a study of the market's reaction to superior sustainability reporting as demonstrated by the financial performance of publicly traded companies

Lawrence Technological University
College of Management

A Study of the Market’s Reaction to Superior Sustainability
Reporting as Demonstrated by the Financial Performance of
Publicly Traded Companies

Presented in partial fulfillment of the requirements
for the degree of

Doctor of Business Administration
Derek A. D’Angela


3315101
Copyright 2008 by
D'Angela, Derek A.
All rights reserved

2008

3315101


ABSTRACT

Recent ethical lapses by business organizations and their management suggest that
traditional governance requirements have had less than the desired effect. Legislated
disclosure alone is insufficient as it provides reactionary guidance that fails to address
performance issues since rules can be circumvented and financial data can be tweaked to
reflect its most favorable presentation. The research evaluated sustainability reporting as

an additional resource for reporting on ethical performance and addressed the question of
whether companies that demonstrate ethical leadership through best in class sustainability
reporting performed better than their peers in terms of value creation.

The study evaluated a group of top companies recognized in the SustainAbility Global
Reporters Listing for 2006 against the market performance of securities traded on the
S&P 500 Index during the period of January 1, 2002 to December 31, 2006. The selected
datasets were compared relative to the dependent variables of risk and return to identify
any potential differences in the datasets. The research does not imply causality, as
sustainability reporting itself does not create value. This is also why the study did not
conclude that companies that fail to report on sustainability issues were bad performers;
rather organizations could potentially increase their value by doing more to communicate
their performance. Strong financial performance may encourage enhanced disclosure; in
that case sustainability reporting provides a manner by which organizations can
demonstrate sound financial decision-making. Sustainability reporting may be viewed as
a best in class business process that ethical and operationally efficient organizations use
to communicate their activities.


Lawrence Technological University
College of Management

A Study of the Market’s Reaction to Superior Sustainability
Reporting as Demonstrated by the Financial Performance of
Publicly Traded Companies

Presented in partial fulfillment of the requirements
for the degree of

Doctor of Business Administration

Derek A. D’Angela


COPYRIGHT

Copyright © 2008 by DEREK A. D’ANGELA. All rights reserved


Sustainability Reporting Impact on Financial Performance iv


Sustainability Reporting Impact on Financial Performance v
ACKNOWLEDGMENTS

I would like to express my thanks and appreciation to the many individuals who
have supported me in the completion of my doctoral work. I would especially like to
thank my chair, Dr. Patricia Castelli, for her generous time and commitment. Her
guidance and support were of significant benefit and enabled me to maintain the focus
necessary to complete the program culminating with the execution of this study.

I am also very grateful for having an exceptional doctoral committee and wish to
thank Dr. Frank Castronova, Dr. Vernon Hoffner and Dr. Jacqueline Stavros for their
continual support and contribution to shaping this research. I truly appreciate the time
they took from their already full schedules to provide their particular insight to enhance
the character of the work.

I wish to express my gratitude to the many other individuals who directly
participated or indirectly supported my work during this program including Mike Rinkus,
Dr. Tom Marx, the members of DBA Cohort 1 and the faculty and staff of Lawrence
Technological University. I would also like to offer a sincere thank you to the

individuals who laid the foundation for my interest and success in this program, including
the professors and staff of Eastern Michigan University, Hillsdale College and from my
earliest days at University Liggett School.

Finally, I want to acknowledge the revolutionary thinkers from whom I have
inherited the ethical and free market principals that inspire my research.


Sustainability Reporting Impact on Financial Performance vi
TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION ........................................................................................ 1
1.1 Background ............................................................................................................... 1
1.2 Key Variables............................................................................................................ 4
1.3 Market Assimilation and Reporting.......................................................................... 7
1.4 Capital Asset Pricing Model ..................................................................................... 8
1.5 Purpose of Study..................................................................................................... 10
1.6 Research Question and Hypotheses ........................................................................ 11
1.7 Definition of Terms................................................................................................. 14
1.8 Limitations of the Study.......................................................................................... 16
1.9 Significance of the Study........................................................................................ 17
1.10 Summary of the Issue and Problem Statement ..................................................... 18
CHAPTER 2 LITERATURE REVIEW ........................................................................... 20
2.1 Overview of the Literature...................................................................................... 20
2.2 Corporate Governance ............................................................................................ 22
2.2.1 External Governance........................................................................................ 23
2.2.2 Internal Governance......................................................................................... 26
2.2.3 Professional Standards ..................................................................................... 29
2.3 Ethical Leadership .................................................................................................. 31
2.3.1 Shareholder Theory.......................................................................................... 35

