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Compare any two articles from the resources and write about how each of the articles covers the relational aspect of the stakeholder association with business. Are the articles similar or different? What would you take from each of these articles and bring to your organization? Provide examples and research to support your thinking.
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Undivided Corporate Responsibility:
Towards a Theory of Corporate Integrity Thomas Maak
ABSTRACT. In the years since Enron corporate social
responsibility, or ‘‘CSR,’’ has become a ubiquitous phe-
nomenon in both research and business practice. CSR is
used as an umbrella term to describe much of what is
done in terms of ethics-related activities in firms around
the globe to such an extent that some consider it a
‘‘tortured concept’’ (Godfrey and Hatch 2007, Journal of
Business Ethics 70, 87–98). Addressing this skepticism, I
argue in this article that the focus on CSR is indeed
problematic for three main reasons: (1) the term carries a
lot of historical baggage – baggage that is not necessarily
conducive to the clarity of the concept; (2) it is the object
of increasing ethical instrumentalism; and (3) given the
multiple ethical challenges that corporations face, and
given the fact that the ‘‘social’’ responsibilities of business
are but one set of corporate responsibilities, a suitable
term would have to be more inclusive and integrative. I
therefore suggests moving instead toward a sound defi-
nition of corporate integrity and aim in this article to de-
velop a working definition by fleshing out ‘‘7 Cs’’ of
integrity: commitment, conduct, content, context, con-
sistency, coherence, and continuity. I then discuss how
these 7 Cs impact our understanding of CSR or, more
broadly, corporate responsibility in general.
KEY WORDS: integrity, corporate integrity, corporate
social responsibility
Introduction
The corporate scandals in recent years have triggered a
broad discussion on the role of business in society, that
is to say, on its legitimacy, obligations and responsi-
bilities. As a result, there has been an exponential in-
crease in corporate social responsibility (CSR)
activities and reporting (for current data see e.g.,
www.corporateregister.com). Responding to their
constituencies corporations have started to present
themselves in much detail as ‘‘good corporate citi-
zens,’’ explaining why and how they care about a
sustainable future and what they do for their
employees, both at home and abroad. And while there
has long been disagreement about the proper role of
business organizations in society (Brickson, 2007),
there is arguably a heightened public awareness and
scrutiny by critical stakeholders as to how corpora-
tions run their businesses and what constitutes legiti-
mate business behavior. In fact, ‘‘CSR’’ has become a
ubiquitous phenomenon in both research and busi-
ness practice. It is used as an umbrella term to describe
much of what is happening in terms of ethics-related
activities in firms around the globe (Scherer and
Palazzo, 2007) to such an extent that some consider it a
‘‘tortured concept’’ (Godfrey and Hatch, 2007), a
label depicting everything and nothing. At the same
time, however, a body of serious academic literature
has emerged (Margolis and Walsh, 2003), exploring
new avenues of research, such as organizational
identity (Brickson, 2005, 2007), sense making pro-
cesses (Basu and Palazzo, 2008), institutional mecha-
nisms (Campbell, 2007), or the political role of the
corporation (Scherer and Palazzo, 2007) in order to
better understand the CSR phenomenon.
Dr. Thomas Maak is Research Director at the Institute for
Business Ethics and Reader in Corporate Responsibility at
the University of St. Gallen (Switzerland) and Visiting
Senior Research Fellow at INSEAD, France, where he co-
directs a research stream on ‘‘Developing responsible leader-
ship for sustainable business’’ within the PwC-INSEAD
initiative on high-performing organizations. He earned his
PhD in Business Ethics, Summa Cum Laude, from the
University of St. Gallen and held visiting appointments at
Columbia University and Georgetown University. Cur-
rently, he is a member of the executive committee of the
European Business Ethics Network EBEN. Among his
many publications is the recent ‘‘Responsible Leadership,’’
published by Routledge in 2006.
Journal of Business Ethics (2008) 82:353–368 � Springer 2008
DOI 10.1007/s10551-008-9891-0
The skepticism vis-à-vis CSR as opposed to
related concepts such as business ethics, corporate
social performance, or stakeholder theory may be
due to its long and varied history and to the fact that
many scholars, in particular in Europe, perceive it as
either too narrow a concept, blurred, or even too
‘‘American,’’ for that matter. In addition, it has been
endorsed by business practice to connote responsible
behavior in increasingly instrumental ways. I will
touch on each of these reasons and present my own
reasoning why ‘‘CSR’’ might indeed become a
‘cul-de-sac’: I argue in what follows that the focus
on CSR is indeed problematic for three main rea-
sons: (1) the term carries a lot of historical baggage –
baggage that is not conducive to the clarity of the
concept; (2) it is the object of increasing ethical
instrumentalism and hypocrisy; and (3) given the
multiple ethical challenges that corporations face,
and given the fact that the ‘‘social’’ responsibilities of
business are but one set of corporate responsibilities,
a suitable term would arguably have to be more
inclusive and integrative. I therefore suggest moving
beyond the CSR label toward a sound definition of
corporate integrity. My aim is to develop a working
definition of corporate integrity by fleshing out the
‘‘7 Cs’’ of integrity: commitment, conduct, content,
context, consistency, coherence, and continuity. I
then discuss how these 7 Cs impact our under-
standing of CSR or, more broadly, corporate
responsibility, and conclude this article by reflecting
on the undivided corporate self.
From ‘‘SR to SCR’’: A short history of CSR
as we know it
The beginning of the debate on CSR is marked by a
landmark study commissioned by the Federal
Council of Churches of Christ in America, entitled
‘‘The social responsibilities of the businessman’’
(1953) and authored by Howard Bowen. Yet, 2
years earlier, in May 1951, Frank Abrams, a top
executive with Standard Oil, published a remarkable
piece of reflection on ‘‘Management’s Responsibil-
ities in Complex World’’ in the Harvard Business
Review, a title that seems even more topical today
than almost 60 years ago. Abrams urged his fellow
managers, i.e., businessmen, to think of themselves
as professionals with an explicit sense of duty not just
to shareholders, employees, and customers, but also
to the public in general: ‘‘(Modern) management
must understand that the general public – men and
women everywhere – have a very deep interest in,
and are affected by, what is going on’’ (p. 32). He
thus introduces an early stakeholder perspective.
Bowen’s study, in contrast, is concerned with
detailing the specific social responsibilities of busi-
nessmen. He argues that businessmen must assume
‘‘a large measure of responsibility if the economic
system of free enterprise is to continue and prosper’’
(1953, p. 5), appealing to enlightened self-interest.
And although Bowen addresses questions such as
‘‘What constitutes good citizenship for a business
enterprise? How does a moral enterprise behave?’’,
or, ‘‘What kinds of business decisions promote the
end of modern society and what kinds detract?’’ his
and Abrams’ early contributions focus on the
responsibilities of individuals within an enterprise or
corporation. Thus, in hindsight the beginning of
CSR is in fact marked by a discussion on individual
responsibilities of managers vis-à-vis their constitu-
encies and society in general. Put differently, CSR
was more like ‘‘SR’’ – social responsibility – and
inextricably bound up with the responsibilities of
executives.
It was not until the 1960s, however, that acade-
mia took serious notice of the emerging interest in
CSR and the level of analysis still continues to be
focused predominantly on the individual manager,
or ‘‘businessman’’ for that matter (as there were
hardly any women in leadership positions). Davis,
e.g., refers to social responsibility as ‘‘businessmen’s
decisions and actions taken for reasons at least
partially beyond the firm’s direct economic or
technical interest’’ (1960, p. 70); and argues that ‘‘the
substance of social responsibility arises from the
concern for the ethical consequences of one’s acts as
they might affect the interests of others.’’ (1967,
p. 46). The social and political revolution of the late
1960s, in particular rising social awareness and eco-
logical concerns, triggered an intensification of the
debate throughout the 1970s. It is Milton Friedman’s
piece on CSR (1970), which first appeared in the
New York Times Magazine, that arguably had the
most sustainable impact. Friedman famously claimed
‘‘that the social responsibility of business is to
increase its profits’’ (and nothing else). He argues
that businesses and corporations have in fact no
354 Thomas Maak
responsibilities (p. 51),
1
in contrast to a corporate
executive (i.e., the individual). As a business person
and ‘‘an agent serving the interests of his principal’’
(p. 53) the executive has direct responsibility to the
principal (also called owner, employer, stockholder),
namely ‘‘to conduct business in accordance with
their desires, which generally will be to make as
much money as possible while conforming to the
basic rules of the society, both those embodied in
law and those embodied in ethical custom.’’ (p. 51).
Yet, as Friedman points out, the executive is
expected to comply with formal responsibilities and
act in accordance with legal and moral standards in
society. Friedman’s much cited argument also marks
a key reference for the latest resistance against ‘‘too
much’’ CSR in terms of redistribution of profits
which ‘‘are not the managers’ to give away’’ (Crook,
2005, pp. 17, 18).
But the 1970s are also marked by serious at-
tempts to define CSR more broadly. The Com-
mittee for Economic Development (1971) e.g.,
came up with a multi-level perspective: the inner
circle consisting of a corporation’s basic economic
responsibilities, the middle level of ‘‘current social
and environmental concerns’’ and the outer circle
of ‘‘emerging responsibilities’’. Moreover, CSR is
defined as ‘‘enlightened self-interest’’ (Steiner,
1971), as what goes beyond obeying the law in
terms of ‘‘what every good citizen does…’’ (Davis,
1973), that is we find references to ‘‘good corpo-
rate citizenship.’’ Eels and Walton (1974) define it
as ‘‘concerns with the needs and goals of society,’’
but we also find multiple references to the ‘‘legal
responsibility’’ of a corporation, to ‘‘being ethical,’’
doing charitable action, or ensuring legitimacy.
Finally, the 1970s are marked by an increasing
interest in the actual social performance of corpora-
tions (CSP) (Carroll, 1979; Sethi, 1975).
It was in the 1980s that the discussion on CSR
became at once more diverse and more theoretical:
scholars inquired about corporate responsibility in
more general, i.e., ethical terms and attempted to
define the moral status of the corporation. It was
asked, ‘‘Can we hold corporations morally
accountable for what they do? And if yes, does this
require treating them as moral persons?’’ After all,
our moral categories are designed by human indi-
viduals for human individuals. Therefore, can we or
should we apply these moral categories to ‘‘corpo-
rate organizations and their ‘acts’?’’ (Velasquez,
2002, p. 17) The discussion around corporate moral
agency (Donaldson, 1982; French, 1984; Velasquez,
1983) marked in some ways the emergence of busi-
ness ethics as an academic discipline. It became clear
that corporations can indeed be considered moral
agents, because they have specific intentions and
decision structures and thus the capacity to engage in
moral decision making, to control their policies,
rules, and actions and even to respond to ethical
criticism, e.g., by external stakeholders. (Donaldson,
1982; French, 1995) Consequently, at the same time
stakeholder theory was developed and put forward
(Freeman, 1984). Moreover, Europe enters the dis-
cussion – a discussion that is propelled by ‘‘dark
cases’’ like Bhopal (Union Carbide) and Exxon
Valdez; the European Business Ethics Network
EBEN is founded in 1987 and, last but not certainly
not least, this journal, the Journal of Business Ethics,
begins its influential work.
The 1990s bring further specialization and first
business ethics theories: global warming and envi-
ronmental concerns shift attention to issues of sus-
tainable development and beyond mere social toward
‘‘triple bottom line’’-performance (Elkington, 1998);
the speed and scope of market globalization lead to
increasing concerns about global business ethics
(De George, 1993; Donaldson, 1989; Maak and
Lunau, 1998). Moreover, Donaldson and Dunfee put
forward an ‘‘Integrative Social Contract Theory’’
(ISCT, 1994; 1999), Ulrich (1997/2008) an ‘‘Inte-
grative Business Ethics’’, Bowie (1998) ‘‘A Kantian
Perspective’’ on business ethics, and the late Bob
Solomon an Aristotelian, i.e., ‘‘Virtue Ethics
Perspective’’ (1993, 1999).
Frederick (1998) divided the first 50 or so years of
CSR into four phases: CSR 1 (1960s/1970s) as
‘‘doing the right thing’’; CSR 2 (1980s), according
to Frederick, is marked by more responsive corpo-
rate behavior toward social responsibilities, i.e.,
‘‘corporate social responsiveness’’; CSR 3 (1990s) is
marked by compliance and Frederick imagines that
CSR 4 (since then) will bring more focus on cos-
mological and spiritual aspects. It remains to be seen
whether or not CSR will indeed become more
holistic in nature. As it stands, it is a stretched out
construct – maybe not a ‘‘tortured’’ one, but cer-
tainly hard to pinpoint. It took Archie Carroll (1999)
e.g., almost 30 pages to revisit 50 years of CSR and
Undivided Corporate Responsibility 355
provide an evolutionary perspective of a ‘‘defini-
tional construct.’’
Interestingly enough, throughout much of the
1980s and 1990s, we find little mention of CSR, or
new CSR theories for that matter. As sketched out
above, we witness specialization and diversification
toward other field of interests. This, however,
changed with Enron. Ever since the fallout of Enron
and the subsequent discussion as to what should be
done to prevent another Enron from happening, i.e.,
with the beginning of this millennium, CSR became
the key term and focus of attention. This perhaps,
because it appealed (and appeals) to increasingly
concerned practitioners as a handy-to-use term, free
from moralizing about the proper role of business
and free from ethical ‘‘heavy-lifting’’ which by
nature dominates the academic discourse in business
ethics; or, maybe because it was early on institu-
tionalized in fora such as ‘‘CSR Europe’’ and was a
term already in use in many firms. But, it is perhaps
also, I would argue, because it developed into
‘‘SCR’’ – strategic corporate responsibility.
By ‘‘strategic corporate responsibility’’ I wish to
connote the increasingly instrumental use of CSR as
a strategic positioning device in the post-Enron
environment. In order to succeed in an environment
of contested values (Diermeier, 2006) CSR is
‘‘used’’ for reputational gains; CSR strategy in and of
corporations is seen as a means to gain competitive
advantage on ‘‘the market for virtue’’ (Vogel, 2006).
Not surprisingly, the number of (more or less glossy)
CSR reports has risen exponentially in recent years,
2
demonstrating just how responsible corporations
behave and that they should be trusted as good cit-
izens around the world. I do not mean to imply that
what gets published in these reports is without
substance. On the contrary, there are many corpo-
rations which take the CSR challenge very seriously,
that is as a challenge to their ethical legitimacy and
try to act, and react, accordingly. Yet, the way CSR
has been transformed into ‘‘SCR’’ since the begin-
ning of the millennium leaves the door wide open
for moral hypocrisy (Bateson et al., 2006), i.e., it may
motivate corporations to appear moral (by way of
CSR) without bearing the costs (and consequences)
of actually being moral. In other words, if CSR
deteriorates to mere PR then it becomes shallow and
ultimately a useless concept – at least in ethical terms.
Practically speaking, CSR is instrumentalized to
benefit the corporation; theoretically speaking, as
‘‘instrumental theory’’ (Donaldson and Preston,
1995), it sets out to describe what will happen if a
firm uses CSR as a strategic tool. Thus, CSR as strategic
corporate responsibility ranges from risk and reputation
management (Fombrun, 1996; Jackson, 2004) and
measures to enhance client focus and benefits (Kotler
and Lee, 2005) to initiatives in which ‘‘social and
business benefits are large and distinctive’’ (Porter
and Kramer, 2006). Consequently, Burke and
Logsdon (1996, p. 496) define CSR as strategic
‘‘when it yields substantial business-related benefits
to the firm.’’ Moreover, Porter and Kramer (2006)
as leading proponents of instrumental theory argue
that ‘‘the essential test that should guide CSR is not
whether a cause is worthy but whether it presents an
opportunity to create shared value’’ (p. 84). Con-
sequently, corporations should engage in ‘‘truly
strategic CSR’’; ‘‘it’s about choosing a unique
position – doing things differently from competi-
tors…’’ (2006, p. 88). In other words, CSR is no
longer considered a social or even a moral obliga-
tion of a corporation to society at large, but a
mere market opportunity to achieve competitive
advantage.
Moving beyond CSR
To recapitulate, so far I have presented arguments to
support two main reasons why CSR may be an
increasingly ill-fitted term to connote the responsi-
bilities of corporations. One, given the long and
varied history of CSR, as laid out above, the term
does not and cannot represent more than a rather
vague ‘‘umbrella term’’ for ethics-related issues in
corporations and the connected academic disciplines:
corporate social responsibility and performance,
business ethics, corporate citizenship, stakeholder
theory, and even sustainability. As such, it is the
object of justified criticism from scholars in these
disciplines and arguably too narrow a label to be
used. If applied, it seems appropriate to connote the
social responsibilities of businesses and executives. In
this sense, early conceptualizations were more con-
cise than the current use of the term. Two, as a result
of being instrumentalized in terms of ‘‘strategic
CSR,’’ or ‘‘SCR,’’ it may develop into mere ethical
instrumentalism and thus – from an ethical point of
356 Thomas Maak
view – be the object of skepticism and rejection.
Either way, ‘‘CSR’’ seems ill-fitted to serve as an
‘‘umbrella term.’’
There is a third reason still to be considered and it
ties into the diversification of what started out as
CSR into academic disciplines: business ethics,
stakeholder theory, etc. I would argue that the
emergence of these fields of interest and ultimately
disciplines in their own right is a reflection of an
increasingly complex market environment and the
challenges it entails – today more so than in the past.
