FSR Forum 14-03 by Eefke van der Meer

14th Volume March 2012 issue #3

Corporate Social Responsibility Strategic Implications of Corporate Social Responsibility

Interview prof J.P. Balkenende

Column J. G. Groeneveld

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The Vestia case

Expert on CSR

Article

Ondernemers helpen groeien met jouw cijfermatig inzicht?

Financieel talent Sta jij aan het begin van een carriĂ¨re als accountant of fiscalist? Dan is het goed om jezelf af te vragen waar jouw financieel inzicht het best tot zijn recht komt. Bij Baker Tilly Berk controleer je niet alleen het verleden, maar adviseer je ook over de toekomst van een bedrijf. Baker Tilly Berk combineert een landelijke aanwezigheid en een internationaal netwerk met kleinschalige kantoren dichtbij onze klanten. Die jij al snel persoonlijk kunt adviseren. Je werkt bijvoorbeeld mee aan de uitbreiding van een transportonderneming, de fusie van twee bedrijven of een audit in de publieke sector. Om ondernemers te helpen groeien zoeken we medewerkers die zelf ook ondernemend zijn en zich continu willen ontwikkelen. Denk jij dat de rol van adviseur bij jou past? Dan hebben we voor jou ook een goed advies: werkenbijbakertillyberk.nl.

www.werkenbijbakertillyberk.nl

ACCOUNTANTS EN BELASTINGADVISEURS

fsrforum • volume 14 • issue #3

Corporate Social Responsibility

Preface

Dear readers, I present you the third edition of the 14th volume. The central theme of this edition is Corporate Social Responsibility (“CSR”). When I selected this theme my knowledge of the practice of CSR was less developed than it is today. In my view CSR was a side activity, a PR instrument and a practice that you would only invest in in times of economic prosperity. After reading this edition it will become clear to you that this view has become outdated. Nowadays the general consensus is that our responsibilities are not restricted to our immediate vicinity but extend to global issues as well as future generations. For that reason businesses incorporate CSR in their main business strategies and don’t treat it as a side activity. As in previous editions this edition includes three scientific articles. These articles provide you with a theoretical framework on CSR. The first article, by Archie B. Carroll and Kareem M. Shabana, explains why firms should engage in CSR practices and what the benefits are of these engagements. By means of a business case, arguments for and against CSR practices are set out. Furthermore the researchers provide you with an overview of the history and background of CSR. The second article is a summary of the research paper by McWilliams, Siegel and Wright. According to these researchers, engaging in CSR practices is beneficial for companies. However, the definitions and measurements of CSR should be defined more profound. Since there are no accurate models available to managers, it is difficult to develop a concrete CSR strategy. Based on several theories, such as the stakeholders’ theory, the researchers provide you with an overview of the theoretical perspectives on CSR since 1970 and subsequently propose an agenda for future theoretical and empirical research on CSR. The final article written by Karen Maas en Frank Boons approaches the CSR practice from a strategic perspective. For CSR to become a strategic activity two conditions have to be met; CSR has to be implemented into the strategy of the firm and secondly the value that the firm adds to its environment has to be measured. The researchers first define three strategic CSR activities, after which they develop a method to measure the firm’s contribution to its environment. As I have mentioned before the articles provide you with a theoretical framework. In an interview with Jan Peter Balkenende, our former Prime Minister who is now Partner at Ernst & Young, gives an insight into how CSR has become a main activity in doing business. Furthermore he links the practice of CSR to the financial crisis and he states the differences between countries globally. Personally, for me interviewing Jan Peter Balkenende was truly inspiring, and I now realize that we as students need to recognize the importance of CSR. Hereby I would like to thank Jan Peter Balkenende for his contribution to this FSR Forum. As in every edition a teacher has written a column especially for the FSR Forum. This time Karen Maas has written the column in which she states the latest developments in the field of CSR, both from a research and a firm’s perspective. She concludes her column by mentioning the importance of teaching students about the practices of CSR and that CSR is no longer a hype.

2 • Preface

In the remainder of this edition you will find the column of Mister Groeneveld, who has dedicated his column to Vestia, a housing corporation that recently got in financial trouble. Naturally this edition also includes the FSR News; among which the News Update, the Former Board Member column and the FSR Member column. The Former Board Member column is this time written by Gideon Sternfeld, who was a member of the fifth FSR Board. Throughout the years Gideon has gained work experience at several companies, which I found truly interesting to read. Donâ&#x20AC;&#x2122;t forget that his career actually started at the FSR. Finally I would like go through our activities calendar. Last edition I mentioned that we are already looking for our successors. For this reason we are going to organize a social drink especially for those who are interested in a board year or in participating in one of our committees next year. The drink will take place on April 12th. The exact location and time will be announced shortly on www.fsr.nl. Go to page 54 or to our website where you can find an overview of the possible board functions or committees. I hope you will enjoy reading this FSR Forum and that it will enrich your knowledge about the practice of Corporate Social Responsibility.

Sincerely, Anne van Driesum Editor in Chief FSR Forum FSR board 2011-2012

Preface â&#x20AC;˘ 3

fsrforum • volume 14 • issue #3

Corporate Social Responsibility

Table of contents

The business case for corporate social responsibility: a review of concepts, research and practice By Archie B. Carroll and Kareem M. Shabana

The business case is concerned with the primary question: What do the business community and organizations get out of CSR? That is, how do they benefit tangibly from engaging in CSR policies, activities and practices? 8

Strategic Implications of Corporate Social Responsibility: Review and Agenda

By Abagail Mc Williams, Donald S. Siegel & Patrick M. Wright This is a summary of McWilliams, Siegel and Wright (2006). It describes a variety of perspectives on Corporate Social Responsibility from which we develop a framework for understanding the strategic implications of CSR. Based on this framework, an agenda for future theoretical and empirical research on CSR is proposed. 17

CSR as a strategic activity. Value creation, redistribution and integration By Karen Maas and Frank Boons

CSR has potential to become a strategic activity adding value on different dimensions if two conditions are met. The first condition for strategic CSR is that CSR needs to become integrated with the strategy of the firm. The second condition for strategic CSR is to measure and monitor these new or additional values. We distinguish three ways in which CSR may provide value to a firm, society and ecosystems: value creation, value integration and value redistribution. 22

Colofon FSR FORUM appears five times a year and is an edition of the Financial Study Association Rotterdam KvK Rotterdam no: V 40346422 VAT no: NL 805159125 B01 ISSN no: 1389-0913 14th volume, number 3, circulation 1550 copies

4 • Table of contents

Editor in chief Anne van Driesum Editorial department Jeroen van Oerle Editorial advisory Dr. M. B. J. Schauten Dr. W. F. C. Verschoor Drs. R. Van der Wal RA

With the cooperation of A. B. Carroll K. M. Shabana A. Mc Williams D. S. Siegel P. M. Wright J.P. Balkenende K. Maas F. Boons Drs. J. G. Groeneveld RA RV

K. Maas D. Smits Editorial address Editiorial office FSR Forum, Erasmus Universiteit Rotterdam Room H14-06 Postbus 1738, 3000 DR Rotterdam Tel. 010 408 1830 E-mail: forum@fsr.nu

Interview J.P. Balkenende

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Expert on CSR Column Joost Groeneveld PhD

Baker Tilly Berk www.werkenbijbakertillyberk.nl BDO www.werkenbijbdo.nl Grand Thornton www.carrierebijgt.nl Deloitte www.werkenbijdeloitte.nl Ministerie van Financiën www.werkenvoornederland.nl/minfin NIBC www.careeratnibc.com Philips www.philips.nl/carriere PWC www.werkenbijpwc.nl Ernst & Young www.ey.nl/carriere

Vestia; sociaal onverantwoord Column professor

Karen Maas

FSR News Word of the Chairman

News update

FSR former board member

FSR member

Activity reports

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Company Presentations Ernst & Young www.ey.nl/carriere Optiver www.optiver.com Grand Thornton www.carrierebijGT.nl Ministerie van Financiën www.werkenvoornederland.nl/minfin

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Table of contents • 5

fsrforum • volume 14 • issue #3

Ernst & Young

Company presentation

Deze bedrijfspresentatie is gericht op het specifieke Corporate Responsibility beleid van Ernst & Young. In het onderstaande interview met de heer Van de Loo zal uitgebreid ingegaan worden op hoe dit CR beleid is ingericht en hoe dit tot uiting komt in de algemene bedrijfsvoering van Ernst & Young. Tevens kunt u op pagina 32 het interview met de heer Balkenende vinden, die net als de heer Van de Loo werkzaam is bij Ernst & Young.

Zou u zich kort kunnen introduceren? Mijn naam is Paul van de Loo en ik ben sinds juli 2011 partner bij Ernst & Young. Tijdens mijn studie Bedrijfseconomie aan de Erasmus Universiteit heb ik mij gespecialiseerd op het gebied van Corporate Finance, waarna ik in het bedrijfsleven ben gaan werken. Na verschillende functies te hebben vervuld bij bijvoorbeeld KPN, heb ik in eerste instantie de telecom adviespraktijk opgebouwd bij Ernst & Young. Sinds juli 2011 ben ik binnen Ernst & Young België en Nederland verantwoordelijk voor Climate Change and Sustainability Services, ook wel Corporate Responsibilty and Sustainability Services genoemd. Dat houdt in dat wij vanuit Ernst & Young diensten leveren aan organisaties zoals de overheid en het bedrijfsleven op het gebied van klimaatsverandering en duurzaamheid. Deze dienstverlening heeft betrekking op de gehele breedte van ons bedrijf: Assurance, Advisory, Tax en de M&A afdeling. Specifiek ben ik verantwoordelijk voor de coördinatie van het contact met onze klanten en de coördinatie van de verschillende opdrachten binnen Ernst & Young.

Zou u het CR beleid van Ernst & Young uit een kunnen zetten? Het CR beleid van Ernst & Young bestaat uit de vier E's: Environment, Employees, Entrepreneurship en Community Engagement. De eerste twee E's hebben voornamelijk betrekking op ons eigen productieproces. Wij als service gerelateerd bedrijf hebben feitelijk gezien een vrij eenvoudig productieproces. De benodigdheden voor het verlenen van diensten zijn een kantoor gebouw, kantoorartikelen, transport en bekwame werknemers. Wanneer je ons productieproces vergelijkt met een industrieel bedrijf dan is de impact die wij hebben op dit proces relatief beperkt. Het beleid rondom Employees richt zich bijvoorbeeld op een divers werknemers bestand, flexibele werkplekken en de gezondheid van de werknemer. Bij het Environment beleid worden maatregelen getroffen om de impact op het milieu te beperken, zoals een autokostenregeling die niet alleen ingesteld is voor de medewerkers maar ook voor de partners. Daarnaast is het van belang hoe er met onze keten wordt omgegaan. Er worden bijvoorbeeld ook eisen gesteld aan de partners binnen ons inkoopproces. De grootste impact hebben wij echter op het gebied van Community Engagement en Entrepreneurship, wat tevens veel raakvlakken heeft met ons kennisgebied. Het meeste kunnen wij wat betreft CR dus betekenen in het contact met de samenleving en met de organisaties waar wij mee om gaan vanuit een kennis perspectief. Wat betreft Community Engagement hebben wij gekozen voor een aantal partners die zich manifesteren op het vlak van CR en duurzaamheid, waaronder Urgenda. Urgenda houdt zich bezig met de mobiliteitsagenda van Nederland in de toekomst. Vanuit de kennis en kunde van onder andere Ernst & Young kan daaraan worden bijdragen door het uitvoeren van scenariostudies of door kritisch te kijken naar het belastingplan van de toekomst. Dit soort projecten behandelen wij als zijnde commerciële projecten terwijl het in feite pro bono-werk is. Tenslotte refereert Entrepreneurship naar het proces waarin wij onze klanten begeleiden in het ontwikkelen van hun eigen CR strategie. Dit is tevens het gebied waarin ik voornamelijk actief ben.

Hoe begeleidt Ernst & Young klanten in het ontwerpen van een passende CR strategie? Wij hebben voornamelijk contact met bestaande klantenrelaties, waardoor wij al weten of de klant actief is op het gebied van CR en waar de problemen ontstaan bij het ontwikkelen of uitwerken van de CR strategie. Vervolgens zal onze Client Service Partner contact opnemen met de algemene directeur of de CEO van het desbetreffende bedrijf. Uit dit contact zal blijken of de

6 • Company presentation

Het CR beleid van Ernst & Young bestaat uit de vier E's:

Environment, Employees, Entrepreneurship en Community Engagement.

klant behoefte heeft aan een verdere ontwikkeling van hun CR praktijken, maar ook zal blijken wat de belangrijskte reden is van waarom CR belangrijk is voor het bedrijf; dit kan zijn vanuit een algemene overtuiging of doordat de afnemer het eist. Uiteindelijk wordt er dan een project geformuleerd en zal er advies uitgebracht worden aan de klant. Hierbij zien wij vaak dat een bedrijf weer dichterbij de core business komt door het heroverwegen van de algemene strategie. Op de lange termijn leidt dit tot concrete voordelen, bijvoorbeeld richting de kapitaalverschaffers, de supply chain of in ‘the war for talent’. We doen dus als het ware een scan waaruit blijkt waar het belangrijk is en waarom de klant het wil.

Mocht een klant nu geen behoefte hebben aan de ontwikkeling van een CR strategie, wat doen jullie dan? Als een partij het echt niet wil dan gaan we daar ook niet op in, want dat heeft gewoon echt geen zin. Het is belangrijk om je te realiseren dat daar waar wij de klant kunnen helpen om te veranderen, we een grotere impact hebben dan als wij de klanten gelijk de rug toe keren. Wij hebben echter wel criteria voor klantacceptatie. Indien een partij zich bijvoorbeeld schuldig maakt aan kinderarbeid of verkeerd omgaat met hun personeel, dan zullen wij daar niet snel een opdracht gaan doen. Tenzij wij dus van mening zijn dat we een gesprek kunnen aangaan om dingen te veranderen, want dan heb je de grootste impact.

Paul van de Loo - Partner Ernst & Young

Hoe groot is de omvang van de CR praktijk binnen Ernst & Young? De CR praktijk van Ernst & Young zal op de korte termijn nog sterk gaan groeien. Momenteel kijken wij voornamelijk vanuit een assurance perspectief naar maatschappelijke verslagen. Ongeveer acht personen richten zich volledig op de controle van deze verslagen. In totaal controleren wij 60 tot 80 assurance verslagen per jaar, waarbij de grote verschilt van C02 verfificaties tot uitgebreide duurzaamheidsverslagen. Daarnaast worden er mensen vanuit de standaard financial assurance teams betrokken bij specifieke opdrachten. Op den duur willen we deze samenwerking gaan intensiveren voor zowel non financial als financial audit. Als je kijkt vanuit een adviesbeleid dan zitten we daar echt nog aan het begin. Ik werk momenteel met ongeveer zes anderen samen, sommigen die echt alleen met CR bezig zijn en anderen die daarnaast ook werkzaam zijn binnen de algemene adviespraktijk. Een verdere uitbreiding kan op drie verschillende manieren: we kunnen mensen trainen, recruiten of we kunnen een strategische samenwerking aangaan met andere partijen. We willen uiteindelijk op een praktijk uitkomen van ongeveer 30 tot 40 personen.

Is er ruimte voor starters binnen deze CR praktijk of is enige ervaring op het gebied van CR een vereiste? Op het moment zijn de starters die CR gerelateerde opdrachten uitvoeren afkomstig vanuit de standaard afdelingen, zoals assurance en advisory. De mensen waar ik intensief mee samenwerk zijn dus over het algemeen mensen met ervaring op het gebied van CR en sustainability. Op den duur willen we naar een normale pyramide structuur toe, waardoor we dan ook op staff en senior staff niveau mensen nodig zullen hebben. De exacte vormgeving is echter tot nu toe nog onduidelijk. Dit is met name afhankelijk van of we een samenwerkingsverband aan zullen gaan met een derde partij. In de zomer verwacht ik daar meer duidelijkheid over te kunnen hebben.

Company presentation • 7

fsrforum â&#x20AC;˘ volume 14 â&#x20AC;˘ issue #3

The business case for corporate social responsibility: a review of concepts, research and practice By Archie B. Carroll and Kareem M. Shabana (2010)

Introduction Today, one cannot pick up a newspaper, magazine or journal without encountering some discussion of the issue, some recent or innovative example of what business is thinking or doing about CSR, or some new conference that is being held. For all practical purposes, however, it is largely a post World War II phenomenon and actually did not surge in importance until the 1960s and beyond. Therefore, it is largely a product of the past half century. 8 â&#x20AC;˘ The business case for corporate social responsibility: a review of concepts, research and practice

The term ‘corporate social responsibility’ is still in popular use, even though competing, complementary and overlapping concepts such as corporate citizenship, business ethics, stakeholder management and sustainability are all vying to become the most accepted and widespread descriptor of the field. At the same time, the concept of corporate social performance (CSP) has become an established umbrella term which embraces both the descriptive and normative aspects of the field, as well as placing an emphasis on all that firms are achieving or accomplishing in the realm of social responsibility policies, practices and results. In this review commentary, the primary subject is the ‘business case’ for CSR. In short, this refers to the arguments or rationales supporting or documenting why the business community should accept and advance the CSR ‘cause’. The business case is concerned with the primary question: What do the business community and organizations get out of CSR; that is, how do they benefit tangibly from engaging in CSR policies, activities and practices?