2.3.2 Stakeholder Theory.......................................................................................... 38
2.4 Corporate Social Responsibility ............................................................................. 42


Sustainability Reporting Impact on Financial Performance vii
2.5 Sustainability and Sustainability Reporting............................................................ 45
2.6 Previous Research on the Link between Ethics and Financial Performance .......... 52
2.7 Summary of the Literature Review......................................................................... 56
CHAPTER 3 RESEARCH DESIGN AND PROCEDURES ........................................... 59
3.1 Overview of the Study ............................................................................................ 59
3.2 Research Question and Hypotheses ........................................................................ 60
3.3 Reliability and Validity........................................................................................... 63
3.4 Population and Comparison Groups ....................................................................... 66
3.5 Selection Procedures............................................................................................... 68
3.6 Data Collection ....................................................................................................... 74
3.7 Data Analysis .......................................................................................................... 75
3.8 Summary of the Research and Design Procedures ................................................. 78
CHAPTER 4 ANALYSIS OF DATA .............................................................................. 80
4.1 Introduction to the Analysis.................................................................................... 80
4.2 Research Question and Hypotheses ........................................................................ 81
4.3 Organization of Data Analysis................................................................................ 84
4.3.1 Historical Securities Prices .............................................................................. 85
4.3.2 Calculation of Beta .......................................................................................... 85
4.3.3 Calculation of Growth...................................................................................... 88
4.3.4 Calculation of Beta and Growth by Sector ...................................................... 90
4.3.5 Calculation of Mean and Application of Statistical Tests ............................... 91
4.4 Presentation of Descriptive Characteristics of Datasets ......................................... 94
4.5 Summary of the Analysis of Data......................................................................... 100

Sustainability Reporting Impact on Financial Performance viii
CHAPTER 5 FINDINGS AND CONCLUSIONS ......................................................... 102
5.1 Introduction........................................................................................................... 102
5.2 Findings................................................................................................................. 103
5.2.1 Historical Securities Prices ............................................................................ 103
5.2.2 Findings Relative to Beta............................................................................... 104
5.2.3 Findings Relative to Growth.......................................................................... 105
5.2.4 Calculation of Beta and Growth by Sector .................................................... 107
5.2.5 Calculation of Mean and Application of Statistical Tests ............................. 108
5.3 Conclusions........................................................................................................... 111
5.4 Future Research .................................................................................................... 117
5.5 Summary............................................................................................................... 119
APPENDIX A: Companies Chosen for SustainAbility Global Reporters Listing for
2006............................................................................................................................. 130
APPENDIX B: Multiple Methods Calculation of Key Variables .............................. 132


Sustainability Reporting Impact on Financial Performance ix
LIST OF TABLES

Table 3.1 Global Reporting Initiative (GRI) Sustainability Reporting Guidelines .......... 60
Table 3.2 Companies Listed by Sector as Selected .......................................................... 61
Table 4.1 Calculated Values for the Key Metric of Beta by Company ............................ 87
Table 4.2 Calculated Values for the Key Metric of Growth by Company ....................... 89
Table 4.3 Calculated Values for Key Metrics of Beta and Growth by Sector Group....... 90
Table 4.4 Results of Kolmogorov- Smirnov Test for Normality of Beta and Growth
Distributions.............................................................................................................. 92
Table 4.5 Statistical Results of Student’s T-test Applied to Key Metric of Beta ............. 93
Table 4.6 Statistical Results of Kolmogorov-Smirnov Two Sample Test Applied to Key
Metric of Growth ...................................................................................................... 93

Table 4.7 Summary of Calculated Key Metric Results for the SustainAbility Group ..... 94
Table 4.8 Calculated Key Metric Results for the SustainAbility Group .......................... 95
Table 4.9 Summary of Calculated Key Metric Results for the S&P 500 Sample ............ 96
Table 4.10 Calculated Key Metric Results for the S&P 500 Sample ............................... 97
Table 4.11 Summary of Key Metric Values Calculated Using Company Average ......... 98
Table 4.12 Summary of Key Metric Values Calculated Using Sector Groupings ........... 99


