Garriga and Melé
Garriga and Melé
Garriga and Melé
ABSTRACT. The Corporate Social Responsibility profits, political performance, social demands and ethical
(CSR) field presents not only a landscape of theories but values. The findings suggest the necessity to develop a
also a proliferation of approaches, which are controversial, new theory on the business and society relationship,
complex and unclear. This article tries to clarify the sit- which should integrate these four dimensions.
uation, "mapping the territory" by classifying the main
CSR theories and related approaches in four groups: (1) KEY WORDS; corporate social responsibility, corporate
instrumental theories, in which the corporation is seen as responsiveness, corporate citizenship, stakeholder manage
only an instrument for wealth creation, and its social ment, corporate social performance, issues management,
activities are only a means to achieve economic results; (2) sustainable development, the common good
political theories, which concern them.selves with the
power of corporations in society and a responsible use of
this power in the political arena; (3) integrative theories,
in which the corporation is focused on the satisfaction of Introduction
social demands; and (4) ethical theories, based on ethical
responsibilities of corporations to society. In practice,
Since the second half of the 20th century a long
each CSR theory presents four dimensions related to
debate on corporate social responsibility (CSR) has
been taking place. In 1953, Bowen (1953) wrote the
Elisabet Garriga is a PhD student in Management at IESE seminal book Social Responsibilities of the Businessman.
Busine.<:s School. University of Navarra, Spain. She holds a Since then there has been a shift in terminology from
degree in Philosophy and another in Economics from the the social responsibility of business to CSR. Addi-
University of Barcelona, Spain. She has taught Busitiess tionally, this field has grown significantly and today
Ethics at the University Pompcu Fabra, Barcelona, for the
contains a great proliferation of theories, approaches
Intemational Education of Students (IES), a consortium
and tenninologies. Society and business, social issues
comprised of more than 120 leading US colleges and uni-
versities. Her current research focuses on the concept and
management, public policy and business, stakeholder
implementation of Corporate Social Responsibilities. She also management, corporate accountabihty are just some
has interest in organizational learning, entrepreneurship and of the terms used to describe the phenomena related
innovation. to corporate responsibility in society. Recently, re-
Donteucc Mcle is Professor and Director of the Department of newed interest for corporate social responsibihties
Business Ethics at IESE Business School, University of and new alternative concepts have been proposed,
Navarra, Spain and chairs the bi-annual "International including corporate citizenship and corporate sus-
Symposhun on Ethia, Business and Society'' held by IESE. tainability. Some scholars have compared these new
He has a Doctorate in Industrial Engineering from the concepts with the classic notion of CSR (see van
Polytechnic University of Catalonia, Spain (1974) and Marrewijk, 2003 for corporate sustainability; and
another ill TIteology from the University of Navarra (1983). Matten et al., 2003 and Wood and Lodgson, 2002
He has been working in the business ethia Jield since 1986
for corporate citizenship).
and has been a member of EBEN from its beginnings. He is
author of three books on economic and bu.<iness ethics (in Furthermore, some theories combine different
Spanish) and has edited eight books (in Spanish), which approaches and use the same temiinology with dif-
include different topics on business ethics. In addition, he has ferent meanings. This problem is an old one. It was
written 20 study cases (IESE Publishing) and 60 articles and 30 years ago that Votaw wrote; "corporate social
chapters in this field. responsibility means something, but not always the
same thing to everybody. To some it conveys the questioned as CSR seems to be a consequence of how
idea of legal responsibility or hability; to others, it this relationship is undentood (Jones, 1983; McMa-
means socially responsible behavior in the ethical hon, 1986; Preston, 1975; Wood, 1991b).
sense; to still others, the meaning transmitted is that In order to contribute to a clarification of tbe field
of 'responsible for' in a causal mode; many simply of business and society, our aim here is to map the
equate it with a charitable contribution; some take it territory in which most relevant CSR theories and
to mean socially conscious; many of those who em- related approaches are situated. We udll do so by
brace it most fervently see it as a mere synonym for considering each theory from the perspective of how
legitimacy in the context of belonging or being the interaction phenomena between business and
proper or valid; a few see a sort of fiduciary duty society are focused.
imposing higher standards of behavior on business- As the starting point for a proper classification, we
men than on citizens at large" (Votaw, 1972, p. 25). assume as hypothesis that the most relevant CSR
Nowadays the panorama is not much better. Carroll, theories and related approaches are focused on one
one of the most prestigious scholars in this disciphne, of the following aspects of social reality: economics,
characterized the situation as "an eclectic field with politics, social integration and ethics. The inspiration
loose boundaries, multiple memberships, and differ- for this hypothesis is rooted in four aspects that,
ing training/perspectives; broadly rather than fo- according to Parsons (1961), can be observed in any
cused, multidisciplinary; wide breadth; brings in a social system: adaptation to the environment (related
wider range of literature; and interdisciplinary" to resources and economics), goal attainment (re-
(Carroll, 1994, p. 14). Actually, as Carroll added lated to politics), social integration and pattern
(1994, p. 6), the map of the overall field is quite poor. maintenance or latency (related to culture and val-
However, some attempts have been made to ad- ues). This hypothesis permits us to classify these
dress this deficiency. Frederick (1987, 1998) out- theories in four groups:
lined a classification based on a conceptual transition
from the ethical-philosophical concept of CSR 1. A first group in which it is assumed that the
(what he calls CSRl), to the action-oriented man- corporation is an instrument for wealth crea-
agerial concept of social responsiveness (CSR2). He '• tion and that this is its sole social responsibil-
then included a normative element based on ethics ity. Only the economic aspect of the
and values (CSR3) and finally he introduced the interactions between business and society is
cosmos as the basic normative reference for social considered. So any supposed social activity is
issues in management and considered the role of accepted if, and only if, it is consistent with
science and religion in these issues (CSR4). In a wealth creation. This group of theories could
more systematic way, Heald (1988) and Carroll be call ins tm met I tat theories because they
(1999) have offered a historical sequence of the main understand CSR as a mere means to the end of
developments in how the responsibihries of business profits.
