In this article, we examine the empirical association between firm value and CSR engagement for firms in sinful industries, such as tobacco, gambling, and alcohol, as well as industries involved with emerging environmental, social, or ethical issues, i.e., weapon, oil, cement, and biotech. We develop and test three hypotheses, the window-dressing hypothesis, the value-enhancement hypothesis, and the value-irrelevance hypothesis. Using an extesive US sample from 1995 to 2009, we find that CSR engagement of firms in controversial industries positively affects firm (...) value after controlling for various firm characteristics. To address the potential endogeneity problem, we further estimate a system of equations and change regression and continue to find a positive relation between CSR engagement and firm value. Our findings support the value-enhancement hypothesis and are consistent with the premise that the top management of US firms in controversial industries, in general, considers social responsibility important even though their products are harmful to human being, society, or environment. (shrink)

In this critique, Martha Nussbaum argues that our dominant theories of development have given us policies that ignore our most basic human needs for dignity and self-respect.

ABSTRACT:Many scholars and managers endorse the idea that the primary purpose of the firm is to make money for its owners. This shareholder wealth maximization objective is justified on the grounds that it maximizes social welfare. In this article, the first of a two-part set, we argue that, although this shareholder primacy model may have been appropriate in an earlier era, it no longer is, given our current state of economic and social affairs. To make our case, we employ a (...) utilitarian moral standard and examine the apparent logical sequence behind the link between shareholder wealth maximization and social welfare. Upon close empirical and conceptual scrutiny, we find that utilitarian criteria do not support the shareholder model; that is, shareholder wealth maximization is only weakly linked to social welfare maximization. In view of the dubious validity of this sequential argument, we outline some of the features of a superior corporate objective—a variant of normative stakeholder theory. In the second article, we will advance and defend our preferred alternative and then discuss some institutional arrangements under which it could be implemented. (shrink)

Abstract:Work on stakeholder theory has proceeded on a variety of fronts; as Donaldson and Preston (1995) have noted, such work can be parsed into descriptive, instrumental, and normative research streams. In a normative vein, Phillips (1997) has made an argument for a principle of fairness as a means of identifying and adjudicating among stakeholders. In this essay, I propose that a reconstructed principle of fairness can be combined with the idea of consent as outlined in integrative social contract theory (ISCT) (...) to bring about a more normative stakeholder theory that also has ramifications for corporate governance. (shrink)

The conceptual literature increasingly portrays corporate philanthropy (CP) as an old-fashioned and ineffective operationalization of a firm’s corporate social responsibility. In contrast, empirical research indicates that corporations of all sizes, and both in developed and emerging economies, actively practice CP. This disadvantaged status of the concept, and research, on CP, complicates the advancement of our knowledge about the topic. In a systematic review of the literature containing 122 journal articles on CP, we show that this business practice is loaded with (...) unique characteristics, strengths, and weaknesses, and both conceptual and practical challenges that require renewed attention. We identify six interrelated but distinctive research themes in the literature: concept, motives, determinants, practices, business outcomes, and social outcomes. Dividing the literature on CP into six research themes creates an insightful comprehensive map of this intellectual terrain. Moreover, we distinguish among the level at which CP is analyzed: individual, organizational, institutional, or any combination of these levels. The review reveals significant gaps in the knowledge on CP. Most importantly we find that the conceptualization is limited, the research is mostly quantitative, the effects of CP on society are severely under-researched, and there is a lack of multilevel analyses. A detailed future research agenda is offered, including specific suggestions for research designs and measurements. (shrink)

This paper argues that the notion of value has been overly simplified and narrowed to focus on economic returns. Stakeholder theory provides an appropriate lens for considering a more complex perspective of the value that stakeholders seek as well as new ways to measure it. We develop a four-factor perspective for defining value that includes, but extends beyond, the economic value stakeholders seek. To highlight its distinctiveness, we compare this perspective to three other popular performance perspectives. Recommendations are made regarding (...) performance measurement for both academic researchers and practitioners. The stakeholder perspective on value offered in this paper draws attention to those factors that are most closely associated with building more value for stakeholders, and in so doing, allows academics to better measure it and enhances managerial ability to create it. (shrink)