Sustainability Reporting Impact on Financial Performance 1

CHAPTER 1 INTRODUCTION

1.1 Background

The concept of ethics has become a very important issue for business leaders,
regulators and the investing public. Managers face challenges arising from a number of
corporate failures and the resulting concern over corporate ethics (Brower, 2006). The
issue however is not a new one, rather it is the result of a series of abuses over the past 20
years including Wall Street stock-trading scandals in the 1980s and the savings-and-loan
collapse in the 1990s (Martinson and Ziegenfuss, 2000). More recently, corporate
accounting scandals and rapid growth in executive compensation have raised concern
among the public regarding the ethical behavior of corporations and their management.
And new developments surrounding the questionable practice of backdating option grants
creates even greater public demand for increased controls and disclosure (Brower, 2006).

The fact that ethical lapses continue to occur suggests that traditional manners of
responding to such crises have had less than the desired effect. New regulation generally
emerges from a developing crisis, is very costly and eventually will begin to experience
diminishing returns (Tafara, 2006). Compliance programs, like those required under
Sarbanes-Oxley, also have had some effect but fail to address the core issue; if an

organization seeks to reduce the occurrence of unethical conduct it must build an ethical
culture (Gebler, 2006). This raises an interesting dilemma, because ethics is a human trait
and is demonstrated at the individual level (Drucker, 1981). Therefore, a business in


Sustainability Reporting Impact on Financial Performance 2
itself is not ethical; rather it is the individuals within the organization who must exhibit
ethical behavior.

As the leaders of the organization, management must assume responsibility for
establishing the framework for an ethical culture and themselves demonstrating ethical
behavior. To create an effective internal control system, companies must first have good
people and then ensure those people remain good (Buhariwalla, 2006). As such, business
leaders must create a business environment and nurture a corporate culture that
encourages ethical performance.

Recent scandals involving organizations such as Enron, WorldCom, HealthSouth,
Adelphia, Tyco, and even the New York Stock Exchange have represented examples of
ethical failures (Shultz, 2003). Rather than focus on these lapses, attention might be
given to organizations practicing effective governance and which offer enhanced
transparency to their business operations and performance. This perspective is consistent
with the framework of Positive Organizational Scholarship, a field of study that focuses
on the positive outcomes achieved by organizations through the application of effective
processes and the specific attributes of the enterprise and its members (Cameron, Dutton
and Quinn, 2003). Utilizing this approach a thorough understanding of the factors
involved in ethical performance may be achieved, this would help companies and their
management to work to implement the practices of ethical performance rather than
working to avoid the previous mistakes made by others.

Sustainability Reporting Impact on Financial Performance 3
The challenge is not new as the history of the U.S. economy and related industry
is marked by a number of issues that have emerged to test corporate leadership. Labor
management disputes provided early challenges and led to subsequent legislation that has
helped shape the current environment (Schlossberg and Fetter, 1986). Prior to 1929 there
was little support for federal regulation of the securities markets and most investors gave
little thought to the dangers involved; the U.S. stock market crash and subsequent
depression quickly changed the public’s attitude toward regulation. The outcry following
the crash resulted in federal hearings to investigate the matter and led to the Securities
Exchange Acts of 1933 and 1934; included was the creation of the SEC with Joseph P.
Kennedy appointed to serve as its first chairman (SEC, 2006).

The recruitment and management of workers is another theme that in the past has
tested the ethical practices of corporations, as a failure by U.S. companies to implement
fair hiring practices and equal treatment of all employees would lead to further
intervention. The development and enforcement of equal employment laws was required
to address the need for improved application of fair standards (Kohl, 1985). As
companies expand across the globe, new issues continue to emerge. Consumption of
increasingly scarce natural resources can lead to increased competition for those
resources. Leading organizations are seeking guidance on reporting activities related to
environmental issues to proactively address these concerns (Hutchison, 2000).

The corporate landscape continues to evolve and business leaders must adapt to
these changes. As companies continue to grow even larger and expand their operations
globally, managers will continue to be faced with new opportunities and challenges. As


Sustainability Reporting Impact on Financial Performance 4
corporate influence grows, internal and external stakeholders are beginning to require
social and environmental reporting in addition to financial reporting (Ballou, Heitger and

Landes, 2006). This requires sophistication by business leaders to address emerging
issues but also a respect for the impact of their enterprise on others.