in society have been understood. 2. A second group in which the social power of
Other classifications have been suggested based on corporation is emphasized, specifically in its
matten related to CSR, such as Issues Management relationship with society and its responsibihty
(Wartick and Rude, 1986; Wood, 1991a) or the in the poUtical arena associated with this
concept of Corporate Citizenship (Alanan, 1998). An power. This leads the corporation to accept
alternative approach is presented by Brummer (1991) social duties and rights or pardcipate in certain
who proposes a classification in four groups of theo- social cooperation. We will call this group
ries based on six criteria (motive, relation to profits, political theories.
group affected by decisions, type of act, type of effect, 3. A third group includes theories which consider
expressed or ideal interest). These classifications, in that business ought to integrate social de-
spite of their valuable contribution, are quite limited mands. They usually argue that business de-
in scope and, what is more, the nature of the rela- pends on society for its continuity and growth
tionship between business and society is rarely situated and even for the existence of business itself
at the center of their discussion. This vision could be We can term this group integrative theories.
Corporate Social Responsibility 53
3. A fourth group of theories understands that the corporate financial performance. Of these, an
relationship between business and society is increasing number show a positive correlation be-
embedded with etliical values. This leads to a tween the social responsibihty and financial perfor-
vision of CSR from an ethical perspective and mance of corporations in most cases (Frooman,
as a consequence, finns ought to accept social 1997; Griffin and Mahon, 1997; Key and Popkin,
responsibilities as an ethical obligation above 1998; Roman et ai, 1999; Waddock and Graves,
any other consideration. We can term this 1997) However, these findings have to be read with
group ethical theories. caurion since such correlation is difficult to measure
(Griffin, 2000; Rowley and Berman, 2000).
Throughout this paper we vnH present the most Three main groups of instrumental theories can
relevant theories on CSR and related matters, trying be identified, depending on the economic objective
to prove that they are all focused on one of the proposed. In the first group the objective is the
forementioned aspects. We will not explain each maximization of shareholder value, measured by the
theory in detail, only what is necessary to verify our share price. Frequently, this leads to a short-tenn
hypothesis and, if necessary, some complementary profits orientation. The second group of theories
infonnation to clarify what each is about. At the same focuses on the strategic goal of achieving competi-
time, we will attempt to situate these theories and tive advantages, which would produce long-tcnn
approaches within a general map describing the cur- profits. In both cases, CSR is only a question of
rent panorama regarding the role of business in society. enlightened self-interest (Keim, 1978) since CSRs
are a mere instrument for profits. The third is related
to cause-related marketing and i.s very close to the
Instrumental theories second. Let us examine briefly the philosophy and
some variants of these groups.
In this group of theories CSR is seen only as a
strategic tool to achieve economic objectives and,
ultimately, wealth creation. Representative of this Maximizing the shareholder value
approach is the well-known Friedman view that
"the only one responsibility of business towards A well-known approach is that which takes the
society is the maximization of profits to the share- straightforward contribution to maximizing the
holders within the legal framework and the ethical shareholder value as the supreme criterion to evaluate
custom of tbe country" (1970)." specific corporate social activity. Any investment in
Instrumental theories have a long tradition and social demands that would produce an increase of the
have enjoyed a wide acceptance in business sofer.As shareholder value should be made, acting without
Windsor (2001) has pointed out recently, "a leit- deception and fraud. In contrast, if the social demands
motiv of wealth creation progressively dominates the only impose a cost on the company they should be
managerial conception of responsibility" (Windsor, rejected. Friedman (1970) is clear, giving an example
2001, p. 226). about investment in the local community: "It will be
Concern for profits does not exclude taking into in the long run interest of a corporation that is a major
account the interests of all who have a stake in the employer in a small conununity to devote resources
firm (stakeholders). It has been argued that in certain to providing amenities to that community or to
conditions the satisfaction of these interests can improving its government. That makes it easier to
contribute to maximizing the shareholder value attract desirable employees, it may reduce the wage
(MitcheU et al., 1997; Odgen and Watson, 1999). bill or lessen losses from pilferage and sabotage or have
An adequate level of investment in philanthropy and other worthwhile effects." So, the socio-economic
social activities is also acceptable for the sake of objectives are completely separate from the economic
profits (MeWilliams and Siegel, 2U01). We wUl re- objectives.
turn to these points afterwards. Currently, this approach usually takes the share-
In practice, a number of studies have been carried holder value maximization as the supreme reference
out to determine the correlation between CSR and for corporate decision-making. The Agency Theory
54 Elisabet Garriga and Domenec Mele
(Jensen and Meckling, 1976; Ross, 1973) is the most b) Natural resource-based view of the firm and dynamic
popular way to articulate this reference. However, capabilities. The resource-based view of the firm
today it is quite readily accepted that shareholder (Barney, 1991; Wernerfelt, 1984) maintains that the
value maximization is not incompatible with satis- ability of a firm to perform better than its compet-
fying certain interests of people with a stake in the itors depends on the unique interplay of human,
fimi (stakeholders). In this respect, Jensen (2(J00) has organizational, and physical resources over time.
proposed what he calls 'enlightened value maximi- Traditionally, resources that are most hkely to lead
zation'. This concept specifies long-tenn value to competitive advantage are those that meet four
maximization or value-seeking as the firm's objec- criteria: they should be valuable, rare, and inimita-
tive. At the same time, this objective is employed as ble, and the organization must be organized to de-
the criterion for making the requisite tradeoSs ploy these resources effectively.
