Thinkstock Learning Objectives After reading this chapter, you should be able to: 1. Understand the three ways to become “vested” in a company and differentiate between the three kinds of stakeholders. 2. Analyze employee types, strategies to motivate employees, and employees’ rights as described by inter- national agreement and U.S. law. 3. Describe the various kinds of suppliers, ways to motivate suppliers, and suppliers’ rights. 4. Summarize the types of investors, ways to motivate investors, and the rights of shareholders and owners. 5. Summarize shareholder activism. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 3.1Vesting and Corporate Ownership Pretest Questions 1. Suppliers are not internal to a company and are therefore not
  • 52. “vested” in the corporation. T/F 2. Research shows that employees of companies with employee stock ownership plans are more committed to their company. T/F 3. Suppliers are solely motivated by profit margin in deciding to whom they will sell. T/F 4. An investor cannot be an employee. T/F 5. A B corporation is a simple tax designation for a type of corporate structure. T/F Answers can be found at the end of the chapter. Introduction Chapters 1 and 2 introduced the idea of stakeholders and stakeholder analysis and showed how corporate social responsibility can originate from or spread through social networks. This chapter examines stakeholders who are internal to the corporation. Specifically, it focuses on three different kinds of stakeholders: employees, suppliers, and owners/market stockholders. To reflect the complex nature of business, the chapter also addresses how the lines blur between different types of stakeholders who are financially or emotionally con- nected to the modern corporation. For example, some employees are also owners, and some owners are also suppliers. These arrangements can create complex governing problems for the corporation. Such complexity increases when owners and employees have certain legal rights. To illustrate how CSR includes—and sometimes begins with—taking care of internal
  • 53. stakeholders, the chapter examines how various regulations and laws currently protect both owners and employees. In order to deal with the complexities of corporate governance and the desire for many corporate stakeholders to create more than just wealth, we also examine different corporate offerings. Specifically, we look at programs such as employee stock own- ership plans that enable employee-owned firms, and we investigate benefit corporations as a new form of corporation. These two options alter the corporate governance scene and the way that firms relate to communities and stakeholders. Taken together, the information in the chapter begins to define the current context for CSR and sustainability efforts and reveals key CSR and sustainability opportunities for leaders and managers. 3.1 Vesting and Corporate Ownership What does it mean to “vest” in a company or to “have a vested interest”? A vested inter- est refers to having personal stake or involvement in a firm. Often, having a personal stake means being or becoming an owner or part owner. Of course, anyone working with or for a firm can have a vested interest if the person has a chance to benefit when the firm succeeds. For example, employees and suppliers can have a vested interest in a company because they receive payment or another benefit from the company. However, to be vested in a firm has an additional meaning that is typically associated with purchasing stock. Most large companies © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution.
  • 54. Section 3.1Vesting and Corporate Ownership are publicly traded—meaning that small pieces of company ownership in the form of stock can be exchanged in return for cash. In such cases the many and varied individuals and insti- tutions that own shares in the company actually own the company together. Before the rise in new employee incentives related to stock ownership, there were only two kinds of stakeholders vested in corporations: financial investors and owners. Now, in the age of globalization and with an increase in firms where managers reward employees with a mix- ture of wages plus the promise of staged future ownership with stock options, there are at least three categories of people vested in corporations: employees, owners/investors, and suppliers (see Figure 3.1). Figure 3.1: Three types of corporate ownership f03_01 SuppliersEmployees Investors Such ownership distinctions matter in a book on sustainability and CSR for several reasons. First, by definition, people vested in a firm tend to care more deeply about how it behaves.
