We highlight how Corporate Social Responsibility can be strategically used against the negative perception from earnings management. Using international data, we analyse the effect of CSR and EM on the cost of capital and corporate reputation. Results confirm that CSR strategy is positively valued by investors and other stakeholders. Contrary to EM, CSR has a positive effect on corporate reputation and lowers the cost of capital. In addition, we also find that the favourable effect of CSR on cost of capital (...) is consistently more intense in firms that show signs of EM indicating that the market does not identify when CSR practices are used as a strategy to mask EM. We also demonstrate how institutional factors influence the above relationship. (shrink)

Most scholarly interest in codes of ethics or conduct has focused on traditional companies. Little is known about the codes of social enterprises or hybrid organizations such as microfinance institutions. Our paper provides a comparative case study of the codes of a Mexican microfinance network and seven MFIs. Using the corporate integrity model, we analyze the content of MFIs’ codes compared to those of traditional organizations. We then examine to what extent some specific features of MFIs such as their mission, (...) target group, and applied credit methodologies, are factors that determine the content of their code. We find that MFIs’ codes, like those of traditional companies, include traditional stakeholder principles. Nevertheless, they put greater emphasis on ‘socially-oriented’ principles or on terms such as ‘people’ and ‘common good’. MFIs’ codes differ with respect to the items they include and exclude and the size of the covered sections. We also find that these codes attempt to address prevailing concerns in microfinance but rarely tackle two critical debates, namely levels of interest rates and of profitability. We finally argue that it is difficult to move toward a global code, owing to regional disparities and the variety of organizational models and missions. (shrink)

In contrast to many aspects of the social responsibility of business, CSR scholarship has been largely silent on the issue of the payment of corporate tax. This is curious because such tax payments are often considered a fundamental and easily measured example of a company’s citizenship behavior. However, because the payment of corporate tax can often be legally avoided, this activity represents a boundary condition for CSR. If the law and CSR suggest that a company should pay its fair share (...) of tax, yet many successful companies actively avoid this social obligation, should they be considered socially irresponsible. This paper explores the issue of tax avoidance and the implications it has for any credible definition and measure of CSR. It also highlights an aspect of corporate practice that is deliberately hidden from public view. (shrink)

Recent research highlights the positive effects of organizational CSR engagement on employee outcomes, such as job and life satisfaction, performance, and trust. We argue that the current debate fails to recognize the potential risks associated with CSR. In this study, we focus on the risk of work addiction. We hypothesize that CSR has per se a positive effect on employees and can be classified as a resource. However, we also suggest the existence of an array of unintended negative effects of (...) CSR. Since CSR positively influences an employee’s organizational identification, as well as his or her perception of engaging in meaningful work, which in turn motivates them to work harder while neglecting other spheres of their lives such as private relationships or health, CSR indirectly increases work addiction. Accordingly, organizational identification and work meaningfulness both act as buffering variables in the relationship, thus suppressing the negative effect of CSR on work addiction, which weakens the positive role of CSR in the workplace. Drawing on a sample of 565 Swiss employees taken from the 2017 Swiss Public Value Atlas dataset, our results provide support for our rationale. Our results also provide evidence that the positive indirect effects of organizational CSR engagement on work addiction, via organizational identification and work meaningfulness, become even stronger when employees care for the welfare of the wider public. Implications for research and practice are discussed. (shrink)

ABSTRACT:The extant literature on cross-national differences in approaches to corporate social responsibility (CSR) has mostly focused on developed countries. Instead, we offer two inter-related studies into corporate codes of conduct issued by developing country multinational enterprises (DMNEs). First, we analyse code adoption rates and code content through a mixed methods design. Second, we use multilevel analyses to examine country-level drivers of differences in code content—specifically, elements of a country’s National Business System (NBS). We find that DMNEs are much more likely (...) to adopt a code of conduct than their domestic counterparts; however, this does not translate into greater code comprehensiveness. We also find support for the ‘substitute view’ of CSR in developing countries, i.e. that MNEs from poorer countries and from countries with lower governance effectiveness tend to express more comprehensive commitments. However, this dynamic does not extend to a country’s labour system; instead, CSR appears here to match the efficiency of a country’s labour market, thus reflecting the ‘mirror view’ of CSR. (shrink)

This study examines the endogenous relation between corporate social responsibility and tax avoidance by focusing on a common strategy of corporate tax avoidance, i.e., establishing entities in offshore tax havens. Using hand-collected data on a sample of U.S. firms, we find that firms’ CSR ratings increase substantially in the two years after they first open tax haven affiliates. We provide evidence by using the controlled foreign corporations look-through rule enacted by Congress in 2006 that facilitates offshore profit shifting. We find (...) that firms that are affected by the CFC legislation increase their CSR practices in response. Overall, our results are consistent with the risk management theory, which argues that firms hedge against the potential negative consequences of aggressive tax avoidance practices through an increase in positive CSR activities. (shrink)