among its stakeholders. The "dynamic capabilities" approach presents the
dynamic aspect of the resources; it is focused on the
drivers behind the creation, evolution and recom-
Strategies for achieving competitive advantages bination of the resources into new sources of com-
petitive advantage (Teece et al., 1997). So dynamic
A second group of theories are focused on how to capabilities are organizational and strategic routines,
allocate resources in order to achieve long-tenn by which managers acquire resources, modify them,
social objectives and create a competitive advantage integrate them, and recombine them to generate
(Husted and Allen, 2000). In this group three ap- new value-creating strategies. Based on this per-
proaches can be included: (a) social investments in spective, some authors have identified social and
competitive context, (b) natural resource-based view ethical resources and capabilities which can be a
of the firm and its dynamic capabilities and (c) source of competitive advantage, such as the process
strategies for the bottom of the economic pyramid. of moral decision-making (Petrick and Quinn,
2001), the process of perception, deliberation and
a) Social investments in a competitive context. Porter and responsiveness or capacity of adaptation (Litz, 1996)
Kramer (2002) have recently applied the well-known and the development of proper relationships with
Porter model on competitive advantage (Porter. the primary stakeholders: employees, customers,
1980) to consider investment in areas of what they suppliers, and communities (Harrison and St. John,
call competitive context.'^ The authors argue that 1996; Hillman and Keim, 2001).
investing in philanthropic activities may be the only A more complete model of the 'Resource-Based
way to improve the context of competitive advantage View of the Firm' has been presented by Hart
of a firm and usually creates greater social value than (1995). It includes aspects of dynamic capabilities
individual donors or government can. The reason and a link with the external environment. Hart ar-
presented - the opposite of Freidnian's position - is gues that the most important drivers for new re-
that the finii has the knowledge and resources for a source and capabihties development vrill be
better understanding of how to solve some problems constraints and challenges posed by the natural
related to its mission. As Burke and Lodgson (1996) biophysical environment. Hart has developed his
pointed out, when philanthropic activities are closer conceptual fi-amework with three main inter-
to the company's mission, they create greater wealth connected strategic capabilities: pollution preven-
than others kinds of donations. That is what happens, tion, product stewardship and sustainable
e.g., when a telecommunications company is teach- development. He considers as critical resources
ing computer network administration to students of continuous inprovement, stakeholder integration
the local community. and shared vision.
Porter and Kramer conclude, "philanthropic
investments by members of cluster, either individ- c) Strategies for the bottom of the economic pyramid.
ually or collectively, can have a powerful etfect on Traditionally most business strategies are focused on
the cluster competitiveness and the performance of targeting products at upper and middle-class people,
all its constituents companies" (2002, pp. 60-61). but most of the world's population is poor or lower-
Corporate Social Responsibility 55
middle class. At the bottom of the economic pyra- 2000). As McWilliams and Siegel (2001, p. 120) have
mid there may be some 4000 million people. On pointed out: "support of cause related marketing
refiection. certain strategies can serve the poor and creates a reputation that a finn is reliable and honest.
simultaneously make profits. Prahalad (2002), ana- Consumers typically assume that the products of a
lyzing the India experience, has suggested some reliable and honest finn will be of high quality". For
nund-set changes for converting the poor into active example, a pesticide-tree or non-animal-tested
consumers. The first of these is seeing the poor as an ingredient can be perceived by some buyers as pref-
opportunity to innovate rather than as a problem. erable to other attributes of competitors' products.
A specific means for attending to the bottom of Other activities, which typically exploit cause-
the economic pyramid is disruptive innovation. related marketing, are classical musical concerts, art
Disruptive innovations (Christensen and Overdorf, exhibitions, golf tournaments or literacy campaigns.
2000; Christensen et al., 2001) are products or ser- All of these are a fomi of enlightened self-interest
vices that do not have the same capabilities and and a win-win situation as both the company and
conditions as those being used by customers in the the charitable cause receive benefits: "the brand
mainstream markets; as a result they can be intro- manager uses consumer concern for business
duced only for new or less demanding applications responsibility as a means for securing competitive
among non-traditional customers, with a low-cost advantage. At the same time a chantable cause re-
production and adapted to the necessities of the ceives substantial fmancial benefits" (Smith and
population. For example a teleconununicadons Higgins, 2000, p. 309).
company inventing a small cellular telephone system
with lower costs but also with less service adapted to
the base of the economic pyramid. Political theories
Disruptive innovations can improve the social and
economic conditions at the "base of the pyramid" A group of CSR theories and approaches focus on
and at the same time they create a competitive interactions and connections between business and
advantage for the firms in telecommunications, society and on the power and position of business and
consumer electronics and energy production and its inherent responsibility. They include both politi-
many other industries, especially in developing cal considerations and political analysis in the CSR
countries (Hart and Christensen, 2002; Prahalad and debate. Although there are a variety of approaches,
Hammond, 2002). two major theories can be distinguished: Corporate
Constimtionahsm and Corporate Citizenship.
the creation of wealth. The firm has power to social contract implies some indirect obligations of
influence the equilibrium of the market and there- business towards society. This approach would
fore the price is not a Pareto optimum reflecting the overcome some limitarions of deoncological and
free will of participants with perfect knowledge of teleological theories appHed to business.
the market. Afterwards, Donaldson and Dunfee (1994,
Davis formulated two principles that express how 1999) extended this approacb and proposed an
social power has to be managed: "the social power "Integrative Social Contract Theory" (ISCT) in
equation" and "the iron law of responsibility". The order to take into account the socio-cultural context
social power equation principle states that "social and also to integrate empirical and nonnative aspects
responsibilities of businessmen arise from the of management. Social responsibilities come from
amount of social power that they have" (Davis, consent. These scholars assumed two levels of con-
1967, p. 48). The iron law of responsibility refers to sent. Firstly a theoretical macrosocial contract
the negative consequences of the absence of use of appealing to all rational contractors, and secondly, a
power. In his own words: "Whoever does not use real microsocial contract by members of numerous
his social power responsibly will lose it. In the long localized communities. According to these authors,
mn those who do not use power in a manner which this theory offers a process in which the contracts
society considers responsible will tend to lose it among industries, departments and economic sys-
because other groups eventually will step in to as- tems can be legirimate. In this process the partici-
sume those responsibilities" (1960, p. 63). So if a pants will agree upon the ground rules defining the
firm does not use its social power, it will lose its foundation of economics that will be acceptable to
position in society because other groups will occupy them.