Background and historical perspectives In the 1950s, there was some limited discourse about CSR. Frank Abrams, a former executive with Standard Oil Company, New Jersey, introduced concerns about management’s broader responsibilities in a complex world (Abrams 1951). Abrams argued that, as management was professionalizing, companies had to think not just about profits but also about their employees, customers and the public at large. William C. Frederick, a noted contributor to the CSR literature, argued that there were three core ideas about CSR that stood out in the 1950s. These included the idea of the manager as public trustee, the balancing of competing claims to corporate resources, and corporate philanthropy business support of good causes (Frederick 2006). Though the 1960s seemed ripe for advances in social responsibility thought, the decade was still reeling from Professor Theodore Levitt’s admonitions about ‘the dangers of social responsibility’. Levitt thought that social concerns and the general welfare were not the responsibility of business, but of government, and that business’s job was to ‘take care of the more material aspects of welfare’. Levitt feared that attention to social responsibilities would detract from the profit motive that was so essential for business success.

towards society. In the mid-1970s, an emphasis on CSP more clearly emerged. In one respect, CSP was an attempt to reconcile the importance of both CSR1 and CSR2, but it was also about placing an emphasis on achieving results or emphasizing the outcomes of socially responsible initiatives (Carroll 1979; Wartick and Cochran 1985; Wood 1991).

Arguments for and against CSR The case against the concept of CSR typically begins with the classical economic argument articulated most forcefully by the late Milton Friedman (1962). Friedman held that management has one responsibility and that is to maximize the profits of its owners or shareholders. Friedman argued that social issues are not the concern of business people and that these problems should be resolved by the unfettered workings of the free market system. Further, this view holds that, if the free market cannot solve the social problems, it falls not upon business, but upon government and legislation to do the job. A second objection to CSR has been that business is not equipped to handle social activities. This position holds that managers are oriented towards finance and operations and do not have the necessary expertise (social skills), to make socially oriented decisions (Davis 1973). A third objection to CSR is that it dilutes businesses’ primary purpose. The objection here is that to adopt CSR would put business into fields of endeavor that are unrelated to their ‘proper aim’ (Hayek 1969). A fourth argument against CSR is that business already has enough power, and so why should we place in its hands the opportunity to wield additional power, such as social power (Davis 1973)? A fifth argument is that, by pursuing CSR, business will make itself less competitive globally. Arguments in favor of CSR typically begin with the belief that it is in business’s long-term self interest to be socially responsible. This view holds that, if business is to have a healthy climate in which to function in the future, it must take actions now that will ensure its long-term viability. A second argument in favor of CSR is that it will ‘ward off government regulation’. This is a very practical reason, and it is based on the idea that future government intervention can be forestalled to the extent that business polices itself with self-disciplined standards and fulfills society’s expectations of it. Two additional arguments in favor of CSR include ‘business has the resources’ and ‘let business try’. These two views maintain that, because business has a reservoir of management talent,

As the 1960s transitioned into the 1970s and beyond, the particular emphasis in the CSR concept evolved primarily through the academic contributions in the literature and the slowly emerging realities of business practice. Formal definitions of CSR began to proliferate in the 1970s, and the overall trajectory was towards an emphasis on CSP (Carroll 1999; Sethi 1975). The 1970s was the decade in which corporate social responsibility, responsiveness and performance became the center of discussions.

of CSR?

Frederick (1978) formalized this distinction by differentiating corporate social responsibility (CSR1) from corporate social responsiveness (CSR2). CSR1 emphasized companies ‘assuming’ a socially responsible posture, whereas CSR2 focused on the literal act of responding or of achieving a responsive posture

functional expertise and capital, and because so many others have tried and failed to solve social problems, business should be given the chance (Davis 1973, p. 316). Another justification for CSR holds that proacting is better than reacting.

What do the business

community and organizations get out

The business case for corporate social responsibility: a review of concepts, research and practice • 9

fsrforum • volume 14 • issue #3

This basically means that proacting (anticipating, planning and initiating) is more practical and less costly than simply reacting to social problems once they have surfaced (Carroll and Buchholtz 2009). Finally, it has been argued that business should engage in CSR because the public strongly supports it. Today, the public believes that, in addition to its pursuits of profits, business should be responsible to their workers, communities and other stakeholders, even if making things better for them requires companies to sacrifice some profits (Bernstein 2000). Over the past half century, many different definitions of what CSR really means have been set out. One recent study identified 37 definitions of CSR (Dahlsrud 2006).Using content analysis, this study identified five dimensions of CSR and

Management has

one responsibility and that is to maximize the profits. used frequency counts via a Google search to calculate the relative usage of each dimension. The study found the following to be the most frequent dimensions of CSR: stakeholder dimension, social dimension, economic dimension, voluntariness dimension and environmental dimension (Dahlsrud 2006). Another way to think about CSR is to identify the different categories of CSR and sort out companies’ activities in terms of these different types, classes or kinds of CSR. Using this approach, we decided to employ Carroll’s four different categories of CSR, which include businesses’ fulfillment of economic, legal, ethical and discretionary/philanthropic responsibilities. This four-part definition of CSR has been stated as follows: ‘The social responsibility of business encompasses the economic, legal, ethical, and expectations that society has of organizations at a given point in time’ (Carroll 1979, p. 500, 1991, p. 283). Because this definition has been used successfully for research purposes for over 25 years, it was decided this might be a positive and appropriate definition to use because of its enduring application in CSR research.

The essence of CSR: ethical and philanthropic responsibilities Carroll’s (1979, 1991) four-part definition of CSR identifies four categories of responsibilities: economic, legal, ethical and discretionary/philanthropic. These ‘responsibilities’ are the expectations placed on the corporation by corporate stakeholders and society as a whole. One of the major advantages of Carroll’s definition is its expansion of the categories of CSR that McGuire referred to in 1963. McGuire (1963, p. 144) argued: ‘The idea of social responsibilities supposes that the corporation has not only economic and legal obligations, but also certain responsibilities to society which extend beyond these obligations.’ By identifying and distinguishing the ethical and discretionary/philanthropic categories, Car-

10 • The business case for corporate social responsibility: a review of concepts, research and practice

roll explicitly spelled out what McGuire referred to as the responsibilities that extend beyond the economic and legal responsibilities. Carroll then made the notion of CSR more explicit when he contended that the economic and legal responsibilities are ‘required’, the ethical responsibilities are ‘expected’, and the discretionary/philanthropic responsibilities are ‘desired’. By doing so, he made a distinction between the traditional and the new responsibilities of the corporation. Kotler and Lee (2005) essentially see CSR in the same way. They define CSR as ‘a commitment to improve community well-being through discretionary business practices and contributions of corporate resources’.

The business case for CSR: What does it really mean? When one examines the history and evolution of CSR, the idea of a business case for CSR has been developing almost since the beginning. Even with early CSR initiatives, there was always the built-in premise that, by engaging in CSR activities, businesses would be enhancing the societal environment in which they existed and that such efforts would be in their long term enlightened self-interest. Though CSR came about because of concerns about businesses’ detrimental impacts on society, the theme of improving society was certainly in the minds of early theorists and practitioners. With the passage of time and the growth of resources being dedicated to social responsibility, it was only natural that questions would begin to be raised about whether CSR was paying its own way. Another incentive for the development of the business case was probably a response to Milton Friedman’s continuing arguments against the concept, claiming that businesses must focus only on long-term profits. If it could be demonstrated that businesses actually benefited financially from CSR, then possibly Friedman’s arguments would somewhat be neutralized. It should be emphasized that a multitude of different business cases for social responsibility have been developing over the years. There is no single business case for CSR - no single rationalization for how CSR improves the bottom line. Many different arguments have been assembled to justify the composite business case. The business case for CSR has been broken down into four different categories by Simon Zadek. Zadek has argued that companies pursue CSR strategies to (1) defend their reputations (pain alleviation), (2) justify benefits over costs (the ‘traditional’ business case), (3) integrate with their broader strategies (the ‘strategic’ business case), and (4) learn, innovate and manage risk (New Economy Business case) (Zadek 2000). Kurucz et al. (2008, pp. 85-92) also have set out four general types of business case for CSR which overlap with Zadek’s. They maintain that there are four different groupings of the business case based on the focus of the approach, the topics addressed, and the underlying assumptions about how value is created and defined. Their four approaches include: (1) cost and risk reduction; (2) gaining competitive advantage; (3)developing reputation and legitimacy; and (4)seeking win-win outcomes through synergistic value creation.

Evidence of the business case for CSR Ethical responsibilities in practice. The ethical responsibilities of business ‘embody those standards, norms, or expectations that reflect a concern for what con-

sumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders’ moral rights’ (Carroll 1991, p. 41). In essence, ethical responsibilities refer to a corporation’s voluntary actions to promote and pursue social goals that extend beyond their legal responsibilities. These goals are of importance to society or to different stakeholders in society, but their promotion and pursuit are beyond the corporation’s immediate financial interest. The importance of these social goals to society may be inferred from the presence of an interest to identify them and measure and report corporate performance regarding them. In response to the mounting social and stakeholder concerns, many corporations are adopting initiatives and programs directed at the ethical responsibilities of business.

Philanthropic responsibilities in practice. The discretionary/philanthropic responsibilities of business encompass ‘those corporate actions that are in response to society’s expectation that business be a good corporate citizen. This includes actively engaging in acts or programs to promote human welfare or good will’ (Carroll 1991, p. 42). Many businesses make donations directed at various causes such as education, community improvement, and arts and culture (Seifert et al. 2004). The Committee Encouraging Corporate Philanthropy (CECP) reports that, according to a 2007 survey, the median total giving of Fortune 100 companies was $46.31 million, with 71% of Fortune 100 companies giving more than they did in 2006 (CECP 2009a). Bruch and Walter (2005, p. 49) observe that ‘[i]n the United Kingdom alone, leading publicly traded companies made donations to non-profit organizations in 2003 and 2004 that were valued at more than $1.6 billion and that equaled close to 1% of the companies’ pre-tax profits’.

Business-case arguments for CSR practices The arguments are organized in four sections corresponding to the four CSR arguments proposed by Kurucz et al. (2008) which were described above as (1) cost and risk reduction; (2) gaining competitive advantage; (3)developing reputation and legitimacy; and (4)seeking win-win outcomes through synergistic value creation.

Cost and risk reduction. Cost and risk reduction justifications constitute arguments

that contend that engaging in certain CSR activities will reduce costs and risks to the firm. ‘[T]he primary view is that the demands of stakeholders present potential threats to the viability of the organization, and that corporate economic interests are served by mitigating the threats through a threshold level of social or environmental performance’ (Kurucz et al. 2008, p. 88). T. Smith (2005) argues that CSR activities in the form of equal employment opportunity (EEO) policies and practices and environmentally responsible commitments enhance long-term shareholder value by reducing costs and risks. He contends that explicit EEO statements are necessary to illustrate an inclusive policy which reduces employee turnover through improving morale. Smith’s argument is consistent with the contentions of others (e.g. Berman et al. 1999; Robinson and Dechant 1997; Thomas and Ely 1996) that ‘[l]ack of diversity may cause higher turnover and absenteeism from disgruntled employees’ (Berman et al. 1999, p. 490).Cost and risk reduction may also be achieved through CSR activities directed at the natural environment. Environmentally responsible commitments may reduce the negative impact of social concern Corporate social responsibility activities directed at managing community relations may also result in cost and risk reductions (Berman et al. 1999). Building positive community relationships may contribute to the firm’s attaining tax advantages. In addition, positive community relationships decrease the amount of regulation imposed on the firm, because the firm is perceived as a sanctioned member of society. Cost and risk reduction arguments for CSR have been gaining wide acceptance among managers and executives. In a survey of business executives by PricewaterhouseCoopers cited in Fortune (2003),73% of respondents indicated that ‘cost savings’ were one of the top three reasons why companies are becoming more socially responsible. Cost savings obviously attract top management attention as a specific bottom-line benefit to CSR.

Gaining competitive advantage. The term ‘competitive advantage’ in this section is best understood in the context of a differentiation strategy. In other words, this section focuses on how firms may use CSR practices to set themselves apart from their competitors. The

The business case for corporate social responsibility: a review of concepts, research and practice • 11

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previous section, which focuses on cost and risk reduction, illustrates how CSR practices may be used to build a competitive advantage through a cost leadership strategy. Competitive advantage justifications contend that, by engaging in certain CSR activities firms may improve their competitiveness. Stakeholder demands are seen as opportunities rather than constraints. Firms strategically manage their resources to meet these demands and exploit the opportunities associated with them for the benefit of the firm (Kurucz et al. 2008). Competitive advantages was cited as one of the top two justifications for CSR in a survey of business executives reported in Fortune (2003). Corporate social responsibility initiatives can also contribute to strengthening a firm’s competitive advantage through enhancing its relationships with its customers. Corporate social responsibility initiatives were also found to have a positive impact on attracting investment. The business case for corporate philanthropy may be made when it is justified based on an economic rationale. In other words, corporate philanthropy is substantiated ‘if it increases shareholder returns’ (Buchholtz et al. 1999, p. 169). Porter and Kramer (2002, p. 59) provide a premise for such an argument. The authors maintain that a business may gain competitive advantages through its philanthropic activities when such activities are directed at causes where there is a ‘convergence of interests’ between the economic gains and the social benefits.

activities and assure unique value creation for the beneficiaries’ (Bruch and Walter 2005, p. 50). Strategic philanthropy, defined as ‘the process by which contributions are targeted to serve direct business interests while also servicing beneficiary organizations’ (Tokarski 1999, p. 34), helps companies to gain a competitive advantage and, in turn, boosts its bottom line (Seifert et al. 2003). Corporate philanthropy, in this case, is used as a means of advancing corporate interests. Corporate social responsibility initiatives enhance a firm’s competitive advantage to the extent that they influence the decisions of the firm’s stakeholders in its favor. Firms build a competitive advantage by engaging in those CSR initiatives that meet ‘the perceived demands of stakeholders’ (Kurucz et al. 2008, p. 89). In other words, one or multiple stakeholders will prefer the firm over its competitors specifically because of the firm’s engagement in such CSR initiatives.

Developing reputation and legitimacy.

Bruch and Walter (2005) argue that companies use philanthropy to enhance their competitive advantage through combinations of market (external) and competence (internal) orientations. Through a market orientation, companies design their philanthropic activities to fit external demands and meet the expectations of key stakeholders. The companies therefore improve their competitive advantage through ‘improved marketing and selling capabilities, higher attractiveness as an employer or better relationships with governmental and non-governmental organizations’ (Bruch and Walter 2005, p. 50).

Reputation and legitimacy arguments maintain that firms may strengthen their legitimacy and enhance their reputation by engaging in CSR activities. Suchman (1995, p. 574) defines legitimacy as ‘a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions’. Fombrun and Shanley (1990) explain that perceptions of a firm’s concern for society illustrates that the firm is able to build ‘mutualistic’ relationships, which indicate that the firm is able to operate while adhering to social norms and meeting expectations of different stakeholder groups. Firms ‘focus on value creation by leveraging gains in reputation and legitimacy made through aligning stakeholder interests’ (Kurucz et al. 2008, p. 90). Reputation and legitimacy sanction the firm to operate in society. N. Smith contends that CSR activities enhance the ability of a firm to attract consumers, investors and employees. He states that ‘consumers report that many claim to be influenced in their purchasing decisions by the CSR reputation of firms’ (N. Smith 2003, pp. 61-63).

Through a competence orientation, companies may align their philanthropic activities with their capabilities and core competencies. ‘In so doing, they avoid distractions from the core business, enhance the efficiency of their charitable

Corporate philanthropy is another CSR activity which aims to enhance corporate legitimacy and reputation. Chen et al. (2008, p. 131) posit that ‘corporate philanthropy may... be a tool of legitimization....’The authors argue that some firms

12 • The business case for corporate social responsibility: a review of concepts, research and practice

that have negative social performance in the areas of environmental issues and product safety use charitable contributions as a means for building their legitimacy. Firms may also use philanthropy to strengthen their legitimacy through managing their local dependency and creating trust (Kamens 1985). Corporations are also reasoned to enhance their legitimacy and reputation through disclosure of information regarding their performance on different social and environmental issues (Brammer and Pavelin 2004). One such disclosure practice is corporate social reporting. Corporate social reporting refers to the issue of standalone reports that provide information regarding a company’s economic, environmental and social performance. The practice of corporate social reporting has been encouraged by the establishment of the GRI in 1997 and the launch of the Global Compact in 1999 (Antal et al. 2002). Through the issue of a social report, firms are able to illustrate that their operations are consistent with social norms and expectations, therefore they are legitimate.

Seeking win-win outcomes through synergistic value creation. Synergistic value creation arguments focus on exploiting opportunities that reconcile the differing stakeholder demands. Firms do this by ‘connecting stakeholder interests, and creating pluralistic definitions of value for multiple stakeholders simultaneously’ (Kurucz et al.2008,p.91). Porter and Kramer (2002, p. 66) argue that, when companies ‘get the where and how right’, philanthropic activities and competitive advantage become mutually reinforcing and create a virtuous circle. They contend that corporate philanthropy may be used to influence the competitive context of an organization, which would allow the organization to improve its competitiveness and at the same time fulfill the needs of some of its stakeholders. The notion of creating winwin outcomes through CSR activities has been raised before. Drucker (1984, p. 62) argues ‘the proper “social responsibility” of business is to... turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth’. Wheeler et al. (2003) echo Drucker’s contention. They posit ‘it will not be too long before we can begin to assert that the business of business is the creation of sustainable value - economic, social and ecological’ (Wheeler et al. 2003, p. 20). The win-win perspective to CSR practices is aimed at satisfying stakeholders’ demands while, at the same time, allowing the firm to pursue its operations. By engaging its stakeholders and satisfying their demands, the firm finds opportunities and solutions which enable it to pursue its profitability interest with the consent and support of its stakeholder environment. The win-win perspective to CSR practices provides a view in which CSR is perceived as a vehicle that allows both the firm to pursue its interest and stakeholders to satisfy their demands.

