Corporate Social Responsibility 2009927293, 9780754628309, 9781315259222

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Corporate Social Responsibility

The Library of Corporate Responsibilities Series Editor: Tom D. Campbell Titles in the Series: Sustainability Tom Campbell and David Mollica Corporate Social Responsibility Wesley Cragg. MarkS. Schwartz and David Weitzner Corporate Environmental Responsibility Neil Cunningham Corporate Governance Lawrence E. Mitchell Corporate Business Responsibility Justin 0 "Brien

Corporate Social Responsibility

Edited by

Wesley Cragg Schulich School of Business, York University, Toronto, Canada

MarkS. Schwartz School ofAdministrative Studies, York University, Toronto, Canada

David Weitzner Schulich School of Business, York University, Toronto, Canada

First published 2009 by Ashgate Publishing Published 2016 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN 711 Third Avenue, New York, NY 10017, USA Routledge is an imprint of the Taylor & Francis Group, an informa business Copyright© Wesley Cragg, MarkS. Schwartz and David Weitzner 2009. For copyright of individual articles please refer to the Acknowledgements. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Wherever possible, these reprints are made from a copy of the original printing, but these can themselves be of very variable quality. Whilst the publisher has made every effort to ensure the quality of the reprint, some variability may inevitably remain. British Library Cataloguing in Publication Data Corporate social responsibility. - (The library of corporate responsibilities) 1. Social responsibility of business. I. Series II. Cragg, Wesley. Ill Schwartz, Mark S. IV. Weitzner, David. 658.4'08-dc22 Library of Congress Control Number: 2009927293 ISBN 9780754628309 (hbk)

Contents Acknowledgements Series Preface Introduction

IX

X111 XV

PART I LAYING THE FOUNDATIONS

2 3 4 5 6 7

E. Merrick Dodd (1932), 'For Whom are Corporate Managers Trustees?', Harvard Law Review, 45, pp. 1145-63. Keith Davis (1960), 'Can Business Afford to Ignore Social Responsibilities?', California Management Review, 2, pp. 70-76. Milton Friedman (1970), 'The Social Responsibility of Business is to Increase its Profits', New York Times Magazine, 33, pp. 122-26. Archie B. Carroll (1979), 'A Three-Dimensional Conceptual Model of Corporate Performance', Academy ofManagement Review, 4, pp. 497-505. Peter F. Drucker (1984), 'The New Meaning of Corporate Social Responsibility', California Management Review, 26, pp. 53--63. Donna J. Wood (1991 ), 'Corporate Social Performance Revisited', Academy of Management Review, 16, pp. 691-718. Peter A. French (1979), 'The Corporation as a Moral Person', American Philosophical Quarterly, 16, pp. 207-15.

3 23 31 37 47 59 87

PART II DEFINITIONS AND ETHICAL JUSTIFICATIONS 8 9 10 11 12 13

Lance Moir (2001), 'What do We Mean by Corporate Social Responsibility', Corporate Governance, 2, pp. 16-22. Elisabet Garriga and Domenec Mele (2004), 'Corporate Social Responsibility Theories: Mapping the Territory', Journal of Business Ethics, 53, pp. 51-71. Geoff Moore (1999), 'Corporate Moral Agency: Review and Implications', Journal of Business Ethics, 21, pp. 329-43. Wesley Cragg (2002), 'Business Ethics and Stakeholder Theory', Business Ethics Quarterly, 12, pp. 113-42. Thomas Donaldson and Thomas W. Dunfee (1994), 'Toward a Unified Conception of Business Ethics: Integrative Social Contracts Theory', Academy of Management Review, 19, pp. 252-84. Donna J. Wood and Jeanne M. Logsdon (2002), 'Business Citizenship: From Indi victuals to Organizations', in R. Edward Freeman and Sankaran Venkataraman (eds), Ethics and Entrepreneurship, The Ruffin Series of the Society for Business Ethics, 3, pp. 59-94.

99 107 129 145 175

209

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14 Marcel van Marrewijk (2003), 'Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion', Journal of Business Ethics, 44, pp. 95-105. 245 15 Dirk Matten and Jeremy Moon (2008), '"Implicit" and "Explicit" CSR: A Conceptual Framework for a Comparative Understanding of Corporate Social Responsibility', Academy of Management Review, 33, pp. 404-24. 257 16 MarkS. Schwartz and Archie B. Carroll (2008), 'Integrating and Unifying Competing and Complementary Frameworks: The Search for a Common Core in the Business and Society Field', Business & Society, 47, pp. 148-86. 279 PART III CSRAND MANAGEMENT: CRITICAL REFLECTIONS

17 Larue Tone Hosmer (1994) 'Strategic Planning as if Ethics Mattered', Strategic Management Journal, 15, pp. 17-34. 18 Bert van de Yen and Ronald Jeurissen (2005), 'Competing Responsibly', Business Ethics Quarterly, pp. 299-317. 19 Michael E. Porter and Mark R. Kramer (2006), 'Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility', Harvard Business Review, pp. 78-92. 20 Bryan W. Husted and David B. Allen (2000), 'Is it Ethical to Use Ethics as Strategy?', Journal of Business Ethics, 27, pp. 21-31. 21 Sum antra Ghoshal (2005), 'Bad Management Theories are Destroying Good Management Practices', Academy of Management Learning & Education, 4, pp. 75-91. 22 Robert Phillips, R. Edward Freeman and Andrew C. Wicks (2003), 'What Stakeholder Theory is Not', Business Ethics Quarterly, 13, pp. 479-502.

321 339 359 371 383 40 I

PART IV ISSUES AND APPLICATIONS

23 Morton Winston (2002), 'NGO Strategies for Promoting Corporate Social Responsibility', Ethics & International Affairs, 16, pp. 71-87. 24 Ian Holliday (2005), 'Doing Business with Rights Violating Regimes: Corporate Social Responsibility and Myanmar's Military Junta', Journal of Business Ethics, 61, pp. 329--42. 25 Uwafiokun Idemudia and Uwem E. Ite (2006), 'Corporate-Community Relations in Nigeria's Oil Industry: Challenges and Imperatives', Corporate Social Responsibility and Environmental Management, 13, pp. 194-206. 26 Graham Knight (2007), 'Activism, Risk, and Communicational Politics: Nike and the Sweatshop Problem', in Steve May, George Cheney and Juliet Roper (eds ), The Debate over Corporate Social Responsibility, Oxford: Oxford University Press, pp. 305-18. 27 Charles Fishman (2006), 'The Wal-Mart Effect and a Decent Society: Who Knew Shopping Was So Important?', Academy of Management Perspectives, 20, pp. 6-25.

427 445 459

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28 R. Edward Freeman (2006), 'The Wai-Mart Effect and Business, Ethics, and Society', Academy of Management Perspectives, 20, pp. 38--40. 29 Pankaj Ghemawat (2006), 'Business, Society, and the "Wai-Mart Effect"', Academy of Management Perspectives, 20, pp. 41-3.

Name Index

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511 515

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Taylor & Francis Taylor & Francis Group http://laylorandfrancis.com

Acknowledgements The editor and publishers wish to thank the following for permission to use copyright material. Academy of Management Review for the essays: Archie B. Carroll (1979), 'A ThreeDimensional Conceptual Model of Corporate Performance', Academy of Management Review, 4, pp. 497-505. Copyright © 1979 Academy of Management Review; Donna J. Wood (1991), 'Corporate Social Performance Revisited', Academy of Management Review, 16, pp. 691-718. Copyright© 1991 Academy of Management Review; Thomas Donaldson and Thomas W. Dunfee (1994), 'Toward a Unified Conception of Business Ethics: Integrative Social Contracts Theory', Academy of Management Review, 19, pp. 252-84. Copyright © 1994 Academy of Management Review; Dirk Matten and Jeremy Moon (2008), '"Implicit" and "Explicit" CSR: A Conceptual Framework for a Comparative Understanding of Corporate Social Responsibility', Academy of Management Review, 33, pp. 404-24. Copyright© 2008 Academy of Management Review. Academy of Management Learning and Education for the essay: Sumantra Ghoshal (2005), 'Bad Management Theories are Destroying Good Management Practices', Academy of Management Learning and Education, 4, pp. 75-91. Copyright © 2005 Academy of Management Learning and Education. Academy of Management Perspectives for the essays: Charles Fishman (2006), 'The WalMart Effect and a Decent Society: Who Knew Shopping Was So Important?', Academy of Management Perspectives, 20, pp. 6-25. Copyright © 2006 Charles Fishman; R. Edward Freeman (2006), 'The Wal-Mart Effect and Business, Ethics, and Society', Academy of Management Perspectives, 20, pp. 38-40. Pankaj Ghemawat (2006), 'Business, Society, and the "Wal-Mart Effect"', Academy ofManagement Perspectives, 20, pp. 41-43. Harvard Business School Publishing for the essay: Michael E. Porter and Mark R. Kramer (2006), 'Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility', Harvard Business Review, pp. 78-92. Harvard Law Review for the essay: E. Merrick Dodd (1932), 'For Whom are Corporate Managers Trustees?', Harvard Law Review, 45, pp. 1145-63. The New York Times for the essay: Milton Friedman ( 1970), 'The Social Responsibility of Business is to Increase its Profits', New York Times Magazine, 33, pp. 122-26. North American Philosophical Publications for the essay: Peter A. French (1979), 'The Corporation as a Moral Person', American Philosophical Quarterly, 16, pp. 207-15.

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Oxford University Press for the essay: Graham Knight (2007), 'Activism, Risk, and Communicational Politics: Nike and the Sweatshop Problem', in Steve May, George Cheney and Juliet Roper (eds), The Debate over Corporate Social Responsibility, Oxford: Oxford University Press, pp. 305-18. Philosophy Documentation Center for the essays: Wesley Cragg (2002), 'Business Ethics and Stakeholder Theory', Business Ethics Quarterly, 12, pp. 113--42. Copyright© 2002 Business Ethics Quarterly; Donna J. Wood and Jeanne M. Logsdon (2002), 'Business Citizenship: From Individuals to Organizations', in R. Edward Freeman and Sankaran Venkataraman (eds ), Ethics and Entrepreneurship, The Ruffin Series of the Society for Business Ethics, 3, pp. 59-94. Copyright© 2002 Society of Business Ethics; Bert van de Ven and Ronald Jeurissen (2005), 'Competing Responsibly', Business Ethics Quarterly, pp. 299-317. Copyright© 2005 Business Ethics Quarterly; Robert Phillips, R. Edward Freeman and Andrew C. Wicks (2003), 'What Stakeholder Theory is Not', Business Ethics Quarterly, 13, pp. 479-502. Copyright© 2003 Business Ethics Quarterly. Sage Publications for the essay: MarkS. Schwartz and Archie B. Carroll (2008), 'Integrating and Unifying Competing and Complementary Frameworks: The Search for a Common Core in the Business and Society Field', Business & Society, 47, pp. I 48-86. Copyright © 2008 Sage Publications. Springer Science and Business Media for the essays: Elisabet Garriga and DomEmec Mele (2004), 'Corporate Social Responsibility Theories: Mapping the Territory', Journal of Business Ethics, 53, pp. 51-71. Copyright© 2004 Kluwer Academic Publishers; Geoff Moore (1999), 'Corporate Moral Agency; Review and Implications', Journal of Business Ethics, 21, pp. 329--43. Copyright © 1999 Kluwer Academic Publishers; Marcel van Marrewijk (2003), 'Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion', Journal of Business Ethics, 44, pp. 95-105. Copyright © 2003 Kluwer Academic Publishers; Bryan W. Husted and David B. Allen (2000), 'Is it Ethical to Use Ethics as Strategy?', Journal ofBusiness Ethics, 27, pp. 21-31. Copyright© 2000 Kluwer Academic Publishers; Ian Holliday (2005), 'Doing Business with Rights Violating Regimes: Corporate Social Responsibility and Myanmar's Military Junta', Journal of Business Ethics, 61, pp. 329--42. Copyright© Springer Science and Business Media. John Wiley and Sons for the essays: Lance Moir (2001), 'What do We Mean by Corporate Social Responsibility', Corporate Governance, 2, pp. 16-22. Copyright © 2001 MCB University Press. Reproduced with permission of Blackwell Publishing Ltd; Larue Tone Hosmer (I 994) 'Strategic Planning as if Ethics Mattered', Strategic Management Journal, 15, pp. 17-34. Copyright© I 994 John Wiley and Sons Ltd. Reproduced with permission; Morton Winston (2002), 'NGO Strategies for Promoting Corporate Social Responsibility', Ethics & International Affairs, 16, pp. 71-87. Reproduced with permission of Blackwell Publishing Ltd; Uwafiokun Idemudia and Uwem E. lte (2006), 'Corporate-Community Relations in Nigeria's Oil Industry: Challenges and Imperatives', Corporate Social Responsibility and Environmental Management, 13, pp. I 94-206. Copyright© 2006 John Wiley and Sons Ltd. Reproduced with permission.

