An Example Essay On Corporate Social Responsibility
INTRODUCTION TO CORPORATE SOCIAL RESPONSIBILITY
Many organizations have acknowledged the importance of corporate social responsibility (CSR) and have made considerable contributions to the welfare of the societies in which they operate (Kinard, Kinard, & Smith, 2003). For example, Procter and Gamble contributed greatly to the earthquake relief in Turkey, community building projects in Japan, and schools in China, Romania, and Malaysia (Kinard et al., 2003). Philip Morris, with its controversial tobacco products, has been recognized for its environmental position, its summer camps for children with HIV or AIDS (Kinard et al., 2003), and its most recent advertising campaigns that inform people of the health hazards involved with smoking. Reputation translates to a good image in the eyes of stakeholders such as consumers and, thus, contributes to the corporations’ competitive advantage by strengthening brand loyalty (Gupta, 2002).
Background of the Problem
The traditional understanding of a corporation’s responsibility has been to be profitable and to provide its shareholders with a dividend or a return on their investment (Melchin, 2005). Melchin (2005) stated that this traditional understanding has been challenged and “commentators have argued that business needs to be rethought in relation to wider visions of human well-being, the environment, global justice, and the common good” (p. 44).
Building a good corporate social responsibility reputation would greatly enhance an organization’s long-term success (Wilson, 2001). A PriceWaterhouseCoopers survey of 25,000 consumers found that two in three citizens want companies to contribute to broader societal issues (Wilson, 2001). Since citizens are all potential consumers, this is a significant message that these citizens sent to organizations. Hatcher (2003) stated that organizations that have been enlightened on the importance of social responsibilities “will invest in the environment in which they want to do business and help to fashion the regulatory architecture that makes trade possible. Not just in their own interest, but for the benefit of the wider community of interest” (p. 36).
Lantos (2002) identified three types of corporate social responsibility: ethical, altruistic, and strategic:
- Ethical corporate social responsibility (CSR) involves corporations fulfilling their moral or ethical responsibilities in order to avoid harm or societal injuries (Lantos, 2002). An example of ethical corporate social responsibility would be the recalling of customer goods that have been sold but later found to be defective or dangerous to the consumers who purchased them.
- Altruistic corporate social responsibility involves corporations making contributions to help remedy societal problems even if the contributions do not ultimately result in any benefits to their shareholders or may even sacrifice the corporation’s profitability (Lantos, 2002).
- Strategic corporate social responsibility involves corporations making contributions to society not only because it is the right thing to do as a citizen of the society but also because they believe that the contributions would ultimately result in some financial benefits to their shareholders. This type of corporate social responsibility would result in substantial benefits to society while fulfilling the corporations’ fiduciary responsibilities to stockholders (Lantos, 2002).
Lantos (2002) concluded that altruistic corporate social responsibility is immoral because it does not consider the rights of shareholders, unfairly takes away stockholder wealth, and grants benefits for the general welfare at the expense of the investors to whom the firm belongs. Lantos (2002) does support strategic corporate social responsibility because it ultimately results in some benefits to the firm by enhancing its value.
Munilla and Miles (2005) also supported strategic corporate social responsibility; they stated that when a firm is pressured to make corporate social responsibility expenditures that are not strategic or go beyond compliance, it is taking a forced corporate social responsibility position. Munilla and Miles (2005) contended that this forced corporate social responsibility perspective is a reactive answer to social pressure and serves as no basis for a firm’s ability to maintain competitive advantage. D. Henderson (2005a) did not advocate corporate social responsibility activities. He stated that businesses should act responsibly, but that the primary role of businesses is to make a profit for their shareholders. The literature shows that some scholars who do not advocate corporate social responsibility have conceded that corporate social responsibility activities that would result in economic benefits to a company, such as strategic corporate social responsibility, would be acceptable because these activities consider the rights of owners and the economic progress of the company (D. Henderson, 2005a; D. Henderson, 2005b; Lantos, 2002; Munilla & Miles, 2005).
