Doktorarbeit / Dissertation, 2021
222 Seiten, Note: 1,0 (very good)
Table of Contents
List of Abbreviations
List of Figures
List of Tables
Introduction
1 The Current Status of Corporate Social Responsibility (CSR)
1.1 Definition & Delimitation
1.1.1 Corporate Social Responsibility
1.1.2 Corporate Citizenship
1.1.3 Corporate Governance
1.2 CSR in the Social Context
1.2.1 Value Changes
1.2.2 Corporate Roles
1.2.3 Business Ethics
1.3 CSR and its Economy Attributes
1.3.1 Guarantors of Success
1.3.2 Regulations
1.4 Research Status of CSR
1.4.1 Status Quo of Current Theory & Practice
1.4.2 Knowledge Framework
1.4.3 Geographic Perspective
1.4.4 Contextual Focus
1.5 CSR within the Construction Business
1.5.1 Statistics
1.5.2 Sustainability Aspects
2 Research Objectives
2.1 Formulation of the Scientific Problem
2.2 Global Objective
2.3 Partial Objectives
2.3.1 Partial Objectives in Theoretical Area
2.3.2 Partial Objectives in Practical Area
3 Research Methodology
3.1 Specific Scientific Methods
3.1.1 Special Methods for Economy
3.1.2 Special Methods for Dissertation Thesis
3.2 Scientific Research Procedures
3.3 Substantiation of the Innovativeness
4 Achieved Results of the Research
4.1 Diagnosing the Initial Condition of the CSR System Enterprise Economy in Germany
4.2 Analysis and Evaluation of the Status and Determining the Development of CSR within SME’s
4.2.1 Research of Methodical Instruments
4.2.2 Quantitative Analysis
4.2.3 Qualitative Analysis
4.3 Development of Methodology for Implementation of CSR Strategy and Recommendation for Continuation of the Transformation Process with Usability Test
4.3.1 Trigger of Transformation Processes
4.3.2 Types of Transformation in Organizations
4.3.3 Transformation Effects on Corporate Structures
4.3.4 Phase Models of Transformation Processes
4.3.5 Resistance in Transformation Processes
4.3.6 Success Factors of Transformation Processes
4.3.7 Model “CIC”
4.4 Qualitative Modelling of the CSR Influence in the Market Diagram
5 Discussion &Recommendations
5.1 The Results of Research
5.1.1 Project
5.1.2 Research Question
5.1.3 Literature Research
5.1.4 Quantitative Analysis
5.1.5 Qualitative Analysis
5.2 Recommendations of Research
5.2.1 The Recommendations for the Theory
5.2.2 The Recommendations for the Practice
5.3 Limitations
6 Conclusion
Bibliography
Annex
My thanks are directed to my doctoral supervisor Associated Prof. Ing. Gabriela Dubcova for the intensive time of supervision, her constructive review and motivation during the dissertation elaboration period.
I would also like to thank Prof. Ing. Peter Markovic, in whose faculty I was able to write various research papers and scientific articles. Furthermore, I would like to thank my two principal assessors Prof. Ing. Viera Markova and Prof. PhDr. Michal Olah for their expertise in the elaboration of the "Final Work Judgement".
My deep gratitude goes to my family who always supported and motivated me unconditionally during the years of my doctorate - "merci vielmals" to our wunderful kids Berenike and Cornelius with a very special appreciation to my lovely wife Sabine - ILYOA.
Kelkheim, August 21 Peter Achenbach
The global objective of the dissertation entitled “Evaluation of the Behaviour of Selected Small and Medium Enterprises in the Area of Corporate Social Responsibility” is to answer the question “What is the status quo regarding strategically implemented CSR in general and at SME’s (<= 49 FTE) within the German construction sector in particular and how should a model be designed that enables the practicability of CSR at these SME’s?” For this purpose, the research areas are divided into a theoretical and a practical section. In the theoretical part, the worldwide status quo on CSR is determined by means of a literature research. Concrete results of this research arise in the definition of key figures, which can be selected on the basis of the SDG's by means of a benchmarking with "Best - in - Class - Companies" for SMEs.
The practical part of the dissertation addresses expert interviews in the context of qualitative analyses, the evaluation results of which are contributing to the derivation of measures for the strategic anchoring of CSR (modelling). A quantitative analysis is used to determine the status quo of CSR directly among a number of representative micro entrepreneurs.
The result of the dissertation work conducted is an easy-to-implement model, furthermore, a typology and categorization of the German CEOs of the SMEs studied is derived, which enables a type-specific implementation of this CSR model. By deducting the most important indicators for recording and managerial accounting non-financial parameters of the German construction industry and developing a standard reporting system according to the DNK a set of methods could be designed that can be used by micro-enterprises and which has proven its suitability in a practical test with a construction company. In a cost-benefit calculation, the ROI of these investments made for the introduction and maintenance of CSR could be determined and thus confirming that a rapid amortisation of these expenses can also be expected from a financial point of view.
Finally, the results can be interpreted to demonstrate the contribution of CSR to the creation of prosperity and autonomy for the stakeholders involved, which is also illustrated in the form of a generic market diagram, where sustainability aspects and their welfare influence are depicted.
The recommendations refer to the macro – mezzo - and micro - level and span a range from regulatory directives on the reporting of CSR aspects to professional monitoring of the transformation process associated with the introduction of CSR to education - training measures at the employee level.
In further studies it is recommended to validate the findings by conducting additional samples to verify the practicability of the toolset including the typologies with associated materiality matrices. In subsequent steps the model including the methodology can be rolled out to other branches and countries.
Abbildung in dieser Leseprobe nicht enthalten
Figure 1: Structure of PhD-Thesis
Figure 2: CSR- Pyramid of Maturity
Figure 3: Corporate Responsibility – Perception
Figure 4: Historical Development of CSR and Sustainability
Figure 5: Corruption Dilemma - Pay-out Matrix
Figure 6: Competitive Advantages through CSR
Figure 7: Tool System of Corporate Responsibility Managerial Accounting
Figure 8: Alternative Methodology of CR Managerial Accounting
Figure 9: CSR - Added Value for Business and Society
Figure 10: Matrix "Principal - Manager"
Figure 11: Environmental Exposure of Bau GmbH
Figure 12: Social Exposure of Bau GmbH
Figure 13: SBSC of Bau GmbH as "Strategy Map"
Figure 14: Road Map of Bau GmbH
Figure 15: Logical Framework Access
Figure 16: Design Thinking Approach
Figure 17: Special Methods for Dissertation Thesis
Figure 18: Dimensions with Special Methods for Dissertation Thesis
Figure 19: Scientific Research Procedures
Figure 20: The Combination of Indicators
Figure 21: System of GRI -Standards
Figure 22: Indicators for CSR- Reporting
Figure 23: Reporting Principles of GRI - Standards
Figure 24: Selected Key Figures from Industry Leaders in the German Construction Sector
Figure 25: Dendrogram
Figure 26: Boxplot “Fluctuation”
Figure 27: Boxplot “Social Commitment”
Figure 28: Boxplot “Trainee Takeover Rate”
Figure 29: Boxplot “Familiarity with CSR”
Figure 30: Boxplot “Environmental Activity”
Figure 31: Boxplot “Energy Savings and Reductions in CO2-Emissions”
Figure 32: Boxplot “Working Days Lost due to Sickness”
Figure 33: CSR-Typology
Figure 34: CSR- Matrix of Typology
Figure 35: Materiality Matrix
Figure 36: Quality Criteria of Qualitative Research
Figure 37: Content-Analytical Procedural Model
Figure 38: Overview of the Application of the Content-Analytical Procedural Model
Figure 39: Procedural Model of Content Structuring
Figure 40: Analysis Procedure including Category System
Figure 41: Types of Transformation
Figure 42: Emotional Phases of the Experience of Change
Figure 43: Overview of Development of Selected Phase Models
Figure 44: Resistance Types
Figure 45: Key Success Factors of a Transformation Process
Figure 46: Principles of the Model “CIC”
Figure 47: Structure of CSR- Strategy
Figure 48: Value Chain
Figure 49: Materiality Matrix “Refuser”
Figure 50: Materiality Matrix “Pioneer”
Figure 51: Materiality Matrix “Observer”
Figure 52: Materiality Matrix “Brakeman”
Figure 53: Communications Strategy
Figure 54: PDCA – Cycle
Figure 55: Project Base Information
Figure 56: Phase 1 – Conception
Figure 57: Phase 2 – Integration
Figure 58: Phase 3 – Consolidation
Figure 59: Developing Process of CSR- Strategy
Figure 60: Sustainability Aspects and their Welfare Influence
Figure 61: Implementation - Process of CSR into SME‘s
Figure 62: Transcription Rules
Figure 63: Business Model Canvas with CSR Aspects (“Expenses” include external costs)
Table 1: Number of Employees referred to Number of German Companies
Table 2: Employees in German Companies by Company Size and Economic Sector
Table 3: Research Objectives
Table 4: Selection Criteria for Companies
Table 5: Extract from Questionnaire
Table 6: General Company Information
Table 7: Metric and Ordinal Variables (Total)
Table 8: Binary Variables (Total)
Table 9: Cluster of Companies
Table 10: Cluster Research Question Test Summary
Table 11: Pairwise Comparison “Fluctuation”
Table 12: Pairwise Comparison “Social Commitment“
Table 13: Pairwise Comparison “Trainee Takeover Rate “
Table 14: Pairwise Comparison “Familiarity with CSR“
Table 15: Pairwise Comparison “Environmental Activity“
Table 16: Pairwise Comparison “Energy Savings and Reductions in CO2-Emissions “
Table 17: Pairwise Comparison “Working Days Lost due to Sickness“
Table 18: Research Question Testing
Table 19: Typology Statement Theses
Table 20: Structure of Category System
Table 21: Coded Segments by Subcategories & Sub-Sub-Categories
Table 22: Ranking of References without Theses
Table 23: Expected Benefits
Table 24: Expected Costs
Table 25: Correlations H01: Total
Table 26: Correlations H01: Cluster
Table 27: Ranks H02: Total
Table 28: Ranks H03: Total
Table 29: Ranks H04: Total
Table 30: Correlations H05: Total
Table 31: Correlations H05: Cluster
Table 32: Correlations H06: Total
Table 33: Correlations H06: Cluster
Table 34: Correlations H07: Total
Table 35: Correlations H07: Cluster
Table 36: Ranks H08: Total
Table 37: Correlations H09: Total
Table 38: Correlations H09: Cluster
Table 39: Correlations H10: Total
Table 40: Correlations H10: Cluster
Table 41: Correlations H11: Total
Table 42: Correlations H11: Cluster
Table 43: Correlations H12: Total
Table 44: Correlations H12: Cluster
Table 45: Ranks H13: Total
Table 46: Ranks H14: Total
Table 47: Ranks H15: Total
Table 48: Typical DNK – Explanation for SME’s
"My son, be with pleasure at the business during the day, but do only such that we can sleep quietly at night!" (Mann, 1901). This principle described in a novel finds its origin in the 11th century with the model of the honourable businessman, which is primarily characterized by honesty, wisdom, temperance and awareness of values. The right to a merchant based on "good faith" shaped the image of this type of manager and allowed business to be transacted with a handshake (Pacioli, 2007).