Corporations are faced with social, environmental,
ethical, humanitarian, and political challenges – and
they need to define who their stakeholders are and
how to assess their claims. There is a widespread
agreement that the stakeholder framework has
proved useful in the analysis of the strategic and
normative challenges organizations face and that
good stakeholder relationships are key to organiza-
tional viability and success (Donaldson and Preston,
1995; Freeman, 1984; Post et al., 2002; Wheeler and
Sillanpäa, 1997). Still, there remain both theoretical
and practical challenges with respect to stakeholder
salience (Jones et al., 2007; Mitchell et al. 1997), and
to evaluate and balance conflicting claims of multiple
stakeholders. Moreover, in a global stakeholder
society moral dilemmas are almost inevitable and this
raises questions on how to solve or even reconcile
them. E.g., how can one adhere to basic moral
principles while respecting cultural differences and
different developmental standards? (De George,
1993; Donaldson, 1996). What needs to be done to
secure ‘uncompromising integrity’ (Moorthy et al.,
1998) on a global level, while leaving leeway for
discretion in matters of particular corporate values
and culture-specific decision making? In meeting
these and related moral challenges, firms have to make
sure that their actions are ethically sound, e.g., by
reconciling cross-cultural dilemmas and knowing
when different is different and when different is
simply wrong (Donaldson, 1996). Moreover, bal-
ancing different stakeholder claims, including those
of the natural environment, future generations and
less privileged groups ‘at the bottom of the pyramid’
(Prahalad, 2005) creates social, environmental, and
humanitarian challenges. While many corporations
have adopted a ‘triple bottom line’-approach
(Elkington, 1998) and have started to integrate social
and environmental considerations into their values
creation, few have yet taken on humanitarian
challenges such as poverty, hunger, or diseases.
These miseries still prevent large parts of the human
community from participating in the global econ-
omy, let alone benefiting from it. The actual chal-
lenge at hand is twofold – on the one hand to ensure
active global corporate citizenship, meeting the
political challenges inherent to the 21st century cor-
poration; on the other hand to actively engage in less
privileged regions of the world by building and
supporting human capabilities (Nussbaum and Sen,
1993) and by assisting in eradicating world poverty.
All considered, these challenges are not just
practical challenges to be faced, but also the object of
intensive academic debate and find their reflection in
particular theoretical streams and disciplines: business
ethics in general, as an established form of applied
ethics, is concerned with systematic reflection on
moral challenges in the business world; sustainability
research elaborates on the environmental challenges
businesses face; research on corporate citizenship or on
‘‘global business citizenship’’ (Wood et al., 2006) is
concerned with the role of the corporation as a
political actor (Scherer and Palazzo, 2007) and thus
the political challenges in today’s market environ-
ment; CSR research in more specific terms, that is,
in its original sense, deals with social challenges in
business; and recently emerging research on ‘‘busi-
ness as an agent of world benefit’’ (BAWB, 2006)
and ‘‘business solutions to poverty’’ (Lodge and
Wilson, 2006; Prahalad, 2005; Rangan et al., 2007)
is focusing on the humanitarian challenges and
proposing solutions as to how poverty could be
eliminated.
Given the scope and diversity of all these chal-
lenges and the richness of research domains a proper
‘‘umbrella term’’ would certainly need to be more
inclusive, integrative and holistic than the CSR
label. Obviously, CSR is but one important domain
among multiple domains of interest and relevance.
Yet, given that these domains are connected to each
other, that all of them deal with ethical challenges in
business, broadly defined, that in fact meeting these
challenges requires some kind of integration work,
we suggest using corporate integrity as an umbrella
term instead. Still, since there are ‘‘many faces of
integrity’’ as Audi and Murphy (2006) argue, and
since both integrity and corporate integrity are far
from being well defined, we need to establish a more
Undivided Corporate Responsibility 357
profound conceptual basis in order to support our
choice of terms. I will do so by clarifying, firstly, the
meaning of integrity and thus the different ‘‘faces’’
and levels of integrity, and secondly, by fleshing out
in more detail the 7 Cs of corporate
integrity.
Integrity
According to Webster’s New World Dictionary
integrity means ‘‘the quality or state of being
complete; unbroken condition; wholeness; en-
tirety,’’ and ‘‘the quality or state of being of sound
moral principle; uprightness, honesty, and sincerity.’’
Indeed, both meanings correspond with our com-
mon perception and understanding of the term. The
first thought that comes to our mind usually relates
to a person of integrity: someone has integrity if she
acts in accordance with important moral principles,
does so in a coherent and consistent way, over time,
i.e., on an ongoing basis, especially when the going
gets rough. ‘‘Integrity involves fidelity to one’s
endorsements’’ (Calhoun, 1995, p. 244), all impor-
tant endorsements, i.e., or it would not be integrity
– an unbroken commitment to uphold a recogniz-
able set of moral principles (McFall, 1987, p. 15).
What is obvious from this meaning of integrity – as
moral integrity – is that wholeness, entirety, an
unbroken condition are part of it. Thus, the idea of
wholeness, of being complete, is an essential ingre-
dient of moral integrity.
The notion of integrity, then, implies a state of
being ‘‘undivided’’, an integral whole in the basic
sense ‘‘of being of sound moral principle.’’ In order
to achieve this state, however, certain requirements
have to be met: First, ‘‘being of sound moral prin-
ciples’’ obviously requires a commitment to some
desirable moral principles such as honesty, respect, or
sincerity. Yet, these principles cannot be just some
principles – principles which I value highly, e.g., but
need to be the right principles (Calhoun, 1995,
p. 248), or they would not be desirable or recog-
nizable by others. And, ‘‘we expect persons
of integrity not only to stand up for their most
deeply held and highly endorsed commitments, but
to treat all of their endorsements as ones worthy of
being held by a reflective agent’’ (ibid, p. 245).
Remember, ‘‘wholeness’’ and ‘‘being undivided’’
are essential for the achievement of integrity. Thus,
the element of commitment alone is already full of
requirements: persons of integrity need to commit
themselves to the right moral principles. This com-
mitment is not just some internal state but is eval-
uated by others; i.e., integrity is ascribed and
therefore, despite being a unique individual state, a
relational phenomenon. Moreover, commitment
implies that a ‘‘person of integrity is willing to bear
the consequences of her convictions, even when this
is difficult, that is, when the consequences are
unpleasant’’ (McFall, 1987, p. 9). In other words, if
upholding moral principles gets tough, if it demands
concessions or gets costly, it is still required that I act
in compliance with these principles, given that act-
ing morally can reasonably be expected of me.
Integrity, ‘‘standing for something’’ (Calhoun,
1995), implies unconditional commitment (McFall,
1987, p. 11) to do the right thing and to do things
right; whether it suits me or not, or whether it pays
or not, is irrelevant.
Second, and with respect to doing the right thing,
integrity requires responsible action or, in other
words, moral conduct in line with my integrity
requirements; e.g., by acting in a socially and envi-
ronmentally responsible manner, by fulfilling my
political obligations, and so on. Thus, thirdly, it is
not only important that I act responsibly, but also
what I do in terms of content-related requirements is
equally relevant. Fourth, given that integrity is a
relational phenomenon, it is not only at stake in
relation to some constituencies, say to friends or
shareholders, but in relation to all stakeholders.
Integrity ascription, although predominantly hap-
pening in close(r) relationships, depends on consis-
tent integrity views of all relevant others, that is, all
those with whom I have a (more or less) regular
relationship. As Brown puts it, ‘‘for individuals to
have real integrity they must be conscious of the
relationships in which they live.’’ (2005, p. 6). And,
from an organizational point of view, we may add
that integrity ‘‘is one of the key life-sustaining prop-
erties in the relational nature of organizational exis-
tence’’ (Srivastva et al., 1988, p. 5).
Fifth, and connected to both commitment and
conduct, integrity requires consistency of words and
deeds. It demands that we adhere in consistent ways
to ethical principles by aligning what we do and
what we say (Brown, 2005, p. 5). In other words, a
person (or a corporation) is ascribed integrity only if
358 Thomas Maak
others have reason enough to believe that what this
person (or corporation) does (and says) is credible
and authentic – if she does what she says and talks
openly and honestly about what she does: integrity
requires walking the talk.
Moreover, sixth, a key property of integrity is
clearly coherence of principles and action. In fact, most
definitions would probably list coherence as integ-
rity’s main feature as it connotes the state of being
‘‘undivided’’ most accurately and with respect to at
least two main directions: firstly, as mentioned al-
ready, coherence between (moral) principle and
(moral) action is of paramount importance. To give
an example: to value and respect basic human rights,
such as the right not be harmed, implies that one
does so irrespective of the conditions, be they
favorable or unfavorable, i.e., unconditionally. Let
us say, I intend to do business in a South-Asian
country that does not have democracy yet; say, for
argument’s sake, that this would require me to work
with ‘‘state-controlled’’ suppliers who have been
known in the past to have violated human rights
repeatedly; in order to ensure my integrity I would
have two basic options: one, to convince these
suppliers not to harm any of their workers anymore
and ensure their compliance; and two, to pull out of
that country. In any case, integrity requires ‘‘sticking
to one’s principles’’, moral or otherwise (McFall,
1987, p. 7), whatever business opportunity may
come along.
Secondly, coherence also implies the alignment of
internal and external coherence. Internal coherence
describes according to McFall (1987, p. 8) the way in
which one’s principles are held, how one may act
given these principles, but also how one may be
motivated in acting on them. In other words, to
guard one’s integrity requires not just doing the right
thing in line with basic moral principles to which
one has subscribed; internal coherence is only given
if the agent does so for the right reasons, i.e., with
the right intention. Thus, if I prevent human rights
violations just because NGOs watch over what I do
and because it is expected by society and serves my
reputation, if I engage in responsible behavior just
because it (currently) pays, I compromise my
integrity. This may not be obvious to others, at least
not right away; yet, it undermines my integrity
nonetheless and may lead eventually to a loss of
reputation. Call this the inner condition of integrity
or simply good character requirement. External
coherence on the other hand connotes the visible
part of behavior ensuring integrity. It comprises,
from a conceptual point of view, what others de-
mand from me in terms of getting my principles and
my action right: that I follow the right principles, do
what is worth doing, consistently and in relations to
all my constituencies, even ‘‘when the consequences
are unpleasant’’ (McFall, 1987, p. 9). In sum,
integrity or wholeness ‘‘has as much to do with one’s
coherent connections and relationships with other
people and institutions as it does with one’s relation
to oneself.’’ (Solomon, 1999, p. 39).
And finally, seventh, integrity requires continuity.
We may, e.g., applaud the whistleblower who shows
moral courage in making public what ultimately are
symptoms and outcomes of an ethically deficient
organization. The whistleblower may have tried to
stop the organization from ethical wrong-doing but
– as an isolated upright organization citizen – could
not succeed. Putting oneself on the line to guard
what is (morally) right usually takes not only a lot of
courage, but may even have unpleasant conse-
quences, such as mobbing and exclusion. Now, does
all this mean that the whistleblower is a person of
integrity? Not necessarily; he may have taken the
step in order to become a person in the spotlight.
My point is, to ascribe integrity to a person requires
that we have known this person over a certain
period of time so that we could observe if she acted
‘‘with integrity,’’ or more precisely, in line with
integrity requirements. Such continuity, in particular
when the going gets rough and the person has
mastered ‘‘integrity tests,’’ is a necessary element of
integrity.
All considered, integrity is obviously more than
just a preferable virtue among others. Audi and
Murphy (2006) have argued that integrity should be
considered an ‘‘adjunctive virtue’’ rather than a
substantive virtue in its own right. It is ‘‘adjunctive’’
in the sense that it integrates several desirable moral
qualities. While I agree with the authors that
integrity differs from virtues like, say, benevolence
or honesty, by being less concise, or ‘‘substantive’’;
‘‘adjunctive’’ seems far too weak a term to describe
integrity as laid out above. Rather, I agree with Bob
Solomon, who contends that integrity ‘‘is not in
itself so much a virtue as it is a synthesis of the
virtues’’ (1999, p. 38). Thus, to call it a ‘‘super’’ or
Undivided Corporate Responsibility 359
‘‘master virtue,’’ aimed at ensuring unified moral
agency, moral integration and ultimately an undi-
vided moral self, reflects better what it stands for and
what is at stake. It also ties into the conclusion that
both McFall (1987) and Calhoun (1995) draw from
their in-depth inquiry into the nature of integrity.
McFall argues that integrity is in fact ‘‘a personal
virtue granted with social strings attached’’ (p. 11),
highlighting the social and ascriptive nature of
integrity; Calhoun takes her argument a step further
by stating that it is both a social trait and a social virtue
– indicating the social nature of integrity.
To summarize, all of the above conditions –
commitment, conduct, content, context, consis-
tency, coherence, and continuity – need to be met
and aligned to ensure integrity. Thus, integrity
obviously requires integration, active moral agency.
Complex as it may be, to master integrity requires
integrative efforts to ensure alignment of intention
and purpose (commitment), conduct, responsibilities
(content), relationships both distant and close (con-
text), words and deeds (consistency), principles and
action as well as internal and external conditions
(coherence), on an ongoing, life-long basis (conti-
nuity). Yet, the relational nature of integrity is such
that despite one’s continuing efforts to achieve this
state of wholeness, it remains difficult as ‘‘one’s
integrity is implicated in everything one does’’
(Calhoun, 1995, p. 242).
Toward a theory of corporate integrity
Until now, in defining the ‘‘7 Cs’’ of integrity, my
level of analysis was pre-dominantly the individual
person. However, my aim in this article is to flesh
out in more detail a working definition of corporate
integrity. This raises the question ‘‘Can we apply the
same conditions and integrity requirements to cor-
porations and individuals?’’ The answer is yes, for
the following reasons: one, as argued above, the
discussion on corporate moral agency (Donaldson,
1982; French, 1984; Velasquez, 1983) made clear
that corporations can indeed be considered moral
agents because they have specific intentions and
decision structures and thus the capacity to engage in
moral decision-making, to control their policies,
rules, and actions as well as to respond to ethical
criticism, e.g., by external stakeholders (Donaldson,
1982; French, 1995). Therefore, as Moore (1999,
p. 339) notes, the acceptance of corporate ‘‘moral
agency’’ is not only plausible but in fact is a reflec-
tion of ‘reality’. Moreover, Velasquez argues that ‘‘it
makes perfectly good sense to say that a corporate
organization has moral duties and that it is morally
responsible for its acts’’ (2002, p. 18), if only in a
secondary sense, with individual decision makers as
primary moral agents. Thus, given the widespread
agreement that there is in fact corporate moral
agency and given the complex demands of ensuring
integrity it is only logical to work out a notion of
corporate integrity. Two, the multiple ethical chal-
lenges of today’s corporation require integration, i.e.,
concerted efforts to align corporate principles and
practice, to engage stakeholders, to ensure ethically
sound issue management and certainly also to align
words and deeds. In other words, they require integ-
rity. And three, even if we took just the non-moral
sense of the word – ‘‘wholeness,’’ i.e., if we left out
the moral requirements of integrity, the term ‘‘cor-
porate integrity’’ could still be employed, at least in a
metaphorical sense.
Moreover, the term has been used occasionally in
recent years: Audi and Murphy (2006) give an
overview of the many uses of the term ‘‘integrity,’’
including references in discussions on business ethics,
although without special mention of the corporate
level. Still, they note that the term ‘‘is quite possibly
the most commonly cited morally desirable trait’’ in
the world of business; ‘‘but integrity is used in
widely differing ways…’’ (p. 3). However, in light of
these many uses they are more concerned with
defining its character as an ‘‘adjunctive virtue,’’ not
with its meaning in corporate terms. Bob Solomon
(1999) has given it, as already mentioned, a promi-
nent role as a ‘‘synthesis of the virtues.’’ Yet, his
Aristotelian business ethics approach is naturally
centered on the individual and thus more concerned
– as one book title suggests – with the question
‘‘how personal integrity leads to corporate success.’’
Srivastva et al. (1988) highlighted early on the sig-
nificance of ‘‘executive integrity,’’ as did Watson
(1991) by presenting insights from America’s CEOs.
Becker (1998) inquired into the role of integrity in
organizations in search of an ‘‘objective code of
morality’’ while Petrick and Quinn (2001) have
focused on leadership integrity as a ‘‘strategic asset.’’
Koehn (2005) shared their intuition by arguing that
360 Thomas Maak
integrity in general, properly understood, could
function as a ‘‘business asset.’’ What all these sources
have in common is their more or less explicit focus
on individual integrity and its relevance in the world
of business.
The actual idea of organizational or corporate
integrity was first put forward explicitly by Paine
(1994). She contrasted the pre-dominant compliance
focus in (American) business ethics with an integrity
perspective and sketched out key features of an
‘‘integrity strategy’’ as a way of pro-active assurance
of responsible conduct, in contrast to a legally dri-
ven, reactive compliance focus. Among other sour-
ces are Thorne LeClair et al. (1998); they however
mix both by offering a ‘‘blueprint for compliance’’ as
‘‘integrity management’’. An explicit integrity
management system is at the core of Kapteins (1999,
2003) and Kaptein and Wempes (2002) contribu-
tions. Similarly, Kennedy-Glans and Schulz (2005)
provide an ‘‘integrity toolkit.’’ Yet, while all these
contributions underscore the significance of corporate
integrity, they miss out on one important element,
namely providing a sound definition of corporate
integrity that pays tribute to both the moral and the
holistic meaning of the term in light of the ethical
challenges in and around organizations. Paine has
certainly popularized the term but her focus is on
aligning ethics and strategy, not on integrity as
wholeness; and Kaptein and Wempe (2002) should
be given credit for highlighting the importance of
aligning principles and action by way of ‘‘integrity
management.’’ Yet, their first chapter is entitled
‘‘Why business ethics?’’, i.e., although integrity is a
focus of their inquiries, their main focus is on busi-
ness ethics in general and management tools in
particular (Kaptein, 1999, 2003), not on a particular
theory of corporate integrity. Thus, while these
authors have prepared the path toward integrity, I
argue here that we can follow that path properly and
successfully – and achieve true integrity (morally and
holistically) – only if we establish a sound under-
standing of corporate integrity in its own right.