Conclusions The business case for CSR refers to the arguments that provide rational justification for CSR initiatives from a primarily

corporate economic/financial perspective. Business-case arguments contend that firms which engage in CSR activities will be rewarded by the market in economic and financial terms. To formulate a successful CSR strategy, firms must understand that the benefits of CSR are dependent on mediating variables and situational contingencies. Pivato et al. (2008) illustrate the role of trust as a mediating variable which shapes the relationship between CSR activities and firm performance. Barnett (2007) set out the construct of stakeholder influence capacity, which illustrates how situational contingencies may affect the impact of CSR activities on firm financial performance. It is critical to apply the contingency perspective as suggested by Barnett (2007) and account for the role of mediating variables as proposed by Pivato et al. (2008) in the exploration of the relationship between CSR and firm financial performance. A contingency perspective would allow the development of justifications for the lack of a positive relationship between CSR and firm financial performance in certain circumstances. In addition it would provide a defense for the business case for CSR in environments where the business case is argued to have failed (e.g. De Schutter 2008; Valor 2008; Williamson et al. 2006).

Stakeholder demands are seen as opportunities rather than constraints. The rationale for the business case for CSR may be categorized under four arguments: (1) reducing cost and risk; (2) strengthening legitimacy and reputation; (3) building competitive advantage; and (4) creating win-win situations through synergistic value creation (Kurucz et al. 2008). Cost and risk reduction arguments posit that CSR may allow a firm to realize tax benefits or avoid strict regulation, which would lower its cost. The firm may also lower the risk of opposition by its stakeholders through CSR activities. Legitimacy and reputation arguments hold that CSR activities may help a firm strengthen its legitimacy and reputation by demonstrating that it can meet the competing needs of its stakeholders and at the same time operate profitably. A firm therefore would be perceived as a member of its community, and its operations would be sanctioned. Competitive advantage arguments contend that, by adopting certain CSR activities, a firm may be able to build strong relationships with its stakeholders and garner their support in the form of lower levels of employee turnover, access to a higher talent pool, and customer loyalty. Accordingly, the firm will be able to differentiate itself from its competitors. Synergistic value creation arguments hold that CSR activities may present opportunities for a firm that would allow it to fulfill the needs of its stakeholders and at the same time pursue its profit goals. The pursuit of these opportunities is only possible through CSR activities.

The business case for corporate social responsibility: a review of concepts, research and practice • 13

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fsrforum • volume 14 • issue #3

Company presentation Do you have what it takes to become our next trader at Optiver? Nelleke van ‘t Hoff

Optiver is een internationaal en innovatief handelshuis. Onze core business is electronische Market Making en arbitrage in financiële producten, zoals derivaten, aandelen en obligaties. We handelen voor eigen rekening, op eigen risico en we hebben geen klanten. Met kantoren in Amsterdam, Sydney en Chicago, 600 medewerkers en 30 verschillende nationaliteiten, wordt er wereldwijd 24 uur per dag gehandeld. Sven Hubens is sinds maart 2011 werkzaam als Trader bij Optiver. Dit interview is voor hem een ideale gelegenheid om te vertellen wat zijn functie bij Optiver inhoudt en wat zijn ervaringen tot nu toe als starter op de arbeidsmarkt zijn.

Waarom heb je gekozen voor Optiver? Op jonge leeftijd was ik al erg geïnteresseerd in de beurs en belegde ik al in aandelen. Ik heb altijd de drive gehad om ooit eens op de beurs te mogen handelen. Tijdens het laatste jaar van mijn studie ben ik me gaan oriënteren op mogelijke banen gerelateerd aan de beurshandel. Ik wist van mezelf dat ik goed ben met cijfers en ik houd van het werken met geld. In mijn zoektocht kwam ik al snel uit bij Optiver. Ik ben toen naar een presentatie gegaan en het werd me al snel duidelijk dat Optiver een erg dynamisch bedrijf is waarin resultaat telt en werknemers snel kunnen groeien. Ik was erg onder de indruk en wist vanaf dat moment dat ik bij Optiver wilde solliciteren.

Wat is je functie binnen Optiver? Mijn werk is het handelen in opties. Met behulp van computermodellen en marktinformatie geef ik prijzen af waarop de markt een bepaalde optie kan kopen of verkopen. Op deze manier verschaffen we liquiditeit in de markt. Daarnaast probeer je als handelaar ook op andermans prijzen te handelen indien die winstgevend blijken te zijn of van belang kunnen zijn voor je handelspositie. Naast het handelen an sich, is het erg belangrijk om in staat te zijn de posities die je zelf hebt te kunnen managen en je risico limieten te beperken. Ik maak deel uit van het CODEC team. In dit team handelen we vooral in fixed income en currencies. Hierbij kun je denken aan het handelen in opties op bijvoorbeeld de Duitse staatslening, de EUR/Dollar, et cetera.

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Company presentation • 15

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fsrforum • volume 14 • issue #3

Strategic Implications of Corporate Social Responsibility: Review and Agenda By McWilliams, Siegel and Wright (2006) This is a summary of McWilliams, Siegel and Wright (2006)

INTRODUCTION Scholars have proposed many definitions of Corporate Social Responsibility, making theory development and consistent measurement difficult. Here we define CSR as situations where a firm goes beyond compliance and engages in “actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (McWilliams & Siegel, 2001). CSR activities include incorporating social characteristics or features into products and manufacturing processes (e.g., aerosol products with no fluorocarbons or using environmentallyfriendly technologies), adopting progressive human resource management practices (e.g., promoting employee empowerment), achieving higher levels of environmental performance through recycling and pollution abatement (e.g., adopting an aggressive stance towards reducing emissions), and advancing the goals of community organizations.

Strategic Implications of Corporate Social Responsibility: Review and Agenda • 17

fsrforum • volume 14 • issue #3

When firms engage in CSR strategically, the behavior can be examined through the lens of the resource based view of the firm (RBV).

Table 1: Selected Theoretical Papers on CSR Author(s)

Nature of Theoretical Perspective(s)

Key Argument/Result

Friedman (1970)

Agency Theory

CSR is indicative of self-serving behavior on the part of managers, and thus, reduces shareholder wealth.

Freeman (1984)

Stakeholder Theory

Managers should tailor their policies to satisfy numerous constituents, not just shareholders. These stakeholders include workers, customers, suppliers, and community organizations.

Donaldson (1990)

Stewardship Theory

There is a moral imperative for managers to “do the right thing,” without regard to how such decisions affect firm performance.

Donaldson and Preston (1995)

Stakeholder Theory

Stressed the moral and ethical dimensions of stakeholder theory, as well as the business case for engaging in CSR.

Hart (1995)

Resource-Based View of the Firm

For certain companies, environmental social responsibility can constitute a resource or capability that leads to a sustained competitive advantage.

Jennings and Zandbergen (1995)

Institutional Theory

Institutions play an important role in shaping the consensus within a firm regarding the establishment of an “ecologically sustainable” organization.

Feddersen and Gilligan (2001)

Theory of the Firm

Activists and NGOs can play an important role in reducing information asymmetry with respect to CSR on the part of consumers.

McWilliams and Siegel (2001)

Theory of the Firm

Presents a supply/demand perspective on CSR, which implies that the firm’s ideal level of CSR can be determined by cost-benefit analysis.

McWilliams, Van Fleet and Cory (2002)

Resource-Based View of the Firm

CSR strategies, when supported by political strategies, can be used to create sustainable competitive advantage.

Waldman, Siegel, and Javidan (2005)

Theory of the Firm/ Strategic Leadership Theory

Certain aspects of CEO leadership can affect the propensity of firms to engage in CSR. Companies run by intellectually stimulating CEOs do more strategic CSR than comparable firms.

However, managers, especially executives of multi-national, multi-divisional companies are more interested in the consequences of CSR. They are aware that business norms and standards, regulatory frameworks, and stakeholder demand for CSR can vary substantially across nations, regions and lines of business. They are also aware that their divisional managers are under constant pressure from employees, suppliers, community groups, NGOs, and governments to increase their firm’s involvement in CSR. Unfortunately for both scholars and practitioners, the analysis of CSR is still embryonic and theoretical frameworks, measurement, and empirical methods have not yet been resolved. Furthermore, it cannot be analyzed through the lens of a single discipline. So, CSR is fertile ground for theory development and empirical analysis.

THEORETICAL PERSPECTIVES ON CSR In Table 1 we summarize selected articles on theoretical perspectives of CSR. Friedman (1970) wrote that the only responsibility of business is to maximize shareholder wealth, adding that the mere existence of CSR was a signal of an agency problem within the firm. By this he meant that agency theory implies that CSR is a misuse of corporate resources that would be better spent on valued-added internal projects or that should be returned to shareholders. Freeman (1984) presented a more positive view of managers’ support of CSR. His stakeholder theory asserts that managers must satisfy a variety of constituents, including workers, customers, suppliers and local community organizations, who

18 • Strategic Implications of Corporate Social Responsibility: Review and Agenda

can influence firm outcomes. Therefore it can be beneficial for the firm to engage in certain CSR activities that nonfinancial stakeholders perceive to be important, because, absent this, these groups might withdraw their support for the firm. Stakeholder theory was expanded by Donaldson and Preston (1995) who stressed the moral and ethical dimensions of CSR, as well as the business case for engaging in such activity. Another perspective, stewardship theory (Donaldson, 1990), is based on the idea that there is a moral imperative for managers to “do the right thing” without regard to how such decisions affect firm financial performance. Using institutional theory, Jennings and Zandbergen (1995) analyzed the role of institutions in shaping the consensus within a firm regarding the establishment of an “ecologically sustainable” organization. A recent paper by Waldman, Siegel and Javidan (2005) applies strategic leadership theory to CSR. They conjectured that certain aspects of transformational leadership will be positively correlated with the propensity of firms to engage in CSR and that leaders will employ CSR activities strategically. When firms engage in CSR strategically, the behavior can be examined through the lens of the resource based view of the firm (RBV) as popularized by Barney (1991). RBV presumes that firms are bundles of heterogeneous resources and capabilities that are imperfectly mobile across firms and that if these resources and capabilities are valuable, rare, inimitable and non-substitutable, they can constitute a source of sustainable competitive advantage.

Applying RBV Hart (1995) asserted that for certain types of firms environmental social responsibility can constitute a resource or capability that leads to a sustained competitive advantage. Russo and Fouts (1997) tested this theory empirically using firm-level data on environmental and accounting performance and found that firms with higher levels of environmental performance had superior financial performance, which they interpreted to be consistent with the RBV theory. Using the RBV framework, McWilliams and Siegel (2001) advanced a more formal theory of the firm model of “profitmaximizing” CSR. They outlined a simple model in which two companies produce identical products, except that one firm adds an additional “social” attribute or feature, that is valued by some consumers. In this model, managers determine the optimal level of resources to devote to CSR activities/ attributes by assessing the demand for CSR and also the cost of satisfying that demand. An important implication of this model is that the two firms will achieve the same level of profitability. They call this the “neutrality effect.” This theory of the firm perspective on CSR has several strategic implications. First, CSR can be an integral element of a firm’s differentiation strategy. Therefore, it should be considered as a form of strategic investment. Even when it is not directly tied to a product feature or production process, CSR can be viewed as a form of reputation building or maintenance. Second, it is possible to generate a set of predictions regarding patterns of investment in CSR across firms and industries. For example, it predicts a positive correlation between CSR and both R&D and advertising as elaborated by McWilliams and Siegel (2000). This theory of the firm perspective can also be expanded to address issues relating to industry evolution, market structure, firm dynamics, and the role of asymmetric information in the context of CSR. In contrast to the ease of valuing CSR attributes, consumers often find it difficult to determine if a firm’s internal operations meet their standards for social responsibility. The level of asymmetric information regarding internal operations may be mediated by the firm themselves or by activists. For instance, companies such as McDonalds, Motorola and Nike include CSR in their annual reports, which can be viewed as a form of advertising, especially for more general types of

CSR. However, some consumers perceive this information as biased, since it is filtered through senior management. Feddersen and Gilligan (2001) assert that activists can play an important role in addressing this concern, by supplying consumers with independent information about CSR. The relationship between CSR and advertising is an interesting one and several stylized facts relating to industry evolution and the nature of advertising are useful to consider. First, we expect levels of investment in CSR to be higher for established firms in more mature industries, since the extent of product differentiation will be greater in such sectors and consumers will, in general, have more sophisticated tastes

We define CSR as situations where a firm goes beyond compliance.

and knowledge regarding products and firms. It is clear that such companies are likely to derive greater benefits from the use of CSR for reputation enhancement/protection. Second, if some forms of CSR do indeed constitute advertising, then it is important to distinguish between persuasive CSR advertising and informative CSR advertising. Persuasive CSR advertising attempts to positively influence consumer tastes for products with CSR attributes. It follows that this type of advertising need not be firm-specific. Informative CSR advertising simply provides information about the CSR characteristics or CSR managerial practices of the firm. A high level of CSR advertising can be viewed as a signal of product or firm quality. The question of whether firms can use CSR to achieve a sustainable competitive advantage is important. Reinhardt (1998) finds that a firm engaging in a CSR-based strategy can only generate an abnormal return if it can prevent competitors from imitating its strategy. In competitive markets this is

Strategic Implications of Corporate Social Responsibility: Review and Agenda • 19

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unlikely, since CSR is highly transparent, with little causal ambiguity. Theoretical studies by Dutta, Lach & Rustichini (1995) and Hoppe and Lehmann-Grube (2001) show that any early-mover advantages that might be gained by offering higher quality products (McWilliams & Siegel (2001) modeled CSR as a “quality improvement” ) are eroded when competitive

and even coerced CSR would constitute a significant theoretical breakthrough. As other issues are resolved, we hope that they lead to the emergence of an agreed-upon definition of CSR.

strategies are observable. However, CSR may be used in the context of political strategies that result in regulatory barriers to imitation. For example, firms could use government regulation to impose CSR on rivals who do not employ an appropriate technology, thus raising the costs of those rivals relative to the initiating firm. McWilliams, Van Fleet, and Cory (2002) applied the RBV framework to demonstrate how U.S. firms can use political strategies based on CSR to raise regulatory barriers that prevent foreign competitors from using substitute (e.g., one’s based on low labor cost) technology.

CSR can be viewed as a form of

reputation building or maintenance. Motivations for CSR

RESEARCH AGENDA ON THE STRATEGIC IMPLICATIONS OF CSR There are numerous unresolved theoretical and empirical issues relating to the strategic implications of CSR. These include • reaching consensus on the definition of CSR • determining the motivations for CSR • assessing the effect of CSR on the firm and stakeholder groups • determining the effects of leadership and corporate culture on CSR activity • identifying institutional differences in CSR across markets and countries • establishing appropriate methodologies for measuring cost and benefits of CSR

Asymmetric information makes it difficult to study the antecedents and consequences of CSR. Managers may perceive that external stakeholders view CSR activity more favorably if it is divorced from any discussion of the bottom line. With this in mind, managers may not reveal the more practical motivations (such as product promotion, labor cost control and reputation building) behind their CSR activities, especially in corporate publications such as annual reports. This lack of candid information has made it difficult to distinguish between and discuss the different motivations for CSR. Researchers need to use more direct methods, such as interviews and surveys, to “tease out” less self-serving information about the motivations for CSR activity and improve the precision of measurement of the private and social returns to CSR.

Definition of CSR

Effects of CSR

There is a no strong consensus on a definition for CSR. CSR has been used as a synonym for business ethics, defined as tantamount to corporate philanthropy, and considered strictly as relating to environmental policy. CSR has also been confused with corporate social performance and corporate citizenship. The lack of consistency in the use of the term CSR makes it difficult to compare results across studies, hampering our ability to understand the implications of CSR activity. Distinguishing among strategic CSR, altruistic CSR,

We need to understand how strategic CSR affects society. An example of strategic CSR is when a firm links the provision of a public good to the sale of their (private) products (e.g., ecolabeling). Bagnoli and Watts (2003) model this behavior and find that the propensity of firms to engage in strategic CSR depends on two factors: the intensity of competition in the market and the extent to which consumers are willing to pay a premium for social responsibility. The authors conclude that there is an inverse relation between intensity of compe-

20 • Strategic Implications of Corporate Social Responsibility: Review and Agenda

Table 2: Selected Empirical Papers on CSR Author(s)

Methodology

Nature of CSR Event/Action

Key Results

Abowd, Milkovich and Hannon (1990)

Event Study

Human Resource Decisions

No consistent pattern of increased or decreased stock price

Clinebell and Clinebell (1994)

Event Study

Plant Closures

Longer periods of advance notice of plant closings result in greater losses in shareholder wealth

Posnikoff (1997)

Event Study

Divestment From South Africa

Divestment enhanced shareholder value

Teoh, Welch, and Wazzan (1999)

Event Study

Divestment From South Africa

Divestment had a neutral effect on shareholder value

Aupperle, Carroll, and Hatfield (1985)

Regression Analysis

An Overall Firm-Level Index of CSR

There is a neutral relation between CSR and profitability

McGuire, Sundgren, and Schneeweis (1988) Regression Analysis

An Overall Firm-Level Index of CSR

Prior profitability was more closely related to CSR than was subsequent performance

Russo and Fouts (1997)

Regression Analysis

Environmental Performance

There is a positive relation between environmental performance and financial performance

McWilliams and Siegel (2000)

Regression Analysis

An Overall Firm-Level Index of CSR–KLD Data

There is a neutral relation between CSR and profitability

Hillman and Keim (2001)

Regression Analysis

“Social Issues” CSR and “Stakeholder Management” CSR –KLD Data

“Stakeholder Management” CSR is positively correlated with shareholder wealth creation (market value added); “Social Issues” CSR is not

tition and provision of CSR. That is, in more competitive markets, less of the public good will be provided through strategic CSR. Conversely, the less competitive the market, the more public good will be provided. This is easy to understand, since more competition results in lower margins and, therefore, less ability to provide additional (social) attributes or activity. Conversely, less competition leads to the potential for higher margins and more ability to provide additional attributes or activity. An analysis of the provision of public goods by private firms is a welcome addition to the management literature on CSR, which has been primarily concerned with answering the question: do firms “do well by doing good”? Showing that a firm does well by doing good is often referred to as making the business case for CSR. While understanding the relation between firm performance and social performance is of primary importance in the management literature, a more thorough understanding of the CSR phenomenon requires that we take account of other stakeholders as well.

