Corporate Governance and Sustainability: Marks and Spencer - Essay Example

?Prepare a report on a selected UK company from the FTSE 100 Table of Contents Introduction 3 Corporate Governance 3 Corporate social reporting 5 Stakeholder Engagement Techniques 6 CSR/Sustainability reporting assurance 9 Conclusion 10 The present paper found that Marks and Spencer indeed had complied with the expectations of its investors and stakeholders as promised in Plan A. the company not only undertook measures to retain environmental sustainability but also indulged in community services which even helped it earn rewards from Business in the Community. However, there still remain subtle rooms for improvement in this aspect even though it had come a long way towards a better governance and sustainability position over the last few years. 10 References 11 Introduction Corporate governance and sustainability report are two prime spectrums that normally investors are on a lookout for prior to zeroing down upon a company. These two aspects define the degree of responsibility that a company complies to while operating its business and their crucial nature often drives these companies to reach out any measures for accomplishing them. The present paper describes these measures and the way through which Marks and Spencer implemented these essential steps in their operations. Corporate Governance a) The following paragraphs summarise the corporate governance measures that each component of Mark and Spencer must align to – Board of Directors The Board of Directors are responsible for ensuring success to the company through leading it in the most effective and low risk path, setting targets for the company while optimising the company resource endowments and monitoring that shareholder and customer interests are aligned to appropriately. The Chief Executive Officer, Deputy Chairman and Non-Executive Directors will be responsible for ensuring that the BoD is fully equipped to carry out their tasks. However, each of them are assigned a different set of powers balanced enough to disarm the unanimous position of any group. The BoD is elected following a fair election procedure from time to time and the elected members must hone their skills and knowledge regularly to deliver optimum service based on which re-election will be made. Remuneration The remuneration fixated by the company for various posts will be in proportion to the type of work they are entrusted with. They must be sufficient enough to motivate the employees to their jobs but not more than needed. In addition, remuneration is incentive based for executive directors, a chunk of whose incomes will base upon individual and organisation performance. However, the structure of their package should be decided in a transparent and fair manner. For instance, no executive will be indulged in deciding his own financial reimbursement. Audit Committee The Board must publish a comprehensible and evaluative company financial report at regular intervals and make transparent arrangements for implementing these reports. Furthermore, it is also the Committee’s responsibility to look after internal control of the firm to protect the interests of shareholders as well as that of the company. They produce an internal audit report where they mention the pace of work being carried on post submission of the report. This report identifies the risks as well as the weaknesses that the company is featured with and have to be tackled in order to meet the annual targets. Shareholder Relations The company supports a timely dialogue interaction with its shareholders to arrive at mutually agreed company objectives. It is the Board’s responsibility to watch over the fact that a pleasing conversation takes place with the shareholders. In addition, investors should be allowed to fully participate in the Annual General Meetings of the company to voice out their concerns (Marks and Spencer Group plc, 2010). Institutional Shareholders There must be a mutual understanding between institutional investors and the company under concern. In addition, these shareholders have voting rights as well which should be brought into use by them. b) The company claims to have complied with the all codes underlying the best practice principles of corporate governance. The only exception had been that the company had assigned a single individual to act both as the CEO and Chairman since June 1, 2008. However, this might be in violation of the rule that no single individual or small group would not be assigned enough power to dominate over the joint decisions of the company. Hence, Marks and Spencer appointed Marc Bolland on May 1, 2010 as its CEO. In the meantime, the Board had stressed highly upon the accountability of decisions being undertaken to minimise any imbalance arising on account of the double role played by the CEO and Chairman, Sir Stuart Rose. Furthermore, the Board of Directors consist of 6 non-executive directors, out of its total strength of 12, appointed for a term of four years. The company had managed to align to its Plan A, aiming towards greater environmental sustainability and ethical concerns. By the end of 2010, the company claimed to have accomplished 80 out of its 100 commitments underlying the plan (Marks and Spencer Group plc, 2010). However, there still exists room for improvement in this regard given that its pension schemes are not quite defined. Moreover, the company must be more stringent about complying with its code of corporate governance which had been found to be violated at a very crucial point, viz., appointing the same person as the CEO and Chairman. Corporate social reporting a) An evaluation of the corporate social responsibility of Marks and Spencer in line with GRI reporting framework has been illustrated underneath (Global Reporting Initiative, 2011, p. 7). Materiality: Marks and Spencer had been indulged in poor packaging which did not match