Definition of Corporate Social Responsibility

 

Definition of Corporate Social Responsibility (CSR)

Students will define their own definition/concept of CSR and compare/contrast it with the CSR Pyramid, utilizing class readings, outside research, and class discussion of other CSR models. 

 

– Five (5) pages of content (this does not include the cover page and references page)

– A minimum of five (5) different resources in addition to those provided within the readings.

– APA Style: Times New Roman 12 with 2.0 line spacing.

 

Note: Please do like the example file which is already attached below!

http://www.mallenbaker.net/csr/definition.php

 

Due Date: 11.00 p.m., Saturday, April 13, 2013 (New York Time)

Definition of Corporate Social Responsibility (CSR)

Students will define their own definition/concept of CSR and compare/contrast it with the
CSR Pyramid
, utilizing class readings, outside research, and class discussion of other CSR models.


Five (5) pages of content

(this does not include the cover page and references page) and a minimum of five (5) different resources in addition to those provided within the readings.

APA Style – Times New Roman 12 with 2.0 line spacing.

1

Definition of Corporate Social Responsibility

Name

Subject

Definition of Corporate Social Responsibility

Date

Professor

Introduction

Corporate social responsibility (CSR) is a very important concept in the business world and in society. In essence, CSR is the relationship between companies, their shareholders, stakeholders, and the rest of society. Through the influence and power of different people and groups, businesses attempt to self-regulate themselves in order to do more than to make a profit or to meet the bottom line. Even though the main responsibilities of a company are to make a profit, to provide a good or service that people want, and to follow the law, a free market incentive to be socially responsible exists. For example, one of three oil companies could be socially responsible by investing money into more “green” energy like solar and wind power. Due to the popularity of “green” energy, that particular oil company could receive more business than its competitors, which in then could make the other two companies become socially responsible as well. This definition of CSR can be compared to different CSR models, including the CSR Pyramid and the 3C-SR Model.

The Pyramid of Corporate Social Responsibility

Archie B. Carroll argues that corporate social responsibility (CSR) should encompass a number of responsibilities or components that each business person should accept. These responsibilities have existed in some form throughout history. The components are put together on a pyramid. The four social responsibilities of CSR are economic, legal, ethical, and philanthropic (1991).

Businesses have economic responsibilities. Companies, which provide goods and services to various consumers, are economic entities in society. Entrepreneurship is ultimately possible mainly because there is a profit motive for entrepreneurs to strive for. That is why organizations try to maximize their profits. As a result, businesses provide goods and services while making a profit. The consumer receives a good or service that he or she wants while the entrepreneur or manager makes money for providing that good or service. Carroll argues that if a corporation cannot meet its economic responsibilities, it cannot meet the other responsibilities as well. For example, how can a company meet its philanthropic responsibilities if it has no money or funds to give away or spend? He also lists five economic components of CSR. They are to maximize profits, maximize earnings per share, be competitive, be efficient as possible, and to consistently earn profits (1991).

Another component of CSR is legal responsibilities. In addition to firms making and maximizing profits, they have to follow all of the laws and regulations issued by the government. These rules tend to create a level playing field for all companies to do business under. Organizations are expected to follow the ‘social contract,’ which is the relationship between businesses and society, under which they attempt to meet their economic responsibilities. “Legal responsibilities reflect a view of ‘codified ethics’” under which businesses practice fairly. Carroll states that even though economic and legal responsibilities coexist as maxims of the free market, legal responsibilities are the next layer on the CSR pyramid. He lists five important legal responsibilities that firms need to do in order to be socially responsible. These components are to behave consistently with the law, comply with the law, “be a law-abiding corporate citizen” (pg. 2), fulfill all legal obligations, and meet all legal requirements when providing goods and services (1991).

The third component is ethical responsibilities. Even though they might not be a part of the law, ethical responsibilities can be determined by society whether or not certain actions are appropriate or acceptable. These components reflect what each individual’s norms, values, and morals are and also what society deems to be fair. Ethics can be the driving force behind certain laws. It is difficult for certain businesses to follow ethical practices because these responsibilities are often times poorly defined or continuously under scrutiny. Ethical responsibilities often go hand to hand with legal responsibilities even though the ethical components are the next layer on the CSR pyramid. Carroll states five important ethical responsibilities for businesses to follow. They are to behave consistently with ethical norms, respect ethical societal norms, be ethical while accomplishing organizational goals, recognize “that good corporate citizenship be defined as doing what is expected morally or ethically” (pg. 3), and understand that being ethical is more than simply following the law (1991).

The fourth and final component of CSR is philanthropic responsibilities. These responsibilities are those that society expects that businesses exercise in order for them to be good corporate citizens. Businesses respond to pressure from individuals, society, and interest groups in order to do things that promote goodwill and human welfare. Companies often give away or spend their money, resources, labor, and/or time to worthy causes such as charity, education, the arts, and other community based initiatives. Being philanthropic is voluntary because even though it considered socially responsible for firms to give back to the community, members of society do not generally think that it is unethical if they are not philanthropic. Carroll argues that the philanthropic component of the CSR is at the top of the pyramid because it is considered less important than the other three responsibilities even though it is highly desired and prized. He states five important philanthropic responsibilities. These components are to consistently meet society’s standards for charitable philanthropy, “assist the fine and performing arts” (pg. 3), be charitable toward the community, fund educational institutions, and contribute to projects that promote the general welfare of the community (1991).

The 3C-SR Model

John Meehan, Karon Meehan, and Adam Richards (2006) say that many business scholars say that corporate responsibility (CR) either opposes or is an auxiliary to the profit motive. They state that CR is “a means to, rather than [a] drain on, business success” (pg. 6). They came up with a model which incorporates the term ‘social resources’ which “are made up of three inter-related components whose simultaneous presence underwrites the credibility of a product/service offer targeted at the ‘ethical consumer’” (pg. 6-7). These three components are ethical and social commitments, “corrections with partners in the value network,” and “consistency of [behavior] over time to build trust” (pg. 7).

The ethical and social commitments “represent the values element of social resources” (pg. 7). These commitments can be codified or written into company policies, the company’s mission, organizational culture, objectives, and programs. They can also be compared to the Carroll’s CSR Pyramid’s economic, legal, ethical layers of the pyramid. When organizations have an inadequate commitment to ethical standards, their legitimacy is low because they focus consistently on short-term profits. As a result, these companies will more than likely lose some customer support and other businesses in that industry will reaffirm their focus on finding ways to meet the bottom line while maintaining their ethical and social commitments. An example of this phenomenon is when Mattel and Hasbro resisted to adopt certain standards that focused on workplace safety, wages and salaries, health, and training. As a result, they were both criticized for not adopting these standards, which were seen as a way to maintain corporate legitimacy in regards to ethical and social commitments (J. Meehan et al., 2006).

The second component of the 3C-SR Model is connections with partners in the values network. J. Meehan et al. (2006) cite Normann and Ramirez who state that values are created in a business network when “different economic actors…work together to co-produce value” (pg. 8). The goal is to rearrange the roles and relationships among the different economic actors in order to create the optimal amount of value. Socially responsible firms should have a system that creates value for the company as well those around them. Credibility is built when firms chooses to establish relationships with other businesses.

The third and final component of the 3C-SR Model is the consistency of behavior. This “refers to the [behavioral] element of social resources” throughout the organization. Businesses that do not follow their ethical and social commitments are not seen as being credible at all. This lack of credibility can be shown as a deficit in corporate social performance. Many people in society criticize firms that are not viewed as being consistent in adhering to their ethical and social commitments. Usually, organizations that do not follow their commitments are seen to be exploiting economic conditions in order to meet the bottom line (J. Meehan et al., 2006).

Conclusion

Corporate social responsibility (CSR) can be defined or interpreted differently by many people. The CSR Pyramid and the 3C-SR Model are two different interpretations of CSR. The CSR Pyramid is depicted as having four components that are layered on top of each other: economic, legal, ethical, and philanthropic. The 3C-SR Model has three components which represent social resources: ethical and social commitments, connections with partners in the value network, and consistency of behavior. The definition given in the introduction can be best compared to the CSR Pyramid, which is similar to an ice cream sundae. The economic component refers to the ice cream, legal reflects the whipped cream, ethical represents the chocolate syrup, and the philanthropic component is like the cherry on top. It is not an ice cream sundae without the ice cream like a business cannot meet its legal, ethical, and philanthropic responsibilities without performing the firm’s economic obligations. As long as a firm focuses on making a profit, follows the law, and acts ethically, then it is socially responsible. Being philanthropic should be desired, but remain optional.

References

Carroll, A. B. (1991). The Pyramid of Corporate Social Responsibility: Toward the Moral

Management of Organizational Stakeholders. Business Horizons, 34(4), 39-48.

Meehan, J., Meehan, K., & Richards, A. (2006). Corporate Social Responsibility: The 3C-SR

Model. International Journal of Social Economics, 33(5/6), 1-13.

Conceptsand Definitions of CSR and Corporate Sustainability

– between agency and communion –

Marcel van Marrewijk

September 2002

Abstract
This paper provides an overview of the contemporary debate on the concepts
and definitions of Corporate Social Responsibility (CSR) and Corporate
Sustainability (CS). The conclusions, based on historical perspectives,
philosophical analyses, impact of changing contexts and situations and
practical considerations, show that ‘one solution fits all’-definition for CSR
should be abandoned, accepting various and more specific definitions
matching the development , awareness and ambition levels of organizations.

§ 1. Introduction

In academic debates and business environments hundreds of concepts and definitions have been
proposed referring to a more humane, more ethical, more transparent way of doing business. This
point in time is an important if not critical moment in the development process of new generation
business frameworks facilitating sustainable growth. A continuation of the creativity period – “let 100
flowers blossom” – will lead to unclear situations: by the time real progress is at hand a clear and
unbiased definition and concept will be needed to lay a strong foundation for the following steps in the
development process of corporate sustainability and especially in its implementation.

In chapter two, I will start with the contemporary critique on CSR. From there I will investigate
historical and philosophical arguments (chapter three) supporting or falsifying the proposal to
differentiate the notion of corporate sustainability according to the development stages of the
organisations. In chapter four I will deal with the major trends supporting corporate sustainability and
elaborate on the changing relationships between corporations, governments and civil society. In chapter
five I will list some recent proposals on the concept and definitions of CSR and CS and will finally
propose a set of differentiated definitions of corporate sustainability, each related to a specific ambition
level c.q. development level of organizations.

“The contents of this publication reflect the views of the author. The European Commission is not liable for any use that may be made thereof”

European Union
European Social Fund
Article 6 Innovative Measures

Author: Marcel van Marrewijk, August 2002 Second draft: controlled circulation 2

2.2 Problems with current definitions
According to Göbbels (2002), Votaw and Sethi (1973) considered social responsibility a brilliant term:
“it means something, but not always the same thing to everybody”. Too often, CSR is regarded as the
panacea which will solve the global poverty gap, social exclusion and environmental degradation.
Employers’ associations emphasize the voluntary commitment of CSR. Local governments and some
Non-Governmental Organizations (NGOs) believe public-private partnerships can, for instance
rejuvenate neighbourhoods. Also various management disciplines have recognised that CSR fit their
purposes, such as quality management, marketing, communication, finance, HRM, and reporting. Each
of them present views on CSR that align with their specific situation and challenges. The current
concepts and definitions are therefore often biased towards specific interests.
Banerjee (2001:42) states that corporate social responsibility is “too broad in its scope to be relevant to
organizations” and Henderson (2001: 21-22 ) “there is no solid and well-developed consensus which
provides a basis for action”. The lack of an “all-embracing definition of CSR” (WBCSD, 2000: 3) and
subsequent diversity and overlap in terminology, definitions and conceptual models hampers academic
debate and ongoing research (Göbbels, 2002:5).
On the other hand, an ‘all-embracing’ notion of CSR has to be broadly defined and is therefore too
vague to be useful in academic debate or in corporate implementation. A set of differentiated
approaches, matching the various ideal type contexts in which companies operate, could be the
alternative.
Jacques Schraven, the chairman of VNO-NCW, the Dutch Employers Association, once stated1 that
“there is no standard recipe: corporate sustainability is a custom-made process”. Each company should
choose – from the many opportunities – which concept and definition is the best option, matching the
company’s aims and intentions and aligned with the company’s strategy, as a response to the
circumstances in which it operates.

2.3 A historical perspective
Past eras have shown acts of charity, fairness and stewardship, such as the medieval chivalry and
Scholastic view on pricing, the aristocracy’s noblesse oblige, the early 20th century paternalistic
industrialists and the contemporary ways of corporate (and private) sponsoring of arts, sports,
neighbourhood developments, etcetera.
In academic literature, various authors2 have referred to a sequence of three approaches, each including
and transcending one other, showing past responses to the question to whom an organization has a
responsibility.
According to the shareholder approach, regarded by Quazi and O’Brien (2000) as the classical view on
CSR, “the social responsibility of business is to increase its profits” (Friedman, 1962). The shareholder,
in pursuit of profit maximization, is the focal point of the company and socially responsible activities
don’t belong to the domain of organizations but are a major task of governments. This approach can
also be interpreted as business enterprises being concerned with CSR “only to the extent that it
contributes to the aim of business, which is the creation of long-term value for the owners of the
business” (Foley, 2000).
The stakeholder approach indicates that organizations are not only accountable to its shareholders but
should also balance a multiplicity of stakeholders interests that can affect or are affected by the
achievement of an organization’s objectives.(Freeman, 1984)
According to the societal approach3, regarded as the broader view on CSR (and not necessarily the
contemporary view), companies are responsible to society as a whole, of which they are an integral part.

1 Quote in the Volkskrant: “Er zijn geen standaardrecepten: MVO is maatwerk”
2 See e.g. Göbbels (2002), Van Marrewijk (2001), Quazi & O’Brien (2000), Freeman (1984)
3 With early contributions of McGuire (1963), Goodpaster & Matthews (1982) and Committee for Economic Development – CED

(1971), but also van Marrewijk (2001) and Göbbels (2002)

Author: Marcel van Marrewijk, August 2002 Second draft: controlled circulation 3

They operate by public consent (licence to operate) in order to “serve constructively the needs of
society – to the satisfaction of society”4.

The philanthropic approaches might be the roots of CS, but the different approaches to corporate
responsibility clearly show that CSR is a new and distinct phenomenon. Its societal approach especially
appears to be a (strategic) response to changing circumstances and new corporate challenges that had
not previously occurred. It requires organizations to fundamentally rethink their position and act in
terms of the complex societal context of which they are a part. This is anew perspective.

§ 3. A philosophical contribution to CS

3.1 Value Systems
Abraham Maslow (1968) declared the five basic needs of human individuals, implying that individuals
would strive for the next need as soon as the former had been fulfilled. His contemporary Clair Graves
concluded that there are many ways of achieving these needs. Individual persons, as well as companies
and societies, undergo a natural sequence of orientations [Survival, Security, Energy & Power, Order,
Success, Community, Synergy and Holistic Life System]. These orientations brighten or dim as life
conditions (consisting of historical Times, geographical Place, existential Problems and societal
Circumstances) change. The orientations impact their worldview, their value system, belief structure,
organizing principles and mode of adjustment. (Beck & Cowan, 1996)
If, for instance, societal circumstances change, inviting corporations to respond and consequently
reconsider their role within society, it implies that corporations have to re-align all their business
institutions (such as mission, vision, policy deployment, decision-making, reporting, corporate affairs,
etcetera) to this new orientation.
Graves, and his successors Beck and Cowan, have made clear that entities will eventually try to meet
the challenges their situation – featuring specific life conditions – provide or risk the danger of oblivion
or even extinction. The quest to create an adequate response to specific life conditions results in a wide
variety of survival strategies, each founded on a specific set of values and related institutions. These
value systems reflect their specific vision on reality (worldview), their awareness, understanding, and
their definition of truth5. This is why in Seattle, Genoa, Prague representatives of the Global Civil
Society clashed with politicians and industrialists; their value systems do not align, there are conflicting
truths and worldviews and opposite strategies as to how to deal with (their interpretation of) the
situation.

3.1 The principles behind evolutionary development
Ken Wilber (1995), having studied evolutionary developments in great depth, supports Graves when
stating: “Evolution proceeds irreversibly in the direction of increasing differentiation/integration,
increasing organization and increasing complexity”6. This “growth occurs in stages, and stages are ranked
in both a logical and chronological order. The more holistic patterns appear later in development because
they have to wait the emergence of the parts that they will then integrate or unify.7 This ranking refers
to normal hierarchies (or holarchies) converting “heaps into wholes, disjointed fragments into networks
of mutual interconnection8”
As the natural orientations emerged, they clearly show an increase of integratedness and complexity,
each stage including and transcending the previous ones.