Leadership and Corporate Culture Also needed is an examination of the role of organizational culture and leadership in determining the importance of CSR. Researchers could analyze how changes in corporate control, particularly mergers and acquisitions, affect the type and level of CSR activity within firms. Alternatively, changes in top management might be examined to determine whether leadership style and characteristics are more important than corporate control/culture for predicting CSR activity. Understanding the role of leadership could be extended to understanding the decision making process and how decisions about CSR activity are affected by demands from multiple stakeholders.

CSR Across Markets and Countries Analysis of the strategic implications of CSR is hampered by cross-country/cultural differences in the institutions that regulate market activity, including business, labor and social agencies. Institutional differences lead to different expectations and different returns to activity. For firms operating in multiple countries/cultures this complicates the process of determining which activities to engage in and how much to invest. As the knowledge base of CSR develops world-wide, we will be better able to analyze and advise on CSR.

Evaluating the effects of CSR Table 2 presents selected examples of CSR studies. Most empirical studies of CSR focus on the relation between it and firm performance. Early studies used either the event study methodology (which is based on analysis of short-run changes in stock prices as a proxy for firm performance in the aftermath of a CSR-related event) or regression analysis (which uses an accounting measure of profitability, such as return on assets, as the dependent variable in a regression model that “explains” firm performance). These studies usually attempted to answer the question: do firms do well by doing good? The reported results have ranged from showing a negative relation between CSR and firm performance, to showing no relation, to showing a positive relation. This inconsistency of results may be a consequence of inconsistency in defining CSR, inconsistency in defining firm performance, inconsistency in samples, imprecision and inconsistency in research design, misspecification of models, or some more fundamental variance in the samples that are being analyzed (McWilliams, et al., 1999). McWilliams and Siegel (1997) critiqued the use of event study methodology to measure the consequences of CSR.

Strategic Implications of Corporate Social Responsibility: Review and Agenda • 21

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The authors reported that the findings of event studies of CSR appearing in top management journals were unreliable, due to serious flaws in the research design and implementation of the event study methodology. They also cautioned that the use of stock price as a metric for performance is not appropriate for studying CSR because it is a firm level measure and many CSR activities occur at the plant level or the product level and, additionally, that stakeholders other than shareholders are usually affected.

Hillman and Keim (2001) propose that empirical tests of the relation between CSR and firm performance should disaggregate CSR activities into those that are strategic (stakeholder management) and those that are altruistic (social issue participation). Based on estimation of a disaggregated model, they report that there is a positive relation between firm performance (measured using market value added) and strategic CSR and a negative relation between altruistic CSR and firm performance.

We expect levels of investment in CSR

Using the theory of the firm perspective of CSR, McWilliams and Siegel (2001) developed hypotheses regarding the provision of CSR attributes across industries and market structures. These include that “the provision of CSR will depend on R&D spending, advertising intensity, the extent of product differentiation, the percentage of government sales, consumer income, the tightness of the labor market, and the stage of the industry life cycle” (p. 125).

to be higher for established firms in more mature industries. McWilliams and Siegel (2000) challenged the typical regression model used to test the relation between Corporate Social Performance—often used as a synonym for CSR—and firm performance. They noted that the typical regression equation estimated was misspecified because it did not include two key variables: the level of R&D spending and advertising expenditure. Both of these variables have been shown to be determinants of firm performance and, because all three (R&D, advertising, and CSP) are elements of a differentiation strategy, they hypothesized that R&D and advertising would be correlated with a measure of CSP. The results of McWilliams & Siegel’s estimation of the correctlyspecified, expanded equation demonstrated that the three explanatory variables were correlated. Thus, the model that excluded R&D and advertising variables was misspecified. Most notably, they showed that when R&D and advertising were included in the model, CSP was not a significant determinant of firm performance, as had been reported in several key studies.

They conclude that “there is some level of CSR that will maximize profits while satisfying the demand for CSR from multiple stakeholders. The ideal level of CSR can be determined by cost-benefit analysis” (p. 125). While the costs of providing CSR attributes may be easy for managers to determine, consumer demand (the benefit) may not be. Consumer demand for CSR is difficult to measure because CSR attributes are among many attributes of a product. However, a possible method for assessing how much consumers are willing to pay for a given product characteristic or feature is hedonic pricing, which involves using data on actual purchases, in order to determine the implicit “price” of a particular attribute (McWilliams and Siegel, 2001). Given this information, managers could conduct a cost/benefit analysis of CSR. A major advantage of hedonics, relative to other methods (e.g. focus groups), is that it is based on observed, not hypothetical data.

CONCLUSION For firms employing a differentiation strategy, CSR can be a valuable strategic resource, but one that is not completely understood or trusted. Therefore, it is important to develop accurate empirical models so that managers can make informed strategic decisions about CSR.

22 • Strategic Implications of Corporate Social Responsibility: Review and Agenda

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fsrforum • volume 14 • issue #3

CSR as a strategic activity. Value creation, redistribution and integration Karen Maas and Frank Boons (2009)

24 • CSR as a strategic activity. Value creation, redistribution and integration

Economic value is the result of judgments of individual consumers, producers and other societal actors.

In recent years corporate social responsibility (CSR) has become increasingly important as the concept which frames the business contribution to sustainable development (Commission of the European Communities 2002). Building on generic definitions of sustainable development (WCED 1987) it denotes a situation in which firms combine their economic goals with taking responsibility for their ecological and social impact. In the view of the authors, CSR has potential to become a strategic activity adding value on different dimensions— business, society and ecosystems—if two conditions are met. The first condition for strategic CSR is that CSR needs to become integrated with the strategy of the firm. The second condition for strategic CSR is to have the means to measure and monitor these new or additional values. The reason for this is twofold. On the one hand, given the public interest in CSR, CSR is closely related to transparency, accountability and legitimacy and requires some form of validation. On the other hand, if CSR is to become a strategic activity, the firm itself will have a need to monitor the impact of its activities. Two critical questions that need answering are: How can the value of business activities for a firm, society and ecosystems be defined? And secondly: How can the contribution of activities of the firm to such value be measured?

1) Defining the value of firm activities: In general, the primary pursuit of firms is to create and maintain value (Conner 1991). How to create and appropriate value are central concepts in the (strategic) management and organizational literature (Lepak et al. 2007; Verwaal et al. 2008). However, what actually constitutes value is often left unaddressed in these theories. Strategic management theories explore the question of why one strategy is more successful in creating and maintaining value than another, given product, firm and industry characteristics. Those theories basically boil down to two general types: competence-based theories and governance-based theories. Competence-based theories—including evolutionary economics and the resource-based view—focus on value creation by explaining the emergence and sustainability of economic rents (Barney 1991; Conner 1991; Barney et al. 2001). Governance-based theories—including agency theory, transaction-cost economics and property rights theory— mainly focus on value

appropriation by explaining the existence and boundaries of economic institutions, such as firms, and employment relations (Williamson 1985, 1999; Makadok 2003). In both cases, value is—implicitly—defined in terms of immediate or future financial gains for firm owners. Financial profit remains an important standard for optimal functioning in the private sector (March and Simon 1993) and it is more or less accepted that the main target of forprofit firms is to maximize, in the long run, the wealth of the shareholders of firms (Friedman 1970; Jensen 1998). From this perspective, CSR is received with great skepticism as a zero-sum game where the impact on companies mainly adds costs and limits the freedom of firms through additional regulatory demands (Haigh and Jones 2006). The management perspective of value as financial profit is also challenged by insights from economic sociologists. They have shown that economic value is not an objective fact, but rather the result of judgments of individual consumers, producers and other societal actors (e.g. financial institutions, government, environmental and social groups). Given the socially constructed nature of value it is not possible to provide specific definitions: these emerge in the context of interactions among economic actors and those that seek to influence them. Together they enact the specific value provided for the firm, society and ecosystems. It is possible though to reflect on different ways in which such value is constructed. For this we draw from literature on innovation, global commodity chains and stakeholder theory. Firms derive profit from value-adding activities. If such activities are performed more efficiently, the value-added increases. In addition to such efficiency improvements, firms may develop product innovations. This consists of creating new value: the firm develops a new object, service or activity which is perceived as valuable by some social group. This may be the creation of a new market, or the development of a new product based on the recognition of a new problem field. Such innovations usually require collaborations with other firms, knowledge institutes and governments, especially when they are aimed to reduce the ecological and social impact of the firm or be more sustainable than the product that is replaced (Weber and Hemmelskamp 2005).

CSR as a strategic activity. Value creation, redistribution and integration • 25

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Such innovations may be considered as the core of a strategic approach to CSR as they move the firm and its core activities towards a redefined balance between economic revenues for the firm, reduced impact on ecosystems and improved value for society.

The main challenge is to maximize value in win–win situations.

resources and generate most of the profits. Third, it views mechanisms of coordination throughout the chain as a source of competitive advantage. Lead firms choose coordination mechanisms (varying from market transactions to network forms and hierarchical relationships) that allow them to achieve their goals. Finally, organizational learning is viewed as the central mechanism through which firms consolidate or improve their relative position towards other actors in the chain. Based on the analysis of global commodity chains of food products, apparel, electronics and automobiles, two distinct types of commodity chain have been identified (Gereffi 2001). Producer-driven commodity chains (automobiles, computers), are led by large transnational corporations that coordinate production and distribution into vertical networks. Buyerdriven commodity chains (food products, apparel, toys) are led by large retailers, marketers and branded manufacturers that coordinate the development of decentralized production networks in developing countries based on trade rather than direct coordination. The global commodity chain approach provides an analysis of what in debates about CSR is often construed as a social issue: the dependence of farmers and workers in developing countries on Western firms. Firms in consuming countries hold power over producers of commodities such as coffee and cacao, but also apparel and consumer electronics, and are thus able to appropriate most of the value-added. Based on this analysis, a third type of strategic CSR takes the shape of value redistribution as relationships among commodity chains are altered to strike a more equal balance among economic actors in producing and consuming countries in terms of ecological, economic and social value. Over the years, various initiatives have developed to forge such a change in relationships, of which fair-trade programs are the most well known.

A second type of CSR concerns the integration of stakeholder concerns into the firm’s strategy. Stakeholders are those individuals and organizations that are influenced by, or are able to influence, the activities of a firm (Freeman 1984). The concept of CSR builds on the idea that the interest of all stakeholders should not be sacrificed to the interest of the shareholders and it is a firm’s task to create value with and for its stakeholders. The purpose of the organization is thus to create value for its stakeholders (or the interests they represent, such as those of ecosystems), bringing into focus different targets, including earnings for owners, satisfaction for employees, product benefits for customers and taxes for society (Post et al. 2002). The mutual dependence of firms and society implies that any business decision, as well as any policy decision, influences society and other stakeholders as well as businesses (Emerson 2003). Therefore, the main challenge is to maximize value in win–win situations or to optimize value in win–lose or lose–win situations.

2) Measuring the firm’s contribution

A third type of strategic CSR activities can be drawn from the literature on global commodity chains. Such chains refer to the globally linked stages of a product’s life-cycle from the extraction of raw materials through production, consumption, to recycling and waste disposal (Gereffi 1999a, b). This approach focuses on the international dimension of power and dependence relationships, often between developing and developed countries. Second, it addresses the issue of relative power in the chain, identifying lead firms that control crucial

If CSR is to become a strategic activity, two conditions have to be met. The first condition for strategic CSR was the integration of CSR within the strategy of the firm, which can be distinguished in the three types outlined above. The second condition for firms is to measure and monitor not only their financial returns but also the value added (or destroyed) across the environmental and social dimension. Current practice tends to focus on measuring only a limited part of the value that is generated by CSR. Management scholars

26 • CSR as a strategic activity. Value creation, redistribution and integration

Figure 1: Developments over time in the focus of performance measurement and value creation

with the measurement results can they select a collection of impact measures with the characteristics necessary to help them achieve these purposes (Maas 2009). Managers should therefore begin by deciding on the managerial purposes to which impact measurement may contribute. Managers might want to answer questions from several perspectives: • How is value distributed in the supply chain? • How do stakeholders see us? • How can we continue to improve? • How can we create value? • How do shareholders see us?

have focused mainly on performance measurement measuring the financial gains for the firm. The question about what impacts those corporate CSR actions have, not only on the bottom line but also on society and ecosystems, remains largely unexplored (Margolis and Walsh 2003). To be able to measure the impact of CSR on different dimensions, a shift is needed from output thinking, focusing on a single-dimensional firm perspective, to impact thinking, which includes a social and ecosystem perspective (see Fig. 1). Performance measurement, traditionally used to measure companies’ efficiency, profit and competitive advantage, builds on output thinking. Measuring output does not enable firms to assess their value added (or destroyed) across environmental, social and economic dimensions. This indicates that new methods capable of measuring impact are needed. In business, generally accepted principles of accounting and an international legal infrastructure have been established over the years to help measure and report on financial impact. Life-cycle assessment provides a framework and indicators for the measurement of ecological impacts. For social impact measurement, however, general accepted standards do not yet exist. Nevertheless, social and ecological impacts are often not explicitly included in measurement or are even ignored. Next to this the impact and the dimension of the impact (economic, environmental and social) vary on a case-by-case basis depending on the CSR activity. Impact measurement is not an end in itself. Neither the act of measuring impact nor the resulting data accomplishes anything itself; only when someone uses these measures in some way do they accomplish something (Behn 2003). Besides this, only if managers know what they want to do

A measurement approach should be selected based on the CSR activity undertaken by the firm—value redistribution, value integration or new value creation—and the corresponding impact. In the author’s typology of strategic CSR activities they distinguish three ways in which CSR may provide value to a firm, society and ecosystems. Each of these requires different impact measures. Impact measurement in the case of value redistribution should focus on the global commodity chain perspective and answer the question: how is impact, on different dimensions, distributed in the supply chain and how could this be optimized in view of sustainable development? Impact measurement in case of value creation through the development of new products or new markets should focus on a financial shareholder perspective and a societal perspective and answer the question: how can we increase positive impact on the different dimensions? Impact measurement in the case of value integration should focus on the stakeholder perspective and answer the question: how do stakeholders see and value the firm? Value creation for the firm through the development of new products or new markets or by bottom-of-the-pyramid strategies are comparable with general innovation activities. CSR as new value creation is a process of collaborative innovation. A key characteristic is that, at the level of the firm, but often also at a system level, a new balance is struck between economic, ecological and social impact. The difficulty of measuring the impact of new value creation is dependent on whether the innovation constitutes a departure from the existing technological paradigm: that is, the current accepted frame of reference on which firms and knowledge institutes base their search for new technologies (Dosi 1982). When new value creation takes the shape of efficiency improvements

CSR as a strategic activity. Value creation, redistribution and integration • 27

fsrforum • volume 14 • issue #3

of processes and products, impact can be measured by comparing the old with the new situation. If companies want to include social and environmental impact next to the financial impact for the firm, they can use the so-called social return on investment (SROI) method (Lingane and Olsen 2004). SROI is a methodology pioneered by the Roberts Enterprise Development Fund (REDF) in 1996. More recently the approach has been used to assess the multi-dimensional impacts of CSR activities. Value integration implies the effort of a firm to integrate values espoused by stakeholders into its activities and organisational routines that were previously disregarded. Problems, solutions and impacts, whether intended or unintended, are often the subject of ambiguity, uncertainty and disputes (Roome 2001). Indicators for value measurement can be selected directly through stakeholder consultation, as in the case of Shell’s residential advisory board, by building learningaction networks or indirectly by using different guidelines, frameworks, standards and rating schemes which provide information on potentially useful indicators. Value redistribution includes the effort of a firm to change the distribution of impact over the system actors. Redistribution builds on the accepted definition of what is valuable. Previous research used an extended version of the overall business impact assessment (OBIA), originally developed by Unilever (Taylor and Postlethwaite 1996), to analyse the environmental and economic impact of supply chains (Jackson and Clift 1998; Clift and Wright 2000). These authors observed that the primary resource industries, often located in developing countries, incur disproportionately high environmental impact but receive disproportionately low economic benefit. Clift (2003) concludes that, in view of sustainability, the ratio between environmental and financial impact along the global commodity chain should be unity. Results from this kind of measurement can be used to produce a more equal distribution of economic and environmental impact along supply chains.

Conclusion CSR has potential to become a strategic activity adding value on different dimensions—business, society and ecosystems— if two conditions are met. The first condition for strategic

28 • CSR as a strategic activity. Value creation, redistribution and integration

CSR is that CSR needs to become integrated with the strategy of the firm through value creation, value integration and value redistribution. Whenever a firm engages in activities of one or more of these types, it connects CSR to its core activities, making it more than a ‘bolt-on’ exercise. The second condition for CSR as strategic activity is to measure and monitor its impact across environmental, social and economic dimensions and, ideally, to incorporate those impacts into management decisions. Measuring the impact of CSR is difficult because any meaningful measurement needs a reference point in terms of accepted criteria. Criteria have to be selected by taking the perspective of the stakeholder into account. However, current developments in measurement instruments focus mainly on output measurement and emphasize the payback results of CSR initiatives for companies instead of the impact along the dimensions of the firm as well as the societies and eco systems on which its activities have an impact. A shift is needed from output thinking, focusing on a single-dimensional firm perspective, to impact thinking which includes a social and ecosystem perspective. New measurement methods capable of measuring impact are needed.

