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CSR Issue Position Paper

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Corporate Reputation Watch 2006:Hill & Knowlton http://www2.hillandknowlton.com/crw/home.asp ... Uses data from online social research database created by KLD ... – PowerPoint PPT presentation

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Title: CSR Issue Position Paper


1
  • CSR Issue Position Paper
  • Corporate Philanthropy, CSR and Corporate
    Reputation

Akif Koca Maria Isaac Hans Cole
2
Corporate Reputation Rankings
  • Corporations today need to measure, understand
    and holistically manage their corporate
    reputation and leverage it as an asset. Those who
    do, find that ratings and rankings take care of
    themselves.
  • ()Robert Fronk, Senior VP, Harris Interactive

3
CSR Issue
  • How does corporate philanthropy contribute to
    corporate reputation in CSR and to overall
    corporate reputation?
  • - Background Corporate Philanthropy
  • - Analysis of leading surveys and other
    indicators

Overall Reputation
CSR Reputation
Corporate Philanthropy
4
CORPORATE PHILANTHROPY
5
Corporate Philanthropy why do it?
  • Philanthropy can often be the most
    cost-effective way and sometimes, the only way
    to improve competitive context. It enables
    companies to not only leverage their own
    resources, but also the existing efforts and
    infrastructure of nonprofits and other
    institutions. Michael Porter and Mark Kramer
  • Its very important these days to have a good
    reputation as a corporate citizen, particularly
    for an industrial company that hasnt put a lot
    of money into branding. Jack Bergen, Senior
    VP, Siemens Co., Head of Siemens Foundation
  • The Competitive Advantage of Corporate
    Philanthropy, Porter, Michael E. and Mark R.
    Kramer, Harvard Business Review, December 2002.
  • The Art of Giving, Mattlin, Ben, Global
    Finance Magazine, July/ Aug. 2006, pg. 49.

6
Corporate Philanthropy Choices
  • Less control less strategic
  • United Way drive funds directed through
    separate non-profit collection organization
  • Donor-advised Funds separate entities run by a
    community organization or financial firm, usually
    for a nominal fee
  • More control more strategic
  • Corporate foundations 501(c) 3, receives funds
    from a specific corporation and representatives
    of the corporation supervise disbursement of
    funds
  • Direct corporate giving corporations donate
    funds, products, or services directly, without a
    foundation or other intermediary
  • Information reference from The Art of Giving,
    Mattlin, Ben, Global Finance Magazine, July/ Aug.
    2006, pg. 49.

7
Benefits vs. Drawbacks of a Strategic Focus
  • Benefits
  • Provides a framework for allocating scarce
    resources
  • Helps the grantmaker achieve greater impact
  • Provides a clear rationale to shareholders for
    the distribution of corporate dollars
  • Allows for linkages among employee volunteer
    efforts, cash and in-kind giving and other
    corporate resources (such as marketing and gov.
    relations)
  • Integrates the contributions programs into the
    larger corporate strategy
  • Helps the company achieve a competitive edge
  • Drawbacks
  • Inability to respond to a breadth of community
    needs
  • Lack of flexibility in addressing new or growing
    needs
  • Limited interaction with all segments of
    community
  • Also…company might be accused of other
    shortcomings
  • Self-serving
  • Focused on PR, rather than doing good
  • Unresponsive to the interests of a diverse
    employee base or community
  • Serving Many Masters the challenges of
    corporate philanthropy. Council on Foundations.
    2003. pg. 53

8
Foundation vs. Corporation
  • Should the company create a foundation?
  • Pros
  • Some removal from business cycle lends stability
    to annual giving an endowment can help
  • Tax benefits (both for corporations and donors)
  • Less competition for positioning as a program
    within the corporation managers can worry less
    about their place in the overall corporate
    hierarchy
  • Indicates a pure purpose separate from
    marketing efforts and from promotion of
    particular products/ services
  • Less risk of cynical backlash from external
    media, non-profit sector, other critics
  • Easier to link with typical non-profit channels
    for grant-making, communication, and partnership
  • Cons
  • Greater disconnect with the company, and,
    therefore possible risk of non-strategic
    approach. This could manifest in a number of
    ways
  • Communication challenges between different teams,
    corporate vs. foundation
  • Lack of synergy or connection between corporate
    goals and foundation goals
  • Lack of focus a tendency towards general
    philanthropic activity as opposed to more focused
    goals
  • Leadership differences, between corporate CEO/
    Board and foundation CEO/ Board
  • Questions