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Every effort has been made to trace all the copyright holders, but if any have been inadvertently overlooked the publishers will be pleased to make the necessary arrangement at the first opportunity.

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Taylor & Francis Taylor & Francis Group http://laylorandfrancis.com

Series Preface The conduct and governance of corporations raise a host of economic, political and social issues of central importance to human wellbeing in the 21st century. The economic capacity and consequent power of corporations make them institutions with the potential for enormous benefit and grievous harm. It is, therefore, crucial to identify the various advantages and disadvantages of the corporate form and how it is utilised, and to work out how to maximise the economic gains while minimising the social and environmental losses deriving from corporate activities. This requires an appreciation of how the corporation contributes to prosperity and human wellbeing, and what risks it poses to the natural and social environments in which it operates. Since the benefits of corporations are dependent on the exercise of corporate freedoms, and countering the potential harms sometimes requires restrictions on those freedoms, there are structural tensions in developing ethical and legal norms for corporate governance. Moreover, corporate freedoms work well for enhancing prosperity only within an appropriate competitive setting which is itself dependent on mutual trust and a regulatory framework, particularly if it is considered a benefit to achieve an equitable distribution of that prosperity. It is, therefore, a complex matter to gain an overall picture of the corporate rights and responsibilities that are appropriate within a good society, both domestic and global. This series of five volumes on corporate responsibilities gathers together crucially important essays on different dimensions of corporate responsibility. The essays are selected and introduced by internationally recognised specialists in the field. Each volume provides a different perspective and concentrates on distinctive issues. Corporate Business Responsibility (Vol I), edited by Justin O'Brien, Research Professor of Law and Corporate Governance at Queensland University of Technology, focuses on the responsibility of the corporation to enhance and sustain share value within the norms of fair competition. Business responsibility constitutes the distinctive core duty of the corporation as the creature of its investors to maximise its profitability in the interests of its legal 'owners' to whom managers and boards are ultimately accountable. This core business duty operates within a wider context of legal and social norms that are directly integral to the conduct of business in a competitive market system which aims at the economic success not only of particular businesses but of business in general. Corporate Environmental Responsibility, (Vol. II), edited by Neil Gunningham, Professor of Environmental Law at The Australian National University, centres on the responsibility of corporations towards the natural environment, taking into account the economic, social and intrinsic reasons for preserving and enhancing the natural environment. It deals with the ethical basis for requiring corporate management to factor-in environmental considerations to their economic decision-making, including and going beyond the purely business case for environmental risk management. Essays dealing with 'smart' regulation and internal management policies to protect the environment both nationally and internationally are included.

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Corporate Social Responsibility (Vol. Ill), edited by Wesley Cragg, Professor of Business Ethics, Schulich School of Business at York University, Mark Schwartz, Professor of Law, Governance and Ethics, School of Administrative Studies, York University, and David Weitzner, Professor of Strategy and Ethics, Schulich School of Business, York University, examines the emergence of the concept of corporate social responsibility and the use and uses that have been made of the language of corporate responsibility to explore the business/ society relationship, or what might be described as the role of the modern corporation in contemporary society. Central to this volume is the challenge of identifying and balancing a corporation's financial and non financial obligations to a wide range of stakeholders including shareholders but also employees, consumers, suppliers and communities affected by its operations. Issues discussed include the ethical bases for these social responsibilities, their practical application, their on-going implications for business management and the efficacy of voluntary self-regulation. Corporate Governance (Vol. IV), edited by Lawrence Mitchell, Theodore Rinehart Professor of Business Law, The George Washington University, Washington DC, deals with corporate governance from the point of view of managing and being accountable for the full range of corporate responsibilities. It explores different visions ofthe corporation in terms of ownership and as a social entity. The structure of the corporation, its legal bases and economic functions are examined. Particular attention is given to the role of the Board of Directors and shareholders in holding management accountable and taking responsibility for corporate conduct. Sustainability (Vol. V), edited by Tom Campbell, Professorial Fellow in the Centre for Applied Philosophy and Public Ethics (CAPPE) at Charles Sturt University, and David Mollica of The Australian National University, focuses on the concept of sustainability and its relevance to the articulation, development and enforcement of corporate responsibilities. Essays are included which trace the origins and multiple meanings of 'sustainability' within a range of disciplines, including ecology, economics and politics, and the ways in which they reflect shifts in value priorities, corporate policies, compliance mechanisms, and issues of global and domestic social justice. Consideration is given to the benefits and drawbacks of utilising the concept of sustainability in theorising and presenting the legal and ethical responsibilities ofthe modern corporation. Together these five volumes provide a wide-ranging picture of contemporary thinking on corporate responsibilities, taking in debates about their proper content and the legitimate and effectual means of their enforcement. TOM CAMPBELL Series Editor Professorial Fellow, The Centre for Applied Philosophy and Public Ethics (CAPPE), Charles Sturt University, Canberra

Introduction Discussion of the responsibilities of business, as Archie Carroll ( 1999) points out, is as old as business itself. The reasons are not hard to discover. The economic productivity of any society inevitably impacts the quality of life of the individual members of that society. It is of course not the only influence on quality of life. Social, political and environmental factors are also significant. Where goods and services are produced efficiently and effectively, however, doors open to possibilities for human flourishing that are otherwise closed. This being the case, it is not surprising that a persistent theme across human history has been the relation of business and society. The concept of corporate social responsibility (CSR) is a relatively recent example of the persistence and importance of that theme. The essays in this volume examine the emergence of the concept of corporate social responsibility and the use and uses that have been made of the language of corporate responsibility to explore the business-society relationship, or what might be described as the role of the modern corporation in contemporary society. A search of the relevant literature suggests that the language of corporate social responsibility begins to emerge as a way of understanding the role of business in society in the early decades of the twentieth century. The purpose of the first part of this volume, entitled 'Laying the Foundations', is to trace the emergence of the concept of corporate social responsibility as a way of understanding and framing the business-society relationship. Part II looks at 'Definitions and Ethical Justifications' with a view to exploring current discussions of the nature, scope and source of the social responsibilities of corporations. Part Ill, 'CSR and Management: Critical Reflections', explores the integration of CSR theories and justifications into business management and business management theories. Essays in the final part, 'Issues and Applications', apply the concept of corporate social responsibility and the theoretical frameworks and analytical tools to which it has given rise to the examination and resolution of specific social issues and problems arising out of the economic activities of corporations.

A Short History of CSR and the Modern Corporation That discussions of the responsibilities of business have come in recent years to focus on corporations, is not surprising in as much as the corporation is today the dominant vehicle for business activity. It is equally unsurprising that the focus of contemporary discussion of what has become known as CSR has been the multi- or transnational corporation. It is worth noting, however, that transnational corporations are not a recent phenomenon. Neither is the idea (though not the language) of corporate social responsibility. Codified laws allowing for the creation of organizations whose purpose is to carry on commercial transactions have a history going back to the Code of Hammurabi in 2083 BC. 1 The genesis of the modern investor-owned corporation, however, can be traced to the early The early history of 'corporations' is set out briefly by James Gillies ( 1992, ch. 2, pp. 28ft).

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modem period of European history with the actual incorporation of business enterprises. 2 James Gillies points out in Boardroom Renaissance (1992, p. 29) that: Monarchs normally granted authority to form (business) organizations in the form of letters patent. The grant usually permitted the creation of a monopoly for the purpose of achieving some specific public goal such as the building of a road or canal. As time went on the public purposes for which charters were granted constantly expanded and, eventually, chartering private corporations became the common way to deal with public needs?

An example is the charter granted to the Governor and Company of Adventurers Trading into Hudson Bay which assigned the company 'the exclusive right to trade and commerce', 'possession of the lands, mines, minerals, timber, fisheries, etc.' as well as the 'full power of making laws, ordinances and regulations at pleasure and of revoking them at pleasure' (Gillies, 1992, p. 30, quoting Myers, 1914, p. 39). As this brief description makes clear, corporations of the early modern period were created with a view to advancing public interests and were assigned responsibility for advancing those interests in their charters. Indeed, incorporation could at this time be said to be an explicit or formal social contract granting the privilege of engaging in profitable business activities in return for the assumption of public responsibilities. The expectation of reciprocal benefits required that the privileges associated with incorporation along with their potential for private enrichment be balanced by the assumption of responsibilities designed to generate public benefits. Were this the end of the story, it would not be difficult to identify, at least in general terms, the social responsibilities of corporations. However, it is not the end but only the beginning of the story of the modem corporation. The legal framework within which corporations operate underwent significant modifications beginning early in the nineteenth century in response in part to charges of favouritism, corruption and unfair monopolies. As a result, the mercantile idea that corporations should be chartered only where their activities would advance public interests was gradually replaced with a regulatory framework requiring only that those wishing to incorporate register their companies following a set of largely formal and non-demanding bureaucratic procedures. 4 Incorporation thus became a legal right that could be activated with minimal effort. It is these changes, Horwitz claims, that laid the foundations for the emergence of big business or the large modem shareholder-owned corporation (see McLean, 1999, p. 130, who attributes this view to Horwitz, 1992, p. 68). These changes also had the effect of disentangling incorporation from the notion that corporations, in return for the privilege of incorporation, should serve public interests as identified in their charter of incorporation.

See Davis ( 1905) for an historical account ofthe history and evolution ofthe modern corporation from its medieval and early modern roots. See also McLean ( 1999, p. 130) and for a more detailed account, Horwitz ( 1992, pp. 65ff) and Alexander ( 1992). It is tangentially interesting to note that eliminating bureaucratic discretion and replacing it with non-discretionary procedures and laws is currently advocated by some as a way of reducing corruption in government administration. It is possible that similar considerations motivated the shift from an approach to incorporation involving the exercise of extensive bureaucratic and political discretion to a largely rule-governed system in the nineteenth century.

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What emerged in law to take its place was the view thatthe primary obligation of corporations was to serve the interests of their owners and shareholders. The shift in law, from the idea that incorporation was a privilege to the idea that incorporation was a right to be conferred by law on the performance of a set of legal formalities, was accompanied by two theories that have exerted a good deal of influence over the evolution of modem understandings of the obligations of the modem corporation. The first is the view that corporations are natural entities whose creation is an expression of the right of association. The second is the view that the public benefits of corporate activities are best left to the operation of Adam Smith's 'invisible hand'. The thesis that corporations are 'natural entities' emerged as a theme in legal theory and legal interpretation in the nineteenth century to challenge the idea that incorporation was a privilege that the state granted at its own discretion. For our purposes, its importance lies in its hostility to 'the (then) dominant artificial entity view of the corporation as a creature of the state' (Horwitz, 1992, p.l 06). 5 Emerging with it was the view that corporations were an expression of the right of freedom of association. Both views gave implicit backing to the thesis that the primary obligation of corporations was to those who created them. 6 Both views had the effect of encouraging sceptical treatment of the thesis that corporations had an obligation to advance public interests broadly defined. 7 Both also implied endorsement of what have come to be described as the financial and the property models of the corporation, at the heart of which is the view that the central, dominant obligation of managers is to maximize profits for the benefit of shareholders. 8 Development in United States corporate law at the tum of the twentieth century is often cited in support of this view of the corporation. An excellent example is the Michigan Supreme Court judgement, Dodge v. Ford Motor Co. in which the court takes the position that: [a] business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.

Blair, citing Allen, takes this decision to be 'as good an example of the property conception of the corporation as exists' ( 1998, p. 51). A response to the 'profit maximization' view of the purpose of the modern corporation was not long in coming, however, and with it came the earliest examples of the use of the language of corporate social responsibility. A good example is a 1916 essay by John Clark, a University ofChicago economist, entitled 'The Changing Basis of Economic Responsibility'. Horwitz ( 1992) traces the emergence of this theory. See also McLean ( 1999). Wesley Cragg's 'Business Ethics and Stakeholder Theory', Chapter 11 in this volume, takes up this discussion at some length. The thesis that corporations in their current twentieth- and twenty-firstcentury incarnation are 'natural entities or expressions of the right of freedom of association' is also taken up and critically evaluated in Cragg (2005). The concept of corporate citizenship that emerges as a framework for understanding the social responsibilities of corporations might be thought of as a response to the anomaly of suggesting that corporations have or should be accorded rights that others have a general obligation to respect while ignoring the reciprocal responsibilities that accompany rights for natural persons. This is a theme that is explored by Donna Wood and Jeanne Logsdon in Chapter 13 'Business Citizenship: From Individuals to Organizations'. The finance and property models are discussed at some length by Margaret Blair ( 1998).

