Corporate Governance, CSR, and Social Marketing: Strategies and Concepts
Definition of Corporate Governance
Definition: Corporate governance encompasses the systems, rules, relationships, processes, and tools designed for the fair and efficient management of an organization.
1.1. Agency Theory
- Info Asymmetry
- Moral Hazard
- Conflict of Interest
- Difficult Monitoring
- Principal-Agent Problem
1.2. Definition and Functions of the Board of Directors
The board of directors acts as the link between managers and investors, crucial for good corporate governance and investor relations. Its main functions include:
- Strategic guidance for company growth and prosperity.
- Ensuring accountability to stakeholders.
- Ensuring a qualified executive team manages the company.
Differences between the Chairman and the Chief Executive Officer (CEO): The CEO has executive responsibility for the board’s operations. Executive and non-executive directors provide oversight and contribute to overall leadership. The board may appoint subcommittees, which should report regularly to the board. The board is responsible for the areas covered by subcommittees.
Composition of the Board
- Size
- Independent Directors
- Profile: Expertise, strategic areas, risk management
- Dedication
Board Subcommittees
- Executive Committee
- Audit
- Nomination
- Remuneration
- Strategy
- Risks
- Ethics/CSR
Nomination & Remuneration Committees
- Evaluation of the CEO
- Evaluation of the Board
- Succession plans
- Nomination of Independent Directors
Good Governance Codes
Good governance codes are tools used by large companies (especially those listed on the stock exchange) to determine conduct regarding the voluntary adoption of ethical and management principles by the company’s highest governance bodies. Key elements include:
- An effective independent board
- A proactive audit committee
- A compensation committee aligning executive compensation to shareholder value
- A nominating committee ensuring effective governance of the board
- A sound internal control framework
- A relevant code of ethical behavior
- Clear and enforced policies and procedures
- Effective management of risk
- An objective, well-resourced internal audit function
- Independent, effective external audit
- Transparent disclosure, effective communication, and systems that ensure effective measurement and accountability
Corporate Governance Codes
These codes aim to provide more transparency and accountability to recover investor confidence. The Cadbury Code (1992, UK) and OECD principles have played an important role in the development of codes. The approach is often “Comply or explain” (vs. mandatory or legislative). These codes have extended to most countries and global institutions. Recently, there is an increased focus on NGOs, the public sector, and charities.
Code of Conduct or Ethics
A structured body of principles and guidelines for ethical behavior, designed to avoid or resolve conflicts of interest and standardize the conduct of all members of the organization. Key features:
- Sets the values of the organization
- Serves as a guide for action and facilitates decision-making and better professional conduct
- Aimed at both employees and other stakeholders
- Should be objective and include clear criteria for understanding and situation
- Available and communicated to affected stakeholders
- Should monitor and control measures to ensure compliance and effectiveness
- Provides a common performance mode for ethical behavior appropriate to the organization’s purpose and activities
Codes of Conduct
- Compliance: External constraints. Prevent irresponsible conduct. Lead by law. People act in their own interest. Codes, Audits, Ethics officers.
- Integrity: Internal motivation. Motivate responsible behaviors. Lead by HHRR. People are led by values. Credo, Ethics training, Culture.
Unit 6. CSR Management
Introduction
To implement a company’s CSR strategy, you need to know:
- What models to consider
- Begin the design of the strategy through the definition of:
- The stakeholders map
- Materiality assessment
1.1. Models
Organizations use a series of previously known indicators to set up their CSR model/strategy. For instance:
- 10 principles of the global compact
- Sustainable development goals
- ESG criteria
- Global reporting initiative criteria
Economic Performance
- Market presence
- Indirect economic impacts
- Procurement practices
- Anti-corruption
- Anti-competitive behavior
Materiality Assessment
The CSR strategy (and its CSR report) shall cover topics/initiatives that:
- Reflect the reporting organization’s significant economic, environmental, and social impacts
- Substantively influence the assessments and decisions of stakeholders
Stakeholders Mapping
Stakeholders are all those who influence or can be influenced by the company’s activity. In other words, the people/organizations or institutions that have direct or indirect relations with the company along the value chain. The aim of mapping stakeholders is to detect and understand their expectations and establish an engagement process.