Brown (2005) has come close to doing so by
suggesting that corporate integrity consists of five
dimensions: a cultural dimension in terms of open-
ness and inclusive behavior, an interpersonal
dimension depicting ‘‘relational wholeness,’’ orga-
nizational integrity ‘‘as pursuing a worthwhile pur-
pose,’’ ‘‘social integrity as civic cooperation,’’ and
ultimately natural or environmental integrity as
‘‘natural prosperity,’’ with leadership as the integra-
tive force. Thus, he emphasizes commitment
(‘‘worthwhile purpose’’), content (social and envi-
ronmental issues) and context of corporate integrity
(‘‘relational wholeness’’). However, while he
advances our understanding regarding corporate
integrity he mixes conceptual and content related
issues, i.e., loci of morality and issues of morality, and
therefore fails to provide a consistent and coherent
definition of corporate integrity.
But still, his approach illustrates that in seeking to
ensure integrity in business we are confronted with
different levels of integrity: the level of the individual
person and thus individual integrity – I refrain from
calling it ‘‘executive integrity’’ (Srivastva et al., 1988)
because it ought to include all individuals, executives
and employees alike; the level of the organization and
thus corporate integrity, but also the level of stakeholder
integrity, broadly defined as the integrity of all indi-
viduals or groups who have a legitimate interest in,
are affected by or could be affected by the activities of
both the corporation and the members of the cor-
poration (Freeman, 1984). These interacting but
different levels of integrity create a particular ‘‘chal-
lenge of wholeness’’ (Kolb, 1988, p. 70): although
these levels are not competing for their integrities,
there may be instances when individual integrity and
organizational integrity conflict with each other, e.g.,
in cases when ethical principles and profit motives
collide, up to a point when the individual’s last resort
is to blow the whistle to save her own integrity. As
for external stakeholders, this integrity tension might
occur more frequently, given that they may value
different things in life, expect the corporation to be
less profit- and more community-oriented, etc.
Moreover, in case of (doubtful) suppliers in devel-
oping countries who operate with production
methods that are harmful to their workers (as it was
the case with the sports apparel maker Nike), or use
harmful substances (as in the case of the toymaker
Mattel), supply chain integrity becomes a major chal-
lenge for the corporation in order to ensure its own
corporate integrity. Thus, there is an obvious need to
synchronize the integrities of all moral agents to the
extent that they become conducive to each other and
do not interfere with each other, e.g., by aligning
individual and corporate principles, by aligning
suppliers to one’s own integrity requirements or by
Undivided Corporate Responsibility 361
creating common ground and purposeful partner-
ships with critical stakeholders.
Figure 1 depicts the 7 Cs of corporate integrity in
a circular way; the outer circle indicates the constant
need for integration.
Commitment
As discussed above, commitment requires that the
moral agent is committed to a ‘‘worthwhile pur-
pose’’ (Brown, 2005) and important moral princi-
ples, i.e., not some principles or the company’s own
principles, but the right principles, even when
‘‘sticking to them’’ may get unpleasant. As a basic
condition for corporate integrity this implies that the
company’s principles are aligned to the basic moral
principles of society and basic human rights more
generally. In a (global) stakeholder society the
‘‘rightness’’ of a company’s principles is ultimately
not determined by its management or shareholders
but by the critical public in general; it is determined
in public deliberation (Scherer and Palazzo, 2007).
Moreover, in the light of growing stakeholder
expectations with respect to the various responsi-
bilities of corporations beyond its core economic
purpose – social, environmental, civic, and human-
itarian – it is essential that corporations make sure
that their purpose is indeed considered worthwhile;
not just by shareholders but by all stakeholders.
Thus, with ‘‘values everywhere’’ (Diermeier, 2006,
p. 156) and growing expectations to deliver on these
values it becomes crucial for a corporation to show
and prove its commitment to a worthwhile purpose
and the ‘‘right’’ principles. The quest for corporate
integrity, then, is at least to some extent an ‘‘ethics
competition’’: corporations compete on having the
right values and principles. Not surprisingly, we
witness an exponential increase in CSR reporting.
Yet, success, i.e., ascription of integrity, also depends
on the uncompromising commitment to these basic
principles. As discussed, integrity is not ascribed for
having ‘‘sunshine ethics,’’ e.g., supporting human
rights when it does not implicate the economic
bottom line, but for sticking to one’s core principles
even when it gets ‘‘costly,’’ e.g., by pulling out of a
country where human rights violations occur or by
not going there in the first place, thereby foregoing
‘‘economic opportunities’’ but saving
one’s integrity.
Conduct
As noted above, integrity requires responsible action
or, in other words, moral conduct in line with one’s
integrity requirements. It is with respect to respon-
sible conduct that ‘‘integrity management’’ or
‘‘managing with integrity’’ comes into play. To
ensure corporate integrity professional ways of
designing, steering, and controlling integrity related
matters in a corporation need to be implemented.
With respect to wholeness (i.e., by definition) this
management approach has to be holistic or it would
not be integrity management. Thus, it requires
thorough and systematic endeavors to find and close
possible loopholes – integrity gaps – that could
endanger the integrity of a corporation. Again, to
give an example related to supply chain integrity:
companies like Nike or Mattel have worked hard to
build both their images and reputation. Yet, both
have suffered considerably due to lapses in their
particular supply chains: Nike, because their incen-
tive system was not aligned with the company’s
commitment to social and human rights (Maak and
Ulrich, 2007, p. 271); Mattel because they were
apparently unable to ensure that their Chinese
suppliers do not use harmful substances such as lead-
based colors in the toy-making process. With out-
sourcing and a vastly progressing division of labor in
the global economy companies like Nike and Mattel
Continuity
Coherence
Consistency
Context
Content
Conduct
Commitment
Corporate
Integrity
Integration
Figure 1. The 7 Cs of Corporate Integrity.
362 Thomas Maak
need to ensure that they close all potential integrity
gaps. A company’s integrity is not only implicated by
everything it does, but also and more importantly by
what it does not do. Each and every integrity gap can
endanger corporate integrity as such – because it
implicates ‘‘wholeness.’’ It is therefore imperative
that a corporation makes sure, e.g., by implementing
an integrity management system (Kaptein, 1999;
Kennedy-Glans and Schulz, 2005; Paine, 1994), that
individual and corporate conduct are aligned, that it
supports pro-active action to prevent any gaps from
arising and that it has principles-based processes in
place that ensure ethically sound behavior in all
walks of corporate life.
Content
The third ‘‘C’’, content, connotes the fact that it is not
only important that a corporation (or the individuals
in that corporation) act responsibly, but also what it
does. Coming back to the aforementioned ethics
challenges, the ‘‘what’’ relates, broadly speaking, to
social, environmental, civic and humanitarian values
creation. Integrity requires both addressing these
challenges and the inherent stakeholder expectations
and fulfilling any corporate responsibilities derived
from these challenges. ‘‘Standing for something’’
(Calhoun, 1995) in social terms means living up to
the corporate social responsibilities and meeting
certain basic social expectations of stakeholders and
communities at large, e.g., by providing a safe and
decent workplace and social benefits for employees,
supporting life-work balance programs, enabling an
inclusive work environment by respecting cultural
differences, establishing kindergartens, etc.; but also
by being socially responsive to the need of commu-
nities and society at large. In terms of the natural
environment companies are arguably expected to be
part of the solution to global warming and the
environmental crisis, and not part of the problem.
Thus, sustainability in processes and practices and the
idea of environmental stewardship in principle be-
come a focal point for corporate value-creation.
Moreover, there is widespread agreement that cor-
porations have civic obligations. Whether or not
corporate citizenship is a mere metaphor or if it in
fact represents the political status of the corporation is
a different debate (see e.g., the BEQ issue 1/2008).
The fact is that corporations are part of communal life
and they contribute to communities in which they
operate and they are expected to act as ‘‘good global
citizens,’’ both at home and abroad. Lastly, as dis-
cussed in the beginning, there are growing expecta-
tions vis-à-vis larger, multinational corporations to
assist and take on a more active role in fighting some
of the world’s most pressing public problems such as
diseases (HIV Aids, etc.), poverty, and hunger. What
we witness, then, are emerging humanitarian
responsibilities. In addition, we should not forget to
mention a corporation’s basic economic responsi-
bilities; all of which require integration work,
alignment and an active, integrity-focused issue
management. Today’s corporations are expected to
engage in multiple values-creation; and integrity
ascription depends on how they deliver on what can
reasonably be expected. Thus, it is not expected that
they transform into social organizations; however,
making profits is certainly not sufficient to ensure
one’s integrity.
Context
Context, as a basic condition for integrity, is well
defined through ‘‘relational wholeness’’ (Brown,
2005, p. v). Corporate integrity as a relational phe-
nomenon requires engaging responsibly with, and
responding to, all stakeholders. It is not only at stake
in relation to some constituencies, but in relation to
all constituencies. Therefore, just like individuals, for
corporations to have true integrity they must be
conscious of all relationships in which they partici-
pate, engage with all their constituencies in
responsible ways, meet their reasonable expectations
and be considered a partner (and not a burden) in
ensuring a sustainable future. Practically speaking,
what is required is an ethically sound stakeholder
engagement and management; one that is not driven
by instrumentalism (Jones, 1995), but takes it as a
given to engage with others (i.e., internal and
external stakeholders) irrespective of the beneficiality
of such engagement, basing their commitment on
mutual recognition and good reasons. ‘‘Relational
wholeness’’ requires sound relating as well as being
consciously embedded in one’s whole range of
relationships; internally, externally, and with socie-
ties at large (Maak and Pless, 2006b).
Undivided Corporate Responsibility 363
Consistency
Moreover, corporate integrity requires consistency of
words and deeds. It demands that a corporation ad-
heres to ethical principles in consistent ways, in par-
ticular with respect to aligning talk and walk. Tying
into integrity commitment this implies being honest
and sincere about the corporation’s CSR achieve-
ments, but also about its failures, and not using CSR
reports as a ‘‘selling device’’ but as an instrument for
authentic representation and stakeholder dialogue. A
corporation is ascribed integrity only if stakeholders
have reason enough to believe that what the corpo-
ration did, or does, and what it says is credible and
authentic. Yet, authenticity is attributed only if both
talk and walk are aligned and if over time no credibility
gaps are detected (Maak and Ulrich, 2007, pp. 22,
122). Corporations need to be aware that window-
dressing, even in small, unintended, PR-driven
amounts, can be a serious threat to their integrity.
Again, one’s integrity is implicated by everything one
does (Calhoun, 1995, p. 242); yet, it is already on the
line, compromising all other efforts, if manipulation or
even hypocrisy come into play. It should be noted,
then, that keeping low profile is certainly a better
‘‘integrity strategy’’ than raising one’s profile without
substance (i.e., action) to support it.
Coherence
As for coherence between (moral) principles and (moral)
action, we noted earlier that this is a fundamental
integrity requirement. It is imperative that a corpo-
ration sticks to all the principles it is committed to, in
particular to the ethical principles as laid down in the
code of conduct, values or mission statement. It is
expected that these principles are aligned to those of
society, that they fulfill basic moral requirements and
promote standards of common decency. Again,
integrity requires a corporation to make sure that it
subscribes not just to some principles it considers
important, say to fairness and profit maximization, but
to the right principles. In other words, integrity
ascription depends on synchronizing, or rather bal-
ancing, of a company’s purpose and society’s princi-
ples. Moreover, it depends on coherent action, i.e.,
corporate conduct in line with the company’s prin-
ciples and thus with what it stands for.
To pick a well-known example: when James
Burke, the former CEO of the U.S. health company
Johnson & Johnson, decided to pull all Tylenol
bottles off the shelves in North America, although
cases of poisoning seemed to be restricted to the
greater Chicago area, it was not only an act of
responsible leadership (Maak and Pless, 2006a), but
in line with the company’s principles. These state
that customers, that is the health (and safety) of
customers, come first and shareholders last. Thus,
J&J was acting with integrity. Giving in to economic
considerations by restricting the recall to certain
areas, not knowing if the health of all customers
would be ensured, was simply never an option –
given the company’s focus on values and integrity.
Such coherent behavior, in particular in defining
moments, demonstrates to stakeholders that a com-
pany is serious about its commitments to certain
principles, that it goes out of its way to make sure
that people and the organization stick to these
principles and that ‘‘customer focus’’ means focusing
on customers desires and needs, not on their money.
As a consequence, trust and integrity ascription fol-
low, certainly not right away, but over the course of
time and in sustainable ways. Moreover, the Tylenol
example also illustrates both external and internal
coherence: as for external coherence, it could be
argued that Burke and J&J not only followed the
right principles, did what was worth doing, consis-
tently and in relations to their constituencies, but did
so when the consequences were unpleasant (McFall,
1987, p. 9) by way of a costly recall. And in terms of
internal coherence it should be noted that apparently
they also did it for the right reasons, i.e., with the
right intention. The rationale for the recall was not
that more cases of poisoning may have damaged the
company’s image or even reputation, or the fear of
costly lawsuits, but simply the conviction that the
health of customers come first. To conclude, it does
not suffice to do the right thing if others (i.e.,
stakeholders) take it to be happening for the wrong
reasons.
Continuity
Lastly, corporate integrity cannot be achieved by
seizing the moment. The ideal of unified moral
agency implies a more or less explicit evaluation
364 Thomas Maak
process by the agent’s constituencies (i.e., stake-
holders) over time. Stakeholders need to have suf-
ficient reason to believe that the corporation and
their executives take ethics seriously. This requires
that the corporation has demonstrated an ongoing
commitment to important principles, even in tur-
bulent times; that it has consistently acted responsi-
bly and in cases of lapses acted swiftly to clarify them
and keep them from happening again; that it has
done so in recognition of all its constituencies in
good times and in bad times; that it has constantly
tried to balance its multiple responsibilities – eco-
nomic, social, environmental, civic, and humani-
tarian; and that it has never left a doubt that it has
considered living up to these responsibilities to be
simply the right thing to do.
Conclusion: Overcoming the divided
corporate self
To conclude, I believe that a detailed account of
corporate integrity as presented above advances our
understanding with respect to how corporations
should think about ‘‘CSR,’’ namely in more
holistic ways in order to capture the complex
reality of corporate responsibility, broadly defined.
In fleshing out the 7 Cs of corporate integrity, I
have demonstrated what is at stake in today’s
environment of contested values and that corporate
integrity is not just another term to be used in
CSR related or business ethics related matters. In
contrast, it can serve as a sense making framework
to further the integration of issues and levels. I
argued that given the scope of ethics challenges it
does not suffice to follow a piecemeal approach in
matters of ‘‘CSR,’’ or corporate responsibility in
more general terms. Corporate integrity may raise
the bar, but by aligning the various integrity
requirements and by integrating issues and levels,
corporations are arguably much better equipped to
meet all and not just some of the ethics challenges
and thus to act responsibly.
In regard to research, I am inclined to think that
we have much to gain by employing corporate
integrity as a sense making device. CSR, business
ethics, stakeholder theory, corporate citizenship, etc.
are all important research domains in their own
right. Yet, what is still missing is a framework that
connects these domains in plausible and workable
ways. By working toward a theory of corporate
integrity such ‘‘relational wholeness’’ may well be
achieved. Thus, although I suggested that corporate
integrity should be used as a more fitting ‘‘umbrella
term’’ for corporate responsibility research in general
and CSR in particular, it is certainly more than that,
in terms of both research and practice. As for busi-
ness practice, integrity is quite possibly the biggest
asset a corporation can have. After all, as McFall puts
it (1987, p. 20): ‘‘Without integrity, and the iden-
tity-conferring commitments it assumes, there
would be nothing to fear the loss of, not because we
are safe but because we have nothing to lose.’’
Thus, even though a focus on integrity raises the
bar even further it is arguably the only chance to
overcome an increasingly fractured corporate self.
Meeting multiple stakeholder expectations, balanc-
ing their claims and realizing value for the many, and
not just a few (managers and shareholders), requires
an explicit sense of wholeness both in matters of
relationships and in matters of content. I suggested in
this article that a more explicit focus on corporate
integrity may help in achieving this goal and ulti-
mately becoming an ‘‘undivided corporate self.’’
Notes
1
The page references refer to a widely available
reprint in Beauchamp and Bowie (2001).
2
See www.corporateregister.com for exact data.
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368 Thomas Maak
A Stakeholder Approach to Corporate
Social Responsibility: A Fresh Perspective
into Theory and Practice Dima Jamali
ABSTRACT. Stakeholder theory has gained currency in
the business and society literature in recent years in
light of its practicality from the perspective of managers
and scholars. In accounting for the recent ascendancy
of stakeholder theory, this article presents an overview
of two traditional conceptualizations of corporate
social responsibility (CSR) (Carroll: 1979, ‘A Three-
Dimensional Conceptual Model of Corporate Perfor-
mance’, The Academy of Management Review 4(4), 497–505
and Wood: 1991, ‘Corporate Social Performance
Revisited’, The Academy of Management Review 16(4),
691–717), highlighting their predominant inclination
toward providing static taxonomic CSR descriptions.
The article then makes the case for a stakeholder approach
to CSR, reviewing its rationale and outlining how it
has been integrated into recent empirical studies. In light
of this review, the article adopts a stakeholder frame
work
– the Ethical Performance Scorecard (EPS) proposed by
Spiller (2000, ‘Ethical Business and Investment: A Model
For Business and Society’, Journal of Business Ethics 27,
149–160) – to examine the CSR approach of a sample
of Lebanese and Syrian firms with an interest in
CSR and test relevant hypotheses derived from the
CSR/stakeholder literature. The findings are analyzed
and implications drawn regarding the usefulness of a
stakeholder approach to CSR.
KEY WORDS: corporate social responsibility (CSR),
stakeholder theory, Lebanese and Syrian context
Introduction
The topic of the social responsibilities of business has
been a subject of intense controversy and interest
over the past three decades. In part, this debate is an
outgrowth of the proliferation of different concep-
tualizations of corporate social responsibility (CSR).