1.2 Key Variables

The topic of ethical leadership was explored as a complement to governance
efforts. Since ethical leadership is an abstract issue, the paper explored the subject to
develop a more robust understanding of ethical considerations demonstrated through the
use of sustainability reporting as a means of evaluating financial performance.
Specifically, the research evaluated whether companies that demonstrate ethical
leadership through best in class sustainability reporting performed better than their peers
in terms of value creation. The study assessed the impact of sustainability reporting as
the independent variable to determine whether sustainability reporting had an influence
on firm value. The statistical hypotheses tested are outlined in Section 1.6: of this paper
titled Research Question.

The study focused on two key dependent variables in assessing value:

1) The risk of the firm’s stock based securities as measured by its relative volatility
versus the marketplace


Sustainability Reporting Impact on Financial Performance 5
2) The return of the firm during a five-year period as measured by its stock price
growth during the period being evaluated

These variables were selected due to their inclusion as key variables in the Capital
Asset Pricing Model. The CAPM model asserts that the market demands a higher return
from a firm based upon the relative volatility of the firm’s securities (Kester et al., 1992);
the more volatile the security the greater its risk and therefore the higher its required rate

of return or growth. Volatility is expressed in terms of a beta value that determines the
relative covariance of a specific security to the market; growth is measured as the
appreciation of the security’s value during the same period of time.

The two variables were considered concurrently in the study to ensure that any
discovered variances were not the result of differences driven by the complementary
variable. Because higher returns are required when the volatility of the security is
greater, volatility was evaluated to determine if the price differences could be driven by
market expectations for higher returns. For this reason, volatility was tested to eliminate
that variable being considered as the differentiating factor.

A group of organizations recognized as demonstrating effective sustainability
reporting was evaluated against the market to test the non-causal relationship between
sustainability and risk and reward as the variables of interest. Sustainability was
considered as a manifestation of ethical leadership due to the fact that both sustainability
and ethical leadership emphasize transparency of operations, balancing long-term value
with short-term objectives and the consideration of multiple stakeholder interests. This is


Sustainability Reporting Impact on Financial Performance 6
consistent with a growing recognition among business leaders that sustainable
development should be viewed as part of the business ethics framework (Payne and
Raiborn, 2001). From an environmental standpoint, most competitive and successful
multinational companies embrace the need to protect the environment and conserve
natural resources (Berry and Rondinelli, 1998). Social considerations also play a
significant role in sustainability.

The companies that represented the group evaluated in this study embrace the
basic principles of sustainability. The sustainable enterprise pursues economic profit
while ensuring that they do so in a manner that is not disruptive to people or the

environment (EPA, 2007). In pursuing this “triple bottom line” of people, planet and
profit (Elkington, 1998), these organizations demonstrated ethical leadership by looking
beyond the self-interest of management to the impact of their operations on others.
Shareholders, employees, customers, business partners and communities all have an
active interest in the operations and success of the firm. The challenge for organizations
is to find ways to cooperate with these stakeholder groups while ensuring that they
benefit not only in terms of corporate citizenship but also in competitive advantage
(Elkington, 1994). Balancing these long-term interests against the short-term profit
targets is a key factor in sustainable development (ERB, 2007) and may serve to reinforce
the control structure of the organization and support ethical decision-making. Finance
plays an especially important role as it relates to sustainability because economic
production has an impact on the environmental performance of the firm and financial
development is linked with economic development (Scholtens, 2006).


Sustainability Reporting Impact on Financial Performance 7
1.3 Market Assimilation and Reporting

Public confidence in the reliability of financial reporting enables securities
markets to transact effectively (GAO, 2006). The Efficient Market Hypothesis asserts
that at all times a security's market price fully reflects the true, rational value of the
security (Fama, 1970). This infers that there is an appropriate price for the security and
that the price reflects that true value (Ogden, Jen and O’Conner, 2003). The market price
is set based upon the information available. For this reason, information availability and
transparency is very important, if all market participants do not have equal access to
information price variances may occur. Important information includes the anticipated
cash flows of the firm, associated risk and discount rate. This information allows
informed participants to make decisions about the firm's prospects and enables a fair
price to be set through trading by these informed parties. Three forms of market
efficiency are discussed as weak form, semi-strong form and strong form (Fama, 1970).

In a weak form, the security's price is reflective of historical prices; value must be
derived based upon the historical assessment of the firm by the market. This provides
little visibility to the firm's future prospects but does provide a trended historical
perspective to evaluate the firm.

