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Rotary Four-Way Test and PromotingSocial Justice through Good Business
Rotary Four-Way Test• Of the things we think, say or do• Is it the TRUTH?• Is it FAIR to all concerned?• Will it build GOODWILL and BETTERFRIENDSHIPS?• Will it be BENEFICIAL to all concerned?
TRUTHThere is something higher and more universalthan our own will or self-interestSomething we cannot change even if we want toImplication: we are part of a large whole, ourlives are bound up in the lives of others
FAIRThere is imbalance and a disturbance if we takeout too much for ourselves or pay too muchattention to our own emotions and needsImplication: reciprocity and equilibrium areessential in life; extremism brings on negativeconsequences
Goodwill/Better FriendshipsWhat others think of us matters.We can prosper more and be happier when wehave good relationships with people who likeand respect us.Implication: Many assets are intangible
Beneficial to AllIf we do live within a larger order, that which isof benefit to more than ourselves improvesthe order from which we derive our being andour well-beingImplication: Providing Benefits to othersunselfishly elevates our sense of well-beingand goodness
GLOBAL CSR MOVEMENTEuropean Definition: “the responsibility of enterprises for theirimpacts on society”To fully meet their corporate social responsibility, enterprises shouldhave in place a process to integrate social, environmental, ethical,human rights and consumer concerns into their business operationsand core strategy in close collaboration with their stakeholders, withthe aim of:– maximising the creation of shared value for theirowners/shareholders and for their other stakeholders and societyat large;– identifying, preventing and mitigating their possible adverseimpacts.
Care About StakeholdersFour-Way Test can be implemented in business byusing it to take care of stakeholders- Truth tells us that stakeholders are important- Fairness includes interests of stakeholders- Goodwill/better friendships is ethical guide togood management of stakeholder relationships- Beneficial to all – business practices are win/win,not win/lose; shared value; avoid negativeexternalities
Stakeholders- Customers – moral compass for capitalism- Employees – moral agents, not parts for amachine- Owners and Investors – fiduciary duties of loyaltyand due care- Suppliers – friends, not foes- Competitors – compete with quality andinnovation, not price- Communities – enhance social capital to enhancefuture profitability
BusinessPeoplePolitics,Government, Lawand Regulation;Sociology;Psychology;History;Anthropology; Artsand Literature;Economics;SciencesEthical Environment of Business
12What is the fair value of an investmentin business?• Quality Income Stream• High net present discounted value• Good capitalization multiplierGood Corporate Value(Warren Buffet would buy it)
13Today where does most corporate value comefrom?Intangible Assets!
14S&P 500 Companies80% of market value comes from:Intangible AssetsSource: Monks/Lajoux, Corporate Valuation
15How do you manage risk?-Each risk hides in a relationship- customers- investors- government regulation- employees-Each relationship is an intangible asset of thebusiness (Assets can Appreciate or Depreciate).-Lowering risk for each relationship enhances thequality of intangible assets and increases businessvaluation
16INPUTS$;sustainableprofits;low beta;maximumvalueReputationalcapitalSocial capitalFinancecapitalPhysicalcapitalHumancapitalConversionprocessesOUTPUTGoods/servicesCustomersReturn on Capital(preserve adequacy of capital inputs)Theory of the Moral Firm(self interest considered upon the whole)
17Capital AccountsCapital Accounts are your defense against risk and yourresource base for competitive initiativesFinance CapitalPhysical CapitalHuman CapitalReputation CapitalSocial Capital
18How Can you Measureand, therefore, ManageStakeholder RelationshipsAnd all a company’sCapital Accounts?
19ASK QUESTIONS!Assess the Quality of yourrelationships