Ethical Performance
inside intelligence for responsible business


board CSR apparatus to go under microscope

May 2005

An inquiry has begun into the role of company boards in fulfilling the social and environmental responsibilities of businesses.

The Boards and Corporate Responsibility Project, set up by Insight Investment, Business in the Community and FTSE Group, is intended to deepen the involvement of boards and will recommend steps directors might take to ensure their company is taking adequate account of its social responsibilities. Issues the inquiry will consider include:

whether all companies should be encouraged to appoint CSR board committees

how best to incorporate non-financial performance indicators into executive remuneration

where board responsibility ends and executive management’s responsibility begins.

The aim is to strengthen board-level systems. However, the findings are also expected to become part of routine inquiries to assess companies’ eligibility for the FTSE4Good index and Bitc’s Corporate Responsibility Index. Businesses could therefore be marked down in both indexes if they fail to heed the advice given.

Thirty large companies have already taken part in Bitc’s initial evidence gathering, and there will be three round-tables of FTSE 100 directors chaired by Lord Stevenson of Coddenham, non-executive chairman of HBOS, Sir Derek Higgs, deputy chairman of British Land, and Mark Makepeace, chief executive of FTSE Group. The views of CSR managers and company secretaries will be sought, with supporting work by the partners and UK consultancy Acona.

The findings will be published in late 2005, summarizing good practice and listing areas for improvement, and will be circulated to UK institutional investors for discussion.

Craig Mackenzie, Insight’s head of investor responsibility, who is leading the inquiry, said all three partners felt that engaging boards on CSR had so far made uneven progress. ‘Our initial investigations have shown a very significant disparity in board approaches,’ he told EP. ‘Some companies have a sophisticated approach in terms of having a board committee with clear terms of reference and proper audit systems to check whether CSR policies are being implemented. But there seem to be plenty of others with no formal approach to this at board level, although they might have a sustainability report and a CSR policy. I sense a lot of boards don’t have a clear idea of what they should be doing. The inquiry is to help them in this.’

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