Corporate Responsibility

Defining CR

The term corporate responsibility (CR) has been employed a bewildering number of ways that do not always cohere (Griffin & Mahon, 1997; Margolis & Walsh, 2003; Orlitzky, Schmidt, & Rynes, 2003). CR and its linguistic ancestors corporate social responsibility (CSR), CSR-1, CSR-2, CSR-3, CSR-4, corporate citizenship, and so on, are contested terms. Some view CR’s closest antecedent, CSR, as a philanthropic, charitable give-a-way. As a philanthropic donation from wealthy industrialists (e.g., Carnegie, Rockefeller, Lever Brothers, Tata, Bosch, Gates, and Buffet) CSR has evolved over centuries of successful commercial enterprises. Early multinational corporations (MNCs) have longstanding traditions of creating roads and infrastructure that provide access to markets (Vachani & Smith, 2008). Tithing and charitable activities aligned with religious beliefs are often considered expressions of corporate obligations and duties to others. On the other hand, others suggests that CSR is about how companies corner instrumental gains (Andriof & McIntosh, 2001)—this is CSR as “beyond philanthropy” school.

A good definition for a concept must specify not only what the concept is but also what it is not. CR, at a minimum, pertains to the portfolio of a firm’s policies and programs that are beyond the requirements of extant law, or where the law is silent. CR initiatives manifest in different ways. They include paying wages beyond the legal minimum, ¹ providing health care benefits beyond what is made available by the state, creating retirement funds and educational opportunities for employees, philanthropic donations, community investments, and pollution abatement as well as producing products and services that exceed regulatory requirements. Firms’ CR portfolio and its beneficiaries is likely to vary across industries, time, and institutional and cultural contexts (Griffin & Weber, 2006; Matten & Crane, 2005; Miller & Guthrie, 2011; Prakash & Potoski, 2011).

Some scholars suggest going beyond the minimalist “beyond compliance” conception of CR and looking for firms’ motives in sponsoring such policies. In this perspective, only those policies that explicitly seek to serve a broader social purpose or lead to the “betterment of society” should be classified as CR (Margolis & Walsh, 2003). From this deontological perspective, beyond compliance constitutes a necessary condition for a policy to be classified as CR but is not sufficient. We relax the motivation (and implicit consequential) requirement in the definition of CR for two reasons.

First, how might one assess intent. Think of CR undertaken by multinationals. To tap economies of scale, they might find it efficient to replicate the same set of CR policies across facilities although the baseline legal standards and institutional and cultural expectations may differ across jurisdictions. A technology barely meeting legal requirements in one country might be considered beyond compliance elsewhere. Would this situation be classified as CR although the intent of the corporation was to attain economies of scale in facility management? While it is important to know the actual (as opposed to declared) motivations behind an action, empirically, actual motivation is difficult to assess. Hence, we suggest treating all beyond-compliance actions, irrespective of their motivations, as CR.

Second, we suggest that scholars should not include the consequences of CR in its definition. This inclusion confuses the independent and the dependent variables. “CR as redistribution” school suggests that for any beyond-compliance policy to be classified as CR it must redistribute profits from shareholders to other actors. We disagree. A short-term redistribution might be motivated by long-term profit gains. How CR policies affect profitability in the short or the long term is an empirical question on the consequences of CR. Consequences should not be confused with what constitutes CR in the first place.

CR as “beyond compliance” broadens and narrows the set of relevant research questions regarding traditional CSR. CR broadens CSR by going beyond community investments or altruistic endeavors and narrows the relevant research questions by focusing on actors and institutions rather than society in general.

CR without the modifier social broadens the relevant research questions by including multiple actors and institutions: investors, employees, suppliers, government agencies, the media community, neighborhoods, clients’ communities, and others. These stakeholders, often assumed to be homogeneous groups, can act in concert with other groups, individuals, and institutions complementing, supplementing, or providing contradictory interests. CR as beyond compliance explicitly goes beyond local (geographically adjacent) neighborhoods as the sole or primary beneficiary of organizations’ impacts (Barnett, 2013; Hess, Rogovsky, & Dunfee, 2008; Matten & Moon, 2008; Waddock, 2008; Windsor, 2006).