  • 55. Secondly, people who are vested in a firm become partially responsible (legally and mor- ally) for how it behaves. Some people (typically employees) have a vested interest in the firm even if they do not technically own the firm outright or have stock or stock options. Finally, people vested in a firm also comprise key stakeholders (see Chapter 2), so considering their voice is part of running a sustainable and socially responsible business. The following sec- tions describe different types of vested stakeholders. Vested Employees Employees constitute the first type of people vested in a corporation. One way employees vest in the corporation is by bringing talent, skills, labor, time, and in the best cases, loyalty and commitment to the workplace. Another way employees vest in a corporation is by purchasing stock, a topic discussed later in this chapter. Most companies pay employees every 2 weeks or monthly, with bonuses paid out quarterly, annually, or semiannually. The anticipation of © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 3.1Vesting and Corporate Ownership future benefits (financial, social, reputational, learning, or other) allows employees to commit to giving their time and talent to a commercial enterprise. Vested Suppliers
  • 56. Suppliers represent another type of entity that can become vested in a company. A supplier is another company or corporation that provides the company with the appropriate parts, inventory, and/or service inputs required for the company to create its products and services. It may sound surprising to suggest that a supplier would be vested in a client, but this is cer- tainly the case if you follow the financial logic. The supplier vests in the future of a client’s company in anticipation of ongoing financial reward in the form of continued sales, increased sales, or sales referrals. Suppliers (or the parent companies that own and manage supplier companies) can purchase a formal stake in the future of the companies they serve by buying large amounts of stock or by forming legally binding partnerships. Thus, suppliers have a range of options in terms of their degree of vested interest; but by definition, any supplier to a firm has a vested interest in it. Vested Owners or Investors Another way individuals develop a vested interest in a company relates to investing money as owners, part owners, or nonequity investors (investors with no ownership rights but with other rights as negotiated at the time of investment). Investors provide a business or project with funding or other resources, and in return they expect a financial benefit. An owner of a company invests in the company for a variety of reasons, but the most common relates to securing rights to future financial benefits in the form of increased stock price. Investors and owners provide capital, absorb risk, and over time expect a
  • 57. return on that investment. Inves- tors also provide resources because they believe in the company’s mission or vision or its product or service, and they want to see the venture succeed— not every investor is focused solely on financial returns. One defining feature of CSR and corporate sustainability relates to how both topics expand the idea of “value” and “responsibility” to spheres beyond the financial. As mentioned, inves- tors, employees, and suppliers invest in, work for, or supply a firm for financial reasons, or for nonfinancial reasons such as believing in the mission, the management, or the technology or service. In many businesses, owners and investors work in the business, or at the very least actively advise the firm. A typical image of an investor is a Wall Street tycoon, distant from the place where work is done. However, most businesses in the United States are small busi- nesses, and owners and investors often work alongside employees to enhance the business’s product or service. Each category of person possibly vested in a corporation differs in relationship to the com- pany, and perhaps in terms of the amount invested or the ease of access to speak with and influence management. In the following sections, we look at the unique relationships each group has with the corporation; the relationships differ by category, and thus the opportunity and best ways to engage each one differs too. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for
  • 58. resale or redistribution. Section 3.2Employees 3.2 Employees In the 21st century, corporate managers view workers differently than they typically did in the past. Also, employees increasingly have different types of commitments to firms. For example, in technology firms and many new nontechnical startups, employees are seen as family, essential members of a work community. Employees often feel the same way about the firm (AFL-CIO, 2015). Modern companies show more commitment to employees than they did in previous decades, in part because there are fewer choices for substitutes—at least in sectors that employ skilled workers. Many technological problems require specific technical expertise that is rare or unavailable in the broader market. Consider the skills of computer programmers, coders, and systems engineers—these skills are specialized and not evenly distributed among the job- seeking population. Other indus- tries face similar situations: Medical personnel have technical training and are currently in high demand by employers. Over time, specific industries create specialists and subspecial- ists, and employees and employers in these industries develop new interdependencies—one worker can no longer be easily substituted for another. Employees in such situations also per- sist in working for the company’s success, because the