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The essay points towards a growing need to move beyond a narrow or what he describes as the prevailing liberal economic or neoliberal view of the responsibilities of business, a view that limits the obligations of corporations to respecting 'the letter of the law' and those responsibilities 'so firmly established in business morals as to have the binding force of law' (Clark, 1916, p. 20). Central to Clark's argument is the viewthatneitherthe statenorthemarketcan by themselves address the outcomes of the economic system. The impacts of 'large-scale industry' and 'scientific production' cannot be left to individuals or the market to sort out by themselves, he argues. Neither is leaving the responsibility for addressing those impacts to government an acceptable solution as laws 'can at best never keep pace with the needs which they are made to meet'. Clark concludes his analysis with the following observation: the world is familiar enough with the conception of social responsibilities. These do not need to be rediscovered in the year of our Lord 1916. But the fact that a large part of them are business responsibilities has not yet penetrated, and this fact does need to be brought home to a community in which business men and theoretical economics alike are still shadowed by the fading penumbra of laissez-faire. (1916, p. 28)

Virtually all of the themes touched on by Clark's analysis have become descriptive and normative staples in the discussions of corporate social responsibility in the intervening years. A book entitled The Modern Corporation and Private Property (Berle and Means, 1932) marks a second significant milestone in the early evolution of the concept of corporate social responsibility. In that book, Adolf Berle and Gardiner Means challenge the property model of the modem corporation. Shareholders are not owners of the corporations in which they invest in the sense in which people as individuals are owners of real property, they argue. Ownership in a modern corporation is widely dispersed. Ownership and management are separated and owners have little to say about the day-to-day operations of the corporations in which they hold shares, they observe. The modem corporation places control not in the hands of investors but rather in the hands of managers. As Berle and Means (1932, p. 3) put it: The property owner who invests in a modern corporation so far surrenders his wealth to those in control of the corporation that he has exchanged the position of independent owner for one in which he may become merely recipient of the wages of capital. (quoted in Boatright, 1999, p. 173)

It follows, they argue, that the community does not have an obligation to protect shareholders

'to the full extent implied in the doctrine of strict property rights'(1932, p.355). That being the case, the door is opened to the possibility that managers have an obligation to operate corporations in the interests of society generally. For whom, then, are corporate managers trustees? This question is asked and answered in an influential essay written by Merrick Dodd, a Harvard Law School professor (Chapter 1, this volume). Dodd begins his discussion with the observation that: It is undoubtedly the traditional view that the corporation is an association of stockholders formed for their private gain and to be managed by its board of directors solely with that end in view. (pp. 4-5)

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He proposes, however, that: It is undesirable ... to give increased emphasis at the present time to the view that business corporations exist for the sole purpose of making profits for their stockholders. (pp. 5-6)

He points out that 'business is permitted and encouraged by law primarily because it is of service to the community rather than because it is a source of profit to its owners' (p. 7), a theme that is taken up and explored at length in Wesley Cragg's 'Business Ethics and Stakeholder Theory' (Chapter 11 of this volume). Dodd then plants an idea that is to become extremely influential in subsequent debate: If we may believe what some of our business leaders and students of business tell us, there is in fact a growing feeling not only that business has responsibilities to the community but that our corporate managers who control business should voluntarily and without waiting for legal compulsion manage it in such a way as to fulfill those responsibilities. (pp. 11-12; emphasis added)

He illustrates this thought by quoting at length a public statement by Owen Young, President at the time of the General Electric Company. A corporation, Young suggests, has an obligation to be 'a good citizen', an idea that, as we shall see, subsequently comes to play a significant role in the language and literature of corporate social responsibility. The prevailing view among corporate social responsibility commentators is that use of the concept of corporate social responsibility is best described as taking firm root in the business and society literature in the 1950s, immediately following the conclusion of the Second World War. Carroll (1999), for example, identifies Howard Bowen's 1953 book The Social Responsibilities of the Businessman, as marking the emergence of corporate social responsibility as a significant idea in the search for a sound understanding of the role and responsibilities of the modern corporation in today's world. A second empirical marker ofthe emerging importance of the concept is the fact that the immediate post-warperiod signalled the beginning of the systematic use of empirical surveys designed to map the attitudes of business people of the day towards the social responsibilities of business. It is indeed fascinating, as Carroll (1999, p. 270, citing Bowen) notes, that 93.5 per cent ofthe businessmen responding to a Fortune magazine survey in 1946 agreed that the responsibilities of business went beyond financial bottom line considerations.

Laying the Foundations It is uncontroversially true that the concept of corporate social responsibility has entered the vocabulary of business, management, and business and management theory in a significant way. It is equally true that there is a sense in which the suggestion that corporations have social responsibilities is today relatively uncontested. What is contested, however, is the nature, scope and what might be described as the origins or source of those responsibilities. As we shall see, answers given to questions about the scope, nature and origin or source of CSR evolve in four distinct phases. What each phase of development has in common, however, is a concerted effort to provide a comprehensive, persuasive and integrated account of each of these three aspects of CSR.

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Phase One: Corporate Social Responsibility Defined The first comprehensive account of CSR appears in the 1950s and 1960s. Initiated by Bowen (1953), a wide-ranging discussion ofCSR emerges built around a set of five foundational ideas. The first of those ideas plays a central role in all four phases of the evolution of CSR. Keith Davis sets this idea out succinctly and persuasively in an essay written in 1960 entitled 'Can Business Afford to Ignore Social Responsibilities?' (Chapter 2 of this volume). With power, he argues, comes responsibility. The emerging power of corporations had been evident through the nineteenth and early twentieth centuries (see, for example, Clark, 19 I 6). However, it was during and following the Second World War that the power of business became graphically evident. The successful conclusion of the war by the allied forces was clearly linked to the capacity of business, particularly corporations in the United States, to provide the weapons of war and the services required to mobilize the war effort and win the war. Growing prosperity following that war, again particularly in the United States, enhanced the growing influence and power of the American corporate community at home and abroad. What Davis observed was that with growing economic power came social power. This fact carried important implications, he argued, as history proved that the 'social responsibilities of businessmen need to be commensurate with their social power' (p. 25). For Davis, the corollary of this historical fact was what has come to be known as the 'Iron Law of Responsibility': If power and responsibility are to be relatively equal, then the avoidance ofsocial responsibility leads to gradual erosion of social power. (p. 26; emphasis in original)

Corporations have a choice, he proposed. They can either use their new found power responsibly or lose it, an outcome, he predicted, that would result in loss of power and control with corrosive impacts on society generally. This first foundational idea, Davis observes, is accompanied by a second. Social responsibility requires that business people engage in actions 'for reasons at least partially beyond the firm's direct economic or technical interest' (p. 23). That is to say, the responsible exercise of both economic and social power requires that business people look at the impact of their decisions on their workers and the communities affected and take those impacts into account in directing the economic activities of the companies in which they hold positions of responsibility. It is clear that this second foundational idea is not purely academic in origin or impact. An illustration of this is an Opinion Research Corporation public opinion survey conducted in 1970 that reported that two-thirds of respondents accepted that business had a social obligation to contribute to social progress whether or not doing so contributed to the bottom line (Carol!, 1999, p. 275). This practitioner perspective was echoed in what Archie Carroll describes in 'A Three-Dimensional Conceptual Model of Corporate Performance' (Chapter 4) as a 'landmark publication' in 1971 by the Committee for Economic Development (CEO) pointing to a changing social contract between business and society that included an expanding circle of social responsibilities (p. 38). Writing in 1967, Clarence Walton, in a book entitled Corporate Social Responsibilities, endorsed the view that socially responsible behaviour might require the expenditure of resources without any guarantee of direct measurable economic returns. To this he then added

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a third dimension to the concept. CSR, he proposed, was by its nature voluntary, an idea implicit in the concept of CSR developed by Davis. These three ideas together implied a fourth subsequently articulated by Davis in an essay written in 1973 entitled 'The Case For and Against Business Assumption of Social Responsibilities'. The social responsibilities of business were those responsibilities that went beyond the direct economic obligations to shareholders or the legal responsibilities imposed by law. CSR was an added responsibility distinct from those obligations arising directly from incorporation as a shareholder-owned corporation. It is the second, third and fourth ideas, central to the phase one concept of CSR, that were subsequently to be subjected to critical examination and rejected for conflicting reasons in the 1970s and 1980s in phase two and phase three to follow. Phase Two: Milton Friedman and the Profit Maximization Thesis A response to this expanded and expanding view of the social responsibilities of business in general and corporations in particular was not long in coming. Alarmed by the growing influence of the CSR movement, Milton Friedman in 1970 published a rebuttal in the New York Times Magazine entitled 'The Social Responsibility of Business is to Increase its Profits' (Chapter 3). Unlike earlier critics, however, Friedman's goal was not to reject CSR as a concept. Rather, his goal in writing was to attack the increasingly expansive accounts of CSR, putting in their place the proposition that the sole social responsibility of business was to maximize profits while respecting the law and local ethical custom. The articulation of this narrow view of CSR marks a distinct and significant phase in the historical development of the idea. It also had clear strengths. It set out clearly the scope of CSR, limiting it to obligations tied directly and exclusively to shareholders and owners. It provided a clear picture of the nature of the social responsibilities of business by tying them directly and exclusively to profit maximization. Finally, it linked to well rehearsed and articulated, practical and theoretical accounts of the origin and source of that obligation. It is not possible within the restricted parameters of this introduction to offer a detailed description and critical appraisal of the profit maximization view of CSR and its various theoretical and ideological justifications (for a detailed analysis see Blair, 1995, esp. ch. 6). It is necessary to set out a summary description, however, because the critique on which the profit maximization view rests sets out what is in effect the basic challenge to any account of CSR that proposes that the social responsibilities of corporations go beyond a narrow focus on profit maximization. The narrow definition ofCSR has clear strengths and virtues. It makes lines of accountability and responsibility clear. Shareholders have a vested interest in ensuring that their investments are managed responsibly and efficiently. One of the foundations of the narrow view of CSR is the proposition that the impact of any framework that assigns managers responsibilities beyond simply profit maximization must have the effect of weakening the capacity of any group to ensure that the responsibilities of the corporation are efficiently and effectively carried out. On this view, if managerial accountability is not clear, managers will have few incentives to use resources under their control efficiently.

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Frederich Hayak gives these concerns an ideological focus that finds an echo in Friedman's position. As Hayak puts it: the tendency to allow and even to impel corporations to use their resources for specific ends other than those of a long-run maximization of the return on capital placed under their control ... tends to confer upon them undesirable and socially dangerous powers. (quoted by Blair, 1998, p. 60)

Friedman's position is very similar. To broaden the responsibilities of managers beyond profit maximization conditioned by respect for the law and local ethical custom is to invite them to undertake tasks for which they are not trained and for which they have no mandate. The result is bound to be socially and politically corrosive, undermining both the free market economy and the democratic values CSR purports to support and advance. The importance of Friedman's essay and subsequent writing on the CSR debate can hardly be overstated. Its central importance, however, lies in the challenge it poses to those advocating a broad definition ofCSR to provide an account of the nature, scope and source of those obligations that is as clear and precise as that offered by the narrow view of CSR with its focus on profit maximization.

Phase Three The third phase in the evolution of the concept of corporate social responsibility takes up the challenge posed by the re-emergence of the profit maximization thesis in phase two. Key to this effort is a re-evaluation ofthe phase one view that the social responsibilities of business are additional and distinct from the responsibility to operate profitably- responsibilities, that is to say, that require managers to pay attention to what strictly speaking are not business values or activities. An important step in this direction was taken by Archie Carroll in a 1979 essay entitled 'A Three-Dimensional Conceptual Model of Corporate Performance' (Chapter 4 in this volume). In that essay, Carroll proposes that: The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time. (p. 40)

On this view, obligations to operate efficiently and profitably are a basic social responsibility as is the obligation to obey the law. CSR is not a matter of going beyond these basic obligations to shareholders. Rather CSR is to be understood to include these along with a broader range of ethical and what Carroll describes as discretionary, non-obligatory or purely voluntary responsibilities. The idea that the scope of CSR should be understood to include basic obligations to shareholders together with an obligation to obey the law is one ofthe fundamental contributions of commentators in this phase of the evolution of the concept to contemporary discussion of corporate social responsibility. 9 With the publication of Edward Freeman's book Strategic This should not be taken to mean that it was universally endorsed by commentators in the late 1970s or 1980s. Thomas Jones, for example, continued to support the view that CSR involved only obligations that were purely voluntary and should not be thought to include obligations to stakeholders or obligations established by law, as Carroll ( 1999, p. 284) points out.

