Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

WealthWise Insurance has recently set up an internal information system to improve social and environmental practices within the company. The company has its head office

WealthWise Insurance has recently set up an internal information system to improve social and

environmental practices within the company. The company has its head office in Brisbane and offices in all

capital cities and every regional city with a population of more than 50 000 people. One of the underlying

principles of the company is to be socially and environmentally responsible. This principle has been in

place for many years, dating back to the firm's founder, Jeannette Dai, who felt that she would like to

contribute to society rather than simply maximising profits.

The company is a major contributor to charities, particularly those that focus on the homeless and the poor.

It actively promotes environmental management in all of the company operations. It sponsors a program

that provides scholarships to disadvantaged students to allow them to attend university, and it is proud to

offer employment in the company to long-term unemployed and the poor. Each year it publishes a

sustainability report that summarises its achievements across each area of performance.

Over time these activities have become a marketing strength of WealthWise. The social and environmental

stance taken by the company has attracted many customers to the company. Listed on the Australian

Securities Exchange in 2001, the company has also become a preferred investment of ethical and green

investment funds.

The mission statement of WealthWise states that it will aim to:

support employees in achieving their personal and career goals

act in a socially responsible way when dealing with insurance clients and the general community

promote a better social and physical environment for the world.

However, the current chief executive officer, Sylvia Trott, thinks that the firm has become complacent and

is resting on its past achievements. She is concerned that the firm has built up a reputation for good social

and environmental practices but is not walking the talk. There is some level of discontent among

employees about the way that management treats staff, and this is impacting on employee satisfaction.

There have also been negative reports in the media of its treatment of businesses in Phuket and Langkawi

that were damaged in the December 2004 tsunami. The reports claim that the company has tried to

minimise the amounts paid to these businesses by strictly applying clauses in the insurance contracts that

cover earthquake damage but not flood damage.

In 2004, the company's profit rose by 15 per cent to $173 million, on an asset base of $1 235 million. This

is the third consecutive year of increased profits. Earnings per share were 62 cents, and the market value

was $5.40 per share. The board is concerned that WealthWise makes a loss on its insurance business,

while its investments yield a strong return and are the main reason for the increase in profitability. Its

investment portfolio includes shares in BHP Billiton, Qantas, Telstra and James Hardie Industries.

The board adopts a sustainability approach to viewing its performance and uses the following key

performance indicators to assess company performance:

Financial indicators:

profit

gross insurance premiums

return on investment

Economic indicators:

policy, practices and spending on local suppliers

procedures for hiring local staff

development projects primarily for public benefit

Social indicators:

employee satisfaction ratings

percentage of women in the top three tiers of management

number of indigenous employees

customers' ethical ranking of sales staff

number of staff hired who were previously unemployed teenagers

Environmental indicators:

tonnes of paper recycled per annum

percentage reduction in electricity usage

litres of fuel per dollar of sales.

Required:

1. Explain what is meant by sustainability reporting and why a publicly listed insurance company like

WealthWise may adopt this approach.

2. Consider the list of key performance indicators used by WealthWise. Explain how these measures

could be used to help achieve the mission.

3. Suggest alternative performance measures that could be included in the performance measurement

system to assist WealthWise to achieve its mission.

4. Write a report to the chief executive officer explaining what steps she can take to encourage staff to

behave in a way that supports sustainability. Specifically, explain to her how the performance

measurement system could be used in a balanced way to support the achievement of the company's

goals.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting The Cornerstone Of Business Decision Making

Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

8th Edition

0357715349, 978-0357715345

More Books

Students also viewed these Accounting questions

Question

The role of life: It consists of your own service to yourself.

Answered: 1 week ago