corporate social responsibility a corporate law contribution to the esop … · corporate social...
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Professor dr. juris Beate Sjåfjell
SSRN author page: ssrn.com/author=375947
@BeateSjafjell
Corporate social responsibility
A corporate law contribution to the
ESOP debate, 3 Nov 2016
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Overview of my presentation
• Different perspectives on the company (or
corporation)
• Corporate governance & CSR: is there a
connection?
• What regulates corporate behaviour?
• What do corporations do? Why?
• Is corporate social responsiblity an answer?
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Companies from a typical
corporate governance perspective
Shareholders
Company
Stakeholders
including employees
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Companies from a typical CSR perspective
The company
Employees External
workers
Environ-
ment
Global
developm.
Local
community
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Other employees
Management
BoardCompany
Share-
holdersBanks
Other
sources of
financeSuppliers
Other
creditors
(Local
authorities)
Customers
(clients, patients, pupils)
Sources of
finance
Other
contractual
parties
CG
External workers
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Global community
Company
CompanyCompany
Company
Company
Company
Company
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Companies can be organised in groups
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Who controls companies?
Bjarnadottir, Margret and Hansen, Gudmundur Axel, 2010, SIC report, Vol. 9, Appendix 2, pp. 23 - and Johnsen, G., 2014, Bringing Down the Banking System: Lessons from Iceland, Palgrave-Macmillan.
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… may be difficult to unravel
Bjarnadottir, Margret and Hansen, Gudmundur Axel, 2010, SIC report, Vol. 9, Appendix 2, pp. 23 - and Johnsen, G., 2014, Bringing Down the Banking System: Lessons from Iceland, Palgrave-Macmillan.
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Corporate Governance & CSR
• Corporate Governance:– Concerns control, management & accountability
– Relevant internally for how the corporation is run
– Relevant externally for impact of corporations on
society
• Corporate social responsibility (CSR)
– An abused and watered-out term
– Taken seriously, it concerns responsibility of
business for impact on society
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Connection between corporate
governance and CSR?
• Two debates with a slight convergence
tendency
• If both are taken seriously, they would
overlap to a great extent (but they aren’t)
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What regulates corporate behaviour?
• Broadly speaking: four modalities of
regulation
– Law: corporations are creatures of (national) law
– Social norms: can complement or undermine the
law
– Markets: regulating through price
– ‘Architecture’: the regulatory effect of the physical
world
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The role of law
• Legal infrastructure for business and finance
– The constitutive role of law
– Companies as ‘creatures of national law’
• Framework: generally and sector-specific
– International law, EU law, national law
• Regulating interests, rights and duties
• The norm-changing role of law
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What do corporations do?
• The backbone of our economies
– Providing jobs, tax revenues, goods and services, welfare
• Yet: «Business as usual» is not an alternative
– A very certain path towards a very uncertain future
– Safe and just operating space requires fundamental change
– Voluntary shift towards sustainability too slow
– Competitive advantage for unsustainable business
• Finance in the era of financialisation:
– Finance for business or finance for the financiers?
– Financial crises just the tip of the iceberg
– What Panama Papers reveals
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Why do corporations act
unsustainably?
• The starting point for the debate:
– Corporate governance
– Corporate social responsiblity
– ‘Maximising shareholder value’
• But what about the law?
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The Sustainable Companies Project
(2010-2014)
• We investigated legal infrastructure of the company:
core company law; corporate groups; reporting
• Why the company (aksjeselskap)?
• The company is an ingenious invention
– Channelling capital to entrepreneurs
– Creating value for investors, employees and
society
• And it is a dominant form of business
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Main results of the SC analysis
• Unrealised potential in company law
– Possibilities for change in company law
– Shareholder value vs shareholder primacy
– Short-term, narrowing effect of shareholder primacy
• Inadequate reporting requirements
– ‘Non-financial’ reporting not treated seriously
– Reporting often neither relevant nor reliable
– Missing link between reporting & corporate duties
• Corporate groups: gap control & responsibility
– Shareholder primacy exacerbated
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Is CSR the answer?
• Not as it is today
• CSR could contribute, if taken seriously:
– It were about legal compliance and beyond
– It were about the business of the company
– It had a broader approach than the legal entity
• Transcending the corporate goverance and
CSR debates: internalising externalities
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Internalising externalities: a proposal
• Redefine the corporate purpose:
– creating sustainable value within the planetary boundaries
while respecting the interests of its investors and other
involved parties
• Redefine the duty of the board:
– To promote life-cycle-based sustainable value creation
– Includes group issues & supply chain
• Operationalise through long-term, life-cycle-based
business plan; key performance indicators to report
on
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The challenge of securing a safe
operating space for humanity
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Safe & just
operating
space
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More information
• Info on our projects and networks:
jus.uio.no/companies (under Projects and Networks)
• Publications:
– A number of papers, including special issues of ECL (under Publ.)
– The Greening of European Business under EU Law, Sjåfjell &
Wiesbrock (eds), Routledge, 2015
– Company Law and Sustainability, Sjåfjell & Richardson (eds),
Cambridge University Press, 2015
– Sustainable Public Procurement under EU Law, Sjåfjell &
Wiesbrock (eds), 2016
E-mail: [email protected]
LinkedIn: Beate Sjåfjell; Facebook: Beate Sjåfjell
@BeateSjafjell