As investors increasingly grapple with how to assess “sustainable” business practices and their impact on corporate performance, a new non-profit organization has launched to develop sustainability accounting standards for use by publicly listed U.S. companies in their disclosure statements to the Securities and Exchange Commission.

The Social Accountability Standards Board (SASB) “will be the U.S. voice for material non-financial issues and how to recognize and account for them as part of corporate reporting,” said Jean Rogers, the organization’s Executive Director. “The standards we develop will promote sustainable value creation and ultimately enhance the competitiveness of all U.S. industries on the most pressing challenges facing industry and society today.”

SASB aims to develop reporting standards and benchmarks for environmental, social and governance (ESG) issues that will enable companies “to communicate their ESG performance on the issues most material to their sector and strategy” while helping investors to “enjoy a complete view of risks and opportunities of issuers, and be able to weight portfolios according to sustainability risks.”

SASB was founded by Rogers, a Ph.D. and management consultant who has previously worked with the Global Reporting Initiative on development of the G3 corporate sustainability reporting guidelines; Steve Lydenberg, a partner in Domini Social Investments and founding director of the Initiative for Responsible Investment at Harvard University; and Robert Eccles, Ph.D., of Harvard Business School, who serves as Chair of the SASB board.

Drawing a comparison with the Financial Accounting Standards Board (FASB) – which has since 1973 set standards for financial reporting by companies to the SEC – SASB said it will establish standards “that are concise, comparable within an industry, and relevant to all 35,000 publicly listed companies in the U.S.”

As its first initiative, SASB said it will produce a “Materiality Map” that weights the priority of sustainability issues by industry across 10 sectors, which “would be useful for asset allocation strategies and understanding exposure to certain kinds of environmental, social, and governance (ESG) risk.”

SASB will differ from the Global Reporting Initiative, Roger said, in that it will be industry-specific and focused exclusively on U.S. companies.

In an interview, Rogers said the first industry sector to be addressed by SASB would healthcare. “We’ve spent about three months intensely engaging with investors and companies and with all industries in that sector” - including biotech, pharmaceuticals, medical supplies, healthcare delivery and managed care, Rogers said.  Draft standards will be followed by “a long tail” of public comment, review and redrafting, “then finally we’ll be ready for piloting,” she added.  SASB’s plan calls for standards to be developed by industry-specific research teams.

Corporate members of SASB’s Advisory Council include Morgan Stanley, JP Morgan, Weyerhaeuser, Timberland, Ingersoll Rand and Deutsche Bank.

Rogers said SASB’s initial three-year budget is about $12 million; about $4 million of that has been raised thus far.  One early financial supporter of SASB has been news and information provider Bloomberg LP, which has its own ESG data and analytics product.  Other backers include the Metanoia Fund the Rockefeller Foundation.

The SASB launch comes as many companies complain that they’re suffering from sustainability reporting fatigue, with requests for ESG information from numerous organizations with varying standards.  A September 2012 survey by GreenBiz Group of 341 companies – most of them large, with annual revenues of more than $1 billion -  found that more than half (53 percent) are filling out up to 10 annual surveys from independent groups.  Some sectors are surveyed more than others.  Fourty-four percent of technology companies and 43 percent of those providing basic materials (such as chemicals, oil and gas, and other extractive industries) said they responded to more than 25 surveys.

At the same time, there’s been a proliferation of sustainability ratings lists including market indices (such as the Dow Jones Sustainability Indexes and FTSE4Good Index Series), mainstream media listings (Newsweek’s Green Rankings and Fortune’s Most Admired Companies) as well as long-standing social investor rankings (the KLD 400 Social Index) and other sustainability lists.

In an effort to bring some order to sustainability ratings, last year the environmental group Ceres and the Tellus Institute announced plans for the Global Initiative for Sustainability Ratings (GISR).

SASB’s Jean Rogers said her standards organization would relate to the GISR in much the same way that the FASB relates to a ratings agency like Moody’s.  “We are participating in GISR’s pilot program to develop their rating system, by providing information on what is material in each industry, which they will consider in their rating framework,” she said.

As members of Facebook’s board of directors prepare for the company’s multi-billion dollar initial stock offering next month, they might want to keep an eye on a pesky new public relations campaign directed at them via Facebook and other social media networks.  It highlights what could become a sticky governance issue: all seven directors at Facebook - the world’s largest social network - are men.

