2. 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 BETTER
FRIENDSHIPS?
• Will it be BENEFICIAL to all concerned?
3. TRUTH
There is something higher and more universal
than our own will or self-interest
Something we cannot change even if we want to
Implication: we are part of a large whole, our
lives are bound up in the lives of others
4. FAIR
There is imbalance and a disturbance if we take
out too much for ourselves or pay too much
attention to our own emotions and needs
Implication: reciprocity and equilibrium are
essential in life; extremism brings on negative
consequences
5. Goodwill/Better Friendships
What others think of us matters.
We can prosper more and be happier when we
have good relationships with people who like
and respect us.
Implication: Many assets are intangible
6. Beneficial to All
If we do live within a larger order, that which is
of benefit to more than ourselves improves
the order from which we derive our being and
our well-being
Implication: Providing Benefits to others
unselfishly elevates our sense of well-being
and goodness
7. GLOBAL CSR MOVEMENT
European Definition: “the responsibility of enterprises for their
impacts on society”
To fully meet their corporate social responsibility, enterprises should
have in place a process to integrate social, environmental, ethical,
human rights and consumer concerns into their business operations
and core strategy in close collaboration with their stakeholders, with
the aim of:
– maximising the creation of shared value for their
owners/shareholders and for their other stakeholders and society
at large;
– identifying, preventing and mitigating their possible adverse
impacts.
8. Care About Stakeholders
Four-Way Test can be implemented in business by
using it to take care of stakeholders
- Truth tells us that stakeholders are important
- Fairness includes interests of stakeholders
- Goodwill/better friendships is ethical guide to
good management of stakeholder relationships
- Beneficial to all – business practices are win/win,
not win/lose; shared value; avoid negative
externalities
9. Stakeholders
- Customers – moral compass for capitalism
- Employees – moral agents, not parts for a
machine
- Owners and Investors – fiduciary duties of loyalty
and due care
- Suppliers – friends, not foes
- Competitors – compete with quality and
innovation, not price
- Communities – enhance social capital to enhance
future profitability
12. 12
What is the fair value of an investment
in business?
• Quality Income Stream
• High net present discounted value
• Good capitalization multiplier
Good Corporate Value
(Warren Buffet would buy it)
14. 14
S&P 500 Companies
80% of market value comes from:
Intangible Assets
Source: Monks/Lajoux, Corporate Valuation
15. 15
How do you manage risk?
-Each risk hides in a relationship
- customers
- investors
- government regulation
- employees
-Each relationship is an intangible asset of the
business (Assets can Appreciate or Depreciate).
-Lowering risk for each relationship enhances the
quality of intangible assets and increases business
valuation
17. 17
Capital Accounts
Capital Accounts are your defense against risk and your
resource base for competitive initiatives
Finance Capital
Physical Capital
Human Capital
Reputation Capital
Social Capital
18. 18
How Can you Measure
and, therefore, Manage
Stakeholder Relationships
And all a company’s
Capital Accounts?