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Question: Discuss how and why financialised management of firms, where managers prioritise shareholder value maximisation and the executive pay fails to solve the agency problem, poses obstacles to transitioning to a governance system of stakeholder value where sustainability and social responsibility are the desirable firm objectives.

15 Oct 2022,12:28 AM

 

  1. Discuss how and why financialised management of firms, where managers prioritise shareholder value maximisation and the executive pay fails to solve the agency problem, poses obstacles to transitioning to a governance system of stakeholder value where sustainability and social responsibility are the desirable firm objectives. You are expected to use all of the following course readings to frame and support your views and arguments:

 

Introduction

300 words

 

Main Body

600 words

The scenario: Financial firms - firms that prioritise shareholder value and have high executive pay as a solution to agency problem

 

How does this scenario causes an obstacle for businesses to begin prioritising stakeholder value in the form of sustainability and social responsibility?

 

Conclusion

300 words

 

 

References

  1. Ertürk, I. (2020) “Shareholder Primacy and Corporate Financialization” in Mader P., Mertens, D. and van der Zwan, N. (2020) International Handbook of Financialization, Routledge, Oxon,           London
  2. Jones, B. and Nisbet, P. (2011) “Shareholder value versus stakeholder values: CSR and financialization in global food firms”, Socio-Economic Review, 9(2), pp.287-314.
  3. Hiss, S. (2013) “The politics of the financialization of sustainability”, Competition & Change, 17(3), pp.234-247.
  4. Rhodes, C. (2016) “Democratic Business Ethics: Volkswagen’s emissions scandal and the disruption of corporate sovereignty”, Organization Studies
  5. Polman, P. (2014) “Business, society, and the future of capitalism”, available at:

http://www.mckinsey.com/businessfunctions/sustainability-and-resource-productivity/ourinsi             ghts/business-society-and-the-future-of-capitalism

 

 

  1. Choose a public company -a company listed in stock market and publishes annual reports in English- and critically analyse, based on the reporting in the company’s last two years’ annual reports and your own research on the company, whether the social responsibility and the ESG (environment, social and governance) performance and activities of this company are supported by meaningful and verifiable data and evidence or are mostly qualitative statements aiming to create a halo effect and a narrative of doing good for investors. You should read the sections of the annual reports where the January 2022 SEMESTER – ASSIGNMENT QUESTIONS Page 2 of 2 company’s social responsibility, ESG (environment, social and governance) performance and its achievement of United Nations Sustainable Development Goals (UN SDGs) are covered. You are expected to use the concepts and analytical frameworks from the following course readings in your analysis:

 

Introduction

300 words

 

Main Body

1200 words

What is the company of your choice doing in terms of social responsibility and ESG?

Are you convinced by it? Is there meaningful data to verity their statements?

Or do you think that the statements is to create a halo effect or a narrative for investors?

 

Conclusion

300 words

 

Appendices

Annual Report in Year 2020-2021

 

References

  1. Rosenzweig, P. (2014) Chapter 4 “Halos All Around Us” The Halo Effect, Simon & Schuster
  2. Rosenzweig, P. (2014) Chapter 5 “Research to the Rescue”, The Halo Effect, Simon & Schuster. 3. Rosenzweig, P. (2014) Chapter 8 “Stories, Science and the Schizophrenic Tour de Force”, The         Halo Effect, Simon & Schuster
  3. Leins, S. (2018) “Chapter 6: Construction of an Investment Narrative”, Stories of Capitalism: Inside the Role of Financial Analysts, University of Chicago Press
  4. Temple-West, P. (February 21, 2020) “‘Monstrous’ run for responsible stocks stokes fears of a bubble”, Financial Times https://www.ft.com/content/73765d6c-5402-11ea-90ad-25e377c0ee1f

Expert answer

 

In recent years, there has been a shift in thinking about the role of businesses and their responsibility to society. This is driven in part by increasing awareness of the negative environmental and social impacts of business activity, as well as the recognition that businesses need to operate in a sustainable manner if they are to be successful in the long-term.

 

One response to this challenge has been the rise of stakeholder capitalism, where businesses take into account the interests of all their stakeholders – including employees, suppliers, customers, and local communities – when making decisions. This approach reflects the view that businesses have a wider responsibility than simply maximising shareholder value, and instead should aim to create value for all those who are affected by their activities.

 

However, the traditional model of capitalism – where businesses are focused on maximising shareholder value – is still very prevalent. This is in part due to the fact that many businesses are still managed in a way that prioritises shareholders over other stakeholders. This is known as financialised management, and it can pose significant obstacles to transitioning to a stakeholder-centric model of business.

 

Financialised management refers to a situation where managers prioritise shareholder value maximisation and executive pay fails to solve the agency problem. This approach has become increasingly common in recent years, as businesses have come under pressure to deliver short-term financial results.

 

There are a number of reasons why financialised management can be problematic for businesses. First, it can lead to a focus

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