“Facebook’s default profile is a white male, but all of its board members don’t have to be,” is the message of  the FACE IT campaign, which cites analyses showing that 58% of Facebook’s users are women, while female Facebookers participate in 62% of sharing on the network and 71% of daily fan activity.  The goal of the campaign, say its organizers, is “to tell (CEO) Mark Zuckerberg and the rest of Facebook’s board that we think their board makeup is a joke! “

While it’s hard to say how Mr. Zuckerberg and his fellow directors will deal with their issue, it’s increasingly clear that the digital communications tools developed by Facebook and others - from blog posts and status updates to tweets and online petitions – are more frequently creating new challenges for senior management and boards at companies all around the globe.  With Facebook now claiming more than 840 million active users around the globe - and networks like LinkedIn and Twitter growing dramatically in size and influence - what happens online is often a critical element in the governance equation.

“The social media phenomenon has made the leap from the consumer world to the board room,” declares a new report from the consulting firm PwC.  “Directors are faced with sorting out how social media impacts the firms that they oversee and their own roles on the boards.”

Digital Dashboards

One source of online activity – posts by employees on platforms such as Facebook, LinkedIn and Twitter – has been an ongoing source of concern for many big companies. Compliance risks include posts that might damage a company’s reputation, defame other employees or management, or disclose confidential information.  While many firms have developed guidelines (like those at Coke and Ford, for example), there’s still considerable uncertainty about what constitutes appropriate policy.  The U.S. government’s National Labor Relations Board has cited a number of employers for taking disciplinary actions based on what the agency calls “overly broad” social media policies.

Beyond employee compliance, however, social networks may be reaching a point where their impact on corporate risk, reputation and operations can’t be ignored in the boardroom.  A new paper from the Stanford Business School - “Monitoring Risks before They Go Viral: Is It Time for the Board to Embrace Social Media?” – suggests that directors ought to pay closer attention to what’s happening on Facebook and elsewhere.

“Directors are responsible for oversight of the corporation,” says the paper. “This includes monitoring and advising the senior executive team as it develops and implements the corporate strategy.  Information gleaned through social media might provide unique and relevant insights into the success of these efforts and supplement the traditional key performance indicators (KPIs) that directors use to evaluate management and award bonuses.”

The authors – Stanford Professor David F. Larker, Sarah M. Larcker and Brian Tayan – argue that social media might alert the board to risks facing an organization in a way that is not currently available.  These risks might include operational risk (how exposed the company is to disruptions in its operations), reputational risk (how protected are the company’s brands and corporate reputation) and compliance risk (how effectively the company complies with laws and regulations).

“Why haven’t more boards of directors made certain that management has a process in place for collecting, analyzing, and responding to this information?” the authors ask. “Do boards actually know what questions to ask?  Can boards distinguish between a good system for monitoring social media and a bad one?”

The paper notes that Procter & Gamble has developed a digital “dashboard” that “uses Bayesian analysis to scan blogs, tweets, and other social media to summarize consumer sentiment about its products and measure brand strength.” P&G Chairman and CEO Robert McDonald reportedly uses the dashboard in reviews of the corporate brand. Similar off-the-shelf programs are available from a number of software suppliers.

Digital Directors?

Understanding the intricacies of social media networks, as well as the broader demands that digital commerce places on many organizations, has also highlighted a need for greater subject expertise among board directors.  According to a survey of corporate secretaries by the executive search firm Spencer Stuart, demand for directors with digital or technology backgrounds increased by 21 percent in 2011 from the year earlier.

“While demand for directors with digital expertise is on the rise, the supply of qualified candidates is small, and those candidates are more likely to have nontraditional backgrounds,” says Spencer Stuart. “This can make recruiting directors with these profiles especially challenging and may require boards to reconsider their perceptions about what an ideal director looks like.”

The firm says “boards should understand that directors with digital expertise may not have achieved the same stature as candidates from more traditional fields; many of these candidates have not reached the C-level, for example. These young, ambitious and, oftentimes, time-starved executives can be more transient than more established executives, and they may be less familiar with the customs of a corporate boardroom.”

One company that has recently added digital expertise to its board is Starbucks, which last year recruited social media entrepreneur Clara Shih as a director.  Shih is CEO of Hearsay Social, a social media platform that enables businesses to engage with customers.  Only 29-years-old at the time of her board appointment last December, Shih has previously held positions at Google, Microsoft and Salesforce.com

“Clara is a true technology leader and will bring fresh insight to our strong and forward-thinking Board,” said Starbucks CEO Howard Schultz. “We could not be more thrilled about the social-media expertise and ideas Clara will bring to our business as we continue to amplify the online experience and interactions Starbucks has with our customers, partners and communities.”

