Knowledge Centre:
News Digests

Stay abreast of what’s happening internationally with developments in corporate public affairs. Here is news that you may find useful and interesting:

AWB scandal erodes line in sand hopesND


Fiona Buffini, Australian Financial Review, 16 February 2006

Despite corporate concern over increased regulation, the AWB scandal has further fuelled debate about corporate social responsibility in Australia. There are currently two Australian government inquiries underway looking at directors duties and sustainability reporting and in the current environment, there is increased pressure for more regulation. For more information, see www.afr.com.au

Ethical breaches pose dilemma for boards: when to fire a CEO?ND


Erin White and Thaddeus Herrick, The Wall Street Journal, 16 February 2006

In response to an ‘ethical lapse’ at US firm RadioShack, whereby the CEO misrepresented his academic qualifications, the WSJ asks ‘what type of ethical breach warrants dismissing a top executive?’ These ethical lapses can impact heavily on share prices, and require a swift response. The Board also need to balance an investigation into any inappropriate conduct, while not being forced into a decision. Ethical breaches can sometimes suggest a bigger problem with integrity, honesty and corporate judgement and this can send a mixed message to employees, depending on how the company acts on these ethical lapses. For more information see www.wsj.com

We’re smart and funny. Really.ND


Elizabeth Kazi, Australian Financial Review, 16 February 2006

Professional bodies in Australia, such as the Institute of Chartered Accountants and the Law Council of Australia, are working to improve their image. A Roy Morgan survey conducted in November 2005 showed that occupations such as nurses, doctors, teachers and police ranked ‘very high’ or ‘high’ for ethics and honesty, whereas company directors, business executives, politicians and journalists were ranked much lower. Industry associations point to many misconceptions and are spending on advertising and marketing campaigns to improve public perception. For more information, see www.afr.com.au

New crisis plans may be needed for flu pandemicND


Allison Bisbey Colter, The Wall Street Journal, 15 February 2006

Companies are advised to update their crisis management plans in the event of a flu pandemic, if they haven’t already done so. With avian flu continuing to spread, companies should plan for possible high absenteeism and disrupted supply chains if borders are closed as a measure to contain the spread of flu. Pandemics typically last around eight weeks and reoccur in waves after that. Good communication with employees is essential and many companies already have measures in place to set up alternate locations or encourage employees to work from home if needed. For more information, see www.wsj.com

The new ethics enforcersND


Joseph Weber, BusinessWeek, 13 February 2006

With corporate behaviour under intense scrutiny, we are seeing a ‘new species of executive’ — compliance and ethics officers who have much more power than the typical executive in this position. US company Computer Associates is one such company that hired a new chief compliance officer in order to avoid legal proceedings over an alleged accounting scandal. Compliance officers are more likely to come from a high-profile background with a good reputation (such as former judges and lawyers), are given complete access to the company and report to the CEO. Other US companies that have employed high-profile ‘ethics enforcers’ include AIG, Bristol-Myers Squibb, KPMG and Morgan Stanley. For more information, see www.businessweek.com

The blog in the corporate machineND


The Economist, 11 February 2006

Some companies find it difficult to manage issues arising from blogs as often the individual blogger does not belong to an organised group like other stakeholders. This makes it ‘harder to identify, appease and control’. Corporates have learnt from experience that blogs can impact on corporate reputation and now pay more attention to the concerns raised on blogs. Companies are also using blogs to gain feedback on products and advertising, as well as provide an early warning system for potential problems. As well, a company’s own blog can be a useful means of communicating during a crisis. For more information, see www.economist.com

Investors revoltND


Beth Quinlivan, Business Review Weekly, 9 February 2006

In the past Australian shareholders had limited options if they lost money due to corporate reporting that was misleading or inadequate. There is now more focus on class actions in Australia, evidenced by recent actions against Telstra, Ion, Concept Sports, Media World, Sons of Gwalia and Aristocrat Leisure, and many more proposed. Joanne Rees of Slater & Gordon says ‘shareholder class actions are here to stay and numbers will grow as long as there is bad corporate behaviour’. She adds that class actions will make companies more accountable. For more information, see www.brw.com.au