If looking at the current business practices the question arises as to how far this model, including the associated virtues, is still valid and to what extent the essential characteristics of a humanistic basic education, economic expertise and a consolidated character with economic virtues are developed in companies and management. Various scandals of the last years (Enron, Siemens, Mannesmann, VW...) raise at least doubts that in the sense of society the general welfare maximization stands in the center of action of the business leaders, so that the call for the "good old" virtues of the honourable businessman is increasingly loud.
According to Stiglitz (Stiglitz, 2002), today in particular we are dealing with a global community of destiny in which people have to follow rules so that "prosperous coexistence" becomes possible. The scandals and grievances mentioned by way of example can be partially explained by the fact that politics is performing less and less of its task of coordinating economic and social events in terms of regulatory policy, and the economy postulates entrepreneurial self-regulation in the form of self-responsibility (Hardt/Negri, 2002). There is currently agreement in (western) society that companies are not only on the market to generate profits, but should also implement ecological and social aspects in their business models in addition to economic aspects ("shared value"). This expectation regarding respect for laws, social values and standards can be subsumed under "Corporate Social Responsibility" (CSR) and, after initial voluntary recommendations (self-regulation), was introduced as a mandatory reporting element in 2017 by the European Union for large companies with more than 500 employees and net sales > €40 million p.a. (Bertelsmann, 2018, EU, 2014). This demand for sustainable management is primarily based on the following three causes, which have been defined as follows in the context of the "Sustainable Development Goals" (SDG Compass, 2019; Malay, 2021):
Firstly, the world population has risen sharply in recent decades and is expected to grow from seven billion to over nine billion by 2050 (United Nations, DESA, 2015). Economic strength and thus the level of consumption will rise even more strongly (OECD, 2012). These are the drivers of over-exploitation of the planet, depending on consumption and production. Secondly, humanity exceeds the limits of the planet's capacity and thus leaves the environmental conditions which are favourable for it (Safe Operating Space) (Rockström et al., 2009). Finally, other causes that can be identified are inadequate market mechanisms (externalities and lack of information; Fritsch et al., 2007), insufficient political framework conditions - including the lack of sufficiently strong global governance for global environmental problems (Ruprecht and Hauser, 2010), unsustainable consumption patterns (EEA, 2013) - which made it necessary to establish regulatory measures and incentive measures that are misguided, especially for top managers (Greiner et al., 2021).
While multinational, large companies are increasingly being examined by the public for their sustainability impacts, to date the impact of the approximately 400 million small and medium-sized enterprises (SMEs), which account for around 95% of all companies worldwide and thus form the backbone of the global economy, has largely been overlooked. And while sustainability reporting is the order of the day among MNEs, practice is much less common among SMEs and has not yet been identified as a business case for smaller firms. However, SMEs are an integral part of the global supply chain and should be proactive on sustainability and transparency issues in order to continue to gain access to MNE's and optimally configure their business models through new value chains (GRI, 2018).
SMEs play a dominant role in sustainable development, especially in emerging economies, where formal SMEs account for up to 60% of total employment and up to 40% of national income (GDP), making those important drivers of job creation and income generation (Crossley et al., 2021). This role continues to grow, e.g. between 2003 and 2016 the number of full-time employees in SMEs almost doubled worldwide, which corresponds to an increase in total employment from 31 to 35% (WTO, 2016; ILO, 2017). This global trend can also be seen in Germany, where SMEs account for more than 99 % of all enterprises (KfW, 2018). If it is possible to sensitise this mass of companies to sustainability issues - before they become mandatory - the following effects can be achieved:
- CSR as Business Case (refer also to 1.3): A publication conducted by GRI (GRI, IOE, 2015) in collaboration with IOE revealed that the business case is evident: SMEs that do report say sustainability reporting had improved productivity, reduced costs, strengthened their competitiveness and opened up new markets.
- CSR as a "Licence to Operate": Companies are developing into a potential target for a critical public, "whose attitude is determined by ethical aspects beyond economic concerns" (Meffert, 1998). Violations of social rules in economic, ecological and social areas must be avoided at all costs in order to maintain or preserve the legitimacy of one's own activities in the market.
It is important that, among other things, the policy provides incentives and tools or methods are available to smaller companies so that CSR can be effectively implemented in the respective company DNA and regular progress reports (internal and external) contribute to transparency. Given their collective reach and dominant role in the global economy, SME adoption of responsible business practices is essential for a thriving global community that lifts humanity and enhances the resources on which all life depends.
In the following Chapter, the intended structure of the dissertation will be briefly outlined and illustrated in Figure 1. The planned work will deal with the topic of "good corporate governance" of small companies from the construction business (construction plus manufacturing). In this context, the constantly increasing social change according to sustainable procedures and production methods will be taken into account.
On the basis of the sustainability reporting (non-financial), which has already become mandatory for larger companies, a work and reporting method for small companies that conforms to the content and sensitizes them to sustainability is to be developed and established in practice (Massingham, 2019). This should be done "ex ante", as the author expects that regulatory measures will also be taken in the near future for companies in the entire supply chain that have hitherto been excluded from mandatory reporting.
Since approx. 30% of all employees in Germany work in the construction business as a whole, the focus will be on this economic sector. Medium-sized companies (50 up to 249 employees) and large companies (> 249 employees and annual sales of > € 50 million) should not be included in the study, as they already have reporting obligations or currently plan to introduce CSR measures.
The focus will therefore be on small companies (1<= number of employees <= 49 and turnover < 10 million € p.a.), which account for approximately 12% of all employees in Germany and thus provide sufficient momentum to implement CSR measures on a broader scale.
A sustainable approach to work is a "conditio sine qua non" for the conservation of the planet's resources, which will also lead to more efficient production processes, which are mandatory for obtaining the companies' "licence to operate". In order to anticipate the possible mandatory requirements regarding the introduction of CSR measures, it is advisable to proactively capture the particularities of smaller companies within the framework of such a reporting system or procedure and to develop processes / methodologies which ideally meet the objectives of sustainable management.
In this sense, the aim of this work is to identify, diagnose and evaluate the current state of theory and practice of CSR in the construction business and to develop a model for micro-enterprises (<= 49 FTE) in the construction sector, which permits the implementation of suitable CSR strategies. The targeted group are primarily managers/owners of micro-enterprises, who should initiate the necessary transformation process top-down.
This thesis is divided into five parts:
The first part deals with the status quo of CSR. Terms and definitions of sustainability are examined, CSR is outlined in the social context of changing values in times of globalization, and the current state of research is illustrated. The focus here is on the application of CSR in the construction business, whereby a selected medium-sized construction company will serve its sustainability concept as a benchmark for small companies, especially with regard to selected key performance indicators for sustainable management.
In the second and third part, the research questions, objectives and research methodology are presented in order to finally develop a model for small construction companies, which can then be iteratively "rolled out" to other sectors. The focus of this model development will be on the necessary steps of CSR to be introduced, which can be planned, implemented and controlled by means of a standardized project management concept. Based on the current GRI guidelines and the DNK criteria derived from them , suitable indicators for recording and managerial accounting sustainable business processes are to be evaluated that are relevant for practical application (approx. 5 - 10 KPI’s for companies that have not yet gained experience with such indicators).
In the fourth and fifth part of the dissertation, the findings gained in this way will contribute to the sustainable implementation of CSR in German small enterprises in the construction sector in order to encourage further small companies from other sectors to embed a corresponding sustainability concept in their business models in the form of a “1st Mover Effect". In a market diagram, the influences of CSR are to be illustrated qualitatively by comparing supply and demand curves without and with sustainability effect and thus contributing to the clarification of achievable gains in prosperity by maximising consumer and producer surplus in the case of sustainability.
In the outlook suggestions are made on how the effectiveness of such a "tool" can be evaluated and further developed by conducting subsequent studies in which the "roll-out" can be carried into the small business community across all sectors and accompanied by “sponsors" in this process. Figure 1 shows the structure in sequence form as follows:
Figure 1: Structure of PhD-Thesis
Abbildung in dieser Leseprobe nicht enthalten
Source: Self-elaboration
In the following Chapter 1.1, CSR is to be clearly described with regard to its terminology by making some distinctions with regard to further terms.
Furthermore, CSR is examined in the social context in Chapter 1.2, an overview of the status of research is presented (Chapter 1.4) and, finally, in Chapter 1.5, the relationship between CSR and the selected object of investigation of "construction business" is established.
