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The Social Responsibility and Sustainable Development Research Center
The Social Responsibility and Sustainable Development Research Center (CRSDD, www.crsdd.uqam.ca) was created in the year 2000, as part of the School of Management Sciences of the „Université du Québec à Montréal‟ -UQAM-. Located in downtown Montreal, the CRSDD is on the sixth floor of a mixed activities building. The floor is composed by two open spaces, one where Master and Ph.D. students work and another one dedicated to the finance area; eleven personal offices for teachers and researchers; two common rooms, a library and an eating area. The CRSDD and the Eco-Advising Chair1 (support environmental advisor profession) in northern Quebec are the only two institutions of their category in Quebec. The CRSDD gathers professors, students, other researchers and guests to work and discuss about new social regulations and new socioeconomic innovating practices made by social actors in a globalized world context. The research center is popular among Quebec business population and plays a role informing people and sensitizing them about social responsibility and sustainable development, and how they can be involved by human actions.
The research center defines its global goal by saying: “While global problems require new coordination models for solution, traditional modes of regulation are being questioned and new governance forms are being suggested. In this context, the enterprise, economy‟s key institution, finds itself at the centre of the debate, concentrating both the preoccupations and the expectations of the population in seek of sustainable development. Research undertaken at the CRSDD on social corporate responsibility and sustainable development focuses on these mutations and on the challenges that they represent for management, for the social organization, and for mechanisms of regulation”2. The three activities of the CRSDD are the research, the training programs for managers, and the education. To talk about my research department, the collegial structure of researchers is concentrated on three different axes: Corporate Social Responsibility -CSR-; sustainable development, and the new social movements and regulations. Researchers come from diverse disciplines and work all together on fundamental and applied research. Regarding the internship itself, I worked as a research assistant for Dr. Bouchra M‟zali, professor of finance in the Corporate Social Responsibility section. My schedule was flexible and I worked 35h weekly. I shared an open space with three Ph.D. candidates working under her supervision. The CRSDD provided me with a desk, computer, printer and access to any documents, software and research results. I also had a special status allowing me to have access to the library and the different databases.
What are the links between formation and internship?
The link between the Master courses and the internship is drawn by the willingness to live in a fair global economic society through responsible investment. On our scale, what we can do is to run studies, research, advice investors and inform general or specialized public. I was already interested in the subject and my first year Master report dealt with the necessity of developing tools such as the micro finance and insurance in developing countries. The International Fair Trade Master degree includes the question: how could we trade fairly and in a responsible way taking into account the global interests? Multinational and national firms such as those set up in the United States will be our field of action, and fairness will be treated in a shareholder and social policy angle. Shareholder advocacy means that shareholders investing in firms open a usually constructive and militant dialogue with the management3 to improve social, societal and environmental performances. Shareholders can be heard during the general meeting proposing resolutions to be voted on. An involved investor can firstly pressure the firm to make it evaluate instead of not invest in it.
What was the Corporate Social Responsibility department looking for?
Dr. Bouchra M‟zali and her research team were seeking someone to manipulate economic and financial data, someone able to read and write in English, able to do econometric analysis and interpret results. They were looking for someone independent to verify if their previous conclusions remain the same after the financial crisis (we will keep working and updating the database to include the years 2008, 2009 and 2010). They were also looking for someone turned to the ethical aspect of the economy and especially interested in the Socially Responsible Investment -SRI-, taking into account that it is a broad and controversial subject mostly due to the connection between social and financial performances. I was highly interested in doing so. I have to say that to approach responsible investing in the USA, where the financial crisis that affected and still affects the whole word started, was exiting.
I was directly involved in the team and they made me participate in their weekly seminar since my first day. The team is composed by professors and Ph.D. students and their seminars consist in sharing ideas and discussing the results of their ongoing research. Several projects and thesis are run and they help each other giving their point of view. Power Point and oral presentations are done followed by positive and negative critics. They also welcome international professors with whom they work to talk about their papers and review their own different databases to launch new projects.
The mission
The final outcome of the work Dr. Bouchra M‟zali committed me to do was to show whether or not the financial crisis had impacted the US social shareholder activism. Questions are asked: did the social policy shareholder activism in the US firms changed between 1997 and 2007? Does a financial crisis impact exist? How can we describe and perhaps explain it? Precisely, what I had to do was updating the thesis work of Dr. Miguel Rojas, former Ph.D. candidate in finance which subject was: “Three essays on social policy shareholder activism: actors and issues, types of targeted firms, and outcomes” (2010). Dr. Rojas studied, from 1997 to 2004, the social policy resolutions filed by the US shareholders to the firms listed on NYSE or NASDAQ stock exchanges in order to improve their corporate social responsibility. They asked me to establish a database with new data available from 2005 to 2007 (We are expecting to buy complementary data to MSCI4 to be able to update the database until 2010) to evaluate the effects, if there are, of the financial crisis on the filling of social policy resolutions.
