The role of social responsibility in investor relations: Guest Post by Kristen Eklund

Social responsibility has a heavy weight in the investment field. Both ethical and moral views are put on the forefront when investing in a company. They are weighed by the stakeholders as well as companies. Social responsibilities could potentially make or break a company and their shareholders. Social responsibility investing represents the ethical and core beliefs of a company and its publics.  With the ability to withhold funds from a company  the shareholders are able to restrict business with that company and limit there ability to run effectively. In conclusion a company's share price may be negatively affected if these unethical behaviors are being carried out. This leads the company to take in to consideration the core values of their company and publics.

Nike has been at the forefront of social responsibility scandals. Being one of the leading brands in the world in 1992, Nike was accused of disregarding social responsibilities within their factories throughout the world. The first case came up in a 1992 edition of Harpers magazine. A young Indonesian worker named Sadisah was questioned about the conditions of the Nike working factories. Sadisah was working 6 days a week for 10 hours a day. Her wage was for 14 cents and hour. With a company being owned by the sixth richest man in the world, stakeholders and customers were outraged by the working regulations. After exposing the company, Nike had began to receive negative publicity. This scandal spanned out for the course of five years. Protests against the company had begun, and Nike retail stores were suffering immensely. Groups were formed to protest against the slave like conditions, while many sports teams pulled their sponsorship deals with the company.

ESPN covered as story about St. Johns University that withheld their 3.5 million dollar sponsorship deal with Nike. Jim Keady an assistant soccer coach at the University refused to wear the Nike product and in return the company suffered. Slave wages, abuse, and neglect were just some of the terms used to describe the market leading brand.  With dominating the market for so long, Nike was under severe criticism and needed to implement crisis control tactics. The report includes a section regarding workers and factories. This section provides information about how the company reaches out to the workers and how they regulate what is now going on in the factories. Given by a third party survey the employee satisfaction survey was administered to workers in 24 factories in China and Vietnam. The survey was composed of questions regarding: training and development, living conditions, working conditions, work hours, compensation and supervision. The company also implemented a 6 point plan which would help Nike monitor conditions while raise minimum wages and work requirements. Following this, Nike also set up a CSR department which communicated directly with Phil Knight along with publics which heavily criticized the company.

Over the years, Nike has attempted to slowly rebuild its reputation. In order to continue, Nike must be able to communicate to the public and its stakeholders their ethical responsibilities. Nike reported in 2005 that they have been working with factories to builds their human resources skill san improve the environment. Since the ongoing scandals that erupted in 1992, Nike has still continued to emerge as a company that suppresses its factory workers. Articles  continue to emerge about Nikes treatment of workers in factories across the world . A recent article in 2011 stated that workers in Nike factories were physically and verbally abused.


In terms of future development, the company must continue to work with factories throughout the world. Nike must directly monitor these factories in order to ensure they are running safely. Nike must be able to communicate their efforts to their stakeholders as well as customers in order to rebuild a relationship. They must gain trust back from these publics in order for them to invest in the company.

It is evident that the Nike controversy has continued to drag on. Being one of the market leaders Nike continues to be a powerhouse. It is evident that there main goal is to gain a profit from their customers regardless of the negative publicity. In order to gain a positive reputation, the company must be able to directly oversee workers and factory conditions. Nike must import jobs back to the United States to ensure that the company is able to oversee the production rather than shipping jobs over to a third party. Though this could potentially affect the company? profit, it will positively affect their image and the shareholders trust with the company. It is the concept of weighing ethical values against profit.

The new task for IRO’s that’s gaining momentum—Sustainability Disclosure: Guest Post by Victoria Seggio

In the highly competitive and rapidly changing economy, staying ahead of the curve can be vital to the fate of a company. A focus on intangible assets has been an integral part of investors’ analyses of a corporation, but there’s a growing trend that has put some companies ahead of the game.

         

In order to compete, companies now need to be cognizant of their triple bottom line—environmental, social and economic performance. According to a study done by the Investor Responsibility Research Center (IRRC) Institute, shareholder support for environmental and social actions has doubled since 2005.

                                                              

Shareholders are now challenging boards, more than ever before, to improve their extended disclosure around hot-button social issues. Environmental and social proposals lead all other major proposal categories of shareholder proposals according to Ernst & Young. These proposals also receive the highest levels of approval, especially those targeted at sustainability in companies facing corporate governance issues or if they seek higher levels of disclosure. Voting patterns provide convincing evidence that investors link a company’s social and environmental policies to its financial performance. Starbucks shareholder’s recently demanded sustainability initiatives in a resolution voted on at the Starbucks annual shareholder meeting.

This growing trend and number of proposals has expanded the role of the CFO and IR department. IR communication needs to provide more in-depth sustainability reports. CFO’s and IRO’s must stay up to date on sustainability initiatives across the organization. As corporate social responsibility issues have become intertwined in business strategies, more and more companies have begun to disclose their sustainability efforts.

According to the Governance & Accountability Institute’s 2012 Corporate Corporate ESG/Sustainability/Responsibility Report the number of S&P 500 companies reporting sustainability efforts has doubled last year, growing from 19% in 2011 to 53% in 2012. This reporting not only pleases investors, but also adds to company’s competitive advantage and bottom line. Sustainability disclosure allows companies to build trust with their investors and the community, and allows them to gain access to new investors who practice sustainable and responsible investing. Sustainable efforts give companies a competitive edge in the marketplace. “Green” practices allow them to differentiate their brand while incurring reduced costs from reduced use of energy and raw materials.

While these disclosures are not yet regulated, companies are reaping the benefits of getting ahead on this trend. They are protecting their freedom to operate by getting ahead of the issues facing their respective industries. They circumvent the threat of regulation by managing these issues themselves.

This trend will only continue, as more and more companies respond to the pressure to disclose social and environmental information from shareholders and competition. While the pressure won’t let up, sustainability reporting will face the same problem other intangibles face, lack of comparability and consistency in measurement. This reporting is voluntary, and companies use different guidelines in their reporting. Investors going forward will be faced with the challenge of how to compare one green initiative with another.