There are various terms in the technical literature in the context of corporate social responsibility. The terms used sound similar, are partly synonymous, complementary, have a similar or completely different meaning, are used as super- and sub-concepts (Mutz/Korfmacher/Arnold, 2001) among each other, mixed in texts or name different things in the political environment and at different times (Matten/Moon, 2004). All this makes people insecure and contributes to misunderstandings, so that clear definitions - delimitations - are necessary.
Most CSR studies approach the issue from the business point of view. The first relevant CSR approaches are attributed to Bowen's (1953) "Social Responsibilities of the Businessman". The specialist literature compiles different definitions, approaches and models on CSR (Bassen/Jastram/Meyer, 2005; Carroll, 1991; Carroll/Buchholtz, 2006; Habisch et al., 2006; Loew et al., 2004), whereby the following definition by Carroll (Carroll, 1979) can be described as trend-setting: "The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time". Based on Carroll's pyramid (Carroll, 1991) Schneider (2015) introduces a maturity model that defines 4 levels in a pyramid that is open at the top (see Figure 2).
Figure 2: CSR- Pyramid of Maturity
Abbildung in dieser Leseprobe nicht enthalten
Source: Schneider 2015, p 33.
The lowest level covers social commitment ("CSR 0.0"), while "CSR 1.0" deals with philanthropic aspects and in the next level "CSR 2.0" represents corporate and social value creation. Interesting about this model is the 3.0 level, since the behaviour of companies in legislative procedures has so far hardly been seen in the context of CSR. A comparable perspective can be found in institutional economic approaches to business ethics. Thus, according to Homann (1992), it is the task of companies to initiate changes in the regulatory framework if there are considerable deficits.
The European Commission defines CSR as "the responsibility of companies for their impact on society" (EU, 2011). CSR means the incorporation of social, economic and environmental aspects into the business activity beyond legal obligations. CSR serves to develop good, sustainable relationships with all stakeholders affected by their entrepreneurial activities. Investing in CSR means investing in quality and starting to realize that doing business goes beyond production and sales. CSR as corporate responsibility therefore goes beyond fundraising (“Philanthropy”) and is ultimately to be understood as a tool that supports in managerial accounting the impact of company activities on society.
The CSR concept is based on the following three pillars ("Triple Bottom Line"; Elkington, 1997):
- The economic pillar: The goal of every company is to act in a value - enhancing way. The daily business results in relationships with customers, banks, authorities as well as competitors and possibly owners / investors. Integrating the expectations of these stakeholders serves to build stable and reliable networks.
- The social pillar: Social responsibility positively influences the economic success of a company and can lead to competitive advantages. Responsibility to employees extends beyond compliance with legal requirements. The training and further education of the employees and their work motivation are crucial for the increase of the enterprise value.
- The ecological pillar: Every company has an impact on the environment through production, transport, packaging, waste etc. The use of raw materials and energy sources should therefore be efficient. Conscious handling of this topic is an important aspect with which entrepreneurs can not only make a significant contribution to the company's own success but also for the benefit of todays and tomorrows society.
This short definition of the EU with the three pillars of responsibilities can be easily reconciled with the maturity model of stage 2 ("CSR 2.0") and, through the open definition, allows expansion possibilities to stage 3, in which companies act as proactive policy-makers and are able to set global accents for a sustainable economy.
Corporate Citizenship (“CC”) is a term often used synonymously with CSR. The current discussion in the United States is characterized by a complex, comprehensive understanding of corporate citizenship (Carroll, 1998; McIntosh et al., 2003; Waddock, 2004). According to this, companies are required to proactively manage concrete internal business processes that serve the economy, ecology and society in addition to their charitable commitments. Topics such as respect for laws, norms and values, relationships with stakeholders, company regulations and behaviour, the management of environmental and social issues, and voluntary philanthropic contributions by companies are all included. The guidelines of the OECD (2000), the ILO (2006), the Global Compact (UN 2000) and standardization efforts of the Global Reporting Initiative (GRI 2007, 2016, 2018) also provide orientation in this respect. In Germany, the term “CC” is often subsumed under the terms entrepreneurial citizenship, corporate citizenship (Wieland, 2002), corporeal citizenship (Ringlstetter/Schuster, 2003), entrepreneurial citizenship (Habisch, 2003) and entrepreneurial citizenship (Deutscher Bundestag, 2002).
This paper regards corporate citizenship as a voluntary, facultative corporate commitment to cultural, social and ecological activities without any compelling connection to business, usually with a local connection, e.g. through sponsoring activities, humanitarian aid projects and the like.
Corporate governance (“CG”) generally focuses on management within the company and on the relationship and communication between management and stakeholders (von Werder, 2003). In the scientific literature different perspectives are taken on this, such as those of regulation (Hommelhoff/ Hopt/ vonWerder, 2003), management and business ethics (Maak / Ulrich, 2007; Schmidt / Beschorner, 2005; Wieland, 2004) or managerial accounting (Gleich/Oehler, 2006).
The following directions of significance for corporate governance as a management and control concept emerge (Hopt 2003):
- CG is legally mandatory, based on legal regulations, e.g. in Germany on the Act to Promote Transparency and Control in Business / KonTraG (1998) or in the USA on the Sarbanes-Oxley Act (2002).
- It is voluntary, whereby the implicit management concept is based on self-regulation using self-chosen values and standards, e.g. codes of conduct, etc. (Hommelhoff/ Schwab, 2003, p 80f.).
- The CG is binding and voluntary. "Soft laws" such as the German Corporate Governance Code are voluntary in nature, with only the part that reflects the law formulating mandatory law. "The remaining components of the Code, namely recommendations and suggestions, do not take the status of a state legal norm" (Hommelhoff/Schwab, 2003, p 54).
The German Corporate Governance Code (DCGK, 2002) provides essential statutory provisions for the management and supervision of German listed companies and contains internationally and nationally recognized standards for good and responsible corporate governance. It contributes to making the German corporate governance system transparent and comprehensible and aims to promote the trust of international and national investors, customers, employees and the public in the management and supervision of German listed companies (DCGK, 2019, Preamble). In contrast to the USA, for example, with this Code Germany has primarily advocated a voluntary self-commitment that gives companies the opportunity to act appropriately and responsibly in the international context of recognized economic, political, social and cultural standards. The legally binding aspect comes only in second place, because German listed companies are obliged by law only to comply with those provisions of the Code that reflect legally valid regulations. In addition, there are recommendations in the form of regulations supplementing the law in which companies are free to comply with them or not. If they opt for the latter, they are obliged to announce and name the non-compliance in an annual declaration ("Comply or Explain"). Non-listed entities are also recommended to comply with the relevant provisions of the Code (Ringleb et al., 2003). Important topics of the Code include tasks, organization, decision-making and formation of wills in the Executive Board and Supervisory Board, remuneration in management and Supervisory Board, leadership by Executive Board and Supervisory Board, transparency in accounting, auditing and communication, co-determination in companies and liability issues.
According to Maak/Ulrich (2007, p 213), corporate governance is an element of corporate culture and communication and should therefore implicitly be regarded as a "matter for the boss" that can contribute to increasing added value.
In this work, CG is to be understood as comprising rules and methods (DCGC, value statement via value management systems, etc.) relating to structures and behaviour, by which a company is strategically managed and operationally controlled. The relationships between the Board of Management and the Supervisory Board and the various stakeholder groups, both internal and external, are of central importance here (Carroll/Buchholtz, 2006; Thommen, 2003).
Figure 3 is intended to illustrate the connections and terminology by showing how CSR, CG and CC jointly define the corporate responsibility of the individual actors as a "bracket". This concerns the "triple bottom line approach", which combines successful management with demands for ecological compatibility and social justice, and can, as shown in Figure 2 in the pyramid open at the top, also be understood in terms of Porter's (2012) "shared value concept" by placing innovations with social added value at the centre of corporate action.
Figure 3: Corporate Responsibility – Perception
Abbildung in dieser Leseprobe nicht enthalten
Source: Self-elaboration according to (Ernst & Young, 2014).
Figure 4 illustrates the historical evolution of CSR and sustainability by illustrating over the centuries the genesis of a common understanding of corporate responsibility combined with sustainability aspects.
Figure 4: Historical Development of CSR and Sustainability
Abbildung in dieser Leseprobe nicht enthalten
Source: Loew, 2004.
It is important to understand which terms are used with regard to CSR in order to also categorise in terms of the maturity level of a company. In terms of embedding sustainability strategically, most SMEs need to evolve from CSR 0.0 to CSR 2.0, no ifs, ands or buts.
In this Chapter, CSR will be examined in its social context by examining the relationship between ethics, politics and economics, analogous to the Aristotelian triad (Ulrich). This concerns in particular aspects of business ethics, politics and corporate policy, which enter into a symbiosis in the sense of "ethics without economics is empty, economics without ethics is blind" (Homann, 1992).
The integration of ethics and economy can take place on 3 levels, the macro, mezzo and micro level (Remisova, 2020). The macro level concerns state, government and society, the mezzo level refers to enterprises and municipal organisations, while the micro level considers the individual. At the highest level, the ethical issues are primarily related to aspects of fiscal policy. At the middle level municipal organisations, NGOs and private companies are confronted with the legal requirements and framework conditions (commercial code, civil code, trade licensing acts...) to be complied with and at the lowest level stakeholders are addressed as individuals (entrepreneur, employee, customer, consumer...).
