Sample Article Review Paper on Corporate Social Responsibility

Article Review

Sweeney, L. & Coughlan, J. (2011). Do different industries report Corporate Social Responsibility differently? An investigation through the lens of stakeholder theory. Journal of Marketing Communications, 14(2), 113-124.

This paper is a study on the inherent differences in the way firms report their Corporate Social Responsibility (CSR) commitments by examining reporting trends through the stakeholder theory. The hypothesis of the study is that there are differences in the way firms engage in and report on CSR, depending on the industry in which they operate. The purpose of this research is to add to the existing literature by providing empirical evidence on the type of CSR reporting across different industries. The research uses content analysis to test the hypothesis and draw conclusions by analyzing the annual reports of the top ten companies listed on the FTSE4Good Global, European, US, and UK indices, which were reduced to 30 firms after catering for overlap. In cases where the company provided a separate CSR document, it was analyzed in tandem with the annual report.

The thirty companies obtained were then grouped according to industries and they were from 6 different industries. Using two different assessors, the annual reports were analyzed and coded with a view to identifying the different stakeholders that the companies focused on. The stakeholders were then split into primary and secondary stakeholders, depending on the emphasis that each of the firms put on each of the identified stakeholders. The list of stakeholders identified from the annual reports was compared to expected results for the industry. One of the weaknesses of content analysis is the lack of reliability due to assessor bias. This is reduced considerably by the use of two independent assessors. The varied nature of the scope and depth of the CSR reports posed a problem vis a vis the identification of stakeholders and this was addressed through the building of consensus where there were differences in the identification of the primary and secondary stakeholders. The biggest threat to validity is that the sampling is biased towards companies with preexisting CSR programs, and hence may not be generalized across the industry.

The research shows that there is some disparity between the expected results and the actual stakeholders identified in the annual reports. However, the observed results conformed to the industry norms for each of the films analyzed. Surprisingly, the research found out that none of the firms lists the shareholders as a stakeholder despite being publically listed companies while confirming that the stakeholder theory can be used to explain the CSR activities of firms. In addition, the study also indicates that the industry in which a firm operates has a moderating and conforming effect on the type of behavior those firms within the industry exhibit.

Evaluation

This study is significant because it is one of the few studies to carry out a cross-industry analysis of CSR reporting, and establishes that companies within a given industry tend to run similar CSR programs. This finding is useful and can be used to model the behavior of firms in an industry by introducing changes in a few firms, which will then be copied across the industry. The study is also important because its findings show that there is a need for companies to change the manner in which they report on their CSR programs. For listed companies, there may also be a need to focus on the shareholders as part of the stakeholders in the CSR since the annual reports are usually directed at them. Therefore, the authors have made a convincing case for the importance of this study since it not only adds to the available literature on CSR but also proposes new approaches to CSR focus and reporting

Campbell, J. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management   Review, 32(3), 946-967.

This paper is an attempt to provide an explanation on why corporations may choose to act in a socially responsible or irresponsible way. The paper’s research problem is an attempt to identify alternative ways and theoretical constructs that can be used to explain Corporate Social Responsibility (CSR) behavior. The purpose of this research is to develop an alternative theoretical construct that can be used to predict and explain CSR behavior. The research also seeks to apply insights from sociology and political science to the field of CSR research. This research is based on the theoretical research model and uses content analysis to develop a model that can explain the behavior of firms vis a vis CSR.

In developing the institutional theory of Corporate Social Responsibility, the authors use published literature from sociology on institutional analysis in tandem with literature from political science on comparative political economy. In addition, the author analyzed published literature on corporate social responsibility to identify clues, which may indicate the institutional conditions likely to precipitate socially responsible or irresponsible behavior while also providing a threshold for behavior to be considered socially responsible. Through analyzing economic and institutional conditions under which institutions are likely to act in socially responsible ways, the author comes up with 8 different propositions that can be used to predict the likelihood of a firm acting in a socially responsible way. In summary, there are two propositions under the economic conditions and six under the institutional conditions that can explain CSR behavior. Although the paper is based on an evaluation of existing theories, the findings need to be tested empirically to gauge their validity.