4 Committee for Economic Development – CED (1971: 16)
5 See also M. Foucault, The Order of things (1970) : ‘truth’ is simply an arbitrary play of power and convention.
6 Wilber, K., Sex, Ecology and Spirituality, Shambhala, second edition. 2000, 1995 (page 19, 74)
7 Wilber, K. SES (page 28) italics by Wilber
8 Wilber, K. SES (page 26)

Author: Marcel van Marrewijk, August 2002 Second draft: controlled circulation 4

Wilber drafted twenty “patterns of existence” or “tendencies of evolution” which I shall briefly
summarize: reality is not composed of things or processes; it is not composed of wholes nor does it
have any parts. Rather it is composed of whole/parts, or holons9. This is true of the physical sphere
(atoms), as well as of the biological (cells) and psychological (concepts and ideas) sphere, or simply
said, apply to matter, body, mind and spirit. Atoms or processes are first and foremost holons, long
before any ‘particular characteristics’ are singled out by us.
Holons display four fundamental capacities: self-preservation, self-adaptation, self-transcendence and
self-dissolution. Its agency – its self-asserting, self-preserving tendencies – expresses its wholeness, its
relative autonomy; whereas its communion – its participatory, bonding, joining tendencies – expresses its
partness, its relationship to something larger. Both capacities are crucial: any slight imbalance will either
destroy the holon or make it turn into a pathological agency (alienation and repression) or a
pathological communion (fusion and dissociation). Self-transcendence (or self-transformation) is the
system’s capacity to reach beyond the given, pushing evolution further, creating new forms of agency
and communion. Holons can also break down and do so along the same vertical sequence in which
they were built up.
These four capacities or ‘forces’ are in constant tension: the more intensely a holon preserves its own
individuality, preserves it wholeness, the less it serves its communions or its partness in larger and wider
wholes and vice versa. This tension can be manifested, for instance in the conflict between rights
(agency) and responsibilities (communions), individuality and membership and autonomy and
heteronomy.
If holons stop functioning, all the higher holons in the sequence are also destroyed, because those
higher wholes depend upon the lower as constituent parts.
In the same way organizations and employees are mutually dependent, as a strike clearly shows.
Naturally, organizations support their employees (vertical relationship), creating value as an (horizontal)
agency, in constant exchange with its stakeholders (horizontal communion).

Holons emerge holarchically, in a natural hierarchy, as a series of increasing whole/parts. Holons
transcend and include their predecessor(s), forming a hierarchical system. What happens if the system
itself goes corrupt, turns into a pathological hierarchy? Given the characteristics of holons and
hierarchies, a disruption or pathology in one field can reverberate throughout an entire system.
The negative consequences of globalization are good examples of outcomes of a pathological system.
With multinationals over-emphasizing their self-preservation (agency), and thus ignoring their
participatory role within the community at large, the “threefold global crisis of deepening poverty10,
social disintegration, and environmental degradation” (Korten, 2001:13) gave rise to major critique on
the business environment11. It inspired a few individual entrepreneurs to immediately transform their
businesses. The majority, however, try to ignore it and continue to disregard their responsibility for its
impact on the physical and social environment.
As can be expected from theoretical exercises, countervailing power is emerging in the growth, both in
number and impact, of the (global) civil society. Non-Governmental Organisations (NGOs) especially,
are building up impact, influencing business and politics towards acting more responsibly and operating
in a more sustainable way. In the next chapter I will return to the relationship between Business, Civil
Society and Government.

3.3 Lessons to be learned
In addition to the previously mentioned principles of charity and stewardship, often regarded as the
roots of CSR, I would like to define two other principles, based on the ‘natural tendencies of evolution’
(Wilber, 1995). These are the Principle of Self-determination (or agency, self-preservation) and the

9 Koestler:” a holon is a whole in one context and simultaneously a part in an other”
10 About 2.3 bn people live on less than 2$ per day. The income of the top 20 in developing countries is 37 times the

income of the bottom 20 and it has doubled in the last decade: See also Korten (2001), WRI, UNEP, WBCSD.
11 See f.i. Drucker (1984), Hawken (1993), Elkington (1997), Zadek (2000)

Author: Marcel van Marrewijk, August 2002 Second draft: controlled circulation 5

Principle of Communion. In combination, the two principles allow each entity, individual or group to
act according to its awareness12, capabilities and best understanding of its situation, provided it does not
conflict with current regulations or interfere with the freedom of others to act in obtaining a similar
objective. “Freedom stops when it interferes with the freedom of others” (Levinas, 1940-’45).
The right to be, the right to define its role within a given situation – the manifestation of agency or
autonomy – is balanced by the moral obligation to be accountable for its impact on the environment. It
is communion that stops freedom when it interferes with the freedom of others. Being an entity within
something larger, obliges to adapt to the environment, adjust it self to changing circumstances and be
accountable for one’s impact on others. These principles apply to water molecules as well as human
beings and their organizations.
When the chosen role and corresponding awareness appear not to be adequate responses to current
circumstances, the system, other related entities in this situation, will influence the subject and try to
correct and, as an ultimate response, bring the existence of the subject into jeopardy. An increasing
number of experiences can demonstrate this principle.

So far we have seen that evolution provides a sense of direction, inspiring both in individuals and
corporations goals for transformation13. Challenged by changing circumstances and provoked by new
opportunities, individuals, organizations and societies develop adequate solutions that might be new
sublimations, creating synergy and adding value at a higher level of complexity. Since instability
increases at higher complexity levels, entities can shift to lower levels should circumstances turn
unfavourable or should competences fail to meet the required specifications.

§ 4. A practical contribution to Corporate Sustainability

Why will companies adopt CS practices? Simply stated: they either feel obliged to do it; are made to do
it or they want to do it. In this chapter we briefly investigate trends within companies and within
society that support the development of CS.

4.1 Corporate challenges
Many companies have mastered their business operations and at the same time created “separate
kingdoms”14. This manifests for instance in employees being more loyal to the business unit than the
company, business metrics supporting unit management even at the expense of the performance of the
mother company, transfer pricing and information asymmetry between HQ and its divisions. Another
contemporary corporate challenge is managing issues in the supply chain. This is even more complex.
In quality management terms these phenomena relate to making shifts or progress in the sequence of
quality orientations. Quality management can be oriented at a product level, at process level, at the
organization as a systemic entity, at the supply chain and at the society as a whole. Each level includes
and transcends the previous ones and each orientation represents a higher level of complexity.
The former ones – product and process quality – can be managed with rather technical and statistical
instruments. Creating an organization that functions as a whole instead of separate departments or with
managing issues in the supply chain, management needs a shift of approach: the employees and their
suppliers have become more important. For instance, o be successful, management has to develop a
climate of trust, respect and dedication and allow others to have their fair share of mutual activities
(together win). We can conclude that organizations which continue to improve their quality, ultimately
have to adopt a more social management style, in other words, move towards (higher levels of)
corporate sustainability.

12 According to Wilber, consciousness (or awareness) is directly related to depth, i.e. the level in the hierarchy (pg 65)
13 See also: Pirsig, R. Lila, an inquiry into morals (1991)
14 Eli Goldratt during a lecture at RSM, October 1998

Author: Marcel van Marrewijk, August 2002 Second draft: controlled circulation 6

4.2 Changing concepts of business, governments and civil society
System theorists recommend, as “a cure to any diseased system, rooting out any holon that have
usurped their position in the overall system by abusing their power…”15 and ignoring their duties and
responsibilities, I would add. To root out cancer cells, medics developed surgical techniques and
chemical cocktails. . By fully abandoning business we would remove ourselves from the creation of
wealth and necessary supplies, making the cure much worse than the disease. Mankind needs more
subtle approaches to, for instance, increase the individual and collective level of awareness and
understanding, support favourable behaviour and restore the imbalance of global institutions16.

Business forms an important triangular relationship with the State and the Civil Society. Each has a
specific mechanism that coordinates their behaviour and fulfils a role within society. Generally, the
State is responsible for creating and maintaining legislation (control), Business creates wealth through
competition and cooperation (market), and Civil Society structures and shapes society via collective
action and participation.
Both market and control mechanisms have shown major fallacies with respect to organizing societal
behaviour. Since civil society has gained importance, both business and government have respond to
the collective actions of civilians, churches and especially NGOs. Corrective actions such as
jeopardizing companies’ reputations, challenge companies to apply more sustainable approaches in
their business (Zwart, 2002).

1. legislation and maintenance (control)
2. competition and cooperation (market)
3. collective action and participation

State State

Business Civil Society Business Civil Society
Past Present

Once, there were circumstances which resulted in clear-cut roles and responsibilities for both
companies and governments, both relatively independent, and an impact oncivil society that could be
neglected. As complexity grew business and government became mutually dependent entities. Since
their coordinating mechanisms were incapable of adequately arranging various contemporary societal
topics, the importance of civil society increased. Various representatives stressed ‘new’ values and
approaches which politics and business no longer could ignore.
Business has to learn how to operate within interfering coordination mechanisms, with blurred
boundaries and surrounding layers of varying degrees of responsibility, overlapping one other.

15 Wilber, K. SES (2000:30)
16 Henry Minzberg, at the inaugurating conference of the European Academy of Business in Society, Fontainebleau, 6 July

2002. “The economically oriented institutions such as the WTO, IMF and the Worldbank are not balanced by as
powerful institutions, defending social and environmental interests.”

Author: Marcel van Marrewijk, August 2002 Second draft: controlled circulation 7

Nowadays, governments increasingly leave societal issues within the authority of corporations. For
instance, Schiphol Airport is supposed to limit noise and pollution, and at the same time accommodate
the increasing demand for flights. NGOs and other stakeholders expect participation and involvement
and request new levels of transparancy.

According to various sources in academic literature (e.g. Wartick & Wood, 1999) common values and
norms play a major role in shaping society. Once it was the government elite that stated the societal
values, later business leaders added theirs. Along with the process of democratization, representatives
of the civil society have increasingly been introducing ‘common’ values and norms and acting upon
them to make government and business respond to these values. We see moving panels, changing
circumstances and new existential problems arousing various members in society to act and transform
into value systems and corresponding institutional arrangements.
Accepting their new position in society, companies develop new values, new strategies and policies and
new institutional arrangements that support their functioning in areas that were once left to others,
redefining their roles and relationships with others.

§ 5. Proposals for defining CSR and Corporate Sustainability

I will introduce three proposals to define CSR and Corporate Sustainability. I will also deal with the
relationship between the two notions.

Corporate Societal Accountability (CSA)
The first one is suggested by Math. Göbbels (2002). He concludes that the inconsistency and
sometimes ambiguity of CSR is also due to language problems. Andriof & McIntosh’s (2001:15)
introduced the term ‘corporate societal responsibility’ in order “to avoid the limited interpretation of the
term ‘social responsibility’, when translated into Continental European cultures and languages, as
applying to social welfare issues only. The term ‘societal responsibility’ covers all dimensions of a
company’s impact on, relationships with and responsibilities to society as a whole”.
He continued investigating the linguistic approach and concluded in line with Brooks (1995) and Klatt
et al. (1999: 17-33) that the word ‘responsibility’ should be replaced by ‘accountability’, for it causes
similar problems as ‘social’. This would imply a preference to use corporate societal accountability (CSA) as
the contemporary term for CSR.
Although I fully agree with its reasoning and suggestion, I expect it will be difficult for policy makers
and executives to get used to another new generic notion.

A hierarchical relationship between CSR, CS and Corporate Responsibility
The second proposal was suggested to me by Lassi Linnanen and Virgilio Panapanaan from Helsinki
University of Technology. They consider Corporate Sustainability (CS) as the ultimate goal; meeting the
needs of the present without compromising the ability of future generations to meet their own needs.
(WCED, 1987). In spite of the traditional bias of CS towards environmental policies, the various
contributions at the Corporate Sustainability Conference 2002 at the Erasmus University Rotterdam in
June clearly showed sufficient interest in integrating social and societal aspects into CS. The Erasmus
University’s Business Society Management has also placed CS as the ultimate goal, with CSR as an
intermediate stage where companies try to balance the Triple Bottom Line17 (see figure 1). Moreover,
the theme of the EU Communication was CSR: a business contribution to Sustainable Development.
The Finnish proposal implies a distinct dis-aggregation of dimensions – distinguishing sustainability
from responsibility (CR) – to draw a more consistent picture. The three aspects of sustainability
(economic, environmental, and social) can be translated into a CR approach that companies have to be
concerned with. The simple illustration below (Figure 2) depicts the relationship of CS, CR and CSR,

17 Wempe, J. and Kaptein, M.(2002) The Balanced Company

Author: Marcel van Marrewijk, August 2002 Second draft: controlled circulation 8

plus, the economic and environmental dimensions. This is also to show how CSR as a new tool fits into
the current CR or CS framework to complete the picture of corporate sustainability.

Corporate
Sustainability

P
R
O
F
I
T

P
L
A
N
E
T

P
E
O
P
L
E

Corporate Social Responsibility

Corporate Sustainability

Corporate
Responsibility

Social
Responsibility

Economic
Responsibility

Environmental
Responsibility

Figure 1. Presentation CS and CSR, Erasmus University – Figure 2. General model of CS/CR and its dimensions18

Although I fully agree with this new domain of CSR and consequently smaller interpretation of the
social dimension of the organization, I doubt if the clock can be reversed. This smaller interpretation
matches the term CSR, but in practice CSR is defined as a synonym to corporate sustainability.

In general, corporate sustainability – and, unfortunately, also the contemporary understanding of CSR –
refers to company activities – voluntary by definition – demonstrating the inclusion of social and
environmental concerns in business operations and in interactions with stakeholders. This is the broad –
some would say ‘vague’ – definition of corporate sustainability.
I will now differentiate this definition into five interpretations, c.q. ambition levels of corporate
sustainability. Each definition relates to a specific context, as defined in Spiral Dynamics. Also the
motives for choosing a particular ambition is provided for:

1. Compliance-driven CS (Blue): CS at this level consists of providing welfare to society, within the
limits of regulations from the rightful authorities. In addition, organizations might respond to
charity and stewardship considerations. The motivation for CS is that CS is perceived as a duty
and obligation, or correct behaviour.

2. Profit-driven CS (Orange): CS at this level consists of the integration of social, ethical and

ecological aspects into business operations and decision-making, provided it contributes to the
financial bottom line. The motivation for CS is a business case: CS is promoted if profitable, for
example because of an improved reputation in various markets (customers / employees /
shareholders).

3. Caring CS (Green): CS consists of balancing economic, social and ecological concerns, which

are all three important in themselves. CS initiatives go beyond legal compliance and beyond
profit considerations. The motivation for CS is that human potential, social responsibility and
care for the planet are as such important.

4. Synergistic CS (Yellow): CS consists of a search for well-balanced, functional solutions creating

value in the economic, social and ecological realms of corporate performance, in a synergistic,
win-together approach with all relevant stakeholders. The motivation for CS is that
sustainability is important in itself, especially because it is recognised as being the inevitable
direction progress takes.

18 Lassi Linnanen and Virgilio Panapanaan (2002), Helsinki University of Technology

Author: Marcel van Marrewijk, August 2002 Second draft: controlled circulation 9

5. Holistic CS (Turquoise): CS is fully integrated and embedded in every aspect of the organization,

aimed at contributing to the quality and continuation of life of every being and entity, now and
in the future. The motivation for CS is that sustainability is the only alternative since all beings
and phenomena are mutually interdependent. Each person or organization therefore has a
universal responsibility towards all other beings.

The above defined principle of self-determination allows each and everyone to respond to outside
challenges in accordance to its own awareness and abilities. Any organization has the right to choose a
position from 1 to 5. However not all these positions are equally adequate responses to perceived
challenges offered in the environment.. The principle of self-determination is balanced by the principle
of communion: entities are part of a larger whole and thus ought to adapt it self to changes in its
environment and respond to corrective actions from its stakeholders.
The right to be and the capacity to create added value equals the duty to be responsible for its impact
and to adjust itself to changes in its environment. Without conforming to this principle, organizations
ultimately risk extinction.

A differentiated set of CS definitions implies that there is no such thing as the features of corporate
sustainability. Transparency, public disclosure, stakeholder engagement, societal approach to business,
human capital, etcetera are all situational solutions that can be structured into coherent institutional
frameworks supporting a specific ambition of CS. Some positions include all these aspects, others,
those more traditionally oriented, almost none.
The coherent institutional frameworks supporting specific levels of CS, can be difficult thresholds
preventing companies from adopting higher levels of corporate sustainability. This might explain why,
according to worldwide research by Ernst & Young19 among 114 companies from the Global
1000, 73% confirmed that corporate sustainability is on the board’s agenda; 94 % responded that a CS
strategy might result in a better financial performance, but only 11 % is actually implementing it.

In Multiple Levels of Corporate Sustainability, Marcel van Marrewijk and Marco Werre show that specific
interventions can only be adequately addressed within a specific context and situation. A higher
ambition level and specific CS interventions require a supporting institutional framework and value
system. The authors developed a matrix distinguishing six types of organizations at different
developmental stages, their corresponding institutional frameworks, demonstrating different
performance levels of corporate sustainability.

Acknowledgements
While writing the basic draft of this article in the beautiful valley of the Ardech, France, I made particular use of
an overview article on CSR by Math. Göbbels [see chapter 2 and 5] and the work of Ken Wilber [see chapter 3]
Furthermore, the author acknowledges the constructive and useful comments of earlier versions of this article by
Teun Hardjono, Marco Were and my wife, Erna Kraak.

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Carroll,

Archie B.

The Pyramid of Corporate Social Responsibility: Toward the Moral
Management of Organizational Stakeholders,
Business Horizons, July-August 1991

For the better part of 30 years now, corporate executives have struggled with the issue

of the firm’s responsibility to its society. Early on it was argued by some that the

corporation’s sole responsibility was to provide a maximum financial return to

shareholders. It became quickly apparent to everyone, however, that this pursuit of

financial gain had to rake place within the laws of the land. Though social activist groups

and others throughout the 1960s advocated a broader notion of corporate responsibility,

it was not until the significant social legislation of the early 1970s that this message

became indelibly clear as a result of the creation of the Environmental Protection

Agency (EPA), the Equal Employment Opportunity Commission (EEOC). the

Occupational Safety and Health Administration (OSHA), and the Consumer Product

Safety” Commission (CPSC).

These new governmental bodies established that national public policy now officially

recognized the environment. employees, and consumers to be significant and legitimate

stakeholders of business. From that time on, corporate executives have had to wrestle

with how they balance their commitments to the corporation’s owners with their

obligations to an ever-broadening group of stakeholders who claim both legal and

ethical rights.