In a semi-strong form, the security's price is reflective of information that is
available to the public, value is derived from information on recent performance and
detailed evaluation of the firm is possible given certain financial and performance metrics
and ratios. This enables evaluation of management decisions and results of operations


Sustainability Reporting Impact on Financial Performance 8
including use of capital and changes in cash flow. Information may be available through
SEC filings, releases and public comments.

In a strong form, the security's price is reflective of publicly available information
but also includes information that is held privately. This provides the greatest visibility
to the firm's prospects and enables effective pricing of the security. In this case complete
transparency exists and each investor has complete information when making investment
decisions. External parties have the same access and understanding as individuals within
the firm.

As can be inferred the challenge in an efficient market is information asymmetry.
To be efficient information must be made available and the more information that is
available the stronger the efficiency. The form of the market is also dependent on the
characteristics of the players, perceived security and the efficiency of available
technology. Each of these factors impacts the rate of information assimilation and in turn
can impact price.

1.4 Capital Asset Pricing Model

Differences in the availability of information to the marketplace and the uncertain
nature of business results create risk for those seeking to invest in a company’s securities.
For each organization there are two forms of risk, the risk associated with the market in
general and the risk associated with the business decisions and operations of the firm
(Burton, 1998). A company’s securities are evaluated relative to the risk associated with


Sustainability Reporting Impact on Financial Performance 9
the marketplace in general. The Capital Asset Pricing Model (CAPM) suggests that in
competitive equilibrium, assets must earn a premium over a corresponding risk-free rate
of return, and the premium demanded increases as risk increases (Ross, 1978). The
likelihood that the entire portfolio of companies within a market will fail is modest
compared to the risk that an individual company may fail. Given that investors may
choose lower risk alternatives, organizations seeking investment must offer higher returns
to attract investment dollars away from safer alternatives. The substitutability of
competing investment alternatives results in risk being assigned a price in the
marketplace (Ross, 1978).

The market is continuously assimilating emerging data to inform investment
decisions. Information is evaluated to determine the appropriate value for a security
given its recent performance and future prospects. Among the considerations is the
perceived risk of the security. The model provides a basis for evaluating the trade-off
between greater risk and expected returns (Blume and Friend, 1973). CAPM assesses the
required return associated with assuming the risk of an investment (Burton, 1998).
Sustainability reporting provides additional feedback to the marketplace regarding
individual firm performance and addressed risk by acknowledging the long-term impact
of the company’s operations.

The Capital Asset Pricing Model is useful in explaining the returns of established
common stocks (Blume and Friend, 1973). The research focused on the common stocks
of publicly traded companies over a five-year period to evaluate performance. The model
asserts that the risk premium for any asset is linearly related to its covariance with the


Sustainability Reporting Impact on Financial Performance 10
broader market (Burton, 1998). This covariance, commonly referred to as the beta
coefficient, provided a measure of the securities volatility. The market requires higher
rates of return as volatility increases (Kester et al., 1992); this is reflected in the expected
growth of the security. Given their status as key variables in the Capital Asset Pricing
Model, risk and return served as the dependent variables for evaluating the research
question.

1.5 Purpose of Study

The focus of this study was to evaluate the market’s reaction to additional
disclosure around sustainability. The study took the positive approach to test whether
companies that engage in reporting beyond legislated financial disclosure, to provide
transparency to their operations, realized a premium in the marketplace. Sustainability
was treated as a manifestation of ethical leadership in which long-term value is balanced
with short-term objectives and the interests of multiple stakeholders. This was in contrast
to focusing on the identification of unethical companies. Unethical companies do not
promote their lack of ethics and once that lack of ethics is discovered the firm’s value is
destroyed. The research sought to establish transparency and enhanced disclosure as best
in class business practices that increase value.

If sustainability reporting is embraced as a standard business reporting practice,
additional information is made available to the marketplace to potentially facilitate better
decision-making. The research tested whether companies should get ahead of this trend

and voluntarily report as they may receive a premium for their efforts. While ethics,


Sustainability Reporting Impact on Financial Performance 11
social responsibility and sustainability are voluntary from a reporting perspective,
conducting business in an ethical, socially responsible and sustainable manner is not.
Cordiero (2003) states, “Being unethical in any arena, but especially in the international
arena, is both bad-for-business and bad business” (p. 327). As companies expand
globally they are subject to increased scrutiny and potential criticism of their activities.
To mitigate this risk, they seek to address the issue of business ethics by complying with
their own internal standards as well as national legislation, international labor standards
and industry benchmarks (Baker, 2005). Sustainability reporting provides a manner by
which organizations can report upon their efforts and success in maintaining compliance
and communicate the ethical standards and actions they apply to their operations.

