International Business-Society Management

Linking Corporate Responsibility and Globalization

Rob van Tulder, Alex van der Zwart

• Publisher: Routledge
• Year: 2005
• Topic: Business
• eBook ISBN:
  9781134293261
• Subtopic: Business General
• Index: Business

In the twenty-first century, as traditional divides are redefined, bargaining over corporate responsibilities has increasingly centred around corporate reputation and the question of whether businesses are part of society's problems or part of their solution. This ground-breaking book treats issues, strategies and societal interaction in a homogenous manner and analyzes the nature of the international bargaining society as it has matured.

Discussing and contextualizing contemporary debates on international corporate social responsibility, globalization and the impact of reputation, this key text integrates them into a new and coherent framework: Societal Interface Management. Using this unique framework, it explores the interfaces between international corporations, governments and civil society representatives.

Analytic and revealing, the text applies the framework to in-depth studies of Nike, Shell, Triumph International, GlaxoSmithKline and ExxonMobil. It investigates the conflicts surrounding Burma, blood diamonds, child labour, oil spills, food safety, patents on HIV/AIDS medication and labour rights that have resulted in a large number of disciplining activities. An accompanying website (www.ib-sm.org) contains additional case studies, as well as issue dossiers on the challenges confronting international firms.

Drawing on a wealth of experience both in research and teaching, the authors have developed a text that integrates reputation, responsibility, ethics and accountability. Clearly constructed, it is a must-have book for all those studying or teaching business ethics, political economics, economic geography, public relations, and corporate social responsibility.

Part I
Rivalry in a changing society

INTRODUCTION TO PART I
SIXTEEN YEARS AFTER THE WALL…

November 1989 appeared to be such a promising start. With the fall of the Berlin Wall, the most significant ideological clash of the twentieth century that had the world in a stranglehold for so long came to an end: the opposition between capitalism and communism, between the ‘free’ market and the ‘plan economy’. Philosophers (Fukuyama, 1992) announced the end of history; economists and managers saw a vast market and considerable opportunities opening up, particularly for Western firms; political scientists declared the victory of parliamentary democracy as the decisionmaking model for society. With the rise of the Internet in the mid-1990s and economic globalization seeming an irrevocable fact, the notion quickly took hold that the world population was living in a ‘global village’ where distances would disappear and everyone would be better off. The entire global population would profit from the benefits of the new technologies and an ever-expanding market economy. The Internet held the promise of democratization and enhanced power to individual citizens and consumers. Many economies perhaps still had to undergo some transformation in order to create the conditions for continuous economic growth, but that was just a matter of time. A global round of further trade liberalization was in the making. In many countries a series of privatization and deregulation measures were in the starting blocks and launched with much enthusiasm.

More than a decade later, this vision is more nebulous than ever and the hangover for some consequently all the greater. A number of former plan economies that tried to adopt capitalism most ardently and applied the ‘shock therapy’ advocated by international organizations such as the International Monetary Fund slid into a state of almost total chaos. Such is their deterioration that even average life expectancy has declined (World Bank, 2003). The anti-globalist movement started using the World Wide Web specifically to protest against the excesses of globalization. It turned out that technological development does not always equal progress and that it has created a number of complex moral dilemmas, such as personal privacy in information networks and the patentability of genetic material. There is talk of a growing ‘digital divide’ between the ‘haves’ and the ‘have-nots’ in the Information Age. Weak international agreements are being reached to address pressing environmental problems such as global warming. Further steps in multilateral trade and investment liberalization have stalled. Countries are hauling themselves along from one financial crisis to the next. Never before has the United Nations Security Council had to debate the possibility of war as often as it has in the 1990–2000 period.¹ Interstate wars are replaced by intra-state (civil) wars. By the end of the 1990s, the dotcom generation of Internet firms appeared to consist partly of hot air. Stock markets plummeted, plunging many small investors into a crisis—and no one knows whether this instability will persist or decline. The list is endless.

Global income inequality, on the one hand, is probably greater than ever in human history. Despite a relative decline in the number of poor people, the absolute number of poor people barely surviving on less than US$2 a day is estimated at slightly below 3 billion—still half the world’s population. The income of the richest 1 per cent totals the sum of the bottom 57 per cent.² The earnings of the three richest men in the world (all businessmen) are almost half of the income generated by all SubSaharan African national economies put together.³ On the other hand, never before have so many people enjoyed such (economic) prosperity as they do today. Thus, a world of paradoxes unfolds. A world that is embedded in a network(ed) society, characterized by multiple decisionmaking centres and governed by the rules of international bargaining and negotiation rather than the rule of law.