This article will explore the nature of corporate social responsibility (CSR) with an eye

toward understanding its component parts. The intention will be to characterize the

firm’s CSR in ways that might be useful to executives who wish to reconcile their

obligations to their shareholders with those to other competing groups claiming

legitimacy. This discussion will be framed by a pyramid of corporate social

responsibility. Next, we plan to relate this concept to the idea of stakeholders. Finally,

our goal will be to isolate the ethical or moral component of CSR and relate it to

perspectives that reflect three major ethical approaches to management—immoral,

amoral, and moral. The principal goal in this final section will be to flesh our what it

means to manage stakeholders in an ethical or moral fashion.

EVOLUTION OF CORPORATE SOCIAL RESPONSIBILITY

What does it mean for a corporation to be socially responsible? Academics and

practitioners have been striving to establish an agreed-upon definition of this concept for

30 years. In 1960, Keith Davis suggested that social responsibility refers to businesses’

“decisions and actions taken for reasons at least partially beyond the firm’s direct

economic or technical interest.” At about the same time, Eells and Walton (1961)

argued that CSR refers to the “problems that arise when corporate enterprise casts its

shadow on the social scene, and the ethical principles that ought to govern the

relationship between the corporation and society.”

Figure 1
Economic and Legal Components of Corporate Social Responsibility

Economic Components
(Responsibilities)

Legal Components
(Responsibilities)

1. It is important to perform in a manner
consistent with maximizing earnings per
share

1. It is important to perform in a manner
consistent with expectations of government
and law.

2. It is important to be committed to being
as profitable as possible.

2. It is important to comply with various
federal, state, and local regulations.

3. It is important to maintain a strong
competitive position.

3. It is important to be a law-abiding
corporate citizen.

4. It is important to maintain a high level of
operating efficiency.

4. It is important that a successful firm be
defined as one that fulfills its legal
obligations.

5. It is important that a successful firm be
defined as one that is consistently
profitable.

5. It is important to provide goods and
services that at least meet minimal legal
requirements.

In 1971 the Committee for Economic Development used a “three concentric circles”

approach to depicting CSR. The inner circle included basic economic functions—

growth, products, jobs. The intermediate circle suggested that the economic functions

must be exercised with a sensitive awareness of changing social values and priorities.

The outer circle outlined newly emerging and still amorphous responsibilities that

business should assume to become more actively involved in improving the social

environment.

The attention was shifted from social responsibility to social responsiveness by several

other writers. Their basic argument was that the emphasis on responsibility focused

exclusively on the notion of business obligation and motivation and that action or

performance were being overlooked. The social responsiveness movement, therefore.

emphasized corporate action, proaction, and implementation of a social role. This was

indeed a necessary reorientation.

The question still remained, however, of reconciling the firm’s economic orientation with

its social orientation. A step in this direction was taken when a comprehensive definition

of CSR was set forth. In this view, a four-part conceptualization of CSR included the

idea that the corporation has not only economic and legal obligations, but ethical and

discretionary (philanthropic) responsibilities as well (Carroll 1979). The point here was

that CSR, to be accepted as legitimate, had to address the entire spectrum of

obligations business has to society, including the most fundamental—economic. It is

upon this four-part perspective that our pyramid is based.

In recent years, the term corporate social performance (CSP) has emerged as an

inclusive and global concept to embrace corporate social responsibility, responsiveness,

and the entire spectrum of socially beneficial activities of businesses. The focus on

social performance emphasizes the concern for corporate action and accomplishment in

the social sphere. With a performance perspective, it is clear that firms must formulate

and implement social goals and programs as well as integrate ethical sensitivity into all

decision making, policies, and actions. With a results focus, CSP suggests an all-

encompassing orientation towards normal criteria by which we assess business

performance to include quantity, quality, effectiveness, and efficiency. While we

recognize the vitality of the performance concept, we have chosen to adhere to the CSR

terminology for our present discussion. With just a slight change of focus, however, we

could easily be discussing a CSP rather than a CSR pyramid. In any event, the long-

term concern is what managers do with these ideas in terms of implementation.

THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY

For CSR to be accepted by a conscientious business person, it should be framed in

such a way that the entire range of business responsibilities are embraced. It is

suggested here that four kinds of social responsibilities constitute total CSR: economic,

legal, ethical. and philanthropic. Furthermore. these four categories or components of

CSR might be depicted as a pyramid. To be sure. ail of these kinds of responsibilities

have always existed to some extent. but it has only been in recent years that ethical and

philanthropic functions have taken a significant place. Each of these four categories

deserves closer consideration.

Economic Responsibilities

Historically. business organizations were created as economic entities designed to

provide goods and services to societal members. The profit motive was established as

the primary incentive for entrepreneurship. Before it was anything else, business

organization was the basic economic unit in our society. As such, its principal role was

to produce goods and services that consumers needed and wanted and to make an

acceptable profit in the process. At some point the idea of the profit motive got

transformed into a notion of maximum profits, and this has been an enduring value ever

since. All other business responsibilities are predicated upon the economic

responsibility of the firm, because without it the others become moot considerations.

Figure 1 summarizes some important statements characterizing economic

responsibilities. Legal responsibilities are also depicted in Figure 1, and we will consider

them next.

Legal Responsibilities

Society has not only sanctioned business to operate according to the profit motive; at

the same time business is expected to comply with the laws and regulations

promulgated by federal, state, and local governments as the ground rules under which

business must operate. As a partial fulfillment of the “social contract” between business

and society firms are expected to pursue their economic missions within the framework

of the law. Legal responsibilities reflect a view of “codified ethics” in the sense that they

embody basic notions of fair operations as established by our lawmakers. They are

depicted as the next layer on the pyramid to portray their historical development, but

they are appropriately seen as coexisting with economic responsibilities as fundamental

precepts of the free enterprise system.

Figure 2
Ethical and Philanthropic Components of Corporate Social Responsibility

Ethical Components
(Responsibilities)

Philanthropic Components
(Responsibilities)

1. It is important to perform in a manner
consistent with expectations of societal
mores and ethical norms.

1. It is important to perform in a manner
consistent with the philanthropic and
charitable expectations of society.

2. It is important to recognize and respect
new or evolving ethical moral norms
adopted by society.

2. It is important to assist the fine and
performing arts.

3. It is important to prevent ethical norms
from being compromised in order to
achieve corporate goals.

3. It is important that managers and
employees participate in voluntary and
charitable activities within their local
communities.

4. It is important that good corporate
citizenship be defined as doing what is
expected morally or ethically.

4. It is important to provide assistance to
private and public educational institutions.

5. It is important to recognize that corporate
integrity and ethical behavior go beyond
mere compliance with laws and regulations.

5. It is important to assist voluntarily those
projects that enhance a community’s
“quality of life.”

Ethical Responsibilities

Although economic and legal responsibilities embody ethical norms about fairness and

justice, ethical responsibilities embrace those activities and practices that are expected

or prohibited by societal members even though they are not codified into law. Ethical

responsibilities embody those standards, norms, or expectations that reflect a concern

for what consumers, employees, shareholders, and the community regard as fair, just,

or in keeping with the respect or protection of stakeholders’ moral rights.

In one sense, changing erl1ics or values pre- cede the establishment of law because

they become the driving force behind the very creation of laws or regulations. For

example, the environmental, civil rights, and consumer movements reflected basic

alterations in societal values and thus may be seen as ethical bellwethers

foreshadowing and resulting in the later legislation. In another sense, ethical

responsibilities may be seen as embracing newly emerging values and norms society

expects business to meet, even though such values and norms may reflect a higher

standard of performance than that currently required by law. Ethical responsibilities in

this sense are often ill-defined or continually under public debate as to their legitimacy,

and thus are frequently difficult for business to deal with.

Superimposed on these ethical expectations emanating from societal groups are the

implied levels of ethical performance suggested by a consideration of the great ethical

principles of moral philosophy. This would include such principles as justice, rights, and

utilitarianism.

The business ethics movement of the past decade has firmly established an ethical

responsibility as a legitimate CSR component. Though it is depicted as the next layer of

the CSR pyramid, it must be constantly recognized that it is in dynamic interplay with

the legal responsibility category. That is, it is constantly pushing the legal responsibility

category to broaden or expand while at the same time placing ever higher expectations

on businesspersons to operate at levels above that required by law. Figure 2 depicts

statements that help characterize ethical responsibilities. The figure also summarizes

philanthropic responsibilities, discussed next.

Philanthropic Responsibilities

Philanthropy encompasses those corporate actions that are in response to society’s

expectation that businesses be good corporate citizens. This includes actively engaging

in acts or programs to promote human welfare or goodwill. Examples of philanthropy

include business contributions to financial resources or executive time, such as

contributions to the arts, education, or the community. A loaned-executive program that

provides leadership for a community’s United Way campaign is one illustration of

philanthropy.

The distinguishing feature between philanthropy and ethical responsibilities is that the

former are not expected in an ethical or moral sense. Communities desire firms to

contribute their money, facilities, and employee time to humanitarian programs or

purposes, but they do not regard the firms as unethical if they do not provide the desired

level. Therefore, philanthropy is more discretionary or voluntary on the part of

businesses even though there is always the societal expectation that businesses

provide it.

One notable reason for making the distinction between philanthropic and ethical

responsibilities is that some firms feel they are being socially responsible if they are just

good citizens in the community. This distinction brings home the vital point that CSR

includes philanthropic contributions but is not limited to them. In fact, it would be argued

here that philanthropy is highly desired and prized but actually less important than the

other three categories of social responsibility, In a sense, philanthropy is icing on the

cake—or on the pyramid, using our metaphor.

The pyramid of corporate social responsibility is depicted in Figure 3. It portrays the four

components of CSR, beginning with the basic building block notion that economic

performance undergirds all else. At the same time, business is expected to obey the law

because the law is society’s codification of acceptable and unacceptable behavior. Next

is business’s responsibility to be ethical. At its most fundamental level, this is the

obligation to do what is right, just, and fair, and to avoid or minimize harm to

stakeholders (employees, consumers, the environment, and others). Finally, business is

expected to be a good corporate citizen. This is captured in the philanthropic

responsibility, wherein business is expected to contribute financial and human

resources to the community and to improve the quality of life.

No metaphor is perfect, and the CSR pyramid is no exception. It is intended to portray

that the total CSR of business comprises distinct components that, taken together,

constitute the whole. Though the components have been treated as separate concepts

for discussion purposes, they are not mutually exclusive and are not intended to

juxtapose a firm’s economic responsibilities with its other responsibilities. At the same

time, a consideration of the separate components helps the manager see that the

different types of obligations are in a constant but dynamic tension with one another.

The most critical tensions, of course, would be between economic and legal, economic

and ethical, and economic and philanthropic. The traditionalist might see this as a

conflict between a firm’s “concern for profits versus its “concern for society,” but it is

suggested here that this is an oversimplification. A CSR or stakeholder perspective

would recognize these tensions as organizational realities, but focus on the total

pyramid as a unified whole and how the firm might engage in decisions, actions, and

programs that substantially fulfill all its component parts.

In summary, the total corporate social responsibility of business entails the

simultaneous fulfillment of the firm’s economic, legal, ethical, and philanthropic

responsibilities. Stated in more pragmatic and managerial terms, the CSR firm should

strive to make a profit, obey the law, be ethical,

and be a good corporate citizen.

Upon first glance, this array of responsibilities may seem broad. They seem to be in

striking contrast to the classical economic argument that management has one

responsibility: to maximize the profits of its owners or shareholders. Economist Milton

Friedman, the most outspoken proponent of this view, has argued that social matters

are not the concern of business people and that these problems should be resolved by

the unfettered workings of the free market system. Friedman’s argument loses some of

its punch, however, when you consider his assertion in its totality. Friedman posited that

management is “to make as much money as possible while conforming to the basic

rules of society, both those embodied in the law and those embodied in ethical custom”

(Friedman 1970). Most people focus on the first part of Friedman’s quote but not the

second part. It seems clear from this statement that profits, conformity to the law, and

ethical custom embrace three components of the CSR pyramid—economic, legal, and

ethical. That only leaves the philanthropic component for Friedman to reject. Although it

may be appropriate for an economist to take this view, one would not encounter many

business executives today who exclude philanthropic programs from their firms’ range

of activities. It seems the role of corporate citizenship is one that business has no

significant problem embracing. Undoubtedly this perspective is rationalized under the

rubric of enlightened self interest.

We next propose a conceptual framework to assist the manager in integrating the four

CSR components with organizational stakeholders.

CSR AND ORGANIZATIONAL STAKEHOLDERS

There is a natural fit between the idea of corporate social responsibility and an

organization’s stakeholders. The word “social” in CSR has always been vague and

lacking in specific direction as to whom the corporation is responsible. The concept of

stakeholder personalizes social or societal responsibilities by delineating the specific

groups or persons business should consider in its CSR orientation. Thus, the

stakeholder nomenclature puts “names and faces” on the societal members who are

most urgent to business, and to whom it must be responsive.

By now most executives understand that the term “stakeholder” constitutes a play on

the word stockholder and is intended to more appropriately describe those groups or

persons who have a stake, a claim, or an interest in the operations and decisions of the

firm. Sometimes the stake might represent a legal claim, such as that which might be

held by an owner, an employee, or a customer who has an explicit or implicit contract.

Other times it might be represented by a moral claim, such as when these groups assert

a right to be treated fairly or with due process, or to have their opinions taken into

consideration in an important business decision.

Management’s challenge is to decide which stakeholders merit and receive

consideration in the decision-making process. In any given instance, there may be

numerous stakeholder groups (shareholders, consumers, employees, suppliers,

community, social activist groups) clamoring for management’s attention. How do

managers sort out the urgency or importance of the various stakeholder claims? Two

vital criteria include the stakeholders’ legitimacy and their power. From a CSR

perspective their legitimacy may be most important. From a management efficiency

perspective, their power might be of central influence. Legitimacy refers to the extent to

which a group has a justifiable right to be making its claim. For example, a group of 300

employees about to be laid off by a plant-closing decision has a more legitimate claim

on management’s attention than the local chamber of commerce, which is worried about

losing the firm as one of its dues-paying members. The stakeholder’s power is another

factor. Here we may witness significant differences. Thousands of small, individual

investors, for example, wield very little power unless they can find a way to get

organized. By contrast, institutional investors and large mutual fund groups have

significant power over management because of the sheer magnitude of their

investments and the fact that they are organized.

With these perspectives in mind, let us think of stakeholder management as a process

by which managers reconcile their own objectives with the claims and expectations

being made on them by various stakeholder groups. The challenge of stakeholder

management is to ensure that the firm’s primary stakeholders achieve their objectives

while other stakeholders are also satisfied. Even though this “win-win” outcome is not

always possible, it does represent a legitimate and desirable goal for management to

pursue to protect its long-term interests.

Figure 4
Stakeholder/Responsibility Matrix
Types of CSR
Stakeholders Economic Legal Ethical Philanthropic
Owners – – – –
Customers – – – –
Employees – – – –
Community – – – –
Competitors – – – –
Suppliers – – – –
Social Activist Groups – – – –

Public at Large – – – –
Others – – – –

This matrix is intended to be used as an analytical tool or template to organize a

manager’s thoughts and ideas about what the firm ought to be doing in an economic,

legal, ethical, and philanthropic sense with respect to its identified stakeholder groups.

By carefully and deliberately moving through the various cells of the matrix, the

manager may develop a significant descriptive and analytical data base that can then

be used for purposes of stakeholder management. The information resulting from this

stakeholder/responsibility analysis should be useful when developing priorities and

making both long-term and short-term decisions involving multiple stakeholder’s

interests.

To be sure, thinking in stakeholder responsibility terms increases the complexity of

decision making and may be extremely time consuming and taxing, especially at first.

Despite its complexity, however, this approach is one methodology management can

use to integrate values—what it stands for—with the traditional economic mission of the

organization. In the final analysis, such an integration could be of significant usefulness

to management. This is because the stakeholder/responsibility perspective is most

consistent with the pluralistic environment faced by business today. As such, it provides

the opportunity for an in-depth corporate appraisal of financial as well as social and

economic concerns. Thus, the stakeholder/responsibility perspective would be an

invaluable foundation for responding to the firm’s stakeholder management question

about strategies, actions, or decisions that should be pursued to effectively respond to

the environment business faces.

MORAL MANAGEMENT AND STAKEHOLDERS

At this juncture we would like to expound upon the link between the firm’s ethical

responsibilities or perspectives and its major stakeholder groups. Here we are isolating

the ethical component of our CSR pyramid and discussing it more thoroughly in the

context of stakeholders. One way to do this would be to use major ethical principles

such as those of justice, rights, and utilitarianism to identify and describe our ethical

responsibilities. We will take another alternative, however, and discuss stakeholders

from the context of three major ethical approaches—immoral management, amoral

management, and moral management. These three ethical approaches were defined

and discussed in an earlier Business Horizons article (Carroll 1987). We will briefly

describe and review these three ethical types and then suggest how they might be

oriented toward the major stakeholder groups. Our goal is to profile the likely orientation

of the three ethical types with a special emphasis upon moral management, our

preferred ethical approach.

Three Moral Types

If we accept that the terms ethics and morality are essentially synonymous in the

organizational context, we may speak of immoral, amoral, and moral management as

descriptive categories of three different kinds of managers. Immoral management is

characterized by those managers whose decisions, actions, and behavior suggest an

active opposition to what is deemed right or ethical. Decisions by immoral managers are

discordant with accepted ethical principles and, indeed, imply an active negation of what

is moral. These managers care only about their or their organization’s profitability and

success. They see legal standards as barriers or impediments management must

overcome to accomplish what it wants. Their strategy is to exploit opportunities for

personal or corporate gain.