The paper postulates that under economic conditions, firms are disincentivized to act in socially responsible ways when they have poor financial performance or there is too little or too much competition, meaning that firms are likely to act responsibly only when such an action has no detrimental effect on their financial health. Under institutional conditions, firms are likely to act responsibly when states have a strong regulatory regime or there is strong self-regulation within the industry. Pressure from private and independent organizations and an environment, which considers responsible behavior normative, can also cause firms to act responsibly. Lastly, firms can behave responsibly when they belong to industry associations that promote responsible behavior or are engaged in institutionalized dialogue with stakeholders.

Evaluation

This study is very significant because it expands on existing theory for explaining CSR behavior by proposing a new theoretical construct through which the behavior of firms can be viewed. The study provides fresh insights into studying responsible behavior and integrates concepts across three fields of academic study to give a nuanced approach to the study of responsible firm behavior. The study also expands the areas in which more research can be done in the field of CSR behavior research, which can help to shed more light on the thinking behind responsible or irresponsible firm behavior.

Mackey, T., Mackey, A. & Barney, J. (2007). Corporate social responsibility and firm performance: Investor preferences and corporate strategies. Academy of                         Management Review, 32(3), 817–835.

This study investigates the relationship between Corporate Social Responsibility (CSR) and firm performance by focusing on the impact of present responsible behavior on likely future earnings. The purpose of the research is to develop a model that can be used to determine the nature and scope of activities that a firm may pursue as well as help firms determine whether to start or terminate an activity. The study uses a theoretical research model and content analysis to develop a model for studying and predicting the necessity for CSR activities.

In order to simplify the development of the model, the authors assume that all firms are similar, operate in the same competitive market, and have the same earnings, the only difference is in their decision on investment in socially responsible activities. They also assume that firms incur a cost for investing in CSR that is non-revenue enhancing at the present, and investors are either wealth maximizing or socially conscious in their investment decisions. Using the assumptions, they develop an equation that can be used to determine the stock price of a firm depending on the supply and demand for the shares of traditional profit-maximizing firms and socially responsible firms. The authors then use the equation they have developed for their model to determine the impact of the presence or absence of socially responsible investments on the firm’s value. The validity of this study is likely to be affected by the assumptions that the authors make on firm, social initiative, and investor characteristics. Although the assumptions help to make the formulation of the model simpler, they present theoretically perfect conditions, which do not exist in reality. The study also lacks empirical evidence to back the efficacy of the model in assessing the relationship between responsible activities and firm value.

The paper proposes that socially responsible activities can be considered as ‘products’ that a firm can sell to investors since there exists a cadre of investors who are willing to buy into socially responsible firms. The paper also postulates that there exists demand and supply dynamics in the marketplace for socially responsible activities. Firms should determine the utilitarian value of any socially responsible activity they engage in vis a vis anticipated impact on future earnings. The study suggests that there is a correlation between the choices a firm makes about investments in socially responsible activities and the firm value, although the relationship is merely theoretical. The paper proposes that there is a need to decouple cash flow from market value because investors are increasingly willing to sacrifice some of their profit-maximizing interests in favor of pursuing socially responsible behavior.

Evaluation

This paper proposes a model that can be used to calculate the efficacy of socially responsible activity, providing firms with an assessment tool that they can use to determine the necessity of continuing with or withdrawing an activity. The study provides managers with the tools to enable them to make informed choices on the socially responsible activities they should sanction. However, the model has a set of assumptions that are sweeping and that make it an ideal market assessment tool. Markets by nature are imperfect, and the conditions on which the model is based do not exist in reality. Proving the existence of a market for socially responsible behavior and measuring the demand for socially responsible behavior is difficult. Although the model does not have empirical evidence to back the projected findings, it provides a framework through which research can be done to ascertain the efficacy of the activity assessment tool.

Aguilera, R., Rupp, D., Williams, C. & Ganapathi, J. (2007). Putting the s back in corporate social responsibility: a multilevel theory of social change in organizations. Academy of Management Review, 32(3), 836–863.

