B8423INVESTORINFLUENCEONCORPORATESUSTAINABILITY

Spring2017

WJW416

PROFESSORJOHNWILSON

AdjunctProfessorColumbiaBusinessSchool

E-mail:jkw12@columbia.edu

OfficeHours:ByAppointment

TEACHINGASSISTANT

TBD

REQUIREDCOURSEMATERIAL

Thereisnotextbookforthisclass.Readingsarederivedfromreal-worldcasestudiesfoundinacademicresearch,investmentnotes,non-governmentalorganizationstudies,mediareports,shareholderproposalsandcompanycorporatefilingsandpublications.

REQUIREDPREREQUISITESANDCONNECTIONTOTHECORE

Therearenoprerequisitecourses.

Thelearninginthiscoursewillbuildonandextendthecontentcoveredinthefollowingcorecourses:

GlobalEconomicEnvironment:ThiscourseextendsthecontentinGlobalEconomicEnvironmenttoconsiderhowlong-termsocialandenvironmentaltrends,suchasclimatechangeorwaterscarcity,mayimpactthecontextinwhichinvestorsandcorporationsoperate,andinturnhowcorporateactivitymayshapethesetrends.Thecoursealsoexploreshowthefinancialmarketparticipantscanaddresstheseconcernsbeyondtheirroleofallocatingcapital.

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LeadershipDevelopment:Leadershipinbusinessethicsiscentraltothephilosophyofsustainableinvestment.Thecasesdevelopedforthisclasswillenablestudentstodrawuponnegotiationskillslearnedinthecoreleadershipprogramtoinfluencecorporatepolicyandhelpresolveconflictsbetweenbusinessactivitiesandsocietalconcerns.

ManagerialEconomics:Akeyfocusofthisclasswillbetoexplorehowattentiontostakeholderconcernsmayhelptoaddressakeysourceofbusinessandeconomicuncertainty.

StrategyFormulation:Manycompaniesnowviewsustainabilityasalensthroughwhichtoviewlong-termcorporatestrategy.Thecoursewillprovideanopportunityforstudentstousebusinessstrategyskillstoanalyzethepotentialstrategicimpactofsocialandenvironmentalconcerns,andtorecommendmoresustainablebusinessmodelsthatarewell-alignedwithlong-termshareholderinterests.

COURSEDESCRIPTION

Doesacompany’srelationshipwithsocietyhaveimplicationsforlong-termfinancialperformance?Whatinsightscaninvestorsgainaboutacompany’slong-termrisks,opportunities,andmanagementqualityfromexaminingacompany’ssocialandenvironmentalpolicies?Dotheownersofcompanieshaveinfluenceovercorporatepolicy?Howdocorporationsrespondtotheuseofshareholdervoice?Whatarethepossibilitiesandlimitationsofshareholderinfluence?Doesitmatter?

Asfractionalownersofcompanies,shareholderspossesstherighttoinfluencecorporatepoliciesonenvironmentalandsocialconcerns.Followingadecadeofcorporatescandal,financialcrisis,andincreasingconcernaboutclimatechangeandglobalization,interestinusingthesepowersisgrowingbeyondthesmallcommunityofreligiousandsociallyconsciousinvestorswhohavetraditionallyraisedtheseconcernswithcorporations.Manyinvestorsnowconsidertheseissuestobeofmaterialconcernforthelong-termfinancialperformanceofcompaniesandmarkets.

1500institutionalinvestorswithassetsofover$62trillionhaveendorsedtheUnitedNationssponsoredPrinciplesforResponsibleInvestment(PRI)asofApril2016.SignatoriestothePRIpledgetobe“activeowners,”engageddirectlyinthegovernanceofthecompaniesinwhichtheyinvest.Inresponse,nearly6000companiesworldwidenowpublicallyreportontheirsocialresponsibilitypoliciesandpractices.

Thiscoursewillexploreemergingquestionsregardingcorporatesocialresponsibilityfromtheperspectiveoftheinvestorinpublicequities.Theclasswilldevelopanalyticaltoolstoevaluatecompanies’long-termstrategyandmanagementthroughthelensofenvironmental,socialandgovernance(ESG)issues.Studentswillalsolearnhowinvestorsengagedirectlywithcorporate

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boardsandmanagementtoaddresssustainabilityconcernsandimprovelong-termperformance.

Thiscoursewillberelevantforstudentswhoareinterestedinpursuingcareersinsustainability,andalsoanywhosecareerpathsincludeaninterestinthelongtermperformanceofcorporations.Businessconsultantsandcorporateexecutivesmayconsidersustainabilityissuesanalternativeperspectivethroughwhichtoassessanddevelopcorporatestrategy.Equityanalystsandportfoliomanagersmayuseenvironmental,socialandgovernancefactorstoevaluatethelong-termperformanceandriskfactorsofcompanies.