An example might be helpful. Many observers would argue that Charles Keating could

be described as an immoral manager. According to the federal government, Keating

recklessly and fraudulently ran California’s Lincoln Savings into the ground, reaping $34

million for himself and his family. A major accounting firm said about Keating: “Seldom

in our experience as accountants have we experienced a more egregious example of

the misapplication of generally accepted accounting principles” (“Good Timing, Charlie”

1989).

The second major type of management ethics is amoral management. Amoral

managers are neither immoral nor moral but are not sensitive to the fact that their

everyday business decisions may have deleterious effects on others. These managers

lack ethical perception or awareness. That is, they go through their organizational lives

not thinking that their actions have an ethical dimension. Or they may just be careless or

inattentive to the implications of their actions on stakeholders. These managers may be

well intentioned, but do not see that their business decisions and actions may be hurting

those with whom they transact business or interact. Typically their orientation is towards

the letter of the law as their ethical guide. We have been describing a sub-category of

amorality known as unintentional amoral managers. There is also another group we

may call intentional amoral managers. These managers simply think that ethical

considerations are for our private lives, not for business. They believe that business

activity resides outside the sphere to which moral judgments apply. Though most

amoral managers today are unintentional, there may still exist a few who just do not see

a role for ethics in business.

Examples of unintentional amorality abound. When police departments stipulated

applicants must be 5’10” and weigh 180 pounds to qualify for positions, they just did not

think about the adverse impact their policy would have on women and some ethnic

groups who, on average, do not attain that height and weight. The liquor, beer, and

cigarette industries provide other examples. They did not anticipate that their products

would create serious moral issues: alcoholism, drunk driving deaths, lung cancer,

deteriorating health, and offensive secondary smoke. Finally, when McDonald’s initially

decided to use polystyrene containers for food packaging it just did not adequately

consider the environmental impact that would be caused. McDonald’s surely does not

intentionally create a solid waste disposal problem, but one major consequence of its

business is just that. Fortunately, the company has responded to complaints by

replacing the polystyrene packaging with paper products.

Moral management is our third ethical approach, one that should provide a striking

contrast. In moral management, ethical norms that adhere to a high standard of right

behavior are employed. Moral managers not only conform to accepted and high levels

of professional conduct, they also commonly exemplify leadership on ethical issues.

Moral managers want to be profitable, but only within the confines of sound legal and

ethical precepts, such as fairness, justice, and due process. Under this approach, the

orientation is toward both the letter and the spirit of the law. Law is seen as minimal

ethical behavior and the preference and goal is to operate well above what the law

mandates. Moral managers seek out and use sound ethical principles such as justice,

rights, utilitarianism, and the Golden Rule to guide their decisions. When ethical

dilemmas arise, moral managers assume a leadership position for their companies and

industries.

There are numerous examples of moral management. When IBM took the lead and

developed its Open Door policy to provide a mechanism through which employees

might pursue their due process rights, this could be considered moral management.

Similarly, when IBM initiated its Four Principles of Privacy to protect privacy rights of

employees, this was moral management. When McCullough Corporation withdrew from

the Chain Saw Manufacturers Association because the association fought mandatory

safety standards for the industry, this was moral management. McCullough knew its

product was potentially dangerous and had used chain brakes on its own saws for

years, even though it was not required by law to do so. Another example of moral

management was when Maguire Thomas Partners, a Los Angeles commercial

developer, helped solve urban problems by saving and refurbishing historic sites,

putting up structures that matched old ones, limiting building heights to less than the law

allowed, and using only two-thirds of the allowable building density so that open spaces

could be provided.

Orientation Toward Stakeholders

Now that we have a basic understanding of me three ethical types or approaches, we

will propose profiles of what the likely stakeholder orientation might be toward the major

stakeholder groups using each of the three ethical approaches. Our goal is to

accentuate the moral management approach by contrasting it with the other two types.

Basically, there are five major stakeholder groups that are recognized as priorities by

most firms, across industry lines and in spite of size or location: owners (shareholders),

employees, customers, local communities, and the society-at-large. Although the

general ethical obligation to each of these groups is essentially identical (protect their

rights, treat them with respect and fairness), specific behaviors and orientations arise

because of the differing nature of the groups. In an attempt to flesh out the character

and salient features of the three ethical types and their stakeholder orientations, Figures

5 and 6 summarize the orientations these three types might assume with respect to four

of the major stakeholder groups. Because of space constraints and the general nature

of the society-at-large category, it has been omitted.

Figure 5
Three Moral Types and Orientation Toward Stakeholder Groups:
Owners and Employees

Type of Management Orientation Toward Owner/Shareholder Stakeholders

Immoral Management

Shareholders are minimally treated and given short shrift.
Focus is on maximizing positions of executive groups-
maximizing executive compensation, perks, benefits.
Golden parachutes are more important than returns to
shareholders. Managers maximize their positions without
shareholders being made aware. Concealment from
shareholders is the operating procedure. Self-interest of
management group is the order of the day.

Amoral Management

No special thought is given to shareholders: they are there
and must be minimally accommodated. Profit focus of the
business is their reward. No thought is given to ethical
consequences of decisions for any stakeholder group,
including owners. Communication is limited to that required
by law.

Moral Management

Shareholders’ interest (short- and long-term) is a central
factor. The best way to be ethical to shareholders is to treat
all stakeholder claimants in a fair and ethical manner. To
protect shareholders, an ethics committee of the board is
created. Code of ethics is established. promulgated. and
made a living document to protect shareholders’ and others’
interests.

Type of Management Orientation Toward Employee Stakeholders

Immoral Management

Employees are viewed as factors of production to be used,
exploited, manipulated for gain of individual manager or
company. No concern is shown for employees’
needs/rights/expectations. Short-term focus. Coercive,
controlling, alienating.

Amoral Management

Employees are treated as law requires. Attempts to motivate
focus on increasing productivity rather than satisfying
employees’ growing maturity needs. Employees still seen as
factors of production but remunerative approach used.
Organization sees self-interest in treating employees with
minimal respect. Organization structure, pay incentives,
rewards all geared toward short- and medium-term
productivity.

Moral Management

Employees are a human resource that must be treated with
dignity and respect. Goal is to use a leadership style such
as consultative/participative that will result in mutual
confidence and trust. Commitment is a recurring theme.
Employees’ rights to due process, privacy, freedom of
speech, and safety are maximally considered in all
decisions. Management seeks out fair dealings with
employees.

By carefully considering the described stakeholder orientations under each of the three

ethical types, a richer appreciation of the moral management approach should be

possible. Our goal here is to gain a fuller understanding of what it means to engage in

moral management and what this implies for interacting with stakeholders. To be sure,

there are other stakeholder groups to which moral management should be directed, but

again, space precludes their discussion here. This might include thinking of managers

and non-managers as distinct categories of employees and would also embrace such

groups as suppliers, competitors, special interest groups, government, and the media.

Though the concept of corporate social responsibility may from time to time be

supplanted by various other focuses such as social responsiveness, social

performance, public policy, ethics, or stakeholder management, an underlying challenge

for all is to define the kinds of responsibilities management and businesses have to the

constituency groups with which they transact and interact most frequently. The pyramid

of corporate social responsibility gives us a framework for understanding the evolving

nature of the firm’s economic, legal, ethical, and philanthropic performance. The

implementation of these responsibilities may vary depending upon the firm’s size,

management’s philosophy, corporate strategy, industry characteristics, the state of the

economy, and other such mitigating conditions, but the four component parts provide

management with a skeletal outline of the nature and kinds of their CSR. In frank,

action-oriented terms, business is called upon to: be profitable, obey the law, be ethical,

and be a good corporate citizen.

Figure 6
Three Moral Types and Orientation Toward Stakeholder Groups:
Customers and the Local Community

Type of Management Orientation Toward Customer Stakeholders

Immoral Management

Customers are viewed as opportunities for personal or
organizational gain. Ethical standards in dealing do not
prevail; indeed, an active intent to cheat, deceive, and/or
mislead is present. In all marketing decisions—advertising,
pricing, packaging, distribution—customer is taken
advantage of to the fullest extent.

Amoral Management

Management does not think through the ethical
consequences of its decisions and actions. It simply makes
decisions with profitability within the letter of the law as a
guide. Management is not focused on what is fair from
perspective of customer. Focus is on management’s rights.
No consideration is given to ethical implications of
interactions with customers.

Moral Management

Customer is viewed as equal partner in transaction.
Customer brings needs/expectations to the exchange
transaction and is treated fairly. Managerial focus is on
giving customer fair value, full information, fair guarantee,
and satisfaction. Customer rights are liberally interpreted
and honored.

Type of Management Orientation Toward Local Community Stakeholders

Immoral Management

Exploits community to fullest extent; pollutes the
environment. Plant or business closing take fullest
advantage of community. Actively disregards community
needs. Takes fullest advantage of community resources
without giving anything in return. Violates zoning and other
ordinances whenever it can for its own advantage.

Amoral Management

Does not take community or its resources into account in
management decision making. Community factors are
assumed to be irrelevant to business decisions. Community,
like employees, is a factor of production. Legal
considerations are followed, but nothing more. Deals
minimally with community, its people, community activity,
local government.

Moral Management

Sees vital community as a goal to be actively pursued.
Seeks to be a leading citizen and to motivate others to do
likewise. Gets actively involved and helps institutions that
need help—schools, recreational groups, philanthropic
groups. Leadership position in environment, education,
culture/arts, volunteerism, and general community affairs.
Firm engages in strategic philanthropy. Management sees
community goals and company goals as mutually
interdependent.

The stakeholder management perspective provides not only a language and way to

personalize relationships with names and faces, but also some useful conceptual and

analytical concepts for diagnosing, analyzing, and prioritizing an organization’s

relationships and strategies. Effective organizations will progress beyond stakeholder

identification and question what opportunities and threats are posed by stakeholders;

what economic, legal, ethical, and philanthropic responsibilities they have; and what

strategies, actions or decisions should be pursued to most effectively address these

responsibilities. The stakeholder/responsibility matrix provides a template management

might use to organize its analysis and decision making.

Throughout the article we have been building toward the notion of an improved ethical

organizational climate as manifested by moral management. Moral management was

defined and described through a contrast with immoral and amoral management.

Because the business landscape is replete with immoral and amoral managers, moral

managers may sometimes be hard to find. Regardless, their characteristics have been

identified and, most important, their perspective or orientation towards the major

stakeholder groups has been profiled. These stakeholder orientation profiles give

managers a conceptual but practical touchstone for sorting out the different categories

or types of ethical (or not-so-ethical) behavior that may be found in business and other

organizations.

It has often been said that leadership by example is the most effective way to improve

business ethics. If that is true, moral management provides a model leadership

perspective or orientation that managers may wish to emulate. One great fear is that

managers may think they are providing ethical leadership just by rejecting immoral

management. However, amoral management, particularly the unintentional variety, may

unconsciously prevail if managers are not aware of what it is and of its dangers. At best,

amorality represents ethical neutrality, and this notion is not tenable in the society of the

1990s. The standard must be set high, and moral management provides the best

exemplar of what that lofty standard might embrace. Further, moral management, to be

fully appreciated, needs to be seen within the context of organization-stakeholder

relationships. It is toward this singular goal that our entire discussion has focused. If the

“good society” is to become a realization, such a high expectation only naturally

becomes the aspiration and preoccupation of management.

References

R. W. Ackerman and R.A. Bauer, Corporate Social Responsiveness (Reston, Va.:
Reston Publishing Co, 1976).

A.B. Carroll, . A Three-Dimensional Conceptual Model of Corporate Social
Performance,’ Academy of Management Review, 4, 4 (1979): 497-505.

A.B. Carroll, “In Search of the Moral Manager,” Business Horizons, March-April 1987,
pp. 7-15.

Committee for Economic Development, Social Responsibilities of Business
Corporations (New York: CED, 1971).

K. Davis, “Can Business Afford to Ignore its Social Responsibilities?” California
Management Review. 2. 3 (1960): 70-76.

R. Eells and C. Walton, Conceptual Foundations of Business (Homewood, ill.: Richard
D. Irwin. 1961).

“Good Timing, Charlie,” Forbes. November 27, 1989. pp. 140-144.

W.C. Frederick, “From CSRI to CSR2: The Maturing of Business and Society Thought,”
University or Pittsburgh Working Paper No. 279, 1978.

M. Friedman. “The Social Responsibility of Business Is to Increase its Profits.” New
York Times. September 13 1970, pp. 122-126.

S.P. Sethi, “Dimensions of Corporate Social Responsibility,” California Management
Review, 17,3 (1975): 58-64.

Archie B. Carroll is Robert W. Scherer Professor of Management and Corporate Public
Affairs at the College of Business Administration. University of Georgia. Athens.

Corporate Social Responsibility
Theories: Mapping the Territory

EUsahet Ganig

a,

Domenec Mele

ABSTRACT. The Corporate Social Responsibility
(CSR) field presents not only a landscape of theories bu

t

also a proliferation of approaches, which are controversial,
complex and unclear. This article tries to clarify the sit-
uation, “mapping the territory” by classifying the main
CSR theories and related approaches in four groups: (1

)

instrumental theories, in which the corporation is seen as
only an instrument for wealth creation, and its social
activities are only a means to achieve economic results; (2)
political theories, which concern them.selves with the
power of corporations in society and a responsible use of
this power in the political arena; (3) integrative theories,
in which the corporation is focused on the satisfaction of
social demands; and (4) ethical theories, based on ethical
responsibilities of corporations to society. In practice,
each CSR theory presents four dimensions related t

o

Elisabet Garriga is a PhD student in Management at IES

E

Busine.<:s School. University of Navarra, Spain. She holds

a

degree in Philosophy and another in Economics from the
University of Barcelona, Spain. She has taught Busitiess
Ethics at the University Pompcu Fabra, Barcelona, for the
Intemational Education of Students (IES), a consortium
comprised of more than 120 leading US colleges and uni-
versities. Her current research focuses on the concept and
implementation of Corporate Social Responsibilities. She also
has interest in organizational learning, entrepreneurship and
innovation.

Donteucc Mcle is Professor and Director of the Department of
Business Ethics at IESE Business School, University of
Navarra, Spain and chairs the bi-annual “International
Symposhun on Ethia, Business and Society” held by IESE.
He has a Doctorate in Industrial Engineering from the
Polytechnic University of Catalonia, Spain (1974) and
another ill TIteology from the University of Navarra (1983).
He has been working in the business ethia Jield since 1986
and has been a member of EBEN from its beginnings. He is
author of three books on economic and bu.

profits, political performance, social demands and ethical
values. The findings suggest the necessity to develop a
new theory on the business and society relationship,
which should integrate these four dimensions.

KEY WORDS; corporate social responsibility, corporate
responsiveness, corporate citizenship, stakeholder manage
ment, corporate social performance, issues management,
sustainable development, the common good

Introduction

Since the second half of the 20th century a lon

g

debate on corporate social responsibility (CSR) has
been taking place. In 1953, Bowen (1953) wrote the
seminal book Social Responsibilities of the Businessman.
Since then there has been a shift in terminology from
the social responsibility of business to CSR. Addi-
tionally, this field has grown significantly and today
contains a great proliferation of theories, approaches
and tenninologies. Society and business, social issues
management, public policy and business, stakeholder
management, corporate accountabihty are just some
of the terms used to describe the phenomena related
to corporate responsibility in society. Recently, re-
newed interest for corporate social responsibihties
and new alternative concepts have been proposed,
including corporate citizenship and corporate sus-
tainability. Some scholars have compared these new
concepts with the classic notion of CSR (see van
Marrewijk, 2003 for corporate sustainability; and
Matten et al., 2003 and Wood and Lodgson, 200

2

for corporate citizenship).

Furthermore, some theories combine different
approaches and use the same temiinology with dif-
ferent meanings. This problem is an old one. It was
30 years ago that Votaw wrote; “corporate social
responsibility means something, but not always the

fournal of Business Ethics 5 3 : 5 1 – 7 1 , 2 0 0 4 .
© 2()t)4 Kluwer Academic Publishers. Printed in the Netherlands.

52 Elisabet Ganiga and Domenec Mele

same thing to everybody. To some it conveys the
idea of legal responsibility or hability; to others, it
means socially responsible behavior in the ethical
sense; to still others, the meaning transmitted is that
of ‘responsible for’ in a causal mode; many simply
equate it with a charitable contribution; some take it
to mean socially conscious; many of those who em-
brace it most fervently see it as a mere synonym for
legitimacy in the context of belonging or being
proper or valid; a few see a sort of fiduciary duty
imposing higher standards of behavior on business-
men than on citizens at large” (Votaw, 1972, p. 25).
Nowadays the panorama is not much better. Carroll,
one of the most prestigious scholars in this disciphne,
characterized the situation as “an eclectic field wi

th

loose boundaries, multiple memberships, and differ-
ing training/perspectives; broadly rather than fo-
cused, multidisciplinary; wide breadth; brings in a
wider range of literature; and interdisciplinary”
(Carroll, 1994, p. 14). Actually, as Carroll added
(1994, p. 6), the map of the overall field is quite poor.

However, some attempts have been made to ad-
dress this deficiency. Frederick (1987, 1998) out-
lined a classification based on a conceptual transition
from the ethical-philosophical concept of CSR
(what he calls CSRl), to the action-oriented man-
agerial concept of social responsiveness (CSR2). He
then included a normative element based on ethics
and values (CSR3) and finally he introduced the
cosmos as the basic normative reference for social
issues in management and considered the role of
science and religion in these issues (CSR4). In a
more systematic way, Heald (1988) and Carroll
(1999) have offered a historical sequence of the main
developments in how the responsibihries of business
in society have been understood.