Globalization has added some new perspectives to the corporate social responsibility phenomenon. Over the last 50 years, corporations have grown to incredible sizes as multinational organizations (Gueterbock, 2004). It is estimated that 25 to 51 of the world’s largest economies are multinational companies, not governments (Gueterbock, 2004). Exxon Mobil is said to have a turnover greater than the gross domestic product (GDP) of all but 20 countries (Gueterbock, 2004). Although these multinational companies are becoming increasingly powerful and are greatly influencing society’s realities, consumers are more and more willing to alter their purchasing behavior based on ethical considerations and corporate social responsibilities (Gueterbock, 2004). This contention implies that it might be wise for global corporations to adopt corporate social responsibility strategies wherever they operate in order to achieve and sustain long-term success. In 2001, Greenpeace launched a campaign against Exxon Mobil’s product in the United Kingdom because of the company’s consistently bad environmental policies. Opinion polling after the campaign showed that five percent of the population, or more than one million people, had refused to buy petrol from Exxon (Esso in Europe) due to its approach to climate change (Gueterbock, 2004). This campaign showed the negative effect that consumers’ perception of irresponsible behavior by a company can have on the reputation or image of the company and, ultimately, its profit.
Conversely, one could conclude that companies that attempt to behave responsibly to societal needs or concerns could reap huge benefits by enhancing their corporate image, which would provide them with a competitive advantage in the marketplace (Gupta, 2002). Knowing the importance of public opinion and corporate social responsibility, BP has recently launched an advertising campaign that portrayed the company as a leader in the effort of reducing CO2 emissions and supporting renewable energy. Based on current trends involving international business affairs through the World Trade Organization and the United Nations, globalization is continuing to evolve and probably cannot be stopped. Continued rapid technological improvements and transportation enhancements that shorten international travel time will further facilitate the globalization of businesses.
Corporate Social Responsibility
The involvement of corporations is essential in order for society to find sustainable solutions to the many dilemmas that the world is faced with today, such as untreatable diseases and environmental degradation, because government alone may not have the resources necessary to resolve these societal problems. In fiscal year 2006, only 18% of the U.S. government’s budget was available for discretionary nondefense and non-homeland security expenditures, such as education, and the government is expected to incur a budget deficit in excess of $600 billion. The latter budget deficit expectation is an indication that government alone may not have the funds to help resolve all societal problems. The term corporate social responsibility is derived from corporations that are fulfilling their social responsibilities by their active involvement in helping resolve societal issues (Carroll, 1999; Dowling, 2004; Gomez, 2002; Gupta, 2002; Mercer, 2003).
Although references to concerns over social responsibility can be found as far back as the 1930s, the literature and research work that were published from the 1950s to present have done much to shape theory, research, and practice of the corporate social responsibility construct (Carroll, 1999). The basic definitions offered by researchers and authors generally have the same theme: corporations’ contributions to the betterment of society. Modern thinking and literature on the subject of corporate social responsibility started in 1953 with Bowen’s book, Social Responsibilities of Businessmen (Valor, 2005).
In 1953, Bowen defined the phenomenon as, “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society” (as cited in Carroll, 1999, p. 270). During the 1950s through the 1980s, researchers and others have expanded on the definitions and concepts of corporate social responsibility (Carroll, 1999).
Corporate Social Performance
The CSP construct is seen as another term for corporate social responsibility because the same corporate social responsibility theme and concepts are used to define it (Carroll, 1999). In 1991, Wood presented the CSP model, which depicted the same concerns as those of corporate social responsibility (Carroll, 1999). Carroll (1999) stated that Wood’s CSP model actually represented a major contribution to the corporate social responsibility construct in the early 1990s. Carroll (1999) commented, “Although Wood discussed and credited the many contributors to the increasingly popular notion of CSP, the model she presented primarily builds on my three-dimensional corporate social responsibility model” (p. 288).
Roman, Hayibor, and Agle (1999) conducted an analysis of 51 research studies, performed during the 25 years preceding 1999, that had investigated the relationship between corporate social performance (CSP) and corporate financial performance (CFP). They reported that 32 of the 51 studies found a positive relationship, 14 found no effect or were inconclusive, and only 5 of the 51 studies found a negative correlation. Roman et al. (1999) concluded that these past studies provided evidence that the correlation between CSP and CFP may be positive.