  • 59. employee’s financial future depends on it—especially when his or her specialization is so specific that the employee cannot find other work without significant retraining. The employer needs the relationship to persist because firms cannot easily or inexpensively find a replacement in the labor market. For example, many software companies and medical service firms continually adjust to market needs by training current employees on anticipated future needs and providing employees with incen- tives to stay at the company. Types of Employees Most firms categorize employees in ways that relate to federal employment regulations. In most firms there are four basic categories of employees: full- time, part-time, independent contractors, and informal employees. Full-Time Employees Full-time employees work either hourly or on a salary. Hourly employees in the United States are typically required by law to spend 30 to 40 hours a week performing their work duties. Salaried full-time employees differ from hourly full-time employees in that they have a con- tractually defined responsibility. They must manage that responsibility and complete asso- ciated tasks in exchange for a monthly paycheck no matter how many hours they work— sometimes they might be able to complete requirements in under 30 to 40 hours a week, and at other times they may work more than this amount. Unlike hourly employees, salaried employees generally do not track work time in any formal way
  • 60. and typically cannot earn more by working more hours. Another difference between the two relates to the fact that full-time salaried employees generally receive health, retirement, and other benefits paid for or par- tially subsidized by the company. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 3.2Employees Part-Time Employees The second kind of employee is a part-time employee; he or she is generally paid by the hour. Part-time employees generally work less than 30 hours per week and do not receive com- pany-provided or company-subsidized benefits, although there are some exceptions. For example, the Starbucks Corporation has received significant press coverage for its decision to offer health benefits and tuition reimbursement to part-time employees. Part-time employ- ees have a variety of reasons for choosing to work part time, including preferring the work arrangement and the flexibility or wanting to sample work environments at different places. Employers who take better care of part-time (and full-time) employees can become employ- ers of choice and can likely select from a large applicant pool. Independent Contractors The third kind of employee is an independent contractor. An independent contractor works
  • 61. when contacted for a specific skill or project. He or she works for a specific amount of time and for a specified salary or hourly wage; there is typically no expectation that the employ- ment arrangement will extend past the life of the project or specified time. Note that when someone builds a house or other structure with a specific builder, the builder then contracts (or subcontracts) with skilled people (or many different ones) to complete the various specialized tasks related to building the structure within a specified time frame and quality level. In most cases, no builder can possibly perform all required tasks with equal skill, speed, and precision as what can be accomplished by various specialists hired for the tasks. The same logic applies to building a corporation or other organization, and the rea- sons a corporation might seek contract employees are the same: Some people have a specific skill set for doing a certain job, and they should be paid to perform that job but not remain associated with the company once the job is complete. A contract employee is not consid- ered an employee in current U.S. legal terms, but in modern (nonconstruction) firms, contract employees may provide accounting, payroll, janitorial, marketing, consulting, or other spe- cialized services. An independent contractor might also be someone who works seasonally. Informal Employees The fourth and final kind of employee is the informal consenting employee. This person might be a friend, spouse, intern, or volunteer. Regardless of the
  • 62. relationship, the informal employee also comes to the corporation to help complete a task. Informal employees are not legally considered employees, and thus have fewer rights and protections than formal employees. Note that informal employees are not the same as illegal ones. Illegal employees are those who do not have legal documentation to work in the United States or the country of interest. Therefore, any firm that accepts, demands, or pays for such labor is breaking the law. Often, informal employees with legal documentation do not receive wages (such as in the case of unpaid internships, where people work in exchange for experience rather than money), or they receive minimal wages. Informal employees may receive nonwage benefits such as insur- ance coverage (as is the case with volunteer firefighters in most U.S. states) or benefits such as experience and industry exposure or positive personal references (common benefits of unpaid internships). © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 3.2Employees Every type of employee has a differ- ent relationship with the corpora- tion, and the working assumption is that the closer and more financially direct the relationship with the employee, the deeper the engage-
  • 63. ment. It can generally be assumed that the full-time employee has a deeper engagement with the corpo- ration and that a part-time, infor- mal, or contract worker has less of a commitment to the corporation’s future. Full-time employees tend to stay longer, be paid more, and have financial and promotion futures more directly tied to the future of the corporation. Figure 3.2 shows the range of rela- tionships that corporations have with the types of employee stake- holders vested in the corporation. As the figure indicates, many dif- ferent options exist. An employee might be a partial owner. A contract employee might also be a supplier. A part-time employee might have a spouse or partner who is employed full-time at the same place. It is important people understand the wide number of options that now exist in the modern work environment. Anyone interested in CSR and sustainability, particularly regarding employees and employee rights, needs to keep a close eye on the many different ways firms define the concept of “employee” and “owner.” Motivating Employees Corporate managers understand the importance of motivating their highest quality workers to have a long-term commitment to the firm. The costs to attain new talent vary by job and
