How Can a Ratings-based Method for Assessing Corporate Social Responsibility (CSR) Provide an Incentive to Firms Excluded from Socially Responsible Investment Indices to Invest in CSR?

Socially Responsible Investment (SRI) indices play a major role in the stock markets. A connection between doing good and doing well in business is implied. Leading indices, such as the Domini Social Index and others, exemplify the movement toward investing in socially responsible corporations. However, the question remains: Does the ratings-based methodology for assessing corporate social responsibility (CSR) provide an incentive to firms excluded from SRI indices to invest in CSR? Not in its current format. The ratings-based methodology employed by SRI indices in their selection processes excludes many corporations by creating limited-membership lists. This received ratings-based structure is yet to offer an incentive for most of the excluded corporations to invest in improving their levels of CSR. We, therefore, ask under what circumstances a ratings-based method for assessing CSR could provide an incentive to firms excluded from SRI indices to invest in CSR. In this article, we attempt to offer a theoretical reply to this question. We show that when all firms are publicly ranked according to SRI index parameters, such indices can indeed create a market incentive for increased investment by firms in improving their performance in the area of social responsibility. We further show that this incentive tapers off as the amount of investment required exceeds a certain point or if the amount of payback on that investment fails to reach a certain threshold.     

Doing Business with Rights Violating Regimes Corporate Social Responsibility and Myanmar’s Military Junta

Whether to do business with rights violating regimes is one of many dilemmas faced by socially responsible corporations. In this article the difficult case of Myanmar is considered. Ruled for decades by a closed and sometimes brutal military elite, the country has long been subject to informal and formal sanctions. However, as sanctions have failed to trigger political reform, it is necessary to review the policy options. The focus here is on the contribution socially responsible corporations might make to change. The article sketches contextual features of the case, examines the recent history and present pattern of business links with Myanmar, and assesses whether current approaches can stimulate reform. Concluding that they cannot, it considers fresh possibilities for corporate engagement. The argument is that socially responsible corporations, committed to improving individual life chances through engagement with developing societies, should undertake collaborative and principled direct investment in Myanmar. The underlying strategy and problems of codification and implementation are all analyzed. To close, the article contends that, by doing business with Myanmar’s rights violating regime, multinational corporations can extend the frontiers of global corporate social responsibility. Ian Holliday is Professor of Policy Studies and Dean of the Faculty of Humanities and Social Sciences, City University of Hong Kong     

企业社会责任与企业财务绩效关联性分析——基于浙江纺织企业的调查数据

企业社会责任与企业财务绩效的关联性决定企业的社会责任态度和行为。通过对浙江纺织行业样本企业数据的计量分析发现,前期企业财务绩效和后期企业的社会责任状况显著正相关;而前期企业社会责任和后期企业财务绩效之间、同期企业社会责任和企业财务绩效之间呈负相关趋势,但统计不显著。出现这种结果的原因可能在于当前中国社会责任市场缺乏,企业社会责任行为的推动力是行政力量而非市场力量,企业社会责任不能顺利转化或提升企业绩效。构建社会责任市场以实现企业和社会的双赢,将有效改善中国企业社会责任状况并促使持久的企业社会责任行为。     

Why Firms Should Not Always Maximize Profits

Though corporate social responsibility (CSR) is on the agenda of most major corporations, corporate executives still largely support the view that corporations should maximize the returns to their owners. There are two lines of defence for this position. One is the Friedmanian view that maximizing owner returns is the social responsibility of corporations. The other is a position voiced by many executives, that CSR and profits go together. This article argues that the first position is ethically untenable, while the latter is not supported by empirical evidence. The implication is that there may be good reason for firms to deviate from a maxim of profit maximization. Ivar Kolstad is Senior Researcher at the Chr. Michelsen Institute (CMI). He is the head of the CMI Human Rights Programme, and the coordinator of the institute programme Business Ethics for Multinational Corporations in Developing Countries. He has published internationally on the topics of social norms and development economics.     

