Compliance & Governance

Seeing in the Dark

Our annual inventory of America’s least transparent big-cap companies.

By Dirk Olin

Click here to view the 2012 Black List.

A significant number of stakeholders care about corporate behavior. So, information pertaining to that behavior matters to them. It matters to investors when companies offer stock options to CEOs, which is why the Securities and Exchange Commission requires companies to disclose such arrangements. It matters to activists concerned with, say, pollution, which is why the Environmental Protection Agency imposes public fines on violators of toxic dumping regulations. And it matters to customers when the product they’re buying might affect their family’s health, which is why the Food and Drug Administration creates various testing regimes.

But all of that falls under the domain of compliance.

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Contribution Clarity

Good corporate governance assumes basic transparency when it comes to political giving.

By Dan Bross and Trevor Potter

Corporate participation in the public policy process is beneficial to free and democratic societies, as well as providing a means of appropriately enhancing shareholder value through improved government policy. Corporations are significant drivers of employment and economic growth, and wise public policies informed by all stakeholders benefit shareholders, employees, and the general public. While some on the fringes of the political spectrum will disagree with this premise, it is a well established principle that business has a responsibility to shareholders to engage with a range of external stakeholders, including governments.

The 2008 global financial crisis has led to a growing interest—among shareholders, the media, public interest groups, and others—in better understanding the governance policies guiding corporate practices on a range of issues.

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Seeking the Best

The pursuit of consistent CR standards is complicated by sectoral differences and the profession’s evolution. An exclusive survey.

By Richard J. Crespin, and Michelle Greene

Do corporate responsibility “best practices” really exist? In short, no. Although a growing number of “successful practices” is definitely emerging.

More often than not, companies are still sorting out what CR really means for them. While companies have an important role to play in tackling some of our most pressing challenges, each company’s CR strategy has to make sense for its industry, its business model, and the identity of its individual organization. So rarely does CR look the same from company to company. Moreover, this remains a nascent field, making it a little early declare any practice “best.”

Each year Corporate Responsibility Magazine, the Corporate Responsibility Officers Association, and NYSE Euronext conduct a survey on CR best practices.

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A Year in the Life

Global Reporting Initiative’s first year back in the U.S. of A.

By Mike Wallace

Reporting Initiative began at Ceres in Boston in 1997 and has since achieved international impact. But, with corporate reporting less common in the United States, GRI was reestablished here almost exactly one year ago. In fact, it was on January 31, 2011 that GRI officially announced its reentry into the U.S. market at the NYSE at an incredibly successful launch event for GRI’s Focal Point USA. (It’s nicely encapsulated in this five-minute video: vimeo.com/24417074.) We want to thank not only Michelle Greene of NYSE Euronext for hosting such a momentous moment for GRI, but also the team at CR Magazine for connecting GRI with NYSE Euronext.

Ever since the launch last year, it has been a nonstop, whirlwind tour of North America to raise awareness about sustainability, sustainability reporting and of course, GRI.

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Manifest Subsidy

Governmental support for energy innovation is hardly the stuff of 20th century liberalism. A history lesson.

By Nancy Pfund and Ben Healy

From land grants for timber and coal in the 1800s to tax expenditures for oil and gas in the early 20th century, from federal investment in hydroelectric power to research and development funding for nuclear energy and today’s incentives for alternative energy sources, America’s support for energy innovation has helped drive our country’s growth for more than 200 years.

Using data culled from the academic literature, government documents, and NGO sources, the extent of federal support (as well as support from the various states in pre-Civil War America) for emerging energy technologies in their early days is clear. In discrete periods in history, the federal government enacted specific subsidies. While other scholars have suggested that the scope of earlier subsidies was quite large, we are—as far as we know—the first to quantify exactly how the current federal commitment to renewables compares to support for earlier energy transitions.

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Building Early Warning Systems

The UBS case offers lessons in how to avoid insider trading and other financial crimes.