Johnson and Greening (1994) contributed to the work on CSP by evaluating possible relationships between types of institutional investors, board composition, top management team equity, financial performance, and CSP dimensions. The results of their study showed the importance of types of institutional investors, board composition, and top management team equity on both CSP and financial performance (Johnson & Greening, 1994). Johnson and Greening contended that the results of their study supported their notion that it is necessary to consider different types of investors, short-term versus long-term, as opposed to investors in general. They found that short-term investors tended not to be interested in the firm’s hiring practices (the hiring of women and minorities aspect of CSP) and philanthropy, but both long-term and short-term investors were interested in the product and environment dimensions of CSP. The results, then, suggested that these investors were concerned about the dimensions that may contribute to the bottom line of the firm, such as product quality, environmental exposure, and compensation issues (Johnson & Greening, 1994). In summary, the results of their study indicated that institutional investors are concerned with the bottom line of the firm as well as some other aspects of firm performance, such as CSP.
The stakeholder theory had already been introduced in the 1980s and was popularized by Freeman (Buono, 2005). Freeman wrote a book on stakeholder theory that distinguished between primary stakeholders, such as shareholders, and secondary stakeholders, such as Green Peace (Hall & Vredenburg, 2005). Freeman contended that it would be detrimental for managers to make the assumption that stakeholders who oppose them are irrational and irrelevant (as cited in Hall and Vredenburg, 2005). Stakeholder theory identified the specific societal groups, such as customers, employees, and government that businesses must consider very important and to whom they must be responsive (Carroll, 1999). In 1984, Friedman persuasively made the case that stakeholder management was eminent to the success of a firm (Berman et al., 1999).
Berman et al. (1999), however, stated that, up to 1999, this notion had not yet been empirically tested in the literature. Although Freeman had made the stakeholder concept popular, it was Donaldson and Preston who made most of the contributions that provided the framework for the dialogue that took place in the 1990s regarding the stakeholder phenomenon. The stakeholder theory became very popular among management and business scholars and practitioners. Donaldson and Preston announced that over 100 articles and about a dozen books had been published in the management literature alone (Jones & Wicks, 1999).
Jones and Wicks (1999) developed what they referred to as the convergent stakeholder theory, which, they stated, is normatively and instrumentally sound but explicitly and unashamedly normative. This convergent stakeholder theory shows how managers can succeed using ethically sound business approaches (Jones & Wicks, 1999).
Business Ethics Theory
During the 1990s, business ethics theory was widely discussed. Most of the literature on business ethics argues that companies that practice sound ethical values and integrity would have a better chance at achieving long-term business success than those companies that do not (Carroll, 1999; Kotler, 1997). Two companies will be used to illustrate the latter notion; first, Enron, a company that did not practice sound ethical values and integrity; second, Johnson & Johnson, a company that practiced sound ethical values and integrity.
The issue of moral or ethical behavior by government and business leaders is currently a very important issue due to the many recent scandals involving unethical behaviors by business leaders, such as in the Enron case. The Enron case is a classic example of how leaders who lacked integrity failed their organization. Certain Enron executives and directors, its accountants, law firms, and banks were charged with violations of the federal securities laws. The charges alleged that they engaged in massive insider trading while making false and misleading statements about Enron’s financial performance. These leaders were not focusing on their organization’s vision, goals, objectives, and the needs of its stakeholders; they were focusing instead on personal gains and wealth. As a result, they failed their organization and all stakeholders, and destroyed the livelihoods and pensions of many individuals. Many prominent scholars and authors contributed to the corporate ethics issue well before the Enron case and other scandals that followed (Carroll, 1999; Kotler, 1997). The Enron case clearly showed that companies that consistently behave unethically more often will eventually fail.
