Hitaish Labour Law

8/17/2019 Hitaish Labour Law

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INTRODUCTION:

In recent years, academics in fields of several business administrations have studied the

economic and managerial implications of corporate social responsibility (CSR). CSR may be

defined, consistent with Mcilliams and Siegel (!""#), as actions on the part of a firm that

appear to advance the promotion of some social good beyond the immediate interests of the

firm$shareholders and beyond legal re%uirements. &hat is, CSR activities of companies are those

that e'ceed compliance with respect to, e.g., environmental or social regulations, in order to

create the perception or reality that these firms are advancing a social goal. It is not surprising

that some firms choose to be socially responsible in this sense. Most large multinational

companies encounter e'tensive pressure from consumers, employees, suppliers, community

groups, government, nongovernmental organiations (*+s), and institutional shareholders to

engage in CSR. Such CSR activities might include incorporating social characteristics or features

into products and manufacturing processes (e.g., producing aerosol products with no

fluorocarbons or ma-ing greater use of environmentallyfriendly technologies), striving to reach

higher levels of environmental performance via recycling or pollution abatement (e.g., adopting

an aggressive stance towards reducing emissions), or promoting the goals of community

organiations or *+s (e.g., nited ay or +reenpeace). /rom an economics perspective,

companies would be e'pected to engage in such activities if the perceived (measured or

unmeasured) benefits e'ceeded the associated costs in the view of the decisionma-ing entity.

Recent theories of CSR (0aron, !""#, Mcilliams and Siegel, !""#, 0agnoli and atts, !""1)

thus con2ecture that companies engage in 3profitma'imiing4 CSR, based on anticipated

benefits from these actions. 5'amples of such benefits might include reputation enhancement, 6

the potential to charge a premium price for its product(s), or the enhanced ability to recruit and

retain high %uality wor-ers. /or a CSR action to be underta-en by a company, the benefits of

engaging in this activity must offset the higher costs associated with the additional resources that

must presumably be allocated for the firm to achieve CSR status. 7ue to rising pressures for and

visibility of CSR activities in the increasingly socially aware climate of developed countries, the

end result has been a substantial increase in investment in such activities in all 5C7 nations.

0ased on the profitma'imiation CSR hypothesis, most academic studies of CSR have focused

on a narrowlydefined businessoriented research %uestion8 do socially responsible firms achieve


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higher, lower, or similar levels of financial performance than comparable firms that do not meet

the same CSR criteria (+riffin and Mahon, #99:, 7owell, ;art, and oor?s Compustat or stoc- price data from the Center for Research in Security >rices). @lthough

the business administration perspective of this body of research 2ustifies an e'clusive focus on

financial measures of performance, from an economic perspective this is unfortunate. @ more

salient issue in this conte't is the relationship between economic performance and CSR

activities, where economic performance involves technological and economic relationships

between output production and input demand, recogniing opportunity costs of inputs and capital

accumulation. /or e'ample, economic performance may be defined as A the amount of (good or

mar-etable) output producible from a given amount of inputs (productivity), the deviation of

output produced from that implied by 3best practice4 production (technical efficiency), or the

input$resource use re%uired to produce a given amount of output (cost effectiveness). 0ecause

such measures are based on evaluating mar-eted outputs and inputs, this raises %uestions about

whether conventional productivity$performance estimates are biased from not recogniing

environmental or other social e'ternalities, and how economic performance might be affected by

reducing such e'ternalities. /or public policy ma-ers, clarifying such relationships helps to

identify the resource costs of CSR, or 3mar-et failures4 with respect to CSR (Siegel, !""#). Such

information in turn provides guidance on optimal levels of 3social responsibility4 regulation. /or

managers, information on such relationships is useful because it helps to inform resource

allocation decisions regarding CSR activities. &hat is, empirical evidence on the magnitude of

the tradeoff between cost or productivity and CSR facilitates determining the amount of CSR

e'penditure that is economically 2ustifiable. ur ob2ective in this special issue is to e'plore this

economic perspective to CSR, and thus address some of these gaps in the literature on CSR.

@fter identifying some of the leading contributors to the literature on environmental e'ternalities

and economic performance, we solicited manuscripts on the economics of CSR and held a


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wor-shop in *ottingham, 5ngland, 2ointly sponsored by the School of ;umanities and Social

Sciences at Rensselaer >olytechnic Institute and the International Centre for Corporate Social

Responsibility (ICCSR) at the niversity of *ottingham. @mong the authors and discussants at

the wor-shop were scholars from several academic disciplines (economics, political science,

accounting, finance, and management), including many international contributors and 2unior

scholars. B &he best economicsoriented papers generated from this wor-shop were selected for

this special issue, after an additional round of reviews. &hese studies address two critical themes

of the economics of CSR8 (#) methodological issues relating to productivity measurement when

3bad4 outputs that impose social costs are 2ointly produced with good or mar-etable outputs and