In explicitly expanding CR beyond a narrow focus solely on local communities, two things are accomplished. First, rather than specific case studies of CR activities within specific communities or activities directed toward specific stakeholders or in response to specific instances or specific product failures, CR policies can be tested across contexts (across countries, business units, product lines, projects, industries, etc.). This broadening allows scholars to examine generalizable claims about the antecedents, forms, and consequences of CR. This broadening is especially important because understanding the conditions under which CR is “effective” (itself a contested term) is a longstanding research goal of CR scholars (Griffin, 2000; Rowley & Berman, 2000).

Second, the notion of CR allows scholars to examine new sets of empirical questions. For example, a CSR cynic might argue that corporations capture local audiences/agencies using their CSR altruism as a “cover up,” to replace or buff the image, in order to get a social license to operate (Gunningham, Kagan, & Thornton, 2003). This argument can be tested for consistency and impact across multiple stakeholders under different socio-political and socio-cultural conditions can begin to tease out the “winners” and “losers” from CR policies.

CR without the modifier social also narrows the research perspective from a focus on the “betterment of society” (Margolis & Walsh, 2003). While some level of coordination of social, economic, political, legal, and ethical aspects of corporate decision making is required, a focus on “society” is not a requirement. Targeted beneficiaries (e.g., the local parent–teacher association, neighborhood school, or a community) can be examined for impacts rather than demonstration of societal impacts. In short, CR and managing responsibly address how stakeholders, actors, and institutions—the institutional and competitive contexts of business—affect and are affected by the organization.

Corporations can choose from a menu of CR initiatives that focus on different issues and differentially benefit stakeholder groups. Given that resources devoted to CR are finite, how does a corporation decide which ones to pursue and why? Extant literature recognizes that firms’ CR initiatives might target various stakeholders as primary or secondary beneficiaries with direct, indirect, or complicit effects (Barnett & Salomon, 2012; Clarkson, 1995; Freeman, 1984). Scholars also note corporations choose among issues (Ansoff, 1980; Porter & Kramer, 2006), portfolios of issues (Mahon, 1989; Mahon, Heugens, & Lamertz, 2004), or the next good cause (Smith, 2003).

We take a slightly different approach to examining how a corporation decides which CR initiatives to pursue and why. We believe that instead of looking at CR initiatives by individual stakeholder groups, scholars should focus on constellations of stakeholders with which the firm negotiates (Wood & Jones, 1995). Furthermore, we also need to move beyond an issue-by-issue approach because firms often face a range of CR issues that cross traditional boundaries. Furthermore, the salience and urgency of the issue vary across stakeholders (Gerde & White, 2003; Mitnick & Mahon, 2007; Wartick & Mahon, 1994). We, therefore, suggest adopting a networked portfolio approach of CR initiatives and mechanisms.

A networked portfolio approach asks questions examining CR beyond the usual suspect: the corporation. CR is no longer directed solely at corporations. India, for example, has a CR law for government-sponsored enterprises. CR has been a growth industry among associations, and multilateral organizations such as the United Nations, Organisation for Economic Co-operation and Development (OECD), International Monetary Fund (IMF), International Organization for Standardization (ISO), Global Reporting Initiative (GRI), and the World Bank. More important, CR and voluntary regulations are now well established in the nonprofit sector as well (Prakash & Gugerty, 2010). Thus, the notion of CR now pervades various organization types, from for-profit firms, to governments and nonprofits reflecting a need to better understand the mechanisms for giving evidence of managing responsibly and the initiatives of what is considered managing responsibly. The traditional stakeholder-by-stakeholder or issue-by-issue perspectives of CR need to incorporate multiple governance forms, multiple actors working in concert while also allowing for going it alone. In doing so, scholars need to identify clearly how the organization navigates among its CR initiatives (what is considered) and CR mechanisms (how to implement).

Corporations pay taxes to governments and, in return, governments provide various types of public goods and infrastructure ranging from access to fresh potable water, sewage treatment, housing standards, communications networks, universal education, intermodal transportation, economic stability, currency oversight, and so on. Payment of taxes is considered part of firms’ responsibilities to allow (democratic) governments to do what they were (democratically) elected to do, without fraud or deception (Friedman, 1970). What if governments do not keep their (expected) end of the bargain? In such cases of failing state or limited statehood, corporations are often asked as part of their CR to voluntarily incur costs to supply and maintain public infrastructure (Börzel & Risse, 2010). Increasingly, the CR umbrella has grown to include a wide-ranging set of initiatives that we discuss below.