Corporate citizenship basically uses the same themes and concepts as corporate social responsibility. A corporation is regarded as a legal being that possesses many of the rights, duties, and powers and also assumes some of the same obligations as those of the individual citizen (Kinard et al., 2003). Just as a person is expected to be a responsible citizen by performing duties that contribute to the common good and welfare of the community at large, an organization should also be expected to do the same.
Advocates of the corporate citizenship theory employ the same themes and concepts as corporate social responsibility (Carroll, 1999; The Corporate Citizenship Company, 2003). They believe that maintaining a positive image or good reputation as a responsible citizen would greatly enhance the organization’s long-term success. For example, The Corporate Citizenship Company believes that the reasons why organizations must have an interest in corporate social responsibility are “the need to know that the company is living out its mission and values, along with the need to protect and enhance its reputation and that of its brand” (The Corporate Citizenship Company, 2003, p. 2).
Carroll (1998) implied that corporate citizenship is just another term for corporate social responsibility, corporate ethics, or social performance of corporations. Carroll commented that corporate citizenship involves businesses responding to all stakeholders, to including shareholders, consumers, and the community in which the businesses operate. Carroll (1998) stated that corporate citizenship represents the four faces of a citizen’s social responsibilities: economic, legal, ethical, and philanthropic. Carroll contended that not only private citizens should be expected to fulfill these responsibilities but companies as well. Carroll (1998) did not see the term corporate citizenship as different from corporate social responsibility because, in effect, he defined corporate citizenship using the same four elements that he used to define corporate social responsibility. Valor (2005) agreed with the notion that the terms corporate citizenship and corporate social responsibility have the same meaning. Valor stated that corporate citizenship, corporate social responsibility, and business ethics are terms that are used to discuss corporate accountability. Matten, Crane, and Chapple (2003) criticized the context in which the term corporate citizenship is used in the literature, namely the social responsibilities context. Like other authors (Carroll, 1998; Kinard et al., 2003), they saw the context the term corporate citizenship is used as being no different than the term corporate social responsibility. Their contention was that corporate citizenship should have a different meaning. They argued that large corporations do not and could not share in the same citizenship rights as individuals. They stated that the term needed to be reconceptualized to mean corporations assuming the responsibility of protecting and facilitating the social, civil, and political rights of citizens. In other words, corporations are acting as catalysts in the citizen process, whether or not they are explicitly trying to be good corporate citizens (Matten, Crane, & Chapple, 2003).
Effect of Globalization
Most large corporations in today’s world environment are becoming large conglomerates with a presence in many countries (Gueterbock, 2004). In the last five decades, many corporations have combined forces and grown to incredibly large multinational organizations (Gueterbock, 2004). It is estimated that from 25 to 51 of the world’s largest economies are multinational companies, not governments (Gueterbock, 2004). One such company is Exxon Mobil, whose turnover is said to be greater that the gross domestic product (GDP) of all but 20 countries (Gueterbock, 2004). Consumer research in Great Britain showed that the percentage of consumers who think that corporate social responsibility is very important grew substantially from 26% in 1997 to 44% in 2002 (Lewis, 2004). Starck and Kruckeberg (2003) commented that globalization has brought many challenges to large corporations, but none is more important than effective communication and responsible behavior in local business communities as well as in global communities. In this global business environment, the expectations that society has of businesses are changing, and the changing societal expectations are interdependent with politics, economics, and technological change (Lenssen, Van Den Berghe, & Louche, 2005). In addition to the concerns of competitiveness and profitability, managers in today’s global setting have to consider the power of civil society groups and the effect these groups could have on the repositioning of conventional stakeholders, such as consumers, governments, and trade unions (Lenssen etal., 2005).
Corporate ability (CA) is viewed as a significant source of corporate advantage (Gupta, 2002). It represents the company’s knowledge, skills, and abilities in manufacturing and delivering a quality product to consumers, including service excellence (Gupta, 2002). Recent research studies have been performed to determine the influence of corporate image associations with corporate ability and corporate social responsibility on consumers’ product evaluations for the purpose of making purchasing decisions. For example, Berens, van Riel, and van Bruggen (2005) investigated the effect of corporate brand dominance, or the popularity of a company’s corporate brand with consumers, on the relationship between corporate associations and product evaluations.
