Abstract and Keywords
As a field of inquiry, corporate social responsibility (CSR) is still in an embryonic stage. The study of CSR has been hampered by a lack of consensus on the definition of the phenomenon, unifying theory, measures, and unsophisticated empirical methods. Globalization has also added to the complexity of CSR issues to be addressed. Despite these concerns, there is still some excellent research on this topic, which has been gathered in this volume. Specifically, this volume contains findings from numerous experts in a wide variety of social science disciplines and fields in business administration, who have summarized the body of CSR literature and also outlined an agenda for additional research. It is important to note that CSR practices and product features are not always totally transparent and observable to the consumer and other stakeholders. This makes it difficult for consumers and other stakeholders to evaluate the firm's social performance.
As a field of inquiry, corporate social responsibility (CSR) is still in an embryonic stage. The study of CSR has been hampered by a lack of consensus on the definition of the phenomenon, unifying theory, measures, and unsophisticated empirical methods. Globalization has also added to the complexity of CSR issues to be addressed.
Despite these concerns, there is still some excellent research on this topic, which we have gathered in this volume. Specifically, the volume contains findings from numerous experts in a wide variety of social science disciplines and fields in business administration, who have summarized the body of CSR literature and also outlined an agenda for additional research.
Given that we have included many perspectives on CSR, readers with a specific ideological or disciplinary orientation will encounter chapters that correspond with their view of CSR. At the same time, they will also be exposed to new perspectives on CSR.
We suspect that most business schools academics who teach courses in CSR or who conduct research on this topic will find the conclusion that firms can ‘do well by doing good’ quite appealing. Neoclassical economists will also accept this argument, especially if it can be framed in such a way as to justify the existence of a rational, economic justification for ‘doing good’ (McWilliams and Siegel, 2001). Conversely, such academics will dislike the call for broader involvement in social responsibility, such as corporate citizenship implies.
On the other hand, those academics who advocate government intervention in the realm of CSR may ‘dislike’ the positive relationship between doing good and doing well, because it obviates the need for additional regulation vis‐à‐vis CSR. Conversely, they will support the notion, which was discussed in several chapters, for additional discretionary spending on CSR by business.
We hope this heterogeneity in perspectives and paradigms results in rich discussion and additional interdisciplinary research on this topic. From a practitioner standpoint, there may be very different reactions from US businesses (which emphasize stockholder rights) and non‐US businesses (which may emphasize a balance of stakeholder rights). Some mutual understanding may lead to more consistency of CSR actions globally.
The authors in this volume provide insights on many concepts and descriptions of the state of knowledge and practice of social responsibility over a wide range of countries and regions. With that in mind, we review some of the important contributions of this volume.
Defining Corporate Social Responsibility and Related Concepts
In addition to having no consensus definition of CSR, there are multiple related concepts and terms that are sometimes used interchangeably with CSR. CSR is typically used to consider and or evaluate the effects of business on society, beyond the traditional role of seeking to maximize profits. These may include such effects as support of charitable and educational organizations, hiring and training of hard‐core unemployed, non‐discrimination in employment, improved workplace safety, development of green technologies, use of non‐animal testing processes, increased consumer protection, and transparency in reporting. Definitions of CSR can be found in this volume in the chapters by Carroll; Dunfee; Frederick; Mackey, Mackey, and Barney; Orlitzky; and Salazar and Husted.
The definition of CSR often depends on motivation, that is, whether an effect such as the development of a green technology was motivated by a concern for the environment or simply as a means to reduce the cost of environment compliance (deceasing costs and increasing profits). Motivation is inherently unobservable, (p. 570) therefore a related concept, corporate social performance (CSP), which is defined in terms of observed CSR policies, processes, and outcomes, was developed. This concept has several weaknesses, not least of which is its reliance on the concept of the ill‐defined CSR. However, many researchers have used this concept, rooted in sociology, to test the relationship between firms doing good (CSP) and doing well (corporate financial performance or CFP). Definitions of CSP are found in chapters by Melé and Orlitzky, while definitions of CFP are found in chapters by Carroll and Orlitzky.