New methods capable of measuring impact are needed. A measurement approach should be selected based on the CSR activity undertaken by the firm—value redistribution, value integration or new value creation—and the corresponding impact. Managers should begin by deciding on the managerial purposes to which impact measurement may contribute. Value redistribution in a way is the easiest in terms of criteria. As redistribution builds on an accepted definition of what is valuable, CSR initiatives that fall into this category can look at the relative equality of distribution of this value across actors in the product chain. But as redistribution can also involve changes in social practices, it mingles with the creation of new value, complicating the measurement of impact.

Social and ecological impacts are often

not explicitly included in measurement or are even ignored.

Value integration brings more sets of values to those previously espoused by the firm, and involves stakeholders in the strategic process. In such instances of CSR, measurement may best proceed through an assessment as part of the stakeholder dialogue. For this to work, scores on different values do not necessarily need to be integrated into one â&#x20AC;&#x2DC;gradeâ&#x20AC;&#x2122;; for each of the stakeholders, it is important to have insight into the way in which their value is addressed by the firm. Value creation is perhaps the most difficult to measure. As it involves the creation of new products and/or services, it is embedded in a process in which value of the activity of the firm at first is uncertain. (Will consumers, governmental agencies and other stakeholders accept the product/service?) Only after market introduction is it possible to define value in any meaningful way. There is general agreement in literature that organizations until now have done little work in evaluating the impact of their CSR activities, specifically on a social and ecosystem level (Margolis and Walsh 2003; Clark et al. 2004). There is also consensus that organizations are beginning to express greater interest in their impact (Young 2002). The SROI methodology could be a useful approach to include social and environmental impacts in measurement. Future research might assess actual impact measurement behaviour of firms. Besides this, it might be interesting to look in more detail at existing impact measurement methods. Methods may differ in approach, perspective and metrics and might be useful for specific situations. Finally, it would be interesting to actually measure the impact of CSR for several cases capturing the different ways in which CSR may provide value to a firm, society and ecosystems.

CSR as a strategic activity. Value creation, redistribution and integration â&#x20AC;˘ 29

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fsrforum • volume 14 • issue #3

Interview with Jan Peter Balkenende

Jeroen van Oerle and Anne van Driesum - Rotterdam, 13 February 2012

What was your incentive to improve the values and norms in the Netherlands during your presidency? During my study period, the left and right wings within Dutch politics were fiercely opposed. First of all, the right wing advocated for market liberation and the left wing advocated extensive regulations by the government. In fact, until a report about shared responsibility appeared, there was no future at all for the Christian democracy. This report was written by the scientific offices of the Christian democratic parties, and it appealed to me because in it I found what I could not come across in politics those days. I object to the exaggerated role of the government as much as I disapprove of a market solely focused on the continuity of returns. As well as this, I am also more a proponent of team work, of the polder model and bargaining economies: people need to recognize the importance of long term visions and the next generation; a principle that nowadays is called sustainability. It is essential to incorporate this moral component in today’s society. After all, in my opinion a situation in which this moral component is only captured in the regulation of the government, is incomplete. Moreover, I strongly feel that the corporate world should take responsibility for their actions, and that is why I raised awareness about sustainability, values and norms during my presidency.

How would you define CSR?

In 1974, Jan Peter Balkenende began his History studies at the Free University of Amsterdam. He had, however, a strong preference for Politics and Economics courses, and thus started a second study in Law in 1979. During this study period, Jan Peter Balkenende participated in the city council of Amstelveen, and remained a member of this council for 16 years. After graduating as a law student, he worked as a lawyer at the Netherlands' Universities Council, which acts as the forerunner of the VSNU. However, after just two years he was asked to work for the scientific office of the political party CDA. Jan Peter Balkenende promoted and became part-time professor of ‘Christian Social Thought’ at the Free University of Amsterdam in 1992. After 14 years of working for the scientific office, he received an offer to join the political party in the parliament. He became Prime Minister of the Netherlands in 2002, and remained in power for a total of 8 years. In 2011 he became a partner of Ernst & Young, and a professor at the Erasmus University in Rotterdam, where he teaches ‘Governance, Institutions & Internationalization’. At Ernst & Young, he leads the Corporate Responsibility strategy: You can find more information about Corporate Responsibility at Ernst & Young on page 6. 32 • Interview

CSR means that companies integrate responsible and sustainable entrepreneurship into their core business activities and strategy. Successful companies are aware of how this strategy generates value - not only for their financial bottom line, but also for their employees, the environment and broader society. To me, sustainability is more than just environmental sustainability, it is also about adding value to your social environment, which means that you have an eye for the human aspects in your own organization too; how do you treat your employees, suppliers and your clients? In the long term, CSR as a strategy only works when it generates financial value. In short – it actually concerns a triple bottom line: to simultaneously create value for People, Planet and Profit.

How did Ernst & Young structure their CR policy? We use the four Es: Entrepreneurship, Employees, Environment and Community Engagement. First of all, the E of Entrepreneurship stands for how we advise our clients and how we can share knowledge. Our largest added value is delivering

CSR as a strategy only works when it generates financial value.

high quality services – which, by nature, include our CR expertise. The E of Employees refers to how we enable our employees and work hard to provide a more diverse, healthy and flexible work environment which aims to benefit those at all levels of the company. The third E stands for Environment: we invest in initiatives to reduce our carbon footprint – in most of these initiatives, we have already seen a return upon investment within just a few years. Examples in the area of electric mobility, greening our office buildings and increasing organic products in our restaurants highlight this. The last E is that of Community Engagement, which means volunteering and pro bono work during working hours. Through our Ernst & Young Foundation, we share our knowledge with selected non-profit organizations. Each of these partnerships is dedicated to accelerating sustainable entrepreneurship, both in the Netherlands and in developing countries.

ago, sustainability has become a true business driver. In accordance with this, company policies are being set out more coherently towards sustainable targets. Examples of leaders, who consider this type of integrated strategic thinking as a true business opportunity, are the CEOs of Unilever, DSM and IKEA. This also has an impact on the way businesses report about their performance. In line with this, the accountancy profession is changing too. Steered by the work of the International Integrated Reporting Council (IIRC), both non-financial and financial information are increasingly being integrated into one report.

If companies shouldn’t use CSR as a PR instrument, then what are the benefits for companies to incorporate CSR in their business strategy?

next generation

For the last 20 years we have been possessed with the drive of the shareholder: short term vision, quarterly reports and the increasing power of shareholders all became guides to strategy and development. Nowadays, businesses do not consider the opinions of their shareholders alone, but they still take their stakeholders into account. At the Harvard Business School, Professor Eccles has conducted research on 90 high sustainability and 90 low sustainability companies. He used data from the time period 1993 to 2010. This research showed that companies who chose to use sustainable measures had, on average, a 5 percent higher return than companies that did not. This higher return is due to the long term vision of companies that are “high sustainability performers”.

In times of financial crisis, companies first save on R&D and marketing. Does that also apply to CSR?

The short term vision is typical for the American model. Do you see differences between CSR in America and Europe?

In the past, CSR was used in times of economic expansion. Granted, the ideas were there, but CSR was just a secondary activity, and nowadays you witness shifts towards sustainability becoming a mainstream business strategy. The general consensus is that by 2050, our global population will consist of 9 billion people. In combination with this growth, we are also conscious of the fact that we have a finite supply of natural resources on our planet, and this awareness has led to an incremental increase in the practice of CSR. Companies that use CSR as a PR instrument choose the wrong strategy: during recessions, it will be removed from the priority list. Furthermore, in comparison with 20 years

When I became a professor at the Free University in Amsterdam, Michel Albert, a businessman from the French Insurance World, launched his book ´Capitalisme contre Capitalisme´. He wrote this book after the fall of Communism and in it, he predicted the rise of two types of capitalism: the Anglo-Saxon and the Rhinelandic. The Anglo-Saxon model focuses on the short term: making profits, less solidarity and a bad quality of governance The Rhinelandic thought focuses more on the long term: more social services, a better quality of governance and increased solidarity. In fact, the Rhinelandic thought is superior, but the Anglo-Saxon model has prevailed in the current era. As a result, two problems have occurred in the

people need to

recognize the importance of long term visions and the

» Interview • 33

fsrforum • volume 14 • issue #3

Companies who chose to use sustainable measures had, on average, a 5 percent higher return than companies that did not.

United States of America concerning CSR: One of them is that one keeps doing business the traditional way and that one donates money to charity. The second issue is the fear of legal accusations, which prevents companies from presenting their results.

How does the Netherlands relate to the rest of the world concerning CSR? In the Netherlands, we have recently launched the Dutch Sustainable Growth Coalition, which consists of eight large companies from the Netherlands: DSM, Akzo Nobel, Philips, Friesland Campina, KLM, Heineken, Unilever and Shell. VNO-NCW and Ernst & Young support and facilitate this initiative. These companies have united and asked themselves: how has sustainability become such a key driver for our business model and growth strategy? Several of these businesses are the highest in ranking in their own category on the Dow Jones Sustainability Index. Besides the Netherlands, countries in other areas of the world, for instance in Asia, are forerunners in the practice of CSR. I have visited South Korea several times, as well as Singapore, Japan and China. There are many companies located there which focus on what their core values are, and who recognize sustainability as a business driver. Han Seung-soo, the former Prime Minister of South Korea, is now chairman of the Global Green Growth Institute of Korea. Asians have a true winning mentality and will, in my view, be the winners of tomorrow.

The European Committee has developed a strategy for a CSR policy in Europe. Does the implementation of this strategy differ per Member State of the EU? Currently governments are taking a defensive position because of the current financial situation involving the public debt and the budget deficits. In my opinion, it is essential that NGOs and companies take responsibility for social issues and environmental sustainability. We need global awareness - and in that sense I am less optimistic than I was several years ago. In 2009 I was at the G20 meeting in London: Back then there was a global sense of urgency to resolve the financial crisis: a better financial architecture, more supervision, more control and a reduction of the bonus culture. We had a shared responsibility to make sure the Copenhagen Climate Summit would succeed. Furthermore, we wanted to conclude the WTO negotiations within the year. Unfortunately, the current situation is as follows: the Chinese criticize the Americans, the Americans criticize the Europeans and the Europeans criticize each other, which is not a good situation. My belief is that the human mind is creative: People continue to invent things that were unimaginable 10 years ago. Moreover, the human mind is so creative that we should focus on preventing the situation in which there is a lack of sense of the common interest

Who is responsible for the recovery of the current situation: the government or the corporate world? I often quote Parag Khanna, a young researcher from the U.S.A., who has written the book ‘How to run the world?’. According to Parag Khanna we currently see the end of the traditional nation State, a system that through the years has become familiar to us. The major issues were solved through national decisions, international issues were solved with a supranational mindset, and in cooperation with various nation States. The issues in which we believe in today, such as sustainability, and the abolishment of poverty and climate change, exceed the boundaries and capabilities of the nation State. If we want to solve these issues we need to create new alliances; alliances of governments, multinationals, religious groups and NGOs who will work together to find solutions for global problems. Which party will take the lead will depend on the situation,

34 • Interview

for instance, the chemical sector took the initiative to continue to solve the climate issue when the results of the Copenhagen Climate Summit were disappointing. Despite this idea however, the governments or organizations such as the United Nations will remain essential.

Do you think that a shift in power from governmental regulations to the private sector will arise? I believe that the traditional welfare state will slowly fade away. During my college days, a social problem was always defined as a political problem, and a political problem was solved through the administrative system of regulation, planning and financing. You still need a government, because you need civil rights, but there should be a greater symbiosis between the roles which the government plays, and the roles of the private sector. The private sector should be free to take its own responsibilities, as a system where the government makes all the decisions for the private sector is no longer valid.

Europe has become defensive and that is something that makes me worried Do you think Europe will recover again? The problems are huge and the positive momentum is not here but elsewhere in the world. As I have said before, Europe has become defensive and that is something that makes me worried. I do think that Europe is able to handle the current situation: This is a continent with a wide variety of cultures and in which democracy is very important. We have great companies and traditions, and the human mind has the right skills to deal with the current challenges. However, if you start to think that the wealth we have generated after the Second World War will always remain, then I am afraid you are mistaken. In the beginning of the 19th Century before the Industrial Revolution started, China and India had half of the world’s wealth. This has reduced to only 9 percent, but now they are back up to 25 percent and that will only increase in the future.

Is a strong sense of values and norms necessary to make a successful career? I often work with starters. These young people know how to set up a project and how to close deals, but they also realize that more must be done than just that. Various studies confirm that young people expect their future employers to focus on CSR and look beyond short-term profits. In the future, the mainstream of business professionals will understand that running a successful business means that CSR is not about PR or a “nice to have”, but the key to market leadership.

Interview • 35

“Grant Thornton biedt mij een uitdagende leercurve waarbij je zelf aangeeft hoe snel je wilt groeien”

“An instinct for growth”

Grant Thornton focust op dynamische organisaties die willen groeien. Als gevolg hiervan ondergaan deze organisaties veranderingen en hebben zij behoefte aan een breed scala (geïntegreerde) diensten. Dit kunnen zowel middelgrote bedrijven zijn als grote (internationale) ondernemingen. Wij helpen bedrijven bij het benutten van hun groeipotentie. Wat verstaat Grant Thornton onder groei? Hieronder verstaan we zowel kwantitatieve als kwalitatieve groei. Dat wil zeggen, naast financiële groei ook groei in cliëntrelaties, persoonlijke groei van medewerkers en het aanmoedigen van innovatie. Jouw mogelijkheden binnen Grant Thornton

Audit & assurance Een ondernemer moet kunnen vertrouwen op zijn cijfers. Maar ook zijn investeerders, de belastingdienst en andere belanghebbenden kijken kritisch mee. Wij verrichten wettelijk verplichte én vrijwillige audits, financiële en niet-financiële controles. Onafhankelijkheid is daarbij van groot belang. We zijn in het bezit van een AFM-vergunning voor het verrichten van wettelijke controles, ook voor organisaties van openbaar belang. Dit onderstreept de kwaliteit die je bij Grant Thornton vindt. Corporate finance Een corporate finance adviseur begeleidt fusies & overnametrajecten van begin tot eind. Van de informatiefase tot het beklinken van de deal. Op zoek naar de best passende match, tegen de meest optimale voorwaarden. Als corporate finance adviseur houd je niet alleen rekening met de financiële cijfers, maar ook met de emoties van de ondernemer. Ook bij waardebepalingen van ondernemingen speel je een rol. Bijvoorbeeld bij verkoop, het zoeken naar investeerders of samenwerking met een nieuwe partner. En is er extra geld nodig om een fusie, overname of investering te financieren, dan adviseer je over de haalbaarheid hiervan. Transaction advisory services (TAS) De juiste prijs. Daar gaat het om bij een fusie of overname. Risico’s van financiële, operationele of administratieve aard beïnvloeden de prijs. De verkopende partij probeert een zo positief mogelijk beeld van zijn onderneming te schetsen. Als TAS-specialist breng je risico’s én kansen van de verkopende partij in beeld. Een belangrijk onderdeel is het onafhankelijke due diligence onderzoek. Een onderzoek waar veel vakgebieden samenkomen en waarbij met veel specialisten wordt samengewerkt. Door betrok-

kenheid bij het proces van begin tot eind, krijg je als TAS-specialist snel diepgaande kennis van het gehele overnameproces. Je werkt voor kopers en verkopers en voor financiële investeerders (private equity-huizen). Restructuring & performance improvement (R&PI) Bij restructuring gaat het om verbeteringen die de kasstroom van het bedrijf in stand houden. De focus ligt daarbij primair op het beheren van het werkkapitaal en cash. Als R&PI-consultant zoek je naar oplossingen om bijvoorbeeld de kostenstructuur en de winstmarges van het bedrijf te optimaliseren. Je kijkt hierbij verder dan alleen financiële indicatoren. Bij performance improvement ziet een bedrijf ruimte om haar marktpositie te verbeteren. Maar hoe? Als R&PI-consultant zoek je naar verbeteringsmogelijkheden op het gebied van interne processen, mogelijke kostenverlagingen of het aanboren van nieuwe groeimarkten. Ook hier kijk je verder dan alleen naar de financiële indicatoren. Corporate finance uitgelicht

Evert Everaarts is, na een paar jaar in het buitenland gewerkt te hebben, sinds 2008 bij Grant Thornton in dienst. “Ik wilde weer terug naar het middle marketsegment, maar wel bij een kantoor met een groot internationaal netwerk. Grant Thornton sloot hier perfect op aan.” De specialist advisory services van Grant Thornton is verdeeld in 3 afdelingen: corporate finance, transaction advisory services en restructuring & performance improvement. “Ons team bestaat momenteel uit 20 collega´s, gelijk verdeeld over de vestigingen Amsterdam en Rotterdam. Aangezien de 3 afdelingen fysiek dicht bij elkaar zitten, wordt er intensief samengewerkt en komt het voor dat collega´s voor beide afdelingen werkzaam zijn. Het is heel leuk om af te een project te doen buiten je eigen afdeling.” Samenwerking “Met alle disciplines werk ik intensief samen. We zitten regelmatig aan tafel met onze juristen, fiscalisten, accountants en nog tal van andere disciplines die wij als Grant Thornton in huis hebben. Maar ook met deze disciplines van de tegenpartij, de koper of de verkoper. Ook werkt ons team intensief samen met leden van Grant Thornton International Ltd. Met name met de UK, Frankrijk en Duitsland, maar steeds vaker ook met kantoren in Azië.”