Mapping the Stakeholders (I)
- Primary: Those necessary for the company to continue operating. Owners, shareholders, employees, customers…
- Secondary: Not directly related but can influence. Competitors, community, media, Global; Members from different countries with common interests on business (NGO’s religious…).
Mapping the Stakeholders (II)
Another method for systematically identifying stakeholder groups should consider the scope of the engagement and may be guided by attributes of stakeholders such as the following:
- Dependency: Groups or individuals directly or indirectly dependent on the organization’s activities, products, or services and associated performance, or on whom the organization is dependent to operate.
- Responsibility: Groups or individuals to whom the organization has, or in the future may have, legal, commercial, operational, or ethical/moral responsibilities.
- Tension: Groups or individuals who need immediate attention from the organization regarding financial, wider economic, social, or environmental issues.
- Influence: Groups or individuals who can impact the organization’s or a stakeholder’s strategic or operational decision-making.
- Diverse perspectives: Groups or individuals whose different views can lead to a new understanding of the situation and the identification of opportunities for action that may not otherwise occur.
Stakeholders Engagement (I)
This profiling and mapping shall be considered in the planning and implementation of the engagement. Thus, engagement owners should systematically seek to understand each stakeholder’s:
- Knowledge of the issues associated with the purpose and scope of the engagement
- Expectations of the engagement
- Existing relationship with the organization (close or distant; formal or informal)
- Dependence on the organization
- Willingness to engage
- Level of influence
- Type (civil society, government, consumer)
- Cultural context
- Geographical scale of operation
- Capacity to engage
- Legitimacy and representation
- Relationships with other stakeholders
Materiality Assessment
The CSR strategy (and its CSR report) shall cover topics/initiatives that:
- Reflect the reporting organization’s significant economic, environmental, and social impacts
- Substantively influence the assessments and decisions of stakeholders
GRI establishes a mechanism for their establishment of:
- The materiality analysis directs and reinforces the CSR strategy
- It provides transparency and shows the way forward in the strategy
Steps:
- Identify the relevant aspects through dialogue, listening, and research
- Prioritize aspects of the economic, social, environmental, and economic impact through their relevance for the company and its stakeholders. It also leads to inclusion in the report
- Validation. It is decided what is included in the report and therefore wins the strategy
- Review through the establishment of KPIs
CSR Communication
1. The Role of Corporate Communication and CSR
Step 1: Get ready: Training and support; Determining resource requirements; Schedule.
Step 2: Plan: Identify stakeholders; Identify issues; Determining the scope.
Step 3: Evaluate: Gathering indicator information; Setting goals for the coming year.
Step 4: Report: Choosing the right communication methods; Writing the report; Reviewing and distributing.
Step 5: Improve: Collect comments; Moving forward: new issues; Getting recognition.
The CSR and GRI Report
- Sponsored by the UN
- First version in 2000 and the last and 4th online version in May 2013
- It does not provide lines of action but helps to describe the economic-social-environmental action
- It is a guide for the preparation of the CSR report
- It includes sector supplements
- It is applicable to all countries, sectors, and company sizes
- It is flexible: it can be applied in stages
- It is voluntary
- It facilitates verification and comparison
The corporate responsibility report focuses on the presentation of a company’s economic, social, and environmental performance.
The integrated report involves:
- The explanation of the company business model and how value creation occurs, at the present time and in the future
- The governance model behind this business model
- The explanation of the business strategy from the perspective of challenges and opportunities, where elements such as materiality and risk matrix should be considered
3. The Role of Corporate Communication and CSR
Communication faces the following scenario:
- The use of multidirectional tools – Interaction, listening, and dialogue
- A new media planning system – Fragmentation of audiences
- A new audience profile – Conversation and influencers
- New ways to disseminate the message – Branded content
There is a contrast between the desire to establish social responsibility strategies and the refusal to communicate them.
Negative Aspects Known by the Companies
- Increases stakeholder expectations
- Companies that do not communicate go unnoticed
- Companies that communicate CSR are evaluated more critically (by audiences and media)
- Stakeholders may think that the company is trying to hide something
- If they communicate too much, they can be perceived negatively (boomerang effect)
The selection of corporate communication channels should be made:
- Depending on the organizational purpose (communication objectives)
- From the previously approved stakeholder map
- Of the characteristics of each network
Kinds of Channels
- Own and paid media (one-way): The company has total control over what appears.
- Earned media: The company competes with other broadcasters from multiple backgrounds to gain audiences and provoke engagement.