(!) empirical relationships between environmental and social regulation$performance and

economic performance$productivity. In addition, all but one of the articles in this special issue

are based on establishmentlevel data, which is generally regarded as more appropriate for

productivity measurement than firmlevel data. In the remainder of our introduction to this

special issue, we provide a brief summary of each of these studies in the conte't of the

economics of CSR and CSR impacts on productivity and costs. &he role of corporations in

society is clearly on the agenda. ;ardly a day goes by without media reports on corporate

misbehavior and scandals or, more positively, on contributions from business to wider society. @

%uic- stroll to the local cinema and films li-e D0lood 7iamond?, D&he Constant +ardener? or

DSupersie Me? reflect a growing interest among the public in the impact of corporations on

contemporary life. Corporations have clearly started to ta-e up this challenge. &his began with

Dthe usual suspects? such as companies in the oil, chemical and tobacco industries. @s a result of

media pressure, ma2or disasters, and sometimes governmental regulation, these companies

realied that propping up oppressive regimes, being implicated in human rights violations,

polluting the environment, or misinforming and deliberately harming their customers, 2ust to give

a few e'amples, were practices that had to be reconsidered if they wanted to survive in society at

the end of the twentieth century. &oday, however, there is virtually no industry, mar-et, or

business type that has not e'perienced growing demands to legitimate its practices to society at

large.


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Theories and hypothesis:

/rom @gency to Sta-eholder Eogics of CSR *umerous articles have documented the emergence

and institutionaliation of the agency logic of corporate control whereby a corporation is

regarded as merely a ne'us of contractual arrangements between individuals (Fensen G

Mec-ling, #9:B illiamson G inter, #991 Ha2ac G estphal, !""6). &hus, managers are

assumed to be fungible agents of shareholders who are li-ely to pursue corporate actions that

advance their own personal interests at the e'pense of shareholder value (e.g. /ama G Fensen,

#91b, #91a seem, #991 7avis G &hompson, #996 estphal G Ha2ac, #99A seem, #99B

Ha2ac G estphal, !""6). @ccording to Ha2ac G estphal (!""6) and other scholars, such strong

agency assumptions resulted in the surfacing of a different model of economic resource

allocation termed as 3investor capitalism.4 &he model?s main idea is that if a firm is simply a set

of contracts and if managerial action results in significant agency costs, then the capital

allocation process is better left to investors rather than managers (p. 61B). Contrary to the

dominant beliefs under a previously prevalent 3corporate4 logic then, managers and e'ecutives

were no longer regarded as 3professionals with uni%ue strategic -nowledge that is re%uired for

efficient allocation of corporate resources4 (Ha2ac G estphal, !""68 61B). *ot surprisingly then,

a number of corporate policies were viewed and interpreted through the lens of the agency logic.

/or e'ample, Ha2ac G estphal (#99A) show that in the midtolate #9"s, e'ecutive incentive

plans were 2ustified as a mechanism to align managerial and shareholder interests (consistent

with an assumption of agency costs) rather than as a mechanism to attract and retain scarce

e'ecutive talent. Moreover, Ha2ac G estphal (!""6) show that due to the switch to the agency

logic, stoc- mar-et reactions to repurchase plan adoptions shifted over time, from negative to

positive. Meanwhile, articles in the accounting and finance literature provide empirical evidence

according to which investment analysts? e'pectations regarding a focal company?s future growth

and performance are in fact a good pro'y for the e'pectations of the company?s own

shareholders (/ried G +ivoly, #9! ?0rien, #9 @barbanell, Eanen, G Jerrecchia, #99A).

More generally, these sellside analysts are employed by bro-erage houses and research firms,

they trac- the performance of a specific set of firms over time, and they generate and publish two

main products8 forecasts of these firms? future earnings as well as investment recommendations

that clients buy, sell, or hold their shares in the stoc-s of these firms. &he same literature


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provides plenty of evidence that mar-et participants e'tensively use these products, and

documents their significant influence over stoc- prices and trading volumes (Stic-el, #99A

omac-, #99B /rancis G Soffer, #99: 0arber, Eehavy, Mc*ichols et al., !""#).

Defining CSR:

*avigating through the 2ungle of definitions In the conte't of such an ine'orable rise to

prominence of CSR, the literature on the sub2ect, both academic and practitioner, is

understandably large and e'panding. &here are now thousands of articles and reports on CSR

from academics, corporations, consultancies, the media, *+s, and government departments

there are numerous conferences, boo-s, 2ournals, and magaines on the sub2ect and last, but not

least, there are literally millions of webpages dealing with the topic from every conceivable

interest group with a sta-e in the debate. ;ow then to best ma-e sense of this vast literature so as

to construct a coherent account of what CSR actually is= @fter all, few sub2ects in management

arouse as much controversy and contestation as CSR. /or this reason, definitions of CSR

abound, and there are as many definitions of CSR as there are disagreements over the appropriate

role of the corporation in society. @s Mcilliams, Siegel, and right (!""B) recently declared8

Dthere is no strong consensus on a definition for CSR?. In /ebruary !"":, this lac- of consensus

blew up into something of a storm on the i-ipedia online encyclopaedia when the phrase

Dcorporate social responsibility? was nominated to be Dchec-ed for its neutrality? following a

series of disagreements about its meaning from supporters and critics (5thical >erformance,

!"":). /igure # gives 2ust some e'amples of the different ways that CSR is described and defined

by different organiations across the globe. @s this clearly shows, there are some similarities in

the &his is the prepublication version of Chapter # from Crane, @., Matten, 7. and Spence, E.