it, especially when society demands responsibility The macrosocial contract provides rules for
from business (Davis, 1960). any social contracting. These rules are called
According to Davis, the equation of social power- the "hyper-norms"; they ought to take prece-
responsibility has to be understood through the dence over other contracts. These hyper-norms are
fiinctional role of business and managers. In this so fiindamental and basic that they "are discernible
respect, Davis rejects the idea of total responsibility in a convergence of religious, political and philo-
of business as he rejected the radical free-market sophical thought" (Donaldson and Dunfee, 2000, p.
ideology ot no responsibility of business. The limits 441). The microsocial contracts show explicit or
of functional power come from the pressures of implicit agreements that are binding within an
different constituency groups. This "restricts orga- identified community, whatever this may be:
nizational power in the same way that a govern- industry, companies or economic systems. These
mental constitution does." The constituency groups microsocial contracts, which generate 'authentic
do not destroy power. Rather they define conditions norms', are based on the attitudes and behaviors of
for its responsible use. They channel organizational the members of the no mi-gen era ting community
power in a supportive way and to protect other and, in order to be legitimate, have to accord with
interests against unreasonable organizational power the hyper-nonns.
(Davis, 1967, p. 68). As a consequence, his theory is
called "Corporate Constitutionalism".
Corporate citizenship
- ;»
Although the idea of the firm as citizen is not new
Integrative social contract theory (Davis, 1973) a renewed interest in this concept
among practitioners has appeared recently due to
Donaldson (1982) considered the business and certain facton that have had an impact on the
society relationship from the social contract tradi- business and society relationship. Among these fac-
rion, mainly from the philosophical thought of tors, especially worthy of note are the crisis of the
Locke. He assumed that a sort of implicit social Welfare State and the globalization phenomenon.
contract between business and society exists. This These, together with the deregulation process and
Corporate Sodal Responsibility 57
decreasing costs with technological improvements, ship cannot be deemed equivalent to individual
have meant that some large multinational companies citizenship-instead it derives from and is secondary
have greater economical and social power than some to individual citizenship" (2002, p. 86). Whether or
governments. The corporate citizenship framework not this view is accepted, theories and approaches on
looks to give an account of this new reality, as we "corporate citizenship" are focused on rights,
will try to explain here. responsibilities and possible partnerships of business
!n the 80s the term "corporate citizenship" was in society.
introduced into the business and society relationship Some theories on corporate citizenship are based
mainly through practitioners (Altman and Vidaver- on a social contract theory (Dion, 2001) as devel-
Cohen, 2000). Since the late 1990s and early 21st oped by Donaldson and Dunfee (1994, 1999), al-
century this term has become more and more pop- though other approaches are also possible (Wood
ular in business and increasing academic work has and Logsdon, 2002).
been carried out (Andriof and Mclntosh, 2001; in spite of some noteworthy differences in cor-
Matten and Crane, in press). porate citizenship theories, most authors generally
Although the academic reflection on the concept converge on some points, such as a strong sense of
of "corporate citizenship", and on a similar one business responsibility towards the local community,
called 'the business citizen', is quite recent (Matten et partnerships, which are the specific ways of formal-
al., 2003; Wood and Logsdon, 2002; among others), izing the willingness to improve the local commu-
this notion has always connoted a sense of belonging nity, and for consideration for the environment.
to a community. Perhaps for this reason it has been so The concern for local community has extended
popular among managers and business people, be- progressively to a global concern in great part due to
cause it is increasingly clear that business needs to take the very intense protests against globalization, mainly
into account the community where it is operating. since the end of the 90s. This sense of global corporate
The term "corporate citizenship" cannot have the citizenship led to the joint statement "Global Cor-
same meaning for everybody. Matten et al. (2003) porate Citizenship - the Leadership Challenge for
have distinguished three views of "corporate citi- CEOs and Boards", signed by 34 of the world largest
zenship": (1) a limited view, (2) a view equivalent to multinational corporations during the World Eco-
CSR and (3) an extended view of corporate citi- nomic Forum in New York in January 2002. Subse-
zenship, which is held by them. In the limited view quently, business with local responsibility and, at the
"corporate citizenship" is used in a sense quite close same time, being a global actor that places emphasis on
to corporate philanthropy, social investment or business responsibilities in a global context, have been
certain responsibilities assumed towards the local considered as a key issue by some scholars (Tichy et al.,
community. The equivalent to CSR view is quite 1997; Wood and Lodgson, 2002).
common. Carroll (1999) believes that "Corporate
citizenship" seems a new conceptualization of the
role of business in society and depending on which Integrative theories
way it is defined, this notion largely overlaps with
other theories on the responsibility of business in This group of theories looks at how business inte-
society. Finally, in the extended view ot corporate grates social demands, arguing that busmess depends
citizenship (Matten et al., 2003, Matten and Crane, on society for its existence, continuity and growth.
in press), corporations enter the arena of citizenship Social demands are generally considered to be the
at the point of government failure in the protection way in which society interacts with business and
of citizenship. This view arises from the fact that gives it a certain legitimacy and prestige. As a con-
some corporations have gradually come to replace sequence, corporate management should take into
the most powerful institution in the traditional account social demands, and integrate them in such a
concept of citizenship, namely government. way that the business operates in accordance with
The temi "citizenship", taken from political sci- social values.
