Corporate Lobbying, Regulatory Conduct and the Porter Hypothesis

Michael Porter, the influential Harvard management guru, has promoted the idea that compliance with stricter environmental regulations can afford secondary benefits to firms through improved product design, innovation, corporate morale and in other ways. Once these secondary benefits are factored, the net cost of compliance is argued to be lower than conventionally thought and may even be negative. Whilst environmental economists have rejected the Porter Hypothesis as being based on excessively optimistic expectations of the likely size of such secondary benefits the underlying ideas do enjoy significant credence in the business community. In the context of a lobbying model of regulatory policy-making we argue that the EPA should change the way it conducts regulatory policy to take account of Porter's views – even if it knows those views to be misguided. The model serves to illustrate the more general point that fashions in management thinking can be expected to impact the optimal conduct of regulatory policy.     

Regulatory ‘Balancing’ and the Efficiency of Green R&D

We identify and analyse several dynamic implications of setting environmental standards such as to balance marginal costs and benefits. The adoption of such a regulatory approach is shown to effect (i) the speed of improvement of abatement technologies; (ii) the direction (in a sense to be defined) of that improvement; (iii) its source and the distribution of the rents from it; and (iv) the rate of development of defensive (averting) technologies. Existing views are thoroughly synthesised in the context of a simple diagrammatic model, several new results are derived and at least one conventional wisdom questioned. The message of the analysis for legislators and regulators is that cost–benefit balancing should be done with care.     

Gender-Based Pricing in the Hairdressing Industry

This paper reviews the evidence and evaluates the claim that the hairdressing industry systematically discriminates on the basis of gender and compares the way in which courts in the UK and US have dealt with such allegations. We argue that "transaction costs" can be used to provide an alternative (perhaps more satisfactory) explanation for the pricing patterns observed than does price discrimination. Any decision to ban gender-based pricing will imply a difficult trade-off between economic efficiency and concerns for gender equality.     

Environmental Protection in Environmentally Reactive Firms: Lessons from Corporate Argentina

We propose a model of planned corporate environmental behaviour that emphasises the values and attitudes of managers towards the environment, environmental intentions and the context in which these intentions are formed and translated into actual performance. In particular, we focus on the extent to which environmentally reactive (as oppose to pro-active) managers influence the environmental performance of their firms. We identify the factors that mitigate or accentuate the effects of environmental “reactivism”—i.e. a mind-set shared by those who assign to the state the responsibility of protecting the environment. We generate a series of hypotheses and use structural equation modelling to test them in the context of a unique dataset of Argentinean firms. Our system’s approach to corporate environmental behaviour explains approximatively 70 % of the variation in reported environmental performance across firms while highlighting elements of the model that may potentially be influenced by policy. Amongst other things, our empirical results suggest that stakeholder pressures can be an effective tool in the development of pro-environmental attitudes (and environmental intentions in the case of small firms) and in so doing offset some of the negative effects of environmental reactivism on environmental performance. Our paper highlights a number of other important implications for the design and implementation of environmental policies that account for human managerial determinants of corporate behaviour and social factors.     

Pie in the Sky? Real Versus Perceived Values of Air Miles

Over 20 million people in the Britain and the US collect air miles – many significantly distorting their consumption patterns to increase the rate of accumulation. You can now earn and spend air miles without ever stepping foot on an airplane, and air miles from the more popular scheme have begun to take on the status of a "pseudo-currency." The importance has attracted the widespread attention of governments (worried about how they should most appropriately be incorporated into the tax base) and financial regulators (worried about how the associated liabilities should be dealt with under accounting and financial reporting legislation). To both groups a key hurdle has been knowing how to value an air mile. The paper outlines the characteristics of air miles that make them peculiarly well suited to use as a "shadow" currency. The perceived value of air miles in a panel of UK consumers is assessed (using the contingent valuation method) and compared to the actual value. The former is shown to be substantially larger than the latter – consumers systematically overestimate the purchasing power of air miles. These findings explain why air mile programmes are, and are likely to continue to be, popular promotional tools with businesses but are potentially harmful to consumers.     