(!""), Corporate Social Responsibility8 Readings and Cases in +lobal Conte't, way that

different actors understand CSR, as well as considerable differences. Moreover, although we

often loo- to academic research to provide clarity amongst so much ambiguity, this diversity is

also reflected in scholarly definitions of CSR. /or e'ample, one early writer on CSR, Keith

7avis described CSR as Dthe firm?s consideration of, and response to, issues beyond the narrow

economic, technical, and legal re%uirements of the firm?(7avis #9:1 cited in Carroll, #999),

whilst a few years later @rchie Carroll (#9:9) defined it much more broadly to include e'actly

those elements that 7avis e'cluded8 Dthe social responsibility of business encompasses the


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economic, legal, ethical, and discretionary e'pectations that society has of organiations at a

given point in time?. &his heterogeneity in CSR definitions has continued unabated. hilst the

Carroll definition given above is arguably the most commonly cited one, it remains contested, as

we will see later in chapter 1. &herefore, others have ta-en a different route and rather than

specify particular responsibilities, have offered more general definitions that see- to include the

different opinions on CSR that are evident across the literature. /or instance, 0rown and 7acin

(#99:) define CSR as a company?s Dstatus and activities with respect to its perceived societal or,

at least, sta-eholder obligations,? whilst Matten and Moon (!""6a) offer the following8 DCSR is a

cluster concept which overlaps with such concepts as business ethics, corporate philanthropy,

corporate citienship, sustainability, and environmental responsibility. It is a dynamic and

contestable concept that is embedded in each social, political, economic and institutional

conte't.? In this boo-, we will not see- to simply follow one of these definitions, nor will we

provide a new improved one that will simply add to the comple' 2ungle of CSR definitions. In

the contested world of CSR, it is virtually impossible to provide a definitive answer to the

%uestion of what CSR Dreally? is. &herefore, our intention is to identify some core characteristics

of the CSR concept, which we hope will help to delineate its essential %ualities, and will provide

a focus for the definitional debates that continue to surround the sub2ect.

Core characteristics of CSR

&he core characteristics of CSR are the essential features of the concept that tend to get

reproduced in some way in academic or practitioner definitions of CSR. /ew, if any, e'isting

definitions will include all of them, but these are the main aspects around which the definitional

debates tend to centre. Si' core characteristics are evident8

Voluntary

Many definitions of CSR will typically see it as being about voluntary activities• that go beyond

those prescribed by the law. &he views of the K government and the 5C as shown in figure #

certainly emphasise this characteristic. Many companies are by now wellused to considering

responsibilities beyond the legal minimum, and in fact the development of selfregulatory CSR

initiatives from industry is often seen as a way of forestalling additional regulation through


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compliance with societal moral norms. &he case of K soft drin-s companies introducing a code

of responsible practice in !""B (see 5thical >erformance, !""B) is a good e'ample of such a CSR

initiative that has arguably been introduced to head off potential regulatory action. Critics of

CSR, therefore, tend to see the element of voluntarism as CSR?s ma2or flaw, arguing that legally

mandated accountability is where attention should really be focused, as the Christian @id

definition.

Internalizing or managing eternalities

5'ternalities are the positive and negative side effects of economic behavior that are borne by

others, but are not ta-en into account in a firm?s decision ma-ing process, and are not included in

the mar-et price for goods and services. >ollution is typically the first place. Much CSR activity

deals with such # See for e'ample the Corporate Responsibility (CR5) Coalition, a collection

of K *+s including / (K), @mnesty International, @ction @id and /riends of the 5arth,

that Dwor- to ma-e changes in K company law to minimie companies negative impacts on

people and the environment and to ma'imie companies contribution to sustainable societies?

(www.corporateresponsibility.org). &his is the prepublication version of Chapter # from Crane,

@., Matten, 7. and Spence, E. (!""), Corporate Social Responsibility8 Readings and Cases in

+lobal Conte't, Eondon8 Routledge, pp.1!". B B e'ternalities (;usted G @llen, !""B), including

the management of human rights violations in the wor-force, calculating the social and economicimpacts of relocation or downsiing, or reducing the health impacts of Dto'ic? or otherwise

dangerous products, etc. /or e'ample, a recent e'ample of CSR in @sia was nilever?s

collaboration with 'fam to assess the positive and negative impacts of its business on the lives

of poor people in Indonesia L this, in effect, was an attempt to account for one of the firm?s main

e'ternalities in the region (see Clay, !""A) regarded as a classic e'ample of an e'ternality since

local communities bear the costs of manufacturers? actions. Regulation can force firms to

internalise the cost of the e'ternalities, such as pollution fines, but CSR would represent a more

voluntary approach to managing e'ternalities, for e'ample by a firm investing in clean

technologies that prevent pollution.


