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International Journal of Management Reviews (2007) doi: 10.1111/j.1468-2370.2007.00215.x

Utilitarian, managerial and relational theories of corporate social responsibility XXXX ORIGINAL XXX utilitarian, 2007 managerial ARTICLES and theories of corporate social responsibility Blackwell Oxford, International IJMR © 1460-8545 Blackwell UK Publishing Publishing Journal of Ltd Management Ltdrelational 2007 Reviews

Davide Secchi Concepts and theories of corporate social responsibility (CSR) have been examined and classified by scholars since the mid-1970s. However, owing to the evolving meaning of CSR and the huge number of scholars who have begun to analyze the issue in recent years fresh efforts are needed to understand new developments. Since there is a great heterogeneity of theories and approaches, the task remains a very hard one, mainly because heterogeneity derives from multi-disciplinary diversity. The criterion for selection is to consider the role that theorists confer to the firm. Following this idea, three groups of theories have been discerned: (1) the utilitarian group, in which the corporation is intended as a maximizing ‘black box’ where problems of externalities and social costs emerge; (2) the managerial category, where problems of responsibility are approached from inside the firm (internal perspective); (3) relational theories, or those in which the type of relations between the firm and the environment are at the center of the analysis. The three perspectives allow the reader to understand the most significant differences between the various theories of CSR. The objective is to classify the theories and to draw a map in which group specificities can be made available. This allows scholars to reach a better understanding of corporate–society relations, and enhances developments both in theoretical and empirical terms.

Introduction

The debate on corporate social responsibility (CSR) issues is commonly dated back to the 1950s (Bowen 1953; Chase et al. 1950). The most important contribution these earlier approaches seem to have made is that they defined the issue in a structured way for the first time. They presented a narrow definition of social responsibility, limited to philanthropy. Far

from these earlier works, if the term ‘social responsibility’ refers to the contribution that the corporation provides for solving social problems (Wood and Logsdon 2002), a significant number of studies may be included in the analysis. Moreover, if this is the starting point, we may also include the generation of social problems at the core of the analysis, i.e. the general study of business–society relations.

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International Journal of Management Reviews Volume 9 Issue 4 pp. 347–373

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Utilitarian, managerial and relational theories of corporate social responsibility One of the first attempts at classifying theories on CSR (business and society issues) was made by Preston (1975). In recent years, many scholars have followed Preston’s idea and tried to give a rationale to the growing number of theories in this field (see, for example, Frederick 1978, 1986, 1998; Klonoski 1991; Pasquero 2000). A far-reaching and complete review of research on the issue has been published by Garriga and Melé (2004). The authors divide CSR theories into four groups: (1) A first group in which it is assumed that the corporation is an instrument for wealth creation and that this is its sole social responsibility. [ ... ] This group of theories could be called instrumental theories because they understand CSR as a mere means to the end of profits. (2) A second group in which the social power of corporation is emphasized, specifically in its relationship with society and its responsibility in the political arena associated with this power. This leads the corporation to accept social duties and rights or participate in certain forms of social co-operation. We will call this group political theories. (3) A third group includes theories which consider that business ought to integrate social demands. They usually argue that business depends on society for its continuity and growth and even for the existence of business itself. We can term this group integrative theories. (4) A fourth group of theories understands that the relationship between business and society is embedded with ethical values. [ ... ] We can term this group ethical theories. (Garriga and Melé 2004, 52–53)

Two critical points emerge from the useful framework developed by Garriga and Melé (2004). The first relates to the distinction between theories from the first and the second groups: it is not clear why a political theory might not also be an instrumental one. Are theories used to analyze corporations that employ their political power to maximize profits political or instrumental? Socialist theories of the firm, for example, are political in relation to the kind of power they consider, but economic/instrumental in the objective 348

they suppose the firm has – nevertheless, the authors do not cite socialists. This and other similar problems are among the most difficult when studying complex and heterogeneous theories. When isolating groups of theories, overlaps always occur but they have to be avoided as much as possible.1 The second problem concerns the strict meaning they give to CSR, in the sense that they only consider ‘direct’ literature. In other words, they consider theories that refer directly to ‘social responsibility’. This is a limit, in my opinion, mainly because, in conclusion, they omit to find more multidisciplinary interconnections. While the first point is a matter of interpretation, the second is a very consistent weakness because it limits the width and depth of the analysis, and its implications. Moreover, it seems more committed to the CSR label than to problems and issues therein. Considering Garriga and Melé’s effort, a third point can be defined even if it does not arise from a critical appraisal and, for this reason, it must be considered separately. It relates to the kind of approach followed, and can also be connected to Klonoski (1991). Authors analyze theories of CSR from a ‘deontological’ (or, broadly speaking, philosophical) perspective (the meaning can be found in Boatright (2003)); thus the categories they obtain deal with the broader question, ‘What is the meaning of business?’ It is a fundamental question indeed. However, once it has been underlined that using this ‘deontological’ perspective is not a problem in itself, we need to take things a step further: What are the connections with management science? How can these broad categories interact with the theoretical developments of CSR? What are the main implications for management practices? In other words, these approaches are extremely useful from many points of view, but the authors’ focus remains mainly fixed on a normative basis. My approach is rather different, as I am interested in the ‘how’ and ‘where’ issues © Blackwell Publishing Ltd 2007

December rather than the ‘what’. I claim that these classifications present data on what the theoretical background of CSR theories is. I analyze CSR theories questioning how they define relations between corporations and society and, more specifically, where responsibility is allocated. I see this approach as integrating with, rather than substituting for, previous ones. The aim is to add some thirty years’ experience to the work begun by Preston (1975). Moreover, and back to the two critical appraisals of Garriga and Melé (2004), my claim is that the heterogeneity of approaches, united to the growing literature on CSR need to be systematized using simple but clearcut concepts. As a result, theories are made comparable. This is a fundamental point, whose implications in terms of empirical evaluation and testing of theories are scarcely considered, since theoretical benchmarking is lacking in modern scientific work (Morin 1999). In summary, the aims of this paper are: (1) to analyze CSR from a broader multidisciplinary perspective (i.e. including ‘indirect’ literature) through (2) the definition of clearcut classes of theories (i.e. avoiding overlaps as much as possible) in order (3) to obtain a set of variables that allow us to analyze CSR in a way that can be useful for enhancing further developments both in theory and practice. Criteria and Methodology

Following up attempts to improve upon the work of other scholars working on CSR we developed a new category system in which contributions can be classified. The aim is to have a system that can help in understanding differences between concepts and avoid the above-mentioned limitations. Distinguishing between disciplines can be of some help. Contributions maintain strong connections with business ethics (De George 1999), strategic management, political economy, and sociology2 (Boatright 2003).

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This paper is dedicated to an analysis of various aspects of CSR. Selecting and classifying literature may help both in exploring hidden meanings of each contribution and in providing a means of fine tuning the concepts adopted for the analysis of firm behavior, within the perspective of social responsibility. Models and approaches analyzed here are directed more to building up a theoretical framework than to a complete overview of the literature. A few examples of so-called ‘neglected’ literature will, however, be taken into consideration, neglected texts often being non-English contributions (mainly European). The criterion for dividing theories into homogeneous groups is the role that theorists confer to the firm. Following this idea, three groups of theories have been drawn up: (1) The enterprise is seen as part of a wider mechanism, the economic system. From this well-known perspective, analyzing the firm’s internal variables makes no sense; moreover, self-interest is also supposed to be the economic system’s driving force. This stream of thought is fundamentally neoclassical in origin and is here defined utilitarian (traditional or mechanicist). It derives mainly from the utilitarianism matrix. (2) The second group of theories is composed of scholars who have tried to re-evaluate the role of the corporation, putting it at the core of their analysis. Theories here concerned, and labeled managerialists, define the firm as the center through which to evaluate external phenomena. It is a kind of counter-proposal if compared with models of the first group, where the core encompasses the whole system (reductionism vs holistic). (3) The third group refers to studies that consider relationships between the corporation and society first and foremost. From this perspective, the firm loses its central role and starts being an interactive part of the economic system. Thus, the category 349

