Financial Management and Corporate Governance from the Feminist Ethics of Care Perspective

Financial Management and Corporate Governance from the Feminist Ethics of Care Perspective

With research on care ethics in accounting and related areas limited, this book addresses an area of research in much need of attention. Most importantly, this research has the capacity to move discourse from the procedural aspects of governance and accountability to open up discussion on ways governance may account for the other. Steven Dellaportas, RMIT University, Melbourne, Australia

Desi Adhariani Nick Sciulli Robert Clift Financial Management and Corporate Governance from the Feminist Ethics of Care Perspective

Desi Adhariani Universitas Indonesia Depok Indonesia Robert Clift Victoria University Melbourne Australia Nick Sciulli Victoria University Melbourne Australia ISBN 978-3-319-33517-9 DOI 10.1007/978-3-319-33518-6 ISBN 978-3-319-33518-6 (ebook) Library of Congress Control Number: 2016958214 The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Cover image OJO Images Ltd / Alamy Stock Photo Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface In recent years, the issue of effective corporate governance has attracted much attention, especially to promote an ethical business environment to ensure corporate accountability and integrity. In the academic sphere, the mainstream research on corporate governance and ethics has been performed using various ethics theories based on the premise of conflict of interest. This research uses a feminist perspective to analyse the corporate governance practices at BHP Billiton using the lens of the feminist ethics of care, as well as projecting the financial condition of the company using the same principles. It is argued that the application of the feminist ethics of care will result in a stakeholder model of corporate governance that places more emphasis on women s interests and maintaining good relationships with stakeholders. This study also projected that the financial condition will be stable, as the company will put more effort into balancing stakeholder interests while addressing social and environmental risk. The two issues were answered using mixed methods. For the first one, the analysis of corporate governance practices from the feminist ethics of care perspective was performed using qualitative content analysis of the Annual and Sustainability Reports of BHP Billiton Limited, as the selected sample company for this study, for the period 2006 2015. Following the analysis, a financial planning model for the period 2012 2016 was designed using the quantitative optimisation method to v

vi Preface address the second issue and the projection was then compared to the actual data. The original principles of the ethics of care, as developed by Gilligan (1982), are as follows: 1. The care approach is achieved through perception of one s self as connected to others. This is translated further as feminist stakeholder theory. 2. Moral dilemmas are contextual. 3. Dilemmas are solved through inductive thinking. 4. The moral development through stages is sequential and hierarchical. 5. Principle of moral responsibility is reflected in the voices of women. 6. The ethics of care is distinguished by an emphasis on attachments, issues of self-sacrifice and selflessness and consideration of relationships as primary. This study adds two more principles based on the interpretation of the illumination of the ethics of care to corporate governance practices as follows: 7. The nature of corporate social responsibility (CSR) activities should be voluntary or discretionary. 8. Women s interests in various stakeholder groups are acknowledged. The results based on the qualitative content analysis showed that BHP Billiton has not consistently applied principles suggested by the ethics of care. The principle relating to the perception of one s self as connected to others was represented in intensive stakeholder engagement programmes and various voluntary CSR programmes. The company also acknowledged women s interests in the employee group and other stakeholder groups by applying gender diversity and gender equality principles. However, the caring approaches through communications, contextual and inductive problem solutions, and sequential and hierarchical moral development were not consistent with the ethics of care. Therefore, the first proposition was not fully supported by the research findings from the qualitative content analysis.

Preface vii The projection of the financial condition for the five-year period 2012 2016 showed that BHP Billiton could achieve an overall positive economic value retained even though negative results exist for 2015 and 2016. Sensitivity analysis was performed by providing two scenarios to show the impact of each on the projected financial condition. It was concluded that the company s financial condition would be stable in the future, which supports the second proposition. Although not all propositions were supported in this study, the use of the ethics of care as a lens to support corporate governance practices and as guidance in financial projection has not been conducted in previous studies. This study therefore offers an original contribution to the literature of corporate governance, business ethics and financial planning.

Acknowledgements First of all, praise to Allah the Almighty who gave me the strength, patience and ability to complete this research. This study would not have been possible without the help of many people who have given support and made valuable contributions. I would like to express my sincere thanks to my supervisors, Associate Professor Nick Sciulli and Professor Bob Clift for their dedication, direction and encouragement in helping me to complete this research. I have learned so much through the process. I am also thankful to Professor Sardar Islam, Dr Jeffrey Faux and Dr Hassan Tanha for their supportive comments during various stages of this research. Also thanks a bunch to Palgrave Macmillan, especially the Editor Aimee Dibbens and Editorial Assistant Alexandra Morton who have given me opportunity to show my work to the world and who helped me a lot through the process. My gratitude goes to the Australia Leadership Award-Ausaid as my scholarship sponsor, providing me the chance to study in Australia and enabling me to present papers to several conferences throughout my study. Many thanks to the staff at Victoria University who have assisted me in all administrative matters, especially to Tina Jeggo, Margaret Jones and the staff of the Graduate Research Centre. ix

