Quanta Corporate Citizenship A snapshot of CSR wages 16/06/2010
Acre has published its annual report on wages of CSR practitioners, and it provides an interesting snapshot about how the sector is operating:
More than a third of CSR practitioners have no budgetary responsibility and two thirds manage less than US$500k, the same proportion of those who work in teams of 9 or less people. As a matter of fact, less than a quarter have more than 3 direct reports. These four elements are good indicators that companies still treat CSR as a relatively unimportant issue.
The majority of in-house practitioners (56%) are individuals who used to work in other functions within the company, i.e., they had to (or are) developing on the job expertise, instead of arriving at their new positions with previous CSR experience. As a matter of fact, the current position is the very first contact with CSR for more than half of those interviewed.
Salary wise, the UK is where the CSR practitioners experience the lowest salaries. As a matter of fact, salaries are 20% lower in the UK when compared to the US, even though the cost of living in the UK is significantly higher.
More than a third of CSR practitioners have no budgetary responsibility and two thirds manage less than US$500k, the same proportion of those who work in teams of 9 or less people. As a matter of fact, less than a quarter have more than 3 direct reports. These four elements are good indicators that companies still treat CSR as a relatively unimportant issue.
The majority of in-house practitioners (56%) are individuals who used to work in other functions within the company, i.e., they had to (or are) developing on the job expertise, instead of arriving at their new positions with previous CSR experience. As a matter of fact, the current position is the very first contact with CSR for more than half of those interviewed.
Salary wise, the UK is where the CSR practitioners experience the lowest salaries. As a matter of fact, salaries are 20% lower in the UK when compared to the US, even though the cost of living in the UK is significantly higher.
Bonuses are also significantly lower in the UK than in the US and Europe, where the bonuses are, on average, around 50% higher, even though bonuses rarely exceed US$10k. Only 31% receive more than US$10k per year, and less than 10% receive more than US$30k per year.
The UK is clearly still playing catch up. By paying lower salaries and bonuses, companies are probably capturing employees in the earlier stages of their careers and also signalling that CSR is still not a top priority, whilst in the US and in the rest of Europe it is quickly becoming a board issue. A clear signal that the UK is not immune to this global trend, though, is that in the last year, despite the financial crisis, UK practitioners experienced salary gains of over 10%, while the percentage of CSR practitioners earning more than £80k has jumped from 12% to 17%.
The UK is clearly still playing catch up. By paying lower salaries and bonuses, companies are probably capturing employees in the earlier stages of their careers and also signalling that CSR is still not a top priority, whilst in the US and in the rest of Europe it is quickly becoming a board issue. A clear signal that the UK is not immune to this global trend, though, is that in the last year, despite the financial crisis, UK practitioners experienced salary gains of over 10%, while the percentage of CSR practitioners earning more than £80k has jumped from 12% to 17%.
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The dark side of outside directors 21/05/2010
We've all had experiences with people who are somehow always around when we are on a high, but are mysteriously too busy to meet or answer our calls when we are in bad shape. Companies suffer from the same problem, accordingly to recent research from Rüdiger Fahlenbrach, René Stulz and Angie Low entitled The dark side of outside directors. Analysing statistical data from 1981 to 2006, they found that outside directors have an interesting habit of leaving boards prior to companies announcing that they had hit a bad patch.
“Following surprise director departures, affected firms have significantly worse stock and accounting performance, are significantly more likely to suffer from an extreme negative return event, are significantly more likely to restate earnings, and have a significantly higher likelihood of being named in a federal class action securities fraud lawsuit. These results are also economically significant. For example, the surprise departure of an outside director increases the probability of an earnings restatement by almost 20% and the probability of being named in a federal class action securities fraud lawsuit by 35%. These results are consistent with directors leaving in anticipation of adverse events to protect their reputation or to avoid an increased workload.”
As per their findings, the problems faced by the companies are not caused by the departure – as the root of many of the problems precedes the departure by months or even years – but the cause of their exit. But, as they put it, the directors departure might actually make things worse; “We cannot exclude the possibility that the outside director departure has a causal effect on firm operating performance post departure. Under this hypothesis, the firm loses a talented outside director. Without her monitoring and advising capabilities, firm performance deteriorates post-director turnover.”