1.6 Research Question and Hypotheses

The basic question answered by this study is whether companies that demonstrate
ethical leadership through best in class sustainability reporting performed better than their
peers in terms of value creation. To facilitate exploration of the issue, two datasets are
compared relative to the dependent variables of risk and return. An understanding of the
characteristics of the two datasets facilitated further exploration of the research question.
Differences in the distribution characteristics of the two datasets required distinct
statistical tests and therefore distinct hypotheses to be applied separately to the variables
of risk and return. While the beta (risk) values for the two datasets were normally
distributed, the growth (return) values were not. In the case of the growth values, the
abnormal distribution may have been the result of under-performing companies dropping
out of the securities marketplace over the five-year period being evaluated. As such,

Sustainability Reporting Impact on Financial Performance 12
Student’s T-test was used to compare the means of the two datasets relative to beta while
the Kolmogorov-Smirnov Two Sample test was used to compare the relative distributions
of the growth values for the two datasets. In each case the study sought to determine
whether significant differences existed between the two datasets. This descriptive
information along with the root calculation of the key metrics provided the basis for
evaluation of the topic. In order to ascertain whether or not a relationship may actually
exist between sustainability reporting and financial performance the study tested the
following two hypotheses:

Hypothesis 1:

H0: The mean value of risk (beta) of the group of Top Sustainability reporters was
greater than or equal to the mean value of risk of the sample of S&P 500
organizations for the period of January 1, 2002 to December 31, 2006

H1: The mean value of risk (beta) of the group of Top Sustainability reporters was
less than the mean value of risk of the sample of S&P 500 organizations for the
period of January 1, 2002 to December 31, 2006

Hypothesis 2:

H0: The growth of the group of Top Sustainability reporters was less than or equal
to the growth of the sample of S&P 500 organizations based upon the distribution


Sustainability Reporting Impact on Financial Performance 13
of return (growth) values for the for the period of January 1, 2002 to December
31, 2006

H1: The growth of the group of Top Sustainability reporters was greater than the
growth of the sample of S&P 500 organizations based upon the distribution of
return (growth) values for the for the period of January 1, 2002 to December 31,
2006

To facilitate evaluation of the stated hypotheses the following took place:

1) A group of companies recognized as top sustainability reporters was identified
along with a listing of companies that comprised the S&P 500 Index

2) These companies were assigned to sectors to ensure a balance between the two
datasets in any subsequent selection

3) The performance of the dependent variables of volatility and growth were
evaluated for datasets drawn from the two groups for the period of January 1,
2002 to December 31, 2006

Additional detail regarding the actual procedures used and analytical methods
applied is presented in Section 3.5: Selection Procedures, Section 3.6: Data Collection
and Section 3.7: Data Analysis in Chapter 3 Research Design and Procedures.


Sustainability Reporting Impact on Financial Performance 14
1.7 Definition of Terms
AA1000S are assurance standards offered by AccountAbility, a professional
institute based in the UK that promotes accountability for sustainable development; the
principles include materiality, completeness and responsiveness (AccountAbility, 2003).
Capital Asset Pricing Model (CAPM) is a financial model that asserts that the
market value of a security can be impacted by the perceived volatility of that security and
in turn impacts the expected value of future returns (Kester et al., 1992).

Committee on Sponsoring Organizations (COSO) is an independent organization
that studies the factors involved in fraudulent reporting suggesting alternatives for
remediation (Gupta and Thomson, 2006).
Compliance is an organization’s efforts to ensure that their activities abide by
agreed upon norms including conforming to national laws and international codes as well
as observing the principles for self-regulation (Broadhurst, 2000).
Corporate Governance is the process by which ownership and other stakeholders
extend control over managerial action (Ponssard, Plihon and Zarlowski, 2005).
Corporate Social Responsibility views the organization as imbedded in the
community and suggests success is predicated on compliance with the shared values
within the society (Brooks, 2005).
Ethical Leadership involves the consideration of the interests of other
stakeholders in determining policy and interests beyond the short-term interest of the
individual or individual firm (Resick et al., 2006 pg. 357).
Global Reporting Initiative (GRI) is an initiative begun in 1997 with the intention
of improving transparency and supporting sustainable enterprise (GRI, 2006).