1.1.1 Defining corporate (social) responsibility
The business in society literature, which is deeply intertwined with the emergence of stakeholder engagement strategies, has a long and rich history with two main streams, corporate (social) responsibility and corporate social performance. In this section we will argue that corporate ‘social’ responsibility has moved from a position where the responsibilities of the firm, originally rather broadly understood to be part of business’s social contract (Derber 1998), moved to a narrow concept of maximising returns to shareholders. This narrow understanding has been re-broadened over the course of the 20th century to encompass what was called corporate ‘social’ responsibility and is currently moving to a new conception of corporate responsibility as embedded in the very practices involved in doing business (Waddock 2002).
Clark (1916) provides one of the earliest considerations of firms’ economic and social responsibility, which was further elaborated by Dodd (1932): the concept that managers needed to accept their social responsibilities. Influential references of the 1930s and 1940s include Barnard’s 1938 The Functions of the Executive and Kreps’s 1940 ‘Measurement of the Social Performance of Business’, both of which argued that managers’ responsibilities went beyond simple returns to shareholders.
Bowen’s 1953 landmark book Social Responsibilities of the Businessman is the beginning of a modern period of literature about corporate (social) responsibility (CSR). Bowen argues that ‘businessmen’ have an obligation ‘to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society’ (1953: 6). As is suggested by Bowen’s emphasis on the objectives and values of society, CSR rests on two fundamental premises. First, in a form of social contracting, business exists at the pleasure of society and, second, business acts as a moral agent within society. These two ideas (social contract and moral agency) provided the basic premises for the evolution of thinking about CSR.
Levitt, however, argues that ‘welfare and society are not the corporation’s business. Its business is making money, not sweet music. In a free enterprise system, welfare is supported to be automatic; and where it is not, it becomes government’s job’ (1958: 47). His objection centres on the fact that social responsibility would put business into fields not related to their ‘proper aim’, as Hayek (1960) stated. In perhaps the strongest, best-articulated and long-standing position against corporate responsibilities beyond maximisation of shareholder wealth, Friedman (1970) argues the social responsibility of business is to increase its profit.
Criticism of the concept of CSR has focused on its ambiguity. For example, Davis and Blomstrom’s classic definition states that ‘social responsibility is the managerial obligation to take action to protect and improve both the welfare of society as a whole and the interest of organisations’ (1975: 6). The main concepts of ‘obligation’, ‘welfare’ and ‘self-interest of obligations’ in this definition are very broad and open to a range of interpretations.
Moving away from economic theory, McGuire (1963) and other authors such as Kohlberg (1969), Davis (1973), Stone (1975) and Frederick (1987) include not only economic and legal obligations but also certain responsibilities to society which extend beyond these obligations. Davis’s definition of CSR demonstrates these concerns: ‘The firm’s consideration of and response to, issues beyond the narrow economic, technical and legal requirements of the firm … to accomplish social benefits along with the traditional economic gains which the firm seeks’ (1973: 313).
Manne and Wallich (1972) take this definition further, by suggesting that the behaviour of the firm must be voluntary. Jones (1980) argues that corporations have an obligation to constituent groups in society other than shareholders and beyond that, as prescribed by law or union contract. Two facets of this definition are critical. First, the obligation must be voluntarily adopted and, second, the obligation is a broad one, extending beyond the traditional duty to shareholders and to other societal groups: that is, to groups we now call stakeholders (Freeman 1984).
Following this, Preston and Post (1975) and Buchholz (1977) introduced the notion of ‘public responsibility of managers’, proposing that the social impact of the firm should be guided and appraised within the context of external public policy. The public responsibilities of managers in corporations, in this view (Preston and Post 1975), extend to the ripple effects of business activities in society and on relevant stakeholders through what Preston and Post called interpenetrating systems. The advocates of public responsibility focus more on the social contract side of business and less on the question of morality.
Steiner (1975) conceptualised CSR as a continuum of responsibilities, ranging from ‘traditional economic production’, to ‘government dictated’, to a ‘voluntary area’ and incorporating ‘expectations beyond reality’. Similarly, Carroll (1979) argued that companies have multiple responsibilities starting with economic and moving to legal, ethical and discretionary (which would generically be ‘social’) responsibilities.
In other conceptual developments during this era, Ackerman and Bauer (1976) and Sethi (1979) further extend the concept of CSR. Rather than providing a focus on ‘social’ responsibility, which assumes an obligation and emphasis on motivation rather than performance, their concept integrates the notion of ‘social responsiveness’. Frederick (1987, 1998a) later termed this perspective CSR2, corporate social responsiveness, as opposed to the earlier CSR1, corporate social responsibility. The idea of corporate social responsiveness meant that companies were responsive to social pressures. Frequently, companies operationalised this responsiveness by establishing boundary-spanning functions, such as public affairs (Post et al. 1982), issues management (Wartick 1988) and community relations (Waddock and Boyle 1995; Burke 1999) functions, in the recognition that they play a long-term role in the social system. The responsiveness framework moved companies from a reactive to a more proactive posture with respect to their external (stakeholder) relationships (Preston and Post 1975). Notably, as the field of business in society developed it was and still is most of the time, called ‘business and society’, as if business were somehow separate and distinct from other elements of society.
Other writers such as Hay et al. (1976) and Zenisek (1979) place greater emphasis on the ethical perspective in modelling social responsibility, viewing it as the degree of ‘fit’ between society’s expectations of the business community and the ethics of business. In 1987, Epstein (1987) provided a definition of CSR in his quest to equate social responsibility, responsiveness and business ethics. Epstein’s article is one of the first attempts to integrate ethical responsibility into corporate behaviours, avoiding what Freeman (1999) has called the separation thesis and arguing, in effect, that ethics is integral to action.
Thompson et al. (1991), Warhurst (1998a) and Schwartz and Gibb (1999) have taken the standpoint that CSR should go beyond mere legal obligations. By the late 1980s, the concept of corporate (social) responsibility had evolved towards a more integrated perspective (see Carroll 1979; Epstein 1987; Frederick 1987) that encompassed all of the economic, legal and ethical obligations of business and even some of what Carroll (1979) had termed discretionary responsibilities.
Although CSR is a concept that was developed primarily in North America, it has been applied in Europe and in developing countries, albeit tentatively (Lash 1998).
During the 1990s, the concepts of corporate responsibility and citizenship began to take the place of corporate ‘social’ responsibility in both business and academic circles, in recognition of the reality that responsibilities are integral to corporate practices, behaviours and impacts, not separate from them (Waddock 2002). Corporate responsibility (CR) or corporate citizenship (CC) has emerged from the legalistic and reactive definitions of the early years through a time in which companies were thought to be obliged or, minimally, requested to ‘do social good’. Corporate citizenship, particularly the stakeholder engagement process, is significantly more interactive, moving it beyond even proactive behaviour (see Preston and Post 1975; Waddock 2002). Early efforts to integrate ethics into the understanding of CSR have now evolved into integrated perspectives on CR and CC, such as those offered by Marsden and Andriof (1998):
As Peter Drucker (1993: 155) says, however, citizenship is more than just a legal term, it is a political term. ‘As a political term citizenship means active commitment. It means res...