NEW ENEMIES

In the meantime, and partly as a result of this unfolding international bargaining society, capitalism has acquired two new enemies. First, an external enemy displayed itself in the form of international terrorism. Attacks on the World Trade Center in New York and the Pentagon in Washington on 11 September 2001, followed by a sequence of bloody attacks in a large number of places (Bali in 2002 and 2005, Istanbul in 2003, Madrid in 2004, London in 2005), represent the most explicit, recent and bloody manifestations of rising global terrorism. But, the problem had already presented itself in the first half of the 1990s. From academia, the warning of a ‘clash of civilisations’ (Huntington, 1993) sounded and in more managerial terms, there was talk of ‘McWorld versus Jihad’ (Barber, 1995). Second, an internal enemy in the form of the self-enriching businessman gained ground. Not only did business leaders succeed in negotiating high earnings for themselves, they also managed to re-label billions in costs as an asset or as ‘growth in earnings’ in order to keep share prices artificially high. This they accomplished through creative bookkeeping constructions and often with the assistance of their external accountants. The American magazine Business Week (13 June 2002) talked of ‘evil forces from within’ that are threatening capitalism.

In the US, icons of American commerce such as Xerox, WorldCom, Enron, General Motors, Merck and Arthur Andersen crumbled. President George W.Bush Jr, a former businessman himself, also came under fire on charges of insider trading. He tried to quell emotions by calling for more controls, but ultimately placed the onus on companies to act more ethically. It turned out that this state of affairs was not restricted to the US. In Europe and Asia, big companies such as Vivendi Universal, Deutsche Telekom, Lernhout&Hauspie, Parmalat, Adecco, Ahold, Daewoo, Hyundai, Sumitomo and Elf also buckled. No country was spared the embarrassment of some sort of corporate scandal. On all sides respected businessmen were accused of insider trading, fraud or reaping excessive earnings. Some ended up in jail, some even committed suicide—an outcome reminiscent of ‘Black Monday’ and the aftermath of the big October stock market crash in 1929. In the Netherlands, the chairman of the largest trade union called for a ‘kleptocrat’ tax. Government leaders around the world condemned corporate selfenrichment but generally refrained from imposing higher taxes or more stringent laws. A contributing factor might have been that some political leaders themselves were being accused of self-enrichment at the time. Evidence of conflicts of interests came to light and cast doubt on the ‘independence’ of accountants, consultants and stock market analysts. Confidence in the economic system and companies suffered heavy blows on all fronts.

CONFRONTING COMPLEXITIES

These developments resulted in societies and corporations being confronted with increasingly complex and ‘messy’ problems (cf. Ackoff, 1999). Big (internationally operating) firms are becoming ‘societies’ on their own. The bigger and the more entangled with societal issues firms become, the more difficult it becomes to analyse firm strategies isolated from society and vice versa. Drastic societal and economic change always spurs the quest for a ‘best-practice’, preferably a single recipe and benchmark for economic success. This propensity is often motivated by the desire to limit uncertainty rather than a true scientific ambition. Nevertheless, the pursuit of these yardsticks holds a magical appeal to many business people and policy makers alike. In the organizational and institutional literature, this pursuit is further reinforced by the idea of institutional isomorphism (DiMaggio and Powell, 1983) that signals a growing tendency towards convergence of institutions and organizational forms around the world, as the consequence of the network(ed) and global society.

Akin to the quest for the Holy Grail or the Golden Fleece, the search for ‘best practice’ is bound to remain elusive or turn out to be a disappointment even if the object of desire is found (Easterly, 2002: xi). A troubling factor for many an ambitious quest is that societies and firms can (and have been) economically successful on the basis of very divergent characteristics. Strategic thinkers consis-tently argue that success is achieved precisely because of the implementation of diverging strategies. Other authors who have analysed the main tenets of the process of change since the early 1990s have stressed various aspects of ‘rivalry’: rival states, rival firms (Stopford and Strange, 1991), rival organizational forms (Ingram and Clay, 2000), rival cultures (Snow and Colini, 1993), rival capi-talisms (Albert, 1993; Hart, 1992) rival social movements, rival ideologies, rival institutions (van Tulder and Ruigrok, 1997).

ADDRESSING THE NATURE OF INTERACTIONS

The degree of rivalry represents the process dimension of institutional and organizational interac-tion, whereas the degree of convergence or divergence represents the outcome dimension of interaction.

• Rivalry: Rivalry entails competition. The concept of market competition, for instance, is a central notion of classical economics and is generally depicted as a process of rivalry between economic actors. Rivalry is not a priori positive or negative. It expresses a process character-istic of interaction. In Darwin’s evolutionary reasoning, rivalry enacts a process of natural selection in which the fittest survive. In this case rivalry represents a ‘race to the top’. In international arenas, rivalry can exist between governments, firms and NGOs. Rivalry between political, social and economic systems can also lead to exclusion—that protects the unfit from the fitter—or to unfavourable copying or herding behaviour that results in a weakening of all actors concerned. In this case rivalry represents a ‘race to the bottom’.
• Divergence/convergence: Rivalry or competition is neither a sufficient nor a necessary condition for divergence or diversity. When systems, individuals, countries or organizations do not interact or complement each other, divergence can result in a state of non-rival co-existence or co-habitation. Convergence, on the other hand, can lead to uniformity and isomorphism, but it does not say much about the underlying process either which—even in the case of isomorphism—might still lead to sustained rivalry. Actors that operate in the same markets under harmonized rules can be bigger rivals than in cases where they operate in differing institutional settings. Consequently, four positions can be distinguished: (1) race, (2) contest, (3) co-alignment, (4) cohabitation (Table I.1).

