Relationship between Corporate Sustainability and Compliance with State-Owned Enterprises in Central-Europe: A Case Study from Hungary
<p>Analytical Hierarchy Process (AHP) pairwise comparison matrix.</p> "> Figure 2
<p>The process of the qualification of indicators.</p> "> Figure 3
<p>Structure of AHP analysis.</p> "> Figure 4
<p>Average of Risk Mitigation Control Factor (RMCF) index by state ownership ratio.</p> "> Figure 5
<p>The CSR goal, the importance of the areas that determine the operation.</p> "> Figure 6
<p>The structure of the analysis and the order of the alternatives (IHFs, HIFs, CEFs).</p> "> Figure A1
<p></p> "> Figure A1 Cont.
<p></p> ">
Abstract
:1. Introduction
2. Key Aspects of Corporate Compliance
- the objectives pursued in setting up the business in question;
- ownership, sometimes at the governmental level, together with regulators at the policy (sector) level;
- compliance with standards;
- meeting the expectations of the public service users;
- compliance with the organization’s short-, medium- and long-term strategic objectives;
- it also represents compliance with corporate values for managers and employees.
3. Overview of the Compliance Environment for Hungarian State-Owned Enterprises
- to carry out the activities in the course of their operation and management in a regular, economic, efficient and effective manner;
- to comply with clearing obligations and protect resources from loss, damage and improper use.
- control environment,
- an integrated risk management system,
- control activities,
- information and communication system, and
- monitoring system design, operation and development.
4. Materials and Methods
- 1. Goal: CSR operation;
- 2. Alternatives: IHFs, HIFs and CEFs;
- 3. Aspects: a, b, c, d, e, f:
- a-
- Integrated monitoring of legal regulators (LeMon),
- b-
- Fulfillment of profitability, size-efficiency (ProSize),
- c-
- Fulfill ownership requirements (OwnReq),
- d-
- Application of international standards (IntSta),
- e-
- Performance monitoring of social benefits (SociBen), and
- f-
- Successful use of EU and state resources (EUsour).
4.1. Creating the Test Matrix, Determining the Weights of the Aspects—The Weighting of the Selected Indicators (a, b, c, d, e, f) Based on the Three Groups of Factors (IHFs, HIFs and CEFs) (Table 1)
4.2. The Process of Evaluating Alternatives According to the Criteria Given
4.3. Summary of Weighting and Ratings
- 1CSR GOAL
- 2Clusters
- 3Alternatives
5. Results and Discussions
5.1. Reasons for Inducing Sustainability Deficit and Their Inductive Analysis
- Integrated monitoring of legal regulators;
- Fulfilment of profitability, size-efficiency;
- Fulfilled ownership requirements;
- Application of international standards;
- Performance monitoring of social benefits;
- Successful use of EU and state resources.
5.2. The Results of Analytic Hierarchy Process (AHP) Comparative Analysis
6. Conclusions
Author Contributions
Funding
Acknowledgments
Conflicts of Interest
Appendix A
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Alternatives | Initial Hazard Factors (IHFs) (p1…p6) | Hazardous Increasing Factors(HIFs) (p1…p6) | Control Enhancement Factors (CEFs) (p1…p6) | |
---|---|---|---|---|
Indicators | ||||
| a1/p1 | a2/p1 | a3/p1 | |
| b1/p2 | b2/p2 | b3/p2 | |
| c1/p3 | c2/p3 | c3/p3 | |
| d1/p4 | d2/p4 | d3/p4 | |
| e1/p5 | e2/p5 | e3/p5 | |
| f1/p6 | f2/p6 | f3/p6 |
Index | The Value of the Index in 2016 (%) | The Value of the Index in 2017 (%) | The Value of the Index in 2018 (%) |
---|---|---|---|
Initial Hazard Factors (IHFs) | 48.4 | 41.4 | 41.6 |
Hazardous Increasing Factors (HIFs) | 35.2 | 25.0 | 27.8 |
Control Enhancement Factors (CEFs) | 60.0 | 49.8 | 46.6 |
Factors Qualifying for IHFs in 2016 | Factors Qualifying for IHFs in 2017 | Factors Qualifying for IHFs in 2018 |
---|---|---|
Carrying out public tasks and pursuing other activities. | Carrying out public and service tasks and carrying out other activities. The blending of the objectives and conditions of the Community mission and the operation of a competitive market has contributed to an increased vulnerability to integrity. | The mixed activity also involved other initial hazards. |
It affects the operation of business associations and the initial hazard to corruption - the contents of the memorandum and articles of association, the management agreement, the operation contract, the public service delegation contract, and the technical and financial requirements relating to the performance of the tasks, and - related ownership reporting. If these required clear and stringent requirements, the initial risk of corruption was less. | More complicated and more complex legal environment. | The initial hazard of public service and high-balance sheet companies was almost double that of smaller, non-public service companies. |
As regards public service charges, the majority of the state-owned public service companies, which are entrusted with public service tasks, lack licensing or equity. | The operation of the public service and the size of the plant enhance the influence of each other. |
Factors Qualifying for HIFs in 2016 | Factors Qualifying for HIFs in 2017 | Factors Qualifying for HIFs in 2018 |
---|---|---|
He has been a recipient of EU funding for the past three years, having been involved as a contracting authority, tenderer and in both ways in public procurement. Maintenance obligation, environmental compliance. | He has received EU funding for the past three years and is now subject to public procurement obligations. Recruitment of an external expert/consultant for the activity, such as obtaining a grant or conducting a public procurement. Environmental compliance: the use of an environmental monitoring system is required to fulfill the application criteria. | Larger companies’ overdue debts pose a greater risk. It was identified as a significant difference factor from a member company of the group: using a service or providing a service. Supporting other organizations or companies and employing or subcontracting external environmental consultants or experts. |