9
Foundation vs. Corporations Brand Confusion
  • Case Bill and Melinda Gates Foundation vs.
    Microsoft
  • Gates Foundations 24B plus overshadowing
    effect
  • Currently Microsoft doesnt have a foundation
    instead focuses on corporate giving within the
    company
  • Microsoft does partner with the Gates Foundation
    on some initiatives for example, expanding
    public access to computing and the Internet in
    public libraries
  • Case William and Flora Hewlett Foundation vs.
    Hewlett-Packard
  • With Hewlett, were in the atmosphere of brand
    confusion with the corporation, whose money
    helped start the foundation… Eric Brown,
    Communications Director, Hewlett Foundation
  • Communication by foundations and companies is
    critical to ensure that grantees and the public
    understand affiliations
  • CONCLUSION confusion yes, but there can also be
    synergy and mutual benefit.
  • Compassionate Capitalism how corporations can
    make doing good an integral part of doing well.
    Benioff, Marc, and Karen Southwick. Career Press.
    2004. pgs. 132-133.
  • Foundations Reap What They Sow, McKenna, Ted,
    PR Week, August 21, 2006.

10
Case Study 1 Cisco Systems
  • Why?
  • - Goal To establish a legacy of trust between
    the community at large and the foundation. We
    believe the foundation further establishes
    Ciscos commitment, as well as its longevity.
    John Morgridge, Chairman Emeritus, Cisco Systems
  • What and How?
  • Cisco Systems Foundation grantmaking in
    communities where Cisco has a significant
    business presence
  • 2005 endowment over 100M
  • Focus on two fundamental equalizers in life
    access to education and the Internet
  • Cisco Networking Academy provides people in
    developing countries with technology access and
    training
  • Benefits?
  • John Morgridge cites recent research by the
    Walker Institute …research indicates that
    customers, employees, and community leaders who
    view a companys philanthropic programs as
    successful are more likely to conduct business
    with that company even when faced with a better
    financial deal elsewhere.
  • The Business of Changing the World. Benioff,
    Marc and Carlye Adler. McGraw-Hill, 2007. pgs.
    187-197.

11
John Morgridges Strategies for Successful
Corporate Giving
  • Look carefully at your employee engagement
    programs The variety of programs you offer, how
    strongly you support them, and your willingness
    to encourage employee originated ideas are
    essential for a successful program.
  • Get strategic about your giving Just as in
    business, you can have greater impact by focusing
    on a few markets for corporate giving programs.
    At Cisco, we have focused our efforts in three
    areas education, the Internet, and support for
    basic needs, such as food and shelter. This
    three-pronged focus allows us to leverage the
    energy, ideas, and strengths of Cisco employees
    and product solution areas.
  • Be creative There are many other ways besides
    cash and equipment donation programs in which
    companies can contribute. We have launched more
    the 10,000 Cisco Networking Academies many
    located in least developed countries and U.S.
    Empowerment Zones to help train the next
    generation of information technology engineers.
  • Partner with nonprofits that demonstrate success
    Many nonprofits seek the business expertise and
    technical know-how that business can offer, while
    others are already highly successful and would
    receive greater benefit from ongoing counsel and
    support. When choosing a nonprofit in which to
    invest, assess your choice as carefully as you
    would a stock market investment devote
    resources to organizations that consistently
    demonstrate success over time.
  • Make it a win/ win There are many ways that
    companies can contribute to the global community,
    but weve found partnering to be successful over
    the years. The best partnership, and those that
    are able to make the biggest impact, are those in
    which both parties benefit. Make any initiative
    a win/win situation for all parties involved.
  • Provide long-term commitment Most programs are
    not successful overnight they require an
    investment in time, money, and resources. By
    being committed for the long term, the initiative
    has a better chance of success. For example,
    Ciscos Networking Academy program is now 10
    years old and Cisco continues to invest in this
    initiative.
  • Consider endowing a corporate foundation There
    are more than 2,000 corporate foundations in the
    U.S. Many of these foundations are funded as line
    items in annual company budgets. As a result,
    foundations are funded generously in good
    business cycles but suffer when business is
    challenging. By endowing a corporate foundation
    and diversifying its portfolio, you protect your
    foundation during tough times.
  • The Business of Changing the World. Benioff, Marc
    and Carlye Adler. McGraw-Hill, 2007. pgs 196-7.