AbstractForeign direct investment (FDI) in offshore financial centers (OFCs) is gaining increased attention in business ethics research. Much of this research tends to focus on OFCs as locations where firms can avoid taxes, considering such behavior as unethical. Yet, there is dearth of studies on capital round-tripping by emerging market firms, which is an integral part of this phenomenon. Such round-tripping involves firms sending capital into OFCs only to invest it back in the home country under the guise of “foreign” (...) investment. Presently there is little discussion of the ethical implications of such round-trip FDI activities. In this paper, we conceptualize round-tripping as institutional arbitrage and look at the determinants and ethical implications of such investments into OFCs. Exploring Russian round-tripping we note that firms tend to invest more funds in OFCs that offer a combination of tax and secrecy, or secrecy and property rights protection arbitrage opportunities. In either case firms exploit the opportunities provided by institutional differences between the OFC and Russia while investing back into Russia. Our results tend to indicate that equating OFC investment to tax avoidance and thus deeming it as unethical behavior is too narrow an explanation in the case of emerging economy round-tripping. This is because such investments are often motivated by the unethical behavior of home country stakeholders and may in fact provide benefits to society. (shrink)

This paper develops two new measures of labor tax avoidance based on social contribution expenses reported in financial statements and tests them and their determinants within a sample of 224 Italian firms defined as legally registered Mafia firms due to having been confiscated at some point by judicial authorities, in relation to alleged connections with Italian organized crime. Overall, our results reveal that before confiscation LMFs engage more in LTAV than lawful firms do, whereas after confiscation there is no significant (...) difference between both types of firm. Furthermore, we find that several factors have a significant influence on the probability of engaging in such a practice. This study can enhance further research on the effectiveness of our measures and on the determinants of LTAV in other contexts and for other types of firms. Moreover, these measures can be added to the other direct and indirect methods commonly employed to measure and detect undeclared work representing a primary means of LTAV. Finally, our study allows inferring conclusions on the relation between corporate social responsibility and tax avoidance, suggesting that socially irresponsible firms, such as LMFs, are more likely to adopt this practice. (shrink)

While proponents of sustainability reporting believe in its potential to help corporations be accountable and transparent about their social and environmental impacts, there has been growing criticism asserting that such reporting schemes are utilized primarily as impression management tools. Drawing on Goffman’s self-presentation theory and its frontstage/backstage analogy, we contrast the frontstage sustainability discourse of a sample of large U.S. oil and gas firms to their backstage corporate political activities in the context of the passage of the American-Made Energy and (...) Good Jobs Act, also known as the Arctic National Wildlife Refuge Bill. The ANWR Bill was designed to allow oil exploration within the most sensitive environmental areas in the Refuge and this bill was vigorously debated in the United States Congress in 2005 and 2006. Our results suggest that the firms’ sustainability discourse on environmental stewardship and responsibility contrasts sharply with their less visible but proactive political strategies targeted to facilitate the passage of the ANWR Bill. This study thus contributes to the social and environmental accounting and accountability literature by highlighting the relevance of Goffman’s frontstage/backstage analogy in uncovering and documenting further the deceptive nature of the discourse contained in stand-alone sustainability reports. In addition, it seeks to contribute to the overall understanding of the multifaceted nature of sustainability reporting by placing it in relation to corporate political activities. (shrink)

With the rise of globalization, the debate around free trade versus fair trade and liberalism versus protectionism has become increasingly complicated. At times, the regulations of the World Trade Organization seem to pit developed markets against emerging markets as governments attempt to expand international trade while at the same time protecting local industry. To this end, antidumping measures have been extensively developed as a way to block foreign low-cost goods from entering domestic markets. In response, some exporters have begun to (...) circumvent these antidumping measures using strategies such as transhipment, assembly operations, and slightly modified products. While previous studies have addressed the ethical aspects of antidumping measures, this study will focus on the ethics of circumvention strategies with a special focus on the theories on legal compliance and, specifically, civil disobedience and conscientious evasion. (shrink)

AbstractMultinationals’ aggressive tax lobbying that involves free-riding behaviour and results in disproportional benefits to the disadvantage of other taxpayers, is problematic for several reasons. Such lobbying undermines the legitimacy of tax legislation and has a negative impact on trust in the tax system. Based on Immanuel Kant’s ethical theory, this article first suggests a new normative basis for a moral duty that requires multinationals and their leaders to be transparent about their political activities and tax lobbying. Next, it introduces a (...) new concept of transparency in respect of tax lobbying. ‘Deliberative transparency’ requires multinationals and their leaders not only to be open about their reasons for tax lobbying, but also to deliberate with stakeholders and, maybe even more importantly, to provide evidence supporting their lobbying positions. Finally, based on these new understandings, additional government interventions against aggressive tax lobbying are suggested, for example mandatory stakeholder consultation, reporting on stakeholder attitudes and perception, and evidence-based lobbying requirements. (shrink)

Setting up affiliated companies in tax havens is a legitimate, but ethically dubious, business practice. This study examines the conditions under which emerging business groups tend to use such a business practice. Business groups in emerging economies have been operating in weak institutional environments with substantial government intervention and ineffective market-supporting institutions. Having offshore companies in tax havens enables the groups to bypass some market transaction costs and institutional constraints, and it also provides them the opportunity to evade taxes and (...) hide illegal conduct, such as bribery. Empirical evidence based on a sample of Taiwanese business groups showed that business groups with a higher level of prosocial orientation established fewer offshore companies in tax havens, as manifested by their commitment of resources to establishing nonprofit organizations. In contrast, groups that have higher levels of product and international diversification tend to use this ethically dubious business practice. However, highly internationalized groups are less likely to do so when they have committed substantial resources to prosocial activities. (shrink)