ence, is at the core of the "corporate citizenship" So, the content of business responsibility is limited
notion. For Wood and Logsdon "business citizen- to the space and time of each situation depending on
58 Elisabet Garriga and Domenec Mele
the values of society at that moment, and comes process for making a corporate response to social
through the company's functional roles (Preston and issues. Issues management has been defined by
Post, 1975). In other words, there is no specific Wartick and Rude (1986, p. 124) as "the processes
action that management is responsible for perform- by which the corporation can identify, evaluate and
ing throughout time and in each industry. Basically, respond to those social and political issues which
the theones of this group are focused on the may impact significantly upon it". They add that
detection and scanning of, and response to, the social issues management attempts to minimize "surprises"
demands that achieve social legitimacy, greater social which accompany social and political change by
acceptance and prestige. serving as an early warning system for potential
environmental threats and opportunities. Further, it
prompts more systematic and effective responses to
Issues management particular issues by serving as a coordinating and
integrating force within the corporation. Issues
Social responsiveness, or responsiveness in the face of management research has been influenced by the
social issues, and processes to manage them within the strategy field, since it has been seen as a special group
organization (Sethi, 1975) was an approach which of strategic issues (Greening and Gray, 1994), or a
arose in the 70s. In this approach it is crucial to con- part of international suidies (Brewer, 1992). That led
sider the gap between what the organization's relevant to the study of topics related with issues (identifi-
publics expect its performance to be and the organi- cation, evaluation and categorization), formalization
zation's actual perfonnance. These gaps are usually of stages of social issues and management issue re-
located in the zone that Ackemian (1973, p. 92) calls sponse. Other factors, which have been considered,
the "zone of discretion" (neither regulated nor illegal include the corporate responses to media exposure,
nor sanctioned) where the company receives some interest group pressures and business crises, as well as
unclear signals from the environment. The firm organization size, top management commitment and
should perceive the gap and choose a response in other organizational tactors.
order to close it (Ackemian and Bauer, 1976).
Ackemian (1973), among other scholars, analyzed
the relevant factors regarding the intemal structures Tlie principle of public responsibility
of organizations and integration mechanisms to
manage social issues within the organization. The Some authors have tried to give an appropriate
way a social objective is spread and integrated across content and substance to help and guide the firm's
the organization, he termed "process of institution- responsibility by limiting the scope of the corporate
alization". According to Jones (1980, p. 65), "cor- responsibility. Preston and Post (1975, 1981) criti-
porate behavior should not in most cases be judged cized a responsiveness approach and the purely
by the decisions actually reached but by the process process approach (Jones, 1980) as insufficient. In-
by which they are reached". Consequently, he stead, they proposed "the principle of public
emphasized the idea of process rather than principles responsibility". They choose the term "public" ra-
as die appropriate approach to CSR issues. ther than "social", to stress the importance of the
Jones draws an analogy with the political process public process, rather than personal-morality views
assessing that the appropriate process of CSR should or narrow interest groups defining the scope of
be a fair process where all interests have had the responsibilities.
opportunity to be heard. So Jones has shifted the According to Preston and Post an appropriate
criterion to the inputs in the decision-making pro- guideline for a legitimate managerial behavior is
cess rather than outcomes, and has focused more on found within the framework of relevant public
the process of implementation of CSR activities than policy. They added that "public policy includes not
on the process of conceptualization. only the literal text of law and regulation but also the
The concept of "social responsiveness" was soon broad pattern of social direction reflected in public
widened with the concept "Issues Management". opinion, emerging issues, formal legal requirements
The latter includes the former but emphasizes the and enforcement or implementation practices"
Corporate Social Responsibility 59
(Preston and Post, 1981, p. 57). This is the essence of fect or are affected by corporate policies and prac-
the principle of public responsibility. tices. Although the practice of stakeholder
Preston and Post analyzed the scope of managerial management is long-established, its academic
responsibiUty in terms of the "primary" and "sec- development started only at the end of 70s (see, e.g.,
ondary" involvement of the fmn in its social envi- Sturdivant, 1979). In a seminal paper, Emshoff and
ronment. Primary involvement includes the essential Freeman (1978) presented two basic principles,
economic task of the firm, such as locating and which underpin stakeholder management. The first
establishing its facilities, procuring suppliers, engag- is that the central goal is to achieve maximum overall
ing employees, carrying out its production functions cooperation between the entire system of stake-
and marketing products. It also includes legal holder groups and the objectives of the corporation.
requirements. Secondary involvements come as The second states that the most efficient strategies for
consequence of the primary. They are, e.g., career managing stakeholder relations involve efforts,
and earning opportunities for some individuals, which simultaneously deal with issues affecting
which come from the pnmary activity of selection multiple stakeholders.
and advancement of employees. Stakeholder management tries to integrate groups
At the same time, these authors are in favor of with a stake in the firm into managerial decision-
business intervention in the public policy process making. A great deal of empirical research has been
especially with respect to areas in which specific done, guided by a sense of pragmatism. It includes
public policy is not yet clearly established or it is in topics such as how to determine the best practice in
transition: "It is legitimate - and may be essential - corporate stakeholder relations (Bendheim et al.,
that affected firms participate openly in the policy 1998), stakeholder salience to managers (Agle and
fonnation" (Preston and Post, 1981, p. 61). Mitchell, 1999; Mitchell et al., 1997), die impact of
In practice, discovering the content of the prin- stakeholder management on financial performance
ciple of public responsibility is a complex and difficult (Berman et al., 1999), the influence of stakeholder
task and requires substantial management attention. network stmctural relations (Rowley, 1997) and
As Preston and Post recognized, "the content of how managers can successfully balance the com-
public policy is not necessarily obvious or easy to peting demands of various stakeholder groups (Og-
discover, nor is it invariable overtime" (1981, p. 57). den and Watson, 1999).
According to this view, if business adhered to the In recent times, corporations have been pressured
standards of perfonnance in law and the existing by non-governmental organizations (NGOs), activ-
public policy process, then it would be judged ists, communities, goverrmients, media and other
acceptably responsive in terms of social expectations. instimtional forces. These groups demand what they
The development of this approach was parallel to consider to be responsible corporate practices. Now
the study of the scope regarding business-govem- some corporations are seeking corporate responses to
ment relationship (Vogel, 1986). These studies fo- social demands by establishing dialogue with a wide
cused on government regulations - their formulation spectrum of stakeholders.
and implementation - as well as corporate strategies Stakeholder dialogue helps to address the question
to influence these regulations, including campaign of responsiveness to the generally unclear signals re-
contributions, lobbying, coalition building, grass- ceived from the envirormient. In addition, this dia-
roots organization, corporate public affairs and the logue "not only enhances a company's sensitivity to
role of public interest and other advocacy groups. its environment but also increases the environments
undentanding of the dilemmas facing the organiza-
tion" (Kaptein and Van Tulder, 2003 p. 208).