While also sometimes used interchangeably with CSR, corporate citizenship (CC), which has its roots in political science, is a broader concept than CSR. It considers the role of corporations as social institutions and their ability to respond to non‐market pressures, especially in a global context. In this volume, discussions of CC are found in the chapters by Frederick, Melé, Orlitzky, and Windsor.
Another related, but not synonymous concept, is that of socially responsible investing (SRI), which has roots in religion, ethics, economics, and political science. SRI differs from the other concepts addressed in this volume, because it is a way for stakeholders to control the socially responsible behavior of managers by determining the incentives for such behavior. A definition of SRI is found in the chapter by Kurtz.
Reviewing and Expanding Perspectives on Corporate Social Responsibility
A dominant perspective in CSR research and practice is the business case, which has its roots in economics, especially the theory of the firm. The business case is that firms ‘do well’ (financially) by ‘doing good’ (acting responsibly). The mechanism by which ‘doing good’ is translated into ‘doing well’ has been open to discussion, both from a theoretical perspective and based on a critique of the empirical evidence. Kurucz, Colbert, and Wheeler address the means by which firms benefit by ‘doing good’ and argue for ‘building a better case’, which ‘would extend beyond the economic’ in their chapter.
Another economic concept, agency theory, has been used to argue against managers engaging in CSR. This perspective, advanced by Friedman (1970), asserts that managers who engage in CSR are acting in their own self‐interest, rather than in the interest of shareholders (the owners of the firm). Therefore, CSR is not good business practice. Salazar and Husted extend this analysis by outlining an agency theory model, where the pursuit of CSR can be an appropriate business practice.
An alternative theory is that of stakeholder management, which has its roots in ethics (rights and justice). Stakeholder theory posits that many stakeholders, not just shareholders, are affected by the actions of firms, and therefore also have rights. (p. 571) The chapters by Melé and Carroll constitute an in‐depth analysis of stakeholder theory.
A more extensive and inclusive theory of CSR (sometimes referred to as CC) has its roots in political science and argues that business firms are citizens, with both rights and responsibilities. The responsibilities of firms include both the economic and social welfare of other citizens. This concept extends the responsibilities of firms beyond those of stakeholders to all citizens. This conceptualization is especially important in developing countries where the governments might not offer protection of human rights and there may be insufficient regulation of environmental, employment, and consumer impacts. A discussion of these issues is found in the chapters by Frederick, Levy and Kaplan, Melé, Millington, Scherer and Palazzo, and Visser.
Levels of Analysis
One of the most challenging aspects of developing a unified theory of CSR is that studies of this phenomenon have been conducted at numerous levels of aggregation: individual actor (manager or employee), organization, industry, nation, region, and global. Each of these levels of analysis is represented in this volume.
Individual actors are at the center of the controversy surrounding CSR. While firms may be legal entities and may be thought of as having identities and citizenship rights, it is individual managers who make decisions about firms' actions, including allocating resources to CSR. Several motives for engaging in CSR have been recognized, including personal preference, career enhancement, stakeholder coercion, moral leadership, reputation building and profit enhancement. Mackey, Mackey, and Barney examine the correlation between managers' commitment to socially responsible causes and the activities of the firm, while Salazar and Husted propose a model for creating incentives for managers to engage in CSR. Windsor's chapter is devoted to examining how responsible management is taught.
Most CSR studies have been based on the firm as the unit of observation. This is entirely appropriate, since most CSR‐related decisions are made at the corporate level. Furthermore, while there is substantial turnover among senior managers, large firms continue to operate and affect our lives. It is also easier to identify actions with the firm rather than with individual decision‐makers. Carroll presents a comprehensive history of firm‐level CSR. In examining the business case for CSR, Kurucz, Colbert, and Wheeler analyze the creation of firm value through CSR. Kurtz examines the foundations of SRI and how shareholders can affect the behavior of the firms they own, that is, the role of shareholder activism in promoting CSR by the firm.