Imperfect markets: Business ethics as an easy virtue

This paper marks a radical diversion from the large body of prevailing literature in business ethics which primarily views the issue in individual-personal terms, i.e., corporate executive and employee, and suggests that making corporations more ethical would primarily come through changes in executive behavior. While this approach has strong intellectual roots in moral philosophy and religion, it fails in explaining the persistence of unethical and illegal behavior among corporations of all sizes, financial health, competitive market conditions, and, level of individual executive compensation. This paper argues for a fundamentally different approach to understanding ethical behavior, or lack thereof, among corporations and their executives. It is asserted that an overwhelmingly large rationale and/or inducement for proactive ethical business behavior is rooted in competitive aspects of particular markets, and industry structures prevailing in those markets. Furthermore, while highly competitive markets may promote efficiency, they do not guarantee ethical behavior and may indeed provide greater opportunities and incentives for unethical business behavior. Thus, by following the current prognosis, we could be wasting enormous resources in terms of teaching business ethics, and creating and imposing corporate codes of conduct. We assert that these approaches would at best make a marginal improvement in the ethical performance of corporations while at the same time exacerbate the problem by ignoring more fundamental, structural issues. Imperfect markets, with their above-market profits, are a necessary but insufficient condition for corporations to behave ethically. It is only under conditions of imperfect markets that individual executives can play an important role in guiding their corporations toward greater ethical norms. These are undertaken for a variety of reasons, including, protecting a corporation's good name, public expectations, competitive norms, and, corporate culture and individual executive's predilections, to name a few.S. Prakash Sethi is Professor and Acting Director, Center for Management, Baruch College, The City University of New York. He has widely published in the areas of corporate social responsibility, international business, business ethics, and corporate strategy and public policy. His most recent publication isMultinational Corporations and the Impact of Public Advocacy on Corporate Strategy: Nestle and the Infant Formula Controversy (Kluwer, 1994).     

Making the Shift: Moving from "Ethics Pays" to an Inter-Systems Model of Business

For several decades, business has operated according to the tenets of neoclassical economic theory, where the primary obligation of corporations is to maximize profit for shareholders. However, the larger social mandate for business has changed, represented by the rise of language such as "sustainable development", "corporate social responsibility" (CSR) and "stakeholder groups." Nevertheless, the theoretical shift implied by the use of such language has not occurred. Issues of sustainable development and CSR continue to be justified in the terms of neoclassical economic theory through the rationalization of "doing well by doing good".Within this economic paradigm, CSR cannot move beyond enlightened self-interest (acting in socially responsible ways in order to further one's own ends) because all behavior must be justified economically. This implies that corporate socially responsible behavior will simply cease when it becomes uneconomic, regardless of the impact on interrelated systems which in turn will re-impact the business realm.Faced with bitter realities arising from complex interactions among social, political, cultural, eco-nomic and natural environments, we may better comprehend and negotiate these problems by moving out of a neoclassical economic justification of the stakeholder model of the corporation to an inter-systems model, shifting from a narrow comprehension of a single economic independent system analyzed apart from its larger context to a fuller understanding of business as one of a number of interrelated systems.Operational differences between the old and new mandates are described, and two ways to practically shift towards the new mandate are identified as a modified version of scenario planning and the introduction of the voice of the critic.     

Making the invisible,visible: Overcoming barriers to ESG performance with an ESG mindset

Improving corporate environmental, social, and governance (ESG) performance starts with recognizing that not every dollar of earnings is created equally, as some profit may be earned at the cost of damaging the environment or of harming stakeholder relationships. These costs are often invisible to corporate employees, as they are not recorded. To earn corporate profits that are environmentally and socially responsible, boards and CEOs must overcome two barriers: (1) the ESG issue-assessment barrier, which reflects an organization’s inability to fairly assess, prioritize, scope, and plan ESG initiatives that address the invisible environmental and social damage corporations cause, and (2) the shareholder-value barrier, which recognizes that corporate employees may resist implementing ESG initiatives owing to their entrenched belief that corporations must maximize shareholder returns. To overcome these two barriers, we propose an ESG mindset model that highlights the pitfalls relating to ESG issue assessment and to the common belief in maximizing shareholder value and then suggests tactics to overcome them. The benefits to corporations that successfully overcome the barriers and improve their corporate ESG performance are threefold: They (1) will be perceived as positively contributing to environmental and societal issues, and thereby (2) avoid accusations of greenwashing and (3) improve their standing with stakeholders.     

Effective Ethical Response

Abstract

Given the need to protect channel investments, including market share and brand equity, channel members have every reason to be certain that their activities are viewed as both ethical and socially responsible by channel stakeholders. On a landscape littered with ethical and social responsibility failures, perceptions of ethical behavior and socially responsible conduct are especially important to creating and maintaining the trust necessary to ensure long-term satisfying exchange relationships. Efficient Ethical Response (EER) uses tools from the study of ethical decision making and corporate social responsibility to efficiently help channel members conduct business so that their activities are far less likely to attract unfavorable attention and concern from channel stakeholders.     

