Elsevier

European Management Journal

Volume 30, Issue 6, December 2012, Pages 564-576
European Management Journal

The organizational virtuousness of strategic corporate social responsibility: A case study of the Sri Lankan family-owned enterprise MAS Holdings

https://doi.org/10.1016/j.emj.2012.08.003Get rights and content

Summary

Relatively little is known about strategic corporate social responsibility (CSR) in Asian companies. In the post-tsunami period, the authors interviewed 23 senior executives at ten prominent companies in Sri Lanka. Nine of the companies responded to the tsunami with philanthropy based CSR initiatives. Interviews with three senior executives at the family-owned enterprise MAS Holdings revealed an explicitly strategic CSR approach. MAS Holdings, an apparel manufacturer owned by three brothers, is Victoria Secret’s lead strategic partner and an ethical buying source for other well-known apparel retailers. This paper examines the organizational virtuousness of MAS Holdings’ strategic CSR initiatives. The analysis uses Bright et al.’s (2006) conceptualization of organizational virtuousness in terms of the three dimensions of human impact, moral goodness and unconditional societal betterment. The case study findings for MAS Holdings illustrate how strategic CSR initiatives could be virtuous due to positive contributions to the community in those dimensions despite generating profits, publicity and reputation advantageous to the firm. While the empirical findings are limited to one company in Sri Lanka in the post-tsunami period, the paper discusses the broader implications of and directions for future research into the organizational virtuousness of strategic CSR.

Highlights

► We examine the organizational virtuousness of MAS Holdings’ strategic CSR initiatives. ► The analysis uses Bright, Cameron, and Caza’s (2006) conceptualization of organizational virtuousness. ► Findings illustrate how strategic CSR initiatives could be virtuous despite generating outputs advantageous to the firm.

Introduction

The purpose of this paper is twofold. The first is to examine the moral dimension of strategic corporate social responsibility (CSR). In their seminal work, Donaldson and Preston (1995) proposed that the stakeholder theory consists of the descriptive, instrumental and the normative dimensions. From a stakeholder theory perspective, strategic CSR is a justifiable approach for firms to allocate resources to internal and external stakeholders. Promoting initiatives that are good for business as well as for society, strategic CSR is a type of philanthropy aligned with the pursuit of profits. Organizations genuinely engaged in strategic CSR initiatives to promote social good are bound to benefit by the ensuing positive impact on profits and firm reputation, and thus be criticized for the self-serving nature of their strategic CSR initiatives (Brenkert, 1996). However, only a handful of researchers have empirically examined this issue (see Brønn and Vidaver-Cohen, 2009, Graafland and van de Ven, 2006). We conform to the view that business is a deeply human institution and that every aspect of value creation within business is embedded with moral complexity (Freeman & Harris, 2009). Within this context, we empirically examine the moral dimension of strategic CSR initiatives by assessing the firm’s strategic CSR initiatives against a normative framework (i.e. organizational virtuousness).

The second purpose is to address the general lack of awareness on strategic CSR in Asia. CSR practices in Asia have traditionally been driven by a philanthropy based CSR agenda (Ramaswamy & Yeung, 2009). While CSR is becoming an integral part of the strategic planning process of Asian companies (Chapple & Moon, 2005), very little is known about the strategic CSR practices in Asia. Porter and Kramer, 2006, Porter and Kramer, 2011 suggest that through strategic CSR initiatives, companies in the region have the potential to use their unique attributes to address an array of social needs (see Jamali, 2007). Especially at a time when Asia has the potential to become the long-term custodian of global civilization (Whelan, 2007), the findings of this Sri Lankan study provide an opportunity to enhance our understanding of the moral aspects of Asian firms’ strategic CSR practices.

The findings of this study are important for several reasons. Sri Lanka is emerging out from a 30-year old civil war. In 2011, the economy recorded an impressive 8.3% growth, the highest since gaining independence from Britain in 1948 (Department of Census, 2011). Sri Lanka was also the second most affected country in terms of loss of lives from the 2004 Boxing Day Asian tsunami. Ironically, the catastrophe brought in a new chapter in CSR practices in the country when it resulted in the mass launch of formal CSR programs. Few Sri Lankan based firms had formal CSR policies prior to the 2004 tsunami. Most of these firms were local subsidiaries of multinational firms or firms operating in the apparel industry (Altered Images, 2003). This study is also important because the featured case study in this paper, MAS Holdings, is South Asia’s largest lingerie manufacturer and recognized as one of the world’s first ‘eco factories’ making lingerie (Telegraph, 2009). Another apparel company participating in this study became the world’s first certified apparel manufacturer to secure the energy management standard ISO 50001 (Daily News, 2011). Lastly, the findings of this study are unique because of the long standing tradition of charitable giving among the people of Sri Lanka (Simpson, 2004). Despite its developing status, Sri Lanka is consistently ranked among the top donors in the world (World Giving Index, 2011). These contextual factors are further explained in the research context section.