This study is interesting to highlight two very important issues about board of directors and of trustees that are often overlooked.
Firstly, if shareholders are a primary CSR stakeholder, the departure of a director should be treated more seriously than a simple handshake followed by farewell drinks. Good governance requires a body producing independent meaningful reports on why a director is leaving and making that report available to the market on an equal basis. That is particularly important for companies with a very diluted shareholder basis, where pensioners and other small investors (or donors, in the case of trustees) aggregately hold substantial ownership, but are unlikely to be active enough in the financial market to understand what might be going on behind closed doors or to hear the noise before their investments are negatively impacted.
Second, and also to reassure good governance, it is important for the rest of the board to know why a board member is leaving. We all know boards where a director left and for some reason did not fully disclose to the board why he or she was leaving because no one actually cared to ask. “Poor health”, “personal reasons” and “spend time with my family” are catchall excuses that often hide deeper reasons. Boards need to have reliable mechanisms to share the concerns of any board member. This is particularly important in boards where asymmetric information is likely to be a substantial concern, such as boards that do not meet often, or that are constituted primarily by outside directors who do not hold enough information about the company, or are constituted by several smaller subcommittees where only the chairs meet in a main board.
On both accounts, the most straightforward solution is for an independent facilitator or legal advisors to be retained to collect the relevant information from the departing director and inform the board, and at the same time work as a reassurance mechanism that the concerns shared by the leaving director will not be used against him/her in the future in the form of bad references or criticism.
- Gus
“Following surprise director departures, affected firms have significantly worse stock and accounting performance, are significantly more likely to suffer from an extreme negative return event, are significantly more likely to restate earnings, and have a significantly higher likelihood of being named in a federal class action securities fraud lawsuit. These results are also economically significant. For example, the surprise departure of an outside director increases the probability of an earnings restatement by almost 20% and the probability of being named in a federal class action securities fraud lawsuit by 35%. These results are consistent with directors leaving in anticipation of adverse events to protect their reputation or to avoid an increased workload.”
As per their findings, the problems faced by the companies are not caused by the departure – as the root of many of the problems precedes the departure by months or even years – but the cause of their exit. But, as they put it, the directors departure might actually make things worse; “We cannot exclude the possibility that the outside director departure has a causal effect on firm operating performance post departure. Under this hypothesis, the firm loses a talented outside director. Without her monitoring and advising capabilities, firm performance deteriorates post-director turnover.”
This study is interesting to highlight two very important issues about board of directors and of trustees that are often overlooked.
Firstly, if shareholders are a primary CSR stakeholder, the departure of a director should be treated more seriously than a simple handshake followed by farewell drinks. Good governance requires a body producing independent meaningful reports on why a director is leaving and making that report available to the market on an equal basis. That is particularly important for companies with a very diluted shareholder basis, where pensioners and other small investors (or donors, in the case of trustees) aggregately hold substantial ownership, but are unlikely to be active enough in the financial market to understand what might be going on behind closed doors or to hear the noise before their investments are negatively impacted.
Second, and also to reassure good governance, it is important for the rest of the board to know why a board member is leaving. We all know boards where a director left and for some reason did not fully disclose to the board why he or she was leaving because no one actually cared to ask. “Poor health”, “personal reasons” and “spend time with my family” are catchall excuses that often hide deeper reasons. Boards need to have reliable mechanisms to share the concerns of any board member. This is particularly important in boards where asymmetric information is likely to be a substantial concern, such as boards that do not meet often, or that are constituted primarily by outside directors who do not hold enough information about the company, or are constituted by several smaller subcommittees where only the chairs meet in a main board.
On both accounts, the most straightforward solution is for an independent facilitator or legal advisors to be retained to collect the relevant information from the departing director and inform the board, and at the same time work as a reassurance mechanism that the concerns shared by the leaving director will not be used against him/her in the future in the form of bad references or criticism.
- Gus