The term CSR has indeed been defined in various
ways from the narrow economic perspective of
increasing shareholder wealth (Friedman, 1962), to
economic, legal, ethical and discretionary strands of
responsibility (Carroll, 1979) to good corporate
citizenship (Hemphill, 2004). These variations
stem in part from differing fundamental assumptions
about what CSR entails, varying from concep-
tions of minimal legal and economic obligations
and accountability to stockholders to broader
responsibilities to the wider social system in which a
corporation is embedded.
Resulting from these divergent fundamental
assumptions is a lingering skepticism in the field of
business and society, inviting Frankental (2001) to
argue for example that ‘‘CSR is a vague and
intangible term which can mean anything to any-
body, and therefore is effectively without meaning.’’
The confederation of British industry has similarly
argued that ‘‘CSR is highly subjective and therefore
does not allow for a universally applicable
definition.’’ Social responsibility has been variously
described as an elusive concept (Lee, 1987), a vague
and ill-defined concept (Preston and Post, 1975),
a concept with a variety of definitions (Votaw,
1973), a concept lacking theoretical integration and
empirical verification (DeFillipi, 1982; Post, 1978;
Preston, 1978), a concept lacking a dominant par-
adigm (Jones, 1983), and a concept susceptible to
subjective and value-laden judgments (Aupperle
et al., 1983).
Along the same lines, Clarkson (1995) has force-
fully argued that a fundamental problem in the field
of business and society has been the notable absence
of definitions of corporate social performance (CSP),
corporate social responsibility (CSR1) and corporate
social responsiveness (CSR2), and the lack of con-
sensus about the meaning of these terms from an
Journal of Business Ethics (2008) 82:213–231 � Springer 2008
DOI 10.1007/s10551-007-9572-4
operational or managerial viewpoint (Clarkson,
1995). He makes the case that CSP can be analyzed
more effectively by using a framework based on the
management of a corporation’s relationships with its
stakeholders than by using CSR models and meth-
odologies given that corporations are the nexus of a
complex web of stakeholder relationships and indeed
manage relationships with specific stakeholder
groups rather than with society at large.
Maignan et al. (2005) similarly find that senior
management and many marketers still struggle with
the notion of CSR. The crux of the problem
stems from the meaning of the word ‘social’ and
how it links to daily business activities. Indeed,
because of the level of abstraction of the word
‘social’, managers may have problems evaluating
how their own organization can contribute to the
well being of society as a whole (Clarkson, 1995;
Maignan et al., 2005). Indeed as suggested by
Clarkson (1995) ‘‘society is a level of analysis that
is more inclusive, more ambiguous and further up
the ladder of abstraction than a corporation itself.’’
Based on casual observation, the term society is
often used interchangeably with the community
stakeholder group in the business and society lit-
erature, raising a legitimate concern as to whether
the societal level of abstraction is indeed helpful or
justified.
Hence, there is clearly some merit to a stake-
holder approach to CSR, which will be further
probed and explored in this article. Indeed as pro-
posed by Maignan et al. (2005), even though
businesses in general are accountable toward society
at large, an individual business can be deemed
responsible only toward stakeholders, or the
definable agents with whom it interacts. The article
starts by presenting an overview of two popular
conceptualizations of CSR, highlighting their pre-
dominant inclination toward providing static taxo-
nomic CSR descriptions. The article then makes
the case for a stakeholder approach to CSR,
reviewing its inherent logic and outlining how it
has been integrated into recent empirical studies. In
light of this review, the article adopts a stakeholder
framework – the Ethical Performance Scorecard
(EPS) proposed by Spiller (2000) – to examine the
CSR approach of a number of Lebanese and Syrian
firms that are considered active in CSR. The
findings are presented and relevant implications
drawn regarding the usefulness of a stakeholder
CSR
approach.
Traditional CSR conceptualizations
Various CSR conceptualizations are on offer in the
literature. This section will shed briefly the light on
two robust CSR conceptualizations that are well-
grounded in the literature. The first is Carroll (1979)
four-part definition of CSR that was embedded into
a conceptual model of CSP. The other is the CSP
model by Wood (1991), which placed CSR into a
comprehensive framework, emphasizing principles
guiding responsibility behavior, processes of
responsiveness and outcomes of performance. The
purpose is to show that despite their groundbreaking
insights, the models on offer still qualify as taxo-
nomic, helping in turn accentuate or bring to light
the dynamism inherent in a stakeholder approach as
well as its practicality from a managerial perspective.
Carroll’s 1979/1991 conceptualization
In 1979, Carroll differentiated between four types of
CSR: economic, legal, ethical, and discretionary.
The first category that Carroll (1979) delineated is a
responsibility that is economic in nature, entailing,
for example, providing a return on investment to
owners and shareholders; creating jobs and fair pay
for workers; discovering new resources; promoting
technological advancement, innovation, and the
creation of new products and services. Business from
this perspective is the basic economic unit in society
and all its other roles are predicated on this funda-
mental assumption (Carroll, 1979).
The legal responsibility is the second part of the
definition and entails expectations of legal compli-
ance and playing by the ‘‘rules of the game.’’ From
this perspective, society expects business to fulfill its
economic mission within the framework of legal
requirements set forth by the societal legal system.
But, while regulations may successfully coerce firms
to respond to an issue, it is difficult to ensure that
they are applied equitably (Pratima, 2002). More-
over, regulations are reactive in nature, leaving little
opportunity for firms to be proactive. Laws, there-
fore, attempt to circumscribe the limits of tolerable
214 Dima Jamali
business behavior, but they neither define ethics nor
do they ‘‘legislate morality’’ (Solomon, 1994).
In essence, ethical responsibility overcomes the
limitation of law by creating an ethics ethos that
companies can live by (Solomon, 1994). It portrays
business as being moral, and doing what is right, just,
and fair. Therefore, ethical responsibility encom-
passes activities that are not necessarily codified into
law, but nevertheless are expected of business by
societal members such as respecting people, avoiding
social harm, and preventing social injury. Such
responsibility is mainly rooted in religious convic-
tions, humane principles and human rights com-
mitment (Novak, 1996). However, one limitation to
this type of responsibility is its blurry definition and
the consequent difficulty for business to concretely
deal with it (Carroll, 1979).
The final type of responsibility is where firms
have the widest scope of discretionary judgment and
choice, in terms of deciding on specific activities or
philanthropic contributions that are aimed at giving
back to society. The roots of this type of responsi-
bility lie in the belief that business and society are
intertwined in an organic way (Frederick, 1994).
Examples of such activities might include philan-
thropic contributions, conducting in-house training
programs for drug abusers, or attempts at increasing
literacy rates (Carroll, 1979). This type of responsi-
bility is the most controversial of all since its limits
are broad and its implications could conflict with the
economic and profit-making orientation of business
firms.
Carroll (1991) revisited his four-part definition of
CSR and organized the notion of multiple corporate
social responsibilities in a pyramid construct (Fig-
ure 1). In this pyramid, economic responsibility is
the basic foundation and discretionary the apex. This
revised conceptualization implies that the four
responsibilities are additive or aggregative. From this
perspective, economic and legal responsibilities are
socially required (i.e., mandatory), ethical responsi-
bility is socially expected, while philanthropy is
socially desired (Windsor, 2001) and each of these
responsibilities comprises a basic component of the
total social responsibility of a business firm.
The other components of the CSP model origi-
nally proposed by Carroll (1979) entailed an iden-
tification of the social issues that business must
address and a specification of the philosophy of
responsiveness to the issues. Recognizing that social
issues may change over time depending on the
industry in which firms exist, an effective responsi-
bility performance entails a systematic attempt at
fleshing out the social issues that are of most
interest to the firm. A strategy or mode of respon-
siveness must also be identified, although this com-
ponent was vaguely addressed in Carroll’s (1979)
conceptualization, with a simple differentiation
between reactive, defensive, accommodative or
proactive responsiveness strategies.
Carroll’s (1979) conceptualization was useful and
timely, and represented a significant advance in CSR
research by specifying the different types or
dimensions of social responsibility. However, his
contribution qualifies primarily as taxonomic, out-
lining the range of responsibilities that managers are
expected to fulfill. Details and guidelines regarding
process and measurement however remain scant for
both managers and scholars. As per Clarkson (1995),
‘‘Carroll’s model in the form of a three dimensional
cube was complex and difficult to test. It did not
lend itself to the development of a methodology that
could be used in the field to collect, organize, and
evaluate corporate data.’’ Herein lies the caveat of
any taxonomic approach, which can be potentially
remedied with a more practical stakeholder
approach.
Wood 1991 conceptualization
In 1991, Wood revisited the CSP model and
introduced important refinements by going beyond
an identification of the different types of responsi-
bilities to examine issues relating to the principles
Discretionary Responsibility
Legal Responsibility
Economic Responsibility
Ethical Responsibility
Total Responsibility
Figure 1. A hierarchy of CSR (adapted from Carroll,
1991)
A Stakeholder Approach to Corporate Social Responsibility 215
motivating responsible behavior, the processes of
responsiveness and the outcomes of performance.
Her refined postulation, therefore, placed CSR into
a broader context than just a stand-alone definition,
and conceptualized CSP as the product of a business
firm’s particular configuration of principles of social
responsibility, processes of social responsiveness, as
well as observable outcomes as they relate to the
firm’s societal relationships (Table I).
The model offered by Wood (1991) constitutes a
significant advance in CSR research. A researcher
using the model would first consider the principles
that motivate a firm’s social responsibility actions at
three levels of analysis: institutional, organizational
and individual. Therefore, the motivation for a
firm’s social responsibility actions may stem from the
principle of legitimacy (institutional level), i.e., from
a desire to maintain credibility and legitimacy as a
responsible societal actor in a shared
environment.
Alternatively, the motivation could stem from an
organizational sense of public responsibility, partic-
ularly for outcomes related to the firm’s primary and
secondary areas of involvement. Finally, the moti-
vation could stem from the choices of individual
managers and their personal responsibility prefer-
ences and inclinations. There is also room for
interactivity among two or more of these principles
in motivating CSP.
Responsiveness according to Wood (1991) consti-
tutes an action dimension that is needed to com-
plement the normative and motivational component
of social responsibility. It is conceptualized as com-
prising three facets – environmental assessment,
stakeholder management and issues management,
which are effectively interlocked. Responsiveness is
rooted in knowledge about the external environ-
ment and in rigorous environmental scanning/anal-
ysis. This knowledge could then be used to devise
strategies for adapting to the environment or con-
versely changing it. Stakeholder management is an-
other tenet of responsiveness and can be investigated
by examining particular kinds of stakeholder man-
agement devices (e.g., employee newsletters, public
affairs officials, and corporate social reporting). Issues
management on the other hand entails an investi-
gation of the firm’s approach to devising and mon-
itoring responses to social issues.
The outcomes of corporate behavior are in turn of
direct and obvious interest in the assessment of CSP.
According to Wood’s CSP model, outcomes are
divided into three types: the social impacts of cor-
porate behavior, the programs companies use to
implement responsibility and the policies developed
by companies to handle social issues and stakeholder
interests. Whether corporate behavior is having
positive or negative impact should objectively be
assessed (positive impact as in the provision of jobs,
the creation of wealth or technological innovation
and negative impact as in toxic wastes or illegal
payments to politicians). The nature of programs
selected for investment of resources to achieve spe-
cific ends is also important as is the extent of the
integration of social issues and impacts within the
body of company policy.
Although Wood’s (1991) CSP model integrates
much of the earlier work into a coherent model for
assessing an organization’s corporate social perfor-
mance, it does not, according to Waddock (2004),
fully consider the significance of stakeholder im-
pacts. Stakeholder management is indeed accorded
only limited attention in discussion of responsiveness
processes. More fundamentally, Wood’s (1991)
model may suffer from a certain level of abstraction
from the perspective of practicing managers in view
of its scholarly language of principles of CSR and
processes of corporate social responsiveness. As
articulated by Meehan et al. (2006) ‘‘While Wood’s
1991 model represents a significant piece of schol-
arship, it nevertheless failed to address the needs of
practicing managers charged with implementing
CSR/CSP programs and crucially measuring their
impacts.’’
TABLE I
The CSP model (Wood, 1991)
Principles of CSR1
Institutional principle: legitimacy
Organizational principle: public responsibility
Individual principle: managerial discretion
Processes of CSR2
Environmental assessment
Stakeholder management
Issues management
Outcomes of corporate behavior
Social impacts
Social programs
Social policies
216 Dima Jamali
Both frameworks hence seem more oriented
toward advancing theory and research in the field
rather than influencing practice. The complex and
dynamic nature of the social environment faced by
most modern organizations, implying the need for
on-going stakeholder management, is also difficult
to capture with such taxonomic descriptions.
Inherent in a stakeholder approach or model is an
exchange perspective for social responsibility man-
agement, recognizing the changing/evolving needs
of different groups of stakeholders which need to be
continuously monitored and addressed in a fluid and
dynamic manner. The potential usefulness/added
value of a stakeholder approach will be further
explored in the next section.
A stakeholder approach to corporate social
responsibility (CSR)
Some of the central concepts associated with what is
known today as stakeholder theory began to gain
currency during the mid-1980s (Freeman, 1984;
Freeman and Reed, 1983). Freeman’s (1984) work
helped to re-conceptualize the nature of the firm to
encourage consideration of new external stake-
holders, beyond the traditional pool – shareholders,
customers, employees, and suppliers – legitimizing in
turn new forms of managerial understanding and
action (Jonker and Foster, 2002). Organizations
from this perspective are expected to manage
responsibly an extended web of stakeholder interests
across increasingly permeable organization bound-
aries and acknowledge a duty of care towards tra-
ditional interest groups as well as silent stakeholders
– such as local communities and the envi
ronment
(Simmons, 2004).
Stakeholder theory hence offered a new way to
organize thinking about organizational responsibili-
ties. By suggesting that the needs of shareholders
cannot be met without satisfying to some degree the
needs of other stakeholders, it turned attention to
considerations beyond direct profit maximization. In
other words, even when a firm seeks to serve its
shareholders as a primary concern, its success in
doing so is likely to be affected by other stake-
holders (Foster and Jonker, 2005; Hawkins, 2006).
Some even argue that an inclusive stakeholder
approach makes commercial sense, allowing the firm
to maximize shareholder wealth, while also
increasing total value added (Hawkins, 2006; Phillips
et al., 2003; Wallace, 2003).
By the end of the decade, many researchers were
using stakeholder ideas and terminology (Wood,
1991). Several authors have indeed favored a stake-
holder approach when examining CSR. In their
assessment of CSR and CSP in the context of a
sample of Italian SMEs, Longo et al. (2005) identi-
fied the demands of key stakeholders regarding the
creation of value by the business, resulting in a grid
of values (Table II), which associates each stake-
holder with value classes that satisfy their respective
expectations. These value classes have been derived
based on studies and models already covered in
existing literature, as well as on the basis of the
analysis of various social audit and sustainability
reports. Companies in their study are considered as
socially responsible if they demonstrate social
behavior satisfying the expectations of at least half of
the value classes identified for each stakeholder.
A similar approach was used by Abreu et al.
(2005) in their exploration of the CSR experience
and practice of enterprises in Portugal, whereby five
key stakeholders were identified, including con-
sumers, suppliers, the community, the government
and the environment. Internally, they also examined
workplace practices vis-a-vis employees. Their
TABLE II
The grid of values (Longo et al., 2005)
Stakeholder Expectations divided into value classes
Employees Health and safety at work
Development of workers’ skills
Wellbeing and satisfaction of worker
Quality of work
Social equity
Suppliers Partnership between ordering company
and supplier
Selection and analysis systems of suppliers
Customers Product quality
Safety of customer during use of product
Consumer protection
Transparency of consumer product infor-
mation
Community Creation of added value to the community
Environmental safety and production
A Stakeholder Approach to Corporate Social Responsibility 217
research suggests a clear inclination on the part of
firms operating in Portugal to attend to the external
dimension of CSR. Another study in the Spanish
context (Uhlaner et al., 2004) also utilized a stake-
holder approach, defining CSR effectiveness as the
ability to satisfy a wide range of constituents within/
outside the organization. Two categories of stake-
holders, economic and social, were identified with
the findings suggesting the salience of the economic
stakeholders – clients and employees – over the so-
cial ones including sports clubs, the church, and the
environment. The researchers confirm on the basis
of their study the utility of a stakeholder approach in
the context of CSR.
A stakeholder approach was also used by Papa-
solomou et al. (2005) in the context of Cypriot
businesses. Their rationale for using a stakeholder
approach is that stakeholders invariably affect or are
affected by business organizations and therefore can
be seen as imposing on them different responsibili-
ties. They identify six groups as key stakeholders
including employees, customers, investors, suppliers,
the community and the environment and delineate
relevant CSR actions vis-a-vis each cluster respec-
tively as illustrated in Table III. Their findings sug-
gest that Cypriot firms accord the most attention to
employees and consumers in their pursuit of CSR,
moderate attention to the community stakeholder,
TABLE III
CSR actions vis-a-vis key stakeholders (Papasolomou et al., 2005)
Stakeholder Actions vis-a-vis key stakeholders
Employees Provides a family friendly work environment
Engages in responsible human resource management
Provides an equitable reward and wage system for employees
Engages in open and flexible communication with employees
Invests in employee development
Encourages freedom of speech and promotes employee rights to speak up and report their concerns at
work
Provides child care support/paternity/maternity leave in addition to what is expected by law
Engages in employment diversity in hiring and promoting women, ethnic minorities and the physically
handicapped
Promotes a dignified and fair treatment of all employees
Consumers Respects the rights of consumers
Offers quality products and
services
Provides information that is truthful, honest and useful
Products and services provided are safe and fit with their intended use
Avoids false and misleading advertising
Discloses all substantial risks associated with product or service
Avoids sales promotions that are deceptive/manipulative
Avoids manipulating the availability of a product for purpose of exploitation
Avoids engagement in price fixing
Community Fosters reciprocal relationships between the corporation and community
Invests in communities in which corporation operates
Launches community development activities
Encourages employee participation in community projects
Investors Strives for a competitive return on investment
Engages in fair and honest business practices in relationships with shareholders
Suppliers Engages in fair trading transactions with suppliers
Environment Demonstrates a commitment to sustainable development
Demonstrates a commitment to the environment
218 Dima Jamali
and limited attention to suppliers, investors and the
environment.