Three types of conversations:
- The company with the public
- The public with the company
- The audiences with each other
The earned media (in general, social networks) is the space where the organization can engage with stakeholders with a greater sense of freedom.
4. Other Communication Tools
Social networks (corporate accounts). They communicate information about the company. They are able to promote transparency and dialogue with stakeholders, making them a fundamental tool for the management and development of social responsibility.
Some Disadvantages
- Lack of interest in the analysis by the current Dircom
- Lack of interest in listening to stakeholders (making social media one-way)
- Lack of interest in mediating between conversations
- Lack of knowledge about how to analyze
- Lack of synergies with those responsible for online communication, DIRCOM, and the CSR manager
Even if a company thinks that it has nothing to contribute in social networks, it has the obligation to mediate in the conversation between its stakeholders.
CSR Communication
Industry-related words, financial performance messages, and the local activities of the company are opportunities to spread the CSR commitment. The communication is scarce between companies and users related to CSR. In general, companies and users shared interests, but these were not related to a real conversation about CSR and sustainability.
Unit 8. Corporate Social Marketing
Social Marketing and Corporate Social Marketing Concepts
Kolter and Lee (2008) define social marketing as: the process that applies marketing principles and techniques to create, communicate, and deliver value to influence target audience behavior that benefits society (public health, safety, the environment, and the communities) as well as the target audience. Principles followed for social marketing are the same as that for commercial marketing. The social welfare goal is achieved through voluntary change of behavior.
Social Marketing
Defined as “the design, implementation, and control of programs calculated to influence the acceptability of social ideas and involving considerations of product planning, pricing, communications, distribution, and marketing research.” Marketing is used to promote not only products or services but also political campaigns, community programs, and social causes. Over the years, it became popular to extend the application of marketing tools and theories to the dissemination of social ideas. Some of these campaigns include family planning, energy conservation, healthcare, improved nutrition, arts promotion, prevention of alcohol and drug abuse, mass transportation, antismoking, safe sex, safer driving, environmental improvement, and many other socially important causes. A positive impact has been an improvement in the dissemination and recall of useful social programs, but this type of marketing has been considered costly and perhaps also manipulative.
Corporate Social Marketing
Marketing that “uses the company’s resources to develop and /or implement a behavioral change campaign aimed at improving public health, safety, the environment, or the well-being of the community.” Also referred to as Cause-Related Marketing or Marketing with a Social Dimension. The main element of differentiation with other social initiatives of companies is that in this case what is pursued is a change in behavior that benefits multiple groups together. Such a change in conduct must also be promoted with the use of the company’s own resources, which are activated in the service of a common social good. The indicator of the success or failure of a company’s Corporate Social Marketing initiative goes beyond pure awareness, as it is about getting the change in the purchasing behavior of its consumers.
3.1. Corporate Social Marketing Issues
- These campaigns do not appear to be particularly effective in achieving short-term economic objectives, such as increasing sales or differentiating products.
- They can be more difficult to execute than other approaches
- Even a well-conceived and well-executed campaign may be ineffective if constituents do not have or develop any affinity for the cause.
- A social campaign’s message may be misinterpreted or misconstrued, which may lead to negative attributions to the company by consumers.
3.2. Corporate Social Marketing Effectiveness Factors
- Alignment: The business object of the company and the social cause promoted are naturally aligned so that the consumer does not question the commitment and authenticity of the company to achieve the required purpose. Example: any company in the food or catering sector intended for children, looking for guaranteeing and promoting their health.
- Relevance: The company’s consumers must naturally be interested in the promoted social purpose rather than the purpose being artificially created. Example: Any company targeted at a female target that promotes gender equality or health initiatives specific to this audience could be an example of this factor.
- Transcendence: The social purpose and the change of associated conduct go beyond business and individual motivations and are of interest to society as a whole, achieving a long-term commitment. Example: Initiatives of companies with high use of electronic material committed to the correct management of their waste.
- Accessibility: Since the company puts all its resources at the service of the initiative, it is easier to remove any barriers that prevent consumers from adopting the required behavior. Example: the large coverage of audiences and geographic points that can guarantee the wide distribution channels of international companies in the food sector.
- Integration: As it is a social purpose naturally aligned with the business purpose of the company, there are more possibilities for integrating with another series of business initiatives.