Stakeholder management
(CSP) includes a search for social legitimacy, with Normative stakeholder theory
processes for giving appropriate responses.
Carroll (1979), generally considered to have Stakeholder management has been included within
introduced this model, suggested a model of "cor- the integrative theories group because some authors
porate performance" with three elements: a basic consider that this fonn of management is a way to
definition of social responsibihty, a hsting of issues in integrate social demands. However, stakeholder
which social responsibility exists and a specification management has become an ethically based theory
of the philosophy of response to social issues. Carroll mainly since 1984 when Freeman wrote Strategic
considered that a definition of social responsibility, Management: a Stakeholder Approach. In this book, be
which fiilly addresses the entire range of obligations took as starring point that "managers bear a fiduciary
business has to society, must embody the economic, relationship to stakeholders" (Freeman, 1984, p. xx),
legal, ethical, and discretionary categories of business instead of having exclusively fiduciary dudes towards
performance. He later incorporated his four-part stockholders, as was held by the conventional view
categorization into a "Pyramid of Corporate Social of the finn. He understood as stakeholders those
Responsibihties" (Carroll, 1991). Recently, Sch- groups who have a stake in or claim on the firm
wartz and Carroll (2003) have proposed an alterna- (suppliers, customers, employees, stockholders, and
tive approach based on three core domains the local community). In a more precise way,
(economic, legal and ethical responsibilities) and a Donaldson and Preston (1995, p. 67) held that the
Venn model firamework. The Venn framework stakeholder theory has a normative core based on
yields seven CSR categories resulting from the two major ideas (1) stakeholders are persons or
overlap of the three core domains. groups with legitimate interests in procedural and/or
Wartich and Cochran (1985) extended the Carroll substantive aspects of corporate activity (stakeholders
approach suggesting that corporate social involve- are identified by their interests in the corporation,
ment rests on the principles of social responsibility, whether or not the corporation has any corre-
the process of social responsiveness and the pohcy of sponding functional interest in them) and (2) the
issues management. A new development came with interests of all stakeholders are of intrinsic value (that
Wood (1991b) who presented a model of corporate is, each group of stakeholders merits consideration
social perfonnance composed of principles of CSR, for its own sake and not merely because of its ability
processes ot corporate social responsiveness and to further the interests of some other group, such as
outcomes of corporate behavior. The principles ot the shareowners).
CSR are understood to be analytical forms to be Following this theory, a socially responsible firm
filled with value content that is operationalized. They requires simultaneous attention to the legiti-
include: pnnciples of CSR, expressed on institu- mate interests of all appropriate stakeholders and
tional, organizational and individual levels, processes has to balance such a multiphcity of interests and
of corporate social responsiveness, such as environ- not only the interests of the finn's stockhold-
mental assessment, stakeholder management and is- ers. Supporters of nomiative stakeholder theory
sues management, and outcomes of corporate have attempted to justify it through arguments taken
behavior including social impacts, social programs from Kantian capitalism (Bow^ie, 1991; Evan and
and social policies. Freeman, 1988), modern theories of property and
distributive justice (Donaldson and Preston, 1995),
and also Libertarian theories with its notions of
Ethical theories freedom, rights and consent (Freeman and Philips,
2002).
There is a fourth group of theories or approaches A generic fonnulation of stakeholder theory is not
focus on the ethical requirements that cement the sufficient. In order to point out how corporations
relationship between business and society. They are have to be governed and how managers ought to act,
based on principles that express the right thing to do a nowtative core ot ethical principles is required
or the necessity to achieve a good society. As main (Freeman, 1994). To this end, different scholars have
approaches we can distinguish the following. proposed differing normative ethical theories. Free-
Corporate Social Responsibility 61
man and Evan (1990) introduced Rawlsian princi- UN Headquarters in New York. Many companies
ples. Bowie (1998) proposed a combination of have since adopted it. Another, previously presented
Kantian and Rawlsian grounds. Freeman (1994) and updated in 1999, is The Global Sullivan Princi-
proposed the doctrine of fair contracts and Phillips ples, which has the objective of supporting eco-
(1997, 2003) suggested introducing the fairness nomic, social and political justice by companies
principle based on six of Rawls' characteristics of the where they do business. The certification SA8000
principle of fair play: mutual benefit, justice, coop- (www.cepaa.org) for accreditation of social respon-
eration, sacrifice, free-rider possibility and voluntary sibility is also based on human and labor rights. De-
acceptance of the benefits of cooperative schemes. spite using different approaches, all are based on the
Lately, Freeman and Philips (2002) have presented Universal Declaration of Human Rights adopted by
six principles for the guidance of stakeholder theory the United Nations general assembly in 1948 and on
by combining Libertarian concepts and the Faimess other international declarations of human rights, la-
principle. Some scholars (Burton and Dunn, 1996; bor rights and environmental protection.
Wicks et al., 1994) proposed instead using a "fem- Although for many people universal rights are a
inist ethics" approach. Donaldson and Dunfee question of mere consensus, they have a theoretical
(1999) hold their 'Integrative Social Contract The- grounding, and some moral philosophy theories give
ory'. Argandofia (1998) suggested the common good them support (Donnelly, 1985). It is worth men-
notion and Wijnberg (2000) an Aristotelian ap- tioning the Natural Law tradition (Simon, 1992),
proach. From a practical perspective, the normative which defends the existence of natural human rights
core of which is risk management. The Clarkson (Maritain, 1971).
Center for Business Ethics (1999) has published a set
of Principles of Stakeholder Management.