ABSTRACT:We extend the Base of the Pyramid (BoP) poverty-alleviation approach by recognizing the poor as valuable suppliers—specifically of intellectual property. Although the poor possess huge reserves of intellectual property, they are unable to participate in global knowledge networks owing to their illiteracy and poverty. This is a crippling form of social exclusion in today’s growing knowledge economy because it adversely affects their capabilities for advancement at several levels. Providing the poor access to global knowledge networks as rightful participants—as suppliers of (...) intellectual property—leads to poverty alleviation as a result of their increased social inclusion, not only through economic benefits, but also through the poor’s improved well-being as a result of their increased self-esteem and dignity. Using concepts from social network theory, we develop a poverty-alleviation approach to harness and integrate the intellectual property of the poor into global knowledge networks through trust-based partnerships among the poor, non-governmental organizations, and multinational corporations. (shrink)

ABSTRACT:In a world filled with poverty, environmental degradation, and moral injustice, social enterprises offer a ray of hope. These organizations seek to achieve social missions through business ventures. Yet social missions and business ventures are associated with divergent goals, values, norms, and identities. Attending to them simultaneously creates tensions, competing demands, and ethical dilemmas. Effectively understanding social enterprises therefore depends on insight into the nature and management of these tensions. While existing research recognizes tensions between social missions and business ventures, (...) we lack any systematic analysis. Our paper addresses this issue. We first categorize the types of tensions that arise between social missions and business ventures, emphasizing their prevalence and variety. We then explore how four different organizational theories offer insight into these tensions, and we develop an agenda for future research. We end by arguing that a focus on social-business tensions not only expands insight into social enterprises, but also provides an opportunity for research on social enterprises to inform traditional organizational theories. Taken together, our analysis of tensions in social enterprises integrates and seeks to energize research on this expanding phenomenon. (shrink)

In this article, we first provide evidence that Scandinavian contributions to stakeholder theory over the past 50 years play a much larger role in its development than is presently acknowledged. These contributions include the first publication and description of the term “stakeholder”, the first stakeholder map, and the development of three fundamental tenets of stakeholder theory: jointness of interests, cooperative strategic posture, and rejection of a narrowly economic view of the firm. We then explore the current practices of Scandinavian companies (...) through which we identify the evidence of relationships to these historical contributions. Thus, we propose that Scandinavia offers a particularly promising context from which to draw inspiration regarding effective company-stakeholder cooperation and where ample of examples of what is more recently referred to as “creating shared value” can be found. We conclude by endorsing the expression “Scandinavian cooperative advantage” in an effort to draw attention to the Scandinavian context and encourage the field of strategic management to shift its focus from achieving a competitive advantage toward achieving a cooperative advantage. (shrink)

The popular view of shareholder activism focuses on shareholder resolutions and the shareholder vote via proxy statements at the annual meeting, which is treated as a "David vs. Goliath" showdown between the small group of socially responsible investors and the powerful corporation. This article goes beyond the popular view to examine where the real action typically occurs-in the Dialogue process where corporations and shareholder activist groups mutually agree to ongoing communications to deal with a serious social issue. Use of the (...) capitalized word "Dialogue" is intended to distinguish this formal process between corporations and shareholders from all the other forms of dialogue or twoway communication exchanged between a corporation and its stakeholders. The phenomenon of Dialogue between a corporation and dissident shareholders has not been analyzed in the academic literature or in the popular press because it occurs behind the scenes and out of sight from media scrutiny. Yet this is where a great deal of social change initiated by shareholder activists is negotiated. This article contributes both theoretically and empirically to the study of Dialogues between shareholder activists and corporations. We explain how Dialogues occur in the context of the shareholder resolution process and examine two Dialogues that focus on international labor issues in two industries. Then data on Dialogues during the period, 1999-2005, from the Interfaith Center on Corporate Responsibility are analyzed. This research contributes to knowledge about the Dialogue process and the emerging literature on corporation-stakeholder engagement. (shrink)

Abstract:Work on stakeholder theory has proceeded on a variety of fronts; as Donaldson and Preston (1995) have noted, such work can be parsed into descriptive, instrumental, and normative research streams. In a normative vein, Phillips (1997) has made an argument for a principle of fairness as a means of identifying and adjudicating among stakeholders. In this essay, I propose that a reconstructed principle of fairness can be combined with the idea of consent as outlined in integrative social contract theory (ISCT) (...) to bring about a more normative stakeholder theory that also has ramifications for corporate governance. (shrink)