More specifically, they investigated what influence a company’s branding strategy had on the effects of a company’s relations with corporate ability and corporate social responsibility and on “the moderating effects of fit and involvement” (Berens et al., 2005, p. 36). The results of Berens et al.’s investigations showed that corporate brand dominance influences the extent to which associations with a company’s corporate ability and corporate social responsibility determine product attitudes and the nature of the moderating effects of fit and involvement. To determine the influence of different corporate branding strategies on corporate associations on consumer product responses, Berens et al. (2005) looked at the results of a study that evaluated the influence of the corporate branding strategy of a financial services company on the transfer of corporate ability and corporate social responsibility associations to customer product evaluations.
The results of that study showed that corporate ability associations were most effective using a monumental branding strategy (when the corporate brand is dominant), and corporate social responsibility associations are most effective when using a sanctioned strategy (when the corporate brand is not dominant). The study also found that corporate brand dominance (CBD) influences the manner in which “the effects of corporate ability and corporate social responsibility are moderated by the fit between the company and the product and by consumer involvement with the product” (Berens et al. 2005, p. 35).
The literature on corporate image can be traced back to the 1950s. In 1958, Martineau (1958a) defined what he then referred to as the store image as “the way in which the store is defined in the shopper’s mind partly by its functional qualities and partly by an aura of psychological attributes” (p. 47). At that time, Martineau looked at the success of three stores to determine the factor that was mainly responsible for their success. He concluded that the stores’ image was mainly responsible for their success. He contended that, increasingly, image plays a vital role in the financial success of businesses. In another article, Martineau (1958b) stated that corporate image can influence the purchasing decisions of individuals at the time of sale.
In 1998, Howard expanded on the definition of corporate image by stating the message that it communicates about an organization (as cited in Gupta, 2002). He stated that corporate image conveys a message about the organization’s mission, the professionalism and caliber of its leaders and employees, and the roles that the organization plays in society. Basically, the corporate image reflects the perception that people have about the organization, its performance, and its products and services (as cited in Gupta, 2002).
The literature on corporate social responsibility continues to show that organizations are increasingly acknowledging the importance of corporate image in today’s marketplace (Argenti & Druckenmiller, 2004). Tosun (2004) contended that every business that wants to grow profitably in this competitive environment needs to focus on three criteria from the perspective of financial public relations: the company’s brand name, the company’s product trademark, and the market values of securities. Jones (2003) acknowledged that an organization with a good reputation would have an easier time recovering from a business crisis situation; Johnson & Johnson provided a great example of Jones’ (2003) argument. Jones (2003) further stated that reputation is also vital to driving company sales. Recent scandals involving unethical behaviors by leaders of large corporations, such as Enron and Arthur Andersen, have shown how fast a damaged corporate image can hurt consumers’ loyalty and threaten a company’s viability (Argenti & Druckenmiller, 2004). In the literature, authors use the terms corporate image and corporate reputation interchangeably (Gupta, 2002). Corporate social responsibility is becoming one of the most essential challenges for businesses because a company’s reputation is increasingly becoming dependent on social, environmental, and ethical performance (de Man, 2005). Nieuwlands (2003) stated that corporations that fail to recognize the importance of corporate social responsibility would be risking their reputation in the marketplace. For example, Nike Inc. had acquired a bad reputation for unacceptable working conditions, paid the price, and has since implemented corporate social responsibility policies (Nieuwlands, 2003).
