CASE STUDY – Macquarie Group
Context: Corporate Social Responsibility
Author: Eric Allgood CMgr CAHRI MAITD
I refer to the Macquarie Group in our Business Ethics course, and stress throughout the program, and to our clients the importance of understanding business ethics and corporate social responsibility.
SBAAS, takes this subject quite seriously and endeavours to create or fund programs that align to our values, which also aligns to our sustainability goals. For us, our passion is education, be it through our business coaching programs or through our courses, at the core of everything we do we are educating our customers and clients in some way and making positive change.
This case study will examine the effect on Macquarie Groups Corporate Social Responsible (CSR) Business in relation to its Philanthropic practices and their subsequent effects on relevant stakeholders.
Analysis was against Carroll’s pyramid of corporate responsibility in assessing Macquarie’s achievements against each of the four levels of responsibility, against key stakeholders and Macquarie’s ability to engage with and enhance their CSR positioning, and the overall financial performance of the company to assess any limitations on a company’s ability to perform financially and practice responsible business process.
It was found that the Macquarie Group has extensive CSR practices which are embedded into the corporate culture and do not limit, rather appear to enhance its financial performance.
The Macquarie Group (Ltd) is a global financial services and investment banking organisation. Founded in 1969 (started trading in 1970) and headquartered in Sydney Australia, Macquarie is the largest Australian investment bank.
With over 14,000 employees, they have been one of Australia’s most prolific philanthropic companies, reporting $17.7m in disbursements in the 2010/2011 financial year according to Philanthropy Australia. Macquarie Group have their own foundation which celebrated its 30th year in 2015 which supports their staff in identifying the needs of local communities globally, in 2015 they reported $24.2m provided to over 1,300 community organisations. The range of philanthropic activities includes pro bono expertise, internal fundraising awards, social innovation awards and direct funding to long term partners.
This case study investigated their philanthropy and noted how it touches across the wider spectrum of corporate social responsibility (CSR) and reflects on how Macquarie Group tangibly benefits from these activities.
Identification of key CSR concepts and issues
Corporate Social Responsibility (CSR) has had many definitions and there is still much debate as to how CSR should be defined. For the purposes of this case study it shall be defined as an organisation’s commitment to minimising, eliminating any harmful effects on society and maximising its long term beneficial impact.
As illustrated in Figure 1, there are four levels of CSR; I note that Carroll & Buchholtz (2003) state that this pyramid of responsibilities should not be separated, rather seen as a whole. In this section I shall, however, investigate Macquarie’s performance against each of these areas separately.
In 1970, whilst writing for the New York Times Magazine, Friedman stated that the sole responsibility of a company is to create profit for its shareholders. According to Carroll (1991), this is only a part of the equation.
In order to be profitable as a company, it must minimise costs, increase sales and make sensible and strategic decisions. This profitability reflects its economic performance, which is required by society.
Macquarie, it could be argued, has put to sleep the argument that philanthropic activities adversely affect profitability by posting a record half year profit for the 2015/2016 financial year. The strong financial performance as shown the Macquarie Group Financial Highlights (Macquarie Group Ltd, 2015) would indicate the Macquarie Group, whilst actively working to be a responsible corporate entity, have structured their business such that their financial sustainability is sound.
This layer; also, a requirement of society, is the company’s requirement to obey the law.
Macquarie undergo external auditing to ensure compliance with all legislative requirements and further undergo an Environmental, Social and Governance (ESG) audit from Price Waterhouse Coopers. Macquarie’s inclusion of the ESG report and the external audit thereof creates a transparency that engages their stakeholders and allows the company to assess its progress in non-financial areas.
The next layer, ethical responsibilities, differs from the previous because these are not required responsibilities; rather they are expected by society.
Through their Corporate Governance Statement, processes (as outlined in Table 1), Code of Conduct, and through the transparency of their accounting practices Macquarie manage their ethical responsibilities to their stakeholders.