The bulk of the studies encountered in the
literature and outlined above fall within the scope of
descriptive stakeholder theory, which seeks to
outline the views of participants of the mission/
objectives of their organization and its actions vis-a-vis
different stakeholders (Brickson, 2007). This meth-
odology can yield interesting insights particularly
that organizations are socially constructed and act in
accordance with shared perceptions (Brickson,
2007). There are also flavors in the literature of
assessments along the lines of instrumental or nor-
mative stakeholder theory. Instrumental stakeholder
theory assumes that the corporation is an instrument
for wealth creation with CSR conceived as a stra-
tegic tool to promote economic objectives (Garriga
and Mele, 2004). Normative stakeholder theory on
the other hand delineates philosophically based
moral obligations towards stakeholders (Brickson,
2007), focusing on the ethical requirements that
cement the relationship between business and soci-
ety (Garriga and Mele, 2004).
While the tenet of stakeholder theory is that all
stakeholders matter and that organizations should
integrate their responsibilities to the various stake-
holder constituencies, this balancing exercise has
proven difficult to enact in practice (Galbreath,
2006; Vos and Achterkamp, 2006). Rather than
producing every kind of social value for every
stakeholder, organizations find themselves
constrained in practice by limited resources and
bounded rationality, and thus tend to prioritize their
stakeholders according to instrumental and/or nor-
mative considerations. Such stakeholder classifica-
tion or prioritization usually draws on managerial
discretion, their specific instrumental or normative
inclinations as well as their assessment of relational
stakeholder attributes of power, legitimacy and
urgency (Mitchell et al., 1997), legitimizing in turn
the usefulness of a descriptive stakeholder theory or
methodology.
Overall, stakeholder theory in all its three veins or
branches brought to the fore a set of new insights for
CSR academics and practitioners. It accentuated the
notion that corporations must be viewed as operat-
ing at the center of a ‘‘network of interrelated
stakeholders that create, sustain and enhance value
creating capacity’’ (Post et al., 2002) challenging in
turn an exclusive focus on shareholders. The lan-
guage of stakeholder theory was also easier to grasp
by managers/practitioners as most organizations
understood and defined obligations and responsibil-
ities vis-a-vis their traditional stakeholders (Clarkson,
1995). Stakeholder theory seems also easier to
maneuver in collecting and analyzing CSR data as
evidenced by the proliferation of empirical studies
that have essentially integrated a stakeholder ap-
proach as outlined in the previous section. This
stream of research has also led to the delineation of
relevant stakeholder issues and associated measures of
impacts, which, with further refinement, can serve as
useful guidelines for managers in their pursuit of
CSR actions and interventions (Dav
enport, 2000).
The next section highlights how a stakeholder CSR
approach – the EPS proposed by Spiller (2000) – was
used to collect and analyze CSR data in the context
of a sample of Lebanese and Syrian firms, allowing in
turn to draw relevant implications regarding the
usefulness of a stakeholder CSR approach.
Research methodology
Research hypotheses
The research methodology is consistent with
descriptive stakeholder theory, which seeks to
outline participants’ views of what the business
organization is doing vis-a-vis its stakeholders, as
well as the mechanisms through which different
views come into being (Brickson, 2007). This
descriptive stakeholder methodology will be sup-
plemented in turn by reference to the two other
veins of stakeholder theory, namely instrumental
stakeholder theory and normative stakeholder
theory. In the framework of these three branches of
stakeholder theory, the following research hypoth-
eses are derived and tested after being presented here
in the context of the corresponding CSR literature
in which they are respectively anchored.
Hypothesis 1 (H1) Developing country firms pri-
oritize their stakeholders based primarily on
instrumental considerations.
H1 draws on a large body of literature that shows
unequivocally that stakeholder management is often
A Stakeholder Approach to Corporate Social Responsibility 219
conceived and approached instrumentally in relation
to its implications for the bottom line and firm per-
formance. Windsor argues in this respect that ’’a
leitmotiv of wealth creation progressively dominates
the managerial conception of responsibility’’
(Windsor, 2001). Firms tend to accord systematic
attention to primary stakeholder management in
anticipation of expected bottom line benefits. This
is also consistent with the view that firms priori-
tize their stakeholders and investments based on
stakeholder attributes of power, legitimacy and
urgency – or indirect instrumental considerations
(Mitchell et al., 1997). A wide range of empirical
studies in various contexts provide support for this
hypothesis (please see Uhlaner et al., 2004 and
Papasolomou et al., 2005 who highlight the salience
of the economic stakeholders in their respective
studies; de Madariaga and Valor, 2007 who report
differential firm attention across stakeholder groups
particularly in relation to customers, employees and
shareholders; Snider et al., 2003 who report that three
stakeholder groups stand out in their study as essential
to firm success namely customers, employees and
owners; and Galbreath, 2006 who makes the case for
an instrumental stakeholder management approach in
his empirical study). H1 is applicable globally and in
developing countries more specifically in view of the
scarcity of resources and the salience of resource
dependency theory in this particular context.
Hypothesis 2 (H2) Developing country firms are
according systematic attention to a limited range
of
stakeholders.
H2 is related to H1 and consistent with an instru-
mental stakeholder management process. In view of
limited resources and bounded rationality consider-
ations, firms identify or prioritize a small number of
what they consider to be core or focal stakeholders,
with their stakeholder management process revol-
ving around these key stakeholders. This hypothesis
is grounded in the literature, with Clarkson (1995)
differentiating between primary and secondary
stakeholders and highlighting the inclination of firms
to focus on primary stakeholders. It is also reflected
in the writings of Carroll and Buckhholtz (2003),
who make a distinction between core, strategic and
environmental stakeholders. There is ample empir-
ical evidence suggesting that firms channel their
stakeholder management efforts around specific
stakeholders, with Knox et al. (2005) arguing for
example that the majority of FTSE companies in
their sample focused on less than three stakeholders;
de Madariaga and Valor (2007) arguing that their
sampled Spanish companies focus on three core
stakeholders and Galbreath (2006) revealing through
his study the criticality of focusing on few primary
internal stakeholders. H2 is applicable globally and in
developing countries more specifically where man-
agerial resources and attention are stretched thin in
light of limited budgets, competing pressures and less
favorable contextual conditions.
Hypothesis 3 (H3) Instrumental stakeholder man-
agement inclinations are counter-balanced or
nuanced by normative flavors, particularly vis-a-vis
the community stakeholder.
H3 draws on a large body of literature that argues that
firms need to maintain credibility and legitimacy as
responsible societal actors in a shared environment.
This is consistent with Wood’s (1991) legitimacy
principle and Davis’ (1960) iron law of responsibility.
H3 is also grounded in integrative theories and the
integrative social contract theory specifically (please
see Donaldson, 1982 and Donaldson and Dunfee,
1994), which assume that an implicit social contract
exists between business and society, implying indirect
obligations of business toward society. It is also
anchored in the corporate citizenship postulation, a
new notion connoting a sense of belonging and
responsibility to a community (Matten et al., 2003).
Finally, it is anchored in normative stakeholder the-
ory which postulates that the interests of all stake-
holders are of intrinsic value and merit consideration
based on ethical motives and principles (Freeman and
Philips, 2002). Normative stakeholder interpretations
are frequently encountered in the literature, with
various empirical studies reporting on firms’ strong
sense of obligation to the community stakeholder
group whose freedom and well-being is affected by
their activities (see Jamali and Mirshak, 2007; Mar-
golis and Walsh, 2003; Papasolomou et al., 2005).
Hypothesis 4 (H4) Stakeholder management is
af
fected by the relational attributes of specific
stakeholders (power, legitimacy, urgency) as well
the pressures they can exert on corporations.
220 Dima Jamali
H4 draws on a large body of literature which argues
that managers will prioritize stakeholder claims
according to their relative power, legitimacy and
urgency. It is thus consistent with Mitchell’s et al.’s
(1997) theory of stakeholder identification and sal-
ience which proposes that the cumulative number of
the three attributes of power, legitimacy and urgency
contributes to a stakeholder’ s claim being salient
from the perception of management. More recently,
Neville et al. (2004) have argued that an increase in
the degree of any of the three attributes will result in
an increase in stakeholder salience. H4 is also
consistent with the issues management and crisis
management literatures. H4 is finally consistent with
institutional theory that emphasizes that institutions
and stakeholders in the firm’s external environment
place pressures on firms, molding responses ranging
from passive conformity to active compromise,
defiance or strategic manipulation (Oliver, 1991).
In this respect, it draws on the institutional
isomorphism body of theory, and coercive institu-
tionalism in specific, which argues that firms will be
coerced to respond to the pressures exerted by
institutionalized stakeholders and that a tendency to
homogenization can be detected when formal and
informal pressures come to bear on business firms via
stakeholder activism and emerging cultural expec-
tations (Shepard et al., 1997).
Hypothesis 5 (H5) Multinational corporations have
a more balanced stakeholder management pro-
cess, translating into attention to a wider range of
stakeholders.
H5 draws on a large body of literature that seems to
suggest that MNCs are diffusing their responsibility
practices across countries in which they set shop
(Hawkins, 2006). It is also grounded in the body of
literature that seems to suggest the increased
sophistication of MNCs in relation to CSR generally
and stakeholder management specifically (Snider
et al., 2003). With the advent of globalization,
MNCs have unprecedented access to markets and
lower production costs. They also have come under
intense scrutiny by stakeholders and are thus
expected to be increasingly more proficient at
identifying and reconciling multiple stakeholder
interests. It is frequently mentioned that MNCs are
making systematic efforts at nurturing a wide
spectrum of trust-based stakeholder relationships
grounded in their greater appreciation and sensiti-
zation to risks and repercussions associated with non-
responsible action and the competitive advantages of
responsible social action. Various empirical studies
provide support to this hypothesis, suggesting that
MNCs are more prone to establish real dialogue with
their stakeholders (Foster and Jonker, 2005) and to
tailor their corporate community involvement
activities in response to the preferences of societal
stakeholders (Brammer and Millington, 2003).
Research sample
The first step in the research entailed an identifica-
tion of potential companies in both Lebanon and
Syria with an interest in CSR who could take part in
the research. The companies were contacted first by
phone, and then a formal introductory letter high-
lighting the aims of the research and its queries was
sent to the companies, with the EPS form enclosed.
An in-depth interview was then scheduled and
conducted by the author and two graduate assistants
(one in each country) with the person(s) responsible
for CSR. The interviewees were all managers,
occupying top managerial positions in their respec-
tive organizations (e.g., heads of public relations or
communications units; marketing managers and
development regional directors).
The companies that finally confirmed their par-
ticipation spanned different industries, including
banking and financial services, Internet/multi-media
services, telecommunications, energy and petro-
chemicals, food and beverage, hospitality, tobacco,
pharmaceuticals and sales/distribution (Table IV).
From a targeted pool of 20 companies operating in
Lebanon, 14 confirmed their participation in the
study by March 2006. Similarly, from a targeted pool
of 13 companies operating in Syria, 8 confirmed
their participation by late March, 2006. Interest-
ingly, the sample comprised companies that are both
national and international. Such sample composition
is potentially interesting, allowing a comparison of
the extent to which the CSR practices of local
companies (Lebanese or Syrian) differ from their
international counterparts as well as the extent to
which local subsidiaries are influenced by the CSR
approach of their mother firms.
A Stakeholder Approach to Corporate Social Responsibility 221
Research tool and protocol
The EPS proposed by Spiller in 2000 was selected
for the primary component of this research.
According to Spiller (2000), the EPS extends the
Balanced Scorecard focus on satisfying shareholders
and customers to take account of the other primary
stakeholders comprising employees, suppliers, the
community and the environment. While the EPS
accords attention to the vision and purpose of the
firm and its ethical principles, the primary focus of
this diagnostic tool is on the company’s practices
vis-a-vis primary stakeholders. These have been
categorized in terms of the six main stakeholder
groups and considered in terms of an inventory of
60 best practices that the author compiled based on
an extensive review of international case studies and
investment analysis (Table V).
According to Spiller (2000), the EPS can be
prepared at varying levels of depth. It can simply be
an account of publicly available information vis-a-vis
key stakeholder issues. Quantitative measures can be
considered from the level of donations disclosed in
the company’s accounts to financial results as well as
qualitative assessments such as stakeholder percep-
tions of company performance included in media
reports, or through additional consultation with
stakeholders. Company involvement is, however,
key in terms of provision of relevant information,
as well as opportunity for discussion and justification
TABLE IV
Sample profile
Company name Type of industry Line of business
Lebanese sample
Company A
*
Financial services International banking and investment
Company B Banking and financial services Commercial, retail and investment banking
Company C
*
Banking and financial services International banking and investment
Company D Banking and financial services Banking services
Company E Insurance Financial protection and insurance
Company F Internet services Regional internet services/connections
Company G
*
Multimedia services Provider of news and financial information
Company H Food and beverage Casual dining and fast food restaurant
Company I
*
Food and beverage Global food service retailer
Company J
*
Hospitality Accommodation and recreational activities
Company K
*
Hospitality Accommodation and recreational activities
Company L
*
Tobacco Distribution and sales of tobacco products
Company M
*
Pharmaceuticals Development, manufacturing and marketing
of leading prescription medicines
Company N Sales and distribution Sales and distribution of consumer products
(personal care, cosmetics and perfumery)
Syrian Sample
Company O Telecommunications GSM telephone lines and pre-paid cards
Company P Telecommunications GSM telephone lines and pre-paid cards
Company Q Management information systems Information and computer technology
services
Company R Energy and petrochemicals Oil/natural gas exploration and production
Company S Energy and petrochemicals Oil/natural gas exploration and production
Company T Metal and contracting Metals and contracting services
Company U Food and beverage Manufacturing and distribution of soft drinks
Company V Food and beverage Manufacturing of consumer packaged biscuits
and beverage products
* Subsidiaries of International Corporations
222 Dima Jamali
TABLE V
The EPS (Spiller, 2000)
Stakeholder Key business practices
Community Generous financial donations
Innovative giving
Support for education and job training programs
Direct involvement in community projects and affairs
Community volunteer programs
Support for the local community
Campaigning for environmental and social change
An employee-led approach to philanthropy
Efficient and effective community activity
Disclosure of environmental and social performance
Environment Environmental policies, organization and management
Materials policy of reduction, reuse and recycling
Monitoring, minimizing and taking responsibility for releases to the envi-
ronment
Waste management
Energy conservation
Effective emergency response
Public dialogue and disclosure
Product stewardship
Environmental requirements for suppliers
Environmental audits
Employees Fair remuneration
Effective communication
Learning and development opportunities
Fulfilling work
A healthy and safe work environment
Equal employment opportunities
Job security
Competent leadership
Community spirit
Social mission integration
Customers Industry-leading quality program
Value for money
Truthful promotion
Full product disclosure
Leadership in research and development
Minimal packaging
Rapid and respectful responses to customer comments/concerns
Customer dialogue
Safe products
Environmentally and socially responsible product composition
A Stakeholder Approach to Corporate Social Responsibility 223
of areas of strength and concern from the perspective
of practicing managers. It is precisely such discus-
sions with managers relating to different conceptions
of the stakeholder management process relative to
specific stakeholder issues and the ability to gauge
variations in prioritization in light of instrumental vs
normative managerial inclinations and changing
societal expectations that help account for the
superiority and dynamism of a stakeholder approach
to CSR over more taxonomic models.
As illustrated in Table V, the terminology used in
the EPS is simple. The interview entailed a discus-
sion with the manager concerned of the relevant
practices across stakeholder groups as per Table V.
Numeric ratings to assess each of the 60 practices
were then respectively reflected upon and decided
by the managers interviewed, with a major strength
recorded as 2, a strength as 1, no strengths/concerns
as 0, a concern as )1 and a major concern as )2,
allowing in turn to obtain as per Spiller (2000) an
overall quantitative EPS score – with the EPS scores
ranging between 120 where each of the 60 practices
is a major strength and )120 where each of the 60
practices is a major concern. The interviews were
tape recorded with the ratings as dictated by the
managers noted down by the researcher and dis-
cussion of specific ratings often dwelled upon in the
context of the interview in way of further clarifi-
cation.
It should be noted that, while the EPS may
provide interesting insights in the context of an
exploratory research study, this approach is not
without its caveats or limitations. One such limita-
tion stems from the equal initial weighting of all 60
issues as reflected in the 5-point scale across issues
which could at the outset be contested based on
TABLE V
continued
Stakeholder Key business practices
Suppliers Develop and maintain long-term purchasing relationships
Clear expectations
Pay fair prices and bills according to terms agreed upon
Fair and competent handling of conflicts and disputes
Reliable anticipated purchasing requirements
Encouragement to provide innovative suggestions
Assist suppliers to improve their environmental/social performance
Utilize local suppliers
Sourcing from minority-owned suppliers
Inclusion of environmental/social criteria in the suppliers’ selection
Shareholders Good rate of long term return to shareholders
Disseminate comprehensive and clear information
Encourage staff ownership of shares
Develop and build relationships with shareholders
Clear dividend policy and payment of appropriate dividends
Corporate governance issues are well managed
Access to company’s directors and senior managers
Annual reports provide a picture of company’s performance
Clear long-term business strategy
Open communication with financial community
224 Dima Jamali
subjective value judgments or normative inclina-
tions. More fundamentally, however, is that the total
EPS score calculated may be construed to reflect
aggregative assumptions about the social impact or
social performance of the firm, a concept that is also
highly contestable (please see Norman and Mac-
Donald, 2004). The EPS scores are thus used in the
context of this study to conjure basic trends in
relation to stakeholder management practices and
not to provide an aggregative weighing of the
overall social performance of the firm.