CR Initiatives

CR initiatives pertain to what the firm is trying to accomplish. To assess what is being accomplished, we also need to explore why the firm is choosing to do so. Initiatives can combine stakeholder- and issue-oriented activities. For example, CR may stem from (or in anticipation of) stakeholder demands (e.g., consumers and governments) for a safe, lead-free product that works as expected. Alternatively, CR initiatives may stem from issues because of the nature of the business such as pollution intensive production process or the need to secure the lowest cost from a global supply chain due to severe competitive pressures. We separate initiatives into functional and cross-functional categories to examine the broad range of CR actors and institutions a firm may engage (Baron, 1995; Freeman et al., 2010; Wood & Jones, 1995).

CR Mechanisms

Within any category of CR initiative, a variety of mechanisms can be employed to achieve CR outcomes. CR mechanisms translate firm’s CR intents and beliefs into concrete commitments. How firms decide to implement CR is the basis of CR mechanisms. Firms may have a favored mode of engagement such as internal policies and formal interactions via lawsuits or prefer to work collectively with similar-minded organizations to shape regulations (Shaffer & Hillman, 2000). Increasingly, public-private partnerships (PPPs) and other types of multiactor collaborative arrangements are popular vehicles for CR investments. We identify both firm-focused unilateral mechanisms and collaborative CR mechanisms below.

Combining, Aligning, or Leveraging CR Initiatives and Mechanisms

The articles in this special issue explore a range of CR initiatives and mechanisms reflecting variations in how corporations manage responsibly. The authors draw from a range of disciplines highlighting the growing importance of CR as scholarly area of social science research. The intellectual diversity and multilevel research reflected in these articles demonstrate the need for further cross-disciplinary research to answer good questions on how, what, and why to manage responsibly. We provide brief introductions to the articles below:

Christian Thauer’s article, “Goodness Comes From Within: Intra-Organizational Dynamics of Corporate Social Responsibility,” presents a transaction-cost-economics perspective on internal investment decisions to engage in CR. He focuses on the automobile and the textile industries in South Africa, a country whose government often fails to provide basic public goods and services. Consequently, firms are called upon to fill the governance and public service provision gaps—a task they accomplish via unilateral mechanisms such as HIV/AIDS workplace programs, campaigns on disease management, medication, anti-retroviral therapy, and condom distribution. In his analysis, Thauer suggests that CR assists managers to preempt foreseeable loss of control and economic efficiency by responding to internal labor challenges and technological specialization issues beyond what is required by law.

The second article, “Micro-Level Interactions in Business-Nonprofit Partnerships,” by Marlene Vock, Willemijn van Dolen, and Ans Kolk, examines how corporations create, monitor, and sustain business–nonprofit partnerships. By looking at how the effects of employees’ active participation in partnerships (e.g., volunteer service to an NGO) may spill over to consumers (consumers’ word-of-mouth advertising, switching, and buying intentions), the authors demonstrate organizational benefits derived from partnerships such as employee learning, motivation, and nonfinancial resource exchanges. Drawing from cross-disciplinary research in marketing, management, and organization studies they examine the effects of personal contact within business–nonprofit collaborations linking employees’ and consumers’ self-interests.

The third article, “Sustainable Development and Industry Self-Regulation: Developments in the Global Mining Sector,” by Hevina S. Dashwood, examines voluntary self-regulation in the Canadian mining industry. Her analysis traces how firms within this industry at different points in time began to recognize the important role of CR in order to maintain autonomy, preempt additional regulations, and to govern their activities. In particular, the article shows how CR convergence via unilateral and collaborative voluntary initiatives promoting sustainable development (e.g., externally verifiable reporting and public disclosure) became institutionalized in the mining sector and highlights the importance of an internal culture of commitment to social, environmental, and economic components of sustainable development.

The fourth article, “Privatizing or Socializing Corporate Responsibility: Business Participation in Voluntary Programs,” by Luc Fransen and Brian Burgoon, focuses on how managers choose among six competing voluntary standards in Europe to oversee and protect labor standards across the global apparel industry. It focuses on managers’ preferences across seemingly equivalent voluntary options. Joining voluntary programs was positively affected by external societal pressures orchestrated by NGOs through public campaign and informal efforts together with pressures from consumers and media. Yet retailers and companies catering to lower ends of the consumer market were late to join (if they joined at all) these voluntary multistakeholder-governed programs. Overall, businesses are more likely to engage in voluntary labor governance and supply chain responsibility programs when NGOs in concert with pressure from consumers and the media combine forces to influence business behavior.

