Strategic Management

Summer 2020; Lecture 10; 29 November

Associate Professor Nazlee Siddiqui
North South University
 Triple Bottom Line

Sustainable Value:

Founders of TBL: Freer • Planet/Environmental Value

Spreckley; John People from strategies of efficient
Elkington
use of planet resources

• People/Social Value from

Planet Profit strategies of well-being of
employees, community
development

• Profit/Economic value from

financial profitability of the
https://hbr.org/2018/06/25-years-ago-i-coined-the-phrase-triple-bottom-line-h business
eres-why-im-giving-up-on-it
Agenda

 Ethics presentation guideline

 Corporate Governance
 Strategy and Business Sustainability
 2030 United Nations sustainability goals:
1.No poverty 2. No hunger 3. Good health and well-being 4. Quality education
5. Gender equality 6. Clean water and sanitation 7. Affordable and clean energy
8. Descent work and economic growth 9. Industry innovation and infrastructure
10. Reduce in equalities 11. Sustainable cities and communities
12. Responsible production and consumption 13. Climate action
14. Life below water 15. Life on land 16. Peace, justice and strong institutions
17. Partnership for the goals

Source: https://www.youtube.com/watch?v=pgNLonYOc9s;
https://www.youtube.com/watch?v=M-iJM02m_Hg
 Targets for SDG 4: Quality education
 Target 4.1: Free primary and secondary education
 Target 4.2: Equal access to quality pre-primary education
 Target 4.3: Equal access to affordable technical, vocational and higher
education
 Target 4.4: Increase the number of people with relevant skills for financial
success
 Eliminate all discrimination in education
 Target 4.6: Universal literacy and numeracy
 Target 4.7: Education for sustainable development and global citizenship

Source: https://sdg-tracker.org/quality-education#:~:text=Goal%3A%20By%202030%20ensure%20equal,per%20year%20for
%20this%20indicator.
 Phases in Business Sustainability (BS)

Padin et al (2019)
1. Nonconformity: This is a stage where the company is not involved in any BS-
related activities;
2. Conformity: This is a stage where the company abides to basic legislative
standards as a result of external forces;
3. Beyond conformity: This is a stage where a company realizes the benefit of BS as
far as it realizes higher return than inputs;
4. Complete integration: This is a stage where BS is incorporated in the regular time-
plan of activities
5. Sustainable company: This is the last stage, referring to a situation where the
company comes into being as a sustainable company
 Ethics issues class discussion/presentation
The 4/5 member group to present answer to any one of the following questions:
 Which phase of the business sustainability (Padin et al., 2019) is your chosen
organisation operating at? You will need to explain two specific business activities
(for example, marketing campaign, material management process) to answer the
question.
 Is your chosen organisation addressing aspects of the triple bottom line (TBL)?
You will need to explain at least two specific business activities (for example,
marketing campaign, material management process) to clarify how the
organisation is either adhering to or not adhering to any two aspects of the TBL.
 Explain how your chosen organisation is addressing or not addressing any two
of the UN Sustainability goals either directly or indirectly. You will need to explain
at least two specific business activities (for example, marketing campaign, material
management process) to answer the question.
 Class discussion/presentation format

 Weighting: 10%
 Presentation to be done on 15 December 2020.
 Each member has to present. Total presentation time is 7-9 minutes.
 At the end of the presentation, each team will engage in a Q & A
session, which can last approx. a minute.
 Questions/response of other students will contribute to class
participation.

Note: If you are having difficulty to choose an organisation, the presentation can be done on the
case study of: “Caring Vision”, “Eastern Housing Limited” or any of the case study organisations
in the text book (e.g. GE, Unilever, P&G)
 Marking criteria of class discussion
 Have you answered the question, covering relevant content
 clarifying the theory (2.5 marks)
 explaining the organisation’s vision and specific examples of
practices in line with the theory ( 4.0 marks)
 Presentation style
 The slides are having intext citation and a reference list (0.5 marks)
 Style of message delivery is interesting to the audience (1 marks)
 Time management (1 mark)
 Answered questions from the lecturer/class appropriately (1 mark)
Questions posed to the class are relevant to the topic
 Governance (Corporate Governance)
 Mechanisms put in place to align incentives between principals and agents
and to monitor issues of information asymmetry and control agents.