The EPS methodology was nevertheless deemed
useful for various reasons. First, it reflected a simple
and comprehensive illustration of a stakeholder
approach to CSR. The EPS provides in this respect a
valuable tool for operationalizing the stakeholder
approach to CSR. Second, it provides an opportu-
nity for gauging the practices of a company vis-a-vis
its key stakeholders and allows a comparative
benchmark assessment of the patterns of firm per-
formance vis-a-vis different stakeholders relative to
other firms. This is particularly true when the EPS
scores derived are supplemented by discussions with
managers to gauge their assumptions, inclinations
and changing perspectives with regard to various
stakeholders and stakeholder issues.
Research findings
The EPS ratings for each of the case study companies
are presented in Tables VI and VII. These ratings
are not intended as a definitive statement of the
performance of the companies vis-a-vis core stake-
holders, but simply report the findings compiled
based on the interviews conducted. The EPS results
reflect the pioneering work of Company A, which
stands out for its successful balancing of the interests
and concerns of all six stakeholder groups. It also
reflects the consistent efforts of Company L at
managing successfully the spectrum of stakeholder
relationships. A question arises here as to whether
the legitimacy of CSR practices can and should be
questioned because of the nature of the industry in
question (e.g. tobacco).
As illustrated in Table VI, the EPS scores for the
companies operating in Lebanon (both national and
international) have ranged from a low of 40 to a high
of 114, with an average EPS score of 73. The pur-
pose here is not to consider the EPS scores as
reflective of aggregate social performance, but rather
to gauge stakeholder management patterns vis-a-vis
the different stakeholders. Companies operating
in Lebanon seem to be according the most attention
TABLE VI
Ethical performance scores – Lebanese sample
Company Name
Community Environment Employees Customers Suppliers Shareholders Total EPS
Company A
*
14 20 20 20 20 20 114
Company B 2 )2 14 13 7 16 50
Company C
*
9 13 15 14 6 13 70
Company D 12 )5 8 13 7 9 44
Company E 10 )9 16 16 13 20 66
Company F 5 0 17 18 4 6 50
Company G
*
3 0 12 9 6 10 40
Company H 13 7 20 20 17 18 95
Company I
*
9 12 18 19 17 15 90
Company J
*
15 4 18 16 14 16 83
Company K
*
10 4 18 12 5 12 61
Company L
*
10 18 20 18 18 19 103
Company M
*
10 2 20 18 14 16 80
Company N 13 12 17 10 11 13 76
Lebanese sample averages 10 5 17 16 11 15 73
* Subsidiaries of International Corporations
A Stakeholder Approach to Corporate Social Responsibility 225
to the traditional stakeholders, namely employees,
customers and shareholders, respectively, and only
limited attention to the silent stakeholders, including
the community and the environment. This is pos-
sibly because ‘silent stakeholders’ tend to be less
easily identifiable and less coherent in articulating
demands and hence relegated to lower priority in a
developing country context.
Results for the Syrian sample are comparable,
with consistently lower EPS scores across all stake-
holder groups (Table VII). The highest EPS score
for the Syrian sample is 98 and the lowest is 30, with
an average EPS score of 60. Similar to the Lebanese
sample, the weakest performance is in the environ-
mental dimension, followed by the community
dimension or in other words vis-a-vis the silent
stakeholder groups. The highest consideration is
accorded on the other hand to what Uhlaner et al.
(2004) refer to as the economic stakeholders, namely
customers and employees. It is clear from both tables
that stakeholders are accorded systematic attention
when they represent rational and/or economic
motives for the firm.
A comparative assessment of the EPS scores of
Lebanese and Syrian firms is shown in Table VIII.
When excluding the subsidiaries of international
corporations that may have potentially skewed the
EPS scores of the Lebanese sample, we notice that
the CSR performance of Lebanese and Syrian
companies vis-a-vis key stakeholders are comparable,
with Lebanese companies exhibiting a slightly
better performance vis-a-vis organizational and eco-
nomic stakeholders (e.g. employees, customers and
shareholders) but worse performance vis-a-vis the
environment. Overall, the findings suggest the
salience of an instrumental stakeholder approach in
developing countries (i.e. firms addressing stake-
holder interests that most directly affect performance).
Discussion of findings
An investigation into the application of the
stakeholder approach in the Lebanese and Syrian
contexts suggests a number of interesting findings
and insights. This section will dwell on the findings
TABLE VIII
A comparative benchmark – Lebanese vs Syrian samples
Community Environment Employees Customers Suppliers Shareholders Total EPS
Lebanese sample (including *) 10 5 17 16 11 15 73
Syrian sample 9 4 13 13 10 10 60
Lebanese sample (excluding *) 9 1 15 15 10 14 64
Syrian sample 9 4 13 13 10 10 60
* Subsidiaries of International Corporations
TABLE VII
Ethical performance scores – Syrian sample
Company Name Community Environment Employees Customers Suppliers Shareholders Total EPS
Company O 13 1 17 13 11 17 72
Company P 18 10 18 18 14 20 98
Company Q 10 )2 20 17 17 4 66
Company R 12 6 16 6 7 13 60
Company S )1 14 8 9 0 0 30
Company T 11 9 4 9 10 5 48
Company U 6 12 15 19 13 10 75
Company V 5 )16 6 16 10 9 30
Syrian sample averages 9 4 13 13 10 10 60
226 Dima Jamali
obtained in more detail in relation to the hypotheses
derived from the literature. An articulation and
explanation of the main findings will be supple-
mented as appropriate by the opinions and perspec-
tives of the managers interviewed, which have been
recorded and compiled during the interviews and
can add much value here in terms of highlighting
relevant nuances. The identities of the respective
managers however will be kept anonymous.
Hypothesis 1 (H1) Developing country firms pri-
oritize their stakeholders based primarily on
instrumental considerations.
Our findings suggest that Lebanese and Syrian firms
seem to prioritize their stakeholders based on
instrumental considerations as reflected in the
higher EPS scores in relation to organizational and
economic stakeholders, namely employees, cus-
tomers and shareholders respectively (Tables VI and
VII). Discussions with managers from both contexts
suggest that they indeed tend to selectively address
stakeholder issues for instrumental reasons. One of
the managers dwelled on this point ‘‘our primary
mandate is to serve customers who in turn significantly
influence the performance of our business. Firms exist in
the first place to meet the needs of their customers.’’
Another manager highlighted the critical impor-
tance of good employee management in the sense
that ‘‘productivity gains resulting from enlightened em-
ployee management policies yield substantial performance
advantages over non responsible firms.’’ A similar view
was expressed by another manager noting that ‘‘how
employees are treated affects firm performance.’’A Leba-
nese manager summed it up nicely, ’’firms have to
manage stakeholder relationships strategically in order to
meet performance objectives.In the context of scarce re-
sources, we must ask if any specific stakeholder relation-
ship has the potential to generate advantages that
positively affect the bottom line.’’ Based on these two
sets of data H1 is ac
cepted.
Hypothesis 2 (H2) Developing country firms are
according systematic attention to a limited range
of stakeholders.
Our findings suggest that Lebanese and Syrian firms
seem to be according systematic attention to a lim-
ited number of stakeholders as reflected in the dif-
ferential higher EPS scores in relation to three core
stakeholders namely employees, customers and
shareholders respectively. This is true for both
samples (Tables VI and VII) but is more clearly
accentuated in relation to the EPS scores of the
Lebanese sample. Discussions with managers in turn
reinforce these observations. One of the managers
expressed the view that despite the need to balance
the interests of different stakeholders, ‘‘competitive
pressures and traditional accounting systems tend to keep all
eyes focused on the short-term and key stakeholder rela-
tionships.’’ In an attempt to justify the limited
attention accorded to suppliers for example, one of
our managers expressed the view that ‘‘we do not have
the resources to ensure that appropriate controls are in place
to monitor our entire supply chain. Attention to a few key
stakeholders is thus dictated by practical considerations and
priorities.’’ Another manager pointed out that ‘‘our
objective is to attend to the needs of our customers and
employees, with highest priority placed on the profitable
creation and maintenance of superior customer value.’’ The
two sets of data suggest that H1 and H2 are indeed
related, and that H2 in turn is also accepted.
Hypothesis 3 (H3) Instrumental stakeholder man-
agement inclinations are counter-balanced or
nuanced by normative flavors, particularly vis-a-
vis the community stakeholder.
There is limited room to gauge whether H3 is
supported by looking at the EPS scores in Tables VI
and VII. The only relevant observation in this re-
spect is that the community stakeholder group has
received systematically higher EPS scores than the
environment stakeholder in both samples. But this
alone does not take us very far in way of evaluating
H3. Discussions with managers on the other hand
helped unveil interesting nuances in support of H3.
According to one of the managers, ’’we have an
obligation to assist the less fortunate community segments
and constituencies. This is a responsibility of which we are
conscious at all times.’’ Another manager expressed the
view that ‘‘firms should seek to alleviate local problems
and improve the quality of life of the local community.’’ A
more progressive view was expressed by another
manager who articulated that ’’business prosperity is
linked to the well-being of the local community.’’These
views are consistent with integrative social contract
theory and with the corporate citizenship postula-
tion, but more importantly seem to reflect norma-
A Stakeholder Approach to Corporate Social Responsibility 227
tive flavors and inclinations vis-a-vis the community
stakeholder group specifically and hence H3 is ac-
cepted.
Hypothesis 4 (H4) Stakeholder management is af-
fected by the relational attributes of specific
stakeholders (power, legitimacy, urgency) as well
as the pressures they can exert on corporations.
H4 is difficult to assess systematically in light of the
EPS scores obtained and the fact that our data was
derived through interviews with managers without
equal consideration of stakeholder claims and per-
spectives. Nonetheless, it is safe to infer that our
managers consider the employees, customers,
shareholder and supplier stakeholder groups fol-
lowed by the community stakeholder group to wield
more power/legitimacy based on instrumental and
normative considerations. More importantly in the
context of our findings is the inferred limited pres-
sures exerted by institutions and institutionalized
stakeholders for environmental issues as can be
detected in the lowest EPS scores in relation to the
environmental stakeholder group in both samples
(Tables VI and VII). This is further supported by
discussions with managers, one of whom suggested
that ‘‘given more pressing priorities, our stakeholders are
least concerned about improvements in corporate environ-
mental performance.’’ Another manager expressed the
view that ‘‘there is not enough pressure on corporations to
assume fuller responsibility for their environmental impacts
and NGOs/environmental activist groups are virtually
dormant.’’One of the managers noted that ‘‘the
importance of corporate environmental performance is sim-
ply not appreciated in this neck of the world.’’ Given that
the environment is a silent stakeholder, environ-
mental issues tend to be channeled through coercive
institutional pressures, which is clearly not the case
in Syria and Lebanon and hence the relegation of the
environment to the lowest priority in both
contexts.
Based on the above analysis, H4 is also accepted.
Hypothesis 5 (H5) Multinational corporations have
a more balanced stakeholder management pro-
cess, translating into attention to a wider range of
stakeholders.
Findings from the Lebanese context suggest that
multinational companies (MNCs) have transplanted
with them a strong sense of responsibility, given that
as illustrated in Table VI, the EPS scores of the
subsidiaries of international corporations which have
been included in the sample are better than those of
their local counterparts.
1
The EPS scores obtained
suggest that MNCs and their subsidiaries are making
systematic efforts at managing the spectrum of
stakeholder relationships. Discussions with MNC
managers support this view. One of the most
progressive managers of an MNC noted in this
respect that ’’it is essential to nurture a wide spectrum of
trust-based stakeholder relationships, which can serve as a
source of opportunity and competitive advantage. Positive
stakeholder relationships are associated with the on-going
participation of stakeholders with the firm, thus increasing
its stability and expanding its overall capacity, effectiveness
and consistency of response.’’ Another MNC manager
expressed the view that ‘‘balancing stakeholder
relationships is the only way to protect the firm against
constant environmental volatility and ultimate erosion of
financial benefits.’’While the stakeholder management
approach of MNCs seem also anchored in instru-
mental motivations, the EPS scores obtained suggest
that MNCs have a more balanced stakeholder
management process and are according attention to a
wider range of stakeholders and thus H5 is accepted.
Concluding remarks
The recent ascendancy of stakeholder theory is
grounded in the belief that firm–stakeholder rela-
tionships are the essential assets that managers must
manage (Post et al., 2002). While CSR aims to
define what responsibilities business ought to fulfill,
the stakeholder concept addresses the issue of whom
business is or should be accountable to (Kakabadse
et al., 2005). Both concepts are closely inter-related.
However, while the CSR concept still suffers from a
level of abstraction, the stakeholder approach offers a
practical alternative for assessing the performance of
firms vis-a-vis key stakeholder groups and hence also
indirectly gauging their CSP.
Indeed, although the literature has made progress
in terms of theoretical development, Clarkson’s
(1995) concern that the business and society field has
been hampered by the absence of widely accepted
definitions of core concepts remains a valid criticism
(Doh and Guay, 2006). This lack of clarity/
consensus has inhibited empirical testing of the
228 Dima Jamali
traditional business and society theories and trans-
lated into a relative paucity of systematic assessments
of the societal impacts of business operations
(Davenport, 2000). Clarkson’s (1995) integration of
the concepts of stakeholders and CSP thus consti-
tuted an advance in this respect, providing an
alternative theoretical lens, and making it easier for
research to accrue.
Stakeholder theory has accordingly witnessed a
new resurgence and ascendancy in the context of
CSR research. Brenner and Chochran postulated as
early as 1991 that stakeholder theory holds the
promise of becoming the theoretical centerpiece in a
field that is searching for workable paradigms. Doh
and Guay (2006) similarly find the adoption of a
stakeholder model as a potentially appropriate and
insightful theoretical lens, given its ability to
systematically identify social stakeholder issues, and
establish specific measures of performance. An
organization’s stakeholder management data can thus
be gathered and compared to other firms within and
across industries, making social auditing for internal
and external use both practical and possible (Dav-
enport, 2000).
Along these lines, this article has tried to make the
case for a stakeholder approach to CSR, by arguing
(1) that stakeholder theory in all its three veins or
branches can bring to the fore a set of new insights for
CSR academics and practitioners; (2) that the lan-
guage of stakeholder theory is easy to grasp by man-
agers as most firms understand and define obligations
and responsibilities vis-a-vis their traditional stake-
holders; and (3) that stakeholder theory seems easier
to maneuver in collecting and analyzing CSR data as
evidenced by the proliferation of empirical studies
that have essentially integrated a stakeholder approach
to CSR. It thus increasingly represents a concrete
alternative to traditional taxonomic models on offer.
Our empirical excursion in the Lebanese and
Syrian contexts has shown on the other hand how
stakeholder theory can be used to draw and test
new hypotheses, and to derive insights into general
CSR patterns/motivations. We have noted in this
respect the continued preoccupation of firms with
traditional core stakeholders (e.g., employees, cus-
tomers and shareholders) and the salience of an
instrumental stakeholder management approach
based on a narrow definition/understanding of
CSR, with the integration of some normative fla-
vors, vis-a-vis the community stakeholder. We
have also noted that stakeholder management is
affected by the relational attributes of stakeholders
and the pressures they can exert on corporations,
while also noting the increased proficiency of
MNCs in balancing a broader range of stakeholder
interests.
While no over-generalizations can be drawn from
our findings, particularly in relation to the latter two
hypotheses (H4 and H5), the study is generally
indicative of the possibilities and range of issues that
can be explored within the context a stakeholder
approach to CSR. The EPS methodology adopted
in turn has its own limitations, but these have been
noted and circumvented through using this tool for
gauging stakeholder management patterns (and not
as an aggregate measure of CSP) and by supple-
menting the data obtained through interviews with
managers. Our empirical study shows that stake-
holder methodology offers clear benefits in way of
deriving intuitive insights particularly in the context
of fleshing out specific stakeholder issues in the
context of familiar language that was easy to grasp
and relate to by managers.
This research allows in turn the delineation of
relevant suggestions for future research. There is a
need for more research along these lines within the
context of a stakeholder approach or framework.
Variations to the EPS can be considered and other
ways of classifying stakeholders (e.g., core vs. stra-
tegic vs. environmental) and differential weightings
of stakeholder issues which could yield equally
interesting insights. Research comparing the patterns
of stakeholder management of local companies and
international firms or subsidiaries is also very infor-
mative and can help build momentum towards
improved global practices. Finally more research
illuminating the patterns of stakeholder management
and CSR in developing countries is also very much
needed in view of the paucity of studies in such
contexts.
Note
1
With the exception of Reuters, which could be ac-
counted for in light of the nature of the industry (news
provider) and the relatively small size of the subsidiary
firm (comprising only 25 employees).
A Stakeholder Approach to Corporate Social Responsibility 229
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A Stakeholder Approach to Corporate Social Responsibility 231
Stakeholder Management Capability:
A Discourse–Theoretical Approach Abe Zakhem
ABSTRACT. Since its inception, Stakeholder Manage-
ment Capability (SMC) has constituted a powerful
hermeneutic through which business organizations have
understood and leveraged stakeholder relationships. On
this model, achieving a high level of capability largely
depends on managerial ability to effectively bargain with
stakeholders and establish solidarity vis-à-vis the successful
negotiation, implementation, and execution of “win–
win” transactional exchanges. Against this account, it is
rightly pointed out that a transactional explanation of
stakeholder relationships, regarded by many as the bottom
line for stakeholder management, fails to provide mana-
gerial direction regarding how to resolve a variety of
normative stakeholder claims that resist commoditization.
In response to this issue, this paper has two overlapping
goals. It seeks to elaborate a discourse theoretical
approach to the problem by first drawing out Jurgen
Habermas’ theory of communicative action and delin-
eating the various types of rational discourse. Second, the
paper attempts to present concrete implications for SMC
relative to reshaping the contours of rational, process,
and transactional analysis in light of central discourse
theoretical conclusions.