The rest of the paper is organized as follows. The next three sections describe the concept of strategic CSR, then the concept of organizational virtuousness, and then the overlap between strategic CSR and organizational virtuousness motives. The subsequent section explains key information about the research context in Sri Lanka. The next section explains the case study methodology based on face-to-face, in-depth interviews, followed by the findings of the study. This section leads to a discussion on strategic CSR and organizational virtuousness. The final section sets out the implications and concluding thoughts.

Section snippets

The strategic view of CSR

While we continue to witness a lively debate over the role of business in society (e.g. Basu and Palazzo, 2008, Godfrey and Hatch, 2007, Jamali, 2007, United Nations Global Compact Focal Point, 2007, Maitland, 2002, McWilliams et al., 2006, Porter and Kramer, 2006, Porter and Kramer, 2011), the CSR literature also gathers diverse definitions of CSR. The concept of CSR is contextual and is therefore influenced by the environment in which an organization operates. Early in the development of CSR,

Organizational virtuousness

Virtuousness is increasingly being promoted in the management literature as an often overlooked yet indispensable topic (Manz, Cameron, Manz, & Marx, 2008). Several researchers have called for corporations to emphasize an ‘ethos of virtuousness in corporate action’ (e.g. Bright et al., 2006, Godfrey, 2006). Bright et al. (2006) assert that virtuousness is a form of character excellence that can be attributed not only to individuals but to organizations as well, and is necessary for genuineness

Strategic CSR and organizational virtuousness

Strategic CSR could be shaped by several firm specific factors that also influence CSR outcomes. Valand and Heide (2005) label these factors as regulators which may reduce or amplify the effects of a CSR initiative (see Figure 1).

As a regulator, CSR Internal Tools refer to firm’s own rules, processes and structures that safeguard a ‘socially responsible’ firm (Valand & Heide, 2005). Based on the cultural context, resources and needs of the firm, strategic CSR initiatives could address a mix of

The research context

The research was conducted in the capital of Sri Lanka, Colombo. There are several factors contributing to situating this study in Sri Lanka. In addition to easy access to the top leadership in influential business organizations in Sri Lanka, the participants of the study, drawn from the multireligious, multiethnic and multilingual Sri Lankan culture, are products of a whole host of influences due to Sri Lanka’s geographic proximity to India and the decades of the Portuguese, Dutch and British

Methodology

McWilliams et al. recommend that CSR researchers need to use ‘more direct methods, such as interviews and surveys, to ‘tease out’ less self-serving information about the motivations for CSR activity’ (2006, p.9). In-depth interviews have been claimed as the ‘best method’ of qualitative research methods (Smith, Thorpe, & Lowe, 1991, p.72), enabling respondents to give an in-depth perspective of the constructs of the study. This form of interviewing is recognized to provide a greater breadth than

CSR practices

During the immediate aftermath of the post-tsunami era, the majority of the 10 companies followed a philanthropic type of CSR. These firms referred to philanthropic type programs, with little mention of ethics, legal compliance or economic interventions. Understandably, many organizations reflected on the spontaneous reaction to the devastation caused by the tsunami. The scope of social interventions in the immediate aftermath of the tsunami was extremely voluntary and altruistic. However, not

Strategic CSR and organizational virtuousness

MAS follows the ‘doing well by doing good’ theme as they contribute to their stakeholders not only because it is a kind and generous thing to do, but also because they believe it to be in their best financial interest to do so. To MAS, strategic CSR appears to be moral and commendable because it benefits the bottom-line, and is aligned with other stakeholder needs as well. Consequently, it seems that the company featured in this paper has attempted to influence different elements of their

MARIO FERNANDO holds a Ph.D. from Victoria University of Wellington, New Zealand. He is an Associate Professor in the School of Management and Marketing at University of Wollongong, Australia. His teaching and research focus is on business ethics, workplace spirituality and leadership. He has published in several academic journals and published a book titled Spiritual Leadership in the Entrepreneurial Business: A Multifaith Study (2007, Edward Elgar).

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    MARIO FERNANDO holds a Ph.D. from Victoria University of Wellington, New Zealand. He is an Associate Professor in the School of Management and Marketing at University of Wollongong, Australia. His teaching and research focus is on business ethics, workplace spirituality and leadership. He has published in several academic journals and published a book titled Spiritual Leadership in the Entrepreneurial Business: A Multifaith Study (2007, Edward Elgar).

    SHAMIKA ALMEIDA holds a Ph.D. from University of Sydney, Australia. She is a Lecturer in the School of Management at University of Technology, Sydney. Her teaching and research focus is on skilled immigrant worker issues and she has published in journals such as the International Journal of Human Resource Management, Journal of Business Ethics and Technovation.

    An earlier version of this paper was presented at the Annual Academy of Management Conference, Montreal, 2010.

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