Figure 3 Macquarie Group Corporate Governance Framework
The final layer requires the company to be a good corporate citizen and improve society’s quality of life. These are becoming more expected rather than desired by society.
Macquarie approaches its philanthropic responsibilities through the Macquarie Foundation (which celebrated its 30th anniversary in 2015) and has a history of being Australia’s largest contributor to charity (according to Pro Bono Australia, (2014)). This is a holistic approach; engaging and incorporating the input of its staff and the community as well as the long-term relationships engaged through the Executive.
In 2015 they launched their inaugural Foundation week where, over a 9-day period, Macquarie employees raised over $A1 million for hundreds of non-profits. Further to this, Macquarie supported their staff in assisting the community with approximately 33,500 hours of voluntary service through their Pro Bono program.
In 2012 the Macquarie David Clarke Social Innovation Fellowship (now extended to the UK, Hong Kong and New York City), valued at $A20,000 encourages CEO’s of non-profits to visit and research best practice social innovation around the world. In addition to the Fellowship, Macquarie’s Social Innovation Award (worth $A100,000) recognises and promotes new ideas that meet pressing community social needs.
CSR Stakeholders and Environmental Factors
Stakeholder theory views organisations relationships through internal and external environments and how these relationships may affect those organisations. For clarity, in this case study a stakeholder is defined as a group or person that has an influence, interest or concern in a business as derived.
The sheer size of the Macquarie Group in terms of their scope of their industry interests, countries traded in and number of employees, creates a vast list of stakeholders both primary and secondary.
Due to the limitations of this blog, the discussion will only touch on three stakeholders.
Macquarie’s approach to social innovation as outlined above, significantly promotes community development, not through paying Friedman’s (1970) social tax, but by fully engaging the community to investigate its own solutions; through the Fellowship and Pro Bono programs, creating an almost symbiotic relationship with the community.
Such engagement and relationships build a strong bind with the community enhancing the company’s reputation as they appear to be the community’s CSR Champion. It could be argued that Macquarie recognised Julius Rosenwald’s innovative ideal at Sears Roebuck and Company and realised that their sustainable profitability depends upon the prosperity of its customers and extended this to include the community surrounding.
Whilst the reporting of the ESG (CSR) activities may be engaging to their external stakeholders, Macquarie’s actual philanthropic activities are engaging to their internal stakeholders and along with their higher pay rates, may be a factor in their ability to attract candidates better aligned to their corporate strategies. Their Pro Bono and staff recognition programs may be a great attraction to work for the organisation as it would appeal to better candidates, retain staff and overall, potentially reduce the costs of employment and therefore increase profits.
Given the record financial performance achieved in 2015, it can reasonably be argued that the shareholders would be comfortable with the CSR (known internally as ESG (Macquarie Group Ltd, 2015)) programs. As shown in the Macquarie Group Financial Highlights shareholders received a 27% increase in ordinary dividends per share; coupled with the company being highly equity financed, and this strengthens the confidence of the shareholder in the company which, in turn strengthens the financial foundations of the company.
Macquarie appears to be achieving responsible competitiveness through their CSR policies and programs whilst avoiding the risk of cause scepticism. It could be argued that through their Pro Bono and social innovation programs their reputation as a responsible corporate entity enhances their overall reputation and customer engagement.
The publicity generated from their programs may be more effective than advertising; creating increased market engagement through enhanced reputation and inferred referral from the organisations assisted.
This competitiveness guided by and achieved from responsible management has shown no signs of inhibiting their financial performance. It can be concluded thus that responsible business management practices can enhance a company’s performance through savings, community engagement and through the engagement of their own staff, knowing what they do matters.
I realise this is a case study on a large organisation, and I chose such a large organisation on purpose. If you run a small business, everything you do towards building success should just be a scaled version of what the large organisations do (to a certain degree).
So, the purpose of this case study is to create an understanding of what CSR is and the benefits it brings and encourage the small business owner to ask, what could I do at my scale to mirror such programs and success?
If you want help with understanding how CSR can create growth within your organisation then contact us.