A race represents foremost regulated rivalry. The ‘track’ is set and enables actors to compete, but also to identify—for the moment—‘the winner’. The process leads to a greater convergence between the actors. A race requires a certain degree of harmonization of institutions. The race can be positive (race to the top) or negative (race to the bottom). In the case where a dominant (hegemonic) actor imposes its rules on other actors, this could perhaps lead to short-term uniformity of rules, but cannot take away the underlying feeling of rivalry that its rivals feel. The imposition of the de facto standard in computer software programs by Microsoft, for instance, triggered other forms of rivalry (litigatious) in an otherwise ‘harmonized’ market place. Actors that are confronted with an extrinsically imposed uniformity due to a leading (hegemonic) actor will always try to challenge the latter’s position. One of their means is to try changing the rules of the game to their own advantage. Company rivalry is as much about technological or market strategies, as about competing rules.

Table I.1 Interaction dynamics

A contest represents a much less regulated form of interaction in which it is not always possible to distinguish a ‘winner’. The stage is set, but the rules are less transparent. In case the outcome of a race is contested, actors literally enter into a divergent position. Active exclusion of other actors through discrimination or through retaliation (tit-for-tat action) are expressions of rivalry that reinforce divergence. The ‘clash of civilizations’ (Huntington, 1993) or contests in ‘uniqueness’ as can be witnessed in beauty pageant elections are concrete examples of diversity enhancing rivalry. Actors confronted with a dominant actor can challenge the latter’s position by changing the rules of the game, thus creating rivalry by divergence.

Co-alignment is the interaction principle in case interaction is aimed at convergence. Co-alignment is a term used in organizational and change management theories where it refers to the idea that firms reap competitive advantage and good performance when they are aligned with their environment, or when strategy and implementation are aligned. Coalignment as an organization principle has, for instance, been applied for IT strategies. Co-alignment involves cooperation between the actors, rather than rivalry, in achieving shared strategic goals. It supports processes that lead to (institutional and organizational) isomorphism.

Co-habitation exists when actors ‘agree to disagree’, but without expressing any ambition of becoming superior over the other (which would entail a measure of rivalry). Co-habitation involves neither intense cooperation nor strong rivalry between actors. The term has been practised in particular to characterize ‘living arrangements’ in marital and political relationships. Political co-habitation in France for instance was practised when a president and a cabinet of opposing political orientations co-governed the country. Coalition governments are another example of co-habitation; the alliance is temporary and at elections the parties contest again—preferably by stressing their own ‘unique’ characteristics. Co-habitation entails a process of enduring polymorphism.

ASSESSING THE NATURE AND THE DIRECTION OF CHANGE

Part I of this book offers an analysis of the most important societal movements of the 1990s along three fundamental institutional building blocks of societies: the market, state and civil society. Chapter 1 (rival institutions) outlines how these coordinating mechanisms of society generally function and interact with one another. In the past, the distribution of responsibilities and the ‘spheres of influence’ of these three institutions have created significant stability and economic welfare in many industrialized countries—regardless of their differing social and economic foundations. Chapter 2 (rival models) delineates what constitutes economic ‘success’ and which major societal models compete at present.

In Chapters 3 to 5 (rival trends), the most important changes within and between the societal spheres/institutions are examined. Nothing seems more difficult to predict than the future. Only slightly less difficult, it seems, is to grasp present ‘trends’ or what is portrayed as such. As the future is firmly rooted in past and present trends, assessing them inaccurately arguably has greater consequences for the organization of society than not being able to forecast the future. The 1990s was, indeed, a decade of heightened expectations based upon a number of promising trends. These were perceived by many as ‘certain’ and embodied in five catchwords: globalization, democratization, deregulation, liberalization and privatization. At the same time, economic, political and business literature became riddled with concepts such as ‘management of uncertainty’, ‘volatility’, ‘risk management’, ‘ambiguity’ and ‘dilemmas’. The combination of certainty and uncertainty seems peculiar, but the two phenomena, in fact, are strongly related: increased (perceived) ambiguity triggers a search for certainty in (perceived) trends. If proclaimed with enough gusto, a ‘trend’ may very well become a self-fulfilling prophecy. Chapters 3 to 5 address the various dimensions of the (perceived) trends since the early 1990s, their origins and their effects on societal institutions and organizational forms. To what extent can these trends empirically be substantiated, what rival trends have emerged, what are the trade-offs between them and which challenges still lay ahead?

The societal changes that occurred in the 1990s are often characterized by three clusters of trends: (1) an advancing business sector—advancing global markets, increased competition and rapid technological progress driven by the efforts of a multitude of small enterprises (Chapter 3); (2) a more emancipated and assertive civil society which—aided especially by new information and communication tec...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Figures
• Tables
• Boxes
• Abbreviations and acronyms
• Website
• Preface and acknowledgements
• Part I: Rivalry in a changing society
• Part II: International corporate responsibility
• Part III: The international bargaining society in action
• Notes
• Bibliography