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Impact of financial decisions on sustainability and social responsibility

Discuss about the Importance of CSR to AVEO.

The goal of this paper is to bring to light the ramifications of their financial decisions, the corporate goals and recommendations. The purpose of this paper is to find out the importance of CSR to AVEO and why its share price has been fluctuating for the last two years (Allouche, 2006). The sources used in this paper are the company’s website, newspaper articles relating to the company and books that give insight to the topic. The conclusion suggests that the company share price has been fluctuating as a result of bad public image. It is also important to that the company engaged in CSR activities (Berk and DeMarzo, n.d.).

We start from the conviction that the activity of the company must not only serve its own profitability objectives, but must also consider the impact of its activities in the environmental and social environment, supply chain, distribution, communities , etc. The company is a social agent that plays a relevant role in the environment where it operates. The strategy of a company that wants to be sustainable seeks lasting relationships of trust and reciprocal commitment to the agents involved in its activity or affected by it-stakeholders or not-and it does not only pursue economic and financial profitability - fulfill the expectations of the investors or shareholders (Cassedy, 2004). Confidence between managers, shareholders, employees, customers and suppliers is an intangible asset that generates positive synergies and adds value to the company. This is in line with other ethical principles guiding the business such as Trustworthiness, respect, fairness, caring and citizen ship.

Social responsibility must be an integral part of a company's business strategy; so that it is not reduced to isolated actions of different departments but, based on the conviction of management, permeate the culture of the entire organization and integrate into different strategies, practices and management systems. It must have tools to assess the level of compliance with sustainability commitments and must report on the results of its internal and external management - transparency. Internal communication and dialogue with stakeholders will help redefine sustainability objectives and foster innovation and continuous improvement (Corporate Social Responsibility, Corporate Restructuring and Firm's Performance, 2010).

Aveo’s organizational goals are as follows; One, is profitability, the company seeks to increase its profitability. Second, is to increase its market share, third, is to improve its productivity and lastly is to be socially responsible.

Business Ethics

Aveo should invest in mending the relationships with its customers, in addition to pursuing profitability and applying the traditional investment criteria, meet environmental, social and good governance criteria, to improve sustainability (Dalton, 2013). They are the ethical funds-investment in companies that fulfill requirements related to corporate social responsibility- and solidary investment funds -funding of social or development projects and microcredit. However, it is not right the company  treats the vulnerable in a wrong manner and expect the profits to rise.

Its products are not conditioned solely by criteria of speculation in the financial markets, nor do they seek only the maximum profit  (Shaw, 2017).

Transparency is also a fundamental tool to maintain credibility and trust in ethical business. In fact, they offer broad access to information on beneficiary projects. The shareholder activism or active participation in the meetings of shareholders of companies, to maintain a dialogue with the management team in order to improve the ethical practices of the company.

When  we talk about Corporate Social Responsibility (CSR ) and Socially Responsible Investment (SRI), why not also talk about Financial Social Responsibility (RSF)?Financial Social Responsibility (RSF) refers to the financial activity carried out by the company. This have an effect on the financial position of the company.

The strict regulation and supervision that the company has is a normative institutionalization of the interests of two essential groups: the clients and the society. Despite this, there have been failures that have led to the crisis of the sector along with its current process of restructuring, adding the challenge of developing a satisfactory CSR.

Given this situation arise the following research questions: what is understood in companies by CSR? Is it necessary, in the opinion of the participants, for business success? Are your companies socially responsible? What CSR actions do they carry out? Do companies get benefits for being socially responsible? Does your situation improve a company that adopts practices and actions of CSR? The objectives of the present work are to identify if the managers of the companies recognize the necessity of the CSR; verify what they understand by this concept and whether they are aware of the importance of incorporating CSR actions in their organizations and the benefits that can bring them. It was also investigated whether the interviewees know companies that are, in their opinion, successful and socially responsible at the same time.

Besides the financial management and the fulfillment of its own objectives of financial profitability -expectations of the shareholders- and of solvency - closing the outstanding debts -, take into account the impact of their activities, in this case financial, in the short and long term, in the social environment, in the supply chain. The company as a social agent also seeks lasting relationships of trust and reciprocal commitment with the agents affected by its financial activity: managers, shareholders, employees, clients, suppliers, financing entities or companies, etc. With respect to the environmental impact, Aveo can consider as an expense the liability requirements in this regard. However, they have to see that responsible environmental management can bring opportunities to generate value, such as greater ease in finding financing.

Corporate Social Responsibility

Aveo as an investment is a highly profitable business and has shares that are worth a lot. As a pharmaceutical company, the share price has taken in a hit after it was accused of ripping of off their customers. Most of their customers are the elderly and the vulnerable and so the public has lost confidence due to the perceived evidence of rip off.An Aveo investment is running down the drain. This is because people are not willing to invest in the share anymore. Sometimes corporate governance dictates that the investor will always refrain from investing in a company that has malpractices and treats its customers unfairly.

 In June 2014, the introduction of the share trades at between $1.99 and $2.3o. it however fluctuates between the two price figures. It has the highest trading price of $3.65 between April and November 2016.

