Corporate Social Involvement

Social, Political and Environmental Issues in Britain and Italy

Michael Marinetto

• Publisher: Routledge
• Year: 2018
• Print ISBN:
  9781138611696
• eBook ISBN:
  9780429873034
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

First published in 1998. This is an examination of corporate social responsibility in Britain and Italy. There is a growing interest in businesses rendering themselves more socially active and becoming more involved in addressing social problems. A number of British companies have been adopting many of the community practices that have characterized corporate life in America since the early 1960s. Corporate responsibility is defined as a business engagement in the wider community in order to contribute towards the general well-being of society. This study employs a hybrid methodology using a variety of sources including historical texts, secondary studies and detailed case studies of corporate social programmes. Businesses studied include Shell, BT, Unilever, and BAT Industries in Britain, and Fiat, Olivetti, ENI, IRI and Dioguardi in Italy. The study aims to provide a qualitative explanation of why companies go beyond their commercial remit to become engaged in communitarian and philanthropic action. Ultimately, the book aims to present a socially and politically informed analysis placed in its historical and political context, taking into consideration economic forces.

1 Introduction: Issues in the Study of Corporate Social Responsibility

The central purview of this study is to examine corporate social responsibility in Britain and Italy. In theory, this should be a straightforward and uncomplicated task. As defined by British company law, the public company is primarily responsible and accountable to its owners, who, in effect, are the shareholders (Donnelly, 1987). Directors, as the custodians of shareholder assets, are under no legal obligation to use company resources for social activities, the reason being that such activities are not directly related to the overarching objective of maximising financial returns.

The orthodox view of the company and its responsibilities has its philosophical advocates. Postwar liberal economists Milton Friedman (1962) and Frederick Hayek (1969) argue that, apart from creating wealth, businesses have no wider social obligations. These theoreticians introduce an important notion, borrowed from Adam Smith, into the contemporary debate on corporate social responsibility: that the selfish pursuit of profit has beneficial repercussions for the rest of society. This argument is based on the concept of the ‘invisible hand’, first introduced by Adam Smith in The Theory of Moral Sentiments (Goyder, 1987). This concept is a metaphor describing the process whereby the accumulation of wealth automatically benefits wider society through consumption and investment. Hence it follows that a business, by seeking to fulfil its commercial obligations, secures its own survival and contributes to the overall wealth and prosperity of society (Levitt, 1979).

We would expect the classical view of corporate responsibility to have widespread credence and support in modern capitalist economies. However, there are alternative perspectives to the classical view. American business leaders and academic writers were at the forefront of the contemporary debate on corporate social responsibility. Indeed, the likes of Friedman, Hayek and Levitt were galvanised into producing a critique of corporate philanthropy by the advent of what Epstein terms the “‘modern era” of interest in corporate social responsibility’ in the United States (1989, p. 585).

The ‘modern era’ was signalled in 1950 by the Supreme New Jersey Legislature ruling that firms should be allowed to make contributions for the purposes of social betterment. The debate was later given scholarly credence when New York academics Bowen (1953) and Clark (1957) published their seminal apologias on the social responsibilities of companies (Walton, 1982). From the mid-1960s to the mid-1970s a consensus regarding the importance of company-led social action emerged among leading American businesses (Epstein, 1989). By the 1980s the corporate social responsibility debate in the United States moved on to the strategic terrain. Business managers and academics examined whether company involvement in dealing with social problems could benefit mainstream commercial activities.

In postwar Britain, efforts to reconcile the commercial and social responsibilities of firms witnessed brief advances in the early 1960s. The Jenkins Committee on Company Law Reform in 1962 maintained that charitable gifts by businesses would be acceptable before the law courts. It was concluded by the Committee that such giving would endear companies to the public (Sheikh, 1990). The modern debate on corporate social responsibility did not gain any real prominence until the 1970s. Executives, academics and government ministers used various platforms to pontificate on the wider responsibilities of business.

The spectre of America, where, by this date, corporate responsibility was a mature research field in university departments (Epstein, 1976, p. 215; Jones, 1983), was influential. Undoubtedly, American practices held a definite bearing on early British discussions of corporate philanthropy (see Fogarty, 1966). These developments also established an important precedent for the expansion of corporate social involvement during the 1980s. It was in this period that companies actively participated across a wide range of areas. For practitioners researching corporate responsibility, initially in America (Jones, 1980) and later in Britain (Beesley and Evans, 1978), the subject matter under scrutiny generated several problems of definition.

Defining corporate social responsibility

So far, a definition of corporate social responsibility has remained largely implicit. It is assumed, in so doing, that the reader already holds a definition of the term which is congruent with its present usage. This is a problematic assumption, not least because, as writers on the subject have observed, no definitive version of the concept exists. Hargreaves and Dauman describe the predicament as a matter of ‘one man: one definition’ (1975, p. 15), and Me Adam (1973) notes that there are over 150 potential areas where a company might disclose information of a social nature (cited in Gray et al., 1987).