There is a trend in contemporary literature that emphasizes the use of corporate social responsibility as a marketing strategy. Research studies have found that consumers do care and are paying attention to corporations that are contributing to the betterment of society (Gupta, 2002; Kinard et al., 2003; Wilson, 2001). Kinard et al. (2003) stated that businesses must be concerned with societal problems such as cancer, the environment, child labor, and human rights because consumers around the world care and will make purchasing decisions based on corporate social responsibility. Prominent scholars and authors continue to document the importance of corporate social responsibility, not only to communities and other stakeholders but also to the companies that have social responsibility policies and practices. PricewaterhouseCoopers conducted a survey of 25,000 consumers and found that two-third of the citizens want companies to make contributions to broader societal causes and not just make a profit (Wilson, 2001). Foka (2003) stated that stakeholders require organizations to accept and commit to their moral and social responsibilities in addition to their financial ones. Consequently, companies that meet or exceed stakeholders’ expectations could substantially improve their corporate image and, thus, contribute to their competitive advantage in their markets. In 2002, Hatcher called on the human resource community to take the lead in elevating the significance of business ethics and guiding organizations toward taking actions based not only on profit but also on the needs of communities and the environment (as cited in Krefting and Nord, 2003). Waddock (2001) commented that, increasingly, more corporate leaders need to recognize how their corporate practices are being monitored externally. Manning (2004) commented that the opportunities exist for companies to not only do good with respect to their social responsibilities but also to benefit from doing good. Corporations are increasingly realizing the influence of corporate social responsibility on their profitability and, thus, are increasingly making business decisions based on social and environmental issues (Manning, 2004).
Lantos (2002) stated that corporate social responsibility could be grouped into three different categories: altruistic corporate social responsibility, ethical corporate social responsibility, and strategic corporate social responsibility. Ethical corporate social responsibility involves corporations fulfilling their moral or ethical responsibilities in order to avoid harm or societal injuries (Lantos, 2002), such as the recalling of Tylenol by Johnson & Johnson. He defined altruistic corporate social responsibility as corporations making contributions to help remedy societal problems even if the contributions do not ultimately result in any benefits to their shareholders or may even sacrifice the corporation’s profitability. Lantos (2002) agreed with Friedman’s assertion that businesses should not be involved in altruistic corporate social responsibility. Lantos even stated that altruistic corporate social responsibility would be unethical because corporations would be using shareholders’ resources for purposes other than furthering the interest of their owners. He commented that altruistic corporate social responsibility “violates shareholder property rights, unjustly seizing stockholder wealth, and it bestows benefits for the general welfare at the expense of those for whom the firm should care in close relationships” (p. 205). Lantos’ contention is that a corporation’s primary responsibility and duty is to its owners and the corporation; a corporation should not be expending its resources if such expenditures will not contribute to the corporation’s bottom line. For this reason, Lantos (2002) favors strategic corporate social responsibility. He stated, “Philanthropic CSR used as a marketing tool to enhance a firm’s image – what I call strategic CSR – is legitimate since it helps achieve the firm’s financial obligations” (p. 600).
Many of today’s organizations are using corporate social responsibility as part of their business strategy. Many large corporations such as Johnson & Johnson, Microsoft, and United Airlines report on their social performance annually. Hemphill (2004) stated that strategic philanthropy has a dual purpose: charitable contributions to help resolve societal issues, such as environmental problems, diseases, education, and other worthy societal causes while enhancing corporate image and a firm’s competitive advantage, thus contributing to the firm’s bottom line. The benefits of corporate philanthropy are good publicity, improved external stakeholders’ goodwill, and public recognition of the corporation and its brand (Wymer & Samu, 2003). Smith (2005) stated that there is ample evidence that corporate social responsibility and fiduciary responsibility are compatible goals. Increasingly, today’s institutional investors are finding themselves in agreement with social investors, sharing the same belief that a good reputation on corporate social responsibility and governance is good for business (Smith, 2005). Sarre et al. (2001) stated that a wide range of facilitators, including governments, industries, and regulatory bodies, can deliver and entice corporate social responsibility principles and initiatives.
Several studies were made to explore the influence of corporate social responsibility activities on a corporation’s financial performance and how consumers and other stakeholders feel about the corporate social responsibility phenomenon (Berens, 2004; Connelly & Limpaphayom, 2004; Crosby & Johnson, 2003; Gomez, 2002; Gupta, 2002; Mercer, 2003; Willmott, 2003;).