Evert Everaarts, senior consultant corporate finance

Branches “Onze cliënten komen uit diverse branches. Zo ben ik onder meer betrokken geweest bij de verkoop van bedrijven in de medische, kinderopvang- en de logistieke branche. Ook op het gebied van waarderingen is er sprake van een diversiteit aan cliënten, zoals een groot internationaal opererend chemisch bedrijf, een metaalverwerkingsbedrijf, een media-adviesbureau en een houthandel.” Groeien en bloeien “Bij Grant Thornton bepaal je zelf hoe uitdagend je groeicurve is. Hiervoor wordt alle ruimte gegeven. Tijdens de projecten kun je zo veel mogelijk zelfstandig te werk gaan en daarnaast wordt het volgen van interne of externe studies aangemoedigd. Zo ben ik zelf momenteel bezig met de Executive Master of Business Valuation.”

Meer informatie over Grant Thornton

Grant Thornton is een sterk groeiende middelgrote accountancyen adviesorganisatie met ruim 500 medewerkers, geworteld in de Randstad en verankerd in het gerenommeerde internationale netwerk van Grant Thornton International. Je hebt hiermee toegang tot de expertise van meer dan 30.000 professionals wereldwijd in circa 100 landen. Grant Thornton en ESJ Accountants & Belastingadviseurs hebben op 24 januari 2012 hun voornemen tot fusie aangekondigd. De geplande fusie resulteert in een organisatie met 14 kantoren, 70 partners, circa 700 medewerkers en een gezamenlijke jaaromzet van zo’n 72 miljoen euro. Op termijn zal de gehele organisatie onder de naam Grant Thornton opereren. Wij zijn trots op onze sterke positie in het midden- en kleinbedrijf. Ook op de corporate markt hebben wij inmiddels onze eigen plek veroverd.

www.carrierebijGT.nl

Grant Thornton kenmerkt zich door een pragmatische aanpak en een open en persoonlijke sfeer. We begeleiden je goed en waarderen een eigen inbreng. Grant Thornton bij jou in de buurt: Alphen aan den Rijn - Amsterdam - Boskoop - Gouda - Leiden Rijswijk -Rotterdam - Woerden Meer informatie is te vinden op www.carrierebijGT.nl.

fsrforum • volume 14 • issue #3

Vestia; sociaal onverantwoord

K(r)anttekening | Drs. Joost Groeneveld RA RV1

Vestia is een grote woningcorporatie in de Randstad. Zij beheert bijna 80.000 huurwoningen. En zij is in problemen geraakt. Daarin is zij niet uniek. In de pers worden oorzaken genoemd. Als primaire oorzaak zie ik de kostenstijgingen die harder gaan dan de huuropbrengsten. Niet verwonderlijk nu die opbrengsten door inflatie zijn gemaximaliseerd en de kosten niet. Zo’n discrepantie kan hard aankomen. Die vraagt om financiële buffers die er misschien niet zijn, en naar de aard van het productieproces ook niet zullen komen. Dat is letterlijk tamelijk uitzichtloos. Een ongeluk komt nooit alleen. Voorheen kon door verkoop van woningen winst worden gemaakt. Nu de prijzen van woningen niet meer stijgen en woningen niet meer zoveel worden verkocht, is dit levenselixer opgedroogd. Nòg een mogelijkheid om iets bij te verdienen was projectontwikkeling. Maar dat is in het algemeen iets van lange adem. En het is dus de vraag hoe lang ze bij Vestia hun adem kunnen inhouden. Kennelijk niet lang genoeg. Dus nu houden wij allemaal onze adem in.

Drs. Joost G. Groeneveld RA RV is directeur van Wingman Business Valuators B.V. te Breda en voorzitter van de Stichting WBO (register van business valuators). Hij was hoofddocent aan de Economische Faculteit van de Erasmus Universiteit te Rotterdam.

Hoe erg is het? Dat hangt ervan af. Als er met vreemd vermogen is gefinancierd betekent dit dat ze aflossingen en rente moeten betalen. Die moeten natuurlijk uit de huuropbrengst komen. Daarvan hebben we al gezien dat die afgezien van een inflatie-correctie behoorlijk vast ligt. Zo ontstaat met rente een vervelende mismatch. Die rentevoet beweegt namelijk wèl op en neer. Het te betalen rentepercentage kun je wel voor een tijdje vastzetten, maar niet voor altijd. Ten minste op lange termijn is zij variabel en op korte termijn kan ze dat zijn. Op korte termijn kan ze ook worden vastgezet. Beide strategieën leveren risico op. Bij vastrentende waarden zit het risico in de waarde van de lening (zie voorbeeld). Bij variabele rente veranderen de rentebetalingen. Veronderstel een lening van E 1.000 met een looptijd van 10 jaar en dan in eens af te lossen, met een marktconforme rente van 5% op jaarbasis, te betalen aan het einde van het jaar. De contante waarde van die lening bedraagt E 1000,-. Nu daalt na 5 jaar de marktrente naar 4%. Bij de vastrentende lening veranderen de betalingen voor rente en aflossing niet. Wel stijgt de (contante) waarde van die lening naar E 1.045,-. In feite neemt bij rentedaling de waarde van de schuld dus toe. Bij een stijging van de marktrente op datzelfde moment 6% daalte de waarde tot E 958,-.

38 • Vestia; sociaal onverantwoord

lening variabel vast

marktrente

Korte termijn

Lange termijn

waarde

betaling

waarde

stijging

neutraal

stijgt

neutraal

betaling stijgt

daling

neutraal

daalt

neutraal

daalt

stijging

daalt

neutraal

daling

stijgt

neutraal

Wanneer je ongevoelig bent voor de waardeverandering van de lening, bijvoorbeeld doordat die in een jaarrekening toch tegen nominale waarde wordt opgenomen, zul je door vaste rente af te spreken alleen aan het betalingsrisico op korte termijn kunnen ontkomen. Over een langere termijn blijft de waarde van de leningen gelijk en zal een dalende rente een voordeel zijn en stijgende rente een nadeel. Dat voordeel is plezierig, maar dat nadeel moet je zien te vermijden. Er van uitgaande dat op basis van een historisch lage rente de marktrente eigenlijk alleen omhoog kan, sta je er met die relatief ‘vaste’ huuropbrengsten slecht voor. In feite kan rente ‘oneindig’ hoog oplopen. Dat betekent dat het negatieve prijsrisico op vreemd vermogen oneindig hoog is. Nu zal het met die oneindigheid niet zo’n vaart lopen. Maar zoals we ons nog kunnen herinneren uit de vroege jaren tachtig: het hoeft niet bij een enkel procent-puntje te blijven. De kans daarop? We kennen al een tijdje een historisch lage rente, en ja, met een economie waar om de crisis te bestrijden steeds maar geld in wordt gepompt, kan een kind verwachten dat de rente gaat stijgen. Dus met een redelijke kans op ernstige gevolgen verdient een ‘verzekering’ hier tegen wel degelijk aandacht. Je zou zelfs kunnen denken dat de rente niet (veel) verder naar beneden kan. En als dat toch gebeurt, duurt dat op basis van zulke waarnemingen zeker niet erg lang. Wanneer een kind dat kan verwachten, geldt dat a fortiori voor de bestuurderen van Vestia. Dat biedt perspectief. Dan hebben de corporaties een bron van inkomen die hier nog niet aan de orde is gesteld. Het is zo eenvoudig, dat het al eerder genoemde kind – en dus ook dat Vestia-bestuur - de was kan doen. Voor de exploitatie van een rentedaling die niet wordt verwacht, bestaan financiële instrumenten: derivaten. Heeft Vestia put-opties geschreven? Ik weet het niet. Het enige wat ik daarover in de krant lees, is dat het derivaten zijn geweest. Misschien waren het wel futures. Daar kun je van dag tot dag op worden aangesproken. En dan gebeurt het ongeluk: centrale banken besluiten de rente laag te houden. Fijn voor de banken die deze lage rente

niet doorgeven, en fijn voor de overheid die haar begrotingstekort door goedkope staatsleningen op de markten kan afwentelen. Niet fijn voor de corporatie die dacht dat rentedaling weinig kans had. Die onmogelijk geachte brand is dus toch uitgebroken. En als je moet bijstorten zijn

Voor de exploitatie van een

rentedaling die niet wordt verwacht, bestaan financiële instrumenten: derivaten. de gevolgen niet op termijn, maar zeer acuut aanwezig. Er moet geld op tafel komen. En dat was er nu juist niet. Zoals een pokeraar die met zijn laatste geleende geld opnieuw verliest. Die wordt tot op het hemd uitgekleed. Als het al daarbij blijft. De vraag is gesteld of het Vestia-bestuur deskundig genoeg was voor dit spel. Misschien moet je hopen van niet. Gewoon iemand die niet zo goed kon pokeren. Dan is het wel dom dat hij meespeelde. Maar hij dacht dat hij er goed in was. Dat kan de beste overkomen. Behalve naar deskundigheid moet de vraag worden gesteld of het tot de bestuursbevoegdheid kon worden gerekend. Mag een bestuur van een woningcorporatie deze risico’s nemen? Mijn antwoord is nee. Maar dat zal het bestuur weerspreken. Iemand die zichzelf overschat, ziet geen risico. Iemand die het spel niet goed kent, evenmin. En dan zijn er nog de toezichthouders. Het zou boeiend zijn te horen waar zij op hebben gelet. Hebben zij de risico’s goed overzien? Hebben zij dit spel geaccepteerd? Zo ja, omdat het op allerlei andere plekken ook zo werd gespeeld? Hebben zij hierover gerapporteerd en zo ja, aan wie? De samenleving is miljarden euro’s verloren op een moment dat die niet erg dik zijn gezaaid. Dat zullen we met ons allen weer moeten gaan betalen. Of laten we Vestia failliet gaan. Dan komt de strop misschien wel bij een systeembank terecht, en dan mogen we die weer gaan redden. Een factor die heeft geleid tot innovatie van financiële instrumenten, is het streven naar verlaging van agencykosten. Privatisering zal daar ook op zijn gericht. Kennelijk werden die agencykosten voorheen niet voor niets gemaakt. Een goede agent is nog geen goede principaal.

1 Directeur Wingman Business Valuators B.V., Breda

Vestia; sociaal onverantwoord • 39

“Groeien tot het hoogste niveau dat voor mij haalbaar is. Dat is mijn toekomstvisie.” Marc Buijs, assistent accountant

Onze ruimte, jouw groei Meer weten over de carrière van Marc en zijn collega’s? Of benieuwd naar onze mogelijkheden? Scan de QR of surf naar onze website.

www.carrierebijGT.nl

Accountancy - Belastingen - Advies

fsrforum • volume 14 • issue #3

Corporate Social Responsibility: from hype to strategy Dr. Karen Maas

In the last decade accountability, legitimacy and transparency have become major issues for all sectors. All around the world companies are increasingly confronted with rising public expectations and stakeholder criticism. In response to these developments Corporate Social responsibility (CSR) has become a widely applied concept. CSR is discussed in most large firms’ corporate reports, (inter)national media and board rooms. Although many definitions of CSR exist, in general the term CSR expresses a situation in which firms not only strive for economic shortterm profit but in which they adopt a broader view and take responsibility for their impact on society. In corporate boardrooms managers are increasingly being asked to describe, for example, their impacts on the environment or the local communities. CSR urges firms to assess their impact across environmental, social and economic dimensions and to incorporate those impacts into management decisions. Traditionally, it was believed that value is either economic (created by for-profit companies) or social (created by non-profit or nongovernmental organizations). Recently, the number of mainstream corporate CEOs discussing the social and environmental performance of their firms as a strategy for increasing the total value of their firms increased significantly (Emerson, 2003). A recent study of UN Global Compact and Accenture (2010) showed that 93% of 766 international CEOs say that sustainability will be one of the critical success factors of their companies in the future. Hence, it is not surprising that the link between CSR and the firms’ financial performance has been the most debated and researched topic in the field of CSR. Although more than two hundred available CSR-FP studies show mixed results, Wood (2010) concluded that the findings suggest a positive association overall, while very little evidence of a negative association was found. A recent longitudinal Harvard study shows that high performing sustainability firms outperform their peers by 4,8% better result on the stock market (Eccles et al., 2011). Although we can still question if the quest to the business case of CSR has ended, we need to move forward to other, perhaps even more important topics. We should move away from the “why” question towards the “how” question. How can we optimize CSR activities and CSR results? In practice, this is a huge struggle for firms’ nowadays. Not only since the firms’ externally raised high expectations with their beautiful CSR statements, but also because the internal ambitions are often huge. How do you change the internal mind set from financially driven to shared value creation (Porter and Kramer, 2011). Do managers work towards sustainability, while they are rated on financial results? One way to pursue sustainability is to reward sustainability targets (VBDO, DHV & Hay Group, 2010). Traditionally, executive remuneration mainly focused on financial performance. Recently, however, performance criteria related to sustainability are also included in remuneration schemes. From 490 of the largest firms world-wide, 161 use non-financial and sustainability targets in their remuneration schemes (Maas en Rosendaal, 2012). In the Netherlands, 28% of the AEX and AMX companies use sustainability targets for executive compensation. Another, and even more pressing question is if CSR actually makes a difference? What is the impact of CSR on society? Amazingly, this has been enormously understudied, in practice as well as in academia. In conversation with CSR managers of large firms’, I often ask if they evaluate

their CSR activities and actually measure the social, economic and environmental impact of their CSR strategy. And how do they decide how to spend their money and where to invest in; e.g. CO2 reduction, community investments programs or chain management? There seems not to be a lot of strategy behind the decisions made. Evaluation of CSR seems to be one of the most difficult things to do. First of all, this can be explained by the lack of agreement on what should be measured. Firms know what the inputs are and what activities have been performed. Information on outcomes or even impact is almost never available. Secondly there is no agreement on how CSR should be measured, either in terms of analysis or methods used. Nevertheless, while the money available is limited and the need for CSR is so great, evaluating the impact of their CSR strategy impact is vital to achieve the greatest good possible with their limited resources. Although we have come a long way, there is still so much to know about the effectiveness and efficiency of CSR. We need teach managers, board members and also students the basics of CSR and to explain that CSR is not a hype anymore. CSR came as a hype and will stay as a strategy.

References: Emerson, J. (2003), The blended value proposition: Integrating social and financial returns, California Management Review, 45(4): 35-51 UN Global Compact, Accenture (2010), A new era of sustainability: UN Global Compact-Accenture CEO Study 2010: 46-56 Wood, D.J. (2010), Measuring Corporate Social Performance: A Review. International Journal of Management Reviews, 12(1), 50-84 Eccles, R.G., Ioannou, I., Serafeim, G. (2011), The impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance, working paper (12-035), Harvard Business School Porter, M., Kramer, M. (2011), Creating shared value: How to reinvent capitalism—and unleash a wave of innovation and growth. Harvard Business Review January–February VBDO, DHV, Hay Group (2010), Sustainable remuneration: a guide linking sustainable goals to executive incentives.

Corporate Social Responsibility: from hype to strategy • 41

Een duurzaam ontwikkelde carrière gaat langer mee. Academisch toptalent Je eerste baan is tegenwoordig vrijwel nooit je laatste. Maar vaak wel de baan die de rest van je carrière beïnvloedt. Droom jij van een loopbaan bij een multinational of de overheid, dan is de keuze voor je eerste werkgever eenvoudig: Deloitte. Veel topbestuurders in Nederland danken hun huidige positie aan een carrièrestart bij Deloitte. En dat is niet toevallig. Bij ons werk je namelijk al vanaf dag één voor toonaangevende organisaties aan innovatieve en vooral duurzame oplossingen. Niet omdat duurzaamheid vandaag de dag in de mode is, maar omdat wij weten dat het de sleutel vormt tot de businesskansen van morgen. Waardoor jij je kansen op de arbeidsmarkt ook weer verder vergroot. Zoek jij de beste start van je carrière? Begin eerst hier: werkenbijdeloitte.nl.

fsrforum • volume 14 • issue #3

Word of the chairman

Wessel Ploegmakers

Dear members, Spring has arrived and as we progress through the academic year many of the planned events see the light of day. It is very rewarding for our board to see that the events we worked for are now successfully taking place. I am excited as the FSR will cross borders very soon with the European Finance Tour and the International Research Project. Next to these two journeys we have the Female Business Tour, a day for the accountancy student as well as a day for the finance student, the Corporate Finance Competition and the finals of the CleanTech Challenge 2012 coming up. Looking back at the past half year I can say that I am proud on what we organized as board of the FSR. However, we could not do it without our committee members, which work very hard for all the activities the FSR has to offer during this year. As a reward for all the hard work we travelled to Prague at the 3rd of February to spend a weekend full of activities over there.

FSR News

Column Gideon Sternfeld

As our board year is officially halfway we started looking for our successors, the XVth FSR board! If you would like to challenge yourself, get in touch with numerous companies, students and professors than a FSR board year is something for you! We are looking for six highly motivated and capable students to take over and lead the FSR for a full year. If you are interested in a position you can go to www.fsr.nl for more information regarding positions, application and deadlines. The Female Business Tour is taking place at the 4th and 5th of April this year. Twenty female top students will be invited to meet and work on cases for the Boston Consulting Group, Deloitte FAS and ING during this two-day event. The event is organised for the second time as last year proved to be a great success. Companies are diversifying their workforce more than ever before and for them it is really important to get more women in board positions. For the Finance student we offer another three events. The first will be the Finance Day, which will provide bachelors students with the opportunity to familiarize themselves with the financial sector. Next to the finance day we also have the appreciated Investment Banking Masterclass with Training The Street (“TTS”). All large investment banks in London and New York hire this firm to train their bankers for success. After the completing the TTS training you will receive a certificate stating that you have completed the Masterclass with success.

