Table of contents(22 chapters)
The fierce debate on CSR is often linked to different understandings of CSR from different perspectives. Although there is no strong consensus on CSR, Carroll's pyramid of CSR encompassing economic, legal, ethical and philanthropic responsibilities (Carroll, 1979) is a good starting point for discussion.
Much of the work in business studies and responsibility has focused on the concept of corporate social responsibility (CSR). For a time, this was very much about the relationship of business to the community. This has developed further into the so-called triple bottom-line approach stressing the importance of giving an account of the firm's relation to the social and physical environment as well as the financial state of the firm. Alongside this has been a stress on both the complexity of the external environment and the need to include the internal environment in any view of responsibility, not least in terms of health, safety, and well-being of the staff (Robinson, 2010). The concept of responsibility, however, goes beyond even these concerns.
In order to understand this new economic environment we need first to look at the context and some of the facts. Firstly society has lost a lot of faith with two important institutions, politics and business. There is a lack of trust in both. The UK political scene has been hit by several scandals involving poor ethical behaviour such as false and fraudulent expenses claims by members of the UK parliament. This has created distrust in politicians according to many surveys and polls such as for the BBC which found 80% of voters did not trust politicians to tell the truth (BBC News 24, 18 March 2010). This distrust arguably created political ambiguity and the country and contributed to the first ‘hung parliament’ in the United Kingdom for many years with no overall majority for one party in the 2010 general election. This subsequently resulted in the first coalition government since 1945 between the Liberal Democrats and the Conservatives (UK General Election, 6 May 2010). In the United States, Barak Obama in an attempt to differentiate himself from the cosy business-Bush presidential era developed a presidential campaign message about ‘restoring trust’. Arguably companies need to do the same as we enter the second decade of the second millennium. According to the 11th annual Edelman Trust Barometer (2010) we have seen trust figures plummet with two-thirds of the study's public trusting companies less than a year ago. Furthermore in the context of organisations' responsibility, just 38% trust business to do what is right, which is down 20% from just the previous year. Perhaps most disturbing of all for corporations only 17% trust the information coming from a company's CEO (chief executive officer). For companies that is a terrifying statistic. In previous eras rolling out the organisational head was a sure fire way of getting media coverage as well as influencing key stakeholders such as institutional investors and also in building and developing credibility. This was achieved because organisational stakeholders when listening to corporate messages heard it ‘from the horse's mouth’, the CEO. Now these individuals are tarnished with the labels of greed, excessive pay and the abuse of managerial power.
In the first decade of the 21st century, the financial crisis of 2007–2010 stands out as a landmark political, societal, business and economic event. Its impact on the financial sector is evident as seen by the collapse of banks such as Lehman Brothers, the sale of Bear Stearns to JP Morgan Chase and by the full or part nationalisation of others such as Northern Rock, Bradford and Bingley, Lloyds (including Halifax Bank of Scotland which they acquired during the crisis) and RBS. Its scope and breadth of impact has spread beyond the financial sector and has affected the broader economy and society. The North American along with a number of European and other economies fell into recession. The UK economy suffered its longest and deepest recession since the Second World War. Government and central banks announced unprecedented policy responses and initiated measures such as record low interest rates and quantitative easing (the printing of money) to stave off a 1930s style depression. Policies such as the car scrappage scheme introduced by the UK and American governments were designed to reduce inventories, stimulate economic recovery and help re-build confidence. Nevertheless, businesses suffered and a number of them collapsed, for example in the United Kingdom, high street retailers Zavvi, Woolworths and among others Borders ceased trading and were put into administration. The story of the financial and economic crisis has been well documented by, among others, Tett (2010), Roubini and Mihm (2010), and Bishop and Green (2010).
The use of performance management in the private sector was prefaced by the establishment of qualitatively new forms of corporate entities in the early years of the twentieth century, particularly in the United States. These vast new corporations involved increasing separation of ownership from control and the establishment of substantial corporate management bureaucracies to organise often technical and geographically diverse tasks and processes. As such, the use of performance management became a key corporate governance tool to extend control to disparate, highly hierarchical and complex organisations and business processes (Drucker, 1955; Kennerley & Neely, 2001, p. 146).
Subprime mortgage was a kind of high-risk and high-interest lending, especially targeted at low-income and minority borrowers. The majority of subprime mortgage loans were made to non-affluent, low-income and poor borrowers who were previously unable to buy properties and might have poor credit histories (Pitcoff, 2003; Schwarcz, 2009). Why did mortgage lenders compromise their lending standards and dare to take obviously huge risks in mortgage lending? It is clear that the origin of the aggressive subprime mortgage practices were linked to the US Government's policy for increasing national homeownership and encouraging lenders to provide mortgage loans and other credits to low-income and minority borrowers, as a specific stakeholder group.
