The New Entrepreneurial Leader: Developing Leaders Who Shape Social and Economic Opportunity by Danna Greenberg & Kate McKone-Sweet & H. James Wilson

Author:Danna Greenberg & Kate McKone-Sweet & H. James Wilson
Language: eng
Format: mobi
Publisher: Berrett-Koehler Publishers
Published: 2011-09-05T14:00:00+00:00

CHAPTER 7

The Financial Challenge: Reconciling Social and Environmental Value with Shareholder Value

Richard Bliss

IN THE FINANCE COMMUNITY, SHAREHOLDER VALUE HAS LONG BEEN the performance metric of choice for academics and professionals. Along with increasing profits, the maximization of shareholder value is viewed by many as the primary objective of corporate managers and is a pillar of most finance courses. As we introduce the importance of SEERS, the immediate question arises regarding how social and environmental sustainability, financial performance, and shareholder value are related. Can these concepts not only coexist but be taught in a cohesive, effective pedagogy? As the importance of developing a SEERS worldview becomes more central for both organizations and entrepreneurial leaders, we have an obligation to try. The task of incorporating SEERS into a finance perspective based on predictive logic, however, can be formidable. To illustrate this challenge, we begin with what appear to be simple questions about sustainability and corporate social responsibility, activities resulting from a SEERS worldview.

The first question relates to the ranking of companies in terms of corporate social responsibility, or CSR.* Each rating approach evaluates a different aspect of sustainability and responsibilities and, for many, the top-rated company can be on the list one year and off the next.

Take Monsanto for example. In 2010 the company was ranked 31 in Corporate Responsibility Magazine’s “best corporate citizen” ranking and was also one of the “least ethical companies” in the Covalence rankings (Cause Integration 2010). There was also a major change in the top 100 “best corporate citizens” from 2009 to 2010: 44 companies from Corporate Responsibility Magazine’s 2009 “best corporate citizen” ranking disappeared from the 2010 ranking, including CSR darlings Agilent (recognized by RiskMetrics Group’s 2010 Global ESG 100, Newsweek’s 2009 Green Rankings, and Corporate Knights’ Global 100) and General Electric (recognized by Ethisphere magazine as among the 2009 Most Ethical Companies, Newsweek’s 2009 Green Rankings, and 2010 Corporate Knights Global 100) (Ravich 2010).

The second question refers to exhibit 7.1, which shows two-year stock returns for four companies: Whole Foods Market Inc., Timberland Co., Exxon Mobil Corporation, and Huntsman Corporation (Fortune magazine’s least-admired American company in 2007 based on social responsibility). Which companies do you think have the positive and negative returns? The two companies with positive stock returns are Exxon Mobil and Huntsman, and the two companies that lost about 40 percent of their value are Timberland and Whole Foods.

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