  • 64. industry type, but the costs associated with turnover can be avoided when committed people stay with the firm. Similarly, many workers prefer a stable, reliable, and involved connection with a firm. In some ways, many corporate actions that fall into the category of being socially responsible or sustainable stem from this mutual desire to increase the quality, reliability, and longevity of the connection between employee and employer. One innovation that results from this mutual interest relates to experiments and innovations with employee ownership. Figure 3.2: Types of Employee Stakeholders and Typical Engagement Levels f03_02 Higher Employee owner Employee stockholder Employee (with bene�ts) Part-time employee Contractor/supplier Intern or informal worker Lower Engagement Level © 2016 Bridgepoint Education, Inc. All rights reserved. Not for
  • 65. resale or redistribution. Section 3.2Employees Employee Stock Ownership Plan In 1956 the owners of Peninsula Newspapers wanted to exit from ownership of the company; at the same time, the employees wanted to become owners themselves to be more tightly coupled to the organization. Political economist Louis Kelso enabled the employees to pur- chase the company by creating a legal category known as an employee stock ownership plan (ESOP). As the idea of the ESOP emerged, it required authorization through legislation and tax code changes. In the United States an ESOP is a qualified pension plan (another way of saying it offers a type of retirement benefit). Because of this designation, employees do not need to pay taxes or any contribution to the firm until they “cash in” on their vested amount when they leave the company. When employees cash in, they can also roll over any ownership shares into an individual retirement account if they qualify (Doucouliagos, 1995). In refer- ence to stock options, vesting is the amount of time employees must wait to exercise or fully own their stock options (which is known as being fully vested). Stock options usually come with terms that provide more ownership or more stock the longer an employee stays with a firm. Usually, the terms include milestones related to time. For example, if an employee stays 5 years, he or she can be 25% vested in the amount of stock in
  • 66. question; in 7 years he or she can be 50% vested in the amount of stock in question; and so on (the exact time and percent- ages vary by company and industry). Over time, employees with vested interest in their company can become fully vested as part owners. Initially, employees’ small compensation in stock won’t give them much say in the company’s operations. However, over time, employees with options could amass consider- able influence in its future and governance. The philosophy behind an ESOP includes at least three parts: broaden ownership of capital, create financial security and incentives, and urge better employee productivity. The California- based National Center for Employee Ownership (2016) claims that 13 million employees in the United States work in places where they are encouraged to participate in ESOPs. In some cases, employees own and manage these companies, and there are no external investors. In other cases, employees own a smaller portion of the corporate stock shares, and external nonemployee investors have greater control. ESOPs are common in the service industry but can be found in many other industries too. Several high-profile companies that have ESOPs include United Airlines and W. L. Gore and Associates (Gimein, Lavelle, Barrett, & Foust, 2006; Paton, 1989). Why do companies go through so much trouble to create a plan that allows employees to become owners? Scholars have studied this idea extensively,
  • 67. and their conclusions are not always clear. Some studies suggest that ESOP programs make the company more profitable and competitive because employees are more dedicated and have a stronger sense of commit- ment to it (Gates, 1999; Blais, Kruse, & Freeman, 2010). Other studies show that ESOP com- panies are in fact more successful than comparable firms and offer more competitive salaries (Hoffmire, 2015). Perhaps ESOP companies attract a higher quality of worker because the benefits are better. However, there are some potential downsides to ESOPs. The first is that employees tend to have a large portion of their retirement tied to a single company. This is contrary to the long accepted principle of investment diversification. If an employee has most of his or her net worth tied up in a single company, he or she is vulnerable if that company fails, performs poorly, or is at a low value when the employee needs to sell the stock. One study showed that © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 3.2Employees ESOP participants generally had about 60% of their retirement savings invested in a single employer (Rosen, Case & Staubus, 2005; Cornforth, Thomas, Spear, & Lewis, 1998).
  • 68. Another criticism of ESOPs is that they are excessively ideological, whereas the marketplace is more practical. For example, companies that are forced to downsize because of changes in the marketplace often lay off workers—such decisions make financial sense and help the organization survive for the remaining employees and customers. However, if through an ESOP an employee participates in the company’s management, then he or she is put in a posi- tion to protect employee jobs, making it less likely the company will take the cost-cutting/ job-cutting steps that are sometimes needed to survive. Managing ESOP companies can thus occasionally become problematic (Stumpff & Stein, 2009; McDonnell, 2000). Other Stock-Related Options In the United States there are other ways that companies can reap the advantages of ESOPs without completely changing the company’s legal structure. One way is to offer stock to employees under very specific conditions. While these are mostly found in highly competi- tive sectors, it is also true that progressively minded companies such as Starbucks use stock options to benefit employees. In such companies workers do not have management control associated with the highest levels and type of stock ownership (there are various levels), but they do have a long-term financial tie to the company created by the option to purchase stock at a fixed price. Other companies allow employees to directly purchase shares in the company on their own.