Utilitarian, managerial and relational theories of corporate social responsibility has been termed relational, referring to the attempt to ‘open’ managerial and utilitarian studies.3 The three classes of theories have been developed following two main frames. The first has been that of Scott (2003), where he classifies organization theories through a simple criterion, following the three main ideas on systems theory (natural, rational and open). This definition had been helpful, especially when distinguishing the third class of theories from the first two. The second fundamental source for this paper has been Klonoski’s classification of theories, in which the author tries to find answers to the question ‘[a]re corporations social institutions?’ (Klonoski 1991, 9), and he isolates three groups of approaches to CSR: amoral, personal and social. In this paper, I explicitly do not refer to ethical issues as he does, but to management. I found Klonoski’s perspective very powerful for classifying CSR theories, but heavily focused on ethics. I think management scholars need something more focused on the organizational perspective. Moreover, I suggest that fundamentalism in business ethics and in CSR is not ‘a-moral’, as suggested by Klonoski’s (1991, 9ff.) statements; it simply lies on a different moral basis. The role of previous classifications has been fundamental for this paper but, nevertheless,

it is structured on a different basis, these two being the main sources of inspiration for methodological purposes. It is now apparent that these three perspectives (Scott, 2003, 31ff.) could be seen to fall in the normative domain more than in the prescriptive one, because their aim is that of defining a framework through which socially responsible behavior could be analyzed. The classification scheme of the three groups and the sub-groups is summarized in Figure 1, which reflects the contents of the paper, and allows the reader to get a clearer idea of the theories from which variables for framing CSR issues are derived (see the last section). Before going on with the analysis, three methodological elements must be specified. First, papers, books and other material are here considered with the aim of underlining specific elements. Secondly, references to the different authors must be considered as referring only to the work cited. It is not the aim of the writer to summarize fully one author’s general thinking, or evolution, from the analysis of the work here cited. From this perspective, quotes from a particular scholar may not necessarily represent their current stance on the issue, but indicate only what she/he affirms in that particular text. The third methodological point stays at the core of the analysis. The subject of this paper is CSR. This paper deals with any kind of

Figure 1. Utilitarian, managerial and relational theories of CSR.

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December concept, theory, model, tool, approach, etc. that allows the reader to capture the central trends in mainstream CSR literature and its new developments. For this reason, it does not refer just to existing or actual, but also to potential theories. The focus is on concepts more than theories following recent approaches from the philosophy of science angle that develop further the traditional Kuhnian and Popperian approaches to scientific development (for the role of abduction in scientific development, see Magnani (2001), while conceptual revolutions are analyzed in Thagard (1992)). This allows us to keep the analysis open to emerging issues and trends in CSR that already characterize, or will characterize, academic and scholarly debates. Henceforth, the word ‘theory’ might be used for both actual and potential theories. As this paper refers entirely to twentieth century literature, it does not cover previous pioneering experience of CSR (ante litteram).4 Corporate activity in the social field has important historical references (see Boyer and Equilbey (1990, Chap. 5 ‘Idées sociales et management’)). ‘A critical point regards the ‘great absentee’ in social responsibility issues: socialist thought. It is difficult to ignore the facts that communist and socialist traditions were based upon in the study of firm–society relations (Preston 1975). A re-reading of the huge number of these contributions can, however, be most useful and enlightening. Of course, the argument is too complex to be discussed here. Finally, the most important thing that we learn from past experiences is that conducting business has always led to social problems. Going beyond the label ‘social responsibility’, we discover the problem of corporate– environment relationships which has been a point of interest for a significant number of scholars. In the following pages, I try to focus attention on theories that can be related to CSR, referring mainly to the concept herein, and not only to the field of studies.


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Utilitarian Theories

In utilitarian theories the corporation is defined as a part of the economic system. Its behavior is rather mechanical, it acquires its meaning only if the function is defined. The term ‘utilitarian’ refers mainly to the traditional economic approach to the firm – mainly seen in the first part of the last century and the years immediately following the Second World War. Within this framework, the firm’s behavior is commonly studied as a profit maximizing function, no matter what happens inside the box. This approach is accepted by both the Liberals (or neo-classicists) and the Keynesians (Velo 2003). The first contribution directed to the problem of responsibility is that of Clark (1916). Referring to the laissez faire regime, he affirms that ‘[w]e have inherited an economics of irresponsibility. [ ... ] To make control really tolerable we need something more; something which is still in its infancy. We need an economics of responsibility, developed and embodied in our working business ethics. [ ... ] The old idea of free will is giving way to determinism, individualism to public control, personal responsibility to social responsibility’ (Clark 1916, 210). Stressing the responsibility of businessmen as very important for the whole system (pp. 225ff.), this contribution remains like a ‘lighthouse in the desert’. In order to understand better the basis of the utilitarian approach to social responsibility, we divide it into two sub-categories: one including scholars involved in studying the social revenues and costs of the firm, and the other for functionalists. The Theory of Social Costs

While responsibility issues did not come to the fore in the scientific debate of the period, the analysis of the external impacts of economic activities were considered by the founding fathers of modern economic science.5 The focus on corporate non-economic influences to the socio-economic system is the basis for 351

Utilitarian, managerial and relational theories of corporate social responsibility responsibility allocation. To some extent, the authors considered below address this point, even if they rarely wrote directly about responsibility. In other words, sometimes problems of modern corporate responsibility, deal with the fair allocation of social costs. Moreover, the social costs literature indirectly influenced the first attempts at measuring the so-called ‘social performance’. When questioning the nature of CSR, we are implicitly relating the concept to economic and social problems, taken together, at the same time. The terms ‘social cost’ point out, at a very basic level of analysis, the same concept. Problems arise in the literature with regard to the study of ‘external economies’, as it appeared in Marshall’s (1890, 221ff.) contribution. This is probably one of the first cases in which an economist takes such ‘hexogen’ variables belonging directly to the firm into consideration. External economies have to ‘be secured by the concentration of many small businesses of a similar character in particular localities: or, as is commonly said, by the localization of industry’ (Marshall 1890, 221). In particular, he affirms that ‘every cheapening of the means of communication, every new facility for the free interchange of ideas between distant places alters the action of the forces which tend to localize industries’ (p. 227). The location of small enterprise is thought of as a matter of exogenous advantage when they can be placed among a cluster of similar enterprises. There is, undeniably, always some part of their activity that affects the environment. From ‘external’ to ‘social’ is a short logical passage, in fact ‘[s]ocial forces here cooperate with economic: there are often strong friendships between employers and employed: but neither side likes to feel that in case of any disagreeable incident happening between them, they must go on rubbish against one another [ ... ]’ (Marshall 1890, 226). Even if the issue is limited to a particular case, one can recognize that Marshall takes a broader view. 352

Pigou (1920) starts out from Marshall’s intuitions in order to introduce the problem of the firm’s social costs, or what we might call the ‘real’ theoretical basis of social responsibility. The distinction between ‘social’ and ‘private’ (Pigou 1920, 131–132) becomes clearer in respect to Marshall’s work. This difference assumes importance in welfare economics, as it can be positive or negative (social revenues and losses). The fact that we can distinguish between social and private profits or losses implies a series of problems in terms of evaluation. Pigou (1920) writes on difficulties concerning the ways to reduce the eventual social losses (from the point of view of the whole economic system).6 The issue of social costs, on the one side, relates to the organization originating the costs and, on the other side, to their coverage. Of the two, the latter produces a huge debate (for a review, see Meade 1973), based on the fact that the problem, according to Pigou, is that of justifying state intervention in the economy, making it easier to reach a ‘natural’ equilibrium (Pigou 1920, 129–130). This assumption has important consequences in terms of social responsibilities: the state’s role in the economic system aims to cover social costs and may be intended as the state assuming responsibilities in order to preserve the national product and citizens’ welfare. Thus, its natural counterpart should be that of leaving no responsibilities to the corporation that produces the cost (except that of taxing it), even if indirectly or involuntarily. This issue makes it clear that there is a responsibility and that it has to be assumed by someone: either by the firm (its managers or owners) or by the state (see also Perez 2002, 7). From a different perspective, Coase (1960) tries to shift the issue to corporate production factors. The main thesis is that the costs of the transaction between citizens and government determine whether the state intervenes in the economy or not (Coase 1988, 24ff.). Responsibility (or paying for social costs) is a matter of contracting (see also Aoki et al. 1990). © Blackwell Publishing Ltd 2007