The concept is elusive. However, it has not stopped researchers from trying to come up with an operational definition of corporate social responsibility. One of the most useful attempts to define the subject area comes from Hargreaves and Dauman (1975). These authors provide a procedural explication of the term, with three distinguishable levels of responsibility. The first level covers ‘basic responsibilities’, referring to technical and routine obligations, such as paying taxes and ensuring scrupulous dealings with customers. At the second level, ‘organisational responsibilities’ are intended to secure the well-being and needs of those under the aegis of the company, whether employees, suppliers, managers or shareholders. When a company adopts ‘societal responsibilities’ — the third level in the classification — it becomes involved in the wider community by assisting the creation of a ‘healthy overall environment’ (Hargreaves and Dauman, 1975, p. 19). What distinguishes societal responsibilities from the other categories is that it covers a wider constituency, emphasising the welfare and prosperity of society.

In view of this, the aim of this study is not to focus on those responsibilities within the parochial animus of the company — welfare and social services for employees, pension schemes, health and safety. Rather the objective is examine the implications for companies of wider social responsibilities. Here, our analytical interests coincide with Hargreaves and Dauman’s third level category or what the CBI (1973) terms a company’s responsibilities to ‘society at large’ — the government, national and local communities.

Providing a definition of the concept is not the only problem generated by this particular field of research: there is also the pressing analytical matter of explaining why corporate responsibility rose to prominence in Britain during the 1970s. When it comes to making decisions about corporate social involvement, a company does not operate in a social vacuum. In this respect, it is influenced by broader developments. The main predicament for the present study is to try to pinpoint these general social factors.

The search for an explanation

There have been some laudable attempts by social scientists to locate corporate philanthropy and social action in a wider social context. Most notably these have come from two main sources. Firstly, managerial theorists have linked corporate social responsibility to the rise of industrial society. Secondly, there are thinkers for whom corporate philanthropy is a functional-defensive strategy on the part of commercial organisations. Each perspective is outlined separately below. The rationale is to assess whether they provide a sound theoretical framework for understanding the emergence of corporate responsibility, especially in Britain.

The managerial thesis

The managerial thesis is the generic term applied to a distinctly American tradition of social science research popularised during the 1950s and 1960s. This intellectual trend spawned a substantial body of literature on the nature of capitalism in the postwar era, and the role of business institutions within society (see Jones, 1983). More importantly, it seems, initially, to have provided theoretical grounding for understanding corporate social action.

The main assertion of those working in the managerial tradition is this: the material basis of class distinctions in capitalist society — the close, umbilical relationship between the ownership and control of capital — has been made redundant by the modernising forces within the postwar economy and society. Galbraith (1974) argues that the emergence of new technology, coupled with the wider distribution of share ownership, has resulted in the growth of business enterprises. This has led to the decline of individually- or family-owned enterprises, thus severing the links between the ownership and control of capital. In the new industrial state, non-owning, salaried managers preside over the operations of business organisations. For Galbraith, capitalist societies have converged towards a common industrial structure, replete with advanced technologies. As such, it is imperative for non-partisan, technical specialists to assume control of commercial enterprises.

According to other theoreticians, the rise of managerial specialists, following from the divorce between ownership and control, has facilitated a greater interest in social issues (Ewing, 1970). As non-propertied controllers of the means of production, managers no longer have a vested interest in the narrow, instrumental pursuit of financial gain. Consequently, the leaders of industry can aspire to broader social and humanitarian objectives. Kay sen has argued that the new managerial class of modern corporations, no longer tied to propertied interests, is responsible to a broader constituency:

Its responsibilities to the general public are widespread: leadership in local charitable enterprises, concern with factory architecture and landscaping, provision of support for higher education, and even research in pure science, to name a few. (1957, p. 313)

A similar point was made by Berle (1959) who noted that, with the separation of ownership and control, the private company has become accountable to a broad range of interests.

Although influential during its time, there are notable difficulties with the theoretical claims made by managerial theory. For the present analysis, this perspective does not furnish an entirely satisfactory explanation for the prevalence of corporate social responsibility. These misgivings stem from views concerning the development and nature of modern capitalism. Historically, the transition from small family-owned units to large, shareholder-owned companies has not facilitated a greater sense of social duty amongst managers. Evidence shows that this development has concretised the objectives of expansion and profit-making. Indeed, for some managerial theorists, the new structure of ownership has generally allowed managers to pursue their own personal interests rather than those of wider society (see Scott, 1985, pp. 19–20).

Economic considerations are still important because links between ownership and control in modern enterprises remains intact. The only changing feature is the identity of the owners: the family enterprise of the Industrial Revolution was replaced, in the twentieth century, by an impersonal, shareholder system of ownership dominated by financial institutions (Scott, 1986). Rather than creating a dispassionate class of managerial technocrats, the dominant form of capital ownership in modern society has reinforced the rights of property holders. Moreover, in legal terms, the maximisation of financial returns on capital investments is a legal requirement for companies.