 It is recommended that for the share price to be at its best or trade at its highest, Aveo must act at its best. The corporate management practice must be withheld to the latter and all rules, principles and practices of good corporate governance must be affected (Financial performance, 2013). This is only for ensuring that the investors have maximum confidence in the management, board and running of day to day activities of the company. It is true to say that any negative practice will affect the company’s share negatively. The Aveo share will fluctuate depending on the type of information that is released out there in the market. It may either affect the company’s share positively or negatively (Gitman and Zutter, 2015).As in many cases, addressing the negative definition of CSR helps to better understand the true meaning of the concept and avoid terminological confusion that is common in CSR of the company.With this aim, we will briefly comment on some concepts that are related to CSR but which are not CSR.Social action is a complement to CSR practices and can never replace them. A company can be socially responsible without doing social action and can be irresponsible even if it allocates large amounts of money to social action (Haerens and Zott, 2014). Social action is, the icing on the cake, the culmination of a whole series of good business practices.

Sustainable development. Idea born at the Rio summit in 1992 and that advocates harmonious development in the economic, social and environmental fields so that current development does not limit the development possibilities of future generations.

The Club of Excellence in Sustainability defines sustainable development as one that, based on continued economic growth, contributes to social development and the proper use of the natural environment, making it possible to increase the value of companies for all interested parties.

spectacular development of CSR, the growing interest in these issues and the implementation of sustainable management in companies originates in a series of causes that have driven this phenomenon (MORRISON, 2016). Some of the main reasons that strengthen the development of CSR are: The ethical origin of the RSCT has traditionally been thought that the world of the company was independent of the moral sphere and that the economic rules were different from the moral ones: "businesses are business". However, the stakeholders of the company have broken with this dissociation and require the company to make the economic benefits compatible with conduct based on strong ethical values  (Financial management, 2014).

AVEO as an investment. Considerations and recommendations

In June 2014, the introduction of the share trades at between $1.99 and $2.3o. it however fluctuates between the two price figures. It has the highest trading price of $3.65 between April and November 2016 (Manos and Derori, 2016). This may be because the company share has just been introduced for trading and its still weak before it can become better. In August 2015, the company share price was valued at slightly above $2.8 as it continues to strengthen. In April 2016, the company’s share continues to trade in a bullish way at $ 3.2 which is a good sign for investor confidence in the company (MORRISON, 2016). Between this period and November 2016, the company trades at its highest recording an incredible $3.65 but starts to plummet after that. By June 16th 2017, the company’s share has plummeted to a low of $ 2.8 and its still plummeting. This is because of the news that the company is treating its customers with contempt and neglecting the vulnerable.

The effect of changes in share prices on investment project decisions in terms of delays, cancellations and successful terms is analyzed. In particular, legit and duration models are used to study a database of investment projects classified by economic sectors (Financial performance, 2013). The analysis framework is the model of real options where commodity prices are used as a variable associated with future income while price volatility is associated with uncertainty about such income  (Penning, 2012). Share fluctuates due to market forces, political environment, competing shares in the same industry and internal operations of the company.The series of scandals derived from bad business practices that have jumped public opinion and caused great losses to small investors have been a trigger to require companies to conduct appropriate behavior to regain confidence in them and in the rules of the market.A clear example of stakeholder pressure is the activism of shareholders or the demands of employees (Perrini, Pogutz and Tencati, 2006). Increasingly, shareholders make their decisions taking into account, in addition to the financial results of companies, their performance in the social and environmental fields. In addition, this trend is strengthened by the leading role these issues are having in the General Shareholders Meetings.

Conclusions

Aveo has to make its internal business ethics and practices very open and transparent in order to regain the customer’s confidence (Perrini, Pogutz and Tencati, 2006).Ethics does not question profitability but how companies earn their profits . In short, also in the world of business, the principle "the end does not justify the means" applies. This growing ethical reflection on the performance of companies and their management has strongly fueled CSR (Schreck, 2009).Investors have preferred to leave their assets quiet and wait for the days of crisis to pass. This can be evidenced in the decrease in the volume of trading in the market. It is only good ethics and corporate social responsibility that can positively affect the company’s performance in terms of share prices and possibly its profitability.

References

Allouche, J. (2006). Corporate social responsibility. Basingstoke [England]: Palgrave Macmillan.

Cassedy, P. (2004). . San Diego, Calif.: Lucent Books.

Corporate Social Responsibility, Corporate Restructuring and Firm's Performance. (2010). Gardners Books.

Dalton, H. (2013). Principles of Public Finance. Hoboken: Taylor and Francis.

Financial management. (2014). London: BPP Learning Media Ltd.

Financial performance. (2013). Que?bec, Que?bec: Investissement Que?bec.

Gitman, L. and Zutter, C. (2015). Principles of managerial finance . Boston: Pearson.

Haerens, M. and Zott, L. (2014). Corporate social responsibility. Detroit: Greenhaven Press.

Manos, R. and Derori, I. (2016). Corporate responsibility. Basingstoke, Hampshire: Palgrave Macmillan.

MORRISON, M. (2016). PRINCIPLES OF PROJECT FINANCE. [Place of publication not identified]: ROUTLEDGE.

Pandey, I. (2015). Financial management. New Delhi: Vikas Publishing House PVT LTD.

Penning, A. (2010). Financial performance workbook. Worcester: Osborne Books.

Perrini, F., Pogutz, S. and Tencati, A. (2006). Developing corporate social responsibility. Cheltenham, England: Edward Elgar.

Schreck, P. (2009). The business case for corporate social responsibility. Heidelberg: Physica-Verlag.

Shaw, W. (2017). Business ethics. Boston, MA: Cengage Learning.

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