December Neoclassical economics limits the problem of firm–environment relations to system disequilibria and links it to the common– private interest debate. The approach is monistic in kind, that is to say while it considers individuals and organizations as unique entities, it sees them as analogues in terms of behavior, such that the impact of their activities on society are measured through a statistical calculation. Furthermore, the sort of environment considered within the utilitarian perspective is strictly economical; it is very rare that scholars belonging to this group consider political, social, cultural and other conditions (Etzioni 1988), if not purely incidentally. The works of Marshall and Pigou gave rise to a series of critical appraisals. Among the huge number of authors, Kapp (1950) seems particularly interesting in his analysis of the nature and meanings of social costs. Kapp finds a significant inadequacy in traditional social costs analysis, which he defined as ‘static’ and ‘narrow’ (Kapp 1950, xxiv). This assumption derives mainly from hypotheses on human rationality and on the goal of economics (as stated by Robbins 1940). Rationality, in Kapp’s view, is a dynamic process, in which means and ends evolve in a process of continuing interaction, and influence individual and firm behavior (Kapp 1950). The only way to explain the raising of social costs is to analyze the non-rational domain of human beings.7 When the market falls short in determining the value of social elements that occur in producing goods and services, it appears that the theoretical approach to the issue has to change. In other words, ‘if private entrepreneurs are able to shift part of the total cost of production to other persons, or to the community as a whole, points to one of the most important limitations of the present scope of neoclassical value theory’ (Kapp 1950, 11). Being more precise, one can argue that if, furthermore, important social returns are not reflected in private return [ ... ] then the competitive


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equilibrium implies necessarily an arbitrary and highly wasteful utilization of resources. What is maximized is not ‘aggregate satisfaction’ in any comprehensible sense of the term but at best only private exchangeable utilities. (Kapp 1950, 234)

The problems Kapp focuses on are important for two reasons: (1) he considers the intangibility and the unquantifiable nature of some social elements;8 (2) he assumes that the private corporation is the main source of social costs and revenues, while Pigou’s (1920) main problem was the general equilibrium. Kapp’s (1950) contribution to the analysis of the firm’s impact on the social environment can be referred to as both pioneering and stimulating: it seems to be one of the first steps in the attempt to ‘open up’ the neoclassical approach to the study of firms’ behavior. The Functionalists

Functionalists see the firm as a part of the economic system whose goal derives from its definite function in society: that of making profits. Some authors call the theories belonging to this group ‘integralist’ (Klonoski 1991), ‘narrowed view’ (Shaw and Barry 1995, 207– 208) or ‘productivist’ (Buono and Nichols 1985, 74–79). The core assumptions are a kind of modern economic ‘mechanicism’, where the system is a closed cybernetic one. First, Milton Friedman’s contribution on social responsibility (Friedman 1962, 1970) can certainly be considered as integralist. While the authors cited above seem to be quasi-foundational, Friedman refers directly to social responsibility as something belonging to the ongoing debate. He gives a narrow meaning to social responsibility, seeing it as the same as a form of philanthropy, i.e. to donate money to the poor, non-profit organizations, churches, and so on. ‘Social responsibility’, and everything that goes beyond shareholders interests, is a ‘fundamental misconception of the character and nature of a free economy’ (Friedman 1962, 133). This statement derives from the idea that 353

Utilitarian, managerial and relational theories of corporate social responsibility there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud. (1962, 133)

The firm is viewed as an investment, and investments have to be eligible and fruitful for their investors (shareholders, in this case). This concept was widespread among other scholars in that period (Chamberlain 1973; Hayek 1967). Forty years have passed since the publication of Friedman’s work on social responsibility, and it is still discussed and cited as a strong and consistent theory. Friedman’s position follows on directly from the main utilitarian neoclassical assumptions about the firm and the market. Developing a theory surrounding its extreme consequences could be a way to test the hypothesis and its predictive and normative potentials. Milton Friedman, perhaps not consciously, contributed to making a step forward in discovering the incongruence of the original neoclassical approach: it does not explain actual corporate behavior, nor forecast it (Etzioni 1988). Contributions referring directly to CSR came earlier (in the 1950s) from management scientists. Among others, Theodore Levitt was significantly involved in the debate.9 Levitt (1958) is reluctant to admit that the firm can assume a kind of social responsibility. The distinction between profit and non-profit is clear-cut: corporations operate in the market to make profits. Social responsibility was born, in the USA, as a defense tactic of the industrial system against external attacks (Levitt 1958, 41– 42). The talk about social responsibility is already more than a talk. It is leading into the believing stage; it has become a design for change. [ ... ] The function of business is to produce sustained high-level profits. The essence of free enterprise is to go after profit in any way that is consistent with its own survival as an economic system. (Levitt 1958, 44)

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Assuming social responsibility as a strategic goal may lead the entire system to collapse. Every organism has to absolve its function, for the system’s general equilibrium. If the function of the corporation is that of making profits, then a misleading objective can stop the entire mechanism. This is a typical functionalist view. In other terms, profit-making is devolved to enterprises but it is, to some extent, a social objective. Profit-seeking derives directly from the pluralistic character of society, socially responsible objectives result somehow imposed, being opposite and non-concealable to that of profit maximizing. This is a sort of ‘New Feudalism’, in which the firm becomes something like the church was in the Middle Ages (Levitt 1958, 44). The Neo-functionalists

More recently there have been new utilitarian contributions. Porter and Kramer (2002), for example, present social responsibility issues as no more than corporate philanthropy or cause-related marketing (see also Kotler and Lee 2004). Belonging to their approach there is an area in which corporate philanthropy (social benefit) and pure business (economic benefit) overlap and are beneficial for both corporations and society. However, the instrumental view of philanthropy seems to characterize this contribution as typically utilitarian. Also Jensen (2002) could be assimilated to Porter and Kramer’s view of CSR. Their common point is to focus on value maximization, as the ultimate goal of corporate management. In order to understand their point of view, suffice it to write that scholars in corporate finance ordinarily present a very similar utilitarian perspective (see, for example, Damodaran 2001; Brealey and Meyers 2000). During the 1950s and 1960s the debate on social issues spread to a wider context, and scholars began to connect social responsibility directly to the management of the firm. This is also traced in essential reading of the period (see, for example, Ansoff 1965). © Blackwell Publishing Ltd 2007

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Theories from Inside the Firm: The Managerial Group

Theories included in the managerial group are characterized by the stress scholars place on corporate management. The main difference between the utilitarian and the managerial view consists of the fact that the latter approaches start considering social responsibility from inside the firm. Managerialists have a firmcentered perspective and, therefore, everything from outside the firm is principally addressed to organizational decision-making. The following theories are never organized according to a chronological criterion, nor does the order they have imply that the latter is a kind of improvement on the former theory. Every contribution has its own theoretical value that does not necessarily discount the previous theories, thus connections and references abound. Managerial theories have been divided into three sub-groups: (1) CSP models, (2) theories on social accountability, auditing and reporting, and (3) social issues in international business. In advance of analyzing the three groups of theories that define the managerialists, I shall mention Drucker’s thought as a sort of bridge from Levitt to the managerialists. On one side, he suggests that business ethics as a field of study has no theoretical relevance; on the other side, he does not say that corporate managers and owners have not got any social responsibility (Drucker 1973). The first sentence is related to the assumption that ethics is not essential for economics, since it relates to ‘pure sentimentalism’ (Drucker 1973, 54–55). The second element seems to contradict Drucker’s disbelief in business ethics. He affirms that the social responsibility of managers is directly related to the power and authority they have. However, integrity, disclosure and responsibility maintain sense only if they reflect on business (Drucker 1955). The author is not against social responsibility tout court; however, he thinks philanthropy, altruism and similar activities are dangerous for the firm ( just as Levitt does).