In announcing Shih’s recruitment, Starbucks also disclosed that another director with extensive digital expertise - Sheryl Sandberg, a board member since 2009 - would not stand for reelection.   Sandberg is chief operating officer of Facebook, but not a member of its board.

The good news is that on-the-job misconduct by American workers may be at an all-time low, and when misconduct is detected it’s likely to be reported by co-workers.

The bad news is that whistle-blowers are being retaliated against for their truth-telling at a “shocking” rate – suggesting a “looming ethics downturn” for U.S. businesses.

Those are the primary conclusions of the seventh National Business Ethics Survey (NBES) conducted by the Ethics Resource Center, a Washington, D.C.-based non-profit organization.  The bi-annual report is based on telephone and web responses from 4,683 employees of for-profit organizations during September 2011.

The percentage of employees who witnessed misconduct at work fell to a new low of 45 percent last year, according to the survey, compared with 49 percent in 2009 and a record high of 55 percent in 2007. The leading types of misconduct cited were misuse of company time (33%), abusive behavior (21%), lying to employees (20%), company resource abuse (20%) and violating company Internet use policies (16%).

And those who reported the bad behavior they saw reached a record high of 65 percent, up from 63 percent two years earlier and 12 percentage points higher than the record low of 53 percent in 2005, according to the survey.

However, while reporting was up, the survey found that retaliation against whistle-blowers hit “alarming levels,” with more than one in five (22 percent) experiencing some form of retaliation in return.  That compares with reported retaliation by 12 percent in 2007and 15 percent in 2009.

According to the survey, these were most common forms of retaliation:

Source: Ethics Resource Center - 2011 National Business Ethics Survey

In addition, the survey found, the percentage of employees “who perceived pressure to compromise standards in order to do their jobs” climbed five points to 13 percent, just shy of the all-time high of 14 percent in 2000.

“While most U.S. workers are currently ‘doing the right thing’ by following company standards and reporting wrongdoing when they see it, we see trouble ahead,” said ERC President Patricia J. Harned, Ph.D. “Retaliation against whistleblowers and pressure on employees to compromise their ethics standards are at or near all-time highs. These are factors that historically indicate that American business may be on the cusp of a large downward shift in ethical conduct.”

“The data make a very clear case that if business leaders will take heed of these findings and make ethics a business priority, they can have a dramatic impact on the conduct of their workforce. Risks noted in this report can be mitigated,” said Dr. Harned and former Congressman Michael Oxley, now chair of the ERC board, in introducing the survey findings.

Economy and Social Media

To help explain the “co-existence of widespread retaliation and pressure with historically low mis­conduct and high reporting,” the NBES cited two factors: the sluggish U.S. economy and employees who use social media while on the job.

“Thirty percent of employees agree that bad actors in their company are laying low because of fears about the recession,” the survey reported. “As the economy gets better – and companies and employees become more optimistic about their financial futures – it seems likely that misconduct will rise and reporting will drop, mirroring the growth in pressure and retaliation that have already taken place and conforming to historic patterns.”

As for social networkers, the Center found that 11% of the respondents identified themselves as “active social networkers”– meaning they spent 30% or more of their workday on social networks, even though that was not part of their job – while another 29% of workers devoted at least 10% to 20% of their workday to social networking. A surprising finding to the survey analysts: more than half (51%) of the social networkers identified themselves as “top or middle management.”

The survey reported: “A surprising and worrisome divide exists within the workplace between employ­ees who spend substantial time on social networks and those who do not. Active social networkers report far more negative experiences in their workplaces. As a group, they are much more likely to experience pressure to compromise ethics standards and to experi­ence retaliation for reporting misconduct than co-workers who are less involved with social networking.”

However, the survey found, active social networkers also “show a higher tolerance for certain activities that could be considered questionable.”  Among active social networkers, for example, 50 percent said it is ac­ceptable to keep copies of confidential work documents in case they need them in their next job, compared to only 15 percent of their colleagues. And 46 percent of social networkers said it is acceptable to take work software home to use on a personal computer, compared to only 7 percent of their colleagues.

