Calvert, Corporate Library: Corporate Boards May Not Heed Social Mandates

Her co-author, Mike Lombardo, senior sustainability analyst and manager for Calvert Asset Management Company Inc., said, “Environmental and social issues must gain even more consistent and conscientious attention as a set of factors, issues and risks that can make or break shareholder value and the fundamental prospects of the enterprise. We believe that a report examining such oversight is especially timely in a year when major companies have faced performance breakdowns—each with fatal consequences for customers or workers as well as damage to the reputations of these companies—that stronger board oversight as well as more stringent management may have helped to avoid.”

Among the findings in the study:

• Many companies do not cover corporate social responsibility issues at board level
• Many boards do not have specified responsibility for social issues in their charters
• Many of those who have do not seem to have interaction on a broader basis with corporate management to ensure that these issues are dealt with
• Women are disproportionately represented on social issue boards
• Social issues lack director involvement.

Also of concern is the apparent disconnect between mandates (for boards that have them) and actions, or the way actions are carried out. The study cites a number of instances in which there is little accountability or traceability attached to the social/environmental mission: “[T]here are instances where companies identify environment as a material issue to the company, but fail to specifically cite environment as part of the board’s mandate or responsibility. For example, in Target Corp’s 2009 Corporate Responsibility Report, the company states: ‘Our research shows that being a responsible steward of the environment is one of the most important issues that defines Target’s corporate reputation.’ Unfortunately there is no indication that Target’s Corporate Responsibility Committee monitors the company’s environmental impact or work.”

Enumerating a number of aspects of the issue as offering the potential for further research, the study makes a number of recommendations for both boards and investors.