This research attempts to explain why firms can trigger positive social change through engaging in socially responsible initiatives within the firm and with the firm’s partners as well as through actions outside the firm, for example, investing in local communities. The research problem is to construct a multilevel model, grounded on theory to explain the positive social change that may be precipitated by corporations engaging in socially responsible activities. The purpose of this study is to add to the existing literature on Corporate Social Responsibility (CR) by addressing the gap in organizational literature through the development of a multilevel theoretical framework to explain the firms’ CSR activities. The research is based on theoretical research and uses extensive content analysis to develop the multilevel theory of social change.

In developing their theory, the authors identify the four levels at which analysis will be carried out as the individual employee level, the organizational level, the national level, and the transnational level. The authors postulate that there are three major motives behind the pressure from actors and interest groups to pressure firms into engaging in a socially responsible manner. The motives identified are: first, instrumental, which are driven by self-interest and egotistical in nature; secondly, there are relational motives, which have to do with the relationships group members have, and finally moral motives that are about moral principles and ethical considerations. Unlike most CSR studies, which use an ex post facto approach by looking at the effects of CSR, the research looks at the antecedents, that is, the factors that cause firms to act ethically. The authors use the three motives that are behind the push for socially responsible behavior to analyze antecedents of CSR at each of the four levels. The validity of the paper’s assertions is subject to the comprehensive identification of actors and their motives. Not all the actors are identified and the model does not take into account the seriousness or type of CSR a firm implements. In addition, the model is ‘front loaded’ and does not distinguish between the top-down and bottom-up influences on CSR activities.

This study develops a theoretical model that can explain how CSR can be a precursor for positive social change. The authors propose that the CSR activities that a firm does have an effect on the social environment that the firms occupy, and that such activity can cause other firms to adopt similar activities, leading to the amelioration of social conditions across the globe. In addition, the authors contend that firms do not necessarily engage in CSR activities willingly or because they believe in the necessity for such activities. Rather, a firm’s participation in socially responsible activities can be traced to a pressure ranging from individual employees to transnational bodies.

Evaluation

This study develops a multilayered theory to explain socially responsible behavior by adopting an interdisciplinary approach and borrowing concepts and theories from legal studies, sociology, psychology, international business, and ethics. This leads to a rich and wide-ranging theory that provides a framework through which firm behavior can be studied. The theory gives a fresh perspective on the causes of socially responsible behavior and provides a mechanism for determining the impact of socially responsible behavior on social change. However, the study is theoretical and its hypotheses lack empirical evidence, meaning that research is needed to prove or disprove the arguments that are advanced by the study.

 

van der Laan, S. (2009). The role of theory in explaining the motivation for corporate social disclosures: voluntary disclosures vs ‘solicited’ disclosures. Australasian    Accounting, Business and Finance Journal, 3(4), 14-29.

This study is an attempt to place corporate disclosures, whether voluntary or solicited, within a theoretical framework that can predict and explain firm Corporate Social Responsibility (CSR) disclosure. The purpose of this study is to identify and develop a theoretical framework that can explain the motivation behind voluntary CSR disclosures. In addition, the study aims to add to the literature on solicited disclosures cognizant that those solicited disclosures are increasingly important, hence the need to develop a theoretical framework that explains the motivation behind solicited CSR disclosures.

This is a theoretical research paper that uses content analysis to identify and develop an appropriate theoretical model that can be used to explain the motivation behind CSR disclosures. From content analysis, the author identifies two theories – the stakeholder theory and the legitimacy theory – that can be used to explain the motivation behind CSR disclosure, and analyzed voluntary and solicited disclosure separately because firms have different impetus to report either voluntarily or due to solicitation. The study reviews the literature on stakeholder and legitimacy theories to identify how the theories can be applied to explain CSR disclosure, even though motivation is a complex area of study, and determining and using a single theory to explain the phenomenon may not be valid. The study does not consider the scope or depth of disclosure and this can affect validity because some firms engage in CSR superficially while others embed it in their operations. Therefore, it is not possible to be certain about the motivation of disclosure without first considering the nature of CSR activities that are being disclosed.