Dr. M‟zali gave me autonomy to update the database. I had to read and codify the raw data; to decide for every resolution, filers and vote in which category order them to standardize the previous database to the current one. She gave me names, email addresses, and phone numbers to contact the people I needed. I primarily contacted Dr. Rojas who was the best person to help me understand how the previous study was run. Dr. Rojas built the previous database under Dr. M‟zali supervision. They decided the definition of categories for every component of the raw data. Dr. Rojas knew the data I needed to collect among different organisms and databases, and how I needed to code them to run econometrical tests. It was not an easy thing since M. Rojas does not work in Montreal anymore but in another Canadian province and we had to communicate by phone and emails. Other organisms such as MSCI provided me with databases and documents. The final database had to include both financial data and information on proposals. Data related to proposals was gathered from MSCI and financial data had to be extracted from Compustat. My work consisted of updating a database which required to merge MSCI and Compustat data. I needed training to use certain software such as Compustat5. I also had to ask for help to the research team members to understand financial and other types of data.
Before going any further, we must contextualize the paper. I worked in the Corporate Social Responsibility research department and the subject, the Social and Responsible Investment, was treated in a shareholder and social policy governance point of view. Shareholders are those who fund the company and who can impact the management comportment through several actions, in our case thanks to the Rule 14a-8. The Rule 14a-8 was enacted in 1934 by the US Securities and Exchange Commission to give voice to the shareholders. US shareholders are allowed, using the Rule 14a-8, to propose resolutions to be voted on in the proxy material of a firm at the annual or special meeting of shareholders. This is done to improve either the financial performance of the firm or the social performance. These two fields correspond to different governance approaches: financial enhancement corporate proposals fit with the so-called corporate governance of a firm (also including external and internal control questions); social policy shareholder resolutions match with social corporate governance6 and the subject of this report. Social corporate governance is complementary but also somewhat opposed to corporate governance.
Contextualization of the Socially Responsible Investment -SRI-
During the last thirty years economy has been deregulated, on one hand the role of financial markets is becoming stronger and on the other, possibilities of state intervention in this financialized economy are low. The concept of responsible investment is not a recent one and comes from two sides. It is possible to say that changes were both internal and external of the financial markets7.
SRI evolution into the financial markets
From a historical point of view, the financial markets started to change when US religious organizations proposed ethical funds in the twenties to prohibit sin values such as alcohol, gambling or tobacco. This is also known as exclusionary or negative criteria because it excludes the negative and unmoral values for investment. In the sixties, new exclusionary criteria appeared such as those against the use of Napalm or weapons during wars. It was the beginning of the socially responsible funds: we found community funds in the USA, solidarity funds and sharing funds in Europe. Their aim was for example to support employment for disadvantaged people. In the eighties, it was the beginning of funds based on positive criteria. Funds selected firms that were for example proactive in sustainable development.
Table of contents :
1- Introduction
2- The Social Responsibility and Sustainable Development Research Center
3- Introduction to the mission
a. What are of links between formation and internship?
b. What was the Corporate Social Responsibility department looking for?
i. Intern profile required
ii. The mission
4- Contextualization of the Socially Responsible Investment -SRI- 6
a. SRI evolution into the financial markets
b. SRI evolution out of the financial markets
i. Firm and management
ii. From Agency Theory to Corporate Social Responsibility -CSR-
iii. CSR, international scandals and financial crisis
iv. The Quality concept
v. Environmental context
5- What Socially Responsible Investment is?
a. Civil society opinion leaders
b. Who are the users of Socially Responsible Investment?
c. Frame and regulation
i. International and political organizations
ii. Public powers
d. Socially Responsible Investment service providers and tools
i. Rating agencies
ii. Stockbrokers
iii. Socially responsible indicators
6- Inside the mission
a. Construction of the database
i. Social proxy, filers and outcomes
ii. Financial and accounting data
b. Univariate variables
i. Companies targeted by involved shareholders
ii. Shareholder targeting companies with social policy proposals
iii. Issues addressed by filers to targeted companies
iv. Outcome of the submitted resolutions
7- Conclusion
8- References