  • 69. In some countries, including the United States, tax-qualified plans allow employees to buy stock at a discount or with matching contributions from the company, which means that employees can purchase stock at an employee price that is set below the normal market price. The employee can make the purchase with cash or with money the company provides that can only be used for stock purchases. Non-Stock-Related Options Non-stock-related benefits offer another way for corporations to engage their employees in a benefit under the company umbrella. For example, most life sciences companies (such as Procter & Gamble, Nike, and Johnson & Johnson) and many fast- moving consumer goods manufacturing companies operate company stores where employees can buy products created by that company at a deeply discounted price. Other companies extend travel discounts to employees or allow them to use company facilities for exercise or social service. All of these benefits are designed to enhance the employee’s life and deepen his or her commitment to the corporation. Some firms Photodisc/Thinkstock The ability to work from home is one exam- ple of a benefit that companies can offer to increase employee engagement. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution.
  • 70. Section 3.2Employees motivate and retain employees by offering flexible hours, work- from-home telecommuting options, and unlimited no-questions-asked time off and sick leave. Many employees work for the promise of future income and bonuses, but many people select employers based on nonfinancial criteria too. Employers of choice tend to be places where the culture supports learning, work–life balance, health and wellness, flexibility, growth, a supportive work environment, safety, and a sense of purpose or meaning (Dill, 2015). Thus, a firm’s employment policies and the general way it treats its workers (its human resource policies and practices) influence employee engagement and become a point of consider- ation when candidates apply for jobs and when firm managers build or rebuild policies and practices. Employee Rights Thus far, we have discussed employees and some options provided to those employees fortu- nate enough to quality for certain benefits. This section examines the rights and protections that government regulations and social standards provide for all employees. While employee rights vary, there is general agreement on the basic rights of workers, despite the fact that enforcing these rights differs by region and industry. The most basic rights include safety,
  • 71. freedom of participation, collective bargaining, free speech, protection from honesty tests, and protection and privacy of information. The Right to Safety The first right covers basic workplace safety while acknowledging that different industries have different safety concerns. Certainly, almost all work has a reasonable risk associated with it. For example, flying in an airplane is generally safe, but there are occasions when acci- dents occur. Likewise, truck drivers, taxi drivers, emergency services workers, factory work- ers, farmers, and many others absorb a certain amount of risk when they enter the workplace. All workers should ask themselves what level of risk they are willing to absorb, and every manager and owner should determine whether they are providing the safest possible work environment. All safety issues are associated with a cost– benefit analysis, and it is under- stood that perfect safety can rarely be achieved. There are always limited resources within which companies operate that affect the amount they can spend on safety procedures. But worker safety is and should always be an overriding question and pursuit in any workplace. Workers, labor unions, managers, leaders, owners, and investors should ask if all reasonable risk is being illuminated and properly managed. An important law that protects worker safety is the Occupational Safety and Health Act of 1970, which regulates the safety and health con- ditions of the majority of industries. This act and its associated department, the Occupational Safety and Health Administration (OSHA), protect workers
  • 72. from unsafe conditions—OSHA violations are expensive and can result in a firm’s closure. The Right to Participate in Work The second basic right is related to participation in the workplace. Issues related to these rights include the age at which it is appropriate for people to begin or stop working; what constitutes child labor or taking advantage of the elderly; and how can everyone be treated © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Section 3.2Employees fairly in the workplace. Broadly framed, these are issues that all stakeholders in the work- place should consider. There is not necessarily a right answer, but work conditions are gener- ally better when all parties engage in an ongoing dialogue about them. In other words, these questions will likely not ever be settled, but should rather produce an ongoing discussion. Part of the job of an informed employee and a socially responsible leader is to ensure that such conversations take place and that all interested and affected parties are aware of the conversations and are included in them. …