Globalisation, digitalisation, disparities, rising educational levels of the population with associated gains in prosperity, technological evolution as well as extensive peace in the western hemisphere are primary dynamics of change which can trigger a critical atmosphere for companies (Carroll/Buchholtz, 2006, p 10ff.; Inglehart, 1989). Values, principles and rules are subject to permanent change and thus also cause a change in society's expectations of companies and their management. For example, the call for new corporate management paradigms is becoming louder by increasingly deviating from the shareholder approach towards a stewardship rate (see Money and Schepers, 2007, Schwerk, 2008), which, based on the principal-agent theory, regards both principal and agent (manager) as "stewards". In this constellation, there are ideally no transaction costs ("agency costs"), as both actors have a stable relationship of trust with each other. Consequently, this also leads to a new (old) understanding of leadership of the "Honourable Businessman" (Klink 2007) who has the well-being of today's and tomorrow's stakeholders in mind and acts to maximise the overall welfare of society. Values play an important role in society through their standardization, structuring and selection functions. They provide orientation and exercise a relief function. If once defined values change or new approaches emerge, one can speak of a change in values. Today, a megatrend towards pragmatism, individual independence as well as hedonistic and material values with a simultaneous increase in willingness to perform and commitment can be observed especially in Western society. The change from materialistic to post- materialistic values is regarded as a higher stage in the evolution of values (Inglehart/Baker, 2000), because it is precisely these values, which are assigned to the individualization process, that influence or promote integration and justice in a democratic society. They lead to increased activities in the field of environmental protection - see also the demonstrations of many pupils within the campaign "Friday for Future" (www.fridaysforfuture.org, 2019) -, to tolerance towards being different ("diversity") or make it possible to demand participation in economic and political decisions. Findings from the 17th Shell Youth Study (2015), for example, point to the first changes in the current youth generation, which, according to Hurrelmann's analysis (2015), is in transition from Generation Y with a pragmatic, explorative attitude and great concern for the future to a new generation that is more self-confident and "relaxed". One symptom of this is the further increase in political interest. For young people it seems to be becoming more perspective again, to be up to date on social issues and, if necessary, to participate in shaping processes. At the same time, young people's view of society and their own lifestyles has deepened. Respect (for culture and their own traditions), recognition (for the diversity of people) and awareness (for the environment and health) are important here. What is conspicuous is the simultaneously growing concern with regard to international politics. At 73%, young people most frequently cite possible terrorist attacks as a risk and problem area that frightens them. The second most common concern, at 62%, is a possible war in Europe. Young people have little fear of immigration and refugees, but more fear of increasing xenophobia.
The theses and findings of the aforementioned studies are of great importance for the topic of CSR as a framework description and future barometer for social developments in Germany. They demonstrate the great importance of social commitment in German civil society. But what does it look like when these people work professionally in (globally active) organisations and make decisions?
„Makers have a positive relationship to values that motivate an active and versatile way of life" (Rose, 2007). Following Kohlberg/Levine/Hewer (1983) and Piaget (1983), these personality characteristics also apply to young managers in organisations. As mentioned earlier, calls for virtuous action by economic actors are becoming louder and louder, whereby the " Honourable Businessman of the Modern Age " can only have an effect in everyday business life if appropriate framework conditions are in place which, among other things, support the development of rules and structures and a perspective-enhancing, cross-cultural understanding of values (Beschorner / Hajduk / Schank, 2011).
A further critical aspect with regard to CSR relates to the new legitimacy of companies, which have to reassess their social responsibility role against the background of social change. Schwab (2007) formulated one of today's challenges as follows: "Today, in the face of the new revolution that is bringing power back into the hands of individuals, a new imperative seems to be gaining ground as a fundamental political principle: to protect the collective from the individual, justified by the argument that the individual may have destructive capabilities that few countries have had in the past. Where is the balance in this collective vs. individual struggle? Only when we find this new balance can we hope that a flatter world will contribute to the well-being of all of us".
There are companies with a potency comparable to that of states. In 1999, the five largest companies in the world reported total sales that exceeded the combined gross domestic product of 182 countries (Hillemanns, 2004, p 2f). The 100 largest economic units in the world were distributed among 51 enterprises in only 49 countries (Anderson/Cavanagh, 2000). Companies such as the US Wal-Mart Group, Google, Facebook or Amazon, to name but a few, dominate their industries with negative consequences in the form of monopoly structures that destroy overall welfare (Varian, 2011). This relationship between economic size and the associated power that goes along with it illustrates the role of CSR and lends a new dimension to the terms "enterprise" and "social responsibility". Until now, the duty of care for society was attributed to the (national) state and its public institutions, but now large internationally active companies (MNEs) in particular can proactively shape and assume the demand to assume such tasks. In the context of the necessary cooperation of such MNEs with small and medium-sized enterprises (SMEs), the role of these SMEs within the overall value chain is becoming increasingly dominant in order to be able to meet the social needs for sustainably produced products. In addition to the regulatory aspects, the views and philosophies of how to run a company, which are examined in more detail in the next Chapter in the context of business ethics, play an important role.
As already mentioned, value-oriented corporate management and ethically motivated business conduct play a major role in the CSR debate. Various scandals in recent years (Enron, Siemens, Ford, VW, Wirecard…) have revived the discussion as to whether economic actors operate in the interests of society or whether they tend to maximize their own profits in the interests of shareholder strategy. This is expressed in the consequences of world poverty (Chomsky, 2001; Stiglitz, 2002) and credibility crises of companies and their managers, or in a nutshell, through the "use of power" (Carroll/Buchholtz, 2006, p 16).
This conflict of interest between profit and morality (Suchanek, 2005; Carroll/Buchholtz 2006, p 213) is illustrated in Figure 5 on the basis of the phenomenon of "corruption" using the term "spiral of collective damage" as an example (Pies et al., 2005).
Figure 5: Corruption Dilemma - Pay-out Matrix
Abbildung in dieser Leseprobe nicht enthalten
Source: Self-elaboration.
If one applies the "moralizing approach" for the desired change of the quadrant Q III to Q I and refers the corruption disposition to the character traits of the actors who are in the area of tension between realizing their own interests and adhering to moral actions, it can be assumed that this approach will be less successful in a dilemmatic situation of the "corruption race". As long as the relationship between self-interest and morality, called "trade-off", is not "harmonized" by appropriate incentives and the actors have to subordinate their self-interest to the welfare of the community, the moral approach can be described as less promising and exposed to the danger of succumbing to the "paradox of corruption". Looking at the role of the state, a ”punitive approach” can deter potential perpetrators by negative sanctions. Tightening criminal law is the paradigmatic example for this approach. However, this approach is aimed at changing the framework conditions for action and not at changing the underlying motivation for action, so it can be assumed that this state prevention approach has only a limited effect in the fight against economic methods that damage society. It can therefore be stated that morality and law alone are not capable of institutionalising sustainable economic activity for the benefit of society and require further support, which can be described with the approach of "self-obligation“ of companies. Together, the socially harmful state in Q III can be overcome and transferred into the desirable status of the 1st quadrant by directing the self-interest of the actors into socially beneficial paths by means of positive incentives. In their own interest, companies have to set the framework for their future conditions of action. This means that companies should assume regulatory responsibility in order to secure or restore legitimacy for their actions in the future. This approach of "self-obligation" (see also Chapter 1.3.2.2) with the resulting positive incentives for the actors is successfully practised by companies such as Siemens AG - details can be found at (www.siemens.com, p 3).
CSR can therefore reconcile this area of conflict by understanding the cause-and-effect relationships between ethics, politics (state) and economics (enterprise) explained above, which can be illustrated and made possible by different approaches to business ethics. For example, in contrast to Ulrich's (2001) integrative business ethics, which attributes ethics a dominance over economics, Suchanek's approach to economic business ethics is shaped by the "idea of a successful, lasting social cooperation for mutual benefit" (Suchanek 2005, p 72). Economic ethics represents "an attempt to reconcile our moral intuitions with reality, and that means in particular: Morality should not be brought into position against self-interest, but self-interest should be used in the name of morality" (Suchanek, 2001, VIII), or self-interest should thus be instrumentalized as a "decisive driving force on the way to the common good" (Kluge 2003), whereby Pies/Sardison (2005) advocate „mutual improvement as a regulative idea for the development of the world order". Siemens (www.siemens.com, p 26) describes in the foreword to its compliance system that the work on the system will never be completed and that its efficiency and practicality must be continuously improved and that the risk analysis in the preventive area must be adapted to the constantly evolving business. However, the multiplier effect of Siemens AG and other multinationals as "moral actors" (Noll 2002) can help to define principles on the basis of minimal morality that place justice, reliability, social care and sustainability at the center of economic activity. Thus it seems feasible to develop and establish a corporate culture that experiences social and economic acceptance worldwide. This process, however, requires "long staying power" and requires not only a dialogue between cultures but also a categorical understanding of ethics and economics (Pies, 2002).
CSR should not only be seen as a concept of the European Union or the United Nations, but rather as common values and fundamental rights (Commission of the European Communities, 2001) that can be practiced in the dialogue of all stakeholders. The new business ethics is incorporated in the form of traditional values and norms into those "mutually advantageous rule arrangements" (Pies/Sardison, 2005, p 193) that will be examined in the next Chapters.
It is not only through Generation Y and Z that new (old) values (again) become important, such as sense fulfilment and compliance. It is of utmost importance for a functioning organisational construct that the corporate culture is characterised by integrity and trust, to which CSR is definitely capable of making a great contribution.
Many studies have identified various competitive advantages that can be summarized as follows (Arthur D. Little, 2003; Bertelsmann Stiftung, 2007; European Commission, 2015; Pohle et al., 2008; Hoffmann et al., 2008; Clausen et al., 2009; McKinsey & Company, 2009):
- Cost efficiency (energy efficiency, material efficiency).
- Risk reduction, improvement of risk management.
- Building and protecting the reputation.
- Increase of the motivation of the employees.
- Attracting and retaining talent ("War of Talents").
- Promoting innovation.
- Consolidation of customer relationships.
- Development of new businesses through new products and / or development of new markets.
- Improvement of investor relations.
Various studies have also been carried out relating directly to the relationship between CSR and financial performance, with the result that CSR does not in principle have a negative impact on financial performance, there is a positive relationship between CSR and financial performance in some individual cases and sectors, and there is an increase in the importance of sustainable investments (Orlitzky et al., 2003; Margolis et al., 2003; Bank Sarasin, 2008). The world's largest asset manager Blackrock (Handelsblatt, 2019) is convinced that "the future of investing is sustainable". His thesis is supported by the figures that the volume of global capital invested according to ESG principles for 2021 is estimated at more than 23 trillion US dollars, which corresponds to a quarter of total assets under management worldwide.