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!ultiple sta"eholder orientation

CSR involves considering a range of interests and impacts among a variety of different

sta-eholders other than 2ust shareholders. &he assumption that firms have responsibilities to

shareholders is usually not contested, but the point is that because corporations rely on various

other constituencies such as consumers, employers, suppliers, and local communities in order to

survive and prosper, they do not only have responsibilities to shareholders. hilst many disagree

on how much emphasis should be given to shareholders in the CSR debate, and on the e'tent to

which other sta-eholders should be ta-en into account, it is the e'panding of corporate

responsibility to these other groups which characterises much of the essential character of CSR,as illustrated by the CSR @sia.

#lignment of social and economic responsi$ilities

&his balancing of different sta-eholder interests leads to a fourth facet. hilst CSR may be

about going beyond a narrow focus on shareholders and profitability, many also believe that it

should not, however, conflict with profitability. @lthough this is much debated, many definitions

of CSR from business and government stress that it is about enlightened selfinterest where

social and economic responsibilities are aligned. See, for e'ample, the definitions of the C0I, the

K government and ;S0C. &his feature has prompted much attention to the Dbusiness case for

CSR? L namely, how firms can benefit economically from being socially responsible.

%ractices and &alues

CSR is clearly about a particular set of business practices and strategies that deal with social

issues, but for many people it is also about something more. &his perspective is evident in both

the +ap and the Chinese +overnment definitions of CSR given in /igure #. &he values

dimension of CSR is part of the reason why the sub2ect raises so much disagreementL if it were

2ust about what companies did in the social arena, it would not cause so much controversy as the

debate about why they do it.


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'eyond philanthropy

In some regions of the world, CSR is mainly about philanthropy L i.e.corporate largesse towards

the less fortunate. 0ut the current debate on CSR has tended to emphatically claim that Dreal?

CSR is about more than 2ust philanthropy and community pro2ects, but about how the entire

operations of the firm L i.e. its core business functions L impact upon society. Core business

functions include production, mar-eting, procurement, human resource management, logistics,

finance, etc. &his debate rests on the assumption that CSR needs to be mainstreamed into normal

business practice rather than being left simply to discretionary activity. &he attempt to consider

how CSR might be Dbuilt in? to the core business of firms as opposed to Dbolted on? as an added

e'tra has become a ma2or theme in the CSR practitioner world (+rayson G ;odges, !""6). 5ven

the then K Minister for Corporate Social Responsibility, *igel +riffiths M>, noted in !""6 that

Dcorporate responsibility must be ingrained into the ethos of every business, built in, not bolted

on.? &hese si' core characteristics, we would suggest, capture the main thrust of CSR. ;owever,

as we will now discuss, the meaning and relevance of CSR will vary according to organiational

and national conte't.

CSR and the pri&ate sector:

&he main arena of CSR, as indicated by the Dcorporate? in CSR, is the business world. ithinthat arena, however, we have a plethora of different types, industries and organiational forms. In

the following, we will have a loo- at one of the main distinctions, namely between large

corporations and small and mediumsied enterprises (SM5s). @rguably, the language of

corporate social responsibility indicates that CSR is predominantly a concept that applies to large

corporations, typically owned by shareholders and run by employed managers. Certainly the

seminal contributions on CSR, as discussed in Chapters ! and 1 of this boo-, conceive CSR

against the bac-drop of these large corporations. &herefore, as entities in which ownership and

control is separated (0erle G Means, #91!), one of the prominent issues for thin-ing about CSR

in the conte't of large corporations is the %uestion of whose interest the company should be run

on behalf of by managers8 2ust the interests of the owners or also the interests of society at large,

represented by different groups such as customers, employees or local communities= ne could

also argue that large corporations are far more visible and thus far more vulnerable to criticism


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from the public than smaller firms. @ large company that wants to behave socially responsibly

therefore may well have formal policies on its responsibilities, and how these are managed. n

the whole, then, CSR in large corporations typically results in a fairly structured and formalied

approach. CSR policies will be translated into codes of conducts for employees or suppliers

there will normally be committees and managers responsible for CSR and many large

companies involved in CSR will document their engagement in a dedicated annual report. In

such a report, the corporation discharges accountability for how e'actly they have dealt with

different interests and e'pectations of society.