Column Pete Schelvis

Banking Dinner

46 47 53

For the real M&A enthusiasts we organize the Corporate Finance Competition in May. This three day business course will take place with five participating companies at a luxurious location somewhere in the Netherlands. One of the strengths of the Corporate Finance Competition is that students really experience the differences between the large, mid-sized and smaller deals the M&A sector is divided in. We are currently heading towards the end of the year, however this will be the time to start planning your next move and I am sure the FSR can be very helpful with that. I hope to see you all during one of our master classes, workshops, cycles or other events. Feel also free to come to our office on H14-06, if you have any question, or just for a coffee and chat!

Gala

58 FSR news • 43

Anouk Marcelis is audit trainee bij de Auditdienst Rijk (ADR), onderdeel van het ministerie van Financiën. Zij studeerde Bedrijfseconomie in Antwerpen. Anouk is in september 2011 begonnen als audit trainee. Haar traineelichting bestaat uit financial auditors (accountants) en IT auditors.

Auditdienst Rijk De ADR is een rijksbrede dienst die de interne auditfunctie van de ministeries vervult. Hieronder valt de wettelijke controletaak (accountantscontrole) en de vraaggestuurde auditfunctie (opdrachten op verzoek). Anouk werkt als financial auditor bij het klantcluster Volksgezondheid, Welzijn en Sport. Anouk heeft al een leuke klus achter de rug. Ze heeft een controle uitgevoerd bij de BES-eilanden. ‘Ik heb gecontroleerd of ze niet teveel geld hebben ontvangen en of ze het geld ook daadwerkelijk hebben uitgegeven aan de op voorhand aangegeven zaken.’

Audit Traineeship Tijdens het Audit Traineeship draait Anouk twee jaar volledig mee op verschillende werkplekken. Op deze manier doet ze ruime praktijkervaring op met de politieke, bestuurlijke en financiële werkelijkheid van de Rijksoverheid. Naast het werk volgen de trainees een Post Masteropleiding, bijvoorbeeld een RA-opleiding. Anouk volgt de opleiding Public Sector Auditing aan Nyenrode. ‘Zowel werk als studie zijn uitdagend en op hoog niveau, ik ben blij dat ik hiervoor gekozen heb.’

Trudy Andriessen is financial trainee bij de directie Begrotingszaken, die deel uitmaakt van het ministerie van Financiën. Zij studeerde Politicologie in Amsterdam. Trudy is in september 2010 als financial trainee begonnen. ‘Voor mij een ideale manier om in twee jaar tijd de Rijksoverheid goed te leren kennen.’

Beheer jij de sleutel van de schatkist? Wij zijn op zoek naar ambitieuze audit en financial trainees!

Kijk voor meer informatie over de traineeships op www.werkenvoornederland.nl/minfin. Solliciteren kan tot en met 20 mei 2012!

Directie Begrotingszaken De directie Begrotingszaken is betrokken bij het opstellen van de Rijksbegroting, coördineert de Miljoenennota en organiseert het begrotingsproces. Trudy werkt voornamelijk aan de begrotings-presentatie. Ze kijkt welke informatie in de begroting moet komen. ‘Hier zijn allemaal voorschriften voor en op dit moment richt ik me op de herziening van deze voorschriften.’ Dit moet ervoor zorgen dat de begroting voor iedereen duidelijk leesbaar is.

Financial Traineeship Tijdens het Financial Traineeship werkt Trudy op verschillende werkplekken. Ze is begonnen bij Economische Zaken, Landbouw en Innovatie. Trudy heeft zich bezig gehouden met het coördineren van de Algemene Rekenkameronderzoeken. Momenteel werkt Trudy voor een half jaar bij het ministerie van Financiën en vervolgens gaat ze aan de slag bij Dienst Justitiële Inrichtingen. ‘Het leuke is dat je meteen volwaardig meedraait en direct verantwoordelijkheden krijgt.’ Trudy volgt ook een opleiding op de Rijksacademie voor Financiën, Economie en Bedrijfsvoering. De verschillende trainees trekken veel met elkaar op. ‘Het is heel fijn om ervaringen met elkaar uit te wisselen.’ Naast politicologen komen ook economen, bestuurskundigen en bedrijfskundigen in aanmerking voor het Financial Traineeship.

fsrforum • volume 14 • issue #3

News Update From hazelnut trees to Foxconn and iPhones, corporate responsibility is growing Corporate social res ponsibility 'makes bus iness sens By Martha ations Moss - 29th e' February 20 Do U.S. Corpor er? 12 p e Need Ae CoheGna– 29ttheFekbreuary 2012 By Elen

Mountain Hazelnut Venture is planting trees, paying fair wages, and supplying customers in a triple win for corporate social responsibility. In recent years the awareness of corporate social responsibility has been given a massive impulse. Businesses recognize the fact that short term shareholder thinking limits long run company performance. In Europe, corporate social responsibility has become one of the company operating pillars. The West often finger-points at the East and Africa with respect to hard core company effort in the area of corporate responsibility. Western companies operating in the East, such as Apple, have received most of that criticism on their corporate policy practices in the East. However, recent developments in operating structure throughout Asia give reasons to alter our view on the inclusion of corporate social responsibility in day-to-day business practice.

A new enterprise in the Southeast Asian nation of Bhutan is one of many new companies developing a more holistic approach to business. Mountain Hazelnut Venture’s goals are lofty: combat deforestation by planting 10 million hazelnut trees in the next five years, employ and empower 15,000 small holding farmer households with fair wages in rural Bhutan and supply the European hazelnut demand by exporting 40,000 metric tons of hazelnuts by the year 2020.

Mountain Hazelnut Venture is one of many emerging companies whose goals include the triple bottom line of corporate social responsibility: people, planet, and profits. This is not some philanthropic oriented non-profit seeking business. In the end, the focus is still on profit, but there are many roads leading to Rome. CSR is itself becoming big business. The Wall Street Journal releases a weekly “Corporate Social Responsibility Weekly Recap.” The title “CSR Specialist” is a nascent career choice. Many companies, like Nike, even release an annual corporate responsibility report, which they allow to be dissected by the public. Of course, paying Bhutanese farmers to plant trees is only one way for companies, big or small, to be socially responsible. In 2007 the Center for Global Development released a report defining corporate responsibility as standards compliance, charitable giving, resource engagement, commercial leverage, and policy advocacy. A recent article from "International Development" explains how each of them is defined in today’s corporate culture: - Standards compliance: Companies adhere to higher standards of business practice, including labor rights, working conditions, environmental protection, or anti-corruption. - Charitable giving: Companies provide direct financial support to public organizations or nonprofits that work on issues reasonably aligned with the company’s interests and corporate culture. It is deemed the most straightforward way for a company to contribute to development efforts. - Resource engagement: Companies donate their own goods, services, and expertise. According to CGDev, this approach “arguably provides greater leverage to development activities than cash because it brings to bear a company’s particular competitive advantages.” - Commercial leverage: Companies leverage their commercial presence to support efforts that can improve the lives of people they employ and communities where they operate. - Policy advocacy: Companies use their influence to lobby home and host governments and the international community for better policies. This week, after months of public scrutiny, Foxconn Technology, a Chinese supplier to Apple computers, announced that it would be raising wages for assembly line workers by 16 to 25 percent. This is in line with operating changes in many Western companies producing in the East. At first instance a decrease in profit margins of large corporations for the better good of corporate social responsibility seems fairest. In the end, however, the Western consumer might even be indulged to accept increased product prices for more humane ways of producing. Even television programs like “blood sweat and luxuries” (BBC) have spend much money, time and effort to change the point of view with respect to working conditions in developing countries. As consumer awareness and activism grows, corporate responsibility is not only an important aspect of a successful business model, but also a key tool in global development and poverty alleviation.

Is CSR's credibility versing? swByifMartlk LeeyHunre ter- March 1, 2012 Part of the text comes from Stephen Oliver, Global Envision / February 28, 2012

FSR news • 45

fsrforum â&#x20AC;˘ volume 14 â&#x20AC;˘ issue #3

FSR Former board member

Gideon Sternfeld

It's been almost ten years since my fellow prospective board members and I travelled to Zandvoort for a weekend to brainstorm and plan the FSR's activities for the 2002-2003 academic year. I have fond memories with many highlights from our board year. On the serious side, I think we did well to organise some outstanding events such as the International Banking Cycle, Corporate Finance Competition and the International Research Project that brought students in touch with some of the world's most sought-after employers, enabling them to put their skills on display through case work and informal encounters. On a slightly less serious note, it was a great year of meeting other motivated students and enjoying the odd drink here and there to blow off steam in between events. For me, the time in the FSR board really gave me a first taste of what working life would be like. Each year a new board takes over the reigns from its predecessors and with that you also take over decades of hard work and you have a responsibility to strive for excellence. The board year taught me responsibility and, in my role as Commissioner External Relations, it gave me a first stab at commercial negotiations and sales. For me, the greatest achievement was that we managed to raise a record amount from sponsors in the tough economic times after the dotcom bubble burst. I thoroughly recommend a year on the board to anyone who's serious about their future: It's about meeting other intelligent and ambitious people at university and within the sponsor companies. It is also about applying your skills for the first time in a real-life situation and achieving something tangible and about honing your organisational skills, networking with representatives from attractive employers and making the transition into professional life that will really set you up for a great start to your career. As for me, after my time in the FSR board, I had a renewed sense of purpose and I set out to complete my coursework and write my thesis. Once I had achieved that, I started off work at a small independent derivatives trading firm. Whilst this work provided me with a good insight into financial markets, I soon realised that it was too monotonous for me and I subsequently moved into consulting. After a few years, I ended up working for Ernst & Young Advisory in the Performance Improvement team. I worked on many interesting finance related projects in the TMT sector, including a oneyear cost modeling project for a telecom operator in Thailand.

46 â&#x20AC;˘ FSR news

After returning from Thailand, I was approached by a headhunter to join Analysys Mason in their London office. Analysys Mason is probably unknown to most people in the Netherlands, however within the TMT sector it is regarded as a leading consultancy firm with 12 offices across the world from which we have served clients in over 100 countries. There is hardly a sector that is so dynamic and constantly subject to change and (r)evolution and it is this dynamic that makes the TMT sector such an interesting field. I would actually challenge anyone to name an industry that has had more of an impact on our daily lives in the past ten years. At Analysys Mason we are at the forefront of this development and we are sought out by many of the world's leading TMT companies and financial institutions for strategy and regulatory advice. I work in the strategy and transactions team and the majority of my work revolves around advising banks and PE firms during transactions. Part of my work revolves around carrying out a comprehensive review of the target's market and its competitive dynamics, the company business, commercial and technical strategy as well as selected operational and organisational aspects. In addition, my colleagues and I carry out a detailed review of companies' business plans, including assessments of projected revenues, and operational and capital expenditures. We help our clients in evaluating potential synergies as well as realistic upsides and downsides to the management's business plan. On debt financing transactions, we also develop realistic banking cases that are used as the basis for determining a deal structure and associated covenants. Besides the transaction related work, I also work with clients to develop their long-term business plans. Recently, I have also been involved in auctions for frequencies (spectrum) used in mobile communications. For instance, I have helped a mobile operator with the valuation of spectrum ahead of a large auction, taking into consideration every single possible auction scenario and using the valuation as the basis for an auction strategy in auctions often raising billions of euro's. Large sums mean large responsibilities and therefore the work is demanding. In my day-to-day work I am surrounded by very intelligent colleagues, typically working in teams of 4-6 people to deliver results under pressure. We do however like to blow off steam after a job well done. In that respect, it is not too dissimilar from my year in the FSR Board.

Passport Name Gideon Sternfeld Age 32 Residence London (UK) Employed at Analysys Mason Current position Lead Consultant Strategy & Transactions Which FSR Board Fifth Board function Commissioner External Relations Study Financial Economics Year of graduation 2004 Which car do you drive None, I take the (in) famous tube to work What do you drink on a Friday night Havana Club 7yr & Coke Life Motto Anyone who lives within their means suffers from a lack of imagination

fsrforum • volume 14 • issue #3

FSR Member

Pete Schelvis

Passport Name Pete Schelvis Age 27 Residence Rotterdam Study MSc Finance and Investments & MSc Strategic Management FSR event Corporate Finance Competition 2011 Internship at/job at Rabobank International Stationed at which department Global Financial markets Year of graduation 2010 What car do you drive Nissan 350Z What do you drink on a Friday night Cocktail - Mojito Life motto Fortune favours the bold

I joined the FSR in the first year of my IBA Bachelor, a lot of my friends and fellow students joined and had informed me that it was a valuable organisation to be part of. I didn’t really use many of the FSR’s resources the first few years, perhaps most of all the social events. However, later, when I was actively seeking more exposure and event experience to gain a deeper understanding of what job and employer I should be aiming for after my studies, I participated in a few more events. The last FSR event I participated in was the Corporate Finance Competition. I have to say that this event was organised very well. Five large potential employers are present during three days of competition. You and four other participants form a team and compete against other teams during various cases hosted/presented by each firm. Score is kept and the team with the highest overall result is the winner, the year I participated I was fortunate enough to be part of that winning team. It was great fun, good for experience and development of your skills. In addition it offered a perfect platform to showcase your capabilities and get in touch with representatives of the firms whom you might be lucky enough to score a job interview with. Such was the case for me, I was fortunate enough to be part of a good team that worked as a unit. Creativity, intelligence, enthusiasm and a bit of luck are all necessary ingredients that are required to perform well here. The business cases are the major focus of the event, however the face time during the formal dinner and evening drinks with the firm representatives offer a valuable opportunity to gain a better insight into how the personalities of the firms differ and which potential employer might be a good match for you personally. During the dinner and the drinks I spoke to multiple firm representatives, one of whom was the head of Rabobank International M&A. I retained their business cards and e-mailed them the next week. Interviews were scheduled soon after.

markets. Rabobank International is a large global organisation with major hubs in Sao Paolo, New York, London, Utrecht and Hong Kong. Other trainees are spread out over all these locations and we all keep in touch. Corporate culture has been an experience in itself, people are very friendly and are all very teamwork focused. Rabobank, in its principals, is different than any other bank out there, which stems from its originating cooperative roots. You notice this in everything the bank does; it is competitive, but will not compromise on keeping the interests of the client central. As the highest rated privately owned bank it enjoys a unique global position, this is one of the reasons that when reliability of banks come into question, Rabobank is known to be a reliable, clientfocused bank. So far I have worked in the Dealing room as a trader and at GFM eCommerce, where I have assisted in the development of the global wholesale transaction portal. From both these experiences I have learnt different lessons. I learnt that trading is skill in itself, much more complicated than it might appear, and that stakeholder management has a major influence on every single individual working in the organisation. Investment banking is no easy field to work in, however enthusiasm, hard work and operating as a team player can bring you long way. Participating in the FSR events can be very helpful and you should definitely go out and explore, however pushing too hard will be noticed. So my piece of advice is to just be yourself. Well, be the best version of yourself.

I am currently employed at Rabobank International in the Global Financial Management Traineeship Programme. Throughout a year I am given the opportunity to discover which department and discipline I am best suited for and find most interesting. GFM is for a large part the Dealing room, however also includes research, sales, operations and capital

FSR news • 47

At NIBC, entrepreneurial bankers start at the deep end As a trainee banker at NIBC, you also have a daily job. Your assignments and responsibilities start from day one. And youâ&#x20AC;&#x2122;ll have the chance to specialise, in for example mergers and acquisitions. You and your fellow analysts will follow our incompany training programme at the Amsterdam Institute of Finance, led by professors from international business schools. A flying start at the bank that thinks and acts like entrepreneurs. For more information, visit www.careeratnibc.com.

fsrforum • volume 14 • issue #3

Financial Business Cycle 2012

Last January and February the Financial Business Cycle 2012 took place. During the three weeks we visited five different top level companies: Two banks, two trading houses and one multinational. The cycle started with a visit at Kempen & Co. Starting with an opening presentation. The next three presentations explained to us more about some of the main divisions Kempen & Co. has: Asset Management/Securities, Corporate Finance, and Investments. As these presentations were given by experienced employees from these departments, these were very interesting and gave the participants a real good insight in the daily activities of Kempen & Co. The presentations were followed by a lunch, during which the participants could integrate with several employees in an informal matter and ask many questions. Afterwards an interesting securities case was presented, in which the teams of participants were asked to valuate two companies and give different types of investors customized investment advice. The day ended with a drink and dinner with a great view at one of the top floors of the building. Rabobank was the next company on our program. The day started with a presentation about the structure and different ‘paths in to Rabobank’. The presentations were followed by a short speed-dating session with trainees and employees of the different departments and traineeships. This allowed the participants to ask questions and listen to the different experiences of the trainees. The next part of the program was a consisted of a ‘koehandel’ game. In this game, students had to make quick valuations of different companies and make an offer on these through different types of auctions. The group with the highest total value of companies combined with cash won. The day ended with drinks, where even more trainees joined us to share their experiences with us.

was divided in to teams which had to compete in a card game, which simulated the trading done by Optiver. The day ended with pizza and drinks, where some traders joined us after the markets had closed for the day. The next company we visited was another trading company, Flow Traders. Walking into their offices, the company looked a bit like every man’s ‘heaven’, the common relax area had a bar, a pool table, a poker table and a lot of different arcade games. During the first presentation of the day, it quickly became clear that it was not all fun and games at Flowtraders. The relatively young company wants to grow substantially, which takes a lot of hard work. After several presentations we got a tour on the trading floor. During this tour we got the opportunity to really experience the working atmosphere at Flow Traders. Next, we had to do some quick thinking in a bid and offer game and one of the participants could go home with a bottle of champagne. The day ended when some traders joined us at an informal lunch. The last company in the Financial Business Cycle 2012 visited was Shell. The day began with some safety rules at Shell’s headquarter in The Hague, which indicated how serious Shell takes its activities and that the company cared about the wellbeing of its employees and visitors. After these precautions, the program continued with several presentations given by the recruiters, trainees, and more experienced employees. The case Shell prepared for the participants was an original manner to show the multicultural difficulties a Shell employee has to cope with. The participants were divided into teams along with one goal: build a bridge and make sure every team builds the same bridge. After a couple of ‘negotiation rounds’, the result was presented. Of course, there was a catch simulating the multicultural and conversational difficulties of a Shell employee. After the game the recruiter told us more about the application process at Shell and invited us to have drinks. We, as the committee of the Financial Business Cycle, can look back at an, another successful edition of the Financial Business Cycle. We hope that the students who participated have learned more about the variety of different employers and that they might even have made a first step towards a good career.