A new study by analysts at J.P. Morgan concludes that “impact investing” – which is intended to generate social good as well as financial return – could represent a highly-profitable trillion dollar market over the next decade.

Women at water pump in Mozambique

“The market opportunity for investment is vast,” the study (PDF) says, “As this movement gathers steam, we recognize the potential for impact investments to attract a larger portion of mainstream private capital and anticipate that more investors will seek to generate positive social and/or environmental impact when making investment decisions. In fact, we believe that impact investing will reveal itself to be one of the most powerful changes within the asset management industry in the years to come.”

Impact investing, according to the study, can target and benefit different populations: the so-called “base of the pyramid” (BoP), which has been defined by the World Resources Institute as people in emerging markets earning less than $3,000 a year; a broader “base of the pyramid” which includes low-income populations in developed markets; and the broadest group, “which can include those impacted by income-independent factors such as climate change.”

Applying its methodology only to the first of those groups - the BoP population in emerging markets – the study identifies five business sectors - housing, rural water delivery, maternal health, primary education and financial services – with potential over the next 10 years for total invested capital of $400 billion to $1 trillion and profit of $183 billion to $667 billion.

The BoP market opportunity exists, the study says, because ““markets at the base of the economic pyramid are typically under-served by traditional business, which may exclude this population from being considered part of its potential customer base.”

Impact investing is attracting a wide variety of investors “including development finance institutions, foundations, private wealth managers, commercial banks, pension fund managers, boutique investment funds, companies and community development finance institutions,” according to the study.

While these investors have varied expectations regarding financial returns, the study says, increasingly “entrants to the impact investment market believe they need not sacrifice financial return in exchange for social impact. Indeed, many have a regulated, fiduciary duty to generate risk adjusted returns that compete with traditional investments.”

The report notes that J.P. Morgan is a co-founder – along with the Rockefeller Foundation and the U.S. Agency for International Development – of the Global Impact Investing Network, which aims “to accelerate the development of an effective impact investing industry.”

Among other signs of growth, the study says, “large-scale financial institutions such as J.P. Morgan, Citigroup, Prudential and Africa’s Standard Bank are positioning themselves to grow impact investing businesses beyond their minimal regulatory obligations.”

Photo: World Bank

A new study by researchers at Harvard Business School and London Business School concludes that companies which have voluntarily embraced a sustainable business culture over many years “significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.”

The study compares a portfolio of 90 “High Sustainability” organizations that have adopted a substantial number of environmental and social policies since the early to mid-1990s with a similar number of “Low Sustainability” companies that have adopted almost none of those policies.  Financial performance of the two groups is tracked for an 18-year period through the end of 2010.

“We document that sustainable firms are fundamentally different from their traditional counterparts with respect to their governance structure, the extent of stakeholder engagement, the extent of long-term orientation in corporate communications and investor base, and the measurement and disclosure of nonfinancial information and metrics,” the study says. “This is an important finding because it suggests that the adoption of these policies reflects a substantive part of corporate culture rather than purely greenwashing and cheap talk.”

The study – The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance – was authored by Robert G. Eccles, Professor of Management Practice at Harvard Business School; Ioannis Ioannou, Assistant Professor of Strategic and International Management at London Business School; and George Serafeim, Assistant Professor of Business Administration at Harvard Business School.

Performance Metrics

The authors report that an investment of $1 in the beginning of 1993 in a value-weighted portfolio of High Sustainability firms would have grown to $22.6 by the end of 2010, based on market prices.  In contrast, a similar investment in a value-weighted portfolio of Low Sustainability firms would have grown to only $15.4 by the end of 2010.

Using Return-on-Equity (ROE) accounting metrics, the study finds that an investment of $1 in the beginning of 1993 in book value of equity in a value-weighted portfolio of High Sustainability firms would have grown to $31.7 by the end of 2010, compared to only $25.7 for Low Sustainability firms.

Using Return-on-Assets (ROA) analysis, a $1 investment would have resulted in assets in a value-weighted portfolio of sustainable firms growing to $7.1 over an 18-year-period, compared to only $4.4 for a portfolio of traditional firms.

An equal-weighted portfolio of High Sustainability firms also outperformed a portfolio of traditional firms, according to the financial analysis.

Culture of Sustainability

At companies with sustainable business policies, the authors write, boards of director “are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics.”  In traditional firms, the study says, executive compensation based on short-term metrics “may push managers towards making decisions that deliver short-term performance at the expense of long-term value creation. Consequently, a short-term focus on creating value for shareholders alone may result in a failure to make the necessary strategic investments to ensure future profitability.”