Thiscourseishighlyinteractive,centeredonclassdiscussion,small-groupexercises,andoutsidespeakerswithcurrentanddiverseexperienceinthisfield.Ourcasesaredrawnfromrecentandongoingbusinessandsocietalconflicts,offeringstudentsrelevantinsightsintothechallengesthatmanagersandinvestorsarecurrentlyfacing.

In-classexercisesmayinclude:

1. Discussingtherelevanceofcertainbusinesschallengesfromtheperspectiveofoutsidestakeholders,suchascustomers,suppliers,societyatlargeandtheenvironment;

2. Evaluatinganddebatingshareholderproposalstomanagement,andhowcompaniesshouldrespondtoexternaleffortsatinfluence;

3. Evaluatingcompanysustainabilitypolicies,strategies,anddisclosures;and

4. Conductingamockshareholder/companydialogueanddraftingmockshareholderproposals.

COURSEOBJECTIVES

Aftertakingthecourse,studentsshouldbeableto:

1. Assessthespecificenvironmental,socialandgovernanceissuesconcernsthatmayaffectshareholdervalueforparticularcompanies;

3. Employtoolsofcorporateinfluenceinsupportoflong-terminvestorobjectives;

4. Anticipateandunderstandcorporateresponsestogovernanceandsustainabilityconcerns;and

5. Asktherightquestionsaboutspecificglobalsustainabilityissuesthatmayaffectlong-termcorporateperformance.

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Type DesignationDiscussionofconcepts

Preparationofsubmission Grade

Agroup/group Permittedwith

designatedgroup*

Bythegroup Samegradeforeachmemberofthegroup

B

group/individual Permitted Individually

(Nosharingofanyportionofthesubmission)

Individual

C individual/individual

Noneofanykind Individually Individual

D (Anoptionalcategorytobedefinedindetailbytheindividualfacultymember)

*Thedesignatedgroupcanbeeitheranassignedstudygrouporaself-selectedone.

Theclasswillemploylimitedlecturingtointroducethebasicconceptsandananalyticalframeworkforevaluatingdilemmasfacinginstitutionalinvestors.

Latersessionswillfeaturediscussionsofcasestudiesbasedonreal-lifeshareholderproposalsandcompanysustainabilityreports

Theformatofthesediscussionswilldependonthesizeoftheclass.Iftheclassissmall,theentiregroupmaydiscussthesametopic.Iftheclasssizeislarger,theclassmaysplitintogroups,discussdifferenttopicsandthencompareresponses.

Studentswillcompletethefollowingassignments:

1. Studentswillwriteashareholderproposal(500wordsmaximum)selectingacompanyfromalistofoptions.AssignmenttypeC,dueApril5.

2. Studentswillworkingroupsoffour.Theywillselectoneoftheresolutionspreparedforassignment1,divideintotwopairsandholdamockdebateinfrontoftheclassaboutwhethershareholdersshouldsupporttheresolution.AssignmenttypeB,dueApril13.

3. Studentswillparticipateinamockshareholderdialogue.Studentteamswillselectashareholderproposalwrittenforassignment1,andnegotiatetowardsanagreementwith

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thecompany.Studentswillthendrafta5-10papersummarizingthekeyissuesandevaluatingthesuccessofthedialogue.AssignmenttypeA,presentationswilltakeplaceApril27;writeupduedateMay3.

4. TakeHomeFinalExam:Studentswillwritea4-6pagepaperanalyzingandevaluatingacorporatesocialresponsibilityreport.AssignmenttypeA,dueTBD.

Assignmentsmaybemodifieddependingonclasssize.

METHODOFEVALUATION

Thestudentswillbeevaluatedasfollows:

• Assignments:45%• ClassParticipation:40%• FinalTakeHomeExam:15%

Theimportanceoftheparticipationgradewilldependonthesizeandcompositionoftheclass.Iwillbemindfulthatsomestudentsmaybehesitanttoparticipateinlargegroupdiscussionsdespitehavingusefulinsights.TherewillbenumerousopportunitiestocontributeandIwillseektorewardstudentsfortheirmasteryofthematerialregardlessofhowtheyareabletocommunicateit.

