Organizing CSR Through Complete Organization
Those discussing what activities constitute CSR have often looked inside formal organizations, in most cases MNCs (Jamali et al.
2009). Looking at CSR within corporations implies to focus on formal, “complete” organizations that usually have access to all organizational elements, although firms may use these elements to different degrees. While research has not yet discussed the relationship between the full range of organizational elements and CSR in an integrated way, numerous studies have provided insights into how selected elements impact the organization of CSR within firms.
Corporations decide about
membership determining who is allowed to join the organization and who is excluded (Ahrne
1994). Membership affects the identity of a corporation and thus influences its understanding of CSR. Corporate identity, understood as shared perceptions leading to a certain degree of “perceived oneness with a group” (Ashforth and Mael
1989, p. 35), can guide the development of CSR activities that are congruent with how managers view themselves and their organization. Basu and Palazzo (
2008), for instance, suggest that an organization’s identity orientation is likely to influence the kind of relationships that it builds with stakeholders. Drawing on Brickson’s (
2007) work, they distinguish between an individualistic orientation (emphasizing individual liberty and self-interest), a relational orientation (emphasizing partnering with stakeholders), and a collectivistic orientation (emphasizing the role of organizations as part of society at large). Who belongs to an organization (i.e., its membership) has an influence on these orientations and hence determines how an organization will organize its CSR activities. For example, a firm with a relational identity orientation is likely to emphasize CSR actions that are based on building strong links with key stakeholders, while a corporation with an individualistic orientation might opt for activities that showcase its CSR performance as “best in class” (Basu and Palazzo
2008).
Corporations organize for CSR by making reference to some form of hierarchical steering.
Hierarchy implies “a right to oblige others to comply with central decisions.” (Ahrne and Brunsson
2011, p. 86) This right can be exercised in formal and informal ways and by different individuals/groups within the organization. Hierarchy does not necessarily imply that CSR is managed by using a command-and-control approach. Although CSR policies are usually backed by central decisions and are mostly defined by top-management (Singh
2011b), there are different ways to ensure compliance with these decisions, including the use of another organizational element, monitoring (see below). For instance, managers can use transactional or transformational leadership styles when organizing for CSR (Burns
1979). Transactional leadership gives more reference to formal power and rests on the belief that leaders motivate through explicit rewards and receive performance in return. Transformational leadership styles are less focused on formal incentives and instead emphasize individualized consideration, inspirational motivation, and intellectual stimulation (Strand
2011). Hence, hierarchical steering can be exercised in different ways, especially when considering the diversity of leadership styles for CSR (see also Pless et al.
2012).
Formal organizations also decide upon explicit
rules that members are expected to follow. According to Weber (
1968), rules provide for consistency, as decisions made in one part of the organization can be executed in another part. Corporations have given themselves rules that are supposed to codify “what counts” as responsible behavior in the context of the organization. These rules are usually called “codes of conduct” (or “codes of ethics”). Langlois and Schlegelmilch (
1990, p. 522) define such codes as “a statement setting down corporate principles, ethics, rules of conduct, codes of practice or company philosophy concerning responsibility to employees, shareholders, consumers, the environment, or any other aspects of society external to the company.” The prevalence of such rules has been increasing with 86 % of the Global Fortune 200 currently having their own code (Singh
2011a). Research shows that the content and language of codes converge across organizations, as there seems to be a “cut and paste” mentality (Holder-Webb and Cohen
2012) reflecting coercive isomorphisms and mimetic practices (Matten and Moon
2008). This raises the question of whether organizations actually implement codes or whether code development is a mere symbolic act. Stevens et al. (
2005) find that codes are integrated into decision-making when market actors (e.g., shareholders) pressure firms to take a code seriously and when it is integrated into routine activities (e.g., via training programs). Of course, codes are just one possible way to communicate expectations regarding responsible behavior within a corporation. The rules underlying CSR can also be fixed through other formal and informal mechanisms (e.g., contracts and standard operating procedures).
Monitoring is often believed to be a necessary organizational element to ensure code effectiveness (Petersen and Krings
2009). Because legislation in some countries requires firms to monitor the effectiveness of codes (e.g., the
Sarbanes‐
Oxley Act in the U.S.; Kaptein and Schwartz
2008), there has been an increased emphasis on compliance mechanisms in recent years. Singh (
2011b), for instance, finds that more than half of all Canadian firms use internal audits to monitor compliance with their codes. However, monitoring, when viewed as an organizational element, can take many forms besides auditing. For example, code enforcement often relies on a complaint-based system, whereby peers or supervisors who observe misconduct can file code violations (Beets and Killough
1990). Establishing reporting and accounting systems (e.g., to track corrupt behavior) can also create indirect monitoring effects, as these systems enhance transparency around misconduct and make it easier to govern individuals (Miller and O’Leary
1987). Organizational members often internalize the resulting pressures to comply with the provisions of a code, making self-monitoring another way to improve code effectiveness.
Most firms combine monitoring with
sanctioning when trying to enforce their codes. Existing research has largely focused on negative sanctions, such as cessation of employment, monetary fines, verbal warnings, and legal actions (Singh
2011b). Of course, codes just contain a promise of sanction, while it is unclear whether organizations really deliver on the promise (Weaver
1995). Even when sanctions are not explicitly used as an organizational element, it is possible that individuals will nevertheless assume that sanctions exist. This is because people often hold expectations based on their prior knowledge about the general role of sanctions in organizations (Treviño and Ball
1992). Hence, even the absence of this organizational element can potentially support the organization of CSR, arguably as long as the absence is not revealed. Conversely, organizations can bring positive sanctions in the form of individual rewards, including for meeting CSR expectations.