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Management: A Stakeholder Approach (1984), a second distinct, decisive and permanent dimension to the evolution of the concept of CSR is added. Freeman's contribution was to shift the focus from shareholders to stakeholders, of which shareholders were only one important component. Without question, managers and the corporations they managed had fiduciary obligations to shareholders. However, shareholders were not the only stakeholders impacted by the decisions and activities of corporations with moral or ethical status. Suppliers, customers, employees, their families, communities and the people who lived in them all had important roles in the building of a successful business enterprise. All had important stakes in the successful and ethical management of a business enterprise. All, by virtue of their role as stakeholders, had moral status that managers had an ethical obligation to take into account and respect. What stakeholder theory contributed to the evolution of the concept of CSR was twofold. It provided a theoretical framework for articulating the nature and the scope of the social responsibilities of corporations. The social responsibilities of corporations were now seen to extend to the direct and indirect corporate stakeholders. Further, those obligations should be understood as ethical or moral obligations. It did not follow that the claims of all stakeholders on corporations should be treated as identical in urgency or priority. What did follow, however, was that the stakes of those impacted were ethically grounded and generated ethical obligations on the part of managers and corporations. The second significant contribution of stakeholder theory was to identify ethics as an integral responsibility of management in all aspects and dimensions of corporate activity, rather than being considered an extra or a distinct component of management and management theory. In Chapter 5 'The New Meaning of Corporate Social Responsibility', Peter Drucker picks up the same basic theme, though in a distinctive way. CSR is not an appendage of management or a set of obligations that are acquired by virtue of acquired wealth, he argues, but rather integral elements of good management in all its various dimensions. Nor, on Drucker's view, is there a fundamental incompatibility between profitable and socially responsible management. In this 1984 contribution to the CSR debate, Drucker is very critical of commentators who endorse what Edward Freeman was later to describe as 'the separation thesis', the thesis that the business responsibilities of corporations and their social responsibilities are distinct in nature and origin. Both, Drucker argues, are interwoven elements of good management. Commentators have tended to assume that, in his essay, Drucker is advancing the thesis that corporations that take CSR seriously do better financially than corporations that ignore CSR considerations in their strategic planning and their operations. 10 The suggestion, that 'in the next decade, it will become increasingly important to stress that business can discharge "its social responsibilities" only if it converts them into "self-interest"' (p. 53), can certainly be interpreted to imply that the motivation for socially responsible behaviour is self-interest. However, what Drucker can also be understood to be arguing here is that the great emerging needs of human beings individually and collectively will only be successfully met if they are taken up by business. Further, they will be taken up by business only if they are seen not

10 Exploring this particular theme is the task of another of the volumes in this series and is not taken up or critically examined in this volume.

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as obligations but rather as business opportunities. 11 For our purposes, however, the basic messages of Drucker, Freeman and Carroll are similar. CSR is not something that stands apart from the basic responsibilities of management. Rather it is integral to the effective strategic management of the modern, shareholder-owned corporation. Phase Four

The proposal that CSR is integral to effective strategic management served to re-energize debate about the nature, scope and source or origin of the social responsibilities of business. In part because of a concern that, both at a theoretical and a practical level, answers to these three questions remained excessively vague (Frederick, 1994; Carroll, 1999; Wood, 1991, Chapter 6, in this volume), and in part because of increasing concern for understanding what this proposal actually implied both theoretically and practically for the operation of business enterprises, discussion shifts in phase four from the concept of corporate social responsibility to the concepts of corporate social responsiveness and corporate social performance. Fredrick (1994) describes corporate social responsiveness as 'the capacity of a corporation to respond to social pressures' (p. 154). Corporate social responsiveness, he suggests, moves the focus from 'imponderable generalities concerning public purpose, enlightened self-interest, the social good, equality, human dignity, good citizenship, responsible use of power, and similar moralistic catchwords' (p. 154) to more answerable operational and management-oriented considerations about 'how to respond in fruitful, human and practical ways' (p. 156). In fact, operationalizing CSR is a central challenge for its advocates. In the absence of measurement tools, benchmarks and methodological frameworks, the proposal that business enterprises have social responsibilities that are integral to effective management cannot meet the challenge of profit maximization orientations whose application is clear and measurable from a management perspective. However, as various commentators have noted, the shift from corporate social responsibility to corporate social responsiveness has limited value. The key question facing managers responding to insistent social pressures is how to respond. Practical questions about building responsive operational structures are clearly crucially important. However, to build those structures requires guidance with regard to the values and principles that should guide the development of responsive operational procedures and policies. Donna Wood, in an influential 1991 essay entitled 'Corporate Social Performance Revisited' (Chapter 6), proposes that the concept required to link corporate social responsibility and corporate social responsiveness is the concept of social performance. She defines corporate social performance as: A business organization's configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm's societal relationships. (p. 61)

The model that emerges is multidimensional. Definitions of CSR, she suggests, have been interpreted as vague and unhelpful because commentators and managers have failed to 11 It is interesting to note that on this interpretation, Drucker is anticipating what has become a significant theme of the management and sustainability literature and is explored in yet another volume of essays in this series.

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understand that CSR operates at three different levels. This first is an institutional or societal level whose fundamental principle is that of legitimacy. Society grants legitimacy and power and expects that corporations as social institutions will use their power responsibly. CSR also operates at an organizational level. At this second level, corporations have a responsibility to mitigate harmful impacts, repair harms when they occur and participate in solving social problems related to a firm's activities and interests. Finally, managers are 'moral actors'. As moral actors they have an obligation to use their positions to bring about socially responsible outcomes. Corporations also have an obligation to put in place structures, policies, programmes and processes designed to ensure that the corporation and its managers live up to their responsibilities at each of these three levels. This is the dimension of corporate responsiveness. Seen in this light, corporate social responsiveness reinforces and supports CSR and rather than substituting for it or replacing it. The focus at this level is action rather than reflection. Finally, corporations have an obligation to assess the effectiveness of their programmes and policies by reference to their impacts on the people and communities affected by their operations at each of the institutional, organizational and managerial levels at which CSR operates. What emerges, then, from the phase four evolution of the concept of CSR is a concrete account of the nature, scope and source or origin of CSR, frameworks and methodologies designed to facilitate the realization of the values and principles defining the institutional, organizational and individual management responsibilities of business firms. What also emerges is the perceived need for tools and methodologies to assess the degree to which business in general, as well as individual firms and individual managers, are living up to their responsibilities. CSR can now be seen as a function of the nature of the impacts the activities of a corporation can have on the lives of those affected by its activities. The scope of a corporation's responsibilities extends to all its stakeholders, that is to say everyone for whom something of value is put at risk voluntarily or involuntarily 1998, p. 2). The source or origin of those responsibilities lies in the power that society has allowed corporations to acquire with the resulting capacity to generate both social benefits and social harms. A final issue fundamental to the evolution of the concept of CSR but not canvassed in the preceding account is whether a corporation or a business firm or enterprise is itself the kind of entity that can properly be said to have social or ethical responsibilities. This question is important, because if the answer is 'No', then much of the CSR debate is fundamentally misguided. The question is one that has attracted significant attention on the peripheries of what might be described as the CSR movement. In 1979, however, the subject was broached directly by Peter French in an influential essay entitled 'The Corporation as a Moral Person' (Chapter 7). Corporations are moral agents and appropriately held morally responsible for their actions, French argues. When corporate actions emanate from a decision-making process that respects appropriate corporate structures, policies and processes, they are the decisions of the corporation itself for which it is appropriate to hold corporations and not individual managers responsible. This view of the moral status of corporations was subsequently taken up by Patricia Werhane in a book entitled Persons, Rights and Corporations (I 985), where she argues, contrary to French, that corporations are more appropriately described as 'secondary moral agents'. That is to say they are created by and are made up of persons who are moral agents in their own

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right and depend on the exercise by those persons of their moral decision-making powers. On the other hand, Werhane agrees that corporations, though they are dependent on individuals as primary moral agents for their existence and moral status, do nonetheless make decisions that are not appropriately described as the decisions of the individuals on whose primary decisionmaking powers they rely. For this reason, it is appropriate to hold them responsible as moral agents for their actions. A third position on this subject is defended by Manuel Velasquez ( 1983) who argues that corporations do not make decisions or engage in actions. Only human beings do that and individual human beings are appropriately held responsible for all corporate decisions and actions. Implicit in the positions of most commentators who defend a broad rather than a narrow view of CSR, however, is the assumption that corporations are moral agents to whom it is appropriate to assign moral and social responsibilities. It is fair to say, therefore, that most of the discussion around CSR builds on the assumption that corporations are moral agents. It is on these foundations, then, that contemporary discussion ofCSR builds. We track those discussions in three subsequent parts. Part II looks atthe ongoing debate over definitions ofCSR as well as justifications and defences ofthe idea that corporations have social responsibilities. Part Ill looks more specifically at the implications of CSR for the management of modem business enterprises. The final part looks at the application of the concept of corporate social responsibilities to a number of pressing social issues in settings in which corporations are active.

Definitions and Ethical Justifications In Part II of this volume we explore the theoretical foundations of CSR. At the centre of that discussion is a debate about the nature, scope and source or origins of CSR. Four theoretical frameworks have emerged to challenge what we have described as the narrow view of CSR, namely the view that the social responsibilities of corporations extend only to maximizing corporate profits, subject to the requirement that in the pursuit of profits, corporations respect the law and what are sometimes described as local ethical custom or 'the rules of the game'. Our first two contributors set out the contours ofthat discussion. Lance Moir, in Chapter 8 'What do We Mean by Corporate Social Responsibility', reviews several definitions of CSR, provides an overview of the dominant accounts in play today of the nature of CSR and then sets out the dominant theoretical frameworks around which current discussions of the origin and source of corporate social responsibilities typically organize themselves. His essay concludes with an examination of the concept of corporate social performance. Moir's essay, which provides a high level overview of current theoretical trends, is followed by a contribution by Elisabet Garriga and Domenec Mele entitled 'Corporate Social Responsibility Theories: Mapping the Territory' (Chapter 9) which provides a map of the theoretical frameworks that structure contemporary discussions of CSR. Their goal is to bring coherence to the 'landscape of theories' and the 'proliferation' of complex and unclear approaches to the topic. Their findings point, in their view, to the need for a new theory that integrates the distinct theoretical frameworks currently guiding discussion and debate.

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Those theoretical frameworks that seek to demonstrate that corporations have responsibilities that go beyond profit maximization tend to assume that it is both coherent and appropriate to hold corporations responsible for their actions, a view that is typically rejected by those who subscribe to the narrow view of CSR. Our third essay in this part returns to this issue. Are corporations moral agents? Do they have ethical responsibilities for which it is morally appropriate to hold them responsible? Geoff Moore, in 'Corporate Moral Agency' (Chapter I 0), points to the importance of this issue, reviews the arguments both for and against the assignment of moral agency to corporations, and concludes that the proposal that corporations have social responsibilities, for which it is appropriate to hold them to account, is sound. The essays that follow provide in-depth discussions of the theoretical challenges associated with the CSR thesis. These discussions revolve around the application of four theoretical frameworks: stakeholder theory, business ethics, sustainability and the concept of corporate citizenship. In Chapter 11 'Business Ethics and Stakeholder Theory', Wesley Cragg explores and evaluates two distinct approaches to justifying the view that corporations have a broad range of social responsibilities emerging from stakeholder theory. The first, the business case, focuses on the instrumental value generated by firms that take their social responsibilities seriously. The second focuses on the ethical values that support the view that corporations have a broad range of social responsibilities. The focus in both cases is on the corporation's stakeholders. Cragg argues that both approaches have limited value and proceeds to construct an account of the nature, scope and origins or source of the social responsibilities of corporations grounded on their status as legal artifacts. The importance of social contract theory as a framework for understanding the nature, scope and origin or source of CSR owes a great deal to the work of Thomas Donaldson and Thomas Dunfee. The basic contours of their contribution to the emergence of this theoretical framework are set out in their 1994 essay 'Toward a Unified Conception of Business Ethics: Integrative Social Contract Theory' (Chapter 12). Building on philosophical theories of social contract, Donaldson and Dunfee propose that the ethical responsibilities of business emerge from two quite different sources. The first is universal or global in nature. They refer to these responsibilities as grounded on a 'macro-social contract'. This contract applies universally to business activity globally whenever and wherever it occurs. The human rights obligations of corporations and other business entities are generated by this macro-social contract. The second kind of responsibility is grounded on understandings that emerge in response to business activity in local communities. These responsibilities apply only to business conducted in the local communities in which they are generated. Donaldson and Dunfee argue that integrative social contract theory provides a foundation for advancing both empirical and normative understandings of corporate responsibility. The next essay in this part traces the emergence of the concept of corporate citizenship and the obligations that follow from the idea that corporations are citizens with attendant rights which are grounded in law, but also ethical responsibilities to the people and communities in which they do business. Donna Wood and Jeanne Logsdon, in 'Business Citizenship: From Individuals to Organizations' (Chapter 13), trace the origins of the concept of corporate citizenship to practical attempts by business leaders to set out and define their responsibilities in response to the expectations and criticisms of individuals, governments and voluntary sector organizations (NGOs) in the communities in which they do business. Wood and Logsdon argue that the concept of corporate citizenship can only serve as a viable CSR framework if

