The Grey Chronicles

2009.October.6

Corporate Social Responsibility, A Myth? Part II



Multinationals and CSR

Corporate Social Responsibility [CSR], per Fonteneau (2003), is a myth as old as capitalism:

“Are the companies capable of self-regulation like they pretend to be? Again, the economic facts: the Enron, Ahold, Worldcom, Crédit Lyonnais, Vivendi … scandals, with doctored accounts, dishonest managers, unjustified remunerations. It is capitalism itself that generates distrust by its incapability of self-regulation.”

Proponents claim that CSR provides corporations with an opportunity to do well while doing good. Critics counter that as a voluntary initiative CSR is little more than a public relations strategy to increase market share and boost corporate profits. While focusing on the collapse of ENRON, Petrache (2009) writes:

“The definition of corporate social responsibility has undergone substantial modifications over time and it is still evolving along with society and society’s expectations. There is no globally accepted definition of CSR, nor is there a consensus on a definitive list of the issues it encompasses. It is generally agreed that CSR is neither corporate philanthropy nor strict compliance with the law.” [Emphasis added.]

With globalization, every corporate activity from procurement, manufacturing, sales, and investment have been conducted on a global basis. De Grauwe and Camerman’s research (2002), contrary to Anderson and Cavanagh (2000) study, finds:

“Multinational corporations are increasingly seen as excessively big and powerful, and as having dramatically increased in size and power. This perception has led to the view that the big corporations are threatening democratic institutions of the nation-states and that they pervert the cultural and social fabric of countries. Using value-added data (instead of sales) we find that multinationals are surprisingly small compared to the GDP of many nation-states. Multinationals have not grown in size relative to the nation-states nor have they become more powerful in the last twenty years, particularly up to 2000.” [Emphasis added.]

Davis, Whitman and Zald’s paper (2006) examines the impact of multinational firms’ increasingly blurred geographical and institutional boundaries on the nature and definition of CSR. Their study dissects some of the issues raised by this new concept of CSR, and speculates on future trajectories for CSR in multinational corporations as globalization continues to exert pressure for convergence of national standards into a more universal definition of Global CSR. Thus:

“Global companies today are often characterized as mere legal fictions that act as a center for the coordination of contractual relations, from supply chains and distribution channels to financial arrangements and licensing agreements. Moreover, their legal and headquarters locales often bear little relation to the places where their goods and services are produced or delivered. … Thus, obligations to their «employees» or «communities» are a conundrum.”(Davis, Whitman & Zald, 2006: 3) [Emphasis added.]

Corporate Social Responsibility in multinational companies, Edwards, et. al. (2007) assert, could either be as management initiatives or negotiated agreements. Similar observation can be found in Davis, Whitman & Zald (2006: 37):

“[R]esearch suggests that global firms spread their standards outside their corporate boundaries, either unwittingly, by setting examples for local competitors, or by evangelism of suppliers and partners. Ironically, then, globalization is accompanied both by a race for lowest production costs and increasing demands for corporate social responsibility. In sum, pressures for global convergence of CSR standards are strong, but the paths by which this process proceeds are neither linear nor smooth.” [Emphasis added.]

Despite PR posturing, Leo Hindery Jr. and Curt Weeden (2008) find that corporate philanthropy is down from 25 years ago. To be taken seriously, they suggest, companies should pledge 1% of pretax earnings. Moreover, a Fleishman-Hillard/National Consumers League Study (2007) reveals:

“Consumers define the meaning of and expectations for corporate social responsibility in ways that go beyond just traditional charitable contributions and philanthropic giving. Consumers have a basic understanding of CSR as a commitment to communities and society. Consumers expect companies to contribute to their communities by volunteering time and effort to local activities, getting involved in community events in nonfinancial ways, providing jobs, and treating their employees well. Companies can no longer assume that donations alone, however much they may be appreciated, can sustain a positive reputation for social responsibility.” [Emphasis added.]

Aaron Chatterji & Siona Listokin (2007) advise that “progressives need to end their fixation with corporate social responsibility—and focus on reform that actually works.” At least in the USA, the Clinton Administration gave in to the 1995 Model Business Principles which encouraged private firms to «adopt and implement voluntary codes of conduct for doing business around the world.»