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Despite the common ground in Drucker’s position (Schwartz 1998), he does not maintain social responsibility as being inversely related to profit maximization. His view on the ultimate goal of the firm is not the same as Levitt or Friedman, i.e. profit maximization, but the production of goods and services. Analysis of Drucker’s thought leads to two main considerations: (a) it appears very clearly, from a traditional point of view, that social responsibility does not simply mean ‘philanthropy’, and that (b) rejecting the functionalist view is not connected to the logic of profit. Drucker’s thought is eminently pragmatic, and related to corporate management. While he did not write explicitly on social and financial performance, he seems to refer to this issue. This is the reason why he is both outside the first group of theories on CSP, but also inside it. Studies on Corporate Social Performance

The analysis is located, for scholars studying social performance inside the firm, and the objective is trying to measure the contribution the ‘social’ variable makes to economic performance. Thus, the problem is that of managing the firm considering social and economic variables together. Social responsibility is, to some extent, something that can be integrated, measured and controlled in the economic performance. Kreps (1940) analyzed whether social evaluation is possible and then how to measure it. However, the first question concerns the reason why it can be useful to make an evaluation of social performance. Kreps (1962) assumes that corporate activities cannot be evaluated only through the profit level. These are but a part of firm–environment relations. According to other authors, the reason for analyzing CSP can be connected to the need to estimate the extent to which a corporation is socially responsible (Carroll 1993, 44). Therefore, CSP becomes a sort of measure for social responsible behavior and makes it possible to obtain connections to strategic and organizational 355

Utilitarian, managerial and relational theories of corporate social responsibility issues (Carroll 1993). Starting from a different perspective, Pruzan (2001) links the tool for making common values clear and understandable to the firm’s various components to social accountability. Corporate social performance may also be considered as the coherent integration of approaches based on social ‘responsibility’ or ‘responsiveness’. It focuses on the ‘outcome of behavior’ giving operational meaning to social responsibility (Wood 1991a). The common objective of scholars promoting CSP theories is that of creating tools for managers, through making social responsibility more concrete (for a literature review on this specific issue, see Clarkson (1995)). Once the final goal of this perspective is defined, it is useful to focus attention on the models and approaches used to reach it. Carroll (1979, 1993), for example, gives an outstanding contribution with the creation of his ‘three-dimensional model’, trying to integrate what Frederick (1978) defines as social responsibility (CSR1) and responsiveness (CSR2). Three variables are selected in the model: (1) social responsibility categories (economic, legal, ethical and discretionary); (2) social issues involved (consumerism, environment, discrimination, product safety, occupational safety and shareholders); (3) philosophy of social responsiveness (pro-action, accommodation, defense, reaction) (Carroll 1979, 1993, 44– 45). Corporate performance derives from interconnecting the three variables. Starting from this basic model, scholars propose integrations and modifications. Wartick and Cochran (1985), for example, define the processes that lead to social issues and not the single items, in order to make the model more dynamic. The second modification concerns Carroll’s categories: ‘social responsibility’ becomes ‘principles’, ‘philosophy of social responsiveness’ is renamed ‘processes’, and ‘policies’ changes to ‘issues’. From another point of view, following Wood’s definition for CSP – measuring social performance in order to contribute to corporate management – the model should give infor356

mation for managing the firm. Therefore, CSP (or the model connected thereto) is ‘[a] business organization’s configuration of principles of social responsibility, processes of social responsiveness, and policies, programs and other observable outcomes as they relate to the firm’s societal relationships’ (Wood 1991b). The words ‘observable outcomes’, ‘policies’ and ‘programs’ refer to quantifying and auditing processes. In short, the outcomes of corporate behavior represent the interaction between principles and processes. Other scholars start from a different point of view. Burke and Logsdon (1996), for example, assume that identifying the connections between corporate, social and financial-economic performance is very hard. Thus, the objective of their model is to re-define these relations. The way to gain such information is to link social responsibility to strategy, giving rise to Strategic corporate social responsibility (S-CSR). As they put it, ‘corporate social responsibility (policy, programme or process) is strategic when it yields substantial business-related benefits to the firm, in particular by supporting core business activities and thus contributing to the firm’s effectiveness in accomplishing its mission’ (Burke and Logsdon 1996, 496). Corporate strategy may be divided into five ‘dimensions’ in order to keep detailed information on the value chain: (1) centrality measures the way CSR is compatible with mission and the core goals; (2) specificity measures advantages CSR cause for the firm (positive externalities); (3) pro-activity is the degree of reaction to external pressures; (4) voluntarism evaluates how discretional the firm is in implementing social responsibility; (5) visibility refers to the way socially responsible behavior is perceived by corporate stakeholders (Burke and Logsdon 1996, 496– 499). The model generates a twofold interest. At first, it considers socio-economic variables instead of economic and/or social variables (for a review, see Margolis and Walsh 2003). Secondly, it attempts to connect the social responsibility ‘doctrine’ to business strategy. This element is sometimes understated or © Blackwell Publishing Ltd 2007

December taken at face value but remains very relevant in terms of interdisciplinary dissemination and improvement. The actual scientific world is characterized by ‘splendid isolated’ scholars (Morin 1999), that have broken with scientific improvement deriving from analogical reasoning. For this reason, cross-contaminations of every sort are particularly welcomed. These two authors do not create a specific theory of CSR; they present a model for analyzing and understanding corporate social and economic performances. However, their attempt to merge social and strategic issues provides many points of interest that have been recently developed. According to Vogel (2005), CSR is not an asset, it belongs to strategy (Burke and Logsdon 1996) and, in this respect, is a matter of corporate policy. Firms chose to behave in a socially responsible way, in the same way they chose to spend more on marketing or production or any other function. More precisely, ‘just as firms that spend more on marketing are not necessarily more profitable than those that spend less, there is no reason to expect more responsible firms to outperform less responsible ones. In other words, the risks associated with CSR are no different than those associated with any other business strategy; sometimes investments in CSR make business sense and sometimes they do not. Why should we expect investments in CSR to consistently create shareholder value when virtually no other business investments or strategies do so?’ (Vogel 2005, 33). The link between strategic, environmental, and social processes defines what Vogel calls ‘virtuous behavior’. Whether we know or not if this is a major trend in CSR, what is apparent is that Burke and Logsdon’s perspective opens to a wide set of issues. A number of studies on social performance underline its connections to the financial performance of the corporation. Few scholars consider the ‘ontological’ problem – should we measure social responsibility or ethical commitment? – (see, for example, Korhonen 2003) while the larger number focus on evaluating the relationship – how can we


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measure the relationship between CSP and financial performance? (Orlitzky 2001; Verschoor 1998; Webley and Hamilton 2004). Recently Margolis and Walsh (2003) published an in depth literature review. Social Accountability, Auditing and Reporting

Concepts and general aims of theories connected to corporate social accounting, auditing and reporting (SAAR) are strictly related to social performance contributions. However, they are divided from CSP theories, as scholars measure social performance through accounting procedures or reporting practices. A multiplicity of models and approaches could be found, and they derive both from practical and theoretical needs. Accountability, auditing and reporting are separate activities, but they may intervene in succession. For example, social accounting could be the first, then the managers might decide to publish a social report, and afterwards the need to have an independent evaluation of both reporting and accounting practices (auditing) may arise. This is the main reason why, here, the three are considered together. The phenomenon of social reporting emerges in the late 1960s, in the US, when corporations began to publish social reports (see, for example, the case of Abt Inc., cited in Bauer and Fenn 1973). Literature concerning social auditing and accountability began a few years later, in the early 1970s (Bauer and Fenn 1973). The theories have been also called corporate social responsiveness or cited as belonging to the Harvard group (see, for example, Ackerman 1973; Andrews 1972, 1973; Bauer and Fenn 1973), as Frederick (1978) pointed out. They define social audit as ‘a commitment to systematic assessment of and reporting on some meaningful, definable domain of a company’s activities that have social impact’ (Bauer and Fenn 1973, 38). Contributions belonging to this sub-group can be divided by source into two main groups. The first group of scholars analyzes 357