Stakeholder nonnative theory has suffered critical Sustainable development
distortions and friendly misinterpretations, which
Freeman and co-workers are trying to clarity (Phil- Another values-based concept, which has become
lips et al., 2003). In practice, this theory has been popular, is "sustainable development". Although
applied to a variety of business fields, including this approach was developed at macro level rather
stakeholder management for the business and society than corporate level, it demands a relevant corporate
relationship, in a number of textbooks Some of these contribution. The term came into widespread use in
have been republished several times (Carroll and 1987, when the World Commission on Environ-
Buchholtz, 2002; Post et al, 2002; Weiss, 2003; ment and Development (United Nations) published
among others). a report known as "Bnitland Report". This report
In short, stakeholder approach grounded in ethi- stated that "sustainable development" seeks to meet
cal theories presents a different perspective on CSR, the needs of the present without compromising the
in which ethics is central. ability to meet the future generation to meet their
own needs" (World Commission on Environment
and Development, 1987, p. 8). Although this report
Universal rights originally only included the environmental factor,
the concept of "sustainable development" has since
Human rights have been taken as a basis for CSR, expanded to include the consideration of the social
especially in the global market place (Cassel, 2001). dimension as being inseparable from development.
In recent years, some human-rights-based approaches In the words of the World Business Council for
for corporate responsibility have been proposed. One Sustainable Development (2000, p. 2), sustainable
of them is the UN Global Compact, which includes development "requires the integration of social,
nine principles in the areas of human rights, labor and environmental, and economic considerations to
the environment. It was first presented by the United make balanced judgments for the long term".
Nations Secretary- General Kofi Annan in an address Numerous definitions have been proposed for
to The World Economic Forum in 1999. In 2000 the sustainable development (see a review in Gladwin
Global Compact's operational phase was launched at and Kennelly 1995, p. 877). In spite of which, a
62 Elisabet Garriga and Domenec Mele
content analysis of the main definitions suggests that this respect, it has been argued that business is a
sustainable development is "a process of achieving mediadng insdtution (Fort, 1996, 1999). Business
human development in an inclusive, connected, should be neither hannful to nor a parasite on
equiparable, prudent and secure manner." (Gladwin society, but purely a posidve contributor to the well-
and Kennelly 1995. p. 876). being of the society.
The problem conies when the corporadon has to Business contributes to the common good in
develop the processes and implement strategies to different ways, such as creadng wealth, providing
meet the corporate challenge of corporate sustain- goods and services in an efficient and fair way, at the
able development. As Wheeler et al. (2003, p. 17) same dme respecting the dignity and the inalienable
have stated, sustainability is "an ideal toward which and fundamental rights of the individual. Further-
society and business can condnually strive, the way more, it contributes to social well-being and a har-
we strive is by creadng value, creadng outcomes that monic way of hving together in just, peaceflil and
are consistent with the ideal of sustainability along friendly condidons, both in the present and in the
social environmental and economic dimensions".' future (Mele, 2002).
However, some suggestions have been proposed To some extent, this approach has a lot in common
to achieve corporate ecological sustainability with both the stakeholder approach (Argandona,
(Shrivastava, 1995; Stead and Stead, 2000; among 1998) and sustainable development, but the philo-
others). A pragmatic proposal is to extend the tra- sophical base is different. Although there are several
didonal "bottom line" accounting, which shows ways of understanding the nodon of common good
overall net profitability, to a "triple bottom line" (Sulmasy, 2001). the interpretation based on the
that would include economic, social and environ- knowledge of human nature and its fulfillment seems
mental aspects of corporadon. Van Marrewijk and to us pardcularly convincing. It permits the circum-
Werre (2003) maintain that corporate sustainability navigation of cultural reladvism, which is frequently
is a custom-made process and each organizadon embedded in some definidons of sustainable devel-
should choose its own specific ambition and ap- opment.
proach regarding corporate sustainability. This The common good nodon is also very close to the
should meet the organizadon's aims and intendons, Japanese concept of Kyosei (Goodpaster, 1999;
and be ahgned with the organizadon strategy, as an Kaku, 1997; Yamaji, 1997), understood as "hving
appropriate response to the circumstances in which and working together for the common good'',
the organization operates. which, together vidth the principle of human dig-
nity, is one of the founding principles of the popular
"The Caux Roundtable Principles for Business"
The common good approach (wv/w.cauxroundtable.org).
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64 Elisabet Garriga and Domenec Mele
LL U. Cu
J= man, 1962) is for wealth creation, as we have
h pointed out above, this concern is rooted in certain
cultural values regarding the free market, private
property and the fact that wealth creation is good for
13
society. This shows us that certain values are present,
C T- rt i_
even though they are frequently questioned. At the
Cl.
C same time, he accepts the rules of the free market,
u •a 0
^
laws and ethical customs in each place. Friedman
3 Ti •? and, above all, Jensen (2000) also accept the inte-
o -6 o
D
O f gration of some social demands into the company if
rt O
-a 3 u
0 P
it is profitable in the long-tenn. Regarding politics,
V -a
3
C
underpinning the Friedman view there is a func-
•d
c tional conception of the social with clear political
o S .a u- ^ O consequences. Society is understood as a mechanism
U
with nionoflinctional groups, each with a concrete
purpose. Thus, the exclusive purpose of business
9 organizations is the creation of wealth. It is held that
business operating in a free market is the best way to
allocate scarce resources because society can achieve
•D C an optimum situation in the sense of Pareto (Pareto
tx
a. o Optimum). This means that the satisfaction of al!
people involved in the situation is the greatest pos-
•c sible or, at least, the situation satisfies most of them
J3
without being detrimental for others. However, in
a the presence of externalities, when decision-makers
do not take into account secondary effects of their
actions that burden or benefit others, the market is
inefficient and the equilibrium is not a Pareto opti-
mum. When externalities appear, another system of
society, the pohtical system, should act. The political
system must confront these externalities through
taxes, regulation and minimum package of rights.
So, business contributes to the welfare of society
through the market mechanism and in compliance
0
with the law. Of course, outside business, the
0
manager can spend any quantity of personal money
•a -S
on social activities according to his or her per-
a,
•a ,0 sonal preferences. However, the social objectives
Corporate Social Responsibility 65
and demands come under business consider- Furthermore executive decision-making should
ation only through the law applied by the political forego power-seeking in favor of directing the firm
system. to economize and ecologize.