Political lifebloodND


Stuart Washington, Business Review Weekly, 9 February 2006

Commenting on the recent release of donation information from the Australian Electoral Commission, Stuart Washington says the system lacks transparency and there are potential conflicts of interest. The largest donors to Australia’s political parties are property and construction companies. In contrast to US and UK laws, Australian political parties are also allowed to accept overseas donations. For more information, see www.brw.com.au

Wal-Mart picks a shade of greenND


Jonathan Birchall, Financial Times, 7 February 2006

In October 2005, Wal-Mart’s chief executive announced a new social and environmental vision for the company. Despite the new strategy to improve business practices, there is still a high level of scepticism by many, reflecting previous concerns. The scale of Wal-Mart’s business means that many critics believe the company could do a lot more. NGOs and campaign groups are also moving away from negative campaigning to engagement with companies such as Wal-Mart around these issues. For more information, see www.ft.com

Multi listed companies learn from experienceND


Stanley Dubiel, Financial Times, 6 February 2006

Companies that are listed on multiple stock exchanges have the complex task of managing different sets of listing requirements. Gone are the days when companies could choose the least rigorous listing requirements or those from their country of origin. Instead companies are under pressure to implement best practice in corporate governance. This article discusses Shell as an example of a company that is adopting more transparent and innovative corporate governance practices in order to address the issues arising from multi-listings. For more information, see www.ft.com

The bribery businessND


Greg Earl, Australian Financial Review, 4 February 2006

While many industrialised countries have implemented the OECD’s convention on bribery, enforcement is happening at a slower pace, according to Transparency International. This article provides the example of Indonesian businessmen running their companies from Singapore as the Indonesia government attempts to recover missing bank bail-out funds of up to $20 billion. A new UN convention on corruption appears to be ‘the real frontline of the fight against bribery in Asia’. Recently, China became the fourth country in Asia, after Australia, Mongolia and Sri Lanka, to ratify the convention and is now required to prosecute corruption by Chinese companies in overseas markets. For more information, see www.afr.com.au

Business ethics are missing in actionND


Mirko Bagaric, The Daily Telegraph, 1 February 2006

The recent AWB scandal in Australia has prompted an ethics check. While many appear to be shocked about the scandal, Bagaric says this is surprising given the nature of business and the lack of morals and ethics education. Bagaric calls for the government to do more to enforce ethics education for the corporate sector. For more information see www.dailytelegraph.com.au

Business executives globally embrace CSRND


McKinsey Quarterly, January 2006

Business leaders around the world believe that corporations should balance the broader community good in the way they operate and at the same time balance high returns to investors, according to a new McKinsey study of Business and Society. The survey reported that only one in six respondents agreed with Milton Friedman's thesis that high returns should be the corporation's sole focus, aligning them with Charles Handy's view that the corporation has an 'invisible hand' that it can use to benefit the community, and in turn, ensure its own ongoing viability and license to operate. The report also reveals that 68 per cent of executives globally believe they and their companies are 'generally' or 'somewhat' making a positive contribution to the community. Forty six per cent said companies have 'substantial' room to improve their performance in society — firmly placing the solution in their own hands. In other findings: 14 per cent say their corporate affairs areas drive their CSR activity; 56 per cent say their chair or CEO take the lead; 41 per cent say job losses and offshoring will dominate CSR debate over the next few years; 28 per cent say that climate change will dominate CSR debate over the next few years; and most see the major emerging social and political issues as threats to their businesses, not opportunities. The full report is available at: http://www.mckinseyquarterly.com/article_abstract.aspx?ar=1741&L2=39&L3=29&srid=304&gp=0

