Question
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.
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