When a board is faced with a choice of aiding the public or government during a crisis, or more generally any corporate social responsibility initiative, well established doctrines of American corporate law can protect directors from legal liability in a shareholder derivative lawsuit. A hallmark trait of the public corporation is a separation of ownership and control (Berle & Means, 1932). Accordingly, managers have great authority over corporate assets. Delaware corporate law provides that “[t]he business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors.”2 The board has the authority to manage the “business and affairs” of the corporation, which in the judgment of the board may include corporate social responsibility initiatives and decisions based thereon.
In the Netherlands, the ‘Tabaksblat Code’ (the Dutch corporate governance code of December) was a semi-private regulation instigated by the Dutch government, the stock exchange and industry associations to restore trust in the public equity markets. The aim was ‘to put the relationship between listed companies and providers of capital under the microscope’ in order to establish a new balance with a larger role for the shareholders (Tabaksblat, 2003, p. 59).
The term business model is a phrase that is loosely used but in this chapter it will be given a temporarily fixed definition. Magretta (2002) likens a business model to a story that explains what a company does to make a profit. The plot of the story is how all the characters in the story, the employees, the customers, the suppliers interact to produce a product or service that the customers are willing to pay for at a price that is profitable. Like a good short story a good business model has a ‘twist’ or an unexpected sting in the tail. Johnson, Christensen, and Kagermann (2008) illustrate this by the way that Apple's business model for the iPod involved providing cheap downloads in order to lock customers into purchasing the hardware. In other market sectors, such as white goods, the twist is the reverse, the products are sold cheaply in order to realise profit on adjunct services such as insurance and maintenance contracts.
The contemporary social capital discourse is ‘probably less than twenty or so years old’ (Castiglione, 2008, p. 1), and its meaning remains elusive and contested (Castiglione, Van Deth, & Wolleb, 2008, pp. 2–21). However, this section develops the view that the returns of social capital can be understood in terms of two sets of intangible assets. First, intangible assets concerned with identity intangibles such as credibility, goodwill and reputation, and second, in terms of intangible assets to do with knowledge management. This section also contends that social capital is context dependent and in its economic context is framed by background assumptions taken from Coleman's rationalist theoretical treatment (1988, 1990). Furthermore, the relevance of the socio-economic perspective is discussed in terms of fraudster's exploitation of the socially embedded nature of all economic activity, including that of the market.
Gordon Gekko's words, although spoken by a fictitious Hollywood character, captures the spirit of a very real age: the Age of Greed. This was an age that, in my view, began when the first financial derivatives were traded on the Chicago Mercantile Exchange in 1972 and ended (we hope) with Lehman Brothers' collapse in 2008. It was a time when ‘greed is good’ and ‘bigger is better’ were the dual-mottos that seemed to underpin the American Dream. The invisible hand of the market went unquestioned. Incentives – like Wall Street profits and traders’ bonuses – were perverse, leading not only to unbelievable wealth in the hands of a few speculators, but ultimately to global financial catastrophe.
Materialism is a consumer value that stresses the importance of acquiring more and more material goods. Success is defined in terms of the type and quantity of goods one owns and happiness is expected to result from physical wealth (Beutler, Beutler, & McCoy, 2008). Materialism as defined thus is closely tied to the idea of the pursuit of rational self-interest that has been associated with Adam Smith (1776).
Corporate Social Responsibility (CSR), in the form of corporate philanthropy or charity, has been practiced in the United States since the late 1800's (Sethi, 1977). Today's concept of CRS originated in 1953 with the publication of Bowen's book entitled “Social responsibilities of Businessmen”. In his book Bowen asked the question: “What responsibilities to society can business people be reasonably expected to assume?” At this time, the emphasis was placed on business people's social conscience, rather than on the company itself. Further on the academics became much more precise in defining the firms’ responsibilities. Carroll (1999) divided companies’ responsibilities into economic, legal, ethical, and philanthropic. Lantos (2002) narrowed down CSR to ethical, altruistic, and strategic responsibility. According to Davis (1973, p. 312) CSR refers to a company's concern for “issues beyond the narrow economic, technical and legal requirements of the firm.”
- Publication date
- Book series
- Critical Studies on Corporate Responsibility, Governance and Sustainability
- Series copyright holder
- Emerald Publishing Limited
- Book series ISSN