CAMAC’s Discussion Paper on CSR is divided into the following sections: the issue of CSR; director’s duties: the current position; director’s duties: matters for consideration; corporate reporting; and encouraging responsible business initiatives.
The Issue of CSR
CAMAC outlines the various approaches to CSR, including the compliance, philanthropic, commercial, ethics-based and altruistic approaches. The compliance approach to CSR emphasises that while companies are obliged to comply with the letter of the law they may also benefit by complying with the ‘spirit’ of the law. This means that companies may be expected to go beyond compliance to help safeguard the company against various reputational and other risks to longer term shareholder value. The philanthropic approach involves companies giving financial or other types of contributions to the community, and may extend to charitable causes. The commercial approach emphasises that it is likely to be in the company’s own interests to take their social and environmental responsibilities into account. This involves both assessing the corporate benefit of CSR and the need for appropriate risk management strategies. The ethics-based approach requires company directors to take various ethical values or standards into account when making corporate decisions. The altruistic approach sees corporations playing an important role in solving social problems and advancing public welfare, given their privileged status in society, especially their establishment as entities with limited liability.
CAMAC also refers in this part to the key concepts of CSR including stakeholders, sustainability and triple bottom line reporting (TBL). The discussion paper refers to the Global Reporting Initiative’s (GRI’s) Sustainability Reporting Guidelines 2002 which are recognised as the global benchmark for voluntary sustainability and TBL reporting. TBL reporting may be used to demonstrate to capital markets and the general public that they are aware of, responding to, and managing their interactions with, and impacts on, society.
Request for submissions are called for with respect to:
- How CSR should be described for working purposes?
- Which approach to CSR is to be preferred?
- What are the dis/incentives to companies behaving in a way that is socially responsible?
- Do the obligations differ according to the type and size of the enterprise?
- What is the role of stakeholders vis a vis a corporation?
- To what extent is CSR considered when assessments are made about a company?
- What could enhance TBL or sustainability reporting?
Directors’ duties: matters for consideration
Currently under Australian law, directors must act in the interests of the company as a whole, but they have considerable discretion in deciding which interests should be taken into account when making corporate decisions. The question arises whether the law should go further by expressly permitting or requiring directors to take into account the interests of stakeholders, other than shareholders. There are two divergent views on this: the pluralist and the elaborated shareholder benefit approach. A pluralist approach permits or requires directors to serve a wider range of interests in their corporate decision-making, although there are concerns that this could subject directors to conflicting or competing fiduciary duties. The elaborated shareholder benefit approach would legally require directors to act for the benefit of shareholders, but goes beyond current statutory provisions to expressly refer to various considerations that directors may take into account in determining what is for the benefit of shareholders generally. For example, directors might be required to have regard to the need to build long-term, and trusting relationships with employees, customers and others in order to secure the success of the enterprise over time. The United Kingdom’s 2005 Company Law Reform Bill adopts an ‘enlightened shareholder value’ approach.
Request for submissions relate to whether the Corporations Act should be amended to clarify the extent to which directors may take into account the interests of stakeholders or the broader community, or to require directors to take these interests into account?
Corporate Reporting
TBL reporting may benefit stakeholders by assisting shareholders and the market to assess how well corporations are dealing with non-financial risk. It helps investors with ethical concerns to make decisions, and informs other stakeholders about the societal and environmental impact of the company. There are various types of reporting: voluntary, continuous disclosure (as required under the Corporations Act), annual reporting, and Australian Stock Exchange (ASX) requirements to include a review of operations and activities for the reporting period. CAMAC also reviews the reporting requirements in the US, the EU, the UK and South Africa.
Submissions are requested on whether or not the Corporations Act should require certain types of companies to report on the social and environmental impact of their activities.
Encouraging responsible business practices
There are a number of self-regulatory codes of conduct in Australia including:
- the Australian Minerals Industry Framework for Sustainable Development
- the Mining Certification Evaluation Project
- the ASX Corporate Governance Council Principles of Good Corporate Governance and Best Practice
- Standards Australia’s Standard 8003-2003 Corporate Social Responsibility and
- The Australian’s Corporate Sustain-ability Index.
Submissions are requested on whether or not Australian companies should be encouraged to adopt socially and environmentally responsible business practices and if so, how?
Source: CAMAC, November 2005.