In recent years, differences in the provision of CSR across countries have been of interest to both researchers and managers. Donaldson examines differences in corporate governance between American firms (where shareholder interests dominate) and European firms (where other groups' interests are also considered). Moon and Vogel examine differences in the business and government interface between the United States and Western European countries and how these differences affect the provision of CSR in these countries. Visser offers an analysis of CSR in developing countries and draws several conclusions regarding how CSR provision differs in developed and developing countries.
The incidence and nature of CSR in a global context is also a fruitful area of research and discourse because technology improvements have opened up markets throughout the world to Western‐style business with its attendant benefits and costs. Because many countries do not provide sufficient government and legal protection for consumers, employees, and the environment, businesses or firms that operate globally are expected to recognize and respond to greater responsibilities than they may have to in their (developed) home country. Scherer and Palazzo explain these expectations. Millington explains how the recent phenomenon of the global supply chain has created pressure on large multinational firms to set the standards for CSR behavior by their suppliers that often operate in developing countries—what he terms ethical supply chain management (ESCM).
Drivers of CSR
One of the issues central to CSR, but often left unexamined, is what ‘drives’ CSR? That is, where does the idea of responsibility originate? Several of the chapters in this volume address this issue in some detail.
One relatively well‐recognized driver of CSR is the consumer. Smith examines how consumers can drive CSR behavior through both positive ethical consumerism (support for products that are produced by responsible firms) and negative ethical consumerism (boycotting firms that act irresponsibly). Steger is more reserved in his support for consumers as drivers, pointing out that consumers are still generally reluctant to support CSR and may punish laggards, but not reward pioneers in CSR. Williams and Aguilera compares consumer attitudes towards CSR across cultures, postulating that there are significant differences.
Another well‐recognized driver of CSR is the manager. The manager as agent for the stockholders (principals) of the firm has control over the resources and can determine how those resources are allocated. Therefore, managers, and especially CEOs, can strongly influence CSR behavior (Waldman et al., 2006). This is at the heart of most of the controversy surrounding CSR. Proponents of CSR assert that managers should exercise moral leadership, as proposed in Swanson's chapter. Opponents believe that there is an agency problem when managers engage in CSR (p. 573) or more generally, that ‘investment’ in CSR constitutes an inefficient use of corporate resources. Salazar and Husted examine this tension. Williams and Aguilera discuss differences in CSR attitudes and behaviors across different cultures. Pruzan discusses a spiritual‐based perspective of CSR which implies that managers are—and should be—the drivers of CSR.
The lack of government regulation and legal protections in much of the world is another recognized driver of CSR. In developing countries and regions, firms must take over many of the social functions of government so that there is a stable economy, a viable workforce, and a globally sustainable environment in which to conduct commerce. This driver is discussed in several chapters, but most explicitly analyzed in the Visser chapter. Hanlon argues that unmet social needs create a means for firms to develop relationships with stakeholders that benefit the firm (building reliance on firms rather than governments).
In developed countries, government may be a driver of CSR. Moon and Vogel discuss ways in which governments can actively encourage firms to engage in CSR, for example, through the establishment of non‐binding codes and standards. Alternatively, firms might choose CSR as a way to escape formal regulation. Whether through the stick or the carrot, governments may be effective in encouraging CSR.
Social Auditing and Reporting
One area where proponents of CSR have prevailed is in auditing and reporting. The premise behind the support for reporting is that managers will be encouraged to perform more responsibly if they must report on results, and shareholder activists can use the information in reports to invest responsibly. Owen and O'Dwyer discuss the growth and development of corporate social and environmental reporting. Kuhn and Deetz outline the critical theorists' critique of social audits and reports. Buchholtz, Brown, and Shabana discuss the role of legislation in establishing standards for auditing and reporting and the need for global guidelines.