“Firms in the High Sustainability group might outperform traditional firms because they are able to attract better human capital, establish more reliable supply chains, avoid conflicts and costly controversies with nearby communities, and engage in more product and process innovations in order to be competitive under the constraints that the corporate culture places on the organization,” the study says.

The study concludes:

Overall, we find evidence that firms in the High Sustainability group are able to significantly outperform their counterparts in the Low Sustainability group. This finding suggests that companies can adopt environmentally and socially responsible policies without sacrificing shareholder wealth. In fact, the opposite appears to be true: sustainable firms generate significantly higher profits and stock returns, suggesting that developing a corporate culture of sustainability may be a source of competitive advantage for a company in the long-run. A more engaged workforce, a secure license to operate, a more loyal and satisfied customer base, better relationships with stakeholders, greater transparency, a more collaborative community, and a better ability to innovate may all be contributing factors to this potentially persistent superior performance, even in the very long term.

In their final analysis, the authors pose several questions that are left unanswered: “What is the optimal degree of a culture of sustainability under various circumstances? Since sustainability involves tradeoffs, both across financial and nonfinancial objectives, and between nonfinancial objectives themselves, the firm cannot optimize across all of them. Choices need to be made.”   And, “since the choices a firm makes are dependent on the overall societal context, how will a culture of sustainability evolve as society evolves?”

One of my ongoing professional amusements involves what I call “The Name Game” – trying to reach agreement with colleagues on what to call the field in which we work.

Michael Porter

Corporate Social Responsibility (CSR) is the longest-standing and still most commonly used term, certainly on a global basis.  For lots of reasons, I prefer a variant of that: Corporate Responsibility.  Still other colleagues, especially in the U.S., embrace Corporate Citizenship.  Sustainability has gained in popularity in recent years.  And then there’s ESG – representing Environmental, Social and Governance issues.

New terms, and variations of existing terms, emerge with regularity.  Individuals and organizations embrace a particular definition because that definition suits their unique culture and goals.

Most terms, however, have one thing in common.  They hold that business and societal interests are not mutually exclusive; in broad terms, what’s good for society is good for business.  Therefore, business has a vested interest in addressing society’s challenges.

You might call it “shared value” – in fact, that’s exactly the term coined and suggested by Harvard Business School professor Michael Porter and Mark Kramer, co-founder with Porter of the FSG social impact consulting firm.

In the cover story of the current issue of the Harvard Business Review – The Big Idea: Creating Shared Value - Porter and Kramer urge business leaders to recognize that shared value is not "about ‘sharing’ the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value.”

Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core.

The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.

Porter and Kramer first addressed the theme of “shared value” in a December 2006 article in the Harvard Business Review, Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility.

In their current article, Porter and Kramaer say there are three distinct ways to create shared value: “by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company’s locations.”

“The concept of shared value resets the boundaries of capitalism,” they write. “By better connecting companies’ success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets.”

Companies employing shared value strategies, according to the authors, include Unilever, Nestlé, Walmart, GE and Johnson & Johnson.

Shared value is a provocative take on what’s happening – and, more importantly, what could happen – when the interests of business and society are aligned.  Porter and Kramer’s article probably won’t resolve the perennial corporate responsibility “Name Game” question, but it is a challenging and valuable analysis, well worth the read.

Photo courtesy of the World Economic Forum.

This article was first published on January 12, 2011.

Requiring that companies report on their environmental, social and governance (ESG) initiatives leads to broad improvement in socially responsible management practices, according to new academic research.

A working paper based on the research - The Consequences of Mandatory Corporate Sustainability Reporting by Ioannis Ioannou of the London Business School and George Serafeim of the Harvard Business School – concludes “that sustainability reporting not only increases transparency but can also change corporate behavior.”

According to the researchers, “mandatory disclosure of sustainability information leads to a) an increase in the social responsibility of business leaders, b) a prioritization of sustainable development, c) a prioritization of employee training, d) more efficient supervision of managers by boards of directors, e) an increase in the implementation of ethical practices by firms, e) a decrease in bribery and corruption, and f) an improvement of managerial credibility within society.”

The researchers applied an econometric model to data from 58 countries regarding laws and regulations that mandate a minimum level of disclosure on environmental, social, and governance matters. These ranged from the Sarbanes-Oxley Act in the U.S. to the King Code of Governance Principles for South Africa.