Utilitarian, managerial and relational theories of corporate social responsibility the process of social accountability, auditing and reporting, underlining its effectiveness and suggesting models or approaches to the theme (Gonella et al. 1998; Gray et al. 1987, 1996; Pruzan 1998; Rusconi 1988; VermotGaud 1986; Zadek 1998; and, for a critical reappraisal, Gray 2001). Recently, international institutions entered the debate promoting models of social reporting. It is possible to highlight three general approaches: (a) sustainable model (United Nations – Global Reporting Initiative 2000); (b) safety labor based (the model SA8000 is based on the International Labor Office Declaration of 2000); and (c) soft encouragement (European Commission 2001). Scholars from the second group analyze the diffusion of corporate social accounting and reporting practices in order to find proof of socially responsible behavior. As data from the larger corporations operating all over the world are not well developed (Line et al. 2002) or not eligible at all, information from single countries is available. These empirical studies concern the state of ethical and social reporting in selected areas or countries, such as North America (Dunfee and Werhane 1997; Nitkin and Brooks 1998), the UK (Belal 2002; Hutton et al. 2001), Greece (Bichta 2003), Spain (Guillén et al. 2002) and Italy (Secchi 2006; Tencati et al. 2004). The two approaches considered together reveal the empirical ‘state of the art’ concerning the diffusion of social reporting practices and the way it ought to be (the former group of studies). Scholars that promote SAAR emphasize this side of social responsibility, and their studies support the idea that CSR is devoted mainly to all these activities. This group of scholars provides practical tools to promote CSR, giving a strong managerial character to the issue. It is not easy to find a common approach among these scholars, the most important thing being that they believe CSR has to be implemented this way. Whether it is a theory or not, needless to say it is growing in importance among institutions and organizations all over the 358

world (especially in the EU; see European Commission, 2001). This suffices to include the group in this classification. Social Responsibility in International Business

The number of corporations carrying on activities in foreign countries or facing transnational competition is constantly growing (Enderle 1999). When these problems arise, separating social from economic issues becomes difficult, as was clear when Sullivan proposed his Principles against the South African apartheid regime (see, for example, De George 1999, 542–546; Sethi and Williams 2001). Cases in international business have also been seriously addressed by supra-national institutions that intervene to moderate corporate behavior, especially when western firms operate in less developed countries (International Labour Office 2000; Organization for Economic Cooperation and Development 2000). However, they cannot actually constrain corporate behavior in any way, and problem solving remains in the hands of managers and owners. Furthermore, this explains the huge number of authors that try to address corporate behavior by studying social responsibility in multinationals. Contributions focusing on international social and ethical issues are generally not involved in measurement models but in defining useful tools and concepts for management ‘survival’ in foreign countries. To this extent, they are managerialists: they are mainly practice-oriented, even when authors provide in-depth analyses serving as the basis for codes, guidelines or principles. This group of scholars provides interesting concepts for a theory of social responsibility in the international context that has not been defined as an actual theory yet. One of the first monographs (maybe it is the first) on the ethics of international business is that of Donaldson (1989). The objective is ‘to establish the moral bottom line for economic actors, for individuals and © Blackwell Publishing Ltd 2007

December multinational corporations in global business, and, to some extent, nation-states insofar as their actions relate directly to global business’ (Donaldson 1989, 8). The analysis defines normative rules for actors (especially multinationals) that operate in the international context. Thus, the aim of the work can be synthesized in defining (1) why ethics matters and (2) what are the ethical norms for the international economic environment (Donaldson 1996). Donaldson refers to the multinational corporation as a ‘moral agent’, analyzed on the basis of the moral values used when individuals make decisions in the firm. It appears clear that the firm has many responsibilities, going beyond the logic of profit (Donaldson 1989). The model the author proposes is the social contract approach (1989, 47) for the studies concerning corporate–society relations. For multinationals, this means that one can follow principles that are ‘culturally neutral’.10 In the text, Donaldson tries to specify the meaning of the minimum requirements for multinationals in international contexts. We need to specify that the social contract theory is a relational one, and is considered together with the others in the next section. The point here is the objective that Donaldson defines in the text relating a managerial problem of the firm, and this suffices to consider the contribution within this group of theories. His analysis starts from a relational theory, but the point he makes is managerial in kind: how the corporation can manage such problems. In other words, Donaldson uses a relational approach to analyze the issue, but he focuses on a managerial solution. While the first falls into the relational theories, the second is eminently managerialist. One of the most important contributions is that of De George (2000). He defines a series of guidelines that the enterprise should follow in order to behave morally in foreign contexts (De George 2000). The guidelines have a normative character, as they are anchored in general ethical-philosophical principles and,


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at the same time, they describe specific norms.11 These rules need to be defined in detail if managers do not want to incur a form of ethical relativism. However, to follow the author’s view, democratic development and co-operation in less developed countries can hardly be confused with actions that lead to the opposite. Applying the rules, the corporation behaves morally, but is also responsible for the impacts that activities have on society overall. Moreover, the norms acquire a definite meaning if managers act voluntarily in applying them, so that control is endogenous. Beyond these two well-known examples, other scholars propose similar approaches to the problem of multinational social responsibility, or moral commitment. Welford (2002), for example, focuses on the respect of human rights in the global economy, but with no reference to guidelines or general principles. The problem of the social impact of multinational corporations has been analyzed, giving a ‘concrete form’ to moral commitment. Some authors propose to base corporate commitment on the voluntary elaboration and adoption of the so-called ‘codes of conduct’. Recently, Sethi (2002), going back to the beginnings of his experience as one of the founders of corporate social issues debate (Votaw and Sethi 1969), questions how the corporation responds to social critics. These problems normally arise in multinationals when a clash of cultures becomes relevant and, for example, boycotts, hostile commercial policies, protests and other actions emerge against the firm. The answer lies, for Sethi, in the adoption of specific ‘codes of conduct’ for multinational enterprises. Through the code, the enterprise can be proactive, in the sense that it can anticipate the criticism from society and already has a tool prepared to manage the situation (Sethi 2002). The success of the initiative may depend on (1) customer expectations and corporate reputation, and (2) the level of trust and acceptance that appertains to all stakeholders (Bobrowsky 1999). Once a few basic conditions are satisfied, Sethi 359

Utilitarian, managerial and relational theories of corporate social responsibility gives an operational schedule for the code’s application: (1) definition; (2) measurement and testing; (3) accounting and reporting (Sethi 2002, 29). Relational Theories

Relational theories originate from complex firm–environment relationships that, in some cases, have brought about a redefinition of the foundations of analysis. Scholars belonging to this group put relationships at the heart of the analysis. They are not concerned with the analysis of corporate internal dynamics in addressing social issues, nor do they focus attention on the environment (system). On the contrary, they study the way the two interact, hence the stress is on interrelations. For this reason, relational theories can be thought of as a type of ‘opening up’ of the utilitarian or managerial approaches. The category is divided into four sub-groups of theories: (1) business and society; (2) stakeholder approach; (3) corporate citizenship; and (4) theory of social contract. In some cases, these groups may belong to one of the fields of studies previously cited. Studies on Business and Society

A series of different contributions can be found under the terms ‘business and society’. Being more precise, this sub-group of theories represents a sort of box (container) in which a huge number of scholars place themselves. The meaning here conferred to the expression is slightly different from the common way scholars understand it. With the words ‘business and society’, we refer to scholars who analyze society, trying to understand the role that organizations, mainly corporations, play in it. Giving space to the use and meanings of terms representing the field of studies, Wood (1991a) proposes the change from ‘business and society’ to ‘business in society’. Therefore, the activities of organizations become intelligible only within the social 360

context in which they operate. Corporate social responsibility emerges as a matter of interaction between business and society. While the firm remains the most studied unit, some authors propose to expand the analysis to every organizational type. These short notes may help in understanding the reason why this approach is thought to be ‘wider’ than the previous ones. In order to focus on concepts that helped in defining social responsibility, an initial critical appraisal on business and social analysis comes from McGuire (1963, 1964; see Pasquero 2000, 374, for similar opinions on this author). However, in terms of the influence it has had on the following debate and on the relevance of the issues explored, probably the most important contribution is that of Davis and Blomstrom (1966). The aim of the work is to show how organizations and their environment interact. This definition of social responsibility is probably the widest ever given. First, they state that business ‘refers to the development and processing of economic values in a society’ (Davis and Blomstrom 1966, 4). Secondly, if social responsibility within the economy is not limited to corporations, it becomes important to analyze relations between corporations and the other productive organizations. Thirdly, social responsibility is defined as ‘a person’s obligation to consider the effects of his decisions and actions on the whole social system. [ ... ] Social responsibility, therefore, broadens a person’s view to the total social system’ (Davis and Blomstrom 1966, 167). Davis and Blomstrom connect social responsibility to the quantity of power the organization possesses. They build-up the power– responsibility equation relating to the influence that corporate managers and owners hold over society (called ‘social power’). In short, ‘to the extent that businessmen or any other group has social power, the lessons of history suggest that social responsibility should be equated with it. Stated in the form of a general relationship, social responsibilities of businessmen © Blackwell Publishing Ltd 2007

