25th Annual ICGFM International Conference

When: May 15 - May 20, 2011
Where: Miami, Florida, USA

Achieving Real Accountability: a Balancing Act Among Stakeholders

Learn how governments are meeting the demands of its citizens, civil society, the media, and donors for greater impact on the shape of PFM policies.

In this era of greater transparency, citizens and civil society are demanding not only greater insight into public finance but an ability to actively influence policies and spending priorities. Citizens, civil society, the media, and donors constitute the stakeholders of government and are establishing communication channels to assert their priorities to their governments and attempting to shape debate and decision making. Governments must strive to listen to these voices even when the messages are not consistent. Valuable information on how countries are meeting these challenges and examples from these stakeholder groups will be the theme of this conference. Representatives from Africa, Asia, Europe, Latin America, the Caribbean, and North America will share their practical experiences in meeting the new demands for greater interaction between government and its stakeholders.

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Accountability Results from a Broad Range of Stakeholders: ICGFM Issues Call for Speakers at its 25th International Conference

In this era of social media, rapidly expanding access to a variety of information outlets, greater activism by civil society groups, and a greater demand for results, public sector accountability has grown beyond the traditional institutions that exercised oversight of public expenditure. While auditors and legislative oversight continue to play a key role, anyone with the ability to create or read a blog can be part of the growing intertwined mechanisms to hold government accountable for how it spends public funds and what outcomes result.

The International Consortium on Governmental Financial Management (ICGFM) has issued a call for speakers, panel members, and presentations to be made at its 25th Annual International Conference which will be held in Miami from May 15-20. The theme of the conference will be: Achieving Real Accountability: A Balancing Act Among Stakeholders.

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Shareholders v stakeholders: A new idolatry

The economic crisis has revived the old debate about whether firms should focus most on their shareholders, their customers or their workers

THE era of “Jack Welch capitalism” may be drawing to a close, predicted Richard Lambert, the head of the Confederation of British Industry (CBI), in a speech last month. When “Neutron Jack” (so nicknamed for his readiness to fire employees) ran GE, he was regarded as the incarnation of the idea that a firm’s sole aim should be maximising returns to its shareholders. This idea has dominated American business for the past 25 years, and was spreading rapidly around the world until the financial crisis hit, calling its wisdom into question. Even Mr Welch has expressed doubts: “On the face of it, shareholder value is the dumbest idea in the world,” he said last year.

In an article in a recent issue of the Harvard Business Review, Roger Martin, dean of the University of Toronto’s Rotman School of Management, charts the rise of what he calls the “tragically flawed premise” that firms should focus on maximising shareholder value, and argues that “it is time we abandoned it.” The obsession with shareholder value began in 1976, he says, when Michael Jensen and William Meckling, two economists, published an article, “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure”, which argued that the owners of companies were getting short shift from professional managers. The most cited academic article about business to this day, it inspired a seemingly irresistible movement to get managers to focus on value for shareholders. Converts to the creed had little time for other “stakeholders”: customers, employees, suppliers, society at large and so forth. American and British value-maximisers reserved particular disdain for the “stakeholder capitalism” practised in continental Europe.

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'Whose Company Is It?' New Insights into the Debate over Shareholders vs. Stakeholders

It is perhaps the core question in the ongoing debate over corporate governance: Does the corporation exist for the benefit of shareholders, or does it have other, equally important stakeholders, such as employees, customers and suppliers?

A new study titled, "Stakeholder Capitalism, Corporate Governance and Firm Value," by Wharton finance professor Franklin Allen, Elena Carletti of the Center for Financial Studies at the University of Frankfurt and Robert Marquez of Arizona State University does not provide a definitive answer. But in showing the various benefits of the stakeholder approach, it demonstratesthat the issue is not as settled as some researchers and business people in the United States, United Kingdom and other shareholder-oriented nations might think.

Several conclusions emerge from the study, which uses a mathematical model to explore the advantages and disadvantages of stakeholder-oriented firms. First, stakeholder-oriented companies have lower output and higher prices, and can have greater firm value than shareholder-oriented firms. Second, firms may voluntarily choose to be stakeholder-oriented because it will increase their value, according to the study.

See full 'Article.

'Whose Company Is It?' New Insights into the Debate over Shareholders vs. Stakeholders

It is perhaps the core question in the ongoing debate over corporate governance: Does the corporation exist for the benefit of shareholders, or does it have other, equally important stakeholders, such as employees, customers and suppliers?

A new study titled, "Stakeholder Capitalism, Corporate Governance and Firm Value," by Wharton finance professor Franklin Allen, Elena Carletti of the Center for Financial Studies at the University of Frankfurt and Robert Marquez of Arizona State University does not provide a definitive answer. But in showing the various benefits of the stakeholder approach, it demonstratesthat the issue is not as settled as some researchers and business people in the United States, United Kingdom and other shareholder-oriented nations might think.

Several conclusions emerge from the study, which uses a mathematical model to explore the advantages and disadvantages of stakeholder-oriented firms. First, stakeholder-oriented companies have lower output and higher prices, and can have greater firm value than shareholder-oriented firms. Second, firms may voluntarily choose to be stakeholder-oriented because it will increase their value, according to the study.

See full Article.

UN Communication on Progress (COP)

One of the explicit commitments that a company makes when it participates in the Global Compact is to produce an annual COP. A COP is a communication to stakeholders (consumers, employees, organized labour, shareholders, media, government…) on the progress the company has made in implementing the ten principles in their business activities and, where appropriate, supporting UN goals through partnerships.

The COP is expected annually of all participating companies, and must be shared publicly with stakeholders - through annual financial, sustainability or other prominent public reports, in print or on the participant’s website. Companies failing to communicate progress will be labeled “non-communicating” on this website. Should a participant fail to submit a COP for two years, that participant would be labeled “inactive” on the Global Compact website.

The purpose of the COP requirement is both to ensure and deepen the commitment of Global Compact participants and to safeguard the integrity of the initiative. It also aims to create a rich repository of corporate practices that serves as basis for learning and continuous performance improvement.

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In the Mind of the Stakeholder

CSM's most recent project on nine stakeholders and their approach to corporate sustainability

It is often said that society exerts increasing pressure on companies to improve their social and environmental performance. To cut through this widespread rhetoric and hype, CSM has examined how stakeholders assess and influence corporate sustainability.

'The contents of this book cut very effectively through a certain amount of mounting 'hype' around CSR issues by empirically exposing the realities of stakeholder strategies influencing corporate sustainability management. As such, it is an excellent and comprehensive primer for managers that wish to discover the current status of their own corporate stakeholder environment, or for business students that wish to understand the managerial complexities of aligning organizations behind sustainability strategies (including those of the corporate stakeholders themselves).'

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Shareholder responsibilities and the investing public: exercising ownership rights through engagement

This discussion paper outlines the rights, responsibilities and powers accorded to shareholders in the US and the UK. It looks at how institutional shareholders in each jurisdiction engage with companies to influence corporate governance and ultimately the value of the client’s investments.

A free copy of Shareholder responsibilities and the investing public - exercising ownership rights through engagement is available here

The paper provides information relevant to the questions in the Investment dialogue section of the Pressure Points consultation paper which are as follows:

See full Press Release.