Abstract:In this article we first review the development of the concept of global business citizenship and show how the libertarian political philosophy of free-market capitalism must give way to a communitarian view in order for the voluntaristic, local notion of “corporate citizenship” to take root. We then distinguish the concept of global business citizenship from “corporate citizenship” by showing how the former concept requires a transition from communitarian thinking to a position of universal human rights. In addition, we link global (...) business citizenship to global business strategy and to three analytical levels of ethical norms. Finally, we trace a process whereby global businesses can implement fundamental norms and learn to accommodate to legitimate cultural differences. (shrink)

Tobacco companies have started to position themselves as good corporate citizens. The effort towards CSR engagement in the tobacco industry is not only heavily criticized by anti-tobacco NGOs. Some opponents such as the the World Health Organization have even categorically questioned the possibility of social responsibility in the tobacco industry. The paper will demonstrate that the deep distrust towards tobacco companies is linked to the lethal character of their products and the dubious behavior of their representatives in recent decades. As (...) a result, tobacco companies are not in the CSR business in the strict sense. Key aspects of mainstream CSR theory and practice such as corporate philanthropy, stakeholder collaboration, CSR reporting and self-regulation, are demonstrated to be ineffective or even counterproductive in the tobacco industry. Building upon the terminology used in the leadership literature, the paper proposes to differentiate between transactional and transformational CSR arguing that tobacco companies can only operate on a transactional level. As a consequence, corporate responsibility in the tobacco industry is based upon a much thinner approach to CSR and has to be conceptualized with a focus on transactional integrity across the tobacco supply chain. (shrink)

The popular view of shareholder activism focuses on shareholder resolutions and the shareholder vote via proxy statements at the annual meeting, which is treated as a “David vs. Goliath” showdown between the small group of socially responsible investors and the powerful corporation. This article goes beyond the popular view to examine where the real action typically occurs – in the Dialogue process where corporations and shareholder activist groups mutually agree to ongoing communications to deal with a serious social issue. Use (...) of the capitalized word “Dialogue” is intended to distinguish this formal process between corporations and shareholders from all the other forms of dialogue or two-way communication exchanged between a corporation and its stakeholders. The phenomenon of Dialogue between a corporation and dissident shareholders has not been analyzed in the academic literature or in the popular press because it occurs behind the scenes and out of sight from media scrutiny. Yet this is where a great deal of social change initiated by shareholder activists is negotiated. This article contributes both theoretically and empirically to the study of Dialogues between shareholder activists and corporations. We explain how Dialogues occur in the context of the shareholder resolution process and examine two Dialogues that focus on international labor issues in two industries. Then data on Dialogues during the period, 1999–2005, from the Interfaith Center on Corporate Responsibility are analyzed. This research contributes to knowledge about the Dialogue process and the emerging literature on corporation–stakeholder engagement. (shrink)

This paper provides strong evidence challenging the self-interest assumption that dominates the behavioral sciences and much evolutionary thinking. The evidence indicates that many people have a tendency to voluntarily cooperate, if treated fairly, and to punish noncooperators. We call this behavioral propensity “strong reciprocity” and show empirically that it can lead to almost universal cooperation in circumstances in which purely self-interested behavior would cause a complete breakdown of cooperation. In addition, we show that people are willing to punish those who (...) behaved unfairly towards a third person or who defected in a Prisoner’s Dilemma game with a third person. This suggests that strong reciprocity is a powerful device for the enforcement of social norms involving, for example, food sharing or collective action. Strong reciprocity cannot be rationalized as an adaptive trait by the leading evolutionary theories of human cooperation (in other words, kin selection, reciprocal altruism, indirect reciprocity, and costly signaling theory). However, multilevel selection theories of cultural evolution are consistent with strong reciprocity. (shrink)