Retailer Target branches out into police workND


Sarah Bridges, Washington Post, 29 January 2006

US retailer Target assists law enforcement agencies by providing access to technology that it uses in its 1,400 stores. The company has its own forensics lab and its investigators spend nearly half their time on pro-bono assistance to law enforcement agencies. Target also has a prevention program (‘Safe City’) involving cooperation on surveillance. According to Doug Pinkham from the US Public Affairs Council, this is ‘a different model of corporate giving’ where companies focus on solving societal problems. Where firms work closely with government, it is also important to consider the ethical complexities. For more information, see www.washingtonpost.com

A trend with legs as well as a heartND


Thomas Crampton, International Herald Tribune, 27 January 2006

Of the $11bn raised for tsunami victims, around $1bn came from individuals and companies. This illustrates a trend of a ‘new kind of corporate and social responsibility’ according to Jane Nelson, director of the CSR program at the John F Kennedy School of Government ‘beyond traditional philanthropy and basic compliance’. Industry-driven initiatives, such as the Equator Principles and Extractive Industries Transparency Initiative, are highlighted as examples of where companies are moving forward with corporate responsibility. Companies are also seeing benefits in employee recruitment. For more information, see www.iht.com

Businesses learn lessons as ties get closer worldwideND


Gill Plimmer, Financial Times, 26 January 2006

Corporate involvement in the education sector has grown in recent years. Companies, such as Woolworths, GlaxoSmithKline, Starbucks, Intel, KPMG and Siemens are investing in education and forming partnerships for continued engagement. The US has a history of companies investing in education, while in the UK it has grown in the past five years, according to Business in the Community. KPMG says it invests in education for business and moral reasons, and that ‘the lifeblood of KPMG is a well-motivated, educated workforce so it makes sense to invest in that field’. Cause-related marketing has also increased though this has been somewhat controversial, particularly in schools. For more information, see www.ft.com

The buck stops where?ND


David James, Business Review Weekly, 26 January 2006

An opinion piece by David James discussing truth and responsibility. He comments on the recent behaviour of Australia’s AWB and the cost of a culture of dishonesty. This article asks the question: ‘When accountability to shareholders is the prime responsibility of management, what is the role of truth?’ For more information, see www.brw.com.au

Soft drink makers in voluntary ban on advertisingND


Raphael Minder and Andrew Ward, Financial Times, 25 January 2006

Soft drink manufacturers in Europe announced a voluntary ban on advertising to children and undertaking commercial activities in primary schools, following concerns about links between advertising and obesity. The industry had been under pressure to toughen self-regulation or face legislation. Many soft drink companies already had a voluntary agreement in place, though this new code of practice is to be implemented by all members of Unesda, the association of European non-alcoholic drinks. For more information, see www.ft.com

The frustrated will to act for public goodND


Alison Maitland, Financial Times, 25 January 2006

A McKinsey Quarterly survey of over 4,000 executives in 116 countries found that many are dissatisfied with the way companies anticipate social and political challenges. Only three percent say companies are doing a good job at this, while many suggest companies are using the wrong tactics. For example, while half of the executives point to use of media and public relations to manage challenges, only 35 percent consider this to be effective. This is the same with lobbying of government and regulators. One measure both used and regarded as effective is use of industry coalitions. Tactics that are seen to be effective (but not used enough) are implementation of policies on issues such as ethics and the environment, involving stakeholders such as NGOs, and transparency about product risks and processes. For more information, see www.ft.com

The 100 Best Companies to Work ForND


Geoffrey Colvin, Fortune, 23 January 2006

Public affairs professionals managing internal communications are increasingly a central part of employee engagement and culture change efforts. Workplaces are getting tougher — but tough is okay if there is good communication, development opportunities and a menu of continual challenges, according to Fortune, which released its ranking of the ‘100 Best Companies to Work For’. Some of the Fortune ‘100 Best Companies to Work For’ that have operations in this region include Boston Consulting Group (ranked 11), Cisco (8), Goldman Sachs (26), Starbucks (29), American Express (37), Eli Lilly (52), Microsoft (42), Ernst & Young (67), Nike (100) and Yahoo (73). For more information, see www.fortune.com

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