An Investigation of Real Versus Perceived CSP in S&;P-500 Firms

Firms are spending billions annually in the name of corporate social responsibility (CSR). Whilst markets are increasingly willing to reward good and responsible firms, they lack the instruments to measure corporate social performance (CSP). To convince investors and other stakeholders, firms invest heavily in building a reputation for good corporate behaviour. This article argues that reputations for CSP are often unrepresentative of true CSP and investigates how differences in ‹perceived’ and ‹actual’ – as measured by the Fortune and KLD databases, respectively – can partly be explained by firm characteristics. Amongst other things, it finds that overrated firms are more likely to be relatively big, profitable, operating in non-polluting but competitive industries and with no history of wrong doings to their primary stakeholders. They will also typically spend a lot of effort satisfying the claims of their secondary stakeholders. Above all, the results emphasise the need for researchers to recognise that the databases measure different phenomenon and are not interchangeable.     

Contents of Volume 23

Volume Contents

Contents of Volume 23     

Stakeholders Pressures and Strategic Prioritisation: An Empirical Analysis of Environmental Responses in Argentinean Firms

This article focusses on corporate attitudes to stakeholder environmental pressures in Argentina. It uses a cross section survey of 505 CEOs of Argentinean firms to gather information on environmental attitudes and a stakeholder theory framework to design and interpret the statistical analyses. It is underpinned by theoretical and empirical findings in the literature on stakeholder management, targeting in particular studies that deal with corporate social responsibility (CSR) in Latin America. Its general aim is to gain a deeper empirical understanding of the coherence between managers’ perceptions of stakeholder pressures and the importance they are given in corporate CSR strategies through an empirical investigation of environmental management (EM) decisions. In doing so, it uncovers general differences in the way firms perceive and treat groups of stakeholders. It also detects variations across firms, observing that some are typically proactive in their response to stakeholder pressures whilst others are less responsive. Profiling the various stakeholder networks and the corporate response strategies in this way encourages the development of stakeholder-focussed policies and corporate strategies that emphasise communications, awareness and a clear sense of direction. It concludes that CSR appears to be more effective in the protection of the environment than previously reported. Although this study focusses on EM in Argentina, the findings are more generally applicable.     

Employee isolation and support for change in the public sector: a study of the internal audit profession

ABSTRACT

We investigate the preferences of public sector internal auditors for changes in their work practices. Informed by the literature, we posit that feelings of trust in the workplace and/or frustrations arising from perceived organizational ‘isolation’—a dimension of work alienation—motivate support and acceptance of change. We also argue that professional bodies directly and indirectly influence these relationships. These conjectures are tested using structural equation modelling and a survey of Canadian public sector internal auditors. The findings provide valuable insights into the process of adaptation and transformation in public sector settings across countries, jurisdictions, and accountability functions.     

Employee Participation in Cause-Related Marketing Strategies: A Study of Management Perceptions from British Consumer Service Industries

The purpose of cause-related marketing (CRM) is to publicise and capitalise on a firm??s corporate social performance (CSP) by enhancing its legitimacy in the eyes of its stakeholders. This study focuses on the firm??s internal stakeholders ?C i.e. its employees ?C and the extent of their involvement in the selection of social campaigns. Whilst the difficulties of managing a firm that has lost or damaged its legitimacy in the eyes of its employees are well known, little is understood about the extent to which managers and their social partners listen to and involve their employees in the legitimation process. Through telephone interviews with non-profit organisations and senior managers of service sector firms, the extent of employee involvement in CRM campaigns and the perceived benefits of doing so are investigated.?Amongst other things, we find that (i) the extent of employee participation varies significantly across firms; (ii) larger CRM campaigns tend to be managed centrally with relatively less employee participation than smaller ones and (iii) financial services firms are more likely to make CRM decisions centrally, with relatively less employee participation than retail services firms.