The author suggests that the motivation for organizations disclosing socially responsible activities is to gain and enhance organizational legitimacy since according to the stakeholder theory, stakeholders have a right to information on the activities that a firm does on their behalf. Therefore, the firm releases information to the stakeholders to clarify and justify the activities it is doing as well as give the stakeholders a sense of belonging. The legitimacy theory advances the notion that firms try to operate within the normative parameters of their societies and they will release information to the public as a means of showing that their conduct is appropriate, desirable, and proper. In this way, the firms gain an aura of legitimacy within their societies and enhance their public image.

Evaluation

This paper separates disclosure of CSR activities into two distinct categories – voluntary disclosures and solicited disclosures – and identifies the distinguishing feature between the two as the impetus to provide information. The paper identifies two theories that can be used to analyze the motivation that makes firms disclose their CSR activities. However, the author does not clearly link the theories with disclosure nor does the paper show which of the theories is appropriate for describing the motivation for voluntary or solicited disclosure. In addition, there is no empirical evidence to back the theory, and measuring some of the variables like legitimacy and motivation can be troublesome owing to the amorphous nature of the concepts.

Literature Review

Corporate Social Responsibility (CSR) is an issue that has come into public prominence in the recent past as consumers become interested in not only the products and services that companies have to offer but also in the manner in which those products or services are procured by firms. Firms are under pressure from consumers and other interest groups to shift from a purely profit-maximizing mentality and demonstrate that they are responsible in the way they conduct their business around the globe (Dorfman et al., 2012). However, although there is an abundance of literature on CSR, most of the research done has been of a theoretical nature focusing on the development of theoretical frameworks to predict and explain socially responsible activities.

Although CSR is currently a mainstream concept and is practiced by a myriad of organizations, the definition of the concept remains amorphous, there is no universally accepted definition. The definition of the term has changed over the years and even currently, CSR is defined depending on the perspective of whoever is defining it (Lee. 2008; Secchi, 2007). Weyzig (2009) states that some corporations view CSR as a means by which they can improve their public image, enhance their reputation, or simply as a good business practice. Other perspectives include viewing it as good corporate citizenship or simply as stakeholder relations exercise (Hess, Rogovsky & Dunfee, 2002). Presently, the concept of CSR is based on the view that it involves business organizations considering the interests of society by being responsible for the impacts and outcomes that their activities have on the environment, local communities, shareholders, employees, suppliers, and customers among others (Ismail, 2009). According to this concept, firms have an obligation to not only comply with laid down laws and regulations but also to undertake voluntary activities that can help ameliorate the well-being of all the parties that are associated with the firm.

A number of theories have been proposed to help ground views on CSR within certain theoretical frameworks. Garriga & Mele (2004) proposed the instrumental theory, which postulates that participating in social activities can help firms to achieve their economic objectives. The political theory proposed by Wood & Lodgeson (2002) among others focuses on how firms can use their immense power responsibly to effect positive change. The integrative theory proposed by Brewer (1992) among others focuses on social integration, while the ethical theories are concerned with the doing of the right thing in an attempt to improve society (Freeman & Philips, 2002). There is a lot of literature on CSR, most of which is focused on the development of theoretical frameworks to explain socially responsible behavior. The legitimacy and stakeholder theories have been advanced to explain CSR disclosure, even though there is no empirical evidence to support the use of the theories to explain disclosure. In addition, literature on solicited disclosure remains sketchy and there is no empirical evidence to explain the increasing incidence of solicited disclosure.

Currently, most companies disclose their socially responsible behavior in their annual reports and some even have separate CSR disclosure reports. Companies working in the same industry tend to have similar disclosure patterns, showing that firms in an industry engage in similar socially responsible activities (Sweeney & Coughlan, 2011). However, the scope and breadth of the disclosure reports have not been thoroughly analyzed to determine whether these CSR activities are tackled seriously or are merely part of a window-dressing exercise. A model to predict the utilitarian function of socially responsible behavior has been developed (Mackey, Mackey & Barney 2007). However, this model requires to be tested to ensure whether it is viable and can effectively predict the cost and benefits of starting or stopping a socially responsible activity.