Other classifications have been suggested based on
matten related to CSR, such as Issues Management
(Wartick and Rude, 1986; Wood, 1991a) or the
concept of Corporate Citizenship (Alanan, 1998). An
alternative approach is presented by Brummer (1991)
who proposes a classification in four groups of theo-
ries based on six criteria (motive, relation to profits,
group affected by decisions, type of act, type of effect,
expressed or ideal interest). These classifications, in
spite of their valuable contribution, are quite limited
in scope and, what is more, the nature of the rela-
tionship between business and society is rarely situated
at the center of their discussion. This vision could be

questioned as CSR seems to be a consequence of how
this relationship is undentood (Jones, 1983; McMa-
hon, 1986; Preston, 1975; Wood, 1991b).

In order to contribute to a clarification of tbe field
of business and society, our aim here is to map the
territory in which most relevant CSR theories and
related approaches are situated. We udll do so by
considering each theory from the perspective of how
the interaction phenomena between business and
society are focused.

As the starting point for a proper classification, we
assume as hypothesis that the most relevant CSR
theories and related approaches are focused on one
of the following aspects of social reality: economics,
politics, social integration and ethics. The inspiration
for this hypothesis is rooted in four aspects that,
according to Parsons (1961), can be observed in any
social system: adaptation to the environment (related
to resources and economics), goal attainment (re-
lated to politics), social integration and pattern
maintenance or latency (related to culture and val-
ues). This hypothesis permits us to classify these
theories in four groups:

1. A first group in which it is assumed that the
corporation is an instrument for wealth crea-

‘• tion and that this is its sole social responsibil-
ity. Only the economic aspect of the
interactions between business and society is
considered. So any supposed social activity is
accepted if, and only if, it is consistent with
wealth creation. This group of theories could
be call ins tm met I tat theories because they
understand CSR as a mere means to the end of
profits.

2. A second group in which the social power of
corporation is emphasized, specifically in its
relationship with society and its responsibihty
in the poUtical arena associated with this
power. This leads the corporation to accept
social duties and rights or pardcipate in certain
social cooperation. We will call this group
political theories.

3. A third group includes theories which consider
that business ought to integrate social de-
mands. They usually argue that business de-
pends on society for its continuity and growth
and even for the existence of business itself
W e can term this group integrative theories.

Corporate Social Responsibility 53

3. A fourth group of theories understands that the
relationship between business and society is
embedded with etliical values. This leads to a
vision of CSR from an ethical perspective and
as a consequence, finns ought to accept social
responsibilities as an ethical obligation above
any other consideration. We can term this
g r o u p ethical theories.

Throughout this paper we vnH present the most
relevant theories on CSR and related matters, trying
to prove that they are all focused on one of the
forementioned aspects. We will not explain each
theory in detail, only what is necessary to verify our
hypothesis and, if necessary, some complementary
infonnation to clarify what each is about. At the same
time, we will attempt to situate these theories and
approaches within a general map describing the cur-
rent panorama regarding the role of business in society.

Instrumental theories

In this group of theories CSR is seen only as a
strategic tool to achieve economic objectives and,
ultimately, wealth creation. Representative of this
approach is the well-known Friedman view that
“the only one responsibility of business towards
society is the maximization of profits to the share-
holders within the legal framework and the ethical
custom of tbe country” (1970).”

Instrumental theories have a long tradition and
have enjoyed a wide acceptance in business so fer. As
Windsor (2001) has pointed out recently, “a leit-
motiv of wealth creation progressively dominates the
managerial conception of responsibility” (Windsor,
2001, p. 226).

Concern for profits does not exclude taking into
account the interests of all who have a stake in the
firm (stakeholders). It has been argued that in certain
conditions the satisfaction of these interests can
contribute to maximizing the shareholder value
(MitcheU et al., 1997; Odgen and Watson, 1999).
An adequate level of investment in philanthropy and
social activities is also acceptable for the sake of
profits (MeWilliams and Siegel, 2U01). We wUl re-
turn to these points afterwards.

In practice, a number of studies have been carried
out to determine the correlation between CSR and

corporate financial performance. Of these, an
increasing number show a positive correlation be-
tween the social responsibihty and financial perfor-
mance of corporations in most cases (Frooman,
1997; Griffin and Mahon, 1997; Key and Popkin,
1998; Roman et ai, 1999; Waddock and Graves,
1997) However, these findings have to be read with
caurion since such correlation is difficult to measure
(Griffin, 2000; Rowley and Berman, 2000).

Three main groups of instrumental theories can
be identified, depending on the economic objective
proposed. In the first group the objective is the
maximization of shareholder value, measured by the
share price. Frequently, this leads to a short-tenn
profits orientation. The second group of theories
focuses on the strategic goal of achieving competi-
tive advantages, which would produce long-tcnn
profits. In both cases, CSR is only a question of
enlightened self-interest (Keim, 1978) since CSRs
are a mere instrument for profits. The third is related
to cause-related marketing and i.s very close to the
second. Let us examine briefly the philosophy and
some variants of these groups.

Maximizing the shareholder value

A well-known approach is that which takes the
straightforward contribution to maximizing the
shareholder value as the supreme criterion to evaluate
specific corporate social activity. Any investment in
social demands that would produce an increase of the
shareholder value should be made, acting without
deception and fraud. In contrast, if the social demands
only impose a cost on the company they should be
rejected. Friedman (1970) is clear, giving an example
about investment in the local community: “It will be
in the long run interest of a corporation that is a major
employer in a small conununity to devote resources
to providing amenities to that community or to
improving its government. That makes it easier to
attract desirable employees, it may reduce the wage
bill or lessen losses from pilferage and sabotage or have
other worthwhile effects.” So, the socio-economi

c

objectives are completely separate from the economic
objectives.

Currently, this approach usually takes the share-
holder value maximization as the supreme reference
for corporate decision-making. The Agency Theory

54 Elisabet Garriga and Domenec Mele

(Jensen and Meckling, 1976; Ross, 1973) is the most
popular way to articulate this reference. However,
today it is quite readily accepted that shareholder
value maximization is not incompatible with satis-
fying certain interests of people with a stake in the
fimi (stakeholders). In this respect, Jensen (2(J00) has
proposed what he calls ‘enlightened value maximi-
zation’. This concept specifies long-tenn value
maximization or value-seeking as the firm’s objec-
tive. At the same time, this objective is employed as
the criterion for making the requisite tradeoSs
among its stakeholders.

Strategies for achieving competitive advantages

A second group of theories are focused on how to
allocate resources in order to achieve long-tenn
social objectives and create a competitive advantage
(Husted and Allen, 2000). In this group three ap-
proaches can be included: (a) social investments in
competitive context, (b) natural resource-based view
of the firm and its dynamic capabilities and (c)
strategies for the bottom of the economic pyramid.

a) Social investments in a competitive context. P o r t e r a n d
Kramer (2002) have recently applied the well-known
Porter model on competitive advantage (Porter.
1980) to consider investment in areas of what they
call competitive context.’^ The authors argue that
investing in philanthropic activities may be the only
way to improve the context of competitive advantage
of a firm and usually creates greater social value than
individual donors or government can. The reason
presented – the opposite of Freidnian’s position – is
that the finii has the knowledge and resources for a
better understanding of how to solve some problems
related to its mission. As Burke and Lodgson (1996)
pointed out, when philanthropic activities are closer
to the company’s mission, they create greater wealth
than others kinds of donations. That is what happens,
e.g., when a telecommunications company is teach-
ing computer network administration to students of
the local community.

Porter and Kramer conclude, “philanthropic
investments by members of cluster, either individ-
ually or collectively, can have a powerful etfect on
the cluster competitiveness and the performance of
all its constituents companies” (2002, pp. 60-61).

b) Natural resource-based view of the firm and dynamic
capabilities. The resource-based view of the firm
(Barney, 1991; Wernerfelt, 1984) maintains that the
ability of a firm to perform better than its compet-
itors depends on the unique interplay of human,
organizational, and physical resources over time.
Traditionally, resources that are most hkely to lead
to competitive advantage are those that meet four
criteria: they should be valuable, rare, and inimita-
ble, and the organization must be organized to de-
ploy these resources effectively.

The “dynamic capabilities” approach presents the
dynamic aspect of the resources; it is focused on the
drivers behind the creation, evolution and recom-
bination of the resources into new sources of com-
petitive advantage (Teece et al., 1997). So dynamic
capabilities are organizational and strategic routines,
by which managers acquire resources, modify them,
integrate them, and recombine them to generate
new value-creating strategies. Based on this per-
spective, some authors have identified social and
ethical resources and capabilities which can be a
source of competitive advantage, such as the process
of moral decision-making (Petrick and Quinn,
2001), the process of perception, deliberation and
responsiveness or capacity of adaptation (Litz, 1996)
and the development of proper relationships with
the primary stakeholders: employees, customers,
suppliers, and communities (Harrison and St. John,
1996; Hillman and Keim, 2001).

A more complete model of the ‘Resource-Based
View of the Firm’ has been presented by Hart
(1995). It includes aspects of dynamic capabilities
and a link with the external environment. Hart ar-
gues that the most important drivers for new re-
source and capabihties development vrill be
constraints and challenges posed by the natural
biophysical environment. Hart has developed his
conceptual fi-amework with three main inter-
connected strategic capabilities: pollution preven-
tion, product stewardship and sustainable
development. He considers as critical resources
continuous inprovement, stakeholder integration
and shared vision.

c) Strategies for the bottom of the economic pyramid.
Traditionally most business strategies are focused on
targeting products at upper and middle-class people,
but most of the world’s population is poor or lower-

Corporate Social Responsibility 55

middle class. At the bottom of the economic pyra-
mid there may be some 4000 million people. On
refiection. certain strategies can serve the poor and
simultaneously make profits. Prahalad (2002), ana-
lyzing the India experience, has suggested some
nund-set changes for converting the poor into active
consumers. The first of these is seeing the poor as an
opportunity to innovate rather than as a problem.

A specific means for attending to the bottom of
the economic pyramid is disruptive innovation.
Disruptive innovations (Christensen and Overdorf,
2000; Christensen et al., 2001) are products or ser-
vices that do not have the same capabilities and
conditions as those being used by customers in the
mainstream markets; as a result they can be intro-
duced only for new or less demanding applications
among non-traditional customers, with a low-cost
production and adapted to the necessities of the
population. For example a teleconununicadons
company inventing a small cellular telephone system
with lower costs but also with less service adapted to
the base of the economic pyramid.

Disruptive innovations can improve the social and
economic conditions at the “base of the pyramid”
and at the same time they create a competitive
advantage for the firms in telecommunications,
consumer electronics and energy production and
many other industries, especially in developing
countries (Hart and Christensen, 2002; Prahalad and
Hammond, 2002).

Cause-related marketing r ••-

Cause-related marketing has been defined as “the
process of formulating and implementing marketing
activities that are characterized by an offer from the
firm to contribute a specified amount to a designated
cause when customers engage in a revenue-providing
exchanges that satisfy organizational and individual
objectives” (Varadarajan and Menon, 1988, p. 60).
Its goal then is to enhance company revenues and
sales or customer relationship by building the brand
through the acquisition of, and association with the
ethical dimension or social responsibility dimension
(Murray and Montanari, 1986; Varadarajan and
Menon, 1988). In a way, it seeks product differen-
tiation by creating socially responsible attributes that
affect company reputation (Smith and Higgins,

2000). As McWilliams and Siegel (2001, p. 120) have
pointed out: “support of cause related marketing
creates a reputation that a finn is reliable and honest.
Consumers typically assume that the products of a
reliable and honest finn will be of high quality”. For
example, a pesticide-tree or non-animal-tested
ingredient can be perceived by some buyers as pref-
erable to other attributes of competitors’ products.

Other activities, which typically exploit cause-
related marketing, are classical musical concerts, art
exhibitions, golf tournaments or literacy campaigns.
All of these are a fomi of enlightened self-interest
and a win-win situation as both the company and
the charitable cause receive benefits: “the brand
manager uses consumer concern for business
responsibility as a means for securing competitive
advantage. At the same time a chantable cause re-
ceives substantial fmancial benefits” (Smith and
Higgins, 2000, p. 309).

Political theories

A group of CSR theories and approaches focus on
interactions and connections between business and
society and on the power and position of business and
its inherent responsibility. They include both politi-
cal considerations and political analysis in the CSR
debate. Although there are a variety of approaches,
two major theories can be distinguished: Corporate
Constimtionahsm and Corporate Citizenship.

Corporate constitutionalism

Davis (1960) was one of the first to explore the role
of power that business has in society and the social
impact of this power . In doing so, he introduces
business power as a new element in the debate of
CSR. He held that business is a social institution and
it must use power responsibly. Additionally, Davis
noted that the causes that generate the social power
of the firm are not solely intemal ot the finn but also
external. Their locus is unstable and constantly
shifting, from the economic to the social forum and
from there to the pohtical forum and vice vers

a.

Davis attacked the assumption of the classical
economic theory of perfect competition that pre-
cludes the involvement of the firm in society besides

56 Elisabet Garriga and Domenec Mele

the creation of wealth. The firm has power to
influence the equilibrium of the market and there-
fore the price is not a Pareto optimum reflecting the
free will of participants with perfect knowledge of
the market.

Davis formulated two principles that express how
social power has to be managed: “the social power
equation” and “the iron law of responsibility”. The
social power equation principle states that “social
responsibilities of businessmen arise from the
amount of social power that they have” (Davis,
1967, p. 48). The iron law of responsibility refers to
the negative consequences of the absence of use of
power. In his own words: “Whoever does not use
his social power responsibly will lose it. In the long
mn those who do not use power in a manner which
society considers responsible will tend to lose it
because other groups eventually will step in to as-
sume those responsibilities” (1960, p. 63). So if a
firm does not use its social power, it will lose its
position in society because other groups will occupy
it, especially when society demands responsibility
from business (Davis, 1960).

According to Davis, the equation of social power-
responsibility has to be understood through the
fiinctional role of business and managers. In this
respect, Davis rejects the idea of total responsibility
of business as he rejected the radical free-market
ideology ot no responsibility of business. The limits
of functional power come from the pressures of
different constituency groups. This “restricts orga-
nizational power in the same way that a govern-
mental constitution does.” The constituency groups
do not destroy power. Rather they define conditions
for its responsible use. They channel organizational
power in a supportive way and to protect other
interests against unreasonable organizational power
(Davis, 1967, p. 68). As a consequence, his theory is
called “Corporate Constitutionalism”.

Integrative social contract theory

Donaldson (1982) considered the business and
society relationship from the social contract tradi-
rion, mainly from the philosophical thought of
Locke. He assumed that a sort of implicit social
contract between business and society exists. This

social contract implies some indirect obligations of
business towards society. This approach would
overcome some limitarions of deoncological and
teleological theories appHed to business.

Afterwards, Donaldson and Dunfee (1994,
1999) extended this approacb and proposed an
“Integrative Social Contract Theory” (ISCT) in
order to take into account the socio-cultural context
and also to integrate empirical and nonnative aspects
of management. Social responsibilities come from
consent. These scholars assumed two levels of con-
sent. Firstly a theoretical macrosocial contract
appealing to all rational contractors, and secondly, a
real microsocial contract by members of numerous
localized communities. According to these authors,
this theory offers a process in which the contracts
among industries, departments and economic sys-
tems can be legirimate. In this process the partici-
pants will agree upon the ground rules defining the
foundation of economics that will be acceptable to
them.

The macrosocial contract provides rules for
any social contracting. These rules are called
the “hyper-norms”; they ought to take prece-
dence over other contracts. These hyper-norms are
so fiindamental and basic that they “are discernible
in a convergence of religious, political and philo-
sophical thought” (Donaldson and Dunfee, 2000, p.
441). The microsocial contracts show explicit or
implicit agreements that are binding within an
identified community, whatever this may be:
industry, companies or economic systems. These
microsocial contracts, which generate ‘authentic
norms’, are based on the attitudes and behaviors of
the members of the no mi-gen era ting community
and, in order to be legitimate, have to accord with
the hyper-nonns.

Corporate citizenship
– ; »

Although the idea of the firm as citizen is not new
(Davis, 1973) a renewed interest in this concept
among practitioners has appeared recently due to
certain facton that have had an impact on the
business and society relationship. Among these fac-
tors, especially worthy of note are the crisis of the
Welfare State and the globalization phenomenon.
These, together with the deregulation process and

Corporate Sodal Responsibility 57

decreasing costs with technological improvements,
have meant that some large multinational companies
have greater economical and social power than some
governments. The corporate citizenship framework
looks to give an account of this new reality, as we
will try to explain here.

!n the 80s the term “corporate citizenship” was
introduced into the business and society relationship
mainly through practitioners (Altman and Vidaver-
Cohen, 2000). Since the late 1990s and early 21st
century this term has become more and more pop-
ular in business and increasing academic work has
been carried out (Andriof and Mclntosh, 2001;
Matten and Crane, in press).

Although the academic reflection on the concept
of “corporate citizenship”, and on a similar one
called ‘the business citizen’, is quite recent (Matten et
al., 2003; Wood and Logsdon, 2002; among others),
this notion has always connoted a sense of belonging
to a community. Perhaps for this reason it has been so
popular among managers and business people, be-
cause it is increasingly clear that business needs to take
into account the community where it is operating.

The term “corporate citizenship” cannot have the
same meaning for everybody. Matten et al. (2003)
have distinguished three views of “corporate citi-
zenship”: (1) a limited view, (2) a view equivalent to
CSR and (3) an extended view of corporate citi-
zenship, which is held by them. In the limited view
“corporate citizenship” is used in a sense quite close
to corporate philanthropy, social investment or
certain responsibilities assumed towards the local
community. The equivalent to CSR view is quite
common. Carroll (1999) believes that “Corporate
citizenship” seems a new conceptualization of the
role of business in society and depending on which
way it is defined, this notion largely overlaps with
other theories on the responsibility of business in
society. Finally, in the extended view ot corporate
citizenship (Matten et al., 2003, Matten and Crane,
in press), corporations enter the arena of citizenship
at the point of government failure in the protection
of citizenship. This view arises from the fact that
some corporations have gradually come to replace
the most powerful institution in the traditional
concept of citizenship, namely government.