with the benchmark environmental standards. However, after protests arising from customers and stakeholders regarding the same, the company switched to cardboard sandwich boxes as well as recycled plastics to reduce environmental degradation. The company also responded to customer requests for demarcating healthier foods by 2006. If performance indicators are considered, every component of the waste reduction process underlying Plan A is either on plan or had been completed by 2010. If the performance of the overall sector is measurable in terms of the volume of waste reduction, then there had been an improvement of 12% in it between 2008-09 and 2009-10. Stakeholder Inclusiveness: Marks and Spencer claim to be rigidly aligning to stakeholder demands, which have driven them to take action on improving environmental sustainability. Post 2006, after the shareholders expressed their concern about the social and environmental factors related with palm oil production, the company decided to join the Roundtable on Sustainable Palm Oil (Marks and Spencer Group plc, 2006, p. 7). Furthermore, the company is also reported to have banned testing of cosmetic products on animals after protests coming from shareholders. However, in order to keep the cost of operation low, it also encouraged suggestions from its financiers (Marks and Spencer Group plc, 2006, p. 12). Sustainability Context: Marks and Spencer continues its quest for assuring a sustainable growth path as could be evinced from the underlying features of Plan A launched in 2007. The plan ensures a sustainable long term supply chain through preserving and minimising the use of natural resources in production. Furthermore, it also aims at assuring a healthier production process owing to zero carbon and waste emission (Marks and Spencer Group plc, 2010, p. 3-11). Completeness: The Group had been operating really fast and effectively as evident from the positive feedback of Plan A from customers and stakeholders. In 2010, the company claimed to have already achieved 62 out of its 100 commitments encompassing Plan A. Their success has encouraged the company to set another 80 commitments to assure sustainability over the next five years (Marks and Spencer Group plc, 2010, p. 1). b) There exists certain amount of room for improvement in this regard given that the company has not yet aligned with many of the policies that it had promised to accomplish. Furthermore, there are some issues related to packaging that the company needs to take care of and examine whether environmental standards are maintained or not. Even though Marks and Spencer has launched its sustainable long term supply chain, the resources of the Group to perform in this aspect is not enough given that most of its stakeholders and consumers are still voicing out their protests against company proceedings. However, this also cannot be said that the company is not trying hard to solve its flaws given the measures that it had been undertaking vehemently over the last few years, following concerns expressed by stakeholders and investors. Stakeholder Engagement Techniques a) Marks and Spencer has employed a large number of strategies and measures aimed at securing the interests of its stakeholders in order to hold on to them. As a part of the successful implementation of Plan A designed to take care of the environmental sustainability factor, the company has decided to invest in a chain of Sustainable Learning Stores all over UK to retain stakeholders. (Roshdi, 2011). Furthermore, in order to retain the trust of stakeholders, the company indulges in considerable amount of community investment. The company targets to employ at least 2500 people every year and prioritises the disabled, homeless, unemployed youth, deprived school children and others from the underprivileged section of the population in this regard. By the end of 2005, the company managed to employ 135 people more than its annual target of 2500. Furthermore, M & S raised close to ? 1.5 million in the same year to fund the Breast Cancer Awareness Campaign in the same year. The company makes it a point to pour at least 1 percent of its pre-tax profits in community projects. Its good works had recently been rewarded when the company achieved five ‘Big Tick’ prizes from Business in the Community, of which it had been a founding member (Maplecroft, 2005, p. 5). Marks and Spencer mandates the summary of Fire, Health and Safety Committee to update the stakeholders with their quarterly reports. Furthermore, they also emphasise about informing the extent of risk involved in the business proceedings to various groups representing the stakeholders. The diagram alongside represents the stakeholder group of Marks and Spencer revealed by Ernst and Young in its Audit report submitted by the end of 2008-09. The stakeholder group has been identified in connection with the commitments that the company made in its Plan A (Marks and Spencer Group plc, 2010, p. 44). b) The diagram underneath summarises the performance of the company in terms of Stakeholder Engagement Techniques for the financial year ending 2009-10. It shows that the company had outperformed its sector in regard to various issues which concern the stakeholders of a company. The only aspect where it could not perform up to the mark is Scope of Public Reporting though it is well above industry figures (Business in the Community, 2009, p. 9). However, survey conducted by Ernst & Young to cross-check Marks and Spencer’s claims about complying with stakeholder engagement policies reveal certain aspects. The former conducted interviews among various members of the Business in Community and emphasised upon the accomplishment of pledges that the company took under Plan A. The members reported that some of the energy efficiency commitments had not been met by the company even if they claimed to have finished them. Most of the stakeholders however, expressed their