CLASSROOMNORMSANDEXPECTATIONS

Inordertofullyexplorethecomplexanddifficultissuesraisedattheintersectionofbusinessandsustainability,studentsmustbefullyengagedandpreparedtoofferdiverseperspectives.Accordingly,classexpectationswillbeasfollows:

• Attendanceatallclasssessionsismandatoryandincorporatedintotheparticipationgrade.Classwillstartontime.Theteachingassistantwilltakeattendanceateverysessionandwillrecordstudentswhocomeinlaterthan5minutesafterstarttimeasabsent.Legitimatereasonsformissingclass,suchasillness,shouldbecommunicatedtotheprofessorinadvance.

• Pleaselimittheuseofelectronicdevicestoclassroompurposesonly.Cellphonesshouldbeturnedoffduringclass.

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• Studentsshoulddisplaytheirnamecardsduringallsessions.

• Readingsandcasestudiesareanintegralpartofthelearningprocess.Studentsshouldcometoclasshavingreadalloftherequiredreadingsandthecasesforthatday.AshortQ&Amaybepostedonlinetoteststudents'comprehensionoftherequiredreadings.BecauseInclassdiscussionwillfocusoncases,studentswillneedtohavereadtheminordertoparticipatefullyintheclassdiscussion.

• Recommendedreadingswillallowstudentstoexploretopicsofinterestinmoredepth.

• Participationisexpectedfromallstudents,thoughqualityismoreimportantthanquantityorassertiveness.Theclasswillofferseveraldifferentkindsofopportunitiesforstudentstocontribute,includingdiscussion,roleplay,andpresentation.Yourresponsestoquestionspostedaboutcoursereadingsarepartofclassparticipationandwillbefactoredintotheparticipationgrade.

• Allclassparticipantswilltreateachotherwithrespect,welcomediverseperspectives,disagreecollegially,andofferandacceptconstructivefeedback.

COURSEOUTLINE

Date/Time Topic Activities

March22 CorporateGovernance,Sustainability,andLongTermShareholderValue

Coca-ColainColombia(A&B)

March29 TheInvestorPerspective:StrategiesforEffectiveCompanyDialogue

Coca-ColainColombia(C)Analysisofshareholderproposals

April5 CorporateSocialResponsibility(I):MakingtheBusinessCase

Cases:Coca-ColainColombia(D)GuestSpeaker:DaveStangis,Campbell’sSoupAssignmentsDue:shareholderproposal

April12(A) CorporateSocialResponsibility(II):Evaluatingcorporatesocial

Case:EmersonElectric

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responsibilityreports

April12(B) Debate,DialogueandNegotiation(I) Assignmentdue:grouppresentations

April19(A) CurrentIssues:Environmental:ClimateChange

Case:StanfordDumpsCoal

April19(B) IntegratingESGintoAssetManagement GuestSpeaker:DanHanson,JarislowskiFraser

April26(A) CurrentIssues:Social:LaborandHumanRights

Case:UrbanOutfitters

April26(B) Debate,DialogueandNegotiation(II) Assignmentdue:grouppresentations

Note:Becausethiscourseaimstobetopical,thereadinglistmaychangepriortothestartofthecourse.

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WEEK1:INTRODUCTION:CORPORATEGOVERNANCE,SUSTAINABILITY,ANDLONGTERMSHAREHOLDERVALUE

Towhomarecorporatemanagersaccountable?Howaremanagersheldaccountableforperformance?Whathappenswhentheinterestsofshareholders,corporatemanagementandsocietyatlargediverge?Whydosomeinvestorscareabouttheimpactofcompaniesonsocietyatlarge?

Thisclasswillintroduceandexploretheconceptsof“corporategovernance,”“sustainability,”and“stakeholders”andexplorewhyalloftheseconceptsareimportantforlong-termcorporateperformance.

LearningObjectives:

1. Toidentifythepotentialconflictsbetweencompaniesandtheirshareholdersandotherstakeholdersthatmaybematerialforfinancialperformance.

2. Todefinetheroleofcorporategovernanceinresolvingtheagencyproblembetweenshareholdersandmanagement.

3. Toexploredefinitionsofcorporatesustainabilityandassesstheinfluenceofexternalstakeholdersoncorporatebehavior.

4. Todefineshareholdervoiceandconsiderthemotivationsofsomeshareholderstobecomeactiveownersofcompanies.

Case:

(Thiscaseshouldbecarefullypreparedpriortoclass)

(a) CypressSemiconductor/SistersofSaintFrancis(Tobedistributedinclass)

RequiredReadings:

(Thesereadingscanbeskimmedforthemainidea)

"Resolved:PublicCorporationsShallTakeUsSeriously,"DashkaSlater,NYTimesMagazine,August12,2007

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Stout,LynnA.,"OntheRiseofShareholderPrimacy,SignsofItsFall,andtheReturnofManagerialism(intheCloset)"(2013).CornellLawFacultyPublications.Paper865.