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its scope extends beyond a narrow range of philanthropic and voluntary initiatives to include a broad range of responsibilities- for example those listed by Moir (p. I 00) in Chapter 8. Wood and Logsdon's essay is followed by Chapter 14 'Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion'. This essay contains an exploration by Marcel van Marrewijk of the role that sustainability frameworks, with their focus on future generations, can play in identifying and justifying the assignment of a broad range of social responsibilities to corporations. In Chapter 15, the penultimate essay in this part, entitled '"Implicit" and "Explicit" CSR: A Conceptual Framework for a Comparative Understanding of Corporate Social Responsibility', Dirk Matten and Jeremy Moon provide an account of two distinct approaches which they describe as implicit and explicit CSR. They use this distinction to build a comparative account of European and American approaches to understanding the social responsibilities of business. Finally, Mark Schwartz and Archie Carroll, in Chapter 16 'Integrating and Unifying Competing and Complementary Frameworks: The Search for a Common Core in the Business and Society Field', review the array of theories or frameworks canvassed in the previous essays in this part (that is, corporate social responsibility, business ethics, stakeholder management, sustainability and corporate citizenship). Following their review of the various frameworks, they identify commonalities and propose an integrating framework built around three core concepts: creating sustainable societal value, appropriately balancing interests, while demonstrating sufficient accountability.

CSR and Management: Critical Reflections This part takes a closer look at the strained relationship between the field of strategic management and the discourse ofCSR and ethics. The first three essays come from strategists who hope to bridge the divide between mainstream management and ethics once and for all. Chapter 17 by Larue Hosmer, 'Strategic Planning as if Ethics Mattered', is noteworthy as a classic piece in its ability to penetrate the Strategic Management Journal with an explicitly ethical discussion, a feat noted recently by Robertson (2008) as being virtually unheard of in the past two decades. Hosmer notes with disappointment that the field of strategic management's intellectual founders had hoped that a prominent place for discussions of ethics and the moral obligations of management would be allocated. Unfortunately, as the field evolved and began to privilege the paradigm of economic performance, the place for ethics disappeared. Hosmer notes with disappointment the failure to asign a prominent place in the field of strategic management to the discussion of ethics and the moral obligations of management, contrary to the hopes of its intellectual founders. Ethics, therefore, should be central, not peripheral, to the overall management ofthe firm. In Chapter 18 'Competing Responsibly', Bert van de Yen and Ronald Jeurissen focus on how different competitive conditions can affect the selection and evaluation of different strategies of corporate social responsibility. They examine three aspects of competition: intensity, risks to reputation and the legal environment. They conclude by arguing that different levels of each aspect of competition generate different degrees ofmorallegitimacy offirm behaviour. According to the authors, based on the level of competition and ethical considerations, each firm must select its own appropriate strategy of social responsibility.

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We close this group with an essay that is significant as one of the major voices in strategic management offering a unique take on how to bridge the fields. In Chapter 19 'Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility', Michael Porter and Mark Kramerarguethattheprevailing approaches to CSR are so fragmented and disconnected from business and strategy that strategists will no doubt ignore them. Yet, they note that this unfortunate fact obscures the real opportunities for companies to benefit society. As such, Porter and Kramer propose a framework for social responsibility tied directly to the tools of strategic management, rooted in further developing the core competencies of a firm and the potential for CSR activities to be a source of a sustainable competitive advantage. They conclude that firms need to explore value chain social impacts and the social dimensions ofthe competitive context instead of focusing on generic social issues. The next series of essays takes a critical look at whether there are fundamental ethical problems with taking a strategic approach to CSR. In Chapter 20 'Is it Ethical to Use Ethics as Strategy?', Brian Husted and David Allen attempt to address a different aspect of corporate social responsibility. While instrumental research suggests a link between ethics or CSR and profitability, the authors examine from a normative perspective whether it is ethically acceptable for a firm to use ethics or CSR in a strategic manner. After discussing the various definitions of strategy and current ethics-based and social strategies, they examine some of the criticisms levelled against such strategies, using the ethical frameworks of utilitarianism and deontology. They conclude that there are appropriate responses to any utilitarianism criticisms against an ethics-based strategy, as well as for most deontological concerns. Yet not all critics come to a similar conclusion. Many argue that we need to revisit some of the fundamental assumptions in management thought if ethics and CSR are ever to take their rightful place in the field. One of the most notable essays in this regard is Sumantra Ghoshal's self-explanatory 'Bad Management Theories are Destroying Good Management Practices' (Chapter 2 I). Ghoshal argues that business schools do not need to do more in order to help prevent future ethical disasters. In fact, they need to stop doing a lot of what they currently do. He argues that new courses are not required, but many of the classical readings and articles need to be retired, particularly those whose topics form the intellectual underpinnings of the modern economics-based paradigm of strategic management. Ghoshal would have us do away with agency theory and reminding students of the agency problem, transaction cost economics and its message of the need for tight monitoring and control of people to prevent opportunistic behaviour. He would even reject modern strategy courses and Porter's framework (mentioned earlier) that encourages a view of competition with suppliers, customers, employees and regulators. Instead, Ghoshal argues, we should replace these views with an emphasis on the positive, the cooperative and the moral. Finally, this part concludes with a look at one of the original theories that was first and thus far most successful at embedding ethical concerns into the mainstream discourse of strategy. In their 2003 essay 'What Stakeholder Theory is Not', Robert Phillips, Edward Freeman and Andrew Wicks (Chapter 22) argue that significant strength in the stakeholder concept is derived from its conceptual breadth. This strength has also been a weakness as the concept means many different things to different people. As a result, rigorous and focused discussions between disputing approaches are made difficult. This final essay sets out what three prominent stakeholder theorists assert stakeholder theory 'is' and what it 'is not'. They also look to dispel two types of opposition: critical distortions and friendly misinterpretations.

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Issues and Applications The final part of this volume provides a selection of essays that address several key issues or applications of CSR. The topics we have selected include the relationship between CSR and NGOs, sweatshops, developing nations and repressive regimes. We conclude with a series of essays that discuss the impact ofthe largest multinational in the world, Wai-Mart. In Chapter 23 'NGO Strategies for Promoting Corporate Social Responsibility', Morton Winston addresses a key stakeholder group often ignored in CSR discussions, that of nongovernmental organizations (NGOs). He looks at several NGO strategies to encourage CSR (from the least to the most confrontational) including engagement and support, social auditing and reporting, shareholder activism, moral stigmatization and shaming, boycotts and divestment, selective purchasing laws and litigation. He concludes by discussing the possible corporate response to the various strategies employed by NGOs. Ian Holliday's essay, 'Doing Business with Rights Violating Regimes: Corporate Social Responsibility and Myanmar's Military Junta' (Chapter 24), addresses a key issue for corporate social responsibility, that of doing business in countries with repressive regimes where abuse of human rights is clearly taking place. To conduct such an assessment, Holliday uses Myanmar as the contextual backdrop. The country clearly has and continues to violate human rights, and while many multinational corporations stopped doing business as a result, many continue to do so. Holliday, rather than criticizing such companies, argues that in fact constructive engagement, as opposed to boycotts leading towards isolation, is the best approach and can actually extend the frontiers of global corporate social responsibility. Chapter 25, Uwafiokun Idemudia and Uwem lte's 'Corporate Community Relations in Nigeria's Oil Industry: Challenges and Imperatives', focuses on CSR in the developing world, and the interaction of host communities and oil companies in Nigeria's Niger Delta. They point out that despite the adoption of CSR-based corporate community relation strategies by oil companies, violent conflict between communities and companies continues. They argue that unless specific deficiencies are addressed, including the failure to integrate community perceptions into CSR policies and practices, the lack of emphasis on negative injunction duties (that is, avoiding and correcting social injury) and the failure of governments to create an enabling environment, the problems will continue. They propose a tri-sector partnership (Nigerian government, oil companies and local host communities) approach to development and conflict resolution. In Chapter 26 'Activism, Risk, and Communication Politics: Nike and the Sweatshop Problem', Graham Knight argues that activism against Nike can be viewed as part of a larger social movement critical of the growth of global power. Knight sees in this a reconfiguration of the relationship between the economic and political systems and the sociocultural lifeworld. New social movement activism is viewed as subpolitics, and these subpolitics are framed as a 'risk society' representing a value shift in the developed affluent countries from materialist concerns with the redistribution of economic goods to post-materialist concerns with the ethics of lifestyle and identity. He uses the term 'risk society' because as uncertainty and insecurity increases, avoiding risks becomes a dominant social rationality. The social movements bring the risk and uncertainty to the forefront, because companies like Nike depend on their credibility, which can be challenged by activist groups. Knight demonstrates how subpolitics accentuate the communicational aspects of anti-corporate activism and how

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this has contributed to a shift in corporate communication practices with the development of CSR. Finally, in 'The Wai-Mart Effect and a Decent Society: Who Knew Shopping was So Important?' (Chapter 27), Charles Fishman starts off with a critical dialogue on Wai-Mart's impact, both good and bad, on our society. He coins the term 'the Wai-Mart effect' to describe the range of impacts resulting from Wai-Mart's way of doing business. Wai-Mart, a phenomenon like no other and the number-one publicly traded company in the world, impacts wage rates, prices and economies on a local, national and global scale. Of note is the fact that Wai-Mart has no rivals and appears impervious to challenge and accountability. Fishman notes the problems created by Wai-Mart's policy of absolute secrecy and our critical need to understand the behaviour and impact of mega-corporations in the global economy. In his response, 'The Wai-Mart Effect and Business, Ethics, and Society' (Chapter 28), Edward Freeman suggests that 'the Wai-Mart effect' can be better described as 'the stakeholder effect'. Viewed through the lens of stakeholder theory, what is wrong and what is right about WaiMart quickly becomes apparent. Pankaj Ghemawat (2006) suggests in Chapter 29 'Business, Society, and the "Wai-Mart Effect"' that while Fishman presents a relatively balanced picture, there is more to the story that critics often forget.

References Alexander, G.S. (1992), Commodity and Propriety, Chicago: University of Chicago Press. Berte, A., Jr. and Means, G. (1932), The Modern Corporation and Private Property, New York: Macmillan. Blair, M.(l995), Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century, Washington, DC: Brookings Institution. Blair, M. ( 1998), 'Whose Interests Should Corporations Serve?', in Max Clarkson (ed.), The Corporation and its Stakeholders: Classic and Contemporary Readings, Toronto: University of Toronto Press, pp. 47-71; first published in Margaret Blair ( 1995), Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century, Washington, DC: Brookings Institution, pp. 202-34. Boatright, J .R. ( 1999), Ethics in Finance, London: Blackwell. Bowen, H.R. ( 1953), The Social Responsibilities of the Businessman, New York: Harper. Carroll, A.B. ( 1999), 'Corporate Social Responsibility: Evolution of a Definitional Construct', Business & Society, 38, 3, pp. 268-95. Clark, J .M. ( 1916), 'The Changing Basis of Economic Responsibility', Journal of Political Economy, 24, 3, pp. 209-29. Clarkson, M.B.E. ( 1998), 'Introduction', in M.B.E. Clarkson (ed.) The Corporation and its Statkeholders: Classic and Contemporary Readings, Toronto: University of Toronto Press, pp. 1-9. Cragg, W. (2005), 'Ethics, Law and Corporate Self-Regulation', in Ethics Codes Globalization and the Challenge ofSelfRegulation, London and Cheltenham: Edward Elgar. Davis, J.P. ( 1905), Corporations: A Study ofthe Origin and Development ofGreat Business Combinations and Their Relation to the Authority of the State, New York: G.P. Putnam's. Davis, K. ( 1973), 'The Case For and Against Business Assumption of Social Responsibilities', Academy of Management Journal, 16, pp. 312-22. Frederick, W.C. ( 1994), 'From CSR I to CSR2: The Maturing of Business and Society Thought', Business and Society, 33, pp. 150-64. Freeman, R.E. (1984), Strategic Management: A Stakeholder Approach, Boston: Pitman. Gillies, J. ( 1992), Boardroom Renaissance, Toronto: McGraw Hill.