satisfaction about the manner in which M & S is progressing in line with Plan A, but some of them had asked for more transparent information about how the company is lobbying measures to protest climate change (Marks and Spencer Group plc, 2009, p. 41). CSR/Sustainability reporting assurance a) Corporate Social Responsibility could be defined as the commitments made by a company or group to take care of work ethics while accomplishing their projects. Ethical considerations include indulging in operations which do not hamper social or environmental sustainability standards, taking care of the employees and their respective families as well as involving in community investments for improving the structure and position of the society (Cramer, 2003, p. 2). An evaluation of the importance of Corporate Social Responsibility could be made suitably if the opinions voiced by the corporate executives of various companies could be enlisted. Most of them considered CSR to be important to enhance investor relations as the stakeholders have an access to a more transparent set of reports about the company in which they are investing. Furthermore, follow-up of work ethics, corporate governance measures and lucidity in business dealings could be assessed by means of Corporate Social Responsibility. In fact, transparency in activity was counted as one of the most important aspects for foreign institutional investors in the study. Furthermore, a good CSR practice and implementation of the policies underlying the same could improve the performance of the staff as they become aware of the measures their company is adopting for their as well as the company’s sake (The Economist, 2005, p. 2). b) Compliance with the standards specified in the Corporate Social Responsibility report is rated quite highly by stakeholders and investors these days which is why it is highly emphasised by companies these days. Marks and Spencer being no exception in this regard make it a point to publish their assurance statement from time to time and verifies their contents by standards pertaining to GRI. In order to verify whether the standards have been met or not, the external and internal auditors meet up annually with the Board. The internal as well as the management also frankly discusses issues which need to be discussed privately. Furthermore, they also check for integrity in the financial statements prepared or accounting principles used by the company while reviewing the announcements made by it. According to the latest assurance statement being published, Marks and Spencer had been able to take care of most climate change issues, all of the 100 commitments that it made under Plan A and has also taken care of 32 of the safety and health standards underlying Plan A by 2009. But there are certain limitations in this regard as well. For instance, the company did not abide by the group performance degrees while claiming the completion of Plan A commitments. Furthermore, the company also did not consider the opinions of its employees working in company stores and warehouses (Marks and Spencer Group plc, 2009, p. 44). Conclusion The present paper found that Marks and Spencer indeed had complied with the expectations of its investors and stakeholders as promised in Plan A. the company not only undertook measures to retain environmental sustainability but also indulged in community services which even helped it earn rewards from Business in the Community. However, there still remain subtle rooms for improvement in this aspect even though it had come a long way towards a better governance and sustainability position over the last few years. References Business in the Community (2009). ‘Marks & Spencer Feedback Report’ [PDF]. Corporate Responsibility Index 2009. Available at http://corporate.marksandspencer.com/documents/publications/2010/2010(2)/2009_bitc_feedback_report (Accessed: March 29, 2011). Cramers, J. (2003). Learning about corporate social responsibility: the Dutch experience. The Netherlands: IOS Press. Global Reporting Initiative (2010). ‘Sustainability Reporting Guidelines’ [PDF]. Available at http://www.globalreporting.org/NR/rdonlyres/660631D6-2A39-4850-9C04-57436E4768BD/0/G31GuidelinesinclTechnicalProtocolFinal.pdf (Accessed: March 28, 2011). Maplecroft (2005). ‘Corporate Social Responsibility Report 2005’ [PDF]. Company report review: Marks and Spencer. Available at http://arts.brighton.ac.uk/__data/assets/pdf_file/0019/22951/Marks-and-Spencer-Corporate-Social-Responsibility-Report-2005.pdf (Accessed: March 28, 2011). Marks and Spencer Group plc (2006). ‘Corporate social responsibility report 2006’ [PDF]. Available at https://images-na.ssl-images-amazon.com/images/G/02/00/00/00/29/41/49/29414982.pdf?mnSBrand=core (Accessed: March 28, 2011). Marks and Spencer Group plc. (2009). ‘How We Do Business Report 2009: Doing the right thing’ [PDF]. Available at http://corporate.marksandspencer.com/file.axd?pointerid=f3ccae91d1d348ff8f523ab8afe9d8a8&versionid=fbb46819901a428ca70ecf5a44aa8ddc (Accessed: March 29, 2011). Marks and Spencer Group plc. (2010). ‘Corporate Governance Statement’ [PDF]. Available at http://corporate.marksandspencer.com/documents/specific/investors/governance/governance_statement.pdf (Accessed: March 29, 2011). Marks and Spencer Group plc (2010). ‘How We Do Business Report 2010’ [PDF]. Available at http://corporate.marksandspencer.com/documents/publications/2010/how_we_do_business_report_2010 (Accessed: March 28, 2011). Roshdi, E. (2011). ‘M&S to open its most sustainable UK store’ [Online]. Available at http://www.imsplc.com/index.php?option=com_k2&view=item&id=227:ms-to-open-its-most-sustainable-uk-store&Itemid=131 (Accessed: March 28, 2011). The Economist (2005). ‘The importance of corporate responsibility’ [PDF]. The Economist Intelligence Unit 2005. Available at http://graphics.eiu.com/files/ad_pdfs/eiuOracle_CorporateResponsibility_WP.pdf (Accessed: March 29, 2011). Read More