An agency relationship arises

whenever one party
delegates decision making
authority or control over
resources to others.
 Corporate Governance
 Governance mechanism also exists to align the interest of the business unit
managers with those of the superiors and likewise down the hierarchy within the
organisation.
 Governance is necessary to ensure achievement of organisational performance
and goals.
 Board of Directors
 Stock based compensation (For example, stock options: The right to purchase
company stock at a predetermined price at some point in the future)
 Financial statements and auditors (Mandatory reporting for public listed
companies in line with GAAP/the Enron case/the role of audit organisation)
 The takeover constraints (The risk of being acquired by another organisation/role
of stockholders)
Board of Director’s role in governance

 Owners elect the board of directors to represent their interest

in the organisation.
 If the board believes that corporate strategies are not in the
best interest of stockholders, it can take measures such as
voting against management nominations/decisions
 The board is legally authorised to hire, fire, compensate the
employees, including the top boss ( e.g. CEO/MD).
 The board is responsible that audited financial statements
present true picture of financial position of the organisation.
 Corporate governance in Bangladesh
 Corporate governance comprises of disciplines to ensure a positive environment for strategic
decisions, including the alignment of incentives between principals and agents, monitoring
and controlling of agents and performance management towards organisational goal.

 Example of authorities bodies on corporate governance:

Registrar of Joint Stock Companies and Firms (RJSC) is responsible for registering companies
under the Company Act 1994.
Ministry of Commerce, administering the Company Act 1994.
The Bangladesh Bank that regulates the financial transactions and organisations in Bangladesh.
the Securities and Exchange Commission (SEC)
The National Board of Revenue (NBR), as the central authority for tax administration in
Bangladesh.
The judicial system in Bangladesh that ensure the rule of law in the society.
 Corporate governance in Bangladesh
 The lesser compliant organisations mostly belong to the family
owned business segments. There is also lack of authority to
provide governance training.

 Areas that corporate governance cover are:

 Board issues; shareholder related issues; issues related to
financial reporting, auditing and non-financial disclosures;
organisational structure and culture.

Source: Ferdous (2018)

Source: Ferdous (2018): List of the least complied provisions of the code (CGI below0.5)
Governance in Bangladesh
 The listed organisations on average comply with 67% of the
voluntary code of corporate governance established by Bangladesh
Enterprise Institute. There is great variance in the score of
corporate governance index.

 Age of the business and compliance to corporate governance

Company age denoted by ‘log Age’ is found to be positively correlated
related with the CGI. The findings indicate that if other things remain
the same, then with a one year increase in the age of the company,
the level of compliance increases by 4.809 units (p <0.05).

Source: Ferdous (2018)

 Governance in Bangladesh
 Profitability
Companies with higher profitability, measured by the ROA, are not more
compliant than the companies with lower profitability.

 Size of the organisation

Company size measured by total assets is positively correlated with the
level of compliance with the Code provisions. The findings indicate that
if other things remain the same then with 1 BDT (Bangladeshi Taka)
increase in the total assets of the company, the level of compliance
increases by 2.461 (p <0.01).

Source: Ferdous (2018)

 Governance in Bangladesh
 Type of Business
Local companies are complying less with the Code as the findings indicate that the compliance
score for MNCs will be more (by 8.24 points) than would be the case for local companies.
In case of J/V and Franchise the level of compliance score increases by 14.496 when compared
against the compliance score of local companies.

 Type of auditors:
The findings do not support that the level of compliance will vary by the type of auditor used by
the companies.

Source: Ferdous (2018)