There was a significantly higher proportion of public service, public-service and other companies increasing the risk of corruption. | The risk of companies using a restricted procedure in the field of public procurement was greater than that of firms not in the scope of public procurement. The continuous additional cost of defects in construction is a significant cost during maintenance. | Lack of approval by the supervisory board of the internal control plan was more often a risk-increasing factor for smaller companies. |
Increasing the risk of corruption when a company is involved in a public procurement procedure is because it uses a significant amount of public money. | The vulnerability of public service companies has already exceeded that of non-public service providers with a subsidy amount of EUR 3 million. | |
Public service companies have a higher HIFs index, mainly because (in the absence of competence) they subcontract their core tasks more frequently, have recourse to a restricted procedure in their procurement and receive more state aid than non-public service companies. The use of the restricted procedure was accompanied by a higher incidence of other public procurement risk factors, such as several public tenders awarded to the same tenderer and the fact that the company was the successful tenderer with which the company was previously contracted. |
Factors Qualifying for CEFs in 2016 | Factors Qualifying for CEFs in 2017 | Factors Qualifying for CEFs in 2018 |
---|---|---|
The relationship between size and hazard has not been studied in detail. | In terms of control structure, the largest differences were found between the total assets, the size of the balance sheet, the reporting activity and the internal control function. | The absolute value of the control structure was significantly influenced by the plant size. |
Higher risk was associated with higher levels of control. For assets with a balance sheet total of more than EUR 2 million, the level of controls is above average. | There was a significant difference in the intensity of the control factors for companies below and above the balance sheet total of EUR 2 million. Larger companies had better controls. | |
If the management (director/chief executive/executive) of a company did not or regularly inform the supervisory board of the decisions taken by the management and their implementation, this was also related to the lower level of control in place. | The intensity of the soft controls is only moderate in the larger companies, but very low in the smaller companies. | |
If a company did not have a risk-based internal control plan, it had a below average control system, which was also significantly lower than companies with an internal control plan based on risk analysis. | If a company received an EU subsidy, it increased the CEFs index by an average of 6.3 percentage points (index of EU subsidized companies: 51.1%, of non-subsidized companies: 44.8%). |
Areas of Application of Integrity Controls 2016 | Areas of Application of Integrity Controls 2017 | Areas of Application of Integrity Controls 2018 |
---|---|---|
- Asset management, management of public funds; - Corporate governance, supervision; - Activities, provision of public services; - Organizational structure; - Purchases, public procurement; - Legal environment; - Internal regulation; - Human resource management; - Internal controls, risk management; - Special anti-corruption systems and procedures. | - Responsible management (provision of ownership, legal environment, role of the supervisory board, reporting to the owner, decision-making power of the owner, corporate governance, establishment of the organizational structure, management information system); - Public service tasks, external relations (public service tasks, public service provision, fee setting, support to and from outside organizations, risks of contractual partners, outsourcing, disclosure, publicity); - Management (resource and asset management, EU support, partner contracts, group of companies, management efficiency); - Compliance, audits (internal regulations, public procurement, tendering, auditing, external and internal audits); - Organizational culture, ethical behavior (integrity culture in internal rules, private benefits, staff selection, conflict of interest, benchmarking, ethics, media appearance). | Beyond the areas named in the 2017 analysis: - External relations: Participation in, or provision of, external aid, accounting for subsidies, measurement of customer satisfaction and social utility, disclosure of data of public interest. - External and internal audits: auditing, audits by external bodies, quality of internal audits, utilization, environmental and financial risk analysis and risk management. - Organizational culture: human resources management, conflict of interest management and employee selection, remuneration system, performance evaluation, ethical procedures. |
Alternatives | Initial Hazard Factors (IHFs) | Hazardous Increasing Factors (HIFs) | Control Enhancement Factors (CEFs) | |
---|---|---|---|---|
Indicators | ||||
| 5/7 (0.71) | 1/7 (0.14) | 7/7 (1.0) | |
| 5/7 (0.71) | 5/7 (0.71) | 7/7 (1.0) | |
| 7/7 (1.0) | 3/7 (0.42) | 5/7 (0.71) | |
| 5/7 (0.71) | 7/7 (1.0) | 7/7 (1.0) | |
| 3/9 (0.33) | 9/9 (1.0) | 5/9 (0.55) | |
| 3/7 (0.42) | 5/7 (0.71) | 7/7 (1.0) |
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Boros, A.; Fogarassy, C. Relationship between Corporate Sustainability and Compliance with State-Owned Enterprises in Central-Europe: A Case Study from Hungary. Sustainability 2019, 11, 5653. https://doi.org/10.3390/su11205653
Boros A, Fogarassy C. Relationship between Corporate Sustainability and Compliance with State-Owned Enterprises in Central-Europe: A Case Study from Hungary. Sustainability. 2019; 11(20):5653. https://doi.org/10.3390/su11205653
Chicago/Turabian StyleBoros, Anita, and Csaba Fogarassy. 2019. "Relationship between Corporate Sustainability and Compliance with State-Owned Enterprises in Central-Europe: A Case Study from Hungary" Sustainability 11, no. 20: 5653. https://doi.org/10.3390/su11205653
APA StyleBoros, A., & Fogarassy, C. (2019). Relationship between Corporate Sustainability and Compliance with State-Owned Enterprises in Central-Europe: A Case Study from Hungary. Sustainability, 11(20), 5653. https://doi.org/10.3390/su11205653