Information Asymmetry and the Strategic Use of CSR
These chapters underscore the importance of information relating to CSR practices. More generally, we believe that the role of information asymmetry in CSR is a fruitful area of research (see Baron, 2001, and Fedderson and Gilligan, 2001, for theoretical analyses and Siegel and Vitaliano, 2007, for empirical evidence). It is important to note that CSR practices and product features are not always totally transparent and observable to the consumer and other stakeholders. This makes it (p. 574) difficult for consumers and other stakeholders to evaluate the firm's social performance.
As noted in Fedderson and Gilligan (2001), the degree of asymmetric information regarding internal operations can be mitigated by the company or by ‘activists’ and/or/‘non‐governmental organizations’ (NGOs). It is interesting to note that McDonalds, Motorola, and Nike now publish ‘annual CSR reports’. One can view this activity as a form of advertising, especially for more general types of CSR. However, stakeholders may perceive this information as biased, since it is presented by incumbent managers and not an independent source. Therefore, NGOs may emerge to fill this gap. Additional evidence is needed on how consumers and other stakeholders respond to these efforts.
More generally, the field would greatly benefit from more research on precisely how firms matrix decisions regarding CSR into their business and corporate‐level strategies. There is now mounting empirical evidence (Russo and Fouts, 1997; Reinhardt, 1998; Siegel and Vitaliano, 2007) that it is consistent with strategic theories of CSR and rational, profit‐seeking management decision‐making. However, others may view this evidence quite differently. They may perceive this stylized fact as indicative of the notion that CSR is a ‘fraud’ or a ‘smokescreen’, used to disguise other irresponsible behavior. In this regard, it is interesting to note that firms such as Enron and Philip Morris were actively involved in social responsibility.
An interesting recent paper by Strike, Gao, and Bansal (2006) examines this tension between responsibility and irresponsibility. The authors assert that firms can simultaneously be socially responsible and socially irresponsible (e.g. Philip Morris). Based on a strategic/resource‐based‐view framework, they examine whether international diversification influences the propensity of firms to be socially responsible and socially irresponsible. More specifically, the authors demonstrate that firms diversifying internationally create value by acting responsibly and destroy value by acting irresponsibly.
The field of CSR remains wide open and we hope that these authors have expanded your horizons. Hope springs eternal.
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Feddersen, T., and Gilligan, T. 2001. ‘Saints and Markets: Activists and the Supply of Credence Goods’. Journal of Economics and Management Strategy, 10: 149–71.Find this resource:
Friedman, M. 1970. ‘The Social Responsibility of Business is to Increase its Profits’. New York Times Magazine, 13 Sep.Find this resource:
(p. 575) McWilliams, A., and Siegel, D. 2001. ‘Corporate Social Responsibility: A Theory of the Firm Perspective’. Academy of Management Review, 26(1): 117–27.Find this resource:
Reinhardt, F. 1998. ‘Environmental Product Differentiation’. California Management Review, 40, summer: 43–73.Find this resource:
Russo, M. V., and Fouts, P. A. 1997. ‘A Resource‐Based Perspective on Corporate Environmental Performance and Profitability’. Academy of Management Journal, 40: 534–59.Find this resource:
Siegel, D. S., and Vitaliano, D. 2007. ‘An Empirical Analysis of the Strategic Use of Corporate Social Responsibility’. Journal of Economics and Management Strategy, 17(3): 773–92.Find this resource:
Strike, V. M., Gao, J., and Bansal, T. 2006. ‘Being Good while Being Bad: Social Responsibility and the International Diversification of U.S. Firms’. Journal of International Business Studies, 37(6): 850–62.Find this resource:
Waldman, D., Siegel, D. S., and Javidan, M. 2006. ‘Components of CEO Transformational Leadership and Corporate Social Responsibility.’ Journal of Management Studies, 43(8): 1703–25. (p. 576) Find this resource: