CSR & Corporate Governance

• Management ethics

  A code of 'honourable behaviour' guided by a set of moral principles
• The manner in which situations are managed will often be determined by the manager's personal ethical norms and values
• It is important that the business enforces a policy that will guide management towards actions that are in line with what the business views as socially responsible
• Corporate social responsibility (CSR)

  Voluntary steps taken to improve quality of life and welfare of all stakeholders (employees, customers, suppliers, government, community and competitors)
• Corporate social investment (CSI)

  The resources (money, manpower, products, machinery, premises) that businesses spend on the community to improve the standard of living
• Sustainability

  The ability to be maintained at a certain level
• Sustainable projects are projects that continue without the presence of the business
• Examples of sustainable projects

  • Vegetable garden that the community is taught to maintain
  • ABET (Adult Basic Education and Training) classes
  • Teaching entrepreneurial skills
• Benefits for BUSINESS from CSR

  • Helps to recruit best employees
  • Gives a favourable image of business
  • Builds employee loyalty
  • Creates customer loyalty
  • Attracts investors
• Problems for BUSINESS from CSR


  • Business does not always have the skills to solve societal problems
  • CSI costs money which a small business may not afford to budget for
  • CSR is time consuming, which may distract employees from meeting targets and deadlines
  • The community may have high expectations from the business and should the business not be able to meet these expectations it will result in bad publicity
  • Managers may not be trained and lack experience to handle social programmes
• Benefits for COMMUNITY from CSR

  • Improves the quality of life of the community through provision of economical and social development opportunities
  • Generates employment through skills development
  • Provision of education and training to enhance employment opportunities
  • Changes future of employees and their families by providing bursaries
  • Improvement and or building of infrastructure in community, example, building schools, libraries, homes
• Problems for COMMUNITY from CSR

  • Communities may not take responsibility for their own actions because they assume the business CSR initiatives will provide for them
  • The community may become dependant on CSR initiatives
  • Some CSR initiatives are not sustainable which means that the project will collapse /stop should the business leave
  • Some businesses may use CSR initiatives to distract the public from other unethical issues the business may be involved in
  • Spending money on CSR means that the money has to be recovered elsewhere, this may lead to higher prices on goods and services which will negatively impact the economy
• CSR (Challenges) in South Africa

  • Inequalities of the past
  • Cycle of poverty
  • Dualistic economy: living in both a developing and developed economy
  • Years of apartheid
  • Culture of crime and violence
  • HIV/AIDS epidemic
  • Limited water supplies
  • Technological advancement
  • The 'global village' phenomenon
• Poverty

  The state of having little or no money as well as few or no material possessions

  • World bank defines this as living on under US$1,90 per person
• Levels of poverty

  • Extreme poverty
  • Moderate or subsistence poverty
• Triple Bottom Line/Integrated Reporting

  Forms an integral part of business management, known as reporting on the 3P's:

  • Profit (economic prosperity)
  • People (social responsibility)
  • Planet (environmental sustainability)
• • Currently have King Code IV
  • Different to King III in that it requires companies to apply AND explain which recommended practices business has adopted and how they have been adopted as well as which ones business plans on implementing in the future.
• Outcomes the Board of Directors is accountable for achieving

  • Ethical culture
  • Good performance
  • Effective control
  • Trust and good reputation
• Governance Framework

  Should be set out as code of principles and practices, companies should not be narrow minded about corporate governance but rather operate in an accountable and responsible manner
• JSE has made it compulsory for all listed companies to comply with King Code by introducing the JSE SRI (Social Responsibility Index) criteria
• There has always been a link between good governance and the law
• Directors MUST conduct themselves within the bounds of the law, they must act with care, skill, diligence, fiduciary duty (legal obligation of one party to act in the best interest of another)
• It is important to have established structures and processes with checkpoints to enable stakeholders to act with legal responsibilities
• Primary characteristics of good governance

  • Transparency
  • Independence
  • Accountability
  • Fairness
  • Integrity
  • Discipline
  • Promoting ethical and responsible business decisions
  • Social issues
  • Duties and responsibilities of directors
• Promoting ethical and responsible business decisions

  • Clarifying standards of ethical behaviour for all stakeholders
  • Comply with all legal requirements
  • Have reasonable expectations of their stakeholders
• Social issues: (good governance)

  • concerned with fair treatment of society as a whole, focus is on social equity and sustainable development, companies need to encourage social equity in the communities they operate in
• Duties and responsibilities of directors (good governance)

  • act with good faith, honesty, skill, integrity
• Sustainability as part of the King Code

  • Key stakeholders should no longer focus on only the needs of the present but also the future needs of generations to come
  • sustainable development measures the relationship between the elements of the Triple Bottom line (Profit/economic, Planet/environment, People/social)
  • Essentially means that once a company has engaged in a business activity, people need to be better off, the planet must not have degraded and the company’s economic position is strengthened.
• Environmental sustainability pillar

  Refers to business activities that are concerned with the degradation of the environment

  • measures both economic growth and development
  • companies must preserve environmental quality
• Ways to achieve environmental sustainability

  • Product: business should consider using recyclable/reusable materials
  • Processes: assess the activities of the business both internally and externally
  • Practices: look at operational activities, organisational culture, waste disposal and effective use of energy
  • Premises: assess the way in which buildings and surrounding are designed
• Benefits of good corporate governance

  • Maintains investor confidence
  • Minimises wastage, corruption, risks and mismanagement
  • Helps with company brand formation and development
  • Provides incentives to owner and management to achieve objectives in the best interest of stakeholders
  • Is a positive impact on share prices and SRI rating
  • Helps company in lowering capital acquisition costs
  • Ensures corporate success and economic growth
  • Contributes to political stability and enhanced international relations
• SRI/FTSE/JSE Responsibility Investment Index

  Purpose is to:

  • continue work initiated by the JSE SRI (Social Responsibility Index) that identified companies that focused on good governance and who used Triple bottom Line in their reporting
  • measure policies and procedures of companies registered on the JSE against globally acceptable ESG (Economic, Social and Governance) standards
  • to serve as a platform for companies to demonstrate to stakeholders that they are acting and reporting in a responsible manner on ESG issues
  • promote responsible business practices in South Africa
• Benefits of the FTSE/JSE Responsibility Investment Index

  • Economic, Social and Governance (ESG) disclosure among JSE-listed companies is promoted
  • Scoring high on the FTSE/JSE Responsible investment Index confirms to stakeholders that the business is accountable and transparent in its dealings with ESG issues
  • Complying with the index could improve/boost image of business in minds of investors
  • Being listed on the index can be used as a competitive advantage for business
  • Companies can build an organisational culture around this index and make it part of their brand
• Global Reporting Initiative (GRI)

  • Promotes reporting on sustainability issues through the creation of a Sustainability reporting Framework
  • Framework used worldwide to promote transparency on Economic, Social and Governance (ESG) issues
  • provides guidelines to businesses to determine their impact on economic, environmental and social fronts
  • ensures like businesses are compared with one another
• helps to recruit best employees (benefit of CSR)

  people are attracted to businesses that have a moral/ethical compass.
• Gives a favourable image business (benefit of CSR)


  the business is giving back to the community.
• builds employee loyalty (benefit of CSR)


  employees can see that the business is attempting to improve the standard of living in the community from where they possibly come from.
• creates customer loyalty (benefits of CSR)


  customers will want to support a business that contributes developing a better society.
• Attracts investors (benefits of CSR)

  investing in a business that gives back to the community implies increased support and loyalty from customers, this gives rise to increased profits.
• What is extreme poverty?

  • people who constantly struggle to survive.
  • Incapable of fighting diseases due to lack of adequate nutrition or medical care
  • Have little to no access to education, medical care or other basic human needs.
  • Particularly devastated by additional disasters such as storms or droughts.