Responsible Investment and the Claim of Corporate Change

In today’s global and integrated economy, the long-term value and success of a company are inevitably linked to its environmental, social and corporate governance (ESG) performance. The relevant corporate policies and ensuing practices are frequently summarized under the term Corporate Social Responsibility (CSR). The Economist (2008) acknowledges “with regret” that “CSR has arrived”. A survey conducted by Oppenheim and colleagues (2007) further proves that social and environmental issues have climbed to the top of the socio-political agenda of senior executives around the globe. Today’s “climate of heightened scrutiny toward corporate behaviour” (Basu and Palazzo, 2008, p. 122) has pressured corporations no longer to ignore their responsibility to protect the communities and the environment in which they operate (Sparkes, 2002; Waddock, 2000). The current financial crisis and the widespread lack of trust in the private sector added further momentum to this quest for social legitimacy. Hence, by engaging in CSR initiatives, such as reducing carbon gas emissions, fighting against child labour, or establishing a clear governance structure, corporations are trying to fulfil societal demands, and, at the same time, legitimize their business operations (Gilbert and Rasche, 2007).

As mentioned in the introduction, responsible investment is a widely discussed link between the stock market and CSR (Scholtens, 2006). It provides the mechanisms through which public shareholders can exert influence on corporate behaviour and is thus the focus of our study. We start this chapter by providing the reader with some terms and definitions relevant for the study of responsible investment, and giving insight into the history and the key actors involved. We proceed by identifying four different approaches of how to practice responsible investment, before we then clarify the link to CSR.

Sensemaking is about relating. It is about finding the connections between verbs and nouns, between cues and frames, between beliefs and actions. The fundamental concern of sensemaking is the process by which meaning is created (Weick 1995a, 1979). The focus of this chapter is thus an analysis of (1) enactment processes through which institutional investors and corporations construct their sense of responsibility, (2) interaction processes through which they may influence each other, and (3) intervention processes through which one party may change the process of organizing responsibility of another party such as through issue-selling (Dutton and Ashford, 1993) and impression management (Goffman, 1959). With our approach we follow Weick’s (1995a) reminder that it should not belong to a researcher’s tasks to list the various ideologies an organization may have but to find out how “people select from the vast pool of ideological substance that smaller portion that matters” (p. 112).

After having elaborated on the claim of corporate change as resulting from a set of various sensemaking processes this chapter summarizes how our understanding of the claim of corporate change, with its different stance toward what is meaningful may enrich and extend the theory and practice of responsible investment. Our distinct objective is thereby to encourage institutional investors and scholars in the field of responsible investment to question their underlying, and often taken-for-granted assumptions which dominate their activities and to focus their attention on novel aspects that may have been overlooked so far.

We conclude this thesis with some final reflections on how the Weickian sensemaking perspective has informed our course of investigation. We will thereby first outline how the sensemaking perspective has controlled our research. Second, we will show how it has animated our research thereby pointing to some of our major findings.