mervyn king´s presentation on wprf

Stakeholder Relationships in the New Economy

WORLD PUBLIC RELATIONS FORUM14 June 2010

Prof Mervyn E King SC

Corporate Legal Advisers

Caretaker

Darwinian or biblicalSuperior beingTaken care?Transient in universal contextNot owners of planet earth


Inheritance

The trouble with our timesYour children and their childrenIndividual the driverOf all entitiesEcological overshootMore in urban areasIT and shareholder revolutions


London


Not in a Vacuum18th and 19th centuriesMid‐20th centuryLast decades of 20th centuryIntegral to society – linkGreatest pools of human and monetary capitalThe 100 largest economiesChanged its identity


Parallel Crises

Financial crisis, spilling over into the economyClimate change crisisEcosystem/natural resources crisis – two thirds of our most important ecosystems –like tropical forests, farm land, fresh water and marine resources –used beyond nature’s capacity to regenerate them


Yesterday’s Economic Model

Yesterday’s economic model was based on the false assumptions :

that there were limitless resources in nature and that nature had an infinite capacity to absorb waste


Planet Inn

100 years ago1 billion people1945 – just under 2 billion2010 – 6.5 billion2050 – 9.5 billionNo vacancies


100 Years

Take, Make and WasteNatural capital at no costAs a result, natural resources depleted, water polluted and greenhouse gasses (GHG) into open sewer in the skyBusiness cannot be conducted as usual


InseparableGood governanceStrategySustainabilityGovernance, strategy and sustainability have become inseparableCoca Cola


Measuring Company’s Economic Value

market value $ 105,586 mil

20 % ?

67%Brand value $ 70,453 mil (Interbrand)

13%Book value $ 13,560 mil

source: SAM


Integrated Reporting


The New Economy

Business as unusualMaking more with lessProcter & GambleCoca ColaGoogleGovernance, strategy and sustainability are inseparable!


Five Essential Capital Aspects

Financial capitalHuman capitalNatural capitalSocial capitalManufactured/technology capitalCritical interdependencies


The Governance Regime

Mid 19th centuryLimited liability company – incapacitatedWealthy families – shareholders and directorsPrimacy of shareholdersGrowth of companies – “agency problem”Stakeholder – inclusive approach


The Inclusive Approach

PurposeValue drivers – cultureStakeholder groupingsInterests and expectationsTake account ofGuided by best interests of company


Principles of the Inclusive Approach

Responsibly and responsivelyAccountability – account to, but ofFairness – the right thing to doTransparency – withering effectIntellectual honesty


Corporate Reputation – Brand

Intangible assetsStakeholders’ aggregate perceptionsEqual overall assessment of companyResults in formation of the reputationMeasurement :performance compared withinterests and expectations


Legitimate Interests and Expectations

A reasonable and informed bystanderValid and justifiableLegal basisMoral or ethical basis


Who are Stakeholders?

Group that can affect operationsGroup affected by operationsBy contractBy tort (delict)By statuteBy codes


Board’s Duty

Identify the stakeholder groupingsTheir interests and expectationsRelevant to company’s long‐term goalsDelegate to management to communicateBoard agenda item: The Relationships


Governance Framework

A

Federations/codesindustry norms

M E

C

S

C

ExternalStakeholders

Internal StakeholdersConsultants &Advisors

Government

EmployeesTradeUnions

Shareholders

CorporateGovernanceGuidelinesCustomers

AuditorsSuppliers

LocalCommunities

TradeAssociations

Environ‐mentalists

BusinessPartners

Media

StockExchange

Lenders ofMoney

Directors

Management

Board

AM E

C

S

C

External Stakeholders

Internal StakeholdersConsultants &Advisors

Government

EmployeesTradeUnions

Shareholders

CorporateGovernanceGuidelines

Customers

AuditorsSuppliers

LocalCommunities

TradeAssociations

Environ‐mentalists

BusinessPartners

Media

StockExchange

Lenders ofMoney

Directors

Management

Board

InternationalNationalLocal


Licensors to Operate

Company

Individual attitudes: Customers, Suppliers, Consumers, Employees,

Investors and Community

Pressure GroupsMedia

Industry Reputation

Public Opinion/ Confidence

Political Opinion Industry and Market Standards

Law/Regulation


The Moat

Stakeholders

The Company


The Gap

Company performanceCompany reportingStakeholder interests and expectationsStakeholder perceptions


Actions

What company doesHow it makes its moneyWhat and how it communicatesBridges actual and perceived gaps


The CRO

Corporate reputation officerCommunicates with stakeholdersInforms managementEmployee or independentStrategic communication


Reporting

Electronic communicationWebsite, blogging, etcStakeholder associationsAdvertisingPress releases


Caveats

Information in public domainNot in public domainPrice sensitive informationDo not make stakeholder an insider


Content

Substance over formTransparentEffective communicationUnderstandable languagePositives and the negatives


Annual Report

The company’s stakeholder policyIdentify stakeholder groupingsInformation highlightsStakeholders’ views, events, issues or trends


Alternative Dispute Resolution (ADR)

Disputes with stakeholdersBuilding relationshipsDispute can destroy relationshipAlternative dispute resolution clause


Integrated Report

Holistic and integrated representationOf the company’s performanceFinancially, socially and environmentallyDisclosure of stakeholder policyStakeholder groupings and relationship


What Can Business Do?Change mindset with changed identityBusiness as unusualProduce more with lessIntegrated reports, including stakeholder relationshipsInformed assessment of sustainability of companyGood, hardnosed business, inclusive approachFulfilling our duty to those who come after usIncapacitated good corporate citizenRight thing – essential thing


How Report Performance?Financial information alone?Not sufficient for informed assessmentsHow has the company positively and negatively impacted on a community economically, socially and environmentally through its operations during the year under review and related to its stakeholders?How is the company going to improve the positive aspects and eradicate or ameliorate the negative aspects in the financial year ahead and improve its stakeholder relationships?Clear and understandable languageCorporate reporting not what it used to be


CSR


A Journey

Step by stepAn ascending pathThere is no endPersonal achievementThe Age of Stupid 2010

Thank You

Prof Mervyn E King SC

mervyn king´s presentation on wprf

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