December need to reflect the amount of social power they have’ (p. 171). The ‘iron law of social responsibility’ here follows: ‘those who do not take responsibility for their power ultimately shall lose it’ (p. 176). In recent years, many scholars have researched within the business and society framework (among others, see Carroll 1993; Weiss 2003). However, they seem to have lost the wider approach followed in the work of the founding authors (Davis and Blomstrom 1966; McGuire 1963). For example, Carroll’s pyramid of social responsibility remains mainly a study directed to corporate managers (Carroll 1991). The Stakeholder Approach

In origin, the stakeholder approach has been developed as a model for improving the management of the firm (Freeman 1984); while it now offers numerous applications (Kaler 2002; Mitchell et al. 1997; Weiss 2003), it has found many critics (Beaver 1999). Above all, it is now far from its origin if considered as a way to foster social responsibility issues (Freeman and Liedtka 1991). Separating it from corporate practices, it remains a model for studying relationships, and this is the way it is taken here. Some authors underline the complementary relationship that the stakeholder approach has with ethical variables (Freeman 1984), others try to expand the list of relevant stakeholders in order to face social issues better (Spence et al. 2001). While some scholars identify the stakeholder approach as a way to understand reality in order to manage the socially responsible behavior of the firm (Carroll 1993; Weiss 2003), others find that it can improve the doctrine of CSR (Freeman and Liedtka 1991). The result should be that social responsibility be abandoned in favor of the correct implementation of the stakeholder approach. Following this perspective, Freeman and Liedtka (1991, 93ff.) suggest abandoning CSR,12 because (1) it promotes manager incompetence, (2) it implies that the


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corporation and society are two distinct domains, connected by responsibility, and (3) ‘rights’ and ‘responsibility’ have no relevance in terms of everyday management. In short, Freeman and Liedtka affirm that CSR lacks dynamism and any connection with the practice of corporate management. A new theory is needed: the ‘new conversation’. It is described by three propositions: (1) the stakeholder proposition considers the firm as an interconnected web of different interests; (2) for the caring proposition individuals behave altruistically; (3) the pragmatic proposition describes the enterprise as a means for expressing creativity and personality (Freeman and Liedtka 1991, 96 –97). Within this framework, ‘self creation’ and ‘community creation’ are ‘two sides of the same coin’, and the process referred to here is adaptive: the firm is a kind of adaptive system (p. 97). Distinctions and classifications of stakeholder theory have multiplied in recent years; here I mention but two of them. One of the most important is that of Donaldson and Preston (1995) identifying four ‘central theses’ of stakeholder theory. It is descriptive, instrumental, normative and managerial (‘in the broad sense of that term’, p. 67). Garriga and Melé (2004) distinguish between ‘stakeholder management’ (p. 59) and the ‘normative stakeholder management’ (p. 60) in order to divide contributions that directly refer to ethical contents (normative) from those which do not. The stakeholder literature might be enriched with a broader set of concepts that help in analyzing the complex contractual and, say, political relationships between them. For example, the boycott phenomenon emerges as a typical reaction to suspected corporate misbehavior. I argue that the model developed by Hirshman (1970) could be of some help, in a way this option is related to the ‘voice’ alternative in a market dominated by ‘exits’. Moreover, one can learn from boycotts by considering them in terms of ‘lack of cooperation’ (Axelrod 1984; Frank 2004), or of ‘socializability’ – ‘docility’ to use Simon’s 361

Utilitarian, managerial and relational theories of corporate social responsibility expression (Etzioni 1988; Simon 1993; Secchi 2005). All these models, theories and concepts could be explored in connection with socially responsible behavior, to enrich the original paradigms and test to see whether fruitful results could follow. Corporate Citizenship

Understanding differences or similarities between corporate citizenship and social responsibility is a difficult task. The concept of citizenship strongly depends upon the type of community to which it is referred. Nevertheless, the definitions scholars use for ‘corporate citizenship’ remain vague, and differences can be noted compared with social responsibility doctrine. An initial approach is that of Clark (1957), who tries to define nine ‘social objectives’ that industry might follow; the eighth refers to the need it has to behave as ‘a good citizen’ (Clark 1957, 181–197). Matten et al. (2003, 111) write that ‘[c]orporate citizenship can be said to highlight that the corporation sees – or recaptures – its rightful place in society, next to other “citizens”, with whom the corporation forms a community’. Relations between the firm and the community (society) are intended as formal and informal rights and duties. Comparing corporate citizenship with social responsibility, three different views can be defined: (a) the limited, (b) the equivalent and (c) the extended view (Matten et al. 2003). The emerging concept in this recent field is that of ‘corporate global citizenship’. The issue derives from studies published in the first part of the 1990s, together with the market openings and the resurgence of interest in social responsibility (see, for example Logan and Tuffrey 1997). The new terms might have been chosen to re-direct the firm–environment relations field of studies (Wood and Logsdon 2002). Altman and Vidaver-Cohen (2000) propose a scheme for interpreting ‘corporate citizenship for the new millennium’. It is defined as the interconnection of (1) proactive engagement, (2) partnership society, (3) business opportu362

nity, (4) transformation, (5) stakeholder relationship, and (6) global corporate citizenship (2000, 3). For these scholars, corporate global citizenship differs from the concept of social responsibility while, for the others, it is a path that corporations may take to behave responsibly. In order to understand differences, it might be better to look at the elements the two approaches share. The two are discretional, in the sense that they are based on individual voluntary behavior that goes beyond social, economic and legal duties (Waddock and Smith 2000). Within this framework, a corporation that wants to become a ‘good citizen’ needs to involve itself in a process of continuing successful relationships with society. Acquiring the status of ‘global citizen’ has to start from focusing on the basic values that lead corporate behavior. This passage involves managers engaging in dialogue with all stakeholders. In other terms, citizenship ‘fundamentally, is about the relationships that a company develops with its stakeholders’ (Waddock and Smith 2000, 48). This is clearly defined as a relational approach to corporate citizenship, and it is characterized by the search for engagement, commitment and relations, toward corporate stakeholders. It follows a different definition of CSR, deriving from the fact that being a good global citizen in a relational context means treating well the entire range of constituencies – stakeholders – who have invested their capital in the business. Citizenship thus has significantly more impact and importance for corporate operations than the so-called discretionary responsibilities implied in typical definitions of corporate ‘social’ responsibility. (Waddock and Smith 2000, 49)

Other scholars seem to have the same sensibility toward the concept, when stating ‘the very phrase “corporate citizenship” suggests a more reciprocal and less philanthropic relationship’ (Willmott 2001, 3). Other authors try to focus attention on corporate global citizenship analyzing it through more traditional economic models. Post (2000), for example, writes that it © Blackwell Publishing Ltd 2007

December is the process of identifying, analyzing, and responding to the company’s social, political, and economic responsibilities as defined through law and public policy, stakeholder expectations, and voluntary acts flowing from corporate values and business strategies. Corporate citizenship involves actual results (what corporations do) and the processes through which they are achieved (how they do it). (Post 2000, 29)

The definition is a wide one, and it does not provide a strict meaning of what is thought to be ‘corporate global citizenship’, but it gives just the sense of what being a ‘citizen’ means. In order to define the different global citizenship models, the author describes two elements, the geographic scope of the business, which could be domestic, multi-domestic or global, and the industry citizenship orientation, which includes natural resources, industrial, service, retail and e-commerce (Post 2000, 33). One of the neglected (or only implicitly mentioned) issues in this literature concerns the role of corporate power. In order to find connections between CSR literature and this particular sociological literature, we need to state that citizenship deals with power. Many CSR issues involve power, from employee– management relations, to sweatshop controversies or to dealing with local government over environmental safety. All these issues (and many others) deal with the power the corporation or its counterparts have. From a broader perspective, this is a mere political point which different contributions (most of them coming from outside the traditional CSR literature: DiMaggio and Powell (1991), Pfeffer (1992), Pfeffer and Salancik (1978)) may help to address fairly. The Social Contract Theory