The temi “citizenship”, taken from political sci-
ence, is at the core of the “corporate citizenship”
notion. For Wood and Logsdon “business citizen-

ship cannot be deemed equivalent to individual
citizenship-instead it derives from and is secondary
to individual citizenship” (2002, p. 86). Whether or
not this view is accepted, theories and approaches on
“corporate citizenship” are focused on rights,
responsibilities and possible partnerships of business
in society.

Some theories on corporate citizenship are based
on a social contract theory (Dion, 2001) as devel-
oped by Donaldson and Dunfee (1994, 1999), al-
though other approaches are also possible (Wood
and Logsdon, 2002).

in spite of some noteworthy differences in cor-
porate citizenship theories, most authors generally
converge on some points, such as a strong sense of
business responsibility towards the local community,
partnerships, which are the specific ways of formal-
izing the willingness to improve the local commu-
nity, and for consideration for the environment.

The concern for local community has extended
progressively to a global concern in great part due to
the very intense protests against globalization, mainly
since the end of the 90s. This sense of global corporate
citizenship led to the joint statement “Global Cor-
porate Citizenship – the Leadership Challenge for
CEOs and Boards”, signed by 34 of the world largest
multinational corporations during the World Eco-
nomic Forum in New York in January 2002. Subse-
quently, business with local responsibility and, at the
same time, being a global actor that places emphasis on
business responsibilities in a global context, have been
considered as a key issue by some scholars (Tichy et al.,
1997; Wood and Lodgson, 2002).

Integrative theories

This group of theories looks at how business inte-
grates social demands, arguing that busmess depends
on society for its existence, continuity and growth.
Social demands are generally considered to be the
way in which society interacts with business and
gives it a certain legitimacy and prestige. As a con-
sequence, corporate management should take into
account social demands, and integrate them in such a
way that the business operates in accordance with
social values.

So, the content of business responsibility is limited
to the space and time of each situation depending on

58 Elisabet Garriga and Domenec Mele

the values of society at that moment, and comes
through the company’s functional roles (Preston and
Post, 1975). In other words, there is no specific
action that management is responsible for perform-
ing throughout time and in each industry. Basically,
the theones of this group are focused on the
detection and scanning of, and response to, the social
demands that achieve social legitimacy, greater social
acceptance and prestige.

Issues management

Social responsiveness, or responsiveness in the face of
social issues, and processes to manage them within the
organization (Sethi, 1975) was an approach which
arose in the 70s. In this approach it is crucial to con-
sider the gap between what the organization’s relevant
publics expect its performance to be and the organi-
zation’s actual perfonnance. These gaps are usually
located in the zone that Ackemian (1973, p. 92) calls
the “zone of discretion” (neither regulated nor illegal
nor sanctioned) where the company receives some
unclear signals from the environment. The firm
should perceive the gap and choose a response in
order to close it (Ackemian and Bauer, 1976).

Ackemian (1973), among other scholars, analyzed
the relevant factors regarding the intemal structures
of organizations and integration mechanisms to
manage social issues within the organization. The
way a social objective is spread and integrated across
the organization, he termed “process of institution-
alization”. According to Jones (1980, p. 65), “cor-
porate behavior should not in most cases be judged
by the decisions actually reached but by the process
by which they are reached”. Consequently, he
emphasized the idea of process rather than principles
as die appropriate approach to CSR issues.

Jones draws an analogy with the political process
assessing that the appropriate process of CSR should
be a fair process where all interests have had the
opportunity to be heard. So Jones has shifted the
criterion to the inputs in the decision-making pro-
cess rather than outcomes, and has focused more on
the process of implementation of CSR activities than
on the process of conceptualization.

The concept of “social responsiveness” was soon
widened with the concept “Issues Management”.
The latter includes the former but emphasizes the

process for making a corporate response to social
issues. Issues management has been defined by
Wartick and Rude (1986, p. 124) as “the processes
by which the corporation can identify, evaluate and
respond to those social and political issues which
may impact significantly upon it”. They add that
issues management attempts to minimize “surprises”
which accompany social and political change by
serving as an early warning system for potential
environmental threats and opportunities. Further, it
prompts more systematic and effective responses to
particular issues by serving as a coordinating and
integrating force within the corporation. Issues
management research has been influenced by the
strategy field, since it has been seen as a special group
of strategic issues (Greening and Gray, 1994), or a
part of international suidies (Brewer, 1992). That led
to the study of topics related with issues (identifi-
cation, evaluation and categorization), formalization
of stages of social issues and management issue re-
sponse. Other factors, which have been considered,
include the corporate responses to media exposure,
interest group pressures and business crises, as well as
organization size, top management commitment and
other organizational tactors.

Tlie principle of public responsibility

Some authors have tried to give an appropriate
content and substance to help and guide the firm’s
responsibility by limiting the scope of the corporate
responsibility. Preston and Post (1975, 1981) criti-
cized a responsiveness approach and the purely
process approach (Jones, 1980) as insufficient. In-
stead, they proposed “the principle of public
responsibility”. They choose the term “public” ra-
ther than “social”, to stress the importance of the
public process, rather than personal-morality views
or narrow interest groups defining the scope of
responsibilities.

According to Preston and Post an appropriate
guideline for a legitimate managerial behavior is
found within the framework of relevant public
policy. They added that “public policy includes not
only the literal text of law and regulation but also the
broad pattern of social direction reflected in public
opinion, emerging issues, formal legal requirements
and enforcement or implementation practices”

Corporate Social Responsibility 5

9

(Preston and Post, 1981, p. 57). This is the essence of
the principle of public responsibility.

Preston and Post analyzed the scope of managerial
responsibiUty in terms of the “primary” and “sec-
ondary” involvement of the fmn in its social envi-
ronment. Primary involvement includes the essential
economic task of the firm, such as locating and
establishing its facilities, procuring suppliers, engag-
ing employees, carrying out its production functions
and marketing products. It also includes legal
requirements. Secondary involvements come as
consequence of the primary. They are, e.g., career
and earning opportunities for some individuals,
which come from the pnmary activity of selection
and advancement of employees.

At the same time, these authors are in favor of
business intervention in the public policy process
especially with respect to areas in which specific
public policy is not yet clearly established or it is in
transition: “It is legitimate – and may be essential –
that affected firms participate openly in the policy
fonnation” (Preston and Post, 1981, p. 61).

In practice, discovering the content of the prin-
ciple of public responsibility is a complex and difficult
task and requires substantial management attention.
As Preston and Post recognized, “the content of
public policy is not necessarily obvious or easy to
discover, nor is it invariable overtime” (1981, p. 57).
According to this view, if business adhered to the
standards of perfonnance in law and the existing
public policy process, then it would be judged
acceptably responsive in terms of social expectations.

The development of this approach was parallel to
the study of the scope regarding business-govem-
ment relationship (Vogel, 1986). These studies fo-
cused on government regulations – their formulation
and implementation – as well as corporate strategies
to influence these regulations, including campaign
contributions, lobbying, coalition building, grass-
roots organization, corporate public affairs and the
role of public interest and other advocacy groups.

Stakeholder management

Instead ot tocusing on generic responsiveness, spe-
cific issues or on the public responsibility principle,
the approach called “stakeholder management” is
oriented towards “stakeholden” or people who af-

fect or are affected by corporate policies and prac-
tices. Although the practice of stakeholder
management is long-established, its academic
development started only at the end of 70s (see, e.g.,
Sturdivant, 1979). In a seminal paper, Emshoff and
Freeman (1978) presented two basic principles,
which underpin stakeholder management. The first
is that the central goal is to achieve maximum overall
cooperation between the entire system of stake-
holder groups and the objectives of the corporation.
The second states that the most efficient strategies for
managing stakeholder relations involve efforts,
which simultaneously deal with issues affecting
multiple stakeholders.

Stakeholder management tries to integrate groups
with a stake in the firm into managerial decision-
making. A great deal of empirical research has been
done, guided by a sense of pragmatism. It includes
topics such as how to determine the best practice in
corporate stakeholder relations (Bendheim et al.,
1998), stakeholder salience to managers (Agle and
Mitchell, 1999; Mitchell et al., 1997), die impact of
stakeholder management on financial performance
(Berman et al., 1999), the influence of stakeholder
network stmctural relations (Rowley, 1997) and
how managers can successfully balance the com-
peting demands of various stakeholder groups (Og-
den and Watson, 1999).

In recent times, corporations have been pressured
by non-governmental organizations (NGOs), activ-
ists, communities, goverrmients, media and other
instimtional forces. These groups demand what they
consider to be responsible corporate practices. Now
some corporations are seeking corporate responses to
social demands by establishing dialogue with a wide
spectrum of stakeholders.

Stakeholder dialogue helps to address the question
of responsiveness to the generally unclear signals re-
ceived from the envirormient. In addition, this dia-
logue “not only enhances a company’s sensitivity to
its environment but also increases the environments
undentanding of the dilemmas facing the organiza-
tion” (Kaptein and Van Tulder, 2003 p. 208).

Corporate social perfonnance

A set of theories attempts to integrate some of the
previous theories. The corporate social perfonnance

60 Eiisabet Ganiga and Domenec Mele

(CSP) includes a search for social legitimacy, with
processes for giving appropriate responses.

Carroll (1979), generally considered to have
introduced this model, suggested a model of “cor-
porate performance” with three elements: a basic
definition of social responsibihty, a hsting of issues in
which social responsibility exists and a specification
of the philosophy of response to social issues. Carroll
considered that a definition of social responsibility,
which fiilly addresses the entire range of obligations
business has to society, must embody the economic,
legal, ethical, and discretionary categories of business
performance. He later incorporated his four-part
categorization into a “Pyramid of Corporate Social
Responsibihties” (Carroll, 1991). Recently, Sch-
wartz and Carroll (2003) have proposed an alterna-
tive approach based on three core domains
(economic, legal and ethical responsibilities) and a
Venn model firamework. The Venn framework
yields seven CSR categories resulting from the
overlap of the three core domains.

Wartich and Cochran (1985) extended the Carroll
approach suggesting that corporate social involve-
ment rests on the principles of social responsibility,
the process of social responsiveness and the pohcy of
issues management. A new development came with
Wood (1991b) who presented a model of corporate
social perfonnance composed of principles of CSR,
processes ot corporate social responsiveness and
outcomes of corporate behavior. The principles ot
CSR are understood to be analytical forms to be
filled with value content that is operationalized. They
include: pnnciples of CSR, expressed on institu-
tional, organizational and individual levels, processes
of corporate social responsiveness, such as environ-
mental assessment, stakeholder management and is-
sues management, and outcomes of corporate
behavior including social impacts, social programs
and social policies.

Ethical theories

There is a fourth group of theories or approaches
focus on the ethical requirements that cement the
relationship between business and society. They are
based on principles that express the right thing to do
or the necessity to achieve a good society. As main
approaches we can distinguish the following.

Normative stakeholder theory

Stakeholder management has been included within
the integrative theories group because some authors
consider that this fonn of management is a way to
integrate social demands. However, stakeholder
management has become an ethically based theory
mainly since 1984 when Freeman wrote Strategic
Management: a Stakeholder Approach. In this book, be
took as starring point that “managers bear a fiduciary
relationship to stakeholders” (Freeman, 1984, p. xx),
instead of having exclusively fiduciary dudes towards
stockholders, as was held by the conventional view
of the finn. He understood as stakeholders those
groups who have a stake in or claim on the firm
(suppliers, customers, employees, stockholders, and
the local community). In a more precise way,
Donaldson and Preston (1995, p. 67) held that the
stakeholder theory has a normative core based on
two major ideas (1) stakeholders are persons or
groups with legitimate interests in procedural and/or
substantive aspects of corporate activity (stakeholders
are identified by their interests in the corporation,
whether or not the corporation has any corre-
sponding functional interest in them) and (2) the
interests of all stakeholders are of intrinsic value (that
is, each group of stakeholders merits consideration
for its own sake and not merely because of its ability
to further the interests of some other group, such as
the shareowners).

Following this theory, a socially responsible firm
requires simultaneous attention to the legiti-
mate interests of all appropriate stakeholders and
has to balance such a multiphcity of interests and
not only the interests of the finn’s stockhold-
ers. Supporters of nomiative stakeholder theory
have attempted to justify it through arguments taken
from Kantian capitalism (Bow îe, 1991; Evan and
Freeman, 1988), modern theories of property and
distributive justice (Donaldson and Preston, 1995),
and also Libertarian theories with its notions of
freedom, rights and consent (Freeman and Philips,
2002).

A generic fonnulation of stakeholder theory is not
sufficient. In order to point out how corporations
have to be governed and how managers ought to act,
a nowtative core ot ethical principles is required
(Freeman, 1994). To this end, different scholars have
proposed differing normative ethical theories. Free-

Corporate Social Responsibility 6

1

man and Evan (1990) introduced Rawlsian princi-
ples. Bowie (1998) proposed a combination of
Kantian and Rawlsian grounds. Freeman (1994)
proposed the doctrine of fair contracts and Phillips
(1997, 2003) suggested introducing the fairness
principle based on six of Rawls’ characteristics of the
principle of fair play: mutual benefit, justice, coop-
eration, sacrifice, free-rider possibility and voluntary
acceptance of the benefits of cooperative schemes.
Lately, Freeman and Philips (2002) have presented
six principles for the guidance of stakeholder theory
by combining Libertarian concepts and the Faimess
principle. Some scholars (Burton and Dunn, 1996;
Wicks et al., 1994) proposed instead using a “fem-
inist ethics” approach. Donaldson and Dunfee
(1999) hold their ‘Integrative Social Contract The-
ory’. Argandofia (1998) suggested the common good
notion and Wijnberg (2000) an Aristotelian ap-
proach. From a practical perspective, the normative
core of which is risk management. The Clarkson
Center for Business Ethics (1999) has published a set
of Principles of Stakeholder Management.

Stakeholder nonnative theory has suffered critical
distortions and friendly misinterpretations, which
Freeman and co-workers are trying to clarity (Phil-
lips et al., 2003). In practice, this theory has been
applied to a variety of business fields, including
stakeholder management for the business and society
relationship, in a number of textbooks Some of these
have been republished several times (Carroll and
Buchholtz, 2002; Post et al, 2002; Weiss, 2003;
among others).

In short, stakeholder approach grounded in ethi-
cal theories presents a different perspective on CSR,
in which ethics is central.

Universal rights

Human rights have been taken as a basis for CSR,
especially in the global market place (Cassel, 2001).
In recent years, some human-rights-based approaches
for corporate responsibility have been proposed. One
of them is the UN Global Compact, which includes
nine principles in the areas of human rights, labor and
the environment. It was first presented by the United
Nations Secretary- General Kofi Annan in an address
to The World Economic Forum in 1999. In 2000 the
Global Compact’s operational phase was launched at

UN Headquarters in New York. Many companies
have since adopted it. Another, previously presented
and updated in 1999, is The Global Sullivan Princi-
ples, which has the objective of supporting eco-
nomic, social and political justice by companies
where they do business. The certification SA800

0

(www.cepaa.org) for accreditation of social respon-
sibility is also based on human and labor rights. De-
spite using different approaches, all are based on the
Universal Declaration of Human Rights adopted by
the United Nations general assembly in 1948 and on
other international declarations of human rights, la-
bor rights and environmental protection.

Although for many people universal rights are a
question of mere consensus, they have a theoretical
grounding, and some moral philosophy theories give
them support (Donnelly, 1985). It is worth men-
tioning the Natural Law tradition (Simon, 1992),
which defends the existence of natural human rights
(Maritain, 1971).

Sustainable development

Another values-based concept, which has become
popular, is “sustainable development”. Although
this approach was developed at macro level rather
than corporate level, it demands a relevant corporate
contribution. The term came into widespread use in
1987, when the World Commission on Environ-
ment and Development (United Nations) published
a report known as “Bnitland Report”. This report
stated that “sustainable development” seeks to meet
the needs of the present without compromising the
ability to meet the future generation to meet their
own needs” (World Commission on Environment
and Development, 1987, p. 8). Although this report
originally only included the environmental factor,
the concept of “sustainable development” has since
expanded to include the consideration of the social
dimension as being inseparable from development.
In the words of the World Business Council for
Sustainable Development (2000, p. 2), sustainable
development “requires the integration of social,
environmental, and economic considerations to
make balanced judgments for the long term”.

Numerous definitions have been proposed for
sustainable development (see a review in Gladwin
and Kennelly 1995, p. 877). In spite of which, a

62 Elisabet Garriga and Domenec Mele

content analysis of the main definitions suggests that
sustainable development is “a process of achieving
human development in an inclusive, connected,
equiparable, prudent and secure manner.” (Gladwin
and Kennelly 1995. p. 876).

The problem conies when the corporadon has to
develop the processes and implement strategies to
meet the corporate challenge of corporate sustain-
able development. As Wheeler et al. (2003, p. 17)
have stated, sustainability is “an ideal toward which
society and business can condnually strive, the way
we strive is by creadng value, creadng outcomes that
are consistent with the ideal of sustainability along
social environmental and economic dimensions”.’

