Corporate Governance Ethics Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction

The paper attempts to describe the relevance of Socially Responsible Investment for institutional investors and discusses its pros and cons. The paper also elaborates the procedure of the strategy implemented by the investors and identifies the social and environmental risks which is faced by the company but affects its investors. Moreover, the paper offer suggestions to the University in responding to the concerns of students and stakeholders on social and environmental issues.

Relevance of Socially Responsible Investment for institutional Investors

The concept of Socially Responsible Investments (SRI) dates back to 1758 when Philadelphia government prohibited its members in buying and selling of human slaves. However, the SRI concept related to institutional investors evolved in the early 1960’s when investors tried to resolve the issues of women inequality and labor rights. SRI is any investment strategy which focuses on ethical and green investment that earns a company's financial return and as well as it becomes socially responsible. SRI is becoming an effective concept in institutions after the implementation of Principle of Responsible Investment (PRI) in the year 2006, which allowed the asset managers and consultants to devise strategies for environmental, social, and governance issues (Sparkes, 2002).

The relevance of institutional investors in investing in SRI can be explained through the potential of SRI provided to the institutions. SRI strategies can be summed up as ethically driven, investment driven, and value driven objectives that require the decision making from the endowment committee which manages investment funds of institutions. The investors believe that the company shall not only be governed by economic issues, but also through social issues. The most common strategy for SRI includes pension funds which has become essential for institutional investors in order to dominate in the stock market. The companies that have higher investment for pension funds would have a strong stock market position. However, many companies are considering social objectives and are integrating it with SRI strategies (Sparkes, 2002).

The SRI strategies are also relevant to institutional investors as it aims for sustainable development. It is the ability to meet the present needs and make progress for the future generations that they could meet their needs as well. SRI strategies are based on the future and long term strategy, as the institutional investors knows that the company would only survive if it forces its strategies to earn financial return, become ethical, and gain values from its products or services. The financial crisis of 2007 revealed the discrepancies of institutions and their models which allowed institutions to be more focused towards a long term vision and to invest in those categories that would not only earn them revenues, but also increase their values. In order to become socially responsible in the eyes of consumers, companies tend to spread awareness for poverty, the eco-system concerns, global warming, and the shortage of raw materials (Sparkes, 2002).

Advantages and Disadvantages

One of the major advantages for SRI includes the financial returns that are received by the company, and to fulfill the aim of becoming a socially responsible company. The aim of SRI is to develop future prospects for the company and to make certain strategies that could support the ongoing activities. The company would be considered strong when it has invested in a pension fund, a form of SRI strategy. This strategy enables a market capitalization due to higher investment in SRI strategies. The SRI strategies are based on the long term strategies which allows companies to avoid the chances of being bankrupted if any of the economic downturn occurs. The long term focus and sustainability of the company helps in maintaining the future growth of the company (Sparkes, 2002).

Many companies implement their own criteria for investments SRI strategies, therefore it would take a certain amount of time and effort to choose from a variety of choices that results in higher returns. However, even though the company decides to make an investment in a particular company, it also has to make sure that the company meets ethical and financial expectations. Sometimes companies invest an ample amount of time that it becomes discouraged from investing. Investing in mutual funds would also require close monitoring resulting in higher management fees. The company can make investments in mutual funds only if it has more time, or the company can assign this task to a consultant or an outsource company which would eventually result in increased management fees. As a result, the financial returns for the long term purposes would be dropped (Sparkes, 2002).

Relevance for Governance of Companies

A good corporate governance framework is necessary for a stronger leadership that could implement those strategies that can generate long term success for the company.........................

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