One of the most important traditions in western philosophical thought is social contract theory.13 The fundamental issue is to justify the morality of economic activities in order to have a theoretical basis for analyzing social relations between the firm and society. Social


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responsibility derives from the moral legitimacy the corporation achieves in society. Understanding the phenomenon is contained in the founding of social actions and in elements that legitimize the corporations existence and behavior. Donaldson (1989) isolates the theoretical basis of his proposal, going beyond the Hobbesian model and ethical relativism, and tries to explain moral obligations for multinational corporations. In another work, together with Dunfee (1999), they present a social contract approach to business ethics that became instantly well known among business ethicists. The basic idea is a simple one. The society, corporations and the other economic organizations are supposed to share implicit, informal relations in order to define a moral community. These relations are thought of as limits that allow us to define every aspect of implicit morality. In order to analyze these elements Donaldson and Dunfee create a framework to underline moral constraints in corporate– society relations. This is the origin of the Integrative Social Contracts Theory (ISCT), thought of as a new approach to business ethics, an approach that exposes the implicit understandings or ‘contracts’ that bind industries, companies, and economic systems into moral communities. It is in these economic communities, and in the often unspoken understandings that provide their ethical glue, that we believe many of the answers to business ethics quandaries lie. (Donaldson and Dunfee 2000a, 436)

The social contract helps in the analysis of the unspoken understandings that rule social relations, defining what is and is not right to do in a given community. Hence from the social contract derives the moral norms and the so-called ‘moral free space’ (Donaldson and Dunfee 1999). The moral free space does not preclude ‘deviant’ moral behavior. The result is that a number of specific moral rules may derive from the original contract (Donaldson and Dunfee 2000a,b). The contract changes with the dynamic society. 363

Utilitarian, managerial and relational theories of corporate social responsibility The authors isolate four general rules that limit individual behavior and define a macrosocial contract. Economic communities have a ‘moral free space’, i.e. they have discretional moral margins for action. Discretional morality is defined through microsocial contracts, sub-ordered to the general macrosocial one. Moreover, individuals making second-level contracts have the faculty to choose between ‘voice’ and ‘exit’ options (references to Hirschman (1970) are here more than explicit). The structured theoretical backbone of the social contract approach describes the boundaries of moral and non-moral actions. The role of communities is extremely important in this theory, as they are the only way through which moral relations between the corporation and the environment emerge. On the one side, the contract isolates an ‘ethical framework’ for economic activities and, on the other, communities define the specific norms to regulate determined economic behaviors. For example, the term community might be applied to corporate stakeholders (Donaldson and Dunfee 2000a, 441). The analysis of corporation–stakeholder relations leads to the definition of hypernorms, macro- and microsocial contracts. Thus, social responsibility is expressed through stakeholder relations and defines corporate existence. This approach also gives rise to some criticism (Boatright 2000; Frederick 2000). Some scholars underline the scarce attention that the theory dedicates to ‘problem-oriented needs of business practitioners’ (Frederick 2000, 476). Some other scholars affirm that the two authors do not expose the hypernorms source. John Boatright, for example, defines this ambiguity as ‘agnostic’, as Donaldson and Dunfee refuse to delineate the source, even though it affects hypernorms legitimacy (Boatright 2000, 455– 456). Donaldson and Dunfee’s conceptualization has given rise to a number of new theories. Among others, one of the most interesting, for the sheer resourcefulness of its argumentative power, is the evolutionary social contract theory by Frederick and Wasieleski (2002). 364

The theory originates from studies in evolutionary biology, and it is a fascinating attempt to transfer advancements in that particular field of studies to the economic domain. Framing CSR

While the three groups (utilitarian, managerial, and relational) constitute a general framework for the classification of theories, the concepts located in sub-groups (social costs, stakeholder approach, and so on) are examples of the main ideas developed within the field of socially responsible thought. Hence, other sub-groups might be isolated in a wider and more in-depth analysis. Among others, we can isolate emerging (or re-emerging) theories: (1) such as the so-called ‘social issues management’ (Weiss 2003) which consists in selecting and analyzing significant issues relating to ethical concerns regarding the firm and society (managerial); (2) the religious influence in moral and social life (relational) is sometimes taken into consideration (Boulding 1953; Carey 2001; Corno 2002; Fort 1997; Melé 2002); (3) the sustainability approach (relational) integrates social with environmental (this time in the ecological sense) and economic issues (Marrewijk 2003; Schaefer 2004). The review gives rise to critical appraisals of the consistency of the theories; development of these criticisms through more in-depth analysis is being addressed in ongoing research. On the contrary, it aims to provide a synthesis of the key concepts characterizing the three groups of theories (Table 1). I focus on four key-concepts that describe the fundamental elements of the different theories. They are the assumptions drawn about the individual, the firm and the system (social, economic, political, and so on); and I also question where responsibility is allocated. The last points derive from assumptions on the other variables, and can be thought of (see Table 1) as one of the clearest distinctions between the three groups. Not every theory of the same group takes all four © Blackwell Publishing Ltd 2007

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Table 1. Defining the three groups: key-concepts Key-concepts

Groups of theories

Utilitarian

Views of the individual

Ideas on the firm

Simplified

Mechanical

Assumptions about the system

Responsibility allocation

Every sub-system Economic system has a definite function Managerial Organizational Measurable Inputs-outputs Firm to be managed Relational Values-based Interdependent Complex and uncertain It depends on the type of relationship between the parts

hypotheses as given but, more realistically, it emphasizes one or two of these key-concepts. The theoretical framework, as exposed in Table 1, tries to include a huge range of present and perhaps future approaches, as, at the moment, I cannot see any other way to analyze corporation–society relations that does not refer to the system, the corporation or to the relationship between the two. The variables described in Table 1 are supposed to be very flexible. The three groups of theories show internally coherent views of the individual, of the firm, of the (socio-) economic system, and of responsibility allocation. Keeping these variables in mind, we can find ‘mixed’ approaches where, for example, (i) a values-based view of the individual is connected to (ii) a measurable idea of the firm, (iii) where the system provides complex turbulences, and (iv) where the firm is the context to which responsibility is allocated. In this case, I repeat, if the variables are intended as flexible ones, the approach can lie within the relational or managerial approach, depending on the emphasis and importance authors give to the variables. It is worth noting that the last column on the right is fundamental in this attempt to classify CSR theories. The framework can also be useful in order to define whether the theory we want to analyze is or is not consistent and/or coherent. It is very difficult, for example, to find the undersocialized view of the individual connected to ideas of a complex and uncertain system; many


scholars have recently pointed this out (see, among others, Etzioni 1988; Sen 1987). Furthermore, following the previous example, ethical views of the individual hardly relate the measurable managerial approach to the corporation; values-based behavior is not always measurable (Kapp 1950), although the group and social behavior of ethically biased individuals is not supposed to be either. Nevertheless, most of the problems of theoretical consistency and coherence rest on the emphasis that authors confer to one variable or the other. Finally, Table 1 can be useful for framing CSR in empirical analysis. Socially responsible behavior is growing in importance, and most literature focuses on corporate practices or on the ‘ought to be’ domain (I provide many references above; however, Margolis and Walsh (2003) help in getting a more detailed idea). Variables in this framework can be useful to define the kind of approach corporations follow when practicing socially responsible behavior. Many questions arise on this point: Are corporations oriented towards a measurable approach? Or do managers consider the corporation as an interdependent body? Do they always feel responsible for social issues involving the enterprise? Are managers and owners far from the utilitarian/ mechanical view? More realistically, are these approaches and variables always useful, regardless of the time and context in which the corporation operates? 365

Utilitarian, managerial and relational theories of corporate social responsibility