Figure 6 summarises the advantages of CSR by referring to the size of the company (Loew et al., 2010). The small companies (up to 49 employees) in the focus of this thesis gain advantages in the areas of employee motivation, low fluctuation, cost efficiency and the opening up of new markets and can therefore identify CSR as a business case.
Figure 6: Competitive Advantages through CSR
Abbildung in dieser Leseprobe nicht enthalten
Source: Self-elaboration according to (Loew et al., 2010).
In addition to the mindsets of all parties involved, established agreements, such as codes, value management systems and controlling - reporting systems, which are transparently verifiable within the framework of a quality management system, guarantee a successful sustainability system. In the following Chapters the characteristics of a value management system, trends in reporting systems and the sustainability balanced score card as a cost accounting instrument will be presented (Kober et al., 2021).
The goal of a VMS is the sustainable and inclusive securing of the company in a legal, economic, ecological and social sense. Methodically a value - oriented organization and behavioural control is created through self - commitment. The value pairs of the company regarding morality, cooperation, performance and communication are to be related to each other so that they provide the enterprise a specific identity and orientation for decisions. The value management system basically refers to all relevant areas of corporate governance such as: Environmental -, Personnel -, Quality -, Risk Management and Corporate Citizenship. Regarding compliance and value orientation "Doing the right things" and "doing things right" applies. Value management systems which are only right-oriented fail because of their lack of persuasive power whereas value-management systems which are only value-oriented fail due to their lack of operationalization. For the long - term safeguarding of legal entrepreneurial behaviour the introduction of corresponding guidelines is indispensable. By implementing corporate core values and behavioural principles identity - building and orientation -giving principles can be manifested. By integrating VMS into the strategy structure and culture of the company motivation of employees can be increased and can help in resolving conflict situations. Value management consists of at least four mandatory elements which in turn are composed of 10 building blocks (declaration of fundamental values, strategic orientation, implementation, model / autonomy, resources, communication, motivation, evaluation, documentation, evaluation). This Chapter will not elaborate on the 4 main steps "Codification" - "Implementation" - "Control" and "Organization". Details can be found in Wieland (2003). Various practical reports show that the VMS is not only an effective initiative to prevent manipulation and corruption but also represents a comprehensive value - oriented management approach and thus creates the conditions for sustainable economic success in, inter alia, the construction industry (EMB-Wertemanagement Bau e.V., 2007).
The instruments for mandatory reporting are on the rise. The Carrots & Sticks report (2016) identifies a total of 383 sustainability reporting guidelines in 64 countries, compared to 151 in 32 countries in 2010. The pressure for SMEs to participate in sustainability reporting can come directly from MNEs. For example, MNEs based in the European Union must comply with the respective national implementation of the EU Non-Financial Information Directive, which requires sustainability reporting from all suppliers. Small companies may also be subject to reporting requirements if there are no national reporting guidelines. Ethical, fair trade and organic labels are increasingly used and SMEs are aware of this trend and understand the benefits of qualifying for such labels to meet the expectations of consumers. The sustainability reporting cycle can thus create awareness and internal understanding, leading to new opportunities for small enterprises to succeed in the market for environmentally friendly and ethical products. Other stakeholders will look directly at the Sustainability Report to find relevant information, such as governments in public procurement or companies establishing relationships or partnerships. A handful of countries such as Chile and Spain have introduced initiatives that include support for SMEs to take on sustainability reporting based on use of the GRI Standards. In Spain, for example, the government of Catalonia with the Chamber of Commerce initiated this as part of a CSR action plan with a group of SMEs (Carrots & Sticks, 2016, p 17). Companies are encouraged to rely on one of the internationally recognized instruments such as the Global Reporting Initiative-Framework, the UN Global Compact Principles, the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises, ISO 26000, the ILO Tripartite Declaration of Principles concerning multinational enterprises and social policy and European Eco-Management and Audit Scheme (EMAS).
According to a study by PwC (2018), the following findings are available which can be categorized with regard to scope, location, business models, nature, minimum aspects, performance indicators, target measures, non-financial risks, audits and frameworks.
The average volume of reporting for all segments of the stock exchange under review is approximately 23 pages. The largest average concentration is between 10 and 19 pages.
The numerous options provided under commercial law for locating the Non-Financial Statement (NFS) have been used extensively by the companies. The DAX 160 segments examined practiced non-financial reporting for the most part outside the management report. The DAX 30 companies chose the option of full integration into another reporting system much more frequently than the other segments. In the TecDax, the majority of companies opted for an independent report on the website.
For the first time, the CSR Directive Implementation Act creates the obligation under commercial law to report on the business model. 85% of the companies considered operate with references to the presentation of the business model in the management report, which was already mandatory in the past for the application of the German Accounting Standard.
Statements on materiality considerations are not an obligatory part of non-financial reporting. As expected, 91% of the DAX 160 companies focus quite uniformly on the business relevance known from management reporting. Three-quarters of the DAX 160 companies take up the fact of impact relevance in their reporting. At 85%, this is done most frequently by DAX 30 companies and least frequently by the SDAX at 66%. The fact that 71% of the companies report on a stakeholder survey with regard to materiality assessment shows the strongly diverging materiality definitions between the German Commercial Code and, for example, GRI and illustrates the associated complexity for the author, which often led to a multi-dimensional consideration of materiality.
The commercial requirements specify five minimum aspects (environmental, labour, social, respect for human rights and the fight against corruption and bribery). 69% of the companies surveyed report on five aspects. Accordingly, significantly fewer companies make use of the possibility to report on more or less than five aspects. As a result, users generally follow the structure prescribed by law very closely. All companies report on employee issues. In addition to the minimum aspects, customer satisfaction and product safety are the most frequently reported topics. Non-financial reporting is based on the management approaches followed by the company management with regard to aspects and facts.
In addition to the objectives and measures pursued, the presentation of the so-called concepts also includes statements on the achievement of objectives. This usually takes place analogously to financial reporting with the aid of performance indicators. The percentage of employee indicators in all reported NFSs is highest at 37%, followed by environmental indicators at 27%. On average, 4 key performance indicators are reported for employee issues and 3 key performance indicators for environmental issues. The companies surveyed rarely use non-financial performance indicators for management purposes. Due to the lack of norms for the presentation of objectives and their achievement, qualitative or quantitative measures can be used. Currently, most companies prefer a qualitative presentation of goals and their results. Only in the case of environmental concerns is there a quantitative target formulation of 1.3 greater than one for all the companies considered.
There is no reporting on significant non-financial risks following risk mitigation measures. This is primarily due to the high hurdle of the multiple materiality requirement for reporting non-financial risks. At least some companies point to immaterial non-financial risks that do not meet the materiality requirement. In this context, the negative declaration or failure to report material non-financial risks proved to be very transparent.
Despite the voluntary nature of an external review of the content of non-financial reporting, this has developed to become the market standard at 67%. In the DAX 30 only one company is not audited, whereas in the TecDAX only 48% resort to an external audit. 74% of the companies have the audit carried out by the statutory auditor and choose a limited audit certainty of 94%.
As a framework, the concepts of the Global Reporting Initiative (GRI) were applied the most across all segments with 59%. While no company in the DAX 30 applied the framework of the German Sustainability Code (DNK) as the leading framework, the share in the SDAX and TecDAX was comparatively high at 26% and 35% respectively. At 22%, the application of other frameworks was highest in the MDAX, which essentially comprises the UN Global Compact, the European Eco-Management and Audit Scheme (EMAS) and the UN Sustainable Development Goals (SDGs). Despite the large number of frameworks available, 19% of the DAX 160 companies did not use a framework. The current "GRI G4" framework was replaced by the new GRI standards in October 2016 and is mandatory for GRI reporting since July 2018, which will also be the standard for this work.
In figure 7 the system is graphically demonstrated showing 8 elements applied for monitoring CR- related issues.
Figure 7: Tool System of Corporate Responsibility Managerial Accounting
Abbildung in dieser Leseprobe nicht enthalten
Source: Self-elaboration according to (Dubcova, 2013, p 78).
As outlined in Chapter 1.2.3 using the "moralising and penalising approach", there is a close coherence between morality and law. Regulations within the framework of CSR have a high degree of binding force for companies, whereby German law applies to German companies, which harmonises with the case law in Western industrialised countries. Germany is also a signatory to international agreements such as the United Nations Charter of Human Rights (UNHCR, 1948), the Rio Declaration (UN, 1992), and the ILO (2006), and can be described as a highly regulated country. Since the social market economy in its libertarian form of interpretation propagates the self-responsibility of social actors ("subsidiarity principle"), codes, contracts, standards, industry agreements, indices etc. acquire a binding potential that goes beyond corresponding laws.
In summary some initiatives, standards and indices are shown in Figure 8, based on Dubcova (2013, p 81), followed by a more detailed presentation of the concept of “Self-Obligation”.
Figure 8: Alternative Methodology of CR Managerial Accounting
Abbildung in dieser Leseprobe nicht enthalten
Source: Self-elaboration according to (Dubcova 2013, p 81).
Codes of conduct often contain national and international legal regulations and are supplemented by company-internal codes. These "Codes of Conduct" are to be understood as internal instructions for action which companies postulate in consideration of their individual business context. This methodically enforces values in the organization that provide employees with orientation on how to behave in certain situations ("complexity reduction") and thus represent an important instrument of CSR implementation. They serve as an opportunity to act as “1st movers" on the internal and external environment and to stabilize or expand one's own position of power. Examples include codes of conduct under the auspices of international organisations, industry codes (for the construction industry EMB, 2007), supplier codes, international framework agreements or corporate governance codes (see also Chapter 1.1.3.1) Many of the codes of conduct of organisations refer to international agreements such as the Global Compact, the OECD guidelines for multinational companies or the ILO guidelines and thus also cover the requirements for compliance with the 17 SDGs (sdgcompass.org).
