Toward Integrative Corporate Citizenship

Given the increased impact of nonmarket forces on business reputation and success, there has never been a greater need to grasp corporate social performance from a theoretically sound, integrative perspective. This involves understanding the responsibilities that business firms have to society, the means by which they respond to stakeholder demands, and the impacts these actions have on social and natural environments. Indeed, interest in these aspects of the business and society field continues to abound, particularly in light of the findings, presented in Part II of this volume, which substantiate the proposition that responsible corporate conduct can pay financially. Given these findings, it can be to a firm’s advantage to incorporate social responsibility into strategic planning proactively as well as to influence and adhere to voluntary codes of ethical conduct in an industry. In short, corporate social responsibility can represent a strategic opportunity. Conversely, not attending to this area can invite public scrutiny. Notably, the public’s concern about a lack of business responsibility, fueled by a wave of business scandals, has culminated in increased investigations by the press and new, expensive oversight mechanisms, such as the regulatory response of Sarbanes-Oxley in the United States, a Code of Corporate Governance in the United Kingdom shaped by the Smith and Higgs Reports, and a legion of ethics consultants charged with assisting firms with compliance.

As indicated in the Introduction to Part I, the business and society field at large and corporate social performance topics in particular have been shaped by two dominant orientations, referred to here as economic-focused and duty-aligned perspectives. The purpose of this chapter is to describe the two perspectives, demonstrate their lack of integration, and identify the problems posed for integrative theory development. To preview, their lack of integration means that restraining unethical behavior by social control that is normatively undefined is emphasized to the detriment of a more forward-looking, affirmative view of business’s role in society. Practically speaking, this fuels the misperception among practicing managers that economics and ethics do not mix, as indicated by the familiar refrain that ‘business ethics is an oxymoron’ (Swanson, 2002; 2008). One goal of integration is to point managers to a holistic approach that counteracts this myth.

This chapter takes up where the last left off. Specifically, corporate social performance topics are further reformulated to move inquiry beyond problems of integration and toward a coherent approach that can inform theory and practice, keeping in mind that the mission of the business and society field is to find and develop a constructive business relationship with society. This search is inherently normative, because it seeks to explain what corporations should or should not do on behalf of the social good (Buchholz, 1989; Frederick, 1986; Waddock, 2002; Wood, 199lb). The endeavor necessarily involves factual accounts of corporate activity as well. However, the normative (what corporations should or should not do) and the descriptive (what corporations do or can do) are difficult to blend into one theoretical perspective for corporate social performance, although the approach taken in Chapter 1 can be seen as an important first step toward reconciliation. This dilemma parallels the antagonism between the duty-aligned approach (influenced by ethics research) and the economic perspective (shaped by management research) detailed in that chapter. The conundrum is serious. Many prominent scholars hold that a coherent theory of business and society will be kept at bay until an integration of the normative and descriptive is forged (Donaldson & Dunfee, 1994; Donaldson & Preston, 1995;Frederick, 1994; Freeman, 1994; Jones & Wicks, 1999; Quinn & Jones, 1995).¹

As mentioned in the Introduction, society increasingly expects corporations to respond affirmatively to a wide variety of social concerns (Butler, 2001; Grace & Cohen, 1998). This expectation is consistent with the origin of the business corporation as a creation of government to be held accountable for serving the public interest (Waddell, 2000). Yet this institutional mission has become increasingly complicated as large corporations operate across the globe and small firms develop worldwide stakeholder networks (Vidaver-Cohen & Altman, 2000). Faced with such complexity, it is difficult for corporate leaders to know how to proceed. Their hesitation is not helped by the widely-held fallacy, addressed in Chapter 2, that values — or normative beliefs about right and wrong — are subjective preferences that cannot be identified and analyzed (Frederick, 1986; Treviño & Weaver, 1994, 1999, 2003). Given this fallacy, it is not surprising that many executives place low priority on integrating policies of social responsibility into organizational cultures and core business practices (Birch & Batten, 2001;Milne, Owen & Tilt, 2001). Accordingly, they may downplay social issues, unless the values at stake just happen to coincide with their own personally held beliefs (Swanson, 1999). And even this ‘value coincidence’ may be uncommon (see Birch & Batten, 2001).

During the last decade, organizations (especially large corporations) have been facing ever-increasing stakeholder pressure demanding ‘good corporate citizenship’ from business. This pressure means that, among other things, nonmarket strategies are increasingly important for effective executive decision making (Baron, 2006). Nonmarket strategies can be observed and measured in a wide variety of ways. However, as is evident from Part I, corporate social performance (CSP) can be regarded as a central outcome of business nonmarket strategies. For the purpose of the empirical analysis presented in this chapter, CSP is defined as ‘a business organization’s configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm’s societal relationships’ (Wood, 1991a, p. 693). This is the definition that Swanson elaborated upon in her remodeling of CSP in Chapters 1 and 2 (where she conveyed these concepts as a means-end continuum).

In the previous two chapters, we presented meta-analytic evidence which suggests that corporate social performance (CSP) is positively related to company financial performance (Chapter 4) and inversely related to business risk (Chapter 5). Even so, Stanwick and Stanwick’s (1998) study raises the suspicion that organizational size may be an exogenous determinant of both CSP and corporate financial performance (CFP). That is, it is possible that the significantly positive path coefficient between CSP and CFP is spurious and disappears when firm size is entered as a third variable (Chen & Metcalf, 1980). However, Stanwick and Stanwick’s (1998) conclusions are limited to their specific sample (Fortune 500 companies) and operationalizations of CSP (Fortune Corporate Reputation Index). The study presented in this chapter takes a broader, more representative perspective.

Corporate social performance research implies that, ideally, organizational researchers can measure fairly accurately when a company ‘does good’ and strives for a better society. However, in a post-Enlightenment world in which moral language seems to have lost much of its substance (Maclntyre, 1984), we cannot, in fact, presume that ‘good’ corporate behavior is self-evident. Instead, researchers must continuously keep a critical attitude toward many so-called ‘good’ organizational policies, such as those related to affirmative action and work/life balance, for instance. Organizational activities or values are rarely absolutely or generally ‘good’, but instead the virtue of particular actions can only be evaluated in particular contexts by particular stakeholder groups (Maclntyre, 1988). This goes to the importance of an organization’s ability to incorporate feedback from stakeholders, as stressed in Chapter 3.

The previous chapters presented theoretical and empirical advances in corporate social performance research. Part I addressed theory building problems, arguing for a better understanding of organizational dynamics instead of defaulting to the assumption of a strict dichotomy between economic performance and other important social goals. Certain organizational processes were identified, particularly the receptivity to values in executive decision making, that may mitigate perceived tradeoffs between these goals, theoretically aligning them to a greater extent than previously modeled. This emphasis on value-inclusive decision processes is important, given the findings presented in Part II that attending to economic, social, and ecological goals simultaneously can pay off while reducing financial risk for a firm. As a practical matter, it is also important to be able to point to a valid measure of socially responsible outcomes, such as that advanced in Chapter 8. We proposed the phrase ‘integrative corporate citizenship’ to convey this comprehensive approach to corporate social performance.