Personal Values as A Catalyst for Corporate Social Entrepreneurship

The literature acknowledges a distinction between immoral, amoral and moral management. This paper makes a case for the employee (at any level) as a moral agent, even though the paper begins by highlighting a body of evidence which suggests that individual moral agency is sacrificed at work and is compromised in deference to other pressures. This leads to a discussion about the notion of discretion and an examination of a separate, contrary body of literature which indicates that some individuals in corporations may use their discretion to behave in a socially entrepreneurial manner. My underlying assumption is that CSR isn’t solely driven by economics and that it may also be championed as a result of a personal morality, inspired by employees’ own socially oriented personal values. A conceptual framework is put forward and it is suggested that individuals may be categorized as Active or Frustrated Corporate Social Entrepreneurs; Conformists or Apathetics, distinguished by their individualistic or collectivist personal values. In a discussion of the nature of values, this paper highlights how values may act as drivers of our behavior and pays particular attention to the values of the entrepreneur, thereby linking the existing debate on moral agency with the field of corporate social responsibility.     

企业社会责任与SA8000认证

企业社会责任和企业伦理是一个问题,国外学者在这方面的研究已走在了前面,他们认识到企业社会责任是公司的一种无形资产,这种无形资产可以为公司带来比较优势。然而,对于我国这一市场化起步较晚,企业参与国际竞争仍处于较低水平的国家而言,社会责任问题还是一个新课题。     

基于企业社会责任理论的危机管理策略研究

面对日益复杂的市场竞争态势,有效的危机管理对于企业的生存和发展至关重要。实践与研究表明,企业社会责任是有效危机管理的核心。本文从企业社会责任的理论角度出发,探讨企业社会责任和危机管理之间的关系,并结合企业社会责任管理和危机管理,给出基于社会责任的危机管理策略。     

Consumers' Perceptions of Corporate Social Responsibilities: A Cross-Cultural Comparison

Based on a consumer survey conducted in France, Germany, and the U.S., the study investigates consumers' readiness to support socially responsible organizations and examines their evaluations of the economic, legal, ethical, and philanthropic responsibilities of the firm. French and German consumers appear more willing to actively support responsible businesses than their U.S. counterparts. While U.S. consumers value highly corporate eco-nomic responsibilities, French and German consumers are most concerned about businesses conforming with legal and ethical standards. These findings provide useful guidance for the efficient management of social responsibility initiatives across borders and for further academic inquiries.     

Effects of quality and corporate social responsibility on loyalty

The purpose is to investigate the impact of corporate social responsibility perceptions on three aspects of customer loyalty for a new bank service (Travel Card) relative to a recognised major predictor in service quality. Surveys were completed by 204 bank consumers in Australia. Using a series of regression equations, two sets of socially responsible perceptions had significant effects on purchase intention and positive word of mouth. In both cases, new socially responsible information was twice as strong a predictor as service quality. However, for affective commitment, service quality was the dominant predictor. Furthermore, existing perceptions of socially responsible performance had a negative effect on purchase intentions. The study presents the first evidence that new socially responsible perceptions for a service firm can be a more powerful predictor than corporate abilities. The findings further illustrate the differential impacts of socially responsible information on different loyalty conceptualisations.     

Managerial Compensation and Firm Value in the Presence of Socially Responsible Investors

Shareholders with standard monetary preferences will give a manager incentives to increase firm profits, which can be achieved with equity grants. When shareholders are socially responsible, in the sense that they also value corporate social performance, it is not clear which incentives the manager should receive. Yet, in a standard principal–agent model, we show that the optimal contract is surprisingly simple: it consists in giving equity holdings to the manager. This is notably because the stock price will incorporate expected profits as well as the social performance of the firm, to the extent that it is valued by shareholders. Consequently, equity holdings give the manager incentives to jointly maximize the profits and the social performance of the firm according to shareholders’ preferences. To facilitate alignment of interests, more socially responsible firms will optimally hire more socially responsible managers. We conclude that neither the shareholder primacy model nor equity-based managerial compensation is necessarily inconsistent with the attainment of social objectives.     

Non-Governmental Organizations, Shareholder Activism, and Socially Responsible Investments: Ethical, Strategic, and Governance Implications

In this article, we document the growing influence of non-governmental organizations (NGOs) in the realm of socially responsible investing (SRI). Drawing from ethical and economic perspectives on stakeholder management and agency theory, we develop a framework to understand how and when NGOs will be most influential in shaping the ethical and social responsibility orientations of business using the emergence of SRI as the primary influencing vehicle. We find that NGOs have opportunities to influence corporate conduct via direct, indirect, and interactive influences on the investment community, and that the overall influence of NGOs as major actors in socially responsible investment is growing, with attendant consequences for corporate strategy, governance, and social performance.     