12
Case Study 2 -- salesforce.com
  • Why?
  • Goal We have integrated philanthropy into our
    corporate culture from the inception of our
    company… Marc Benioff, Chairman/ CEO of
    salesforce.com
  • What and How?
  • - salesforce.com and salesforce.com/foundation
  • - the 1-1-1 model
  • 1 of the corporations stock upon founding went
    into the foundation
  • the salesforce.com initial public offering
    raised more than 12M
  • 1 of company profits into the community
  • salesforce.com includes product donations and
    funding
  • 1 of employee working hours to community
    service
  • over 2,000 employees have donated over 30,000
    hours
  • Benefits?
  • Our employees …tell us that the foundation is
    the secret weapon that keeps them grounded.
    People are here to do more than just make money
    they want to help make the world a better place
    during their time here.
  • The Business of Changing the World. Benioff, Marc
    and Carlye Adler. McGraw-Hill, 2007. pgs
    xxii-xxvii.

13
Is there evidence for a direct benefit of
corporate philanthropy?
  • Siemens Foundation sponsors math and science
    scholarships and academic competitions
  • A recent multimillion-dollar deal Siemens signed
    with MGM was won, in part,…because the work of
    the Siemens Foundation showed the company to be
    socially responsible, which was among MGMs
    criteria in choosing a telecom network equipment
    provider.
  • Jim Whaley, President, Siemens Co.
  • Foundations Reap What They Sow, McKenna, Ted,
    PR Week, August 21, 2006.

14
CORPORATE REPUTATION SURVEYS
15
Corporate Reputation Surveys
  • Growing number of rankings and lists
  • Different methodologies
  • Different benchmarks and metrics
  • Different survey samples
  • Different target audiences
  • Different surveys, different rankings
  • Examples
  • Harris Interactive Corporate Reputation Quotient
    (RQ) http//www.harrisinteractive.com/news/allnews
    bydate.asp?NewsID1170
  • Fortune America's Most Admired Companies
    http//money.cnn.com/magazines/fortune/mostadmired
    /2007/index.html
  • Corporate Reputation Watch 2006Hill Knowlton
    http//www2.hillandknowlton.com/crw/home.asp

16
Different Surveys, Different Rankings
17
Corporate Reputation Quotient (RQ) 2006 Harris
Interactive
  • Survey methodology
  • Nominations Phase (July and August)
  • Online and telephone interviews with 7,886 people
  • Each respondent nominates two companies
  • Harris Interactive identifies list of top 60
    companies
  • Ratings Phase (September and October)
  • Online interviews with 22,480 people
  • Respondents rate companies on 20 attributes
  • Survey focus
  • Capture perceptions of corporate stakeholder
    groups such as consumers, employees, investors,
    or key influentials
  • Target audience corporations and general public

stakeholders perception
corporate reputation
18
Corporate Reputation Quotient (RQ) Drivers and
Attributes

19
America's Most Admired Companies-2007 Fortune
  • Survey methodology
  • Surveyed 3,322 executives, directors, and
    securities analysts
  • Respondents select 10 companies they admire most.
  • Survey focus
  • Capture perceptions of business executives
  • Target audience Corporations and general public
  • Survey benchmarks
  • Issue areas
  • Innovation
  • Quality of management
  • People management
  • Financial soundness
  • Use of corporate assets
  • Long-term investment
  • Social responsibility
  • Product/services quality

20
Corporate Reputation Watch 2006 Hill Knowlton
  • Survey methodology
  • 282 telephone interviews with buy and sell side
    analysts with over 2 years experience
  • Key Findings
  • Over 90 of analysts agree that if a company
    fails to look after reputational aspects of its
    performance it will ultimately suffer financially
    too.
  • Top factors affecting analysts' assessment
  • Quality of management financial performance
  • Making good on promises and corporate strategy
  • Non-financial factors
  • executing company strategy
  • transparent disclosure/strong governance
  • clear consistent communication with
    stakeholders
  • Branding, corporate culture, employee issues and
    social responsibility may also contribute to
    their assessment but are less likely to lead to
    negative ratings.

21
SRI RANKINGS
22
Goals and Target Audience
  • Reach out to a very sophisticated audience
    investment professionals
  • Growing number of rakings and lists
  • Increasing demand for information on companies
    practices
  • By-product of analysts work… It also generates
    buzz for the SRI companies
  • Focused on investment decisions
  • Risks, preferences, social and financial returns
  • Examples
  • Calvert ranking 100 largest US corporations
    (market cap) http//www.calvert.com/sri_calvertra
    tings.html
  • KLDs 100 best corporate citizens
    http//www.kld.com/research/socrates/businessethic
    s100/
  • Dow Jones sustainability index
    http//www.sustainability-index.com
  • Innovests global 100 - the most sustainable
    corporations in the world http//www.global100.or
    g/what.asp and http//www.innovestgroup.com/

