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Excerpt from course description

Corporate Value Creation, Sustainability and Social Welfare

Introduction

The issues of Corporate Social Responsibility (CSR), Socially Responsible Investment (SRI), and Sustainability are at the forefront of the challenges corporations, investors and government are facing. To a large extent, the need for CSR arises from the existence of externalities to the firm productive activities. We first examine the problem of externalities and review the market, non-market and ethics based solutions  proposed in the literature. We use this  framework to provide a solid economic foundation to the conditions under which the objective of the firm should be shareholder value maximization, and the conditions under which it should be replaced by either shareholder welfare maximization or stakeholder welfare maximization. We then develop the practical steps firms need to undertake to incorporate sustainability in their investment decisions and operations management. We investigate in detail the alternative institutional mechanisms open to shareholders and institutional investors to effect CSR and sustainability focused management practices. We examine alternative ways through which finance innovations can help achieve individual returns and benefits, economic development and social impact. We review the empirical evidence on the different solutions to the externalities problem on value creation and firm performance. Of particular interest is the link (or lack thereof) between CSR and firm economic performance as well as CSR and firm value. We analyze the role of fiduciary duty in helping align board and manager behavior to shareholders priorities.

Course content

Topics:

  • Economic analysis of externalities: market vs non market solutions and the role of ethics: Meade, Coase and Arrow
  • Shareholder value maximization vs shareholders welfare maximization – From Friedman and Jensen to Hart and Zingales.
  • Corporate Social Responsibility, Governance and Firm Economic Performance and Value.
    • ESG and firm operating performance & downside risk
    • ESG and equity and bond value & returns
  • Sustainability focused corporate investment and operating management
    • Identification of the firms’ areas of operations that create or destroy value, in financial, environmental and social terms, using of the main sustainability frameworks to measure impact.
    • Materiality analysis: which social and environmental dimension really matter for the firm’s operations
    • Investment and operation action plan.
  • Tools for engagement: institutional mechanisms for shareholder actions to enhance corporate sustainability focus
    • UN Principles of Responsible Investing (UNPRI) and UN Sustainable goals.
    • Institutional Investors and Socially Responsible Investing
  • Ethics, Fiduciary duty and social responsibility
  • Alternative finance mechanism to sustain for profit economic activity with benefits to the individuals and social impact.
  • Finance, economic development and inequality

Disclaimer

This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.