Research Question

Corporate Social Responsibility: The increasing incidence of solicited disclosure

Purpose

The purpose of this research is to address a lacuna in CSR research by focusing on the increasing incidence of solicited disclosure. This research aims to determine the reasons behind increased solicited disclosure and locate the phenomenon within an appropriate theoretical framework.

Research Design

This research shall be qualitative and will involve the collection of data through interviews with managers as well as parties seeking disclosure of CSR. Structured interviews will be used to guide data collection and ensure consistency in the collected data. Data shall be analyzed thematically and to avoid bias, independent reviewers will be used to determine the themes in the data. This method is appropriate for this research because it affords the researcher a chance to find new perspectives on the reasons that may be behind the rise in solicited disclosure.

Data Analysis

The collected data will be thematically analyzed to determine the common themes, which will then form the basis for the further mathematical treatment of the data. The collected data will enable the researcher to find the common themes in the data, and use them to determine the main reasons leading to the increasing incidence of solicited disclosure.

References

Aguilera, R., Rupp, D., Williams, C. & Ganapathi, J. (2007). Putting the s back in corporate         social responsibility: a multilevel theory of social change in organizations. Academy of Management Review, 32(3), 836–863.

Brewer, T. (1992). An issue area approach to the analysis of mne-government relations. Journal        of International Business Studies, 23, 295–309.

Campbell, J. (2007). Why would corporations behave in socially responsible ways? An                   institutional theory of corporate social responsibility. Academy of Management   Review, 32(3), 946-967.

Dorfman L., Cheyne, A., Friedman, C., Wadud, A. & Gottlieb, M. (2012). Soda and tobacco            industry corporate social responsibility campaigns: how do they compare? PLoS Med, 9(6), 25-37.

Freeman, E. & Philips, R. (2002). Stakeholder theory: a libertarian defence. Business Ethics Quarterly, 12(3) 331–349.

Garriga, E. & Mele, D. (2004). Corporate social responsibility theories: mapping territory.          Journal of Business Ethics, 53, 51-71.

Hess, D., Rogovsky, N & Dunfee, T. (2002). The next wave of corporate community             involvement: corporate social initiatives. California Management Review,  44(2), 110–     125.

Ismail, M. (2009). Corporate social responsibility and its role in community development: an         international perspective. The Journal of International Social Research Volume, 2(9),          199-209.

Lee, M. P. (2008). Review of the theories of corporate social responsibility: Its evolutionary path        and the road ahead. International Journal of Management Reviews, 10(1), 53-73.

Mackey, T., Mackey, A. & Barney, J. (2007). Corporate social responsibility and firm             performance: investor preferences and corporate strategies. Academy of Management   Review, 32(3), 817–835.

Margolis, D., & Walsh, P. (2003). Misery loves companies: rethinking social initiatives by   business. Administrative Science Quarterly, 48, 268 –305.

Secchi, D. (2007). Utilitarian, managerial and relational theories of corporate social             responsibility. International Journal of Management Reviews, 9(4), 347-373.

Sweeney, L. & Coughlan, J. (2011). Do different industries report Corporate Social             Responsibility differently? An investigation though the lens of stakeholder theory.             Journal of Marketing Communications, 14(2), 113-124.

van der Laan, S. (2009). The role of theory in explaining motivation for corporate social               disclosures: voluntary disclosures vs ‘solicited’ disclosures. Australasian    Accounting, Business and Finance Journal, 3(4), 14-29.

Weyzig, F. (2009). Political and Economic arguments for Corporate social Responsibility:            Analysis and proposition regarding CSR agenda. Journal of Business Ethics, 86, 417-        486.

Wood, D. & Lodgeson, M. (2002). Business citizenship: from individuals to organizations. Business Ethics Quarterly, Ruffin Series, 3, 59–94.