The paper notes a widespread increase in reporting of non-financial information, mostly on a voluntary basis, over the last decade.  According to the Global Reporting Initiative (GRI), only 44 firms followed GRI guidelines to report sustainability information in 2000. By 2010, the number of organizations releasing sustainability reports grew to 1,973.

“Disclosure of ESG information forces companies to manage these matters effectively in order to avoid having to disclose bad ESG performance to their multiple stakeholders,” the working paper states.

“To our knowledge, this study is the first to show that mandatory sustainability reporting may effectively promote socially responsible management practices and may improve perceptions of corporate social responsibility by stakeholders,” the researchers write. “These results are potentially economically important because socially responsible managerial practices could enhance the competitiveness of a country by generating higher levels of trust in business and its leaders.”

The working paper concludes: “An implication for regulators is that if they want companies to perform better on ESG metrics then reporting could be a useful means to achieve this objective. An implication for companies is that reporting could change the way they conduct business. If better ESG performance provides a competitive advantage and leads to higher economic value, as it has been argued…then reporting could enhance the economic value produced by a firm.”

This article was first published on April 27, 2011.

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• We First: How Brands & Consumers Use Social Media to Build a Better World by Simon Mainwaring

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We First: How Brands & Consumers Use Social Media to Build a Better World by Simon Mainwaring

Reviewed by Michael Connor

The only thing hotter than social media these days may be the business of writing about it, with pundits by the Google-load now relentlessly analyzing the impact on everyday life of technology platforms like Twitter, Facebook, YouTube and dozens of new social apps that promise to connect us all in ways that we’ve never before imagined.

The same might also be said of corporate social responsibility (CSR), with observers and analysts of that movement sometimes seeming to outnumber true practitioners in the field, speculating on how the world could be a much better place if only companies would try harder.

Combining the two – CSR and social media – can lead one to believe a revolution is just around the corner. The theory seems to be that if one could hit a CSR “reset” button on traditional corporate attitudes toward environmental and social issues – while at the same time inspiring consumer action through millions of tweets and status updates – we’d be well on our way to solving many of the world’s pesky and complicated problems.

We First: How Brands & Consumers Use Social Media to Build a Better World is not the first book to suggest a linkage between digital media and social change.  But author and advertising executive Simon Mainwaring is more forceful than many, making a powerful argument to “temper the excesses of free-market capitalism” before proceeding to outline nothing less than a consumer-driven “comprehensive system to build a better world.”

“The application of We First means that corporations must recognize that they are part of society and have a responsibility to create something more than profit,” Mainwaring writes.  “As for consumers, they, too, need to understand that they play a role in preserving the Earth and helping a better form of capitalism take root by requiring the businesses they deal with to become responsible corporate citizens.”

The We First plan for building a better world has two specific elements.  The first, which builds on fundraising precursors such as 1% For the Planet, is what Mainwaring calls “contributory capitalism,” in which every single consumer transaction for products and services globally “would include a contribution toward building a better world.”  The second element is what he calls the Global Brand Initiative, an association of hundreds or thousands of leading corporate brands working together to put their “collective power and resources” to work addressing some of society’s most difficult problems.

Simon Mainwaring

It’s difficult to imagine this becoming reality.   Then again, CSR was a nascent movement only 10 years ago; WalMart embracing sustainability would have been impossible to imagine in 2001.  And the modern Internet was still being born only 20 years ago, before web browsers were introduced.  Who would have imagined then that democratic movements in countries like Egypt and Tunisia could harness the power of status updates and tweets to help overthrow entrenched dictators?

Social media has its limitations, and Mainwaring acknowledges a phenomenon that critics of these new platforms call “slactivism” – slacker activism – wherein “it is easy to sign up on a fan page for a cause and do almost nothing.”  But Mainwaring says the future will be more complex than that, and he outlines six levels of engagement offered by social media which provide “a complex and rich infrastructure for the activist processes of social transformation.”

The hope, of course, is that such “social transformation” will be positive.  It’s also possible that new forms of media could be employed more nefariously for less desirable social outcomes.

In an interview, Mainwaring admits the challenges are huge. “In the context of being realistic, if consumers do not shift their behavior sufficiently, none of this will happen,” he says. “At the same time, we should not underestimate the engagement of consumers both with social technology and with their responsibility to improve the world that they want in the way that they want.”