The fifth article, “A Conceptualization of How Firms Engage in Corporate Responsibility Based on Country Risk,” from Linda C. Rodriguez, Ivan Montiel, and Téofilo Ozuna, posits an inverse relationship between country risk and firms’ commitment to engage in voluntary beyond-compliance CR initiatives. Drawing on signaling theory, they examine why firms invest in CR initiatives by suggesting variation in CR investment is inversely related to aggregate country risk. When aggregate country risk is high, firms are less likely to invest in voluntary CR initiatives. Aggregate country risk and investment in CR have important implications for small- and medium-sized companies making initial attempts to internationalize.

The article, “Culturally Embedded Organizational Learning for Global Responsibility,” authored by Ariane Berthoin-Antal and Andre Sobczak, examines how firms learn to transfer practices, beliefs, and traditions across cultures. In tracing a multinational firm’s decision-making process regarding CR investments in transferring social traditions and practices (or not!) from headquarters in France to a subsidiary in Brazil, this article focuses on intraorganizational learning. Their case study suggests organizational learning is critical to address new responsibilities in new ways when the context changes. With voluntary investments such as CR, choosing the criteria that are universally applicable across contexts—global responsibility—while remaining sensitive to local conditions has broad applications for many multinational corporations.

The last two articles in this special issue on CR focus on organizational policies dedicated toward employees.

In the article, “Action Programs for Ethnic Minorities: A Question of Corporate Social Responsibility?,” by Astrid Podsiadlowski and Astrid Reichel, the focus is squarely on organizational policies to manage diversity. Drawing from 1,865 organizations across 10 countries they build a multilevel model examining economic, normative, and discretionary pressures encouraging managers to implement ethnic minority action programs. Ethnic minority action programs are closely aligned with national (socio-political and socio-cultural) context, competitive (sector and industry) context, and organizational pressures.

In the final article of the special issue, Michelle Westermann-Behaylo with Shawn Berman and Harry Van Buren focus on “The Influence of Institutional Logics on Corporate Responsibility Towards Employees.” This article examines institutional logics at multiple levels (market, state, professional, and firm) that influence how firms treat their employees. Externally derived logics (e.g., from the market, state, or professional networks) often enable firms to adopt a more instrumental relationship with their employees. Internally derived logics (e.g., organizational identify) enable firms to resist instrumental pressures and create a wider variety of employee-centric policies, behaviors, and expectations.

The articles in this special issue, when examined as a group, suggest that firms combine, align, and leverage CR initiatives and mechanisms in various ways. Most interestingly, the articles suggest that there is not necessarily one “best” way to give evidence of managing responsibly. Rather, there are many ways to manage responsibly; some ways are better than others, depending on leadership, competitive, and contextual conditions that include issues, industries, and nation-states.

We hope the readers agree with us that this collection of eight articles demonstrates a broad range, depth, and breadth of managing corporate responsibilities in a global economy. In this special issue, two contributions are particularly noteworthy. First, we focus on CR rather than CSR to emphasize decisions that go beyond compliance, beyond philanthropy, and beyond obligations or duties of religious affiliations. CR focuses on corporate decisions integrating (without distinction) social, political, economic, ethical, and legal dimensions of everyday decisions (who to source from, how to price a product, how customers and employees benefit from volunteerism) to strategic decisions (what voluntary industry standards do we adopt and how do we compete with CR). That is, multiple stakeholders benefiting from each corporate decision managing for stakeholders is part of the corporate narrative since CR decisions are never redundant if tied to the business values and how the business creates value. And yet, CR will mean different things to different people at different times within same context (Guaspari, 1985).

Second, a more nuanced perspective to CR, rather than a one-size-fits-all concept, is emerging that will continue to create additional challenges for managers, public policy decisions makers, and scholars in the days, months, and years ahead. Aligning, leveraging, and learning from CR initiatives and mechanisms suggest that managing responsibly differs across industries (e.g., mining or apparel), issues (e.g., wage rates, ethnic minority policies), and nation-states (e.g., country of origin and emerging markets) with minimal thresholds of behavior set by corporations. A multilevel view of CR entails examining collaboration and competitions among “soft” and “hard” laws (Abbott & Snidal, 2000) and engaging with individuals, governments, community groups, or others such as industry associations, multilateral organizations, business communities, or professional association or regional governance agencies.

Overall, factors operating at multiple levels influence CR behaviors over time. Why firms undertake CR, what initiatives they choose to invest in, and how they give evidence of managing responsibly by successfully implementing CR mechanisms is the focus of this special issue.