If we turn to SM5s, however, we will find a rather different picture. In a recent study in the

*etherlands, only !" of SM5s reported on their CSR as opposed to B! of large businesses,

and similar differences were found with regard to the implementation of codes of conduct or

CSR committees (+raafland, Jan de Jen, G Stoffele, !""1). &here are a number of reasons that

account for these differences (see Spence, #999). /irst, SM5s are normally managed by their

owner(s), who delegate decisions on CSR to a small number of people or often 2ust to one

person. &his will ma-e the approach to CSR rather informal and adhoc as opposed to the

structured approach of large corporations. Second, unli-e large corporations L who due to sie

and branding are often %uite visible and vulnerable to criticism L SM5s are generally rather

small and go under the radar of wider society. &heir -ey relationships with society are the

personal relations developed between the owner$manager and, for instance, his or her employees,

suppliers, customers, or neighbours. &hese personal relations, however, are of crucial importance

to the SM5 and therefore much of what we could identify as CSR in this conte't is targeted at

building good personal relations, networ-s, and trust (Spence G Schmidpeter, !""!). verall, it

is probably fair to say that given the importance of SM5s, which in much of the world account

for the ma2ority of private sector employment and +7> in their countries, the CSR literature has

so far paid disproportionate attention to larger organiations (Spence G Rutherford, !""1).

CSR and the pu$lic sector:

@t first sight, one would not necessarily e'pect CSR to be an issue for public sector

organiations, such as government ministries, agencies or local administrative bodies. @fter all, it

is Dcorporate? social responsibility. ;owever, in most industrialied countries, governments still


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supply a large amount of all goods and services, somewhere between 6"A" of the +7> in

many countries. Conse%uently, the same claims laid upon corporations to conduct their

operations in a socially responsible fashion are increasingly laid on public sector organiations as

well. /or e'ample, public sector organiations face the similar environmental demands, similar

claims for e%ual opportunities for employees, and similar e'pectations for responsible sourcing

as do private companies. Conse%uently, we increasingly find public sector organiation adopting

CSR policies, practices and tools very similar to the private sector. In some ways, these demands

for CSR in the public sector could be even considered as more pronounced (Seitanidi, !""6).

>ublic organiations, such as schools, hospitals or universities, by definition have social aims

and are mostly run on a notfor profit basis. &his establishes the social dimension of their

responsibility at the core of their operations. /urthermore, given the sie of many public bodies

and agencies, as well as their %uasimonopolistic position in many areas of services, they are

li-ely to have an impact on society which is often far beyond the impact of a single large

corporation. Conse%uently, the claim for responsible behaviour on the part of public bodies has

grown, as has the demand for greater accountability to society in the public sector. Fust as private

sector companies are e'horted to become more accountable in their reporting and

communication to the public, so we now witness a steady rise in the use of typical CSR

instruments, such as social auditing and reporting, by public bodies (0all, !""6). /or e'ample,

the publicly funded K media organiation, the 00C, now publishes an annual CSR report.

@part from incorporating CSR into their own operations, many government organiations also

ta-e an active role in promoting CSR within their sphere of influence. hile CSR as such is a

voluntary business activity, governments have nevertheless tried to create incentives for and

facilitate the voluntary adoption of socially responsible policies by the private sector (Crane G

Matten, !"":8 6699). So for instance the S government, in issuing the S @pparel Industry

Code of Conduct! provided a regulatory basis for CSR by S companies in their overseas

supply chains. ften, governments are also part of multipartite initiatives to further CSR, such as

the S , which is a set of principles issued by the nited *ations for voluntary adoption by

corporations globally. In particular the K government, since the #9"s, has made considerable

efforts to encourage CSR in 0ritish companies through a number of initiatives (Moon, !""6b),

including the 5thical &rade Initiative (promoting fair trade practices) or the CSR @cademy

(educating business people about CSR). @ similarly pronounced role in promoting CSR has been


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adopted by the 5uropean nion. In a part of the world where CSR is still largely considered a

novel and @ngloSa'on idea, the 5uropean Commission has invested considerable effort in

defining and promoting CSR in 5urope, convening a multista-eholder dialogue which resulted

in a widely discussed hite >aper in !""! (Commission of the 5uropean Communities, !""!).

More recently, these efforts have continued in the establishment of the D5uropean @lliance on

CSR? which, though facilitated by the 5uropean Commission, represents a significant step

towards business ta-ing charge of CSR in a more autonomous fashion (+ardner, !""B).

CSR and ci&il society organizations

Intractably lin-ed to the rise of CSR is the role of civil society organiations (CS) or

nongovernmental organiations (*+s). Many of the initial demands for more responsible

business behaviour L such as the protection of the environment, improvements in wor-ing

conditions in sweatshops in the developing world, or prevention of human rights violations in

countries with oppressive regimes L have been brought to the attention of the wider public by

*+s such as +reenpeace, Save the Children, or @mnesty International. &raditionally then, the

role of *+s in the CSR arena has been more that of a police officer or watchdog, a constant

critic e'posing corporate misbehavior and mobiliing pressure against allegedly irresponsible

practices. &his role continues to be an important function of those CSs whose s-ills in raising

awareness.