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Horwitz, M.J. (1992), 'Santa Clara Revisited: The Development of Corporate Theory', in The Transformation ofAmerican Law 1870-1960: The Crisis ofLegal Orthodoxy, New York, NY: Oxford University Press, pp. 65-108. McLean, J. (1999), 'Personality and Public Law Doctrine', University ofToronto Law Journal, 49, pp. 123--49. Myers, G. ( 1914), History of Canadian Wealth, Chicago: Charles H. Kerr & Company. Robertson, C.J. (2008), 'An Analysis of 10 years of Business Ethics Research in Strategic Management Journal: 1996-2005', Journal of Business Ethics, 80, 4, pp. 745-53. Velasquez, M.G. (1983), 'Why Corporations Are Not Morally Responsible for Anything They Do', Business and Professional Ethics Journal, 2, pp. 1-18. Walton, C. (1967), Corporate Social Responsibilities, Belmont, CA: Wadsworth. Werhane, P. ( 1985), Persons, Rights and Corporations, Englewood Cliffs, NJ: Prentice-Hall.

Part I Laying the Foundations

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~

Taylor & Francis Taylor & Francis Group http://laylorandfrancis.com

[1] FOR WHOM ARE CORPORATE MANAGERS TRUSTEES? E. Merrick Dodd

AN individual who carries on business for himself necessarily

enters into business relations with a large number of persons who become either his customers or his creditors. Under a legal system based on private ownership and freedom of contract, he has no duty to conduct his business to any extent for the benefit of such persons; he conducts it solely for his own private gain and owes to those with whom he deals only the duty. of carrying out such bargains as he may make with them. If the owner employs ah agent or agents to assist him in carrying on business, the situation is only slightly changed. The enterprise is still conducted for the sole benefit of the owner; the customers and creditors have contract rights against him and n_ot normally against the agent even when the agent is the person who actually transacts business with them. The agent himself shares in the receipts of the enterprise only to the extent provided by his agreement. He, however, on his part owes something more than a contract duty toward his principal. He is a fiduciary who must loyally serve his principal's interests. Substitute several owners for one and the picture is scarcely altered, except that insofar as the owners take part in the conduct of the enterprise, there is a fiduciary relation between owner and owner, as well as between employee and owner. Incorporate the enterprise, making the owners stockholders and some of them or persons selected by them directors, and- if we adopt the widely

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prevalent theory that the corporate entity is a fiction 1 - our picture is substantially unchanged. The business is still a private enterprise existing for the profit of its owners, who are now the stockholders. Its customers and creditors have contract rights, nominally against the corporation but in reality against the stockholders, whose liability is limited to the assets used in the business. 2 The directors and other agents are fiduciaries carrying on the business in the sole interest of the stockholders. These latter have indeed lost much of their de jure and, if the enterprise is a large one, perhaps nearly all of their de facto control so that they may appear to be more like cestuis que trust than like partners. Nevertheless they are not strictly cestuis que trust, for it is the association of which they-are members and not an individual acting as trustee for them that comes into contract relations with customers and creditors. Stress the theory of the corporate entity and the picture is altered slightly, but more in form than in substance. The corporation as a distinct legal person is now conceived of as carrying on the business and making the contracts, and the directors and other agents are fiduciaries for it. The sole function of the corporation is, however, conceived to be the making of profit for its stockholder-members, 3 so that they are the ultimate beneficiaries of the business and of the activities of the persons by whom it is carried on. Subject to this, from a practical standpoint, relatively minor controversy as to the emphasis to be placed upon the corporate entity/ it is undoubtedly the traditional view that a corporation 1 There has been a voluminous amount of legal writing, of late years on the corporate personality. Among legal expressions of the view that the corporation is in essence merely an aggregate of its members, see Hohfeld, The Individual Liability of Stockholders and the Conflict of Laws (1909) 9 CoL. L. REv. 492, (r910) ro id. 283, 52o; Radin, The Endless Problem of Corporate Personality (1932) 32 id. 643. Compare also the tendency today to " disregard the corporate fiction " in a wide variety of situations. 2 For an analysis of the legal duties of corporations as legal duties of their stockholders, see Hohfeld, supra note r. a For a vigorous assertion of this view, see Dodge v. Ford Motor Co., 204 Mich. 459, 170 N. W. 668 (1919). 4 The amount of emphasis which should be given to the corporate entity concept is unimportant for our present purpose if we assume that the sole function of the entity is to make profits for the stockholders. If the latter proposition be disputed, the entity concept may then, as indicated below, become important.

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is an association of stockholders formed for their private gain and to be managed by its board of directors solely with that end in view. Directors and managers of modern large corporations are granted all sorts of novel powers by present-day corporation statutes and charters, and are free from any substantial supervision by stockholders by reason of the difficulty which the modern stockholder has in discovering what is going on and taking effective measures even if he has discovered it. The fact that managers so empowered not infrequently act as though maximum stockholder profit was not the sole object of managerial activities has led some students of corporate problems, particularly Mr. A. A. Berle, to advocate an increased emphasis on the doctrine that managerial powers are held in trust for stockholders as sole beneficiaries of the corporate enterprise. 5 The present writer is thoroughly in sympathy with Mr. Berle's efforts to establish a legal control which will more effectually prevent corporate managers from diverting profit into their own pockets from those of stockholders, and agrees with many of the specific rules which the latter deduces from his trusteeship principle. 6 He nevertheless believes that it is undesirable, even with 5 See Berle, Corporate Powers as Powers in Trust (1931) 44 HARv. L. REv. 1049. s That directors are fiduciaries for their corporations is indisputable. That many of their powers, such as the power of declaring or passing dividends and the power of issuing new stock, may affect the individual interests of the stockholders rather than the corporate enterprise as a whole is obvious and has led to a growing tendency to treat directors as fiduciaries for stockholders as well as for the corporate entity. Thus, a stockholder may under some circumstances compel the declaration of a dividend even though the corporate entity would not be injured by the failure to declare. Dodge v. Ford Motor Co., supra note 3; In re Brantman, 244 Fed. 101 (C. C. A. 2d, 1917). A stockholder may also enjoin the issue of new stock by directors where the 'purpose of the issue is to change the control of the enterprise, even though the issue may not injure the corporation and even though the stockholder may not under the circumstances have any contractual preemptive right to have the stock issued to him. Elliott v. Baker, 194 Mass. 518, 8o N. E. 450 (1907); Luther v. C. J. Luther Co., n8 Wis. n2, 94 N. W. 69 (1903); see Dunlay v. Avenue M. Garage & R. R., 253 N.Y. 274, 279, I70 N. E. 917, 919 (1930). It may be questioned, however, whether some of the problems which Mr. Berle treats as fiduciary problems-e.g., that relating to dividends on non-cumulative preferred stock-are not questions of contract rather than of fiduciary law. Cf. Wabash Ry. v. Barclay, 28o U. S. 197 (1930). A further controversy as to the fiduciary duties of management when management is vested not in directors but in a particular group of stockholders is beyond the scope of the present article. See BERLE, STUDIES IN THE LAw OF CoRPORATION FINANCE (1928) c. 3· But cf. Wood1 Tlze Status of Ma11ageme11t Stockholders (1928) 38 YALE L. J. 57·

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the laudable purpose of giving stockholders much-needed protection against self-seeking managers, to give increased emphasis at the present time to the view that business corporations exist for the sole purpose of making profits for their stockholders. He believes that public opinion, which ultimately makes law, has made and is today making substantial strides in the direction of a view of the business corporation as an economic institution which has a social service as well as a profit-making function, that this view has already had some effect upon legal theory, and that it is likely to have a greatly increased effect upon the latter in the near future. Several hundred years ago, when business enterprises were small affairs involving the activities of men rather than the employment of capital, our law took the position that business 1 is a public profession rather than a purely private matter, and that the business man, far from being free to obtain all the profits which his skill in bargaining might secure for him, owes a legal duty to give adequate service at reasonable rates. Although a growing belief in liberty of contract and in the efficacy of free competition to prevent extortion led to abandonment of this theory for business as a whole, the theory survived as the rule applicable to the carrier and the innkeeper. In recent years we have seen this carrier law expanded to include a variety of businesses classed as public utilities. Under modern conditions the conduct of such businesses normally involves the use of a substantial amount of property. This fact, together with the accidental circumstance that a passage from Lord Hale was quoted in one of the briefs in the leading case of Munn v. Illinois, 8 has led to a change in the conventional legal phraseology. Instead of 7 It has been asserted that the medieval like the modern law drew a distinction between those businesses which were public and those which were private. See :r WYMAN, PuBLIC SERVICE CoRPORATIONS (I9II) 5· It is reasonably clear, however, that this view involves reading modern conceptions into the early cases and that what those cases really indicate is that all business publicly carried on was regarded as public in character. See Adler, Business Jurisprudence (1914) 28 HARv. L. REv. :r35. " The notion of a distinct category of business ' affected with a public interest,' employing property ' devoted to a public use,' rests upon historical error." Brandeis, J., dissenting, in New State Ice Co. v. Liebmann, 52 Sup. Ct. 371, 383 (!932). 8 See Hamilton, Affectation With Public Interest (1930) 39 YALE L. J. :ro89,

:rogs.

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talking, as the early judges talked, in terms of the duty of one engaged in business activities toward the public who are his customers, it has become the practice since Munn v. Illinois 9 to talk of the public duty of one who has devoted his property to public use, the conception being that property employed in certain kinds of business is devoted to public use while property employed in other kinds of business remains strictly private. This approach to the problem has been justly criticized as attempting to draw an unreasonably clean-cut distinction between businesses which do not differ substantially, and as furnishing no intelligible criterion by which to distinguish those businesses which are private property from those which are property devoted to public use. 10 The phrase does, however, have the merit of emphasizing the fact that business is permitted and encouraged by the law primarily because it is of service to the community rather than because it is a source of profit to its owners. Accordingly, where it appears that unlimited private profit is incompatible with adequate service, the claim of those engaged therein that the business belongs to them in an unqualified sense and can be pursued in such manner as they choose need not be accepted by the legislature. Despite certain recent conservative decisions such as Tyson v. Banton,11 it may well be that the law is approaching a point of view which will regard all business as affected with a public interest. If certain businesses then continue to be allowed unregulated profits, it will be as a matter of legislative policy because the lawmakers regard the competitive conditions under which such businesses are carried on as making regulation of profits unnecessary, and not because the owners of such enterprises have any constitutional right to have their property treated as private in the sense in which property held merely for personal use is private. At any rate, there is no doubt that property employed in a business now classed as a public utility is private property only in a qualified sense. Such a utility as an interstate railroad must 9

10

94 U.S. II3 (1877).

See Hamilton, supra note 8; Brandeis,

J., in New State Ice Co. v. Liebmann,

52 Sup. Ct. 371, 383 (1932). 11 ;a73 U. S. 418 (1927); cf. New State Ice Co. v. Liebmann, 52 Sup. Ct. 37I (1932).

8

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render adequate service, expand its facilities when called upon by public authority, charge only reasonable rates, and treat all customers alike even though profitable new business might be secured by making concessions to certain patrons.12 In addition to such regulations of its rates and services, ap. interstate railroad is powerless to issue new securities even to its existing stockholders without the consent of an administrative board which is charged with the duty of considering primarily the bearing of such se~ curity issue upon the welfare of the traveling or shipping public rather than the desirability of the issue from the standpoint of the stockholders as owners.13 Furthermore, the relations between such a railroad and its employees are no longer solely a matter of private bargaining but have of recent years been regulated, first by the Adamson Act,14 a thinly disguised measure for increasing wages, and more recently by an act creating a labor board with power to determine wages in case of a dispute, although without any weapon save an appeal to public opinion for the enforcement of its determinations. 15 Whether these labor regulations be regarded as designed to protect the public against possible interruptions of service due to strikes, or as derived from a partial recognition of the validity of the claims of labor as an integral part of the enterprise to a fair share of the receiptsfairness to be dependent on criteria which, however vague, are not wholly a matter of bargaining strength- it is plain that these regulations, like those previously referred to, involve important limitations on the right of stockholders and managers acting in their interests to treat the enterprise as the private property of the former. The law applicable to interstate railroads has, moreover, recently broken away from the idea that each business enterprise is a wholly distinct entity owing no obligations to aid in the success of the industry as a whole. The Transportation Act of r920 as construed by the United States Supreme Court in the New England Divisions Case 16 treats the railroads of the country as parts See 41 STAT. 474, 483 (r92o), 49 U.S. C. §§ r, 6 (1926). See 41 STAT. 494 (1920), 49 U. S. C. § zoa (1926). 1 4 39 STAT. 721 (r9r6), 45 U.S. C.§ 65 (1926). Held constitutional in Wilson v. New, 243 U.S. 332 (r9r7). 15 4I S'l'AT. 469 (!920), 45 u.s. c. §§ I3I-34 (!926). 16 26r U. S. 184 (1923). Cf. Dayton-Goose Creek Ry. v. United States, 263 12