Gupta (2002) conducted a study that measured the effectiveness of corporate
social responsibility and corporate ability, individually and jointly, as sources of competitive advantage via differentiation. Gupta found that corporate social responsibility was an effective source of competitive advantage. More specifically, Gupta found a positive relationship between corporate social responsibility and consumers’ purchasing decisions. Of significance is her finding that the corporate social responsibility variable was a stronger source of competitive advantage than the corporate ability (CA) variable. The study found that consumers would pay 50% more than the average price for the product of a manufacturer that had a strong corporate social responsibility record (Gupta, 2002). The study provided empirical evidence that corporate social responsibility is a significant source of competitive advantage. However, the corporate ability variable was found to be stronger than the corporate social responsibility variable in supporting the customer satisfaction element of competitive advantage (Gupta, 2002).
Mercer (2003) conducted a corporate social responsibility study, using the automobile industry, which took a different approach. The study aimed at identifying the types of business activities and practices that consumers expect from a corporation and understanding which of those activities and practices would have more of an influence on how consumers feel about a corporation and its products. Mercer’s (2003) results varied depending on consumer groups. For example, Mercer found corporate social responsibility activities to be more important to respondents who were minorities, more self-transcendent, at the lower household income bracket, civically involved, and ideologically liberal; blacks and lower household income groups attributed more importance to corporate social responsibility activities than any other group. Mercer’s explanation for this finding was that blacks and lower income groups are more vulnerable in society and possess less power than other groups, and, consequently, may be more sensitive to corporate social responsibility activities that are perceived to directly influence the interests of communities and society at large.
Other research studies reiterated the importance of corporate social responsibility to a corporation’s financial performance (Berens, 2004; Connelly & Limpaphayom, 2004; Crosby & Johnson, 2003; Willmott, 2003). Research studies conducted in 2003 found that corporations that had a commitment to ethics and corporate social responsibility increased their bottom lines by 18% more than corporations that did not have such commitments, and investors would be willing to pay a premium of more than 20% for stocks of companies that have excellent corporate social responsibility policies and practices (Berens, 2004). Business ethics is associated with companies doing the right things, and the notion of doing the right things is extremely relevant to corporate social responsibility (Zwetsloot, 2003). Zwetsloot (2003) contended that businesses that are socially responsible will achieve success and those who are not socially responsible would not. Connelly and Limpaphayom (2004) conducted a study using a benchmarking survey from the Thailand Institute of Director’s Corporate Governance. The study provided some empirical support for the Porter hypothesis which states that a well-designed environmental standard can increase the productivity and competitiveness of a firm. The study revealed that good environmental performance does not negatively influence the short-term financial performance of a firm. Conversely, the study found empirical evidence that showed a significant positive and non-linear relationship between good environmental performance and the market valuation of a firm. This finding implies that the reporting of good environmental performance by a firm affects long-term financial performance (Connelly & Limpaphayom, 2004). Adams and Zutshi (2004) concurred with the latter notion and stated that socially responsible behavior is seen progressively more as critical to the long-term survival of businesses. Berkhout (2005) commented that corporate social responsibility is intended to improve a firm’s image and may provide businesses with a good start toward achieving sustainability.
Most researchers and authors have continued to document a positive relationship between corporate social responsibility and the financial performance of a firm (Berens, 2004; Connelly & Limpaphayon, 2004; Crosby & Johnson, 2003; Willmott, 2003; Zwetsloot, 2003). This positive relationship is caused mainly by the positive influence of corporate social responsibility on corporate image and a firm’s competitive advantage.
Consequently, it could be construed that most corporate leaders would be willing to make corporate social responsibility investments if their corporations would benefit economically. The recent big business fraud scandals, such as the Enron case, have resulted in a distrust of big business by the American public (Mohr & Webb, 2005). A Business Week/Harris Poll found that 66% of Americans believed that companies were more interested in making big profits than manufacturing safe, reliable, and quality products (as cited in Mohr and Webb (2005). The growing discontent among the American public about big business provides a basis for businesses to adopt a socially responsible strategy (Mohr & Webb, 2005). If empirical evidence continues to show that investment in corporate social responsibility continues to be a good leadership strategy that greatly enhances corporate image in the eyes of consumers, corporate leaders would probably be more willing to make that investment. Comparing the views of consumers regarding the relationship of corporate social responsibility and purchasing decisions with the views of corporate leaders would add greatly to current corporate social responsibility knowledge. The main question that the results of this comparative analysis answered was whether or not the views of corporate leaders regarding corporate social responsibility are in congruence with the views of consumers. This research study, however, mainly attempted to reveal whether or not there is a relationship between corporate social responsibility and the purchasing decisions of consumers and corporate leaders. In today’s environment, a discussion of corporate social responsibility would not be complete without addressing the effect of globalization on this phenomenon. The following paragraphs discuss the literature as it relates to the globalization factor.