“[T]here seems to be a kind of ‘great forgetting’ evident in mainstream CSR (and related) research wherein the original rationality for the joint stock corporation — to facilitate the raising of investment capital for growth and to limit the legal liability (that is, the responsibility) of owner-shareholders — is somehow lost amongst calls for corporations to become ever more responsible, either out of moral or instrumental impulses. We propose the adoption of the more theoretically coherent and empirically precise terms enlightened self-interest [ESI] and corporate social irresponsibility [CSI] in CSR.” (Jones, 2008: 16). [Emphasis added.]

Furthermore, Linnik and Thorsen (2008) proposed a principled approach as a basis for developing compulsory, i.e., legally binding, minimal CSR standards that include all internationally recognized human rights, as opposed to ILO’s traditional approach to CSR, as voluntary and limited to core labour rights. They argue:

“The term Corporate Social Responsibility (CSR) has been defined by many actors to mean voluntary initiatives and initiatives that go beyond the law. However, semantically, «responsibility» does not correspond well with voluntarism. Further, the consequence of this perception creates an oxymoron: «It is not the social responsibility of a corporation to comply with the law!» Actually such voluntary initiatives could be better described as Corporate Social Opportunities.” (Linnik and Thorsen, 2008: 106-107). [Emphasis added.]


Notes:

Anderson, Sarah, & Cavanagh, John (2000). The Rise of Corporate Global Power. Washington: Institute for Policy Studies, 04 December 2000. back to text.

Chatterji, Aaron & Listokin, Siona (2007). Corporate Social Irresponsibility. Democracyjournal.org, Winter 2007. pp. 52-63. back to text.

Davis, Gerald F.; Whitman, Marina von Neumann & Zald, Mayer N. (2009). The Responsibility Paradox: Multinational Firms and Global Corporate Social Responsibility. University of Michigan, January 2006. p. 3, 37. back to text: 1 | 2 | 3.

De Grauwe, Paul & Camerman, Filip (2002). How Big are the Big Multinational Companies?. Brussels: University of Leuven, January 2002. back to text.

Edwards, Tony; Paul Marginson, Paul Edwards, Anthony Ferner, & Olga Tregaskis (2007). Corporate social responsibility in multinational companies: Management initiatives or negotiated agreements?. Geneva: International Labour Organization (International Institute for Labour Studies), 2007. back to text.

Fleishman-Hillard/National Consumers League (2009). Rethinking Corporate Social Responsibility. Fleishman-Hillard | National Consumers League, May 2007. p. 13. back to text.

Fonteneau, Gérard (2003). Corporate Social Responsibility: Envisioning its Social Implications. The Jus Semper Global Alliance/The Living Wages North and South, Inc., October 2003. p. 6. back to text.

Hindery, Leo Jr. & Weeden, Curt (2008). Corporate Social Irresponsibility. Business Week, August 2008. back to text.

Jones, Marc T. (2008). Disrobing the Emperor: Mainstream CSR Research and Corporate Hegemony. Hertfordshire, U.K.: Ashridge Business School and Maastricht School of Management, August 2008. p. 16. back to text.

Linnik, Marianna & Thorsen, Sune Skadegaard (2008). ILO and CSR — minimum human rights standards for corporations, Governance, International Law & Corporate Social Responsibility. Geneva: International Labour Organization (International Institute for Labour Studies), 2008. pp. 105-127. back to text.

Petrache, Ana-Maria (2009). The collapse of ENRON, a classic case of corporate social irresponsibility, Economia seria Management. 12: 2 (special). Romania: The Bucharest Academy of Economic Studies, 2009. pp. 51-57. Proceedings of The Ninth International Conference “Investments and Economic Recovery”, 22 — 23 May 2009. back to text.

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts herein do not necessarily represent any organization’s positions, strategies or opinions. Read the full version of self-imposed rules for this blog: A New Year; New Rules. Unless otherwise expressly stated, the posts are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
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1 Comment »

  1. Good blogpost, amazing looking weblog, added it to my favs!!

    Comment by FakSerseabe — 2009.December.31 @ 17:54 | Reply


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