Strategy Evaluation Process and Social Responsibility QUESTION 1 Instructions According to your textbook, the strategy-evaluation process consists of thr

Strategy Evaluation Process and Social Responsibility QUESTION 1

Instructions

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Strategy Evaluation Process and Social Responsibility QUESTION 1 Instructions According to your textbook, the strategy-evaluation process consists of thr
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According to your textbook, the strategy-evaluation process consists of three basic activities:

Examine the underlying bases of a firm’s strategy.
Compare expected results with actual results.
Take corrective actions to ensure that performance conforms to plan.

Answer the following questions:

Which of the three strategy-evaluation activities do you think is most critical to be performed well? Why? (must be specific as which one of the three)

Read and reply to at least one (1) post from any classmate. A simple statement such as, “good” or “I agree” does not constitute a substantial comment.

Your post will be graded as follows:

Clear and concise answers to all questions – 80%
Substantial comment to one classmate – 10%
Substantial comment to one more classmates – 10%

QUESTION 2

The purpose of this assignment is to allow you the chance to evaluate the role of social responsibility in society. After you complete this assignment, you will analyze a written article, be able to ascertain your view on social responsibility, and evaluation the pros and cons of social responsibility.

Instructions

Read the article The-Fastest-Growing-Cause-for-Shareholders-is-Sustainability
In your opinion, does it pay to be socially responsible?
What are some of the advantages and disadvantages for a company that pursues a sustainability strategy?
How could a manager’s attitude toward social responsibility affect the company’s strategy?
What is your position on social responsibility, are you for it or against it, why?

You should submit:

A word document with your responses
Make reference to material covered (textbook, websites, etc.)
Each response should be between 1 to 2 paragraphs.
Format your paper according to APA guidelines, and include any sources you cite in a reference page.

Remember………

All questions should be answered fully, and concisely.
Sentences should be well-structured, complete, clear, and concise.
Rules of grammar, usage, and punctuation are followed, and spelling is correct. The Fastest-Growing Cause for Shareholders is Sustainability
By George Serafeim
July 12, 2016
Ask someone to name the demands that activist hedge funds make of companies, and they’ll
likely list corporate governance issues such as board changes and executive compensation, or
perhaps some form of restructuring. In fact, the largest number of shareholder resolutions filed
by investors — the method through which activists work — now concern social and
environmental issues. This is a recent phenomenon, according to my research: The number of
these resolutions has increased dramatically over the past five years. Political spending, climate
change, diversity, and human rights are now some of the most frequent resolutions that investors
file.
This data suggests the need to rethink how we view investor activism. Done well, it can improve
a company’s sustainability in addition to performance.
Activism takes many different forms, but usually it begins with investors holding private
conversations with company management on the need to change a process, business model, or
management practice. When management fails to adequately respond to investor queries or
concerns, investors typically file shareholder resolutions that ask all of the company’s
shareholders to vote on a specific topic. If the company agrees to comply with the request or to
take alternative measures that address the investors’ concerns before the resolution is subject to a
vote at the annual general meeting, the investors withdraw the resolution. Otherwise,
shareholders vote on the resolution.
Evidence on the financial value of investor activism is sparse, since collecting data on the private
engagement efforts of different investors is difficult. To gain further insights into the
sustainability and financial outcomes associated with shareholder advocacy efforts, Jody Grewal,
Aaron Yoon, and I analyzed 2,665 shareholder proposals submitted between 1997 and 2012 in
a new paper.
As we saw in a previous paper and discussed in a previous HBR article, not all environmental,
social, and governance (ESG) issues are equally financially important across industries. For
instance, managing environmental impact is a very important element of business strategy for
firms in the fossil fuel or transportation industries, but less so for financial institutio ns or health
care companies. In contrast, fair marketing and advertising of products is very important for
companies in these sectors. Using the data infrastructure that was created only recently by the
Sustainability Accounting Standards Board (SASB), my coauthors and I were able to classify
these proposals as addressing either financially material or immaterial topics. SASB develops
industry-by- industry accounting standards that identify the material ESG issues that could have
financial implications. SASB uses the U.S. Supreme Court’s definition of material information
as information presenting “a substantial likelihood that the disclosure of the omitted fact would
have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of
information made available.”
We found that 58% of the shareholder proposals in our sample were filed on immaterial issues.
The high percentage of proposals on immaterial issues is further evidence that investors aren’t
motivated only by short-term profit. Rather, it reflects the pro-social objectives of a large number
of sponsors of such proposals.
Overall, we found that when investors file a shareholder proposal on an ESG issue, performance
of the company on that ESG issue improves whether the issue is material or immaterial. Thus,
even though such proposals rarely receive the majority support necessary in the event of a vote,
they still have had an effect on corporate management, with managers investing resources and
improving performance on issues of diversity, energy efficiency, water consumption, and
product safety.
We also found that targeted firms experienced changes in market valuation subsequent to filing
shareholder proposals. However, proposals had a substantially different effect depending on
whether they related to immaterial or material issues. Proposals on immaterial issues were
associated with subsequent declines in market valuation. In contrast, proposals on material issues
were associated with subsequent increases in market valuation, even several years after the
proposal. This suggests that pressure on companies to address ESG issues that are not financially
material for the firm but are relevant to other stakeholders could lead to decreases in financial
value, while the opposite is true for proposals on material issues.
Some policy experts have argued that environmental and social issues divert the attention of
senior management and directors away from more-important work, thereby destroying value. We
show that this position is supported in cases of financially immaterial ESG proposals. However,
our results suggest that one should be careful about overgeneralizing, since a significant number
of ESG proposals are financially material and associated with subsequent increases in market
valuation.
Why would managers choose to respond to investors’ requests on immaterial issues if doing so
decreases financial value? After all, activists usually don’t have the necessary votes to compel
management to respond. We found evidence for three different explanations. First, responding to
immaterial issues was more common when the incentives of managers and investors were
misaligned. Perhaps management agrees to initiatives that destroy financial value because they
themselves somehow benefit. Second, we found some evidence that management struggled to
distinguish between material and immaterial requests. Perhaps management responds to
immaterial investor requests because they mistakenly believe that doing so will increase the
company’s value. Third, we found that management responded to immaterial issues to divert
attention away from material ones. Perhaps a bank is more likely to reduce its use of fossil fuels
(an immaterial issue) if doing so distracts investors or the public from problems with false
advertising (a material issue).
Much of the discussion around investor activism has concentrated on how such activism might
increase the short-term orientation of corporate America, but it is important to realize that
investor activism takes many different forms. A substantial amount of investor activism appears
to be motivated by social or environmental aims. Investors can be a driver for social
responsibility and, at least when focused on material issues, can improve both societal and
financial outcomes at the same time.
Access original version of the article at https://hbr.org/2016/07/the-fastest-growing-cause-forshareholders- is-sustainability

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