CSR in different regions of the glo$e:

&he meaning of CSR not only differs from sector to sector (as we have discussed in the previous

section), but it also differs %uite substantially from country to country. &o put CSR Din global

conte't? (as our subtitle suggests) it is essential to understand the specific regional and national

conte'ts in which companies practice CSR. In the following section, we will therefore discuss

some basic characteristics of CSR in different regions of the globe.

CSR in de&eloped countries:


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In its most well -nown guise, CSR is essentially a S idea. It was in the S where the language

and practice of CSR first emerged. @lso, most of the academic literature on the topic, and most

of the -ey ideas discussed in the first section of this boo-, originate from there. &he main reason

for this lies in the specific characteristics of the S business system (Matten G Moon, !""6b).

@s such, @merican society is characteried by fairly unregulated mar-ets for labour and capital,

low levels of welfare state provision, and a high appreciation of individual freedom and

responsibility. Conse%uently, many social issues, such as education, healthcare, or community

investment have traditionally been at the core of CSR. >hilanthropy is high on the agenda with,

for instance, corporate community contributions by S companies being something li-e than ten

times higher than those of their 0ritish counterparts (0rammer G >avelin, !""A). In other parts

of the world, most notably 5urope, the /ar 5ast, and @ustralasia, however, there has always been

a stronger tendency to address social issues through governmental policies and collective action.

Many issues that S companies would typically boast about as CSR on their websites, such as

the provision of healthcare or fighting climate change, have not appeared until recently on the

screens of continental 5uropean companies. &he reason for this is that these issues have

traditionally been considered a tas- for governments or, in other words, the corporate

responsibility for social issues has been the ob2ect of codified and mandatory regulation. CSR for

5uropean companies, therefore, has predominantly come on the agenda through their overseas

operations (where regulatory framewor-s are different from 5urope), and it is fair to say that

even until the present day, multinational corporations (M*Cs) rather than domestic companies

can be considered to be the leading actors in 5uropean CSR. &he S5urope differences in CSR

are li-ely to persist and the way corporations address CSR issues, such as global warming, the

provision of affordable medicine to the developing world, or the use of genetically modified

organisms in food production, remains mar-edly different on both sides of the @tlantic (7oh G

+uay, !""B). Countries such as Fapan, and to a lesser degree South Korea and &aiwan, are

considered fairly similar to continental 5urope in terms of the institutional conte't for CSR. &hey

are characteried by high ban- and public ownership, patriarchal and longterm employment, and

coordination and control systems based on longterm relations and partnerships rather than

mar-ets. &he Fapanese DKeiretsu?, the Korean DChaebol? or the (mostly state owned) &aiwanese

conglomerates have a legacy of CSR similar to 5uropean companies L including lifelong

employment, benefits, social services, and healthcare L not so much as a result of voluntary


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corporate policies, but more a response to the regulatory and institutional environment of

business. &he reasons for the rise of CSR in 5urope and in these developed economies in the /ar

5ast in recent years are several. &o begin with, M*Cs with their home base in such countries are

challenged to implement more CSR in their operations located in countries with poor governance

and low levels of state provision of public services, human rights protection, or environmental

protection. /urthermore, some of these developed economies have undergone substantial

overhauls of their welfare systems and regulatory framewor-s, resulting in lesser degrees of state

attention to social issues and more discretion for private actors. &he nited Kingdom is probably

the best e'ample here, where radical reforms that liberalied labour and capital mar-ets, together

with the privatiation of public services and publicly owned companies, contributed to a

significant surge in CSR (Moon, !""6a). Increasingly, corporations in the K have assumed

responsibility for regenerating local communities, addressing unemployment, sponsoring schools

and education, as well as improving public transparency and accountability. In addition to these

domestic political changes, globaliation also represents a powerful booster of CSR as we will

discuss in more detail in chapter ##. &he rise of global investors lin-ing their investment

decisions to Dsocially responsible investment? criteria, the growth in global *+ activism

scrutiniing corporate behaviour, and intensified e'posure of business by the media have all

boosted growing attention to CSR in 5urope and elsewhere (Matten G Moon, !""6b). It can also

be observed that in most developed countries we have specific domestic CSR issues that shape

the debate in the respective conte't. /or instance, many 5uropean countries see CSR specifically

with regard to the protection of the natural environment, while the CSR debate in the /ar 5ast

prominently features issues of corporate governance and transparency in large conglomerates

(ebb, !""B). ften the CSR debate in a country reflects longstanding and ongoing deliberations

in society at large8 for instance in @ustralia and South @frica, considerable e'pectations have

been directed towards companies to address and uphold rights of aboriginal and blac- people

respectively, or to contribute to their economic empowerment more generally.