13

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9 II5I

of a single system to such an extent as to justify the Interstate Commerce Commission in dividing the joint rates charged by connecting carriers between those carriers in such a way as to increase the resources of the weaker roads by giving them a disproportionately large share of the total. Although this single system concept has thus far been confined to interstate railroads, the limitations on unqualified pursuit of private profit imposed by the more advanced states on other socalled public utilities such as gas, electric, and telephone companies, are substantially similar to those imposed by federal law upon interstate railroads.17 Outside the public utility field there is in the present state of the law little or no attempt to curtail private property in the interest of the customer, it being generally assumed that competition furnishes him adequate protection.18 On the other hand, the inequality of bargaining power between employer and employee- an inequality which the recent rise of the large corporation has greatly accentuated- has resulted in a considerable amount of legislation designed to protect the health and safety, and even to a slight extent the financial rewards, of the employee.19 Recent economic events suggest that the day may not be far distant when public opinion will demand a much greater degree of protection to the worker. There is a widespread and growing feeling that industry owes to its employees not merely the negative duties of refraining from overworking or injuring them, but the affirmative duty of providing them so far as possible with economic security. Concentration of control of industry in a relatively few hands 20 has encouraged the belief in the practicaU.S. 456 (1924); Fifteen Per Cent Case, 178 I. C. C. 539 (1931). (For modification of the order in that case, see U. S. Daily, Dec. 8, 1931, at 2275.) 1 7 See, e.g., N.Y. PUB. SERV. CoM. LAw (1910) c. 480. l.S The United States Supreme Court, as indicated above, takes the position that charges to the consumer can not constitutionally be regulated unless the business is one which in the Court's opinion may properly be regarded as a public utility. 19 Reasonable health and safety measures such as limitations of hours of service are accepted as proper exercises of the police power. Bunting v. Oregon, 243 U. S. 426 (1917). Minimum wage laws are deemed invalid. Adkins v. Children's Hospital, 26r U.S. 525 (1923). More limited wage regulations such as those compelling payment in cash have been upheld. Knoxville Iron Co. v. Harbison, r83 U.S. 13 (I90I). 2o

The extent to which control of American industry is thus concentrated has

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bility of methods of economic planning by which such security can be achieved in much greater degree than at present. This belief is no longer confined to radical opponents of the capitalistic system; it has come to be shared by many conservatives who believe that capitalism is worth saving but that it can not permanently survive under modern conditions unless it treats the economic security of the worker as one of its obligations and is intelligently directed so as to attain that object. 21 It is true that, as many advocates of industrial planning have pointed out, high wages and economic security for workers tend in the main to increase the profits of stockholders, inasmuch as they tend to increase consumption of the things which business corporations produce. 22 It can not, however, be successfully maintained that the sort of industrial planning which may be found desirable to protect the employee is necessarily under all circumstances in line with the interest of the stockholders of each individual corporation. If contemporary discussion of the need for a planned economic order ultimately results in a more stabilized system of production and employment, we may safely predict that this will involve some further modifications of the maximum-profit-for-the-stockholders-of-the-individual-company formula. It may, however, be forcibly urged that all these and other past, present, and possible future limitations on the pursuit of stockholder profit in no way alter the theory that the sole function of directors and other corporate managers is to seek to obtain the maximum amount of profits for the stockholders as owners of the enterprise. Ownership of a modern railroad may today be hedged about with restrictions which make such ownership considerably less absolute than was the ownership of a cotton mill at the time when economic and legal theories of laissez faire were most completely accepted. Ownership in the cotton industry tomorrow may be even more restricted in some ways than is recently been investigated. See LAIDLER, CONCENTRATION OF CONTROL IN AMERICAN INDUSTRY (I93I). 21 See, e.g., DONHAM, BUSINESS ADRIFT (1931) passim; THE SWOPE PLAN (Frederick editor, 1931); Address of Daniel Willard, President of Baltimore & Ohio R. R. in AMERICA FACES THE FuTURE (Beard editor, 1932) 29; Butler, Unemployment, id. at 141. 22 E.g., DoNHAM, BusiNESS ADRIFT 129-37; THE SwoPE PLAN 20.

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ownership in the railroad field today. Regulations imposed in the interest of employees, consumers, or others may increasingly limit 'the methods which managers of incorporated business enterprises may employ in seeking profits for their stockholders without in any way affecting the proposition that the sole function of such managers is to work for the best interests of the stockholders as their employers or beneficiaries. If, however, as much recent writing suggests, we are undergoing a substantial change in our public opinion with regard to the obligations of business to the community, it is natural to expect that this change of opinion will have some effect upon the attitude of those who manage business. If, therefore, the managers of modern businesses were also its owners, the development of a public opinion to the effect that business has responsibilities to its employees and its customers would, quite apart from any legal compulsion, tend to affect the conduct of the better type of business man. The principal object of legal compulsion might then be to keep those who failed to catch the new spirit up to the standards which their more enlightened competitors would desire to adopt voluntarily. Business might then become a profession of public service, not primarily because the law had made it such but because a public opinion shared in by business men themselves had brought about a professional attitude. 23 Our present economic system, under which our more important business enterprises are owned by investors who take no part in carrying them on- absentee owners who in many cases have not even seen the property from which they derive their profitsalters the situation materially. That stockholders who have no contact with business other than to derive dividends from it should become imbued with a professional spirit of public service is hardly thinkable. If incorporated business is to become professionalized, it is to the managers, not to the owners, that we must look for the accomplishment of this result. If we may believe what some of our business leaders and students of business tell us, there is in fact a growing feeling not only that business has responsibilities to the community but that our corporate managers who control business should voluntarily and without waiting for legal compulsion manage it in such a way as 2a

Cf. BRANDEIS, BusiNEss-A PROFEssroN (1925).

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to fulfill those responsibilities. Thus, even before the present depression had set many business men thinking about the place of business in society, one of our leading business executives, Mr. Owen D. Young, had expressed himself as follows as to his conception of what a business executive's attitude should be: " If there is one thing a lawyer 2" is taught it is knowledge of trustee-

ship and the sacredness of that position. Very soon he saw rising a notion that managers were no longer attorneys for stockholders; they were becoming trustees of an institution. If you will pardon me for being personal, it makes a great difference in my attitude toward my job as an executive officer of the General Electric Company whether I am a trustee of the institution or an attorney for the investor. If I am a trustee, who are the beneficiaries of the trust? To whom do I owe my obligations? My conception_ of it is this: That there are three groups of people who have an interest in that institution. One is the group of fifty-odd thousand people who have put their capital in the company, namely, its stockholders. Another is a group of well toward one hundred thousand people who are putting their labor and their lives into the business of the company. The third group is of customers and the general public. Customers have a right to ·demand that a concern so large shall not only do its business honestly and properly, but, further, that it shall meet its public obligations and perform its public duties -in a word, vast as it is, that it should be a good citizen. Now, I conceive my trust first to be to see to it that the capital which is put into this concern is safe, honestly and wisely used, and paid a fair rate of return. Otherwise we cannot get capital. The worker will have no tools. Second, that the people who put their labor and lives into this concern get fair wages, continuity of employment, and a recognition of their right to their jobs where they have educated themselves to highly skilled and specialized work. Third, that the customers get a product which is as represented and that the price is such as is consistent with the obligations to the people who put their capital and labor in. Last, that the public has a concern functioning in the public interest and performing its duties as a great and good citizen should. I think what is right in business is influenced very largely by the 24

tive.

Mr. Young practised law for many years before he became a business execu-

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growing sense of trusteeship which I have described. One no longer feels the obligation to take from labor for the benefit of capital, nor to take from the public for the benefit of both, but rather to administer wisely and fairly in the interest of all." 25 More recently Mr. Young's colleague, President Swope of the General Electric Company, has put forward his plan for the stabilization of industry which is based on the idea that " organized industry should take the lead, recognizing its responsibility to its employees, to the public, and to its stockholders rather than that democratic society should act 'through its government." 26 That industry as at present organized can take this lead only through the agency of the directors and corporate executives who manage it is obvious and is tacitly assumed by Mr. Swope. As Professor Beard has put it in commenting on the Swope plan," Mr. Swope spoke as a man of affairs, as president of the General Electric Company. No academic taint condemned his utterance in advance; no suspicion of undue enthusiasm clouded his product. As priest-kings could lay down the law without question in primitive society, so a captain of industry in the United States could propose a new thing without encountering the scoffs of the wise or the jeers of the practical." 27 In his recent study of the situation which confronts American business today, Dean Donham of the Harvard Graduate School of Business Administration has stated the problem as follows: "How can we as business men, within the areas for which we are responsible, best meet the needs of the American people, most nearly approximate supplying their wants, maintain profits, handle problems of unemployment, face the Russian challenge, and at the same time aid Europe and contribute most to or disturb least the cause of international peace? " 28 Answering this question he says, " The only way to defend capitalism is through leadership which accepts social responsibility and meets the sound needs of the great majority of our 25 Address of Owen D. Young, January, 1929, quoted in SEARS, THE NEw PLACE OF THE STOCKHOLDER (1929) 209. Cj. WORMSER, FRANKENSTEIN, INCORPORATED (1931) c. 8. 26 THE SwoPE PLAN 22. 27 AMERICA FACES THE FUTURE 186, 2s DoNHAM, BusiNEss ADRIFT 38.

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people. Such leadership will seek to form constructive plans framed not in the interest of capital or capitalism but in the interest of the American people as a whole. . . . The responsibility of capital for leadership is overwhelming. To a large extent in this industrial civilization of ours the potential leadership of the country is concentrated in industry." 29 Dean Donham does not explicitly state that leadership of industry is in the hands of those who do not own it but he is too well-informed an observer of modern business not to be thoroughly aware that such is the case. Assumption of social responsibility by industrial leadership necessarily means assumption of such responsibility by corporate managers. The view that those who manage our business corporations should concern themselves with the interests of employees, consumers, and the general public, as well as of the stockholders, is thus advanced today by persons whose position in the business world is such as to give them great power of influencing both business opinion and public opinion generally. Little or no attempt seems to have been made, however, to consider how far such an attitude on the part of corporate managers is compatible with the legal duties which they owe the stockholder-owners as the elected representatives of the latter. No doubt it is to a large extent true that an attempt by business managers to take into consideration the welfare of employees and consumers (and under modern industrial conditions the two classes are largely the same) will in the long run increase the profits of stockholders. As Dean Donham and others have demonstrated, it is the lack of a feeling of security on the part of those who are dependent on employment for their livelihood which is largely responsible for the present under-consumption which has so disastrous an effect upon business profits. If the social responsibility of business means merely a more enlightened view as to the ultimate advantage of the stockholder-owners, then obviously corporate managers may accept such social responsibility without any departure from the traditional view that their function is to seek to obtain the maximum amount of profits for their stockholders. And yet one need not be unduly credulous to feel that there is 29

Id. at xos-o6.