KEY WORDS: critical theory, discourse ethics, stake-
holder management capability, stakeholder management
theory, communicative action
Introduction
Managerial stakeholder models often represent
attempts to understand and describe a wide variety of
business relationships as forms of transactional
exchange. In very general terms, transactional rela-
tionships involve the mutual and voluntary trade of
assets for gain. Now broadly construed, ‘‘assets’’
correspond to a wide range of tangible (e.g., capital
and labor) and intangible (e.g., goodwill and social
capital) interests and associated metrics. Since its ori-
ginal characterization (Freeman, 1984), the notion of
Stakeholder Management Capability (SMC) has
constituted one of the more influential and transac-
tional frameworks for understanding and leveraging
stakeholder relationships. Essentially, SMC involves
managerial analysis at rational, process, and transac-
tional levels. Corresponding to each level of analysis,
managers are charged with: 1) mapping stakeholders
and identifying their perceived stakes, 2) structuring
organizational processes to reflect and align organi-
zational and stakeholder goals and expectations, and
3) negotiating transactions or ‘‘bargains’’ with stake-
holders sufficient for ‘‘balancing’’ competing interests
and surfacing discontent. On this model, achieving a
high-level of capability, indeed, the very ‘‘bottom
line’’ for SMC, comes down to the success or failure
of transactional exchanges (Freeman, 1984, p.69).
Provided that managers execute ‘‘win–win’’
exchanges, SMC promises a powerful and useful
heuristic for effective strategic management (Carroll
and Bucholtz, 2006). Despite the optimism, this
strategic and largely instrumental approach has come
under fire. It is rightly pointed out that although a
transactional account of stakeholder relationships may
help to balance stakeholder currencies, SMC fails to
provide managerial direction regarding how to con-
ceptualize, address, and resolve normative interests
that resist commoditization. Adapting a common
example, normative demands for the end of ‘‘sweat-
shop’’ labor are often not leveraged as pleas for
balancing the transactional interests of ‘‘slave’’ labor
against the interests of the business organization.
Dr. Abe J. Zakhem works primarily in the areas of ethical theory
and business ethics. He has worked in private industry as a
senior management consultant and chief operating officer and
is currently an assistant professor at Seton Hall University.
Journal of Business Ethics (2008) 79:395–405 � Springer 2007
DOI 10.1007/s10551-007-9405-5
On the contrary, claims of this kind constitute
outright rejections of exploitive labor practices by
way of a universal appeal to non-transferable human
rights. Without much effort we can identify a wide
variety of similar claims (e.g., deeply held commu-
nity values and demands for corporate legitimacy)
that call for the recognition and enforcement of
deeply held and non-economic moral obligations.
To reduce such interests to the status of negotiable
assets seems both morally objectionable and too
simple a model for effectively capturing the complex
nature of normative conflict (Orts and Strudler,
2002, p.222). The problem is further exacerbated by
the fact that any single strategic initiative can serve
as a normative flash point for competing stakeholder
conceptions of that, which is good, right, and
legitimate.
Certainly, the normative and practical limitations
of a purely transactional orientation to stakeholder
management constitutes a recognized concern.
Within stakeholder literature, this concern has been
met with rather traditional and largely deontological
attempts to instill in managerial analysis a ‘‘moral
point of view’’ that is sufficient for integrating
conceptions of the good and the right (Evan and
Freeman, 1993). Expanding the debate, this paper
addresses normative SMC concerns from a dis-
course–theoretical perspective. Accordingly, the first
part of the paper outlines the central features of
Jürgen Habermas’ theory of communicative action,
discourse ethics, and political theory and sets up a
general framework for a discourse–theoretical
approach. Particular attention will be paid to
defining a ‘‘moral point of view’’ from a discourse
ethical perspective. The second part advances
previous applications of Habermasian critical theory
to stakeholder management by recasting the SMC
categories of rational, process, and transactional
analysis in light of central discourse–theoretical
principles. Finally, the third and final part summa-
rizes the following conclusions. First, that rational
stakeholder mapping should be regarded as a
dynamic and discursive process that is ultimately
driven towards mutual understanding and partici-
patory solidarity. Second, that overcoming gaps
between discourse and practice requires continued
process analysis at both strategic and operational
levels. Lastly, that the ‘‘bottom line’’ for SMC must
be determined from a ‘‘moral point
of view.’’
Communicative action and discourse
Echoing prominent social action theory, Habermas
supports the claim that social solidarity and order
require a basic level of norm regulated coordination
and conduct. Moving beyond traditional attempts to
account for the ‘‘binding’’ power of social norms,
Habermas advances the concept of communicative
practices. Properly defined, communicative practices
refer to those social interactions that are driven
towards dialogically motivating, sustaining, and
renewing intersubjective consensus and mutual
understanding (Habermas, 1984, p.17). In short,
Habermas explains that speakers of a language
express criticizable validity claims concerning how
social action ‘‘ought to be’’ structured. Speakers
further warrant that, if called upon, they will provide
publicly justified reasons and point to shared
convictions that support their contentions. Under-
standing the very conditions of validity, hearers
likewise commit to respond with counteracting
reasons in the event of disagreement and dispute.
Collectively, both parties commit to an intersub-
jective and consensual process of reasoning with
the illocutionary goal of achieving mutual
understanding. Habermas refers to this process as
‘‘communicative reasoning’’ (Habermas, 1984,
p.11). Within this framework, social norms ulti-
mately owe their ‘‘binding’’ force to the fact that
definitive obligations on the parts of speakers
and hearers are incurred in the collective pursuit of
rational and consensual agreement.
Although foundational, communicative practices
certainly do not account for or adequately explain all
of the mechanisms affecting social order and coor-
dination. In fact, communicative appeals are often
rejected in favor of dogmatically held worldviews
and perlocutionary aims and goals. Habermas uses
the category of ‘‘rational-purposive’’ action to
explain the mode of reasoning at work in such sit-
uations. As opposed to communicative reasoning and
action, rational-purposive reasoning is not oriented
towards mutual understanding and consent and tends
to assess situational significance relative to an agent’s
own ‘‘privately held’’ interests and standards of
choice. Although a necessary component of social
interaction and coordination, Habermas observes
that lifeworld orientations dominated by operation-
alized forms of rational-purposive reasoning tend to
396 Abe Zakhem
reduce meaningful action to ‘‘strategic action.’’
Strategic actions are thusly defined as attempts to
influence situations and the behavior of other social
agents with the intent of advancing individual ends
(Habermas, 1984).
The pervasive rationalization of strategic orienta-
tions, however, carries with it two interrelated
problems and one clear way out. First, Habermas
observes that the reduction of meaningful social
interaction to strategic considerations resoundingly
erodes the communicative ‘‘glue’’ that produces
mutual understanding and social solidarity. This
erosion in turn contributes to such social pathologies
as lifeworld fragmentation, legitimation crises, ano-
mie, alienation, and social dissonance (Habermas,
1987, p.143). Second, strategic actions tend to
devolve into the use and application of morally
questionable means, such as force, threats, violence,
or inducements to manipulate rational opponents.
For Habermas, the solution to this problem does not
rely on a simple denunciation of strategic actions. If
we desire to avoid the ill effects of strategic action,
then we first ought to harmonize our plans and
pursue our individual and private goals on the
condition of communicative agreement (Habermas,
1984, p.86). In other words, communicative agree-
ment and action must serve as the horizon against
which strategic actions are understood, evaluated,
and harmonized. When communicative bonds are
broken, which is often the case in modern, pluralistic
societies, we require a complementary process
through which the ‘‘fabric’’ of communicative
action is repaired (Smith, 2004, pp. 318–320).
In order to draw out such a process, recall Hab-
ermas’ theory of communicative action. As noted,
communicative action rests on expressed warrants
and commitments directed towards an intersubjec-
tive and dialogical pursuit of mutual understanding.
Distinct from motivating rational participants by way
of brute force or enticement, the rationality inherent
in communicative practices is ‘‘seen in the fact that a
communicatively achieved agreement must be based
in the end on reasons’’ (Habermas, 1984, p.17).
Further, all competent speakers of language are
aware of these conditions of validity and likewise
bear some level of communicative obligation. Thus
from the very beginning, communicative practices
point to a highly cognitive and ‘‘argumentative’’
form of conflict resolution. In this sense,
‘‘argumentation’’ does not refer to mere rhetorical
debate. On the contrary, ‘‘argumentation’’ marks a
reflective form of communicative action whereby
competent speakers can thematize and dispute
operative validity claims with the aim of achieving
mutual understanding (Habermas, 1984, p. 25). In
other words, Habermas regards the turn towards
argumentation as constituting a rational ‘‘court of
appeal’’ that makes it possible to reestablish com-
municative understanding in spite of participatory
disagreement (Habermas, 1984, p.17–18).
Habermas further explains that efforts to
argumentatively preserve communicative action in
the face of disagreement must meet certain dialogical
conditions. In general, these dialogical conditions
must collectively ensure that validity claims are the
objects of discussion and that discursive outputs
reflect an intersubjective and rationally motivated
agreement. Habermas specifies certain dialogical
conditions within the framework of the discourse
principle (D). In its most basic form, (D) states that
‘‘just those action norms are valid to which all
possibly affected persons could agree as participants
in rational discourses’’ (Habermas, 1996, p. 107). As
such, (D) is the point of view from which norms of
action can be impartially justified. Implied by (D),
the general requirements for rational discourse in-
clude: the exclusion of coercive forces and strategic
influences, truthfulness, freedom of access to infor-
mation, equal participatory rights, and reciprocal
role taking and ‘‘ideal role taking,’’ or the reciprocal
reversal and checking of participatory points of view.
As such, discourse creates the necessary space
whereby competent speakers disengage from probl-
ematized action contexts, isolate validity claims, and
reach a rationally and communicatively motivated
agreement (Habermas, 1996, pp.108–109).
Whereas (D) represents an ‘‘ideal’’ and ‘‘irreduc-
ible’’ order that is ‘‘built into’’ communicatively
structured forms of life in general, actual discourses
take on different forms and require different sorts of
discursive rules. Much of Habermas’ more recent
work in political theory and discourse ethics relies
on distinguishing the separate realms of pragmatic,
ethical, moral, and legitimacy based discourses
(Habermas, 1996; 1993; 1990). While each form of
discourse in some way reflects (D) and thus requires
the same basic sorts of discursive rules, operational-
ized discourses differ with respect to various features:
Stakeholder Management Capability 397
the discursive goals at hand, argumentative criteria,
the required level of preexisting and background
consensus, the scope of the validity claim in ques-
tion, and the status of discursive participants (Reed,
1999). In short, as the nature of the validity claim in
question changes, the contours of rational discourse
likewise change and imply different and more or less
stringent cognitive and procedural demands. In
order to draw out these distinctions, the following
sub-sections briefly explain the different forms of
discourse and clarify that which constitutes and gives
dialogical weight to reasoning from a ‘‘moral point
of view.’’
Pragmatic discourse
Pragmatic discourse centers on collectively deter-
mining the ‘‘best’’ way to achieve predetermined
ends, preferences, and goals. While engaged in
pragmatic discourse, participants advance various
strategic or technical recommendations and evaluate
possible courses of action in light of accepted
decision-making criteria. More often than not,
pragmatic strategies are assessed against a standard of
efficiency and direct participatory attention towards
the critical evaluation of empirical data (Habermas,
1996, p. 160). The selection of the particular
strategy would then provide a rational basis for
implementing certain situational definitions and
norms and providing a context for understanding
and interacting with others. It is critical to note that
a discursive assessment of pragmatic validity claims
requires a high-level of preexisting communicative
consensus relative to that which is determined to be
good, right, and legitimate. So, even as (D) ideally
requires the consideration of all possibly affected
persons, pragmatic discourse must draw on a pre-
viously achieved communicative consensus.
Accordingly, the outputs of pragmatic discourse
constitute ‘‘hypothetical’’ imperatives, ultimately
grounded in particular and historically and culturally
contingent social action situations. When this
shared level of meaning is called into question (i.e.,
the validity claims turn from pragmatic contesta-
tions to questions concerning the good, right, or
legitimate), the application of (D) takes a different
form as do the corresponding features of rational
discourse.
Ethical discourse
Distinct from pragmatic discourse, the goal of ethical
discourse is to collectively determine that which is
‘‘good’’ for an individual, community, or association.
As such, ethical discourse counts as one distinct realm
of normativity (Reed, 1999b). Engaging in ethical
discourse involves proffering arguments in the form of
‘‘clinical advice’’ with the intent of reaching a con-
sensus over guiding values or ‘‘deep preferences.’’ In
other words, ethical discourse engages participants in a
higher form of self-clarification and understanding by
which they become reflectively aware of deeper,
‘‘normative consonances in a common form of life’’
(Habermas, 1996, p. 160–161). Unlike pragmatic
claims, ethical arguments are assessed against a stan-
dard of authenticity and direct participatory attention
towards the critical evaluation of various forms of the
‘‘good’’ life. The selection of an authentic identity
would then provide a rationally motivated and eval-
uative basis for assessing certain pragmatic claims (e.g.,
organizational goals, aims, values, and pragmatic
argumentative criterion), determining situational def-
initions, and interacting and engaging with others.
Similar to strategic determinations regarding the
‘‘best’’ technical recommendations, it is important to
note that conceptions of the ‘‘good’’ are also groun-
ded in particular, non-generalizable life histories, the
validity claims therein constituting hypothetical or
conditional imperatives that are issued from and
evaluated against the backdrop of certain unpro-
blematic meaning structures. Within ethical discourse,
(D) is likewise indirectly applied as appealing to all
members sharing particular ‘‘traditions and strong
evaluations’’ (Habermas, 1996, p.108). Yet, when the
unproblematic meaning structures required for ethical
discourse are called into question, notably, on grounds
that particular ways of life are unjust or illegitimate, an
application of (D) makes additional demands.
Moral discourse
Distinct from both pragmatic and ethical discourse,
moral discourse is geared towards rationally and
collectively determining that which is right. As such,
moral questions constitute a second realm of norm-
ativity. Specifically, moral discourse involves the
redemption of maxims and norms relative to their
398 Abe Zakhem
compatibility with the maxims and norms of others
(Habermas, 1993, p.6). Towing a decidedly Kantian
line, Habermas argues that ‘‘only a maxim that can be
generalized from the perspective of all affected counts
as a norm that can command general assent and to that
extent is worthy of recognition, or, in other words, is
morally binding’’ (Habermas, 1993, p.8). For Hab-
ermas, however, if we expect to find a rationally
motivated and generally binding agreement, then we
must throw into relief those questions ‘‘that can be
resolved by an appeal to a generalizable interest; in
other words, questions of justice’’ (Habermas, 1993,
p.151). Parting with Kantian moral theory, considered
to permit a monological application of universality,
Habermas’ approach rests on the intersubjective and
dialogical determination of that which is just. So,
while moral discourse requires an application of the
principle of universalization (U), it is applied as a rule
of argumentation, stating that a norm is valid only if
all affected can accept the consequences and the side
effects its general observance can be anticipated to
have for the satisfaction of everyone’s interests (and
these consequences are preferred to those of known
alternative possibilities). Correspondingly, (D), as seen
from a ‘‘moral point of view’’, requires that only those
norms can claim to be valid that meet (or could meet)
with the approval of all affected in their capacity as
participants in a practical discourse (Habermas, 1993,
pp.65–66). Within this context, a ‘‘moral point of
view’’ involves separating out questions of justice and
then dialogically testing the validity of social norms
vis-à-vis (U). Distinct from pragmatic and ethical
discourse, the cognitive requirements of moral dis-
course requires an ‘‘idealizing’’ moment of univer-
sality that effectively distances participants from the
contexts of life in which their ‘‘particular identity’’ is
interwoven and as such proffers categorical action
norms (Habermas, 1993, p.12). Despite the possibility
of moral convergence, there remains the distinct
reality that in our complex, pluralistic, and fragmented
society conflict between that which is efficacious,
good, and are inevitable.
Legitimacy
Discourse regarding legitimacy constitutes a third
realm of normativity quite distinct from ethical and
moral orientations. Playing a largely integrative role,
legitimacy-based discourse aims at ensuring that
pragmatic, ethical, and moral discourses are supported
and that the outputs of which are reflected in larger
political and legislative institutions. Although a
complete explication and defense of Habermas’
political theory is well beyond the scope and intent of
this paper, the central argument is that legitimacy
ultimately derives from the communicative power of
citizens (Habermas, 1996, 151). As Darryl Reed
explains, ‘‘It is the exercise of communicative action
in public discourses (involving moral, ethical, and
pragmatic concerns) carried out through a web of
political institutions which generates the basis for
legitimate law’’ (Reed, 1999b, p.26). Understanding
legitimacy in this way, Habermas reconfigures (D) in
terms of a principle of democracy: ‘‘only those statues
may claim legitimacy that can meet with the assent of
all citizens in a discursive process of legislation.’’
(Habermas, 1996, p.110) This move carries with it
two general implications. First, there must be a system
of rights to ensure that (D) can take the shape of a
principle of democracy through the medium of law.
Primarily, these rights include various guarantees
(e.g., freedom of opinion and equal entitlement for
influencing political will formation) for securing and
balancing private and public autonomy. (Habermas,
1996, pp.128–129) Second, there must be defined
principles that serve to ‘‘steer administrative processes
and transform communicative power into adminis-
trative power’’ (Habermas, 1996, pp.168–176). These
principles include ensuring popular sovereignty,
political pluralism, equal protection under the law,
and the separation of state and society (Habermas,
1996, pp. 122–123). Whereas the previous forms of
rational discourse elicit either hypothetical or uni-
versal imperatives, the outputs of legitimacy-based
discourse reflect a dual nature. The dual faced nature
of legal validity is expressed in the fact that legal
norms enable the pursuit of self-interest while at the
same time stem from a discursive process that carries
the mark of communicative legitimacy (Habermas,
1996, p.31).