The popular view of shareholder activism focuses on shareholder resolutions and the shareholder vote via proxy statements at the annual meeting, which is treated as a “David vs. Goliath” showdown between the small group of socially responsible investors and the powerful corporation. This article goes beyond the popular view to examine where the real action typically occurs – in the Dialogue process where corporations and shareholder activist groups mutually agree to ongoing communications to deal with a serious social issue. Use (...) of the capitalized word “Dialogue” is intended to distinguish this formal process between corporations and shareholders from all the other forms of dialogue or two-way communication exchanged between a corporation and its stakeholders. The phenomenon of Dialogue between a corporation and dissident shareholders has not been analyzed in the academic literature or in the popular press because it occurs behind the scenes and out of sight from media scrutiny. Yet this is where a great deal of social change initiated by shareholder activists is negotiated. This article contributes both theoretically and empirically to the study of Dialogues between shareholder activists and corporations. We explain how Dialogues occur in the context of the shareholder resolution process and examine two Dialogues that focus on international labor issues in two industries. Then data on Dialogues during the period, 1999–2005, from the Interfaith Center on Corporate Responsibility are analyzed. This research contributes to knowledge about the Dialogue process and the emerging literature on corporation–stakeholder engagement. (shrink)

This article aims at showing the need for a sound ethical and anthropological foundation of economics and business, and argues the importance of a correct understanding of human values and human nature for the sake of economics and of businesses themselves. It is suggested that the ethical-anthropological side of economics and business can be grasped by taking Aristotle’s virtue ethics and Amartya Sen’s capability approach (CA) as major reference points. We hold that an “Aristotelian economics of virtues”, connected with the (...) CA’s notion of human richness, can promote the shift to the concept of personhood, and can lead to a more “humanized” business, by fostering human flourishing, the enhancement of human capabilities, and the pursuit of a more humane development for each and every person. (shrink)

Controversial industry sectors, such as alcohol, gambling, and tobacco, though long-established, suffer organizational legitimacy problems. The authors consider various strategies used to seek organizational legitimacy in the U.K. casino gambling market. The findings are based on a detailed, multistakeholder case study pertaining to a failed bid for a regional supercasino. They suggest four generic strategies for seeking organizational legitimacy in this highly complex context: construing, earning, bargaining, and capturing, as well as pathways that combine these strategies. The case analysis and (...) proposed bidimensional model of generic legitimacy-seeking strategies contribute to limited literature on organizational legitimacy in controversial industry sectors. In addition, beyond organizations active in controversial contexts, this study and its implications are useful for individuals and organizations supporting or opposing the organizational legitimacy of organizations in controversial industries. (shrink)

Recently, Amartya Sen and Martha Nussbaum have developed the capabilities approach to provide a model for understanding the effectiveness of programs to help the developing nations. The approach holds that human beings are fundamentally free and have a sense of human dignity. Therefore, institutions need to help people enhance this dignity by providing them with the opportunity to develop their capabilities freely. I argue that this approach may help support business ethics based on virtue. Since teleology has become problematic, virtue (...) ethics has had difficulty giving itself an ultimate justification. By combining virtue ethics with the capabilities approach, it becomes possible to ground virtue ethics on the basis of the existence of human dignity. This frees virtue ethics of the need for a strict teleology, replacing it with the notion that people must work to develop the capabilities of others although those capabilities are not pointed toward a definite goal. I further suggest that by grounding virtue ethics in capabilities, the actions of a virtuous manager become clearer. Rather than simply charging a manager with serving the public, the manager is charged with serving the stakeholders in a way that develops their capabilities. For example, a manager should not just give their employees what is just but must give them the environment and the encouragement to grow and to find fulfillment in their job. (shrink)

We describe the Catholic natural law tradition by examining its origins in the medieval penitentials, the papal decretals, the writings of Thomas Aquinas, and seventeenth century casuistry. Catholic natural law emerges as a flexible ethic that conceives of human nature as rational and as oriented to certain basic goods that ought to be pursued and whose pursuit is made possible by the virtues. We then identify four approaches to natural law that have evolved within the United States during the twentieth (...) century, including the traditionalist, proportionalist, right reason, and historicist approaches. The normative implications of these approaches are discussed in relation to ethical issues in the tobacco industry, ITT under Geneen, the marketing of pharmaceuticals, affirmative action, and bribery. It is argued that Alasdair MacIntyre is correct in claiming that the natural law tradition is superior to the liberal ethics of modern deontology and utilitarianism. (shrink)