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Silence on ownership structure ‘hampers CSR debate’

January 2009

A call has been made for more debate about how company ownership structures should be changed to encourage responsible business practices.

Members of a panel at the recent annual Business for Social Responsibility conference in New York regretted there was so little global discussion on how forms of ownership affect corporate social responsibility.

Susan MacCormac, a partner at the international law firm Morrison & Foerster, told delegates: ‘Unless there is a fundamental change to the rules to which every corporation adheres, there’s not going to be change fast enough to significantly address what we are facing.’

She said ownership structures at many companies, especially those that are publicly listed, lead executives to seek short-term returns rather than ‘long-term value creation’.

Rob Frederick, corporate responsibility vice-president at the US-based wine and spirits business Brown-Forman, said the potential benefit of private ownership could be seen at his own company, which has a majority family holding. He claimed the operating structure of Brown-Forman, which is free of pressures from outside owners, ‘promotes... internal cohesion, where the values are often so strong that it is not necessary to make the business case for CSR initiatives’.

However, he added that in a private business, ‘you must manage competing interests, personalities and histories, which can at times make transparency difficult to achieve’.

Participants said companies should consider how forms of ownership, including various kinds of employee equity, might enable companies to consider social and environmental issues more carefully. Private ownership, delegates were told, can give a company more freedom to set its own agenda – and without shareholder oversight private businesses can spend more on CSR. Yet, without this oversight, companies do not need to be as transparent, which can have negative implications for CSR.

Frederick warned that, however important ownership structure could be in changing corporate priorities, it was unrealistic to expect that merely adjusting a company’s set-up would deliver dramatic change. ‘It’s not so much that one [ownership] form is better than another, but how CSR is managed,’ he said.




Business for Social Responsibility | Global | Corporate governance

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