x Acknowledgements Also many thanks to all of my friends who have provided sincere support and beautiful friendships. Special thanks to my family who have accompanied me to study in Australia. My deepest love and gratitude goes to my husband, Haris Badillah, who has provided never-ending support and love which made it possible for me to go through the ups and downs of my PhD journey. Also to my lovely sons and daughter, Abdul Aziz Sihkananda, Rayhan Firtra Qowiynanda, and Aishadinda Qaulan Maisura, who have completed my life and become my inspiration to complete this study. I am also grateful for the continual support and encouragement from my parents, parents-in-law and brothers and sisters. I have been blessed to have such a wonderful family. Desi Adhariani

Contents 1 Introduction 1 2 An Introduction to the Ethics of Care 17 3 Corporate Governance Practices from the Ethics of Care Perspective 49 4 Research Methodology 81 5 Qualitative Content Analysis: Results and Discussion 119 6 Quantitative Optimisation Model, Results and Discussion 209 7 Conclusion 285 Glossary 299 Index 303 xi

List of Figures Fig. 1.1 The theoretical constructs framework 9 Fig. 2.1 The content and organisation of the literature review chapter 21 Fig. 3.1 The structure of corporate governance 52 Fig. 3.2 A feminist governance model 53 Fig. 3.3 Conceptual framework 75 Fig. 4.1 Qualitative content analysis 85 Fig. 4.2 Zigzag approach in the qualitative content analysis 88 Fig. 5.1 BHP Billiton governance structure 135 Fig. 5.2 A metaphor of natural diamond structure 147 Fig. 5.3 Percentages of female employees 2006 2015 187 xiii

List of Tables Table 2.1 Features of positive and phenomenological paradigms 22 Table 2.2 Comparison of the ethics of care and the ethics of rights 26 Table 2.3 Different concepts of autonomy and independence 27 Table 2.4 A summary of feminist thinking 39 Table 3.1 Stakeholders interests 54 Table 3.2 Masculine vs. feminine metaphors in the stakeholder concept 56 Table 4.1 Qualitative content analysis protocol 91 Table 4.3 Decision variables and list of parameters 109 Table 5.1 The stakeholder engagement method 125 Table 5.2 Employee turnover rate 2006 2015 (%) 132 Table 5.3 The number of community complaints and environmental spending 133 Table 5.4 The frequency of meetings 137 Table 5.5 Zero Harm goals at BHP Billiton 138 Table 5.6 Profit and the economic contribution (US$ million) 149 Table 5.7 BHP Billiton s general corporate strategy statements 2006 2015 156 Table 5.8 BHP Billiton s specific strategies statements 2006 2015 160 Table 5.9 Moral development comparison 174 Table 5.10 Several statements in reports regarding the Olympic Dam Mine and expansion 181 xv

xvi List of Tables Table 5.11 Excerpt from BHP Billiton 2006 Sustainability Report regarding women as stakeholders in the consumer group 203 Table 5.12 Gendered appearances in 2006 2015 Reports (in terms of number of pictures) 203 Table 5.13 Number of pages comparison 204 Table 6.1 Quantitative optimisation model for financial planning based on the ethics of care principles of corporate governance 231 Table 6.2 The derivation from the ethics of care principles and accounting limitations to the optimisation model 234 Table 6.3 Key data inputs of BHP Billiton (consolidated), for the years 2006 2011 (in US$ million, otherwise stated) 237 Table 6.4 Selected ratios 239 Table 6.5 Revenues (net sales revenue plus other income) projection (in US$ million) 241 Table 6.6 Assets projection (in US$ million) 243 Table 6.7 Selected excerpts to determine the SROI 244 Table 6.8 EBIT projection (in US$ million) 249 Table 6.9 Current assets and current liabilities projection (in US$ million) 253 Table 6.10 Estimation of BHP Billiton s environmental costs 254 Table 6.11 Operating expenses projection (in US$ million) 257 Table 6.12 The amount of actual or potential litigation (in US$ million) 259 Table 6.13 The estimation of the costs of turnover 265 Table 6.14 The expenditures for women empowerment program in community group (US$) 266 Table 6.15 BHP Billiton s Pro forma financial data (in US$ Million) and key ratios 268 Table 6.16 BHP Billiton s pro-forma financial data (in US$ million) for Scenario 1: increase the revenues 272 Table 6.17 BHP Billiton s pro-forma financial data (in US$ million) for Scenario 2: decrease certain expenses 276 Table 6.18 Comparison of projected and actual data of BHP Billiton for the years 2012 2015 (in US$ million) 280