Conclusions

The analysis of the three perspectives fairly describes actual and potential theories of CSR. Although one might argue, from the body of citations, that some approaches seem to predominate over others, this is not what the threefold division provides to the reader. This may be a limit of this classification, in the sense that this qualitative analysis requires the reader’s interpretation. However, the model tells us something about the way theories emerge in relation to the period in which they have been created and presented. In any case, this classification and re-organization of the CSR literature does not mean to be chronological; however, the reader may observe that overall conditions foster the predominance of one or another theory, depending on the emergence of each single issue. The groups and sub-groups that I have selected in the systematic classification can be summarized in Figure 1 (see above). Interdisciplinary connections and useful clues regarding the meaning that a theory might have emerged as this model’s two most relevant strengths (see below for details). Within the first group, for example, I cited the work of Coase (1960), who can be classified, together with Williamson and many others (such as DiMaggio and Powell, and Pfeffer, in the third ‘relational’ group), in the area of new institutionalism in economics (Scott 2001). From the same perspective, ‘new institutionalists’ in sociology, economics or politics, might also be considered valuable contributors, even if they seem to be much more focused on the other side of the impact: that of society on the firm (Scott 2001; see also Zenisek 1979, for connections between CSR and organization theory). Corporate social responsibility emerges as a very broad issue that I have tried to detail in its main variables. In summary, I can report the main contributions of the paper as follows. CSR has been always analyzed from a given disciplinary perspective, either ethical or managerial. This classification of theories into utilitarian, managerial or relational allows 366

the definition of detailed variables that go beyond the traditional disciplinary boundaries. Each perspective focuses on a particular problem concerning the corporation–society relationship, hence we are able to shift the issue from ‘how a particular theory is used to deal with a specific problem’ to ‘how each perspective helps in analyzing a particular problem’. As shown in the paper, each of the three perspectives encounters multidisciplinary perspectives and the shift, then, is also a shift from a monodisciplinary to a multidisciplinary approach to CSR. It is apparent that this framework defines the many ‘levels’ of CSR, so that issues in this domain may fall specifically into a given perspective, but it could be enriching the use of the three perspectives at once. We can agree on the fact that different perspectives are supported by a distinct knowledge. Take, for example, the case of a firm’s chimneys polluting the environment in a Third World country. This fact involves many issues, but we can manage them more effectively if we first divide them into (a) the system’s overall effects, (b) managerial (internal) issues, and (c) interactive (or relational) issues. Once issues have been isolated, we can look for models, theories or tools that fit the situation without any reference to the label CSR. Many environmental critical issues need disciplinary support that is far from traditional CSR approaches. In summary, these frames allow scholars to isolate the three basic components of CSR issues easily and to look for concepts that help in understanding, analyzing and hopefully solving the given problem. I claim that the framework presented in this paper (see Table 1) is useful for analyzing theoretical developments. The main assumption of this paper is that CSR issues emerge when corporate behavior and the social system interact, regardless of whether the effects are positive or negative. Hence, there are only three possibilities for responsibility allocation: (a) the system, (b) the corporation, (c) both the system and the corporation, depending on the analysis. If we exclude the © Blackwell Publishing Ltd 2007

December fourth alternative, that of none being responsible, there are no more alternatives. This means that any other development in the CSR area of studies must be covered by one of these three (or four) alternatives. Then, this framework provides a grid to interpret the main actual or potential trends: are they utilitarian, managerial or relational? Where is the field going? Recent developments in CSR theories fall under one of these three perspectives, so that we can easily evaluate what scholars are focusing on. Recently, relational theories of CSR seem to have captured the attention of scholars, and new concepts and perspectives seem to come under this third perspective (Fort 2001; Vogel 2005). One of the main contributions that a useful literature review provides to scholars is that of defining some field boundaries. The three perspectives allow us to define the boundaries of CSR theories and approaches; moreover, knowing what has been studied or what is going on in recent trends helps in searching out grey areas or uncovering new issues. A few examples of what theories from each perspective do not address here follow: (a) scholars from the utilitarian approach are light on providing formalized models of responsible or irresponsible behavior, or in defining the quantitative benefit (or threat) of socially responsible behavior in respect to the system overall; (b) managerialists wanting to analyze carefully the core element of responsible behavior should think of defining the cognitive, psychological or socio-psychological source of responsible behavior at the individual level; (c) scholars studying relational theories might think of including insights from systems theory, especially studies on system–subsystems relations. A few citations could be provided, but mostly these are largely overlooked points (e.g. Boal and Peery 1985 for the managerialists). In addition, more interest could be given to approaches that originate from the attempt to mix concepts that fall under the first, second or third perspective. Hence, this analysis appears fundamental in the extent to which it


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can help scholars in moving forward from the existing theories, but it remains just the first step in this direction. I can add more points, not to mention the relevance this system of classification has for an initial didactical explanation of CSR theories. However, in terms of research and theoretical developments, this is a minor point. The third point is, in my view, the most critical and stimulating. Once theories are classified and we get the framework, what next? How can we improve the study of CSR, given the actual state of theories? And furthermore, what is the empirical impact of the variables that define theories of CSR? These are the basic questions that we are trying to answer in our ongoing research, where concepts derived from utilitarian, managerial and relational theories are the fundamental hypotheses and form the groundwork. Acknowledgements

I am especially indebted to W. Richard Scott and to Sabine Urban for comments on an earlier draft of the manuscript, challenging discussions and support. Anthony Buono provided me with a very interesting perspective that led me to change the last part of the paper. I also wish to thank the two referees who helped me so much in analyzing the limits of the first draft. All unclear passages, errors and omissions fall entirely under my responsibility. Notes 1 2

In any case, what matters is the way a theory is read by the scholar that makes the classification. Extremely interesting contributions come from political economy and management science. The most important contribution comes from business ethics, an insitutionalized field of studies in the US but not yet in Europe. One of the most important scholars within this field, Richard T. De George, defines business ethics as ‘the interaction of ethics and business. Business ethics is as national, international, or global as business itself, and no arbitrary geographical boundaries limit it’ (De George 1999, 23).

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Utilitarian, managerial and relational theories of corporate social responsibility 3

4

5

6

7

8

9

10

11

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The distinction between managerial and relational approaches relates closely to that of Scott (2003), when he points out differences between the two organizational paradigms of closed and open systems. It is worth noting that socially responsible activities have always been connected to corporate management, as shown by the experience of Robert Owen in 1804 Scotland at the New Lanark Mill (Morton 1962; Podmore 1906; Reynaud 1841; recently, Stuttard 1992, called for a re-interpretation of Owen’s work), and by the so-called welfare work movement, occurring in the US at the beginning of the 20th century (Nelson 1980, 1995). Moreover, owing to evident connections to the ethics domain, references can be traced back to Smith (Sen 1987). While the external positive variables in corporate activity are of great importance, authors address their attention to the problem of social costs (see, for example, Samuelson 1947). It seems that ‘rational behavior = economic behavior’, and ‘non-rational behavior = sociological behavior’. This has no meaning when trying to understand human behavior; we need both rational and non-rational elements contributing together to explain economic and sociological points of interest (Simon 1993). The problem of measurement is not a way to reject the analysis, although it invites, in Kapp’s view, thought about the nature and the limits of economic analysis. Levitt dedicated the great part of his work to the management field. Thus, his inclusion with the utilitarians could lead to an idea of misplacement. However, if we consider his contribution as limited to the one mentioned in the text, it clearly appears that he falls into the so called ‘economistic fallacy’ (Luijk 1992, 24). The principles are: ‘1. That a productive organization should enhance the long-term welfare of employees and consumers in any society in which the organization operates. 2. That a productive organization should minimize the drawbacks associated with moving beyond the state of nature to a state containing productive organizations. 3. That a productive organization should refrain from violating minimum standards of justice of human rights in any society in which it operates’ (Donaldson 1989, 54). In short, the guidelines are: ‘1. Do no direct

intentional harm; 2. Produce more good than harm for the host country; 3. Respect the rights of employees and of all others affected by one’s actions or policies; 4. To the extent consistent with ethical norms, respect the local culture and work with and not against it; 5. Multinationals should pay their fair share of taxes and cooperate with the local government in developing equitable laws and other background institutions’ (De George 2000, 51). 12 The concept of social responsibility considered by Freeman and Liedtka derives from works by Frederick (1987) and Preston (1988). 13 Relating to its positive – Thomas Hobbes’ Leviathan or De Cive for the contract within the state, and the pamphlet Zum ewiger Frieden, written in 1795 by Immanuel Kant for the contract being signed within a community of states – or negative – Jean Jaques Rousseau analyzes in his Le contracte social the origin of society – meanings, the approach maintains numbers of applications.

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Davide Secchi is from the Department of Management, University of Wisconsin – La Crosse, 1725 State Street, La Crosse, WI 54601, USA.

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