23
How are the rankings done?
  • Mostly these rankings rely on public information
  • Government databases
  • Company CSR reports
  • Calls and meetings with companies
  • News reports
  • Non-governmental organizations (NGOs)
  • External research providers in specialized issue
    areas, such as corporate governance rating
    agencies
  • Other public documents
  • Trade journals
  • Industry and regional publications
  • Direct contact with the companies.
  • Different rankings have different set of criteria

24
Calvert Rating of the top 100 US companies
(market cap)
  • Methodology
  • Data from public domain (reports, NGOs etc..)
  • Focus
  • analysis and ranking company corporate
    responsibility policies and performance across
    five key areas
  • Benchmarks
  • Environment - Management Policies, Performance
    Impact, Product Lifecycle, Resource Use
    Habitat
  • Workplace - Diversity, Labor Relations, Employee
    Health Safety
  • Business Practices - Corporate Governance,
    Business Ethics, Product Safety Impact, and
    Animal Welfare
  • Human Rights - Management Policies,
    Performance, Indigenous Peoples' Rights
  • Community Relations - Economic Impact, Community
    Unrest, Philanthropy, Employee Volunteerism, Fair
    Lending

25
100 Best Corporate Citizens Corporate
Responsibility Officer (CRO) KDL
  • Methodology
  • Uses data from online social research database
    created by KLD and puts a numerical rating on
    companies service to various stakeholders.
  • Companies in Domini Social 400, SP 500, or
    Russell 1000 are eligible for inclusion on the
    list
  • Focus
  • Rank leading ethical performers publicly listed
    in the US
  • Target audience General public
  • Benchmarks
  • Eight stakeholder categories
  • Shareholders (based on 3 year average return)
  • Community
  • Governance
  • Diversity
  • Employees
  • Environment
  • Human rights
  • Product

26
Dow Jones Sustainability index
  • Methodology
  • Sustainability assessment that covers economic,
    environmental and social criteria.
    Industry-specific criteria to assess companies.
    The analyzed companies are assigned a
    sustainability score and are ranked accordingly
    within their sector.
  • Focus Competitive advantage of companies. Looks
    for the creation long-term shareholder value by
    embracing opportunities and managing risks
    deriving from economic, environmental and social
    developments.
  • Benchmarks
  • Economic Codes of Conduct / Compliance /
    CorruptionBribery Corporate Governance, Risk
    Crisis Management, Industry Specific
  • Environment Environmental Performance
    (Eco-Efficiency), Environmental Reporting,
    Industry Specific Criteria
  • Social Corporate Citizenship/ Philanthropy, Labor
    Practice Indicators, Human Capital Development,
    Social Reporting, Talent Attraction Retention,
    Industry Specific Criteria

27
Innovests Global 100
  • Methodology
  • Intangible Value Assessment ratings are
    ultimately expressed on a relative scale similar
    to those currently in use by conventional credit
    rating agencies such as Moodys and Standard and
    Poors.
  • Focus performance factors, including innovation
    capacity, product liability, governance, human
    capital, emerging market, and environmental
    opportunities and risk.
  • Benchmarks Innovests intangible value
    assessment measures 4 different criteria
  • Stakeholder Capital Regulators and policymakers
    Local communities/NGOs Customer relationships
    Alliance partners Emerging markets
  • Strategic Governance Strategic scanning
    capability Agility/adaptation Performance
    indicators/monitoring Traditional governance
    concerns International best practice
  • Human Capital Labour relations Health safety
    Recruitment/retention strategies Employee
    motivation Innovation capacity Knowledge
    development dissemination Progressive
    workplace practices
  • Environment Board and executive oversight Risk
    management systems Disclosure/verification
    Process efficiencies eco-efficiency Health
    and safety New product development
    Environmental/climate risk assessment

28
SUMMARY FINDINGS
  • There are many surveys and ratings. They are very
    different!
  • methodologies
  • benchmarks and metrics
  • target audiences
  • SRI Rankings
  • Rankings issued by funds are more methodical
  • Rely on same data - public for the most part
  • Each group developed a specific metric to
    evaluate companies
  • They apply a score to corporate philanthropy
  • Corporate Rep. Surveys
  • Most surveys are based on primary research. They
    try to capture the reputation of a company.
  • However, it is unclear what the relative weight
    of CSR is in these surveys.

29
CONCLUSIONS
  • What are the best surveys/benchmarks to measure
    the return on corporate philanthropy in terms of
    corporate reputation?
  • It all depends on who you are trying to reach
  • Average people?
  • CEOs?
  • Investors?
  • Each one will look at a different ranking. Make
    sure you understand your target audience and do
    not try to be all things to all people.
  • Consider media training for the recipients of
    philanthropic activities.
  • Improve communication with the organizations
    doing the surveys.
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