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February 06, 2003
World Economic Forum Surveys CEO Attitudes Toward Corporate Citizenship
    by William Baue

The World Economic Forum CEO survey finds much enthusiasm but less substance in the adaptation of corporate social responsibility into core business activities.

At the World Economic Forum annual meeting last month in Davos, Switzerland, the Forum's G lobal Corporate Citizenship Initiative (GCCI) released a survey of more than 30 CEOs of global companies regarding their attitudes toward corporate citizenship. Corporate citizenship is defined as a company's management of its economic, social, and environmental impacts as well as of its relationships with all stakeholders.

The Forum considers corporate citizenship, which is similar to the term corporate social responsibility (CSR), as a fundamental component of core business operations and not as an optional "add on."

The report, entitled Responding to the Leadership Challenge: Findings of a CEO Survey on Global Corporate Citizenship, was based on questionnaire responses by the CEOs of public, private, and state-owned companies from 16 countries in 18 industries.

The report found that many of the companies surveyed had specific corporate governance structures in place to assess and promote corporate responsibility, mostly in the form of board sub-committees and executive committees on CSR and sustainability. However, the report also cited research conducted by Sustainable Asset Management (SAM) revealing that only 16 percent of the 1,336 companies SAM assessed in 2002 have established specific board committees on CSR and sustainability. A mere 29 percent of the companies assessed by SAM had boards that have taken formal responsibility for CSR or sustainability. SAM Group is an independent, Switzerland-based financial services firm that focuses exclusively on sustainability.

The Forum report cited several specific examples of companies linking executive compensation to CSR performance. Social investors are particularly interested in this issue; shareowner resolutions filed this year at Citigroup (ticker: C), Johnson & Johnson (JNJ), and Wal-Mart (WMT) call for just such a link. The report quoted one of the surveyed CEOs to illustrate this linkage.

"Indicators related to health, safety, environment and employee satisfaction are included, among others, in my performance contract, and are thus used for determining my bonus and form part of my performance review," said Statoil CEO Olav Fjell in the survey. "So far, there are no indicators covering bribery and corruption, security and human rights, and community development, but these topics are on the Board's agenda and are thus indirectly part of the review of the CEO."

However, this strategy is relatively anomalous in actual practice. The SAM research found that only 9 percent of the companies surveyed reported that more than 3 percent of their workforce received variable remuneration and compensation linked to CSR performance, according to the Forum report.

The survey revealed that the CEOs desire more sound empirical evidence linking CSR performance to financial and market performance.

"UBS has just launched a project to investigate the impact of corporate responsibility issues on UBS share price," said UBS (UBS) Chairman Marcel Ospel. "The project has two components: analysis of share price movements in the aftermath of certain events; [and] survey among UBS key investors to assess the extent to which they incorporate consideration about UBS's corporate conduct in their valuation of the company."

While there is a lack of evidence of a causal link between CSR performance and market performance, the PriceWaterhouseCoopers CEO survey launched at last year's World Economic Forum annual meeting found 70 percent of CEOs consider CSR vital to profitability.

The report concluded by stressing the importance of reporting CSR performance. Almost half (48 percent) of the companies surveyed produce a CSR or sustainability report separate from the annual report. Others include CSR information on their web sites and in their annual reports. In addition to their own reporting mechanisms, corporate social responsibility performance can be communicated through compliance with standards such as the Global Reporting Initiative (GRI) and ISO 14000. Inclusion in socially responsible investment (SRI) indexes such as DJSI, FTSE4Good, and the Domini Social Index also reflect well on companies' positive social and environmental performance, according to the report.


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