ShareholdersandStakeholders:“thetyrannyoftheor”RemarksatAsiaCorporateGovernanceRoundtable,AnneSimpsonSeniorSpecialist,PSACG,TheWorldBankSingapore,April32001[today,Ms.SimpsonisHeadofCorporateGovernanceatCALPERS]

"TheSocialResponsibilityofBusinessistoIncreaseProfits,"MiltonFreidman,NewYorkTimesMagazine,September13,1970

“AreYouThinkingLikeAUniversalOwner?”ByJohnWilson,JournalofSustainableFinanceandBanking,September16th,2014“Let’sstopinvestingourretirementfundsinlethalweapons,”ByAdamKanzer,ReutersBlog,January9,2013

WEEK2:SHAREHOLDERSTRATEGIESFORENGAGEMENT

Howdoshareholdersinfluencecorporations?Whattoolsareavailabletocommunicateshareholderconcernstomanagement?Howdoesmanagementrespond?

ThismodulewillexplorethevariousactiveshareholderstrategiestoincorporateESGintoinvestmentstrategies,includingproxyvoting,corporatedialogueandshareholderresolutions.Wewillexaminethepotentialforshareholderinfluenceanditslimitsthroughcasestudydiscussionsandabriefroleplayingexercise.

LearningObjectives:

1. Todistinguishpowerfromlegitimacyandnegotiationfromdialogue;Toexplorewaysthatshareholdersachievelegitimacywithcompaniesthroughdialogue.

2. Toassesshowshareholdersdetermineprioritiesforengagementandstandardsforproxyvoting.

3. Tounderstandhowshareholderresolutionsraiseinvestorconcernswithmanagement,andtoanticipatecorporateresponsestoshareholderresolutions.

4. Tomeasuretheprogressofshareholderengagements.

Cases:PartI:

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Coca-ColaInColombia(A&B)

PartII:Foreachcompany,pleasereviewtheproposalandcompanystatementofoppositionasfoundintheproxymaterials:ShareholderProposals(TobedistributedinClass)

1. EmersonElectric–Sustainability2. Halliburton–HumanRightsAssessment3. Omnicom–EqualEmploymentOpportunity4. CenterpointEnergy–LobbyingExpenses

RequiredReadings:

“PuttingHumanRightsontheAgenda:TheUseofShareholderProposalstoAddressCorporateHumanRightsPerformance,”AdamM.Kanzer,inFinanceforaBetterWorld,2009

WEEK3:CORPORATESOCIALRESPONSIBILITY

Whatisthebusinesscaseforsustainability?Howdocompaniescommunicatetheirstrategiesforaddressingsustainabilityconcerns?Howcantheseclaimsbeevaluated?

Thisclasswillexaminesustainabilityfromthecorporateperspective,emphasizingtherelationshipbetweenthecorporationanditsoutsidestakeholders,suchasworkers,communities,customersandregulators.Wewilldevelopaframeworkforevaluationoftheimpactofsustainabilityissuesoncorporatefinancialperformance.Wewillalsospecificexamplesofcorporatebestpracticesregardingsustainability.

LearningObjectives:

1. Toidentifykeycorporatestakeholdersandcompanystrategiestobalancethesometimescompetinginterestsofthesestakeholders.

2. Toevaluatehowstakeholderrelationshipsaffectspecificdriversofcorporatevalue.

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3. Tounderstandcompanymotivationtotakeactiononsustainabilityconcernsandtoevaluatecompanyeffortstointegratesustainabilityintocorporatepolicy,strategyandpractice.

4. Toexplorebestpracticesforpublicreportingandengagementwithshareholders.

Cases:

(a) Coca-ColainColombia(C)(assignmentwillbedistributedinclass)

RequiredReadings:

(Maybeskimmedforthemainidea)

“ThePathToCorporateResponsibility,’SimonZadek,HarvardBusinessReview,2004

Becomefamiliarwiththesewebsites:

GlobalReportingInitiativeWebsitewww.globalreporting.org

CDPWebsitewww.cdp.net

SocialAccountingStandardsBoardwww.sasb.org

TheInternationalIntegratedReportingCouncilwww.theiirc.org

WEEK4:STUDENTDEBATE;ESGINTEGRATION

StudentgroupswillholddebatesontheshareholderresolutionstheyselectedinWeek3.Theclasswillvoteonwhethertosupporteachshareholderresolution.

WewillalsocompletethelessononCorporateSocialResponsibility,anddiscussacaseregardingthesustainabilitystrategyandreportingofaparticularcompany.Seeweek3formoredetailsabouttheobjectivesofthislesson.