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more to this talk of social responsibility on the part of corporation managers than merely a more intelligent appreciation of what tends to the ultimate benefit of their stockholders. Modern largescale industry has given to the managers of our principal corporations enormous power over the welfare of wage earners and consumers, particularly the former. Power over the lives of others tends to create on the part of those most worthy to exercise it a sense of responsibility. The managers, who along with the subordinate employees are part of the group which is contributing to the success of the enterprise by day-to-day efforts, may easily come to feel as strong a community of interest with their fellow workers as with a group of investors whose only connection with the enterprise is that they or their predecessors in title invested money in it, perhaps in the rather remote past. 30 Moreover, the concept that the managers are merely, in Mr. Young's phrase, "attorneys for the investors , leads to·the conclusion that if other classes who are affected by the corporation's activities need protection, that protection must be entrusted to other hands than those of the managers. Desire to retain their present powers accordingly encourages the latter to adopt and disseminate the view that they are guardians of all the interests which the corporation affects and not merely servants of its absentee owners. Any clash between this point of view and the orthodox theory that the managers are elected by stockholder-owners to serve their interests exclusively has thus far been chiefly potential rather than, actual. Judicial willingness -which has increased of late- to allow corporate directors a wide range of discretion as to what policies will best promote the interests of the stockholders, together with managerial disinclination to indulge a sense of social responsibility to a point where it is likely to injure the stockholders, has thus far prevented the issue from being frequently raised in clear-cut fashion in litigation. 31 30 Some of our most successful industrial corporations have for years obtained all the additional capital which they needed out of surplus profits without any further issue of securities. See, e.g., The General Electric Co., Moonv's MANUAL OF INVESTMENTS, INDusTRIAL SECURITIES (1931) 971, indicating that the only outstanding bonds of that corporation were issued in 1902 and that no stock has been issued since 1920 except as a stock dividend or split-up. 8 1 It was raised in the case of Dodge v. Ford Motor Co., supra note 3, in which Mr. Ford's expressions of an intention to share profits with the public through a

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Nevertheless there are indications that even today corporation managers not infrequently use corporate funds in ways which suggest a social responsibility rather than an exclusively profitmaking viewpoint. Take, for example, the matter of gifts by business corporations to local charities. The orthodox legal attitude toward such gifts is well stated in the following language of Lord Bowen: "Charity has no business to sit at boards of directors qufi charity. There is, however, a kind of charitable dealing which is for the interest of those who practise it, and to that extent and in that garb (I admit not a very philanthropic garb) charity may sit at the board, but for no other purpose." 3 ~ Other courts have expressed substantially the same view, which is generally regarded as representing the law on the subject. 33 There is, however, another viewpoint which is undoubtedly becoming widely prevalent with laymen if not with lawyers. Most local charities are designed to carry on relief work which, if not thus carried on, might be undertaken as a public enterprise supported by taxareduction in prices were relied upon as justifying a decree compelling the declaration of a dividend out of the large surplus of the company. Neither the language of the opinion nor the relief granted necessarily involves an unqualified acceptance of the maximum-profit-for-stockholders formula. The opinion states that " a business corporation is organized and carried on primarily for the profit of the stockholders " and that directors cannot lawfully " conduct the affairs of a corporation for the merely incidental benefit of shareholders and for the primary purpose of benefiting others." 204 Mich. at 507, 170 N. W. at 684. Despite testimony of Mr. Ford that he planned to e.'i:pand the enterprise in the interest of consumers rather than of stockholders, the court was careful so to limit its decree as not to interfere seriously with the expansion program. Its avowed reason for so doing was that expansion might be made profitable despite Mr. Ford's e.-.;:pressed indifference to profit. One may suspect that it was also motivated, consciously or unconsciously, by a reluctance to prevent the growth of a socially important enterprise. 3 ~ Hutton v. West Cork Ry., 23 Ch. D. 654, 673 (1883). "The law does not say that there are to be no cakes and ale, but there are to be no cakes and ale except such as are required for the benefit of the company." Ibid. 3 3 The present tendency is to take a liberal view of what gifts may reasonably be thought by the directors to be for the financial benefit of the corporation. C/. Evans v. Brunner, ;Mond & Co., 90 L. J. Ch. 294 (1920); Armstrong Cork Co. v. H. A. Meldrum Co., 285 Fed. 58 (W. D. N.Y. 1922). Many of the recent cases on corporate gifts involve the deductibility of the gift from income under the federal income tax act as an " ordinary and necessary expense incurred in carrying on trade or business." Here also the modern cases take a liberal view of what may be to the business advantage of the company. Cf. Corning Glass Works v. Lucas, 37 F.(zd) 798 (App. D. C. 1929); American Rolling Mill Co. v. Commissioner of Int. Rev., 41 F.(2d) -314 (C. C. A. 6th, 1930); Forbes Lithograph Mfg. Co. v. White, 42 F.(2d) 287 (D. Mass. 1930).

Corporate Social Responsibili~v

FOR WHOM ARE CORPORATE MANAGERS TRUSTEES?

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tion. As recent efforts to relieve unemployment indicate, one community may rely wholly on charitable contributions for what another community may undertake with public funds. Where taxation is the method used, corporate, like individual wealth, contributes. There is a widespread feeling that it should also contribute where the voluntary method is employed. Lists of contributors to such charitable enterprises as community chests and unemployment relief funds indicate that donations by corporations, even by those whose employees are unlikely to share in any great part in the funds, are becoming frequent. 34 Conceivably, a stockholder advantage may result thereby through the creation of good will, but the suggestion that charitable gifts increase the good will of a corporation as a business enterprise assumes that the public no longer whole-heartedly believes in the principle that corporations have no right to be charitable. The view that directors may within limits properly use corporate funds to support charities which are important to the welfare of the community in which the corporation does business probably comes much nearer representing the attitude of public opinion and the present corporate practice than does the traditional language of courts and lawyers. Nor are there wanting signs of the adoption of a more liberal attitude by legislatures 35 and judges. 36 Such a view is difficult to justify if we insist on thinking of the business corporation as merely an aggregate of stockholders with 34 For example, the New York Telephone Company is said to have spent $233,ooo for charity during the past three years, including $r3o,ooo for unemployment relief. The New York Public Service Commission has recently ruled that such contributions must be charged against surplus and not to operating expenses. See (1932) 70 NEW REPUBLIC 219. 35 Cf. Tex. Acts I917, c. 15, §§ I, 3; construed in James McCord Co. v. Citizens' Hotel Co., 287 S. W. 906 (Tex. Civ. App. 1926); N. Y. Laws 1931, Supp. c. 24, § 33· 36 "Again, we see no reason why if a railroad company desires to foster, encourage and contribute to a charitable enterprise, or to one designed for the public weal and welfare, it may not do so. Maitland, in ' Collected Essays,' says: 'If the law allows men to form permanently organized groups,. those groups will be, for common opinion, right-and-duty bearing units; and if the lawgiver will not openly treat them as such he will misrepresent, or, as the French say, he will "denature" the facts: in other words, he will make a, mess and call it law.' We see no reason why a railroad corporation may not, to a reasonable extent, donate funds or services to aid in good works.'' Per Letton, J., in State ex rel. Sorensen v. Chicago, B. & Q. R. R., II2 Neb. 248, 255-56, I99 N. w. 534, 537 (1924).

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directors and officers chosen by them as their trustees or agents.

It is not for a trustee to be public-spirited with his beneficiary's

property. But we are not bound to treat the corporation as a mere aggregate of stockholders. The traditional view of our law is that a corporation is a distinct legal entity. Unfortunately, its entity character has been thought of as something conferred upon it by the state which, by a mysterious rite called incorporation, magically produces " e. pluribus unum." The present vogue of legal realism breeds dissatisfaction with such legal mysteries and leads to insistence on viewing the corporation as it really is.. So viewing it we may, as many do, insist that it is a mere aggregate of stockholders; but there is another way of regarding it which has distinguished adherents. According to this concept any organized group, particularly if its organization is of a permanent character, is a factual unit," a body which from no fiction of law but from the very nature of things differs from the individuals of whom it is constituted." 37 If the unity of the corporate body is real, then there is reality and not simply legal fiction in the proposition that the managers of the unit are fiduciaries for it and not merely for its individual members, that they are, in Mr. Young's phrase, trustees for an institution rather than attorneys for the stockholders. As previously stated, this entity approach will hot substantially affect our results if we insist that the sole function for the entity is to seek maximum stockholder profit. But need we so assume? We have seen that the law has already reached the point, particularly in the public utility field, where it compels business enterprises to recognize to some extent the interests of other persons besides their owners. We have seen further that the same trend of public opinion which may in some.cases compel such recognition may in other cases encourage and approve it without compelling it. A sense of social responsibility toward employees, consumers, and the general public may thus come to be regarded as the appropriate attitude to be adopted by those who are engaged in business, with the result that those who own their own busi87 DICEY, LAW AND PUBLIC OPINION IN ENGLAND (3d ed. 1920) 165. Cf. Laski, Tlze Personality of Associations (1916) 29 HARV. L. REV. 404. See also United Mine Workers v. " 8 ~" t: " g ::1 ~ " ~ "" "'"" ~ .s EL ;:;:-" "~ 03" ;=1"" c..;a " av """ " ~r " .8" ~ ~ ~ " " ·~ -;:: 0 c;1'

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"" co '"' ... N'; tOr the maintenance of a soci,1l system: adaptation (A), goal attainment (G), integration (I) and pattern maintenance or latency (L). 2 Son1e years bd()re, T. Leavitt, a Harvard Business School professor, expressed this approach in an even n1ore radical \vay: "Corporate \velflre tnakes good sense if it nukes good economic sense - and not infrequently it does. But if smnething does not n1ake economic sense, sentiment or idealism ought not to let it in the door" (Leavitt, 1958, p. 42). 3 According to Porter and Kramer (2002), a competitive context consists of tOur interrelated eletnents of the local business environtnent that shape potential productivity. The flrst elernent is the factor condition, \vhich involves etnployee education, natural resources, high quality technological institutions and physical infrastructure. The second clement is related to demand

conditions; that is to say, hovv the firm_ can influence the quality and the size of local market by, for example, developing educated and detnanding custmners. The third, the context for strategy and rivalry involves ho\Y the flnn can invest in incentive" ctnd norms that rule competition as t(1r example all the efforts f(u reducing corruption, preventing the ±Onnation of cartels and opening nurkets. The last is the firn1's investlnent in related and supporting industries, for exatnple, strengthening the relationship with suppliers of services, cmnponents and n1achinery. + According to D,tvis, "markets leave business theoretically \Vithout any social po\ver and hence, no social responsibility (balanced zero equation). This zero equation of no power and no responsibility is a proper theoretical n1odel f()r pure cmnpetition, but it is theory only and it's inconsistent with the po\\.:er realities of tnodern organizations. They posses such a great initiative, econmnic assets, and power in their actions do have social ctlccts" (Davis, 1967, p. 49). 5 In fact, different models have been constructed in order to explain ho\v and \vhy partnerships arc built and hc_nv to detennine, n1easure, evaluate partnerships (Andrioti, 2001; Zadek, 2001). 6 That is not the only probletn. According to Gladwin and Kennelly (1995, p. 876), the concept of sustainable developtnent is ''fUzzy, elusive, contestable and/or ideologically controversial" and with multiple objectives and ingredient'>, complex interdependencies and considerable moral thickness. Hut, in spite of e\-'etything, the concept is becmning tnore and tnore popular and has introduced an itnportant eletnent to the C:SR debate.

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Altman, B. W.: 1998, 'Corporate Community Relations in the 1990s: A Study in Transfonnation', Business and Society 37(2), 221-228. Altman, H. W. and D. Vidaver-Cohen: 2000, 'Corporate Citizenship in the Ne\v Millenniutn: Foundation for an Architecture of Excellence' Busi11ess and Society Review 105(1), 145-169. Andriof, J. and M. Mcintosh (eds.): 20(Jl, PerspectiiJes on Corporate Citi:cenship (Greenleaf, ShefEeld, UK). Andrioff, J.: 2001, 'Patterns of Stakeholder Partnerhsip Huilding', in J. Andriof and M. Mcintosh, (eds.) Per·'J!ecfives 011 Corporate Citi.ze11ship (Greenleaf~ Sheffield, UK), pp. 200-213. Argandm1a, A.: 1998, 'The Stakeholder Theory and the Common Good', Journal of' Business Ethics 17, 10931102. Barney, J.: 1991, 'Finn Resource and Sustained Competitive Advantage·, Journal (!_{2\fana/tCirtent 17, 99120. Hendheim, C. L., S. A. Waddock and S. H. Graves: 1998, 'Detennining Best Practice in Corporate-Stakeholder Relations Using Data En\-'eloptnent Analysis', Business and Society 37(3), 306-339. Bem1an, S. L., A. C. Wicks, S. Kotha and T. M. Jones: 1999, 'Does Stakeholder Orientation Matter' The Relationship between Stakeholder Management Models ,1nd the Finn Financial Performance', Aradrrny of 1\;/anagelllellt Journal 42(5), 488-509. Dowen, H. R.: 1953, Social Responsibilities of the Businessf/um (Harper & Ro\v, Ne\v York). Dov,.rie, N.: 1991, 'Ne\v Directions in Corporate Social Responsibility', Business Hon';:;orlS 34(4), 56-66. Bowie, N.: 1998, 'A Kantian Theory of Capitalism', Business Ethics Quarterly, Ruffin Series, Special Issue, No. 1, 37-60. Hrandy. F. N.: 1990, Ethical Ma~tagiflg: Rules aud Results (Macmillan, London). Brewer, T. L.: 1992, 'An Issue Area Approach to the Analysis of MNE-Government Relations', Journal of International Business Studies 23, 295-309. Brummer, J.: 1991, Corporate Responsibility and Legitimacy (Greenwood Press, New York). Hurke, L. and J. M. Logsdon: 1996, 'How Corporate Social I-