However, some suggestions have been proposed
to achieve corporate ecological sustainability
(Shrivastava, 1995; Stead and Stead, 2000; among
others). A pragmatic proposal is to extend the tra-
didonal “bottom line” accounting, which shows
overall net profitability, to a “triple bottom line”
that would include economic, social and environ-
mental aspects of corporadon. Van Marrewijk and
Werre (2003) maintain that corporate sustainability
is a custom-made process and each organizadon
should choose its own specific ambition and ap-
proach regarding corporate sustainability. This
should meet the organizadon’s aims and intendons,
and be ahgned with the organizadon strategy, as an
appropriate response to the circumstances in which
the organization operates.

The common good approach

This third group of approaches, less consoh-
dated than the stakeholder approach but with po-
tendal, holds the common good of society as
the referential value for CSR (Mahon and McGo-
wan, 1991; Velasquez, 1992). The common good
is a classical concept rooted in Aristotelian tradi-
tion (Smith. 1999), in Medieval Scholasdcs
(Kempshall, 1999), developed philosophically
(Maritain, 1966) and assumed into Catholic social
thought (Carey, 2001) as a key reference for business
ethics (Alford and Naughton, 2002; Mele, 2002;
Pope John Paul II, 1991, #43). This approach
maintains that business, as with any other social
group or individual in society, has to contribute to
the common good, because it is a part of society. In

this respect, it has been argued that business is a
mediadng insdtution (Fort, 1996, 1999). Business
should be neither hannful to nor a parasite on
society, but purely a posidve contributor to the well-
being of the society.

Business contributes to the common good in
different ways, such as creadng wealth, providing
goods and services in an efficient and fair way, at the
same dme respecting the dignity and the inalienable
and fundamental rights of the individual. Further-
more, it contributes to social well-being and a har-
monic way of hving together in just, peaceflil and
friendly condidons, both in the present and in the
future (Mele, 2002).

To some extent, this approach has a lot in common
with both the stakeholder approach (Argandona,
1998) and sustainable development, but the philo-
sophical base is different. Although there are several
ways of understanding the nodon of common good
(Sulmasy, 2001). the interpretation based on the
knowledge of human nature and its fulfillment seems
to us pardcularly convincing. It permits the circum-
navigation of cultural reladvism, which is frequently
embedded in some definidons of sustainable devel-
opment.

The common good nodon is also very close to the
Japanese concept of Kyosei (Goodpaster, 1999;
Kaku, 1997; Yamaji, 1997), understood as “hving
and working together for the common good”,
which, together vidth the principle of human dig-
nity, is one of the founding principles of the popular
“The Caux Roundtable Principles for Business”
(wv/w.cauxroundtable.org).

Discussion

The preceding descripdon, summed up on Table I,
leads to the conclusion that the hypothesis consid-
ered in the introducdon about the four basic focus
employed by CSR theories and related approaches is
adequate. Consequently, most of the current theo-
ries related to CSR could be broadly classified as
instrumental, polidcal, integrative and ethical theo-
ries.

Donati (1991), a contemporary sociologist, has
reviewed many aspects of the work of Parsons. He
suggests that adaptadon, goal attairunent, integradon
and latency presented by Parsons (1961) as rigid

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functions, have to be understood as four intercon-
nected dimensions present in every social phenom-
enon. This suggests that the concept of business and
society relationship must include these four aspects
or dimensions and some connection among them
must exist. This must be reflected in every theory. In
some authors, such as Friedman, it is relatively easy
to discover these dimensions and connections, in
other theories it is not so easy.

In fact, although the main concern in the Fried-
man view (Friedman, 1970; Friedman and Fried-
man, 1962) is for wealth creation, as we have
pointed out above, this concern is rooted in certain
cultural values regarding the free market, private
property and the fact that wealth creation is good for
society. This shows us that certain values are present,
even though they are frequently questioned. At the
same time, he accepts the rules of the free market,
laws and ethical customs in each place. Friedman
and, above all, Jensen (2000) also accept the inte-
gration of some social demands into the company if
it is profitable in the long-tenn. Regarding politics,
underpinning the Friedman view there is a func-
tional conception of the social with clear political
consequences. Society is understood as a mechanism
with nionoflinctional groups, each with a concrete
purpose. Thus, the exclusive purpose of business
organizations is the creation of wealth. It is held that
business operating in a free market is the best way to
allocate scarce resources because society can achieve
an optimum situation in the sense of Pareto (Pareto
Optimum). This means that the satisfaction of al!
people involved in the situation is the greatest pos-
sible or, at least, the situation satisfies most of them
without being detrimental for others. However, in
the presence of externalities, when decision-makers
do not take into account secondary effects of their
actions that burden or benefit others, the market is
inefficient and the equilibrium is not a Pareto opti-
mum. When externalities appear, another system of
society, the pohtical system, should act. The political
system must confront these externalities through
taxes, regulation and minimum package of rights.
So, business contributes to the welfare of society
through the market mechanism and in compliance
with the law. Of course, outside business, the
manager can spend any quantity of personal money
on social activities according to his or her per-
sonal preferences. However, the social objectives

Corporate Social Responsibility 65

and demands come under business consider-
ation only through the law applied by the political
system.

A contrasting theory, in which the four dimen-
sions mentioned and their connections are not so
easy to discover, is “the principle of public respon-
sibility” of Preston and Post (1975). However, these
dimensions are implicit. In fact, this theory presup-
poses a certain conception of society and values. The
political dimension is clear, since public policy is
assumed as basic criterion. Regarding wealth crea-
tion, undoubtedly the application of this theory
would have consequences for profit generation.
Actually, these scholars recognize that what they call
secondary relationships (related to secondary
involvements) “as essential to effective management
over the long term” (Preston and Post, 1981, p. 57).

It is not our aim to review all theories described,
but what has been said regarding the four dimensions
in the approaches of Friedman and Preston and Post,
could probably be extended to other theories. If our
intuition is correct, a proper concept of the business
and society relationship should include these four
aspects or dimensions, and some mode of integration
of them. Although most theories studied do not
make it explicit, one can appreciate a tendency to
overcome this deficit.

In fact, in the last few years, some theories have
been proposed in which two or even more of these
dimensions and their interconnection have been
considered. That is the case, e.g., of Wood’s Cor-
porate Social Performance model (1991b). This
model basically focuses on integrating social de-
mands, however, it also considers institutional
legitimacy, accepting that “society grants legitimacy
and power to business” (Davis, 1973, p. 314). In this
manner. Wood introduces both political and inte-
grative dimensions while economic and ethical
dimensions are implicit. Regarding the latter, the
stated principles of corporate responsibihty assumed
are based on social control rather than on prescrip-
tive responsibility coming from ethics. This is pre-
cisely the criticism Swanson (1995) made of Wood’s
model. As an alternative, Swanson (1995, 1999)
proposed a derived model in which she tried to
include the ethical dimension explicitly, through a
theory of values. Following Frederick (1992) she
accepted that business organizations have responsi-
bilities related to economizing and ecologizing.

Furthermore executive decision-making should
forego power-seeking in favor of directing the firm
to economize and ecologize.

More recently. Wood and Lodgson (2002),
dealing with the corporate or business citizen model,
have introduced the ethical dimension in their
model. They focus on the political dimension but
also incorporate universal rights into their vision of
corporate behavior.

Theories on CSR, which take long-term profits
as the main goal nomially, use an empirical meth-
odology and are descriptive, although explicidy they
also present a conditional prescription. Their generic
statement might take the fonn: “if you want to
maximize profits you must assume CSR in the wsy
proposed by this theory”. In contrast, ethical theo-
ries are prescriptive and use a normative methodol-
ogy. Integrating empirical and nonnative aspects of
CSR, or economic and ethics, is great challenge.
Some authors (Brandy, 1990; Etzioni, 1988; Quinn
and Jones, 1995; and Swanson, 1999; Trevino and
Weaver, 1994 among others) have considered this
problem, but it is far from being resolved. This lack
of integration has been denounced as the cause of
the lack of a paradigm for the business and society
field (Swanson, 1999).

Finally, the current situation presents many com-
peting ethical theories. This very often produces
confusion and skepticism. The problem is especially
serious in the case of ethical theories, and even within
each group of theories. Considering, for instance, the
stakeholder normative theory. As we have explained
above, this can be developed using a great number of
different ethical theories. Although each of these
theories states universal principles, in practice, the
global effect is one of unabashed relativism: “If you
are Utilitarian, you’ll do this, if you are Kantian you’ll
do that.” (Solomon, 1992, p. 318).

Conclusion

We can conclude that most of current CSR theories
are focused on four main aspects: (1) meeting
objectives that produce long-term profits, (2) using
business power in a responsible way, (3) integrating
social demands and (4) contributing to a good society
by doing what is ethically correct. This permits us to
classify the most relevant theories on CSR and related

66 Elisabet Garriga and Domenec Mele

concepts into four groups, which we have called
instrumental, pohtical, integrative and value theories.
Most of the theories considered do not make explicit
the impHcations of each specific approach for the
aspects considered in others groups of theories.

Further research could analyze these four
dimensions and their connecdon in the most rele-
vant theories and consider their contributions and
limitations. What seems more challenging, however,
is to develop a new theory, which would overcome
these hniitations. This would require an accurate
knowledge of reahty and a sound ethical foundadon.

Notes

Parsons considers the existence of four interconnected
problems in any action system: (1) the problem mobiliz-
ing of resources from the environment and then distrib-
utir^ them throughout the system, which requires
adaptadon to environment; (2) the problem of establish-
ing priorities among system goals and mobilizing system
resources for the attainment of the goals; (3) the problem
of coordinadng and maintaining viable relationships
among system units and (4) the problem of assuring that
the actors in the social system display the appropriate
values. Thi.s entails motivation and other characteristics
(pattern maintenance) and dealing with the internal
tensions and strain of the actors in the social system
(tension management). That means preserving the basic
structure of the system and adjusting to changing
condidons within the framework that the basic structure
provides. According to Parsons these problems necessitate
four requisites or imperatives for the maintenance of a
social system: adaptation (A), goal attainment (G),
integration (I) and pattern inaintenance or latency (L).

Some years before, T. Leavitt, a Harvard Business
School professor, expressed this approach in an even more
radical way: “Corporate welfare makes good sense if it
makes good economic sense – and not infrequendy it
does. But if something does not make economic sense,
sentiment or idealism ought not to let it in the door”
(Leavitt, 1958, p. 42).
* According to Porter and Kramer (2002), a comped-
tive context consists of four interrelated elements of
the local business environment that shape potential
productivity. The first element is the factor condition,
which involves employee education, natural resources,
high quality technological institudons and physical infra-
structure. The second element is related to demand

conditions; that is to say, how the firm can influence the
quality and the size of local market by, for example,
developing educated and demanding customers. The
third, the context for strategy and rivalry involves how
the firm can invest in incendves and norms that rule
competidon as for example all the efforts for reducing
corruption, preventing the formation of cartels and
opening markets. The last is the firm’s investment in
related and supporting industries, for example, strength-
ening the relationship with suppliers of services, compo-
nents and machinery.

According to Davis, “markets leave business theoret-
ically without any social power and hence, no social
responsibility (balanced zero equation). This zero equa-
tion ot no power and no responsibility is a proper
theoredcal model for pure competition, but it is theory
only and it’s inconsistent with the power realities of
modem organizations. They posses such a great inidadve,
economic assets, and power in their acdons do have social
effects” (Davis, 1967. p. 49).

In fact, different models have been constructed in order
to explain how and why partnerships are buUt and how to
detennine, measure, evaluate partnerships (Andrioff,
2001; Zadek, 2001).

That is not the only problem. According to Gla-
dwin and Kennelly (1995, p. 876), the concept of
sustainable development is “fuzzy, elusive, contestable
and/or ideologically controversial” and with multiple
objectives and ingredients, complex interdependencies
and considerable moral thickness. But, in spite of
everything, the concept is becoming more and more
popular and has introduced an important element to the
CSR debate.

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Department of Business Ethics,
IESE Business School,
University of Navarra,

Au. Pearson, 21,
08034 Barcelona,

Spain
E-mail: mcle@iese.edu, egarriga@iese.edu

The Four Faces
of Corporate Citizenship

ARCHIE B. CARROLL

Some observers call it corporate socialresponsibility (CSR). Others refer to it ascorporate ethics. More recently, busi-
nesses’ social performance has been framed as
“corporate citizenship.” But, what does corpo-
rate citizenship really mean? What is business
expected to be or to do to be considered a good
corporate citizen? Is corporate citizenship com-
patible with or hostile to corporate growth and
profits?

A significant boost to corporate citizenship
initiatives was given in 1996 when President
Clinton called to Washington a group of leading
business people to discuss the notion of corpo-
rate citizenship and social responsibility. At
this conference, President Clinton exhorted the
business leaders to “do well” by their employees
as they make money for their shareholders.
He and then–Labor Secretary Robert Reich
announced the newly created Ron Brown Cor-
porate Citizenship Award, named for the late
commerce secretary who died in 1996 along
with a group of business executives on a trade
mission to Bosnia. The award was to honor
American companies each year deemed to best
exemplify efforts to support its workers.

President Clinton’s five criteria for the Ron
Brown Award for “good corporate citizenship”
boiled down to companies exhibiting the follow-
ing practices: “family-friendly” policies, such as
allowing family leave; good health and pension
benefits; a safe workplace; training and

advancement opportunities; and policies that
avoid layoffs. In 1998, the 1997 winners were
announced: IBM Corporation, for its diversity
programs, and Levi Strauss & Co., for its anti-
racism initiative “Project Change.”1 One could
not argue with these criteria nor these winners;
however, one cannot help but note that the cri-
teria all involve the relationship between com-
panies and their employees, with no mention
being made of shareholders, consumers, the
community in which the business is located, or
other important stakeholders. Surely corporate
citizenship extends beyond relationships be-
tween companies and their employees and
includes the business responding to and inter-
acting with these other vital stakeholders.

Decades of studying businesses’ corporate
social performance, their activities that extend
beyond profit-making, and their contributions
to the community lead one to conclude that cor-
porate citizenship is real—it is expected of busi-
ness by the public, and it is manifested by many
excellent companies. Further, corporate citi-
zenship addresses the relationship between
companies and all their important stakehold-
ers, not just employees.

The full gamut of corporate citizenship in-
cludes its four faces. Each “face,” aspect, or re-
sponsibility reveals an important facet that
contributes to the whole. Just as private citizens
are expected to fulfill these responsibilities,
companies are as well. Corporate citizenship
has an economic face, a legal face, an ethical
face, and a philanthropic face.2 Stated differ-
ently, good corporate citizens are expected to:

• Be profitable (carry their own weight or fulfill
their economic responsibilities).

• Obey the law (fulfill their legal responsibili-
ties).

© 1998 Center for Business Ethics at Bentley College. Published by Blackwell Publishers,
350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road, Oxford OX4 1JF, UK.

Archie B. Carroll holds the Robert W. Scherer Chair of Management
and Corporate Public Affairs in the Terry College of Business at the
University of Georgia, where he also serves on the faculty of the Non-
profit Management Program. He is president-elect of the Society for
Business Ethics. He is the author of dozens of articles on corporate
social policy, business ethics, and stakeholder relationships and the
author of Business and Society: Ethics and Stakeholder Manage-
ment, Third Edition (Cincinnati: South-Western College Publishing,
1996).

Business and Society Review 100/101: 1–7

• Engage in ethical behavior (be responsive to
their ethical responsibilities).

• Give back through philanthropy (engage in
corporate contributions).

ECONOMICS: GOOD CORPORATE
CITIZENS ARE PROFITABLE

In the early years of this century, President
Theodore Roosevelt said that “the first requisite
of a good citizen is that he [or she] be able and
willing to pull his [or her] own weight.” With re-
spect to corporations, this translates into the
economic responsibility of profit-making.
Profit-making is not antithetical to good corpo-
rate citizenship. Indeed, it is required of good
citizenship. Just as private individuals are ex-
pected to work and earn an income as part of
participating in society and being good citizens,
business organizations are expected to gener-
ate income sufficient to pay their bills and re-
ward their investors.

Good corporate citizens earn enough money
that their investors receive a strong return on
their investments and that other stakeholders
are assured of the continuity of the business
and the flow of products, services, jobs, and
other benefits provided by the company. Presi-
dent Clinton highlighted the importance of
profits when he stated in a speech on corporate
responsibility: “The most fundamental respon-
sibility of any business in a free-enterprise sys-
tem is to make a profit. . . .”3 Like many others,
the president went on to say that there are other
responsibilities as well.

President Clinton’s statement was reminis-
cent of that made by the renowned economist
Milton Friedmann, when he asserted over three
decades ago that management is “to make as
much money as possible. . . .”4 Unfortunately,
the concluding part of Friedmann’s quote is of-
ten dropped in the repeating of it. The rest of his
quote was “. . . while conforming to the basic
rules of society, both those embodied in the law
and those embodied in ethical customs.”5 When
these words are appended, it appears that
Friedmann does see a role—or responsibility

—for business that extends beyond profit-
making.

It is clear from public opinion today that
businesses are expected to make money, but
also to go “beyond the bottom line.” A recent
Business Week/Harris Poll revealed that 95% of
Americans surveyed thought U.S. corporations
owe something to their workers and communi-
ties and that they should sometimes sacrifice
some profit “for the sake of making things better
for their workers and communities.”6 Profits,
therefore, are a sine qua non of effective corpo-
rate citizenship.

THE LAW:
SOCIETY’S CODIFIED ETHICS

Good corporate citizens, like private individu-
als, are also expected to obey the law. One way
of thinking about the law is to perceive it as
codified ethics. If business ethics is about what
is right, good, and just in the commercial realm,
law is designed by our lawmakers to manifest
these standards in terms of businesses’ per-
formance. Of particular concern to businesses
wishing to be good corporate citizens are laws
that are designed to govern their relationships
with key stakeholders such as consumers, em-
ployees, the community, and the natural envi-
ronment. Congress and the states promulgate
laws to establish the basic ground rules for the
game of business. If businesses wish to be re-
garded and admired as good corporate citizens,
they abide by these laws and integrate legal
compliance into their corporate strategies and
operational management.

