IICD Event

Corporate Social Responsibility as GCG variable in facing The Global Financial Crisis

On the previous editions, We have already known the GCG (Good Corporate Governance) is about respect the FACT, such as The right man at the right place at the right time. FACT means Fairness, Accountability, Clarity (which consists of Responsibility and Integrity/Independency), and Transparency and Implementing GCG will encounter cost/TARIF. TARIF stands for Transparency, Accountability, Responsibility, Integrity/Independency, and Fairness, and the third one: to ensure a good brand name of corporation, or in Indonesian terms we called CITRA,..which stands for Clarity, Integrity/Independency, Transparency, Responsibility, and Accountability. We do understand the close relationship between GCG and ERM (Enterprise Risk Management). We all know that without Excellence GCG implementation, there will be no ERM Excellence, since those two are spouses. Manipulated data that brought in into Excellent ERM machine will not work – GARBAGE in GARBAGE OUT….!!!!!
Consider the current excessive risks faced by corporations especially in this global era, the need to be dynamically competitive, in the middle of reality that 80% employees in the world are not happy (while Happy Employees will Create Value through creativity, knowledge, experience, and ideas that doesn't land on a traditional P&L Evolving Excellence-2007) and 75% people in the world are potential fraud perpetrators (Tan Chen Leong, CFE - IICD-Marcus Evans Forum for Directors 16-17 Jan. 2006), added with 84% people in the world has only got less than $2/day (Djordjija Petkoski-Lead Specialist, World Bank), then we may say that the recent Global Financial Crisis is actually was a matter of time to occur.
If we were listen to the market, where Peter writes: ‘Should I be worried about Bear Stearns in terms of liquidity and get my money out of there?’ No! No! No! Bear Stearns is fine! Do not take your money out. … Bear Stearns is not in trouble. I mean, if anything they’re more likely to be taken over. Don’t move your money from Bear! That’s just being silly! Don’t be silly!” —Jim Cramer, responding to a viewer’s e-mail on CNBC’s Mad Money, March 11, 2008, and Six days after Bear’s shares lost 90 percent of their value and was sold to JPMorgan Chase backed up by US$ 30 Billion US Treasury Fund, and listen to Henry Paulson, US The Treasury secretary on US National Public Radio, Nov. 13, 2008 said “I believe the banking system has been stabilized. No one is asking themselves anymore, is there some major institution that might fail and that we would not be able to do anything about it.” Which shortly after his vote of confidence, Citigroup’s stock price plunged 75 percent in one week, closing below $5 for the first time in 14 years, then we may say that this unpredictable world has been full of non Governance people, who has low ethical conduct and have no accountability, and responsibility to what they said.

To become competitive in the recent dynamic global corporate live, there should be a continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large, in one title, “CORPORATE SOCIAL RESPONSIBILITY” (CSR) . Djordjija Petkoski-Lead Specialist, World Bank elaborated these variables on the following diagram.

Leadership and Values based on business ethics that consider GCG as basis, and CSR as major variable, will tend to enhance the corporate competitiveness. The whole four (4) variables (Business Conducts/Ethics, GCG, CSR, and Competitiveness) are in one intersection which really depended on Leadership and values of the corporation. Crisis in Leadership and values will destruct the synergy between those four (4) variables, and end up with decreasing corporate competitiveness.

These four (4) variables of Leadership in crisis had actually in line with the following four (4) quadrants of recent global crisis on the following picture. We are facing the following barriers to CSR at the corporate level: Lack of leadership and vision, too much focus on short-term goals, Inability to recognize opportunities, as well as Lack of entrepreneurial spirit and innovation. We also face Lack of creative pressure from the government and civil society, Lack of support from the consumers, Lack of peer support through business associations, reluctance of other companies to follow, and Lack of economic/market incentives as CSR barriers on Country/Society Level. However, it’s good to know that as the planet heats up due to human, industrial , and corporate / leaders activities, regulatory mandates CSR activities to reduce greenhouse gas emissions worldwide. The trade-offs in the supply chain are no longer just about cost, service and quality – but cost, service, quality and carbon. Data from the market research firm (02/12/2009) shows that the value of the global carbon market surged 84 percent to US$ 118 billion in 2008 despite the worldwide financial crisis, and the comprehensive Stern Report calculates that in cash terms needed US$ 2 Trillion each year fighting global warming, and foresee carbon sales of US$ 40 Trillion over the next two decades (around 667 times of previous IBRA/BPPN assets).

4 July 2008, last year Indonesian Government has come up with Dewan Nasional Perubahan Iklim (DNPI) that is coordinated directly by the Indonesian President, Mr. Soesilo Bambang Yudhoyono with 17 departments/ministers and Badan Meteorologi dan Geofisika (BMG) under Peraturan Presiden (Perpres) Nomor 46 tahun 2008 to lead national policies on climate change, where Indonesian development strategy will be coordinated to approach climate change.

Now, the question is to what extent will the recent corporate/public leaders be supported to the new GLOBAL CARBON ERA implementing CSR as GCG variables, Business Ethics, and leadership in enhancing their competitiveness? Let’s envision the real answer…