Fiduciary Fiduciary Responsibility vs. Responsibility vs. Corporate Social Corporate Social

ResponsibilityResponsibility

Getting a Seat at the TableKevin M. BrettApril 16, 2013

A Seat at the Table?A Seat at the Table?

Executives are hired to maximize profits; that is their responsibility to their company’s shareholders. Even if executives wanted to forgo some profit to benefit society, they could expect to lose their jobs if they tried—and be replaced by managers who would restore profit as the top priority,” – Arneel Karnani, University of Michigan associate professor of strategy, Wall Street Journal, August 23, 2010.

Spirit Airlines to Dying Flyer: Spirit Airlines to Dying Flyer: You’re Not Getting a $197 You’re Not Getting a $197

RefundRefund“Still, at the end of the day, companies have actual real

people as employees. And if you're the type of person

who thinks most people are decent, you might assume

those employees want the place they work to be

interested in doing the right thing – even if it means

sacrificing a little profit now and then.” – Yahoo Finance,

May 4, 2012

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Fat

Fiduciary DutyFiduciary Duty

Fides = faith

Fiducia = trust

Fiduciarius = (holding) in trust

A legal or ethical relationship of

confidence or trust regarding the

management of money or property

between two or more parties.

A Vote for Fiduciary A Vote for Fiduciary ResponsibilityResponsibility

“It is hard in this world to do well. It is hard to do good.

When I hear a claim that an institution is going to do both,

I reach for my wallet. You should too.” – Harvard

Professor and

former Treasury Secretary Lawrence Summers.

Corporate Social Corporate Social ResponsibilityResponsibility

CSR is a form of corporate self-regulation integrated into a

business model.

• Sustainable responsible business

• Corporate conscience

• Corporate citizenship

• Social performance

A Vote for Corporate Social A Vote for Corporate Social Responsibility (CSR)Responsibility (CSR)

• “Right now, the public is more likely to view greed as a deadly sin than an engine of economic growth,” Edward Glaeser, Harvard Economist, New York Times, January 6, 2009

A Vote for CSRA Vote for CSR

“Pleas for corporate social

responsibility will be truly embraced

only by those executives who are

smart enough to see that doing the

right thing is a byproduct of their

pursuit of profit.” – Arneel Karnani, University of Michigan

associate professor of strategy.

Doing WellDoing Well

• ERISA mandate

• Investors expect returns

• Employees expect

returns

• Need to stay in business

• Board oversight

• Possible securities

litigation

Doing GoodDoing Good

• Multiple stakeholders

• Giving back

• Heightened trust

• Benefit of the doubt

• Creative capitalism

• Counter to NGOs

• No green washing

• No pink washing

Fiduciary vs. CSR: Topic No. 1Fiduciary vs. CSR: Topic No. 1McDonald’s Corp. (NYSE: MCD)

introduced grilled chicken salads, fruit

smoothies and other healthier foods, while

continuing to serve Big Macs, fries and

shakes.

A. Corporate social responsibility

B. Fiduciary responsibility

C. Both?

Fiduciary vs. CSR: Topic No. 2Fiduciary vs. CSR: Topic No. 2

Toyota Motor Corporation (NYSE:

TM) introduced the hybrid Prius,

enhancing fuel mileage and

reducing air emissions.

A. Corporate social responsibility

B. Fiduciary responsibility

C. Both?

Fiduciary vs. CSR Topic Fiduciary vs. CSR Topic #3#3

• Subway Restaurants’ “Jared” campaign uses Jared S. Fogle, “The Subway Guy,” to emphasize the low-calorie, low-grams of fat benefits of Subway sandwiches

• A. Corporate Social Responsibility?

• B. Fiduciary Responsibility? • C. Both?

CSR: Ethics Question No. 1CSR: Ethics Question No. 1

KFC (NYSE: YUM) unveiled its “Buckets for the

Cure”

benefitting the Susan G. Komen Foundation and

featuring the firm’s grilled chicken offerings.

Are there ethical questions for:Are there ethical questions for:

• KFC?

• Susan G. Komen Foundation?

Corporate Responsibility (CR) ranks Altria Group Inc. (NYSE: MO) No. 20 of its 100 best Corporate Citizens for 2013. k

According to the CDC, 443,000 Americans die each year from cigarettes.

Should Altria Group Inc. champion its CSR program?

CSR: Ethics Question No. 2

Fiduciary vs. CSR TakeawaysFiduciary vs. CSR Takeaways

• Fiduciary and CSR are not mutually exclusive

• Fiduciary and CSR complement each other

• Fiduciary honors shareholder/employee ownership

• CSR reflects a company’s obligations to its stakeholders, including local communities and the environment

CSR Assignment Due April CSR Assignment Due April 1818

• Prepare a one-page memo from your chosen corporation CEO to company employees

• Provide an overview of the company’s CSR philosophy and activities

• Don’t Forget Fiduciary Responsibility

• Use bullets as needed to highlight activities

One-Page Memo One-Page Memo GuidelinesGuidelines

• Single Space• Flush Left• Subheads?• Bullets?• Use Corporate Responsibility (CR)

Best 100 Corporate Citizens for 2013

• http://www.thecro.com/files/100Best2013_web.pdf