“Still, the world we want will not be built by fiber optics, cell-phone towers, or social media platforms,” Mainwaring writes. “It will be created choice by choice, in our hearts and minds, and with our hands.” The process could take many years, he says.  At the moment, “we're at about 3 o'clock on Day One.”

Shareholder proposals on social and environmental issues constitute about half of all resolutions in the 2011 proxy season and have become a serious strategic consideration for corporate boards and their members, according to a new report from the consulting firm Ernst & Young.

The report found that the number of shareholder proposals related to environmental issues rose from  from 150 in 2000 to 191 in 2010, while  those proposals garnered average voting support of 18.4% of votes cast in 2010, compared to just 7.5% a decade earlier.

“And it’s not just that there are more of these proposals than there have been previously. Rather, the degree of support for these types of resolutions is growing among mutual funds and other important investors” the report says. “Partly, this is because investors and regulators such as the Securities and Exchange Commission (SEC) are becoming more aware of the reputational and financial risks associated with social and environmental issues.”

The percentage of social and environmental shareholder resolutions that garnered at least 30% shareholder support, “a critical threshold for many corporate board members,” rose from just 3% in 2005 to 26.8% in 2010, according to the report.

The report recommends that board members and senior management work actively to mitigate shareholders’ concerns.  “Failure to respond to a shareholder proposal that receives 50% or more of votes cast may result in votes against directors in the following year,” the report says. “First steps toward addressing shareholder concerns related to environmental risk include understanding their investment philosophies and voting policies; knowing who is responsible for key voting decisions; and becoming familiar with shareholders’ history of activism with other target companies.”

The report notes a 2010 survey conducted by Institutional Shareholder Services, the proxy advisory firm, which found that 83% of investors now believe environmental and social factors can have a significant impact on shareholder value over the long term.

"A growing number of shareholder proposals are linking social and environmental matters to traditional governance issues such as compensation and the qualifications of board members,” Ernst & Young says. “For example, some resolutions advocate tying performance metrics used for determining executive compensation to environmental goals. Others seek to ensure that board members have the environmental expertise needed to deal with sustainability and other environmental issues.”

Social and environmental issues on 2011 proxies make up the largest portion of proposals and focus on issues including political contributions and lobbying, human rights and labor practices, sustainability and greenhouse gases, environmental risk and toxic chemicals, according to Ernst & Young.  “Board-focused” proposals constitute the second-largest category of proposals, focusing on issues such as board composition, independent leadership, majority voting to elect directors and board declassification.

Cash bonuses paid to New York City securities industry employees declined by nearly 8 percent to $20.8 billion in 2010, as Wall Street firms shifted toward more deferred compensation and higher base salaries, according to an estimate released by New York State Comptroller Thomas P. DiNapoli.

For the average Wall Street worker, however, that still translated into a 2010 cash bonus of $128,530, according to DiNapoli’s estimate.   And although cash bonuses were down, it's estimated that total compensation on Wall Street rose 6 percent last year, DiNapoli said.

“Cash bonuses are down, but that’s not an indicator of a weakness on Wall Street,” DiNapoli said. “Wall Street is changing its compensation practices in response to regulatory reforms adopted in the aftermath of the greatest financial meltdown since the Great Depression.  Past practices rewarded short-term gains at the expense of long-term profitability.”

Profits of the broker/dealer operations of New York Stock Exchange member firms, the traditional measure of Wall Street profitability, totaled $27.6 billion in 2010, “making 2010 the second most profitable year on record after the $61.4 billion record set in 2009, which was fueled by federal bailouts, low interest rates, and proprietary trading,” according to DiNapoli.

DiNapoli’s office annually releases its estimate of bonuses paid to securities industry employees who work in New York City.  Bonuses paid by New York City-based firms to their employees outside of the City (whether in domestic or international locations) are not included.  DiNapoli’s office said the estimate is based on tax collections and reflects cash bonus payments and deferred compensation for which taxes have been prepaid. The estimate does not include stock options that have not yet been realized or other forms of deferred compensation.

The securities industry in New York City added 3,600 jobs between August 2010 and December 2010, according to DiNapoli, and trends in unemployment insurance data suggest job gains may have been even stronger during this period.  The securities industry in New York City lost 30,700 jobs during the recession, a decline of 16 percent, or 3.5 times the rate of total job loss in New York City, according to the state comptroller’s data.

An audio file of Comptroller DiNapoli's press briefing on this report is available here.