CSR in de&eloping countries:


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&he activities of estern M*Cs in developing countries have also been a ma2or driver behind

the recent surge in CSR over the last two decades. Many companies use developing countries as

a source of cheap raw materials and, in particular, cheap labour. @gainst this bac-drop, it was for

instance, campaigns against Shell?s role in *igeria and *i-e?s labour practices in its @sian

supply chains that triggered significant changes toward more responsible practices in many

M*Cs (see case study 1, '''' for more on the *i-e story). 7eveloping countries can at times

be characteried by various features that can offer considerable scope for the e'ercise of CSR.

&hese include low standards for wor-ing conditions and environmental protection, high

corruption, oppressive regimes with low regard for human rights, poor provision of healthcare

and education, as well as low levels of per capita income and foreign direct investment. @lthough

this is not a fair representation of all developing country conte'ts at all times, the main challenge

for M*Cs from the developed world when they are faced with such circumstances lies in

conducting their business in a way that would be considered socially responsible in their

respective home countries. &he paper by Scherer and Smid in chapter ## (NNNN) describes

some of the approaches companies have applied to tac-ling such challenges. It is important to

recognie though that a growing number of domestic companies in developing countries have

also developed an interest in CSR. &he main CSR issues these companies are concerned with

include contributions to enhance the infrastructure of health, education, and transport, and to

serve as e'amples of good governance. Similarly, as the e'ample of the +rameen 0an-B ,

founded by *obel >eace >rie winner Muhammad


16/20

these countries but business being present in these countries in the first place. &he article by

>rahalad and ;ammond in Chapter ## ('''') develops one particular approach to poverty

alleviation in developing countries that indicates a ma2or potential role for business in

development. &his role of M*Cs, however, is not uncontested. Many critics argue that profit

ma'imising corporations have only very limited interest in these more political goals, and that

evidence of M*Cs contributing positively in the developing world is at best s-etchy (/rynas,

!""A). ltimately, according to the sceptics, responsible corporate behaviour in the developing

world is an issue that cannot be left to the voluntary discretion of business people but needs to be

addressed by more stringent regulation in their home countries in the global *orth (@aronson,

!""A).

CSR in emerging(transitional economies:

0etween those two ma2or categories of developed and developing countries there is a third

category that deserves attention from a CSR perspective. Most countries of the former

communist bloc have changed from a planned and government run economy to a capitalist

mar-et system. hile the social responsibility of stateoperated business in the former model

was far reaching, including broad provision of education, healthcare, housing and a plethora of

other services, the transition to a mar-et economy has seen many of these former conglomerates

dismantled and transformed into shareholder owned companies. hile there is a plethora of

different approaches to CSR in these countries, one might argue that in some respects, Russia

and China represent the more e'treme cases. Russia, on the one hand, has seen privatiation and

the turn to capitalism accompanied by rather wea- and corrupt governmental institutions

resulting in what some would refer to as a Dcowboy economy?. It is therefore little wonder that

CSR is still a largely un-nown concept in Russia (+rafs-i G Moon, !""6) and for many Russian

business people, bears strong resemblances to communist times. China, on the other hand, has

maintained a strong capacity for the state in controlling and regulating the economy and whilst

the role and responsibilities of business in society might not always be referred to in terms of the

estern language of CSR we still see considerable involvement of companies in the area. Many

commentators e'pect that China, with growing economic development, will see a rise in

CSRoriented regulation in the ne't few years (Miller, !""A).


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Conclusion In this chapter we have discussed the development of CSR, and its recent rise to

prominence. e have also e'amined the mae of definitions that have been used to delineate

CSR in order to develop some core characteristics of the concept. /inally, we e'plored the

meaning and relevance of CSR in different national and organiational conte'ts. hat should

certainly be clear by now is that the term Dcorporate social responsibility? is very difficult to pin

down precisely L it can have many meanings, applications, and implications, and these are rarely

agreed upon by those who ta-e an interest in the debate. &his may not ma-e our lives any easier

when studying CSR, but it certainly ma-es it more interesting. e have adopted a deliberately

broad perspective on CSR in order to provide a wellrounded introduction to the sub2ect.

Included in the following chapters are those that espouse a view of CSR thoroughly embedded in

a procorporate Dbusiness case for CSR? as well as those that argue for a more political view of

CSR that attends to the need to ma-e corporations more accountable to the societies in which

they operate. &he point of this te't is not so much to suggest that any of these perspectives is

necessarily Dbetter? or more Dcorrect? than another, but more to provide an insight into the

richness and the diversity of the CSR literature. 5diting a collection of readings on CSR allows

us to present some of this heterogeneity whilst simultaneously providing some guidance as to

how to Dread? some of the different contributions. @fter all, it is clear that many of the authors

writing about CSR in this boo- are engaging in a discussion about CSR for different ends, and

bring with them very different assumptions about the nature and purpose of the corporation. &he

introductions to the readings will offer some useful insight on these purposes and assumptions, at

least as far as we see them.