In order to unfold the full effectiveness of CSR with its economic, social and environmental benefits, the application of common methods and tools available on the market is required. In addition to the implementation of integrity measures, including self-imposed commitments to "good corporate governance", this also includes the use of control tools for managerial accounting, regardless of the size of the company. Only in this way will CSR ultimately "materialise".
The theoretical foundations of responsible corporate governance can be clearly described on the basis of various perspectives (Schneider et al., 2015, p 21ff.). For this purpose the maturity model plastically represents the development steps from "CSR 0.0" to "3.0" by means of the CSR pyramid (refer also to Chapter 1.1.1). According to the phenomenological approach sustainable corporate governance can be described as a long - term oriented, value - based concept that demands responsibility for people and the environment. Seven hypotheses describe why companies should assume social responsibility. The ethical business perspective considers the preservation of trustworthiness - understood as an asset - as the very core of corporate responsibility whereby corporate self - commitment is seen as the basis of trustworthiness. The business perspective defines CSR as a "business case", i.e. as a business necessity for doing business (see also Chapter 1.3). As shown in Figure 9 the condition "Q I" is desirable meaning that society and enterprise profit from CSR (profit and moral as complementary goals). Other goals may include business models that are not socially recognized but profit maximized (Q IV -> Q I).
Figure 9: CSR - Added Value for Business and Society
Abbildung in dieser Leseprobe nicht enthalten
Source: Self-elaboration according to (cf. Schneider et al., 2015, p 73).
Further perspectives on economics, sociology and social capital will not be considered here and can be found in Schneider et al (2015, p 89ff.). Summarizing the findings from the previously explained theoretical fundamentals the following aspects can be recorded, especially for SME's: The aim should be to progressively reach "CSR 2.0" according to the maturity model in order to make the "Stakeholder - and "It – Pays – Theory” mentioned in the phenomenological approach effective. Economic ethical aspects with the central concept of trust should always be elementary elements of the business conduct of small enterprises which earn their "license to operate" daily as "Honourable Businessmen". In doing so the business model should be aligned such that sustainable growth is paired with profitable business but not profit maximization.
Many studies collect and analyse data using questionnaires or interviews that are primarily aimed at business leaders (Bertelsmann Stiftung, 2015; McKinsey, 2011; PwC, 2018; WEF, 2003; Wieland/Conradi, 2002; KPMG, 2017), some at marketing/investor relations managers (Hockerts/Moir, 2004; Maignan/Ferrell, 2000), NGOs (Rieth/Göbel, 2005) and citizens (Eberl/Schwaiger, 2004) or consumers (CSR Europe, 2001, 2017). Wider meta-studies are less common, e.g. Margolis/Walsh (2001) examined more than 90 empirical studies and Orlitzky/Schmidt/Rynes (2003) analysed empirical data over a period of 30 years. However, it is difficult to draw a clear picture due to different methodological approaches, with the exception of studies by individual authors such as Maignan (2001), who refer to Carroll's (1979) CSR structure.
Large German companies are increasingly pursuing strategic sustainability management which goes beyond a motivation that justifies legitimacy. Market orientation has thus gained in importance in order to allow proactive, innovative sustainability efforts to bear fruit in the medium to long term. Furthermore, an increased awareness of the integration of CSR into the core business can be observed by applying sustainability management methods which primarily fall within the area of responsibility of the management. Personnel issues are increasingly becoming the focus of attention as the qualification of the workforce is increasingly geared to sustainability aspects through further training. There is a need for action in the areas of finance, accounting and managerial accounting in order to better record and control the effectiveness of CSR measures on business success. With regard to stakeholder management there is further need for optimisation in which more intensive forms of exchange and integration are practiced for the purpose of maintaining and extending the "licence to operate". In order to ensure a closed sustainable value chain across all companies involved in the creation process, it will be necessary in the medium term to anchor binding sustainability issues in SME's as well. Through integrative consideration of ecological, social and economic aspects a win-win situation with prosperity gains for the entire society can be created in the sense of a "triple value".
Two and a half decades after the United Nations Conference on Environment and Development in Rio de Janeiro, the guiding principle of sustainable development has reached the consciousness of politics, society and business. However, many sustainability issues such as climate change remain unsolved and many problems (e.g. loss of biodiversity) have even intensified since then. Not least in the entrepreneurial context it becomes clear that no actor can manage the implementation of sustainable development alone. Instead, it is necessary to motivate companies to cooperate more closely with external partners such as NGOs, state actors or educational institutions. It is essential that in the sense of stakeholder management the interests of all parties involved are taken into account and that all organisational areas within the company are involved in sustainability management. In the recent past around three - quarters of companies have stated that they at least partially link sustainability to their core business, with the focus of their sustainability efforts being primarily on the inside. Market-oriented sustainability strategies could rarely be identified. It was also noticed that some organizational areas are not involved in sustainability management and the effects of sustainability commitment on corporate success in the sense of "good corporate governance" are only measured sporadically. The findings on the current status of CSR in the German companies surveyed, which are presented in more detail in Chapter 1.4.3.2 cover the subject areas of intention, integration, implementation and training. "Intention" subsumes the reasons and motives for the introduction of CSR as well as sustainability management strategies and the currently relevant topics. The Chapter "Integration" examines whether and how companies include sustainability in their core business, who deals with sustainability there and which drivers of a business case are addressed. In the context of "implementation" concrete sustainability measures are analysed by involving stakeholders using management methods and measuring the effects of CSR. Finally, the topic "Training and further education for corporate sustainability" deals with whether and how companies qualify their employees for the implementation of sustainability
In 2019, there were a total of around 3.4 million companies with approx. 30.4 million employees in Germany (Statista 2021). Table 1 shows the number of employees subject to social insurance contributions by number of enterprises, whereby the Federal Statistical Office classifies the enterprises as follows:
1. Micro-enterprises: Up to 9 employees and up to 2 million Euro turnover.
2. Small businesses: Up to 49 employees and up to 10 million Euro turnover and no micro enterprise.
3. Medium-sized companies: Up to 249 employees and up to 50 million Euro turnover and not a small company.
4. Large companies: > 249 employees or a turnover of more than 50 million euros.
Table 1: Number of Employees referred to Number of German Companies
Abbildung in dieser Leseprobe nicht enthalten
Source: Self-elaboration according to(Statista, 2021).
Since 2017, capital market-oriented companies, credit institutions and insurance companies with more than 500 employees and a balance sheet total of more than EUR 20 million or sales revenues of more than EUR 40 million have been subject to reporting requirements. According to a study by the University of Jena 536 companies in Germany are currently affected (Boeckler, 2016). In practice, many small and medium-sized enterprises will also be indirectly affected, for example through the supply chain. Reporting companies are expected to request such information from their subcontractors. At the beginning of March 2017 the “Bundestag” decided that subsidiaries do not have to report and that reporting at group level is sufficient. Businesses must provide information on the non-financial aspects of the environment, workers and social issues, respect for human rights and the fight against corruption and bribery including the following: - Description of the concepts pursued for this purpose, in particular with regard to compliance with operational due diligence obligations; - Results of the concepts pursued; - Description of the main risks arising from the company's own business activities; - Description of the main risks in the supply chain; - Identification of the main non-financial performance indicators relevant to the company's business activities. National, European or International Frameworks can be used to produce the reports. It must be reported whether a framework has been used and if so, which one. Otherwise it must be shown why there was no framework used. The principle of "comply or explain" applies. It is advisable to refer to well-established standards such as the guidelines of the Global Reporting Initiative, the principles of the UN Global Compact, the OECD Guidelines for Multinational Enterprises, ISO 26000 or the German Sustainability Code “DNK”.
What is right is what meets the requirements - what is common practice what keeps the effort in moderate proportions and is used in the industry. The information has to be integrated into the annual report after a certain period of time and must be made publicly available on the company's website for ten years. The information must be provided within four months of the balance sheet date. There is no obligation for the auditor to check the content of the financial statements. The latter only has to check whether the reporting has been submitted. This reporting is to be reviewed by the Supervisory Board which may also commission an external review.
In order to reflect the practical status and progress of sustainability management, Germany's largest companies were asked 27 questions using a standardized questionnaire. This was based on the Top 500 ranking published by the daily newspaper "Die Welt". This selection was supplemented by the DAX, MDAX and SDAX companies, which are not already among the 500 companies with the highest turnover in the country. The 50 largest banks and 30 largest insurance companies were also taken into account in terms of their total annual balance sheet and gross annual premiums. In the final, 383 companies were sent the link to the survey of which a total of 152 questionnaires from companies from all sectors and ownership structures were considered for the anonymous evaluation, which corresponds to a response rate of 39.7%. The distribution of enterprises in terms of annual turnover (or balance sheet total), number of employees and sector affiliation is such that the participating enterprises well reflect the range of large German Enterprises.
In the following the status quo with regard to CSR in German companies will be presented by explaining the motivation to deal with sustainability management and to what extent corresponding activities are integrated in the companies or how they are implemented. This is accomplished with the help of the thematic blocks "Intention", "Integration", "Implementation" and "Training", which are described in more detail below. The percentages are taken from the "Corporate Sustainability Barometer" study and can be accessed under (Schaltegger 2012).
- Intention
This section will shed more light on the reasons and strategies of corporate sustainability and the sustainability issues currently relevant in practice.