A contrasting theory, in which the four dimen- More recently. Wood and Lodgson (2002),
sions mentioned and their connections are not so dealing with the corporate or business citizen model,
easy to discover, is "the principle of public respon- have introduced the ethical dimension in their
sibility" of Preston and Post (1975). However, these model. They focus on the political dimension but
dimensions are implicit. In fact, this theory presup- also incorporate universal rights into their vision of
poses a certain conception of society and values. The corporate behavior.
political dimension is clear, since public policy is Theories on CSR, which take long-term profits
assumed as basic criterion. Regarding wealth crea- as the main goal nomially, use an empirical meth-
tion, undoubtedly the application of this theory odology and are descriptive, although explicidy they
would have consequences for profit generation. also present a conditional prescription. Their generic
Actually, these scholars recognize that what they call statement might take the fonn: "if you want to
secondary relationships (related to secondary maximize profits you must assume CSR in the wsy
involvements) "as essential to effective management proposed by this theory". In contrast, ethical theo-
over the long term" (Preston and Post, 1981, p. 57). ries are prescriptive and use a normative methodol-
It is not our aim to review all theories described, ogy. Integrating empirical and nonnative aspects of
but what has been said regarding the four dimensions CSR, or economic and ethics, is great challenge.
in the approaches of Friedman and Preston and Post, Some authors (Brandy, 1990; Etzioni, 1988; Quinn
could probably be extended to other theories. If our and Jones, 1995; and Swanson, 1999; Trevino and
intuition is correct, a proper concept of the business Weaver, 1994 among others) have considered this
and society relationship should include these four problem, but it is far from being resolved. This lack
aspects or dimensions, and some mode of integration of integration has been denounced as the cause of
of them. Although most theories studied do not the lack of a paradigm for the business and society
make it explicit, one can appreciate a tendency to field (Swanson, 1999).
overcome this deficit. Finally, the current situation presents many com-
In fact, in the last few years, some theories have peting ethical theories. This very often produces
been proposed in which two or even more of these confusion and skepticism. The problem is especially
dimensions and their interconnection have been serious in the case of ethical theories, and even within
considered. That is the case, e.g., of Wood's Cor- each group of theories. Considering, for instance, the
porate Social Performance model (1991b). This stakeholder normative theory. As we have explained
model basically focuses on integrating social de- above, this can be developed using a great number of
mands, however, it also considers institutional different ethical theories. Although each of these
legitimacy, accepting that "society grants legitimacy theories states universal principles, in practice, the
and power to business" (Davis, 1973, p. 314). In this global effect is one of unabashed relativism: "If you
manner. Wood introduces both political and inte- are Utilitarian, you'll do this, if you are Kantian you'll
grative dimensions while economic and ethical do that." (Solomon, 1992, p. 318).
dimensions are implicit. Regarding the latter, the
stated principles of corporate responsibihty assumed
are based on social control rather than on prescrip- Conclusion
tive responsibility coming from ethics. This is pre-
cisely the criticism Swanson (1995) made of Wood's We can conclude that most of current CSR theories
model. As an alternative, Swanson (1995, 1999) are focused on four main aspects: (1) meeting
proposed a derived model in which she tried to objectives that produce long-term profits, (2) using
include the ethical dimension explicitly, through a business power in a responsible way, (3) integrating
theory of values. Following Frederick (1992) she social demands and (4) contributing to a good society
accepted that business organizations have responsi- by doing what is ethically correct. This permits us to
bilities related to economizing and ecologizing. classify the most relevant theories on CSR and related
66 Elisabet Garriga and Domenec Mele
concepts into four groups, which we have called conditions; that is to say, how the firm can influence the
instrumental, pohtical, integrative and value theories. quality and the size of local market by, for example,
Most of the theories considered do not make explicit developing educated and demanding customers. The
the impHcations of each specific approach for the third, the context for strategy and rivalry involves how
aspects considered in others groups of theories. the firm can invest in incendves and norms that rule
competidon as for example all the efforts for reducing
Further research could analyze these four
corruption, preventing the formation of cartels and
dimensions and their connecdon in the most rele- opening markets. The last is the firm's investment in
vant theories and consider their contributions and related and supporting industries, for example, strength-
limitations. What seems more challenging, however, ening the relationship with suppliers of services, compo-
is to develop a new theory, which would overcome nents and machinery.
these hniitations. This would require an accurate According to Davis, "markets leave business theoret-
knowledge of reahty and a sound ethical foundadon. ically without any social power and hence, no social
responsibility (balanced zero equation). This zero equa-
tion ot no power and no responsibility is a proper
theoredcal model for pure competition, but it is theory
Notes only and it's inconsistent with the power realities of
modem organizations. They posses such a great inidadve,
Parsons considers the existence of four interconnected economic assets, and power in their acdons do have social
problems in any action system: (1) the problem mobiliz- effects" (Davis, 1967. p. 49).
ing of resources from the environment and then distrib- In fact, different models have been constructed in order
utir^ them throughout the system, which requires to explain how and why partnerships are buUt and how to
adaptadon to environment; (2) the problem of establish- detennine, measure, evaluate partnerships (Andrioff,
ing priorities among system goals and mobilizing system 2001; Zadek, 2001).
resources for the attainment of the goals; (3) the problem That is not the only problem. According to Gla-
of coordinadng and maintaining viable relationships dwin and Kennelly (1995, p. 876), the concept of
among system units and (4) the problem of assuring that sustainable development is "fuzzy, elusive, contestable
the actors in the social system display the appropriate and/or ideologically controversial" and with multiple
values. Thi.s entails motivation and other characteristics objectives and ingredients, complex interdependencies
(pattern maintenance) and dealing with the internal and considerable moral thickness. But, in spite of
tensions and strain of the actors in the social system everything, the concept is becoming more and more
(tension management). That means preserving the basic popular and has introduced an important element to the
structure of the system and adjusting to changing CSR debate.
condidons within the framework that the basic structure
provides. According to Parsons these problems necessitate
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