DISCUSSION #ND SU))*STION:

e e'plore the sociological processes that affect the evaluation of firms with high CSR scores by

sellside investment analysts in the S, over a period of #A years. e argue and find empirical

evidence that a wea-ening of the prevailing logic L the agency logic L and the gradual emergence

of a sta-eholder focus, leads to an initial unfavorable and a subse%uent more favorable

evaluation of firms with high CSR scores by investment analysts. hereas under an agency logic

CSR was typically interpreted as an activity that primarily generated managerial returns or

satisfied managerial aspirations to the detriment of corporate profitability (i.e. an agency cost),

under a sta-eholder logic, CSR is conceptualied as a set of corporate policies essential to


18/20

corporate standing that does not penalie a firm?s financial performance and may even generate

financial value in the longrun. ur article provides insights into the assessment of firms with

high CSR ratings, and suggests that firms may adopt CSR without being penalied by a -ey third

party in the financial mar-ets, namely sellside analysts. @s mentioned at the outset of this

article, an emerging strand of literature has focused on the relationship between CSR and

financial mar-ets but without e'plicitly ta-ing into account the sociological processes that affect

the assessment of firms? CSR ratings. @ccording to e'tensive prior literature, in financial mar-ets

such sociological processes have a direct and measurable impact on firm value (>hillips G

Huc-erman, !""# Ha2ac G estphal, !""6) ma-ing this an important gap that needs to be

addressed. Such sociological processes are particularly relevant for the domain of CSR where

sta-eholder e'pectations and e'ternal assessments by third parties are especially salient. ith

this paper we begin to fill this gap in our understanding by introducing the idea that the

prevailing agency logic was wea-ened by the gradual emergence of a sta-eholder orientation

within the analyst and investor community. &he findings of this article also provide support to

the institutional perspective that focuses on how financial mar-ets perceive and assess policies

such as those related to CSR. &he theoretical arguments, as well as the empirical evidence

presented here provide additional support for the influence of historical change on the dominant

belief system or institutional logic of -ey mar-et actors. /urthermore, we are able to provide

evidence that mar-et actors who possess more e'perience or en2oy higher status are more li-ely

to be the first to ad2ust their assessments based on this new and emergent logic. e therefore

contribute to the sociological research that focuses on understanding the macrohistorical and

institutional changes in the conte't, to the literature that focuses on the microsocial dynamics of

financial mar-ets (@bolafia, #99B estphal G Ha2ac, #99 Huc-erman, #999).

References:

@aronson, S. @. !""A. DDMinding ur 0usiness??8 hat the nited States +overnment has done

and can do to 5nsure that .S. Multinationals @ct Responsibly in /oreign Mar-ets. Fournal of

0usiness 5thics,, A98 #:A#9.


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0all, @. !""6. @ Sustainability @ccounting >ro2ect for the K Eocal +overnment Sector= &esting

the Social &heory Mapping >rocess and Eocating a /rame of Reference. Critical >erspectives on

@ccounting, #A()8 #""9#"1A.

0erle, @. @., G Means, +. C. #91!. &he modern corporation and private property. *ew avelin, S. !""A. Corporate community contributions in the nited

Kingdom and the nited States. Fournal of 0usiness 5thics, AB8 #A!B.

0rown, &. F., G 7acin, >. @. #99:. &he Company and the >roduct8 Corporate @ssociations and

Consumer >roduct Responses. Fournal of Mar-eting, B#(#)8 B6. Carroll, @. 0. #9:9. @ three

dimensional model of corporate social performance. @cademy of Management Review, 68 69:

A"A.

Carroll, @. 0. #999. Corporatesocial responsibilityevolution of a definitional construct. 0usiness

G Society, 1(1)8 !B!9A. Clay, F. !""A. 5'ploring the Ein-s between International 0usiness

and >overty Reduction8@ Case Study of nilever in Indonesia.

'ford8 'fam +0, *ovib 'fam *etherlands, and nilever.Commission of the 5uropean

Communities. !""!. Communication from the Commission concerning corporate social

responsibility8 @ business contribution to sustainable development. 0russels8 5 Commission.

Crane, @., G Matten, 7. !"":. 0usiness ethics, Managing corporate citienship and

sustainability in the age of globaliation (!nd ed.).

'ford8 'ford niversity >ress. 7oh, F.>.G +uay, &. R. !""B. Corporate Social Responsibility,

>ublic >olicy, and *+ @ctivism in 5urope and the nited States8 @n InstitutionalSta-eholder

>erspective. Fournal of Management Studies, 61(#)8 6::1. 7oh, F. >., G &eegen,;. (5ds.). !""1.

+lobaliation and *+s8 &ransforming 0usiness, +overnment, and Society. estport, C&8

>raeger >ublishers. 5lan-umaran, S.,Seal, R., G ;ashmi, @. !""A.&ranscending &ransformation8

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5l-ington, F., G /ennell, S. !""". >artners for sustainability, In F. 0endell (5d.), &erms for

endearment8 0usiness, *+s and sustainable development8 #A"#B!. Sheffield8 +reenleaf.

5thical >erformance. !""B. Soft drin-s firms sign code aimed at fighting obesity. 5thical


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