- Reasons: Corporate sustainability management takes place for various reasons. On the one hand, demands from politicians, the public and other social stakeholders put pressure on companies (push factors), e.g. in the form of regulation or media attention (Dyllick et al., 1997). Accordingly, companies strive with their commitment to sustainability to legitimize their actions, their products and their existence in order to obtain the "license to operate". On the other hand, consumer demand or inquiries from investors and the behaviour of competitors can create market incentives that "pull" companies towards sustainability (Meffert et al., 1998). Above all, non-governmental organisations or environmental or social associations, as well as the media and the public, are regarded by large companies in Germany as particularly conducive to corporate sustainability. Suppliers, banks, lenders and insurance companies, on the other hand, are rated as neutral or less supportive.
- Strategies: Corporate sustainability can be pursued with different strategies. On the one hand, sustainability management can help to control risks and reduce costs. On the other hand, commitment to sustainability offers the opportunity to increase sales and reputation by differentiating and developing new markets (Crittenden et al., 2011). A company that takes defensive sustainability measures pays particular attention to reducing risks or costs whereas an offensive strategy aims at realizing opportunities, for example in the form of increased sales or the development of new business areas. In addition, internally oriented sustainability measures serve to achieve internal effects (e.g. promotion of employee motivation), while socially oriented measures are directed at the public or the media (e.g. via an environmentally or socially oriented risk management). Market-oriented measures serve, among other things, to increase sales. A large proportion of the companies surveyed therefore pursue internally oriented sustainability strategies. These are often both defensive (84.2%) and offensive (69.7%). In addition, a similar number of companies pursue a defensively socially oriented sustainability strategy (72.4%). Market-oriented strategies are less pronounced (48.7%) than the aforementioned strategies which also applies to offensively socially-oriented strategies (43.4%).
- Practical relevance: The results of the study show that the companies surveyed are involved in a large number of sustainability issues. Social topics (in particular training, occupational safety and security) as well as ecological topics (energy consumption) are on the agenda. On the other hand, companies are less than average committed to the topic of biodiversity. Companies tend to engage less in social aspects that are more relevant in the supply chain (child-, forced- and compulsory labour). Ecological issues such as energy consumption, emissions, waste and waste water are in midfield. Many companies mention energy and resource-related topics such as water treatment and recycling, comprehensive life cycle assessments, CO2 compensation and energy-efficient buildings as relevant environmental topics for the future. In addition, product-related topics such as product life cycles, environmental financial services or packaging are mentioned. The social issues of future relevance are often internally oriented, such as work-life balance, sustainability in training and socially oriented, such as demographic development, consumer protection and urban development.
-Integration
The following section examines whether companies link sustainability to their core business, how they integrate organizational units and which drivers of a business case for sustainability can be addressed.
- Linking with the core business: Sustainable development requires consideration and integration of ecological, social and economic aspects into the core business (Porter et al., 2006). 94.1% of those surveyed said they linked sustainability in their company to their core business. Most companies establish such links through production, processes and employee training with resource efficiency as the thematic focus. Certification and renewable energies also play a significant role.
- Organizational areas: Sustainability management is a cross-cutting task whose implementation requires the integration of all operational functions and the management (Shrivastava, 1995). However, the management of ecological and social issues is still in development, both in business practice and in science. In addition, different functional areas take on different tasks in companies although functional specialization has increased in many large organizations making the interaction of the areas even more difficult (Steinmann et al., 2005). Accordingly, the ecological and social impact varies significantly from one organisational area to another. As expected, the staff divisions "Corporate Social Responsibility" including Environment, Health and Safety are most strongly affected by ecological and social issues. In addition, the human resources department and management are particularly affected by social issues and the production of ecological issues. Very little is affected by ecological and social issues in the areas of accounting / managerial accounting and financing which in some cases are even classified as inhibiting the implementation of CSR- issues.
- Drivers: The integration of sustainability in companies can succeed if conflicts of trade-off between ecological and social action and economic action are reduced as much as possible and, ideally, added value is created through ecological and social action (Schaltegger et al., 2005). The focus of corporate sustainability is not on the distribution of profits for good causes, but rather on creating economic value in a sustainable way in which "Business Cases for Sustainability" (Chapter 1.3) can be created. There are fundamentally different approaches to business cases, such as increasing efficiency, innovation, cost reduction, employee motivation, reputation enhancement, risk management, revenue growth and business model innovation, whereby the measures most frequently implemented are those that address efficiency increases.
-Implementation
The following section examines how companies integrate stakeholders, which management methods for the implementation of sustainability management can be used and which sustainability relevant topics and impacts are measured.
- Stakeholder involvement: Stakeholder engagement is very important for a company's sustainability management (Schaltegger et al., 1992). On the one hand, stakeholders are in a position to play a significant role in determining a company's sustainability strategy; on the other hand, the successful management of stakeholder relationships by the company can help to strengthen its own legitimacy and secure access to central resources. In addition, active stakeholder management makes it possible to recognize trends at an early stage and to increase the innovative ability of the company (Ruppel et al., 2000). The analysis of stakeholder relationships of companies is based on the classification developed by Krick et al. (2005). A distinction is made between the following successive stages: - Observing the stakeholders; - Informing the stakeholders; - Discussion with stakeholders; - Involvement in decision-making processes; - Networks for joint solution development; - Empowerment; -Transfer of decision-making competence. The analysis illustrates the following: The more (cost) intensive forms of involvement tend to be used less frequently than the basic forms of stakeholder involvement. Accordingly, information (94.7%) and stakeholder monitoring (93.4%) are the most commonly used measures. The application frequency of the more intensive forms of stakeholder involvement is significantly lower: While 86.2% of companies still say they discuss with stakeholders and 85.5% work with them this is still the case for 71.7% of companies for consideration in decision-making processes. Even more intensive forms of stakeholder involvement, such as empowerment (52.6%) or the transfer of decision-making powers (29.6%), are less frequently used. - Management methods: Sustainability management methods serve to operationalize and implement corporate sustainability in corporate practice. This enables ecological, social and economic concerns to be integrated into the day-to-day business of companies. Looking at the ten most frequently used methods for implementing sustainability management it becomes clear that conventional management methods of business management, which are related to sustainability, are the most widely used. Training (92.1%), working time models (87.5%), quality management systems (84.9%), proposal systems (83.6%), incentive systems (77.6%) and, somewhat less frequently, personnel managerial accounting (69.7%) and risk analyses (68.4%) are used. However, methods with a clear environmental or social reference such as the environmental management system (71.7%), social or cultural sponsoring (69.7%) and environmental indicators (69.1%) are also among the top 10 most frequently used methods. Integrated sustainability management methods that take ecological, social and economic aspects into account are used much less frequently despite their high recognition, e.g. the sustainability audit (22.4%) or the Sustainability Balanced Scorecard (11.8%). Exceptions here are the sustainability report (62.5%) and the sustainability mission statement (55.3%) which are applied in more than half of the companies surveyed. The least used methods are Socio-Eco-Efficiency-Analysis (4.6%), “Öko-Kompass” (3.9%) and sustainability reporting and accounting (2.6%). The most frequently applied standards and guidelines are the ISO standard families with application rates of over 60%. The GRI guidelines (48.0% in 2016, 59 % in 2018 – PwC, 2018) and the principles of the UN Global Compact (34.2%) are also relatively often taken into account. The most important properties are considered to be the feasibility (40.1%) of the methods and their economic efficiency (30.9%). Flexibility (2.6%) and consideration of the local context (2.0%) are evaluated as less important.
- Recording/measurement: Successful sustainability management requires managerial accounting the ecological and social effects of corporate activity and measuring the effects of sustainability management on economic performance (sales increase, reputation gain...) (Collison et al., 2003). Measuring sustainability performance is also of great importance for external perception and evaluation by third parties (rating agencies) (Windolph, 2011). 93.4% of those surveyed said they recorded energy consumption, while the development of the number of jobs and occupational safety and health was measured at 92.8% each, training at 92.1%, emissions, waste water and waste at 90.1% and water and materials consumption at 86.2% each. The developments in child-, forced- and compulsory labour (40.1%), consumer protection (37.5%), freedom of association / right to collective bargaining (35.5%) and biodiversity (20.4%) are measured the least frequently. The integration of environmental and social measures into the core business requires a successful link with economic activities. Nevertheless, only 18.4% (business model innovation) to 46.7% (efficiency/productivity) of companies state that they measure the impact of their sustainability management on the respective drivers of a business case for sustainability. Of the companies that determine the impact on competitiveness or economic success, more than half see a positive impact of the sustainability commitment on the respective business case drivers and thus improved competitiveness or greater economic success. The impact of sustainability management on innovations (67.3%), efficiency and productivity gains (65.7%) and reputation or brand value (64.3%) is judged most positively. An impairment of competitiveness is rarely seen (maximum 7.0% in the case of costs). The data collected underline that companies still measure the effects of their activities on environmental aspects more frequently than the social effects. However, trends are becoming visible that social issues are also increasingly monitored by measurements.
-Training and further education
The implementation of corporate sustainability requires the involvement of employees (micro-level). Here not only the motivation but also the qualification of the workforce is of central importance (Wilson et al. 2006). The survey on training and further education shows that the majority of companies are generally relatively well placed to meet the demand for qualified employees (56.7%). However, 27.0% of companies claim that they are unable to meet their needs adequately. This shows that there are great differences between companies. By contrast, only 18.9% of those surveyed rated the qualification of the workforce for the design and implementation of corporate sustainability measures as positive, while 45.9% of the companies regarded the workforce as not or not specifically qualified. Here, too, there are major differences between companies. 56.8% of those surveyed cited personal skills as the most important competence for implementing sustainability. Characteristics such as ecological and social awareness, motivational ability and sense of responsibility therefore play a central role when sustainability measures are to be implemented together with the workforce. Personality competence is clearly followed by professional competence on sustainability issues (rated by 27.0% as the most important characteristic), social competence (10.8%) and methodological competence (2.7%). In order to increase the sustainability competence of the workforce the companies asked most frequently apply further training measures (94.6%). Initial employee training is promoted or competence portfolios are used much less frequently (in 43.2% of cases). By contrast, only about one third of companies recruit new employees with specific sustainability qualifications.