The third inhouse day of the Financial Business Cycle was at Optiver. Starting with a presentation about the company and an introduction in options and other derivatives. The students got a little surprise: a mathematical test. After this mathematical test we got a presentation by a wholesale trader followed by a screen trader. During their presentations they elaborated on the differences between their jobs, answered questions, and gave us some insight in their jobs by telling anecdotes. After a quick tour through the building the group

FSR news • 49

fsrforum • volume 14 • issue #3

Bij Financiën tel je meteen mee. Zeker als econoom. Company presentation

Als ambitieuze academicus kun je overal aan de slag. Ook bij de overheid. Daar moet je wel bewust voor kiezen, de publieke zaak moet je ter harte gaan. Bij Financiën vertaal je politieke keuzes in concreet beleid. Het gaat daarbij om heel veel geld, zo’n 250 miljard euro per jaar, een bedrag dat zo effectief en efficiënt mogelijk moet worden ingezet. Resultaatgericht en projectmatig werken is bij ons dan ook eerder regel dan uitzondering. Tegelijkertijd opereren we in de context van hectische politieke verhoudingen en maatschappelijke ontwikkelingen. Die dimensie maakt het werk extra spannend.

Vanaf dag één meedoen Ga jij naar Brussel om de overheidsfinanciën van Europese lidstaten te bespreken? Of wil je collega's in voormalige Oostbloklanden helpen bij het maken van een deugdelijke rijksbegroting? Misschien werk je liever aan de Nederlandse Rijksbegroting of zou je graag de minister in Washington adviseren tijdens de jaarvergadering van de Wereldbank en het IMF? Ook kun je meewerken aan het verzekeren van exportkredieten of analyses maken van landenrisico’s. Bij het ministerie van Financiën draai je gelijk volledig mee. Kortom, je krijgt vanaf de eerste werkdag de kans om jezelf te bewijzen. Om te laten zien dat je de verantwoordelijk heden aankunt. Uiteraard word je niet zomaar in het diepe gegooid. Er zijn altijd seniorcollega’s die je coachen of als mentor optreden.

Bij het ministerie

spelen economen een belangrijke rol. Als econoom aan de slag Tegenwoordig verschilt de overheid helemaal niet zo veel van een bedrijf. Het gaat om het effectief en doelmatig inzetten van middelen. Alleen gaat het op ons ministerie om iets grotere bedragen: jaarlijks ruim 250 miljard. Bijna altijd is de vraag hoe we dat gemeenschapsgeld op de juiste manier gaan besteden, gezien de actuele maatschappe-

50 • Company presentation

lijke ontwikkelingen. Het antwoord vereist inzet, precisie en creativiteit, maar ook een scherp gevoel voor politieke verhoudingen.

Wat wil je doen? Bij het ministerie spelen economen een belangrijke rol. Wat jij precies gaat doen, hangt natuurlijk af van je achtergrond en belangstelling. Je kunt denken aan: het meeschrijven aan de Miljoenennota, het handelen in de dealingroom, het initiëren en stimuleren van publiek-private samenwerkingsverbanden, het risicomanagement van de staatsschuld, het aan- en verkopen van bedrijven, het doorlichten van de financiële sector en het uitvoeren van audits.

Tijdens het Rijkstraineeprogramma en

het Audit en Financial Traineeship leer je de Rijksoverheid goed kennen.

werkelijkheid van de Rijksoverheid. Daarnaast krijg je een Post Master Accountancy of een Post Master IT-audit en een intern opleidingsprogramma aangeboden. Tijdens het Financial Traineeship werk je in drie verschillende financiële functies. Je gaat aan de slag bij een directie Financieel-economische Zaken van één van de ministeries en je werkt een half jaar bij het ministerie van Financiën, de Tweede Kamer, de Algemene Rekenkamer of een uitvoeringsinstantie. Daarnaast neem je samen met de andere trainees deel aan een op maat gemaakt cursusprogramma. Aanmelden voor het Audit- of Financial Traineeship kan tot en met 20 mei 2012! Daarnaast neemt het ministerie van Financiën ook ieder jaar een aantal rijkstrainees aan. Het Rijkstraineeprogramma is een breed programma voor starters met verschillende studieachtergronden. De aanmeldingsperiode voor het Rijkstraineeprogramma loopt van 2 t/m 16 april 2012!

Meer informatie Zo blijf je in beweging Bij het ministerie van Financiën tel je meteen mee. Maar het is natuurlijk belangrijk dat je je ook snel verder ontwikkelt. Daarbij krijg je hulp in de vorm van allerlei individuele en collectieve opleidingsprogramma's. Financiën is voor economen een plek met heel veel doorgroeimogelijkheden. We kennen een roulatiebeleid, zodat je steeds nieuwe dingen leert en je grenzen verlegt. Zowel op nationaal als op internationaal niveau. Hoe ver je komt, is ook een kwestie van ambitie en talent.

Wil je meer weten over werken bij het ministerie van Financiën? Kijk voor informatie over startfuncties, traineeships, stagemogelijkheden en onze recruitmentactiviteiten op www.werkenvoornederland.nl/minfin. Je kunt ook meteen solliciteren via recruitment@minfin.nl. Telefonisch zijn wij te bereiken via (070) 342 73 17 of (070) 342 69.

Kennismaken? Elk jaar organiseert het ministerie van Financiën de Studentendag voor academici vanaf het tweede studiejaar. Tijdens deze dag krijg je een unieke kans om het ministerie van binnenuit te leren kennen. Je draait een dag mee en wordt door enthousiaste medewerkers begeleid. Meer informatie op www.studentendag.nl. Naast de studentendag zijn er verschillende andere inhousedagen bij het ministerie van Financiën. Een overzicht is te vinden op onze website.

Traineeships bij het ministerie van Financiën Naast onze reguliere startfuncties bieden wij ook traineeships aan. In september gaan het Audit Traineeship, het Financial Traineeship en het Rijkstraineeprogramma weer van start. Een mooie manier om de Rijksoverheid in twee jaar tijd goed te leren kennen. Het Audit Traineeship is een programma van de Auditdienst Rijk. Als pas afgestudeerd academicus krijg je de kans ervaring op te doen binnen de auditfunctie van de Rijksoverheid. Je draait twee jaar volledig mee op verschillende werkplekken binnen verschillende ministeries. Zo doe je ruime praktijkervaring op met de politieke, bestuurlijke en financiële

Company presentation • 51

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fsrforum • volume 14 • issue #3

FSR Banking Dinner

On the 29th of February the first edition of the FSR Banking Dinner took place in Restaurant De Harmonie in Rotterdam. The successor of the Young Financials Dinner appeared to be very successful. The participation of four well known Dutch banks led to a lot of applications. Out of the many applicants twenty top students were selected to participate in this event. They had the opportunity to meet four potential employers in an informal setting. After all students and bankers were greeted with a welcome drink, the evening started off with a short introduction by representatives of the four participating banks: ABN AMRO, Kempen & Co, NIBC and SNS REAAL. The introduction was followed up by the dinner itself. The dinner consisted of three courses. After each course the student switched from table to join another bank. The three courses of Restaurant De Harmonie tasted delicious. The evening ended with a social drink. The FSR Banking Dinner has given the students the opportunity to extensively become acquainted with the corporate culture, activities and differences of the four banks in an informal setting. From the perspective of the FSR’s I considered the first edition of the banking dinner to be very successful and therefore we would like to thank all the parties involved!

FSR news • 53

The FSR has opportunities for you in 2012-2013! Become a BOard or committee member of the financial study association rotterdam!

Interested? Mail to chairman@fsr.nu

The FSR is looking for enthusiastic board and committee members for the academic year 2012-2013. As a board or committee member you have the opportunity to distinguish yourself from other students and to get connected to the corporate world. Are you a Bachelor 3 or a Masters student next year and do you have affinity with finance, accountancy or controlling? Grab this chance to become an active member at the FSR in one of the following positions: Board positions: Chairman Secretary Treasurer Commissioner External Relations Commissioner Activities Commissioner Finance Activities

Committees: Accountancy Committee CleanTech Challenge Committee Corporate Finance Competition Committee European Finance Tour Committee FAN Committee Female Business Tour Committee Finance Committee FSR Forum Editorial Committee International Banking Cycle Committee International Research Project Committee

FSR.NL

fsrforum • volume 14 • issue #3

Multinational Battle 2012

The Multinational Battle is a nationwide event jointly organized by the Financial Study association Rotterdam, Financial Study association Amsterdam, Risk (Groningen), FS Focus (Maastricht) and Asset Accounting & Finance (Tilburg). This year’s participating companies were Ahold, Heineken, KPN, NS and PostNL. These five multinationals showed their career opportunities with a focus on Finance, Accounting & Control. Each of the multinationals facilitated the qualification round in one of the organizing cities. The four best students from this round in each of the five cities were selected for the finals. Rotterdam had the honor to invite Heineken to the campus of the Erasmus University on the 16th of February. During the qualification round the selected students had the chance to meet Heineken during an informal drink and, most important, had the opportunity to show their skills to the employees of Heineken during the case. After the case Heineken selected the four best performing students who would continue to the final. These four students had to represent Rotterdam during the finals from the 29th of February till the 2nd of March. During these three days, the five battling teams from Amsterdam, Groningen, Maastricht, Rotterdam and Tilburg stayed at a very luxurious location, Kasteel de Vanenburg. The final consisted of solving cases from the participating multinationals, who ranked the teams at the end of each case. Besides that, the students had lunches, drinks and dinners together with employees and recruiters of the participating companies in order to get to know the employees in a more informal atmosphere. It was a close call until the final case. The teams were very competitive and tried to impress the employees of Ahold, Heineken, KPN, NS and PostNL. Unfortunately, at the end of the battle not the team from Rotterdam, like last year, but the team from Tilburg had the highest score. They returned home with the cup for the ‘Winning team Multinational Battle 2012’. We would like to thank the participating companies for their cooperation and of course the students who made it to the finals for the great event!

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fsrforum • volume 14 • issue #3

Update of the International Research Project 2012

The International Research Project is in full swing! So far, the group is getting along very well and is very enthusiastic about the research. We've visited in-house days of Ernst & Young, KPMG, BDO, Deloitte, PwC and ROBECO and attended a guest lecture by Varavo. In the coming weeks we'll visit Achmea. Besides the fact that the in-house days are a great way to get to know the companies, most of them also focused on the IRP research topic, being Corporate Social Responsibility (CSR). Therefore, these days are also a great addition to the research. The students are split in five groups researching the Transport, Commodities, Energy, Finance and Consumer goods sectors. Each group will focus on the relationship between CSR efforts of companies in their sector and company performance. As each group will look at the situation in the Netherlands, Thailand and Vietnam, a comparison can be made between countries of the relation between CSR efforts and company performance. Together, the research of the groups should show a country wide analysis of this relationship. So far, it promises to be very interesting research. Besides the official activities of the project, we've also had some informal events to get to know each other. And it's safe to say that everybody is getting along great! More so, as we approach the departure date of the 22nd of April everybody is getting more and more excited about the project. It will definitely be a very exciting trip as we already have some great companies on board in Thailand and Vietnam that will welcome us into their offices. We'll keep you informed!

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fsrforum • volume 14 • issue #3

Active Members Weekend

This weekend is famous for its nice stories that come out of it, year over year! At Friday the 3rd of February a group of 28 excited active members, last year’s board and the current board departed from Schiphol airport to Prague for a long weekend full of activities. Although the airplane had some delay, due to snowy weather conditions, we arrived full of energy in Prague. We stayed in a hotel in the city centre and as the weekend was to short, we quickly headed out to discover some of the nightlife this old city has to offer. With -22 °Celcius on the thermometer outside the cosy and stylish clubs of Prague make you never want to leave and head for home. So after a relative short night the first activity of the weekend was already starting in the morning. A bus took us outside the city centre to a shooting range where we could do some target shooting with Kalashnikovs AK-47’s and some Magnums pistols. Everybody made it out alive and was surprised by the shooting skills of former board member Kim de Vries. She won the day prize for the best shooter of the day! After this activity ten old Trabant cars and a little van lined up to pick us up for some sightseeing sovjet style. The cars drove us around the city and we got the opportunity to try Trabant driving ourselves at the parking lot of the old and abandoned Praha stadium. The Trabants dropped us of at some Communist café where the vodka warmed us up a little! After a refreshing hour back at the hotel room it was time for a dinner with a traditional Czech dish. I would like to tell you its name but unfortunately I still have not found out as well! The next exploration of the nightlife could begin and this time we headed toward the biggest club in Central Europe, Karlovy Lazne. This club has over 5 stories and is indeed, very big! We had reserved a special place for the group were they could poor their own drinks and this seemed to work for them very well. We had a great night and had much fun hopping from floor to floor! The next day everybody was really tired but there was still one activity to do, we visited an old beer brewery where we got a tour from a Czech man that spoke English remarkably well, for a Czech guy. After this it was time to travel to the airport, where everybody fell asleep at the McDonalds and was happy to go to bed early that night! We had a good time and we look forward to next year’s active members weekend where we will be the former board members and can enjoy another weekend full of short nights and good times!

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fsrforum • volume 14 • issue #3

FSR Gala dinner 2012

On the 14th of January, the FSR Gala dinner 2012 took place. Together with the FSR board, active members, former FSR boards and dates we had a wonderful evening at museumrestaurant 'De Pappegay'. We were welcomed with bubbles to toast on a happy new year. After that, the dinner started and between each course the Chairman and former Chairmen gave a speech. At the end of the evening, after the dinner, the DJ arrived and we concluded the FSR Gala dinner 2012 with a drink and some dancing. We would like to thank everyone for the great evening!

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fsrforum • volume 14 • issue #3

FSR Alumni Association

Dear FSR Alumni, It is with great excitement that I can inform you about the ins and outs of our beautiful Alumni Association. The academic year is over its midway point and the current FSR Board is coping with the last parts of –probably- the best year in their lives. In this section of the FSR Forum we are delighted to provide you with a review of the FSR Alumni Friday Afternoon Event at the Ketel 1 Drink. We also look forward to upcoming events such as the Old Boards Diner (OBD), where all of the former FSR board members are invited to wine and dine, and the FSR Alumni Golf Championship, where beginning and advanced level golfers are challenged to show their golfing talent. First, we like to review the past. We can joyfully look back at a more than successful Ketel 1 Friday Afternoon Drink at the Westelijk Handelsterein. All FSR Alumni members were invited to meet up at the Ketel 1 Drink to enjoy the sparkling Ketel 1 jenever cocktails and keep up with their fellow Alumni members. If we switch from the past into the future, we can look forward to the OBD, which will be organized by two former board members from the 13th FSR Board. On the 14th of April, all of the former boardmembers of the FSR are invited for a diner at restaurant de Harmonie. This event is traditionally the event with the highest density rate among all of the Alumni events. The alumni board is furthermore planning a great golf tournament, the Philips FSR Alumni Golf Championship, where the current Chairman of the FSR Alumni Association –Joris Kilwill be challenged to defend his title and to become the first and only consecutive winner of the Championship. During the day, advanced level golfers will compete with each other on an ostentatious 9-holes course filled with outrageous water hazards, St. Andrews styled bunkers, a Longest Drive and Nearie Competition. The inexperienced Alumni members can also expect a beautiful day of golf. During a 2 hour clinic they will be thaught the basic skills of golf and as icing on the cake they will show their new learned skills on a par-3 course! As you can read, lots of networking and recreation events. We, as Alumni Board, would like to invite all of the current and previous FSR committee and board members to join the network and be part of the fun! Together we can increase the strength of the FSR alumni network and make the events fun and worthwhile to attend! Bart Lips Vice-Chairman FSR Alumni Association

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fsrforum • volume 14 • issue #3

FSR Activity Agenda 2012

Cartoon: Deef Smits www.coolgraphix.nl

April Female Business Tour

May Bachelor Accountancy Day

It might be a men’s world but it would be nothing without women

Will you choose for a career in accounting?

Potential Board and Committees drink

Corporate Finance Competition

For everyone who’s interested in the possibilities the FSR has to offer you next year!

Five star event: hotel, companies and participants!

April/May International Research Project Examine the corporate world of Bangkok & Ho Chi Minhcity!

National Investment Competition Invest and be a winner!

60 • FSR news

Finance Day Want to know what finance is all about…

Investment Banking Masterclass Learn to valuate, like an investment banker.

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Kom verder met het Financial Traineeship

Financial Traineeship Start september 2012 Evi van Splunder 088 792 73 69 evi.van.splunder@nl.pwc.com

Weten wat je kan, begint met weten waar je naartoe wilt.

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Een succesvolle carriĂ¨restart is meer dan een goede cijferlijst. Het begint met karakter en inzicht in jezelf. Ontdekken wie je bent, weten waar je naartoe wilt groeien ĂŠn hoe je dat voor elkaar krijgt staat altijd aan de basis. Ernst & Young coacht jou actief op weg naar jouw succes. We bieden je volop kansen in de wereld van assurance, tax, transaction en advisory. Ontdek ze op ey.nl/carriere