By Frances McLeod

The UBS case, which involved more than $2 billion in “unauthorized” trading losses made by Kweku Adoboli, is still not completely understood. Details will no doubt continue to emerge over coming months and at the eventual trial of Adoboli who has been charged with fraud and false accounting in connection with the losses. It already seems clear, however, that the scandal is attributable to a “perfect storm”: lax risk management and controls; the failure of senior executives to understand the complexity (and therefore potentially adverse implications) of some of the trades being made by relatively junior employees; and what many are describing as an industrywide failure to overhaul an entirely bonus-driven culture, which can tempt traders to take extraordinary (and inappropriate) risks in exchange for extraordinary profits, and even to commit fraud.

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Best Citizens by Sector

From financials to healthcare, corporate leaders of transparency and sustainability were honored at the COMMIT!Forum.

By The Editors

For the first time ever, the top 10 Best Corporate Citizens rankings by industry category were unveiled at the COMMIT!Forum.

Rankings were announced in the following sectors: financial/real estate; information technology; materials; consumer items; media & entertainment; business services; consumer staples; utilities; energy; and healthcare. This was the first year that CR Magazine recognized companies by industry, applying the methodology from our 100 Best Corporate Citizens List. The announcements were made at the 2011 CR Magazine CEO Awards Dinner

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“Our annual 100 Best list honors transparency across all industry sectors,” said Dirk Olin, the magazine’s editor-in-chief. “This segmentation bestows apples-to-apples recognition and reveals sector leaders who might not have made the annual 100.

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The Great Convener

The U.S. State Department’s Kris Balderston is forging a new paradigm for public-private partnerships.

By Dirk Olin

The State Department’s Ben Franklin Room was jam-packed on February 17. Its ceremonial flags and brocaded silk drapery provided a staid, solemn backdrop befitting the collection of Queen Anne and Chippendale furnishings that glowed in diffuse chandelier light. All of which made the raucous whooping and hollering completely incongruous. Given the roaring peels of laughter, the proceeding resembled nothing so much as a celebrity roast.

On the dais stood Secretary Hillary Rodham Clinton, but she was not the one receiving the accolades. Indeed, Clinton was the leader of the homage. With a wry allusion to the charges of carpetbagging that had briefly plagued her 2000 campaign for a U.S. Senate seat from New York, she declared that she “really always was a Yankees fan.

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Compliance as Competitive Advantage

The Dodd-Frank Act gives regulators vast new powers—and financial institutions vast new opportunities.

By Kris Bryant

The impact of the Wall Street Reform and Consumer Protection Act will be felt far, wide, and for decades to come. Also known as the Dodd-Frank Act, the law ushers in a dramatically new regulatory architecture, bringing significant changes to the financial industry.

Reconfiguring to navigate that new architecture is crucial. Banks that leverage a transformed IT environment to compete will thrive. 

The Dodd-Frank Act gives regulators new powers of financial oversight that will fundamentally change how banks and other institutions gather, store, analyze, and report data of virtually every kind. Data clearly lies at the heart of this landmark reform.

The act’s risk-tolerance and consumer protection requirements will force financial firms to establish new and multiple touchpoints, to acquire robust capabilities for data collection, aggregation, and integration.

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The National CPO

The GSA’s Administrator is on a CR mission like no other.

By Martha Johnson

Martha Johnson’s ascent to head the Governmental Services Administration (GSA) in 2009 was a homecoming. She had served as chief of staff to the GSA administrator during the Clinton administration. A graduate of Yale’s School of Organizational Management, she had spent a chunk of her early career during the 1980s at engine manufacturer Cummins Inc., (which has appeared on the last two “100 Best Corporate Citizens” lists).

Johnson was a materials availability manager, then took turns through personnel and manufacturing, absorbing the lessons of Total Quality Management and Six Sigma. She credits Cummins with teaching her “the language of corporate responsibility,” which she furthered in later stints providing diversity consulting for the likes of Ben and Jerry’s.

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