1.4.3.2.D Slovakia
According to the article “Comparison of Perception and Application of CSR in Enterprises of Slovak Republic” (Stojanová et al., 2017) the findings future challenges have to cope with are as follows:
- Lack of information about the concept of CSR.
- Lack of specialists in the field of social responsibility.
- Insufficient financial resources.
- Absence of a legally binding legislative framework.
The results show that companies often use CSR activities intuitively without interconnection to the main strategy, mission or vision of the enterprise. Based on the comparative analysis and its findings the authors formulated the following recommendations complementing the strategy of the implementation of the CSR concept for public and private companies:
- Increase CSR awareness and knowledge especially of the young generation in order to influence their behavior in this area.
- Increase the competence in the field of CSR in general (students, teachers, employees, management).
- Develop CSR awareness and improvement of the Slovak business and management environment.
- Ensure transition from partial activities of corporate social responsibility to the complex systematic (holistic) approach by means of integration of CSR strategy into the companies “DNA”.
According to a survey conducted by the Slovak Compliance Circle (SCC 2015) two out of three respondents see ethical business conduct as a competitive advantage with positive effects in a long - term perspective. As the situation in the public sector is in general referred to as the key part of the corruption problem in the Slovak environment it is encouraging that there are many other factors through which the business community believes it can influence their integrity climate. Respondents stated that leading by example is more important than any set of preventive or consequence measures or overall market atmosphere. It means that in order to achieve fair and ethical business conduct companies must pass through the process of cultural change. Although substantial ethical awareness of employees can be seen today they also indicate their understanding that a long way is ahead of each of them to achieve adequate application of ethical principles. According to an idea in the theory of business ethics integration of ethics and economics takes place at four levels – individual, organizational, macro level and global. At each level different subjects bear responsibility for development of ethics: a particular person at the individual level; owners and management at the organizational level; state, parliament and justice at the macro level and international organizations with worldwide impact at the global level. Changes in business ethics at one level influence business ethics at other levels. The ideal situation for growth of business ethics in practice occurs when all levels demonstrate interest in systematic expansion of ethics in the economy. The results of the SCC survey prove that the determining factors for development of business ethics within the examined organizations appear to be internal whereas the incentives and stimuli from the macro level (public sector) are not so relevant. This correlates with the findings of a survey conducted about codes of ethics from 1996. Based on this results organizations will play the key role in development of the business ethics, not the macro level. The cause of the situation goes back to the 90’s when intentional transformation from centralized to market economy began in Slovakia. Politicians managing the process put emphasis on creating a legislative framework of a business conduct whereas the moral aspect was not so important. According to a global fraud report published in 2014 Slovakia ranked the fifth most corrupt of 28 EU countries (Ernst & Young, 2014). 56 % of Slovak respondents consider corruption widespread in their country (the global average is only 38 %) and 62 % of Slovak managers would use bribery / corrupt practices in order to win business. At the same time 22 % of managers state that it is common practice to use bribery to win contracts. The Slovak Republic is among the top five countries worldwide with high tolerance of excess expenses for representation and the provision of personal gifts or services in order to win orders. Only 18 % of surveyed Slovak companies have whistleblowing hotlines installed compared to 96 % in the USA. 60 % of respondents from Slovakia feel that non-ethical practices can be justified to meet financial targets. Anti-bribery and / or anticorruption policies and code of conducts are implemented in only 64 % of organizations. This is far below the global average of 81 %. Only one out of four respondents form Slovakia attended anti - bribery / anti - corruption training, which is below the global average (47%). The implementation of a whistleblowing hotline was discussed by the National Council of the SR and as a result since 2015 a whistleblowing hotline must be implemented by employers with more than 50 employees.
As demonstrated in this Chapter it is absolutely necessary to practice sustainability and carry it into the company in the form of "good corporate governance". This applies equally to large, medium-sized and small companies, which, as already described, operate self-interested in the sense of "triple value" in addition to the creation of societal advantages and thus earn and preserve their "license to operate".
The focus of this thesis will be on the economic perspective and will aim at providing small companies from the construction business with practice-relevant instructions on how to implement CSR in their companies. In particular, topics of corporate strategy are considered with the materiality criteria relevant for all stakeholders concerned and correlations to economic performance are established by systematically integrating employees, customers, suppliers and investors into the implementation concept.
According to Bassen et al. (2005), CSR is understood as interaction with these stakeholders, with the stakeholder theory shaping the CSR discussion and referring to the type of stakeholder, norms and values. Here the earlier understanding of shareholders as the most important corporate target group (Friedmann, 1962) has changed and was substituted by the concept of the so-called relevant stakeholders (Clarkson, 1995). The circle is, however, extended to the general public, since otherwise there may be a threat to the existence of companies through non-observance of this social group (Andres, 2004). Studies that focus on employees or executives consider aspects such as employee incentives (Maignan/Ferrell/Hult, 1999), increasing the number of employees (Maignan/Ferrell, 2004, p 13), increasing productivity, ethical behaviour and ethical decision-making (Anand/Ashforth/Joshi, 2004). The ethical behaviour of managers is of particular interest in the CSR discussion because it is seen as one of the causes of the various corporate scandals of recent years. In an experiment with 34 active managers of US companies, Rose's study (2007) shows that the decisions of managers are conditioned by their own perceived legal obligation. Although they are attributed high ethical and moral values and recognize the ethical dilemma, their decisions follow a hierarchy of responsibilities that puts compliance with the law first, followed by fulfilment of obligations to stakeholders. Rose concludes from this insight that additional ethical training, for example, has only a limited influence on management decisions.
As already in Chapter 1.2.1 mentioned, in the literature a new paradigm characterized by a change from a shareholder - oriented model to a stakeholder - oriented approach based on the stewardship theory is described and particularly in the light of increasing environmental management - and corporate scandals, the shareholder - oriented version of the principal - agent theory is increasingly being questioned today. Principal - agent - relationships, which represent the contract-theoretical perspective of organizations, are characterized by the fact that the principal delegates decision-making authority to the contractor / agent, and the latter acts only conditionally in the interest of the former and instead pursues its own goals. Consequently, the agent will only fulfil the principal's mandate optimally if the interests of both parties coincide. The basis of all principal - agent relationships is the different risk -, information - and interest distribution prevailing between client and contractor (Beckmann, 2006; Grothe, 2006). The following four problem characteristics can occur through the delegation of tasks (principal -> agent) (Jost, 2001): - Hidden Characteristics: The agent has properties that the principal cannot determine before the contract is concluded. These can be either desired (but not existing) or undesired (but hidden until the contract is concluded) characteristics. - Hidden Information: In the decision making phase, the information situation of the agent remains hidden from the principal, making it either impossible or only possible at high cost for the principal to assess the agent. - Hidden Action: Due to (the frequently encountered) spatial distance and lack of monitoring mechanisms, the principal is only able to observe the agent's behaviour to a limited extent, which can tempt the agent to either reduce the quality of his performance or to perform actions that cannot be observed ex post. - Hidden Intention: The true intentions of the agent remain hidden from the client. He is dependent on loyalty and must avoid self - motivated actions of the agent, which can have a negative effect on the achievement of his goals. The problem areas outlined above, which arise as a result of delegation relationships, cause agency costs, which can be composed as follows (Jensen and Meckling, 1976): - Monitoring Costs by satisfying the principal's need for information and steering the agent. - Risk Premiums received by the agent (e.g. in the form of variable remuneration components). - Opportunity Costs. They arise when the agent makes decisions that are detrimental to the principal (e.g. through reduced work performance). In the following, some approaches to solve problems caused by information asymmetry will be presented: - Screening: The principal informs himself about the qualities of the candidate prior to the conclusion of the contract. - Signalling: Agents with above - average qualifications can market themselves by disclosing references. - Vertical Integration: The principal should be protected from the agent's unfairness, which can be achieved by long - term contracts, securing rights of disposal or social values - and penalty systems. - Motivational and Incentive Systems: The principal is interested in a high level of effort on the part of the agent and can try to motivate higher performance through performance - related variable salary components. - Information and Control Mechanisms are used to ensure that the principal is fully informed about the agent's behaviour and the extent of external effects. Examples of this are, inter alia, the Supervisory Board, the duty to prepare and audit external financial statements by independent auditors and the voluntary obligation of management to provide information in the context of investor relations. Under normal circumstances, it can be assumed that conflicts of interest arise between owners and management, the reasons for which may be as follows (Mustaghni, 2012): - Empire Building: If the investment policy of the manager is not oriented towards the interests of the shareholder ("value increase"), but follows the maximisation of his own benefit, this is done in order to increase the sphere of influence as well as the income of the agent. - Short - Termism describes the manager's focus on short - term success. Agents can be motivated by false incentives, e.g. to increase the share price in the short term through an underinvestment not observable by the shareholders (reduction of expenses for employee training etc.). - Quiet Life: According to Bertrand and Mullainathan (2003), managers tend to lead a "quiet life" and therefore avoid critical decisions. - Hybris: The hybris hypothesis expressed by Roll (1986) states that a certain form of over - investment problem is due to the manager's (inappropriately) optimistic view of future earnings developments. In addition to over - investment, there may also be an increase in indebtedness if the optimism does not lead to an increase in equity. - Herding occurs when managers imitate strategies of other managers instead of making decisions based on their own information. From an agent's point of view, this strategy is the lower - risk variant, because as Zwiebel (1995) shows, "strategy imitators" are rated higher by the market. - Low-Risk Investment Policy: Managers generally pursue a low - risk investment policy with a high degree of self - financing, which effectively counteracts the risk of bankruptcy and the associated loss of their assets. - Consumption on the Job: Agents benefit from the consumption of corporate resources (e.g. luxurious office furnishings, company cars etc.).
As already mentioned above in the case of the areas of tension caused by delegation, costs caused by conflicts of interest can also have a negative impact on company evaluation and the success of the company.
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