The priority of the right
As we have seen, Habermas’ discursive account aims
to elaborate communicative means for achieving
social solidarity and order, resolving conflict, and
Stakeholder Management Capability 399
regulating egoistic pursuits. Success in this endeavor
accordingly requires a rather complex array of
discourses situated at each of the previously
differentiated and operationalized levels. Despite the
importance of fostering all forms of discourses,
Habermas grants dialogical priority to moral
issues.
Earlier noted, a ‘‘moral point of view’’ constitutes
the privileged and idealized perspective from which
questions of justice can be rationally and impartially
tested. On what grounds does Habermas support a
theory of the right over the good? Well stated in
other more detailed commentaries (Rehg, 1994),
Habermas accepts as a ‘‘contemporary social fact’’
that our post-traditional world is marked by
numerous, fragmented, and conflicting conceptions
of the good life. Although perhaps compelling for a
particular form of life, ethical and other hypothetical
imperatives lack the intersubjective force necessary
for communicatively bridging the normative gap
between competing forms of life. For Habermas,
only norms that find universal assent can serve as a
foundation for normatively and communicatively
structured social interactions (Rehg, 1994, pp.94–
100). The dialogical priority of the right over the
good is explained as follows. If we want to build
solidarity and avoid the ill consequences of instru-
mental reasoning and strategic action, then we must
give first priority to rationally and communicatively
resolving questions of justice.
While moral discourse provides a fundamental
basis for universal agreement, the cognitive force
behind dialogically motivated moral validity claims is
weak and suffers from ‘‘unprecedented’’ cognitive,
motivational, and organizational demands (Haber-
mas, 1996, pp.114–118). Simply put, moral dis-
course requires complementary processes and
institutional forms for spreading ‘‘decontextualized’’
moral insight through complex, strategically driven,
and pluralistic forms of life. Habermas explains that
‘‘only those forms of life that meet universalist
moralities halfway…fulfill the conditions necessary to
reverse the abstractive achievements of decontextu-
alization and demotivation’’ (Habermas, 1990,
p.109). As we have seen, the formulation of legiti-
mate law and institutions represents a crucial com-
ponent in achieving this end. We must remember,
however, that Habermas understands legitimacy as
ultimately deriving its force from the communicative
power of citizens. Further, that this communicative
power must first be developed vis-à-vis robust public
discourses concerning that which is pragmatic, good,
and just. How exactly can we expect to meet
universalistic moralities half way? Following Rehg,
one should seek incorporate discourse–theoretical
intuitions in the decision-making procedures and
organizational processes of various types of institu-
tions (Rehg, 1994, 230). Accordingly, Section 2
attempts to meet this demand by drawing out dis-
course–theoretical implications for SMC rational,
process, and transactional analysis.
Implications for stakeholder management
capability
At the beginning of this paper we identified a per-
sistent and unresolved problem with the transactional
and largely instrumental foundation of SMC. In short,
treating all stakeholder interests as balanceable com-
modities was found to be morally objectionable and
thus unable to capture the complex nature of nor-
mative conflict. We now know that stakeholder
claims come in different varieties and carry with them
distinct cognitive demands. In many cases, stake-
holders and business organizations share similar values
(e.g., economic efficiency, return on investment, cost
minimization) and norms (e.g., principles of meri-
tocracy) sufficient for resolving disputes through
traditional, economic means (e.g., transactional bar-
gaining, negotiation, and exchange). At other times,
however, stakeholder claims are aimed at criticizing
the dominant perspective through which interests are
commonly understood and valuated. Such is the case
with the example of sweatshop labor presented in the
introduction. Stakeholder claims of this kind are
decidedly more ‘‘radical’’ in that they serve to chal-
lenge prevailing economic and exchange-based hori-
zons of understanding. How are managers to capture
and resolve these more radical normative contestations
without immediate recourse to transactional decision-
making models? Unfortunately, SMC fails to provide
managers with a coherent framework for answering
such questions. Attempts to address this concern by
simply asserting that managers ought to in some way
‘‘balance’’ competing conceptions of the good and the
right (Evan and Freeman, 1993) are at best left
wanting of further explanation and at worst guilty of
begging the question.
400 Abe Zakhem
A discourse–theoretical approach provides some
critical insight as to how to understand and move
beyond these difficulties. Essentially, in the face of
more radical normative conflict managers may
choose to adopt one of two general orientations.
Option 1: managers can take a strategic orientation
and endeavor to influence stakeholder relationships
in ways that advance ‘‘private’’ organizational
interests. Although at some level necessary for
conducting business, we found that when left
unchecked strategic action tends to denigrate into
the use of morally questionable means of influence
(e.g., coercion, inducement, or even violence).
Additionally, relationships that are largely strategic in
nature fail to produce the communicative ‘‘glue’’
necessary for a more robust form of mutual under-
standing and solidarity. Given that both of the
problems associated with strategic responses under-
cut the normative acceptability and practical utility
of SMC, we require another approach. Therefore,
Option 2: prior to applying strategic standards of
evaluation, managers ought to seek a communica-
tively driven normative consensus between stake-
holders regarding generalizable and shared interests.
In short, strategic interactions must first be based on
and in someway reflect an intersubjective and dia-
logical recognition of that which is good, right, and
legitimate, with special priority given to moral
issues.
Although there is ongoing philosophical debate
over many aspects of Habermas’ theory of commu-
nicative action and discourse, a brief review of the
business ethics literature suggests that theorists are
beginning to note distinct discourse–theoretical
advantages over more traditional management
approaches. On empirical grounds, a discourse–
theoretical approach is said to better describe the
nature of stakeholder relationships and draw out a
more accurate picture of pluralistic and seemingly
divergent stakeholder claims (Waxenberger and
Spence, 2003). On economic grounds, the com-
municative model is proving to be a compelling
model for determining and advancing organizational
aims and goals (Smith, 2004) and serving as a
mechanism for economic coordination (Kesting,
1998). Finally, normative advantages include the
ability for a discourse-theoretical approach to
systematically incorporate various forms of nor-
mative reasoning (e.g., virtue, deontological, and
consequentialist approaches), provide a more robust
account of social consent (Reed, 1999a), and gain a
deeper understanding of human rights and corporate
legitimacy (Van de Ven, 2005). Contributing to
these ends, the following sub-sections will advance
previous attempts to integrate Habermasian critical
theory with SMC (Jonker and Foster, 2002) and
rethink the traditional categories of rational, process,
and transactional analysis in light of central dis-
course–theoretical principles.
Rational level of analysis
The first step in enhancing stakeholder management
capability is to rationally ‘‘map’’ organization stake-
holder groups and define stakes of each. Regardless
of the specific analytical techniques involved,
applying a discourse–theoretical approach to stake-
holder mapping yields two primary conclusions.
First, the determination of who and what really
counts ought to be the result of operationalized
forms of discursive reasoning. Although this requires
a rather complex array of multi-leveled discourses,
some general suggestions are as follows. At an ethical
level, we could expect that managers rationally
appraise an organization’s mission, values, and cul-
ture and ultimately pose the question, ‘‘Who are we
and what would we like to become?’’ Since the
determination of organizational identity will neces-
sary cut across and impact various conceptions of the
good life, ethical discourses should be structured to
include participation from all stakeholders that are
part of larger business communities (e.g., employees,
shareholders, subcontractors, and local communi-
ties). At a moral level, discursive participants will
likely extend beyond the traditionally defined busi-
ness community (e.g., across industries and down
supply chains) and consist of all those groups im-
pacted by operative principles of justice, which may
include competitors. Within today’s business envi-
ronment, moral questions will likely focus on issues
of economic opportunity, fair trade and competi-
tion, fair labor practices and compensation, and fair
global development strategies, to name a few.
Regarding questions of legitimacy, organizations are
minimally required to support the formulation of
legitimate law, and where appropriate, actively
contribute to the communicative resolution of
Stakeholder Management Capability 401
competing pragmatic, ethical, and moral claims.
Given the globalized nature of business, organiza-
tions should also seek to structure or otherwise
reform governmental and non-governmental inter-
national institutions based on the discursive principle
of democracy. As scholars have already noted, this
may be accomplished by modeling international
governance bodies and organizational standards in
accordance with communicative principles (Steffek,
2003).
Second, a rational stakeholder map must represent
discursive outputs in their categorically differentiated
forms. By treating all stakeholder claims in the same
way, we noted that SMC arbitrary elides logical
differences between the types of validity claims and
thus misses opportunities for rational discourse and
mutual understanding. Accordingly, stakeholder
maps should now clearly lay out the various types of
pragmatic, ethical, moral, and legitimacy-based
claims and likewise specify the values, moral norms,
and legal norms upon which such claims are foun-
ded. In short, managers must understand stake-
holders as discursive claimants who leverage various
types of normative claims qua community member,
natural person, and citizen. This may make stake-
holder mapping a more complex and difficult
activity. Stakeholders claims, however, can no
longer be simply represented as extant interests that
are fully captured and strategically understood
through the lens of transactional exchange. On the
contrary, to reduce all stakeholder’s interests to
balanceable commodities myopically reduces mana-
gerial vision and analysis to only one, largely stra-
tegic, aspect of rational analysis. Additionally,
stakeholder salience must reflect rational analysis
from a moral point of view. Given the dialogical
priority of moral questions, managers should high-
light those claims that can be resolved in relation to a
universalizable interest. Accomplishing this task,
rational stakeholder maps should be structured to
throw into relief questions of justice, perhaps as
‘‘special characteristics,’’ or those features of stake-
holder interaction that indicate a requirement of
particular and continued attention.
This analysis only points in the direction of some
general applications of a discourse–theoretical
approach to rational stakeholder mapping. Indeed,
much work is still needed to develop specific
strategies that support discursive arrangements and
analytic techniques for mapping the complex world
of stakeholder interaction. This, of course, is no
small task. That which should become clear, how-
ever, is the determination of stakeholder identity and
salience is a now regarded as a dynamic and
discursive process that is ultimately driven towards
mutual understanding and participatory solidarity.
Further, this process will be narrowly or broadly
construed depending on the nature of the validity
claim in question and the level of required discursive
participation. In any event, rational mapping must
be designed to effectively move organizations out
from cloistered positions of strategic analysis and into
a more engaged and normatively structured societal
dialogues. This requirement seems perfectly consis-
tent with the spirit and intent of stakeholder man-
agement and the goals of rational mapping.
Process level of analysis
The second step in enhancing an organization’s
stakeholder management capability is to align busi-
ness processes with the normative outputs derived.
In line with a discourse-theoretical analysis, organi-
zational processes ought to be evaluated and
accordingly restructured in line with shared con-
ceptions of that which is good, right, and legitimate.
On the practical front, managers can certainly expect
that there will be definitive gaps between discur-
sively determined values, moral norms, and legal
norms and actual practice. A particular challenge for
bridging the gap between discourse and practice is
the fact that business organizations often reflect
deep-seated propensities for strategic action and re-
sist evening out unequal distributions of power. In
light of this apparent difficulty, pressing questions
come to the fore. How can managers effectively
integrate communicative and strategic actions? What
sorts of organizational process are required to meet
normative discourses half way? How can a moral
point of view take root in environments hostile to
universalistic moralities? Overcoming these chal-
lenges requires reconfiguring organizational process
at two complementary levels.
First, managers ought to bring stakeholders into
strategic decision-making processes. Freeman rec-
ognizes early on that a primary means for effec-
tively aligning interests is to include stakeholder
402 Abe Zakhem
participation at various levels of strategic planning.
(Freeman, 1983; Freeman, 1984, p.69). In this
way, stakeholders will set the strategic tone for a
business organization from the top down. In dis-
course–theoretical terms this implies that bridging
the gap between rational analysis and practice
requires stakeholder representation in a variety of
executive and operationalized forms of pragmatic
discourse. To this point, there has been a con-
siderable amount of research suggesting how this
can actually be accomplished. Jeffery Smith, for
example, cites several examples (e.g., at Saturn
Corporation) where organizations successfully link
the pursuit of strategic ends and communicatively
oriented actions (Smith, 2004). Other scholars
have developed communicative means for effective
environmental analysis, screening, and reporting
(Wiklund, 2005; Dayton, 2002), enterprise plan-
ning (Dillard and Yuthas, 2006), and strategic
development efforts in developing countries
(Reed, 2002). Bringing stakeholders into higher-
level strategic and pragmatic discourses, however,
is but one piece of the puzzle. Bridging the gap
between discourse and practice requires additional
process analysis.
Second, managers ought to analyze and design
management systems to ensure that an organization’s
day-to-day operations reflect and meet stakeholder
claims. Complementing efforts at the strategic plan-
ning level, stakeholders will also need to set the
operational tone of an organization from the bottom
up, so to speak. Unfortunately, as others have pointed
out, this aspect of process analysis, once prominent in
Freeman’s earlier writings, has since been unduly
neglected (Jonker and Foster 2002, p.190). Turning
our attention to this level of analysis from a discourse–
theoretical perspective yields valuable insight. In
particular, it means that management systems should
be in place to ensure that shared conceptions of the
good, right, and legitimate are communicatively re-
flected in an organization’s everyday operations.
Although there are many types of management
systems that could fit the bill, there are good reasons
for suggesting that modeling organizational ethics
programs along discourse–theoretical lines is a good
starting place. First, ethical programs have proven to
be effective and systematic means for positively
influencing organizational-ethical culture (Izraeli and
Schwartz, 1998). Second, the key components for an
effective ethics program are well defined in US fed-
eral law and flexible enough to apply to all types of
business organizations (Palmer and Zakhem, 2001).
Finally, there is a growing movement that suggests
that ethical programs should be designed and ulti-
mately evaluated from a ‘‘moral point of view’’
(Reynolds and Bowie, 2004).
Although we cannot apply discourse–theoretical
principles to all components of a robust ethical
program, several implications seem obvious. Ethical
codes of conduct, mission statements, and proce-
dures should appropriately reflect shared values,
moral norms, and legal norms. Such documentation
should be communicatively transmitted, understood
at all levels of the organization, and be open to
rational criticism and change. Ethical training pro-
grams should include means to develop communi-
cative competence and moral reasoning. Perhaps
most importantly, ethical audits should be conducted
to both monitor system performance and serve as a
catalyst for introducing a moral point of view into
company operations and routine processes (Garcı́a-
Marzá, 2005). In other words, ethical program
effectiveness and process capability should be audited
and evaluated, in large part, against the level of
communicatively and discursively achieved agree-
ment and solidarity. Furthermore, the results of
ethical audits should be publicly reported in a
manner consistent with communicative principles
(Yuthas et al., 2002).
Again, this analysis only points in the general
direction of how to analyze and structure organiza-
tional processes from a discourse–theoretical per-
spective. We should, however, come to the
realization that overcoming gaps between discourse
and practice requires continued process analysis at all
levels of the organization.
Transactional level of analysis
The final step in enhancing and organization’s stake-
holder management capability is for managers to
establish and execute ‘‘win–win’’ transactional
exchanges with stakeholders. It is through transac-
tional processes that managers must, at some level,
engage stakeholders in an effort to surface discontent
and ‘‘balance’’ competing claims. In this arena it can
also be expected that both managers and stakeholders
Stakeholder Management Capability 403
will, and perhaps must, exert some level of strategic
influence. While transactional negotiation and ex-
change should continue to play a central role, it can no
longer be regarded as the ‘‘bottom line’’ for stake-
holder management. As Robert Phillips recognizes,
stakeholder relationships should have moral restric-
tions rather than being merely strategic in nature
(Phillips, 2003, p.38). From a discourse–theoretical
perspective, this means that transactional relationships
ought to be ultimately judged from a moral point of
view. In other words, transactional interactions must
first be based on and in someway reflect an intersub-
jective and dialogical recognition of that which is
right.
In the complex world of business, however,
establishing shared normative convictions through
discourse is likely to be an ongoing, fragile, and often
open-ended task of argumentation, learning, and
continual improvement. Accordingly, managers will
potentially need to conduct business and engage
stakeholders as transactional partners without nec-
essarily fully realizing moral consensus. In the
absence of communicatively established moral
norms, however, bargaining can still occur and at
least indirectly reflect a moral point of view. As
Habermas recognizes, bargaining processes are
appropriately tailed for situations in which social
power relations cannot be neutralized in the way
rational discourses presuppose. Whereas a rationally
motivated consensus rests on reasons that convince
all parties in the same way, compromised bargains
can be accepted by the different parties each for its
own different reasons. While transactional bargain-
ing cannot replace moral discourse, it can be regu-
lated from the standpoint of fairness. At a minimum,
this requires that all negotiating parties be provided
with ‘‘an equal opportunity to influence one another
during the actual bargaining, so that all the affected
interests can come into play and have equal changes
of prevailing.’’ (Habermas, 1996, pp. 165–167)
Whether directly or indirectly, the ‘‘bottom line’’
for stakeholder management must be determined
from a moral point of view.
Concluding remarks
In this paper we have articulated and analyzed a
persistent problem with SMC transactional analysis
and balancing. Recognizing the need to comple-
ment SMC analysis with a ‘‘moral point of view,’’
we parted company with traditional normative ap-
proaches and recast morality in terms of Habermas’
discourse–theoretical and ultimately communicative
perspective. This exegesis leads to several important
implications for SMC. First, that stakeholder map-
ping should be regarded as a dynamic and discursive
process and one that is ultimately driven towards
achieving mutual understanding. Second, that
overcoming gaps between discourse and practice
requires continued process analysis at both strategic
and operational levels. Lastly, that the ‘‘bottom line’’
for transactional involvement with stakeholders must
be determined from a moral point of view. While
this paper only provides a general framework for
adapting discourse–theoretical principles to SMC
analysis, the conclusions drawn will hopefully inform
more detailed research.
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Department of Philosophy,
Seton Hall University,
400 South Orange Avenue, Fahy Hall, South Orange,
NJ, 07042, U.S.A
E-mail: zakhemab@shu.edu
Stakeholder Management Capability 405