Case:

Coca-Cola(D)

HumanRightsandSustainability:ACorporatePerspective,”EdPotterandMarikaMcCauleySine,2009

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GreeningGoliath:DevelopingaShareholderEngagementStrategyforEmersonElectric

RequiredReadings:

“HowtoReadACSRReport,”BostonCollegeCenterforCorporateCitizenship,2010

WEEK5:CURRENTISSUES–Environmental:ClimateChange

Inweeks5and6,wewillapplytheskillslearnedinthecoursetospecificglobalsustainabilityissuesofmostinteresttoinvestors.Theclasseswillconsistofacombinationoflecturesonthespecificissuesandcasesrelevanttoshareholderengagementontheseissues.Week5focusesonclimatechange.

Whatistheeconomicrelevanceofclimatechange?Whatisthecorporateroleinexacerbatingormitigatingclimatechange?Whyshouldinvestorscare?

ClasscontentwillbedrawnfromthescientificconsensusaboutthisissueascompiledintherecentreportoftheIntergovernmentalPanelonClimatechange.Followingthisdiscussion,theclasswilldiscussthecaseoftheStanfordUniversitydecisiontodivestofcoal.

Inthesecondhalfoftheclass,wewillhearfromguestspeakerDanHanson,aportfoliomanagerwithJarislowskiFraser

LearningObjectives(Forweeks5&6):

1. Toidentifyandexplorebroadglobalsustainabilitytrendsastheyarerelevantforcompaniesandinvestors.

2. Todeterminehowshareholdersselectstrategiesforaddressingthesetrendsanddeterminewhichcompaniestotargetforengagement.

3. Toevaluatecompanyresponsestotheseglobaltrends.

4. Tounderstandthebarriersthatmightexisttoachievinganagreementandhowmightthesebarriersbeovercome.

Case:

StanfordDumpsCoal

Readings:

(Maybeskimmedforthemainidea)

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Convery,FrankJ.andGernotWagner.“Reflections–ManagingUncertainClimates:SomeGuidanceforPolicyMakersandResearchers.”

“World’sCarbonBudgettobeSpentinThreeDecades.”KellyLevin,WorldResourcesInstitute,September2013

“UnburnableCarbon2013:WastedCapitalandStrandedAssets”TheCarbonTrackerInitiative

FromExxonMobil:EnergyOutlookto2040

WorldBank,TurnDowntheHeat,ExecutiveSummary(focusinparticularonthelastsection,page8)

“NASAStudyFindsCarbonEmissionsCouldDramaticallyIncreaseRiskofU.S.Megadroughts,”NASAPressRelease,February12,2015

TheParisClimateAgreement,NationalResourcesDefenseCouncil

WEEK6:CURRENTISSUES–Social:LaborandHumanRights

InthefirsthalfofClass6,wewillconsidertheissueoflaborrightsandthecontractsuppliersystem,withafocusonBangladesh.AfteranoverviewoftheissuesraisedbytheRanaPlazadisasterandothersafetyincidentsinsupplierfactories,studentswilltakepartinamockdialoguebetweenshareholdersandacompanyonthisissue.

Inthesecondhalfoftheclass,studentswillpresenttheirfinalprojectstotheclass.

Attheendoftheclass,timepermitting,wewillhaveaninformaldiscussiononthetopic:“What’snextforcorporatesustainability?”

Learningobjectivesarethesameforclass5

Case:

UrbanOutfitters:ShareholderAdvocacyandtheHipsterHyper-capitalistReadings:

(Maybeskimmedforthemainidea)

Short,JodiL.andToffel,MichaelW.andHugill,Andrea,MonitoringGlobalSupplyChains(hardcopydistributedinclass)

TestimonybyKalponaAkterExecutiveDirector,BangladeshCenterforWorkerSolidarity

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(BCWS)SenateForeignRelationsCommittee,“ProspectsforDemocraticReconciliationandImprovingWorkers’RightsinBangladesh”February11,2014(pages46-51)H&MConsciousActions,SustainabilityReport2014pps30-51“Supplychainaudits—onlyasstrongastheweakestlink,”SimonGarbett,GlobalSupplyChainLawBlog“ShrimpSoldbyGlobalSupermarketsispeeledbyslavelaborersinThailand,”MargieMason,etal,theGuardian“ForcedLaborInTheProductionOfElectronicGoodsInMalaysia:AComprehensiveStudyofScopeandCharacteristics(ExecutiveSummary),”Verite“CreatingSustainableApparelValueChains:APrimeronIndustryTransformation,”Dr.MaximilianMartin,ImpactEconomy(Pages3-15)