Adams, C., & Zutshi, A. (2004). Corporate social responsibility: Why businesses should act responsibly and be accountable. Australian Accounting Review, 14(3), 31-39.
Argenti, P. A., & Druckenmiller, B. (2004). Reputation and the corporate brand. Corporate Reputation Review, 6(4), 368-374.
Berkhout, T. (2005). Corporate gains. Alternatives Journal, 31(1), 15-18.
Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42(5), 488-506.
Buono, A. F. (2005). Corporate social performance: A stakeholder approach. Personnel Psychology, 58(3), 811-814.
Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional construct. Business & Society, 38(3), 268-295.
Connelly, J. T., & Limpaphayom, P. (2004). Environmental reporting and firm performance: Evidence from Thailand. JCC, 13, 137-149.
Crosby, L. A., & Johnson, S. L. (2003). Do your metrics reflect your market strategy? Marketing Management, 12(5), 10-11.
de Man, F. (2005). Corporate social responsibility and its impact on corporate reputation. Brand Strategy, (195), 40-41.
Dowling, D. R. (2004). Corporate reputation: Should you compete on yours? California Management Review, 46(3), 19-36.
Foka, I. (2003). The FSM: A holistic approach to measuring ethical and social performance. Business Ethics: A European Review, 12(4), 314-324.
Gomez, S. J. (2002). “Opinion” leader stakeholder perceptions of corporate community involvement and external corporate social responsibility. Los Angeles: ProQuest Information and Learning Company.
Gueterbock, R. (2004). Greenpeace campaign case study – StopEsso. Journal of Consumer Behavior, 3(3), 265-271.
Gupta, S. (2002). Strategic dimensions of corporate image: Corporate ability and corporate social responsibility as sources of competitive advantage via differentiation. Ann Arbor, MI: ProQuest Information and Learning Company.
Hall, J., & Vredenburg, H. (2005). Managing stakeholder ambiguity. MIT Sloan Management Review, 47(1), 11-13.
Hatcher, M. (2003). New corporate agendas. Journal of Public Affairs, 3(1), 32-38.
Hemphill, T. A. (2004). Corporate citizenship: The case for a new corporate governance model. Business and Society Review, 109(3), 339-361.
Henderson, D. (2005a). The role of business in the world today. Journal of Corporate Citizenship, (17), 30-32.
Henderson, D. (2005b). The role of business today: Does it include corporate social responsibility? Journal of Financial Planning, 18(9) , 10-14.
Johnson, R. A., & Greening, D. W. (1994). Relationships between corporate social performance, financial performance, and firm governance. Academy of Management Proceedings, 314-318.
Jones, T. M., & Wicks, A. C. (1999). Convergent stakeholder theory. Academy of Management Review, 24(2), 206-221.
Kinard, J., Smith, M. E., & Kinard, B. R. (2003). Business executives’ attitudes toward social responsibility: Past and present. American Business Review, 87-91.
Kotler, P. (1997). Competitiveness and civic character. In F. Hesselbein, M. Goldsmith, & R. Beckhard (Eds.), The organization of the future (pp. 151-158). New York: Jossey-Bass.
Krefting, L. A., & Nord, W. R. (2003). Ethics and HRD: A new approach to leading responsible organizations (book). Academy of Management Review, 28(3), 512-514.
Lantos, G. P. (2002). The ethicality of altruistic corporate social responsibility. Journal of Consumer Marketing, 19(3), 205-230.
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