Trust, reputation and corporate accountability to stakeholders

This paper explores the relationship between accountability, trust and corporate reputation building. Increasing numbers of corporations are mobilising themselves to put more and more information out into the public domain as a way of communicating with stakeholders. Corporate social accounting and stakeholder engagement is happening on an unprecedented scale. Rather than welcoming such initiatives, academics have been quick to pick faults with contemporary social auditing and reporting, claiming that in its current form it is not about demonstrating accountability at all, but rather about building corporate reputation. Academics argue that 'accountability should hurt', that if accountability is an enjoyable process, then the organisation isn't doing it right. For organisations that are currently engaging with stakeholders and ostensibly becoming more transparent about their corporate social performance, this kind of critique is likely to be bewildering. This paper argues that central to the notion of accountability and to contemporary social accounting practice is the concept of trust. Accountability is based upon a distrust of corporate management, whereas corporate reputation building is about strategically seeking to establish trust in stakeholder relationships in order to negate formal accountability requirements. Using a split trust continuum, the paper seeks to explain and synthesise what seem to be two very different paradigms of organisational transparency.     

Galvanising Shareholder Activism: A Prerequisite for Effective Corporate Governance and Accountability in Nigeria

Shareholder activism has been largely neglected in the few available studies on corporate governance in sub Saharan Africa. Following the recent challenges posed by the Cadbury Nigeria Plc, this paper examines shareholder activism in an evolving corporate governance institutional context and identifies strategic opportunities associated with shareholders’ empowerment through changes in code of corporate governance and recent developments in information and communications technologies in Nigeria; especially in relation to corporate social responsibility in Nigeria. It is expected that the paper would contribute to the scarce literature on corporate governance and accountability in Africa. Olufemi Amao (LLM, Warwick; LLM, Ibadan, Nigeria; LLB, OAU, Nigeria; BA, Ilorin, Nigeria; BL, NLS) is a PhD candidate at the Faculty of Law, University College Cork, Ireland. He is a recipient of the President PhD Scholarship and the Department of Law Scholarship. His current research interests include Corporate Social Responsibility, Corporate Governance, Multinational Corporations and Human Rights. Kenneth Amaeshi is a Research Fellow at Warwick Business School. His research interests include commercialisation of intellectual property assets; governance of global innovation networks; R&D partnerships; sustainable innovation; multinational corporations and corporate social responsibility in developing economies. He is currently studying comparative political economy of corporate stakeholding and corporate social responsibility. He is the 2007 winner of the International award for excellence in the field of interdisciplinary social sciences, awarded by the international journal of interdisciplinary social sciences (Australia/USA).     

Corporations and NGOs: When Accountability Leads to Co-optation

Interactions between corporations and nonprofits are on the rise, frequently driven by a corporate interest in establishing credentials for corporate social responsibility (CSR). In this article, we show how increasing demands for accountability directed at both businesses and NGOs can have the unintended effect of compromising the autonomy of nonprofits and fostering their co-optation. Greater scrutiny of NGO spending driven by self-appointed watchdogs of the nonprofit sector and a prevalence of strategic notions of CSR advanced by corporate actors weaken the ability of civil society actors to change the business practices of their partners in the commercial sector. To counter this trend, we argue that corporations should embrace a political notion of CSR and should actively encourage NGOs to strengthen “downward accountability” mechanisms, even if this creates more tensions in corporate–NGO partnerships. Rather than seeing NGOs as tools in a competition for a comparative advantage in the market place, corporations should actively support NGO independence and critical capacity.     

Is It Ethical to Use Ethics as Strategy?

Increasingly research in the field of business and society suggests that ethics and corporate social responsibility can be profitable. Yet this work raises a troubling question: Is it ethical to use ethics and social responsibility in a strategic way? Is it possible to be ethical or socially responsible for the wrong reason? In this article, we define a strategy concept in order to situate the different approaches to the strategic use of ethics and social responsibility found in the current literature. We then analyze the ethics of such approaches using both utilitarianism and deontology and end by defining limits to the strategic use of ethics.     

The Ethics of Marketing Good Corporate Conduct

Companies that contribute to charitable organizations rightly hope that their philanthropic work will also be good for the bottom line. Marketers of good corporate conduct must be especially careful, however, to market such conduct in a morally acceptable fashion. Although marketers typically engage in mild deception or take artistic license when marketing goods and services, these sorts of practices are far more morally troublesome when used to market good corporate conduct. I argue that although mild deception is not substantially worrisome with respect to the marketing of most goods and services, it is a far greater moral blunder to use such methods in the marketing of good corporate character. These erode trust and demonstrate alack of adequate respect for the moral good. In light of these concerns, I suggest that such practices must be re-examined when applied to the marketing of corporate character and good conduct. Finally, I develop a revised set of ethical guidelines that are needed in order to address the problems peculiar to the marketing of morally praiseworthy behavior.