This critique of the managerial thesis still leaves unaddressed an important issue: that of explaining the flourishing interest surrounding corporate responsibility in Britain. On the whole, the literature that has expressly tackled this subject lacks useful insights. Much of it has been characteristically practical in emphasis, either advising managers on how to organise social action programmes or providing voluntary groups with ideas on corporate fund-raising (Clutterbuck, 1981; Knox and Ashworth, 1985; Norton, 1987, 1989; Carmichael and Drummond, 1989; Clutterbuck and Snow, 1990; Fogarty and Christie, 1990; Christie et al., 1991). Most of these writings are bereft of analytical vigour and valuable observations. Nevertheless, there are some notable illuminations made by British theoreticians and researchers. The most interesting ideas are those that have conceptualised corporate social responsibility as a defensive response in the face of economic and political instability.

The defensive thesis

For subscribers to this thesis, commercial survival in modern society is contingent on enterprises addressing social problems. Writing from their experience of pioneering a corporate social programme for IBM in Britain, Hargreaves and Dauman (1975) view social responsibility as an indispensable element of modern business strategy. The authors make this assertion because commercial activities and the external environment have coalesced into an interdependent and dynamic relationship.

One influential feature of contemporary society, mentioned by the authors, concerns the increasing size and importance of the central state bureaucracy. The state apparatus controls institutions and functions vital to the reproduction and maintenance of society — for instance, the provision of health and educational services or the safeguarding of industry. Hence, unless businesses are prepared to actively participate in society, their influence and position will be marginalised. Hargreaves and Dauman are not alone in expressing concerns over the level of state involvement in society and the possible repercussions for business activity. A number of texts and reports written in the 1970s, during a time of economic and political crisis, expressed similar concerns. These reports argued for self-imposed social regulation instead of government intervention to protect the wider social good (Ivens, 1970; CBI, 1973; Beesley, 1974; BIM, 1974; Kempner et al., 1974; Beesley and Evans, 1978).

Hargreaves and Dauman (1975) farther observed that modern commerce is taking place in an unstable social environment: finite energy resources, hyper inflationary pressures, urban poverty and industrial disputes have undermined the aims and philosophy of the liberalised market. The panacea offered by the authors is for business organisations to invest their resources in social and community action:

…we find that the long-term profit-making potential of every individual company and of free enterprise as a whole, and indeed their very survival, will be jeopardised unless all companies substitute their token handouts, often made with muddled motives, for heavy investments in public and social affairs. (Hargreaves and Dauman, 1975, p. 39)

The above arguments are mainly prescriptive in their intent. Yet they provide a theoretical framework for understanding the modern era of corporate social responsibility in Britain. The hypothesis that is forwarded is very much in the tradition of American writings on the subject (Ackerman, 1975; Logsdon et al., 1990). The central claim of these writers is that interest in corporate responsibility is essentially symptomatic of commercial organisations responding to their social environment. These active responses are made in order to secure legitimacy and commercial success.

There may be some validity to the contingency view. When corporate responsibility came to the fore in Britain during the mid-1970s, there was a deep economic and industrial relations crisis. For the private sector, this crisis was exacerbated by the possibility of increased government scrutiny over commercial activities (see Chapter 3). But there are questions over whether these strategic responses by the business sector to wider social events sustained the expansion of corporate social responsibility throughout the 1980s. The contingency thesis is undoubtedly correct in its assertion that enterprises are required to modify and adapt, organisationally, to changes in society. Nonetheless, it is prone to conceptualising the relationship between society and business organisations in functionalist terms. Harvey et al. write as such:

Corporations are treated as if they simply adapt to their ‘environments’, and writers try to relate corporate social responsibility mechanisms and responses to organisational characteristics and effectiveness with the apparent lack of appreciation of ‘structural’ conflicts of interest implied in their unitarist themes. (1984, p. 157)

The contingency view simplifies the agency of business organisations in society. Corporations, as organisational bodies, may be forced into adopting defensive strategies to external events. Yet these very same organisations — particularly large corporations that have extensive resources at their disposal — can assert their own interests with varying degrees of success, and negotiate with other institutions (Utton, 1982). This study attempts to go beyond this simplistic functional theory. The aim is to provide a fuller explanation of corporate philanthropy.

Corporate responsibility and philanthropy in and across capitalist societies

The emergence of corporate social responsibility can be explained by recourse to a socially informed analysis. This requires a sharper, more focused examination of the political and social circumstances that give rise to a general interest in corporate social activism. As part of this analytical strategy, a historical examination will be outlined. Chapters 2 and 3 trace the emergence of the modem capitalist economy in Britain and its influence on the social and philanthropic aspirations of commercial agents and institutions. In particular, these chapters focus on the emergence of large, corporate-owned, industrial conglomerates and their repercussions for philanthropic activities.

The ‘modern era’ of corporate social responsibility, dating from the mid-1970s onwards, introduces new factors for consideration. Most notably, these are concerned with the...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication Page
• Table of Contents
• Acknowledgements
• Preface
• 1 Introduction: Issues in the Study of Corporate Social Responsibility
• Part One: A History of Corporate Philanthropy in Britain
• Part Two: The Modern Era
• Part Three: Corporate Philanthropy in Italy
• Appendix: Research Materials
• References
• Author Index
• Subject Index