To be sure, government regulation of busi-
ness is a controversial subject. Much has been
written and will be written regarding busi-
nesses’ challenge in fulfilling the expectations
of governmental stakeholders who are the
agents of the public in promulgating and en-
forcing standards of behavior in various busi-
ness realms. This topic gets even more heated
when U.S. firms think about the degree of regu-
lations they experience vis-à-vis world competi-
tors. In today’s global marketplace, competition

2 BUSINESS AND SOCIETY REVIEW

is fierce and businesses often perceive regula-
tions as unfair burdens that hinder rather than
help. A widely held view on this subject is that
government regulations were implemented in
commercial realms where the marketplace
failed to ensure fair competition (Microsoft Cor-
poration would have something to say about
this), safe and pure products, fair and equitable
work arrangements, and an unharmed envi-
ronment. In other words, government regula-
tions were created to bring about social benefits
that individuals and companies, each acting in
their own self-interest, did not seem able to
generate.

Laws frequently emerge when a significant
need for them is perceived. For example, in the
mid-1970s, the U.S. experienced a blaze of
scandal when disclosures of bribes rocked big-
name companies such as Lockheed, Exxon,
and Mobil and toppled government leaders
from Italy to Japan. One direct outgrowth of
these scandals was the passage by Congress of
the 1977 Foreign Corrupt Practices Act, still
regarded today as the world’s toughest law
against foreign bribes. Many observers re-
garded Americans as naïve in the ways of world
markets when this law was passed. And for two
decades American businesses have complained
about the law but begrudgingly followed it.7

Attempting to be good “world” citizens, U.S.
officials approached the Organization for Eco-
nomic Cooperation and Development (OECD) in
the late-1980s, attempting to lobby for a multi-
national ban on bribery. Again, the officials
were rebuffed as naïve Americans who really
did not understand how things worked in the
rest of the world. By 1995, however, momentum
started to change as more countries and com-
panies got on the bandwagon, realizing that
some kind of international ban on bribes was
desperately needed.

By the fall of 1997, countries around the
world were about to follow the U.S.’s lead and
adopt tough laws of their own to crack down on
companies that bribe to win foreign contracts.
Work is now underway to draft an anti-bribery
treaty for the twenty-nine nations of the OECD
who expect to have national laws effected in

member countries by the end of 1998. In addi-
tion to the member nations, five other countries
—Argentina, Brazil, Chile, Bulgaria, and Slova-
kia—have signed off on the deal. Under the
agreement, the countries will propose laws to
their parliaments to combat bribery, which has
given certain corporations an unfair advantage
in global markets.8

In fulfilling its legal obligations by aspiring to
follow the Foreign Corrupt Practices Act, the
U.S. finds itself in a leadership role in spear-
heading an international agreement that will
help shape a new vision of corporate citizenship
at a global level. The legal face of corporate citi-
zenship in the U.S., therefore, has served as a
springboard for initiatives leading to the codifi-
cation of a bribery ban that has the potential to
spread all over the world.

GOING BEYOND THE LAW:
ETHICS AND MORAL MANAGEMENT

Questions about society’s morality are being
raised by many people today and apply not only
to the business community, but to other societal
sectors as well—government, education, health
care, and so on. Philosopher Christina Hoff
Summers, also a fellow at the American Enter-
prise Institute, recently posed the question,
“Are we living in a moral stone age?” Sommers
goes on to argue that many citizens today, espe-
cially youth, suffer from conceptual moral
chaos, a kind of moral confusion that has re-
sulted in the country losing its bearings on so
many issues. Sommers is concerned that we
have lost a sense of the standards of ethical ide-
als that all civilizations worthy of the name have
discovered.9 Her concern is with society at
large. Our attention here, however, is devoted to
business enterprises that are embedded in this
larger society.

Businesses wishing to be regarded as exem-
plary corporate citizens not only carry their
own weight by being economically successful
and function in compliance with law, but they
also strive to operate in an ethical fashion.
Complying with the law means operating at a

ARCHIE B. CARROLL 3

minimum level of acceptable conduct. It has of-
ten been said that the law is at the floor level of
acceptable behavior. The upright corporate
citizen must go beyond mere compliance with
the law.

There are several reasons for this. First, laws
and regulations frequently reflect “minimums”
that our lawmakers can agree upon in the give-
and-take of political maneuvering. Therefore,
the laws may not be at a level or standard that is
truly needed to protect various stakeholder
groups. Related to this, laws are often not kept
up to date; that is, they may not reflect the lat-
est thinking, norms, or research that indicates
the level or standard at which business should
be operating to protect stakeholders.

Another reason law may be inadequate is
that the law may not address all the social is-
sues that need to be addressed. Quite often to-
day, topics or issues arise for which a law or
legal standard does not effectively address the
problem. We have seen this in the debate over
human cloning and genetic engineering. In
these kinds of situations, sound ethics are
needed because laws may not be yet passed to
reflect society’s thinking on the issue for some
years to come. Laws, in other words, may lag
behind ethical thinking. Other arenas in which
this may be true today include the question of
what constitutes protection of privacy rights in
a networked world (who owns your e-mail mes-
sages?) and in health care, where technological
advances are outpacing our ability to think
through their ramifications.

Business ethics is concerned with the dis-
tinctions between corporate behavior that is
good versus bad, fair versus unfair, or just ver-
sus unjust. Business ethics is concerned both
with developing codes, concepts, and practices
of acceptable business behavior and with carry-
ing out these practices in all business dealings
with its various stakeholders. Thus, two vital
aspects of business ethics are “knowing ethics”
and “doing ethics.”

For many, ethical behavior is synonymous
with moral behavior while discussing the busi-
ness context. Therefore, an ethical manager is
a moral manager. Managers need sound

business ethics not only because it will best
serve their own interests and the interests of
their organizations, but also because they are
role models for many subordinates and peers
who are constantly watching them for cues as
to what is considered acceptable or unaccept-
able behavior. Joseph L. Badaracco, a business
ethics professor at the Harvard Business
School, made this point emphatically in his re-
cent book Defining Moments (1997) when he
observed that “managers are the ethics teach-
ers of their organizations.”10 He went on to say
that this is true whether they themselves are
saints or sinners or whether they intend to
teach or not: “It simply comes with the terri-
tory. Actions send signals, and omissions send
signals.” In other words, conscientious manag-
ers are concerned about how their decisions
and actions “reveal, test, and shape the char-
acter of their companies.”11

Two key branches of moral philosophy with
which managers must attend are descriptive
ethics and normative ethics. Good corporate
citizens will be able to differentiate between
these two. Descriptive ethics is concerned with
describing or characterizing the morality or be-
havior of people or organizations (what manag-
ers, organizations, or industries are doing). It
may involve the comparing and contrasting of
different moral codes, systems, practices and
beliefs.12 By contrast, normative ethics is con-
cerned with supplying and justifying a coher-
ent moral system. Normative ethics seeks to
answer the question “what should be done?”
Good corporate citizens need to be more inter-
ested in what should be done than what is
being done. It is easy to fall into the trap of be-
lieving that because a practice is being done by
many (bribes, kickbacks, pollution, downsiz-
ing) that it is an acceptable practice. Normative
ethics would insist that a practice or policy be
justified on the basis of some ethical principle,
argument, or rationale before being considered
acceptable. Normative ethics requires a more
meaningful moral anchor than “everyone is do-
ing it.”

An aspect of ethical behavior that seems to be
making a strong comeback in academic circles

4 BUSINESS AND SOCIETY REVIEW

today relates to what is known as virtue theory.
Whereas many of the great ethical principles,
such as rights, justice, and utilitarianism, are
more action-oriented, another ethical tradition
known as virtue ethics merits further considera-
tion by those concerned with corporate citizen-
ship. This is particularly important at a time in
which there is much debate over the role of
character in our leaders—whether it be the
president of the U.S. or the CEO of a major
corporation.

Virtue ethics, rooted in the thinking of Plato
and Aristotle, focuses on the individual becom-
ing imbued with virtues (e.g., honesty, integrity,
fairness, truthfulness, benevolence, and non-
malfeasance). Thus, it goes to the heart of the
person or corporation. Whereas many ethical
principles emphasize doing, virtue ethics em-
phasizes being. Obviously, the two are con-
nected, but it is a matter of emphasis. The belief
is that the virtuous citizen, whether private or
corporate, will also be virtuous in his or her ac-
tions, decisions, and practices.

A concern with virtue raises the issue of
character—a private citizen’s character, a
manager’s character, a corporation’s character.
Virtue ethics adherents would subscribe to the
bumper sticker that reads “character counts.”
In a period in which some journalists are argu-
ing that character is no longer an issue, others
speak out strongly in favor of good character as
a key component of leadership and citizenship.

General H. Norman Schwarzkopf, who dis-
tinguished himself in Vietnam, in Grenada, and
in the Gulf War as commander of Operations
Desert Shield and Desert Storm, commented in
his recent autobiography on the importance of
ethical leadership in the twenty-first century
and, in particular, of the importance of charac-
ter. In this book, as in his speeches, Schwarz-
kopf identifies character as the most important
attribute of successful leaders. He argues that
the “main ingredient of good leadership is good
character. This is because leadership involves
conduct, and conduct is determined by values.”
Values, he goes on to say, make us who we are.13

Good corporate citizenship requires that
companies and managers engage in—indeed

be leaders in—strong ethical values and prac-
tices. It is unlikely that a corporation can be
regarded as a good corporate citizen if it does
not take the moral high road. Whether one de-
pends on religious upbringing, corporate so-
cialization, responsiveness to stakeholders’
expectations, use of ethical principles, good
character, or any other means of bringing
about right and just behavior and actions, the
good corporate citizen will function at a level
that is at least minimally in compliance with
law and, ideally, imbued with a quest to display
ethical leadership in the communities in which
they reside. Driscoll, Hoffman, and Petry have
referred to this quest as organizations seeking
to gain the ethical edge that can ensure them of
a solid future.14

GIVING BACK: PHILANTHROPY

Philanthropy is commonly believed to be a de-
sire to help humankind through acts of charity,
whether done by private citizens, foundations,
or corporations. Robert Payton, an expert on
philanthropy, argues that it is defined as three
related activities: voluntary service, voluntary
association, and voluntary giving for public
purposes. He goes on to say that it includes
“acts of community to enhance the quality of life
and to ensure a better future.”15 The good pri-
vate or corporate citizen is imbued with this
sense of charity—this sense of improving life for
others while at the same time improving life for
oneself.

Philanthropic giving, frequently manifested
through corporate contributions, is an activity
that many in the business community loosely
equate with corporate citizenship. That is, good
corporate citizens “give back” to the communi-
ties in which they reside or maintain offices.
The late Roberto C. Goizueta, CEO of Coca-Cola
Company, argued that “businesses have an ob-
ligation to give something back to the commu-
nities that support them.”16 Goizueta cited four
reasons why business should give back to soci-
ety: business has a stake in civil discourse; a
corporate culture of incivility and intolerance

ARCHIE B. CARROLL 5

thwarts the development of a company’s most
important asset, its people; businesses should
serve as an example of how people are treated;
and, because there has been a decline of the
institutions that have bound communities
together—the lodge, social hall, and the church
—business must fill the void.17

There are many ways in which businesses
have engaged in philanthropy in recent years
and have given back to communities and other
stakeholders. An excellent example of a robust
corporate citizen is Chick-fil-A, the Atlanta-
based fast-food giant, founded and managed by
CEO S. Truett Cathy. The string of nonprofit
ventures that Cathy has initiated over the years
looks more like a full-fledged conglomerate
than a corporate sideline: a charitable founda-
tion, ten foster homes, a summer camp, two
separate scholarship programs, and a number
of one-on-one programs with children. Fueled
by an ad campaign featuring cows painting
billboards with the slogan “Eat Mor Chikin,”
Cathy’s chain of 700 restaurants has seen
double-digit sales increases for four straight
years, which proves that a company can do
good (be a good corporate citizen) and do well
(be extremely profitable) at the same time.18

Other recent examples of corporate citizen-
ship manifested through giving back and com-
munity involvement include the following
companies, which all received 1997 Corporate
Conscience Awards given by the Council on
Economic Priorities in Washington, D.C.:

Kellogg Company. Kellogg has provided tech-
nical assistance and direct services to African-
American men and boys in their communities.

Community Pride Food Stores. This company
is dedicated to revitalizing the inner-city of Rich-
mond, Virginia, where the company is based. In-
novative services include transportation for
non-mobile customers and discounts to cus-
tomers who participate in community service.

Toys R Us. Working jointly with the World
Federation of the Sporting Goods industry, the
company received the Pioneer Awards in Global
Ethics for their work in addressing the issue of
child labor and fair labor practices around the
world.19

Though corporate citizenship and philan-
thropy often mean writing a check or buying a
table at a charity ball, for Aaron Feuerstein,
owner of Malden Mills Industries, Inc., in Law-
rence, Massachusetts, it meant keeping work-
ers on the payroll for months as he rebuilt his
fire-razed plant. It is little wonder that Feuer-
stein is one of ten corporate heroes who are in
the running for the first annual Newman’s
Own/George Award for innovative and signifi-
cant corporate philanthropy, founded by actor
Paul Newman and John F. Kennedy, Jr.20

We will not entertain the question here as to
whether corporations are giving back to their
communities or stakeholders because it is in
their own direct financial interests to do so (as
in the case of strategic philanthropy or cause-
related marketing) or because they genuinely
care about the recipients of their philanthropy
(altruism). Undoubtedly, there may be a mix-
ture of reasons at work. Regardless of the mo-
tive, however, good corporate citizens engage in
philanthropic giving and strive to make their
communities and stakeholders better off.

A FINAL OBSERVATION

As a final observation, we should make it clear
that the four faces of corporate citizenship are
intimately related, though they are in frequent
tension with one another. To be sure, it is in
businesses’ financial interests to comply with
law, to engage in ethical behavior, and to exer-
cise philanthropy by “giving back” to the com-
munity and stakeholders. Thus, each of these
faces of corporate citizenship does not exist
apart from or in isolation from the others. Each
of them is but one facet of what it means to be a
good corporate citizen.

When one reads the business news today
about illegal or unethical corporate practices,
one cannot help but wonder whether the syn-
ergy that is so much an indivisible element of
these four kinds of business responsibility has
been lost on the part of some business leaders.
Addressing and fulfilling all four faces of corpo-
rate citizenship are vital as the business

6 BUSINESS AND SOCIETY REVIEW

community approaches the millennium. The
exemplary corporate citizen strives to magnify
its profits (responsibility to self), while fulfilling
its citizenship obligations to others (law, ethics,
and philanthropy). These are not to be fulfilled
sequentially, but simultaneously, in the quest
for model corporate citizenship. When this is
done by a significant portion of the business
community, the stakeholder environment of the
twenty-first century will flourish.

NOTES

1. “The Ron Brown Award for Corporate Leader-
ship,” Business Week, 2 February 1998, 118.

2. Archie B. Carroll, “Understanding Stakeholder
Thinking,” Business Ethics: A European Review,
January 1997, 46–51. Also see Archie B. Carroll,
“The Pyramid of Corporate Social Responsibility:
Toward the Moral Management of Organizational
Stakeholders,” Business Horizons, July–August,
1991, 39–48.

3. “Clinton Has Challenge for CEOs,” Atlanta
Journal, 17 May 1996, G3.

4. Milton Friedmann, “The Social Responsibility
of Business Is to Increase Its Profits,” New York
Times, September 1962, 126.

5. Friedmann, 126.
6. “America, Land of the Shaken,” Business Week,

11 March 1996, 64–65.
7. Neil King, Jr., “Momentum Builds for Corpo-

rate-Bribery Ban,” Wall Street Journal, 23 September
1997, A16.

8. Paul J. Deveney, “Thirty Four Nations Sign
Accord to End Bribery in Deals,” Wall Street Journal,
18 December 1997, A16.

9. Christina Hoff Sommers, “Are We Living in a
Moral Stone Age?” Imprimis, March 1998, 1–4, 8.

10. Joseph L. Badaracco, Jr., Defining Moments:
When Managers Must Choose between Right and

Wrong (Boston: Harvard Business School Press
1997), 65.

11. Badaracco, 65.
12. Richard T. DeGeorge, Business Ethics, Fourth

Edition (Englewood Cliffs: Prentice-Hall, 1995),
20–21.

13. H. Norman Schwarzkopf, “Ethical Leadership
in the 21st Century,” Imprimis, March 1998, 5.

14. Dawn-Marie Driscoll, Michael W. Hoffman,
and Edward S. Petry, The Ethical Edge: Tales of Or-
ganizations That Have Faced Moral Crises (New York:
Mastermedia Limited, 1995).

15. Robert L. Payton, Philanthropy: Voluntary
Action for the Public Good (New York: Macmillan,
1988), 32.

16. Quoted in Chris Roush, “Goizueta Preaches
Civility in Loyola Graduation Speech,” Atlanta Jour-
nal/Atlanta Constitution, 11 May 1997, C4.

17. Quoted in Roush, C4.
18. Russell Shaw, “Eat Mor Chikin,” Sky Maga-

zine, March 1997, 83–86.
19. Carsten Henningsen, “The 1997 CEP Corpo-

rate Conscience Awards,” URL: http://www.daily
rocket.com/articles/sri/cep_henn.html.

20. Richard A. Melcher, “Philanthropy: Oscar,
Meet George,” Business Week, 20 April 1998, 48.

ARCHIE B. CARROLL 7

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