See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/277929679

Guest Editors’ Introduction: Human Rights and Business

Article  in  Business Ethics Quarterly · January 2012

DOI: 10.5840/beq20122212

CITATIONS READS

17 683

3 authors:

Wesley Cragg Denis Arnold

York University University of North Carolina at Charlotte
56 PUBLICATIONS   601 CITATIONS    46 PUBLICATIONS   831 CITATIONS   

SEE PROFILE SEE PROFILE

Peter Muchlinski
SOAS, University of London
48 PUBLICATIONS   627 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Mining, First Nations and Responsible Investment: A Case Study View project

Multinational Enterprises and the Law View project

All content following this page was uploaded by Wesley Cragg on 07 June 2016.

The user has requested enhancement of the downloaded file.

Corporate Social Responsibility

y
op
fC
oo
Pr
 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, Mark S. Schwartz and
David Weitzner

Corporate Environmental Responsibility

Neil Gunningham

y
Corporate Governance
Lawrence E. Mitchell

Corporate Business Responsibility

Justin O’Brien

op
fC
oo
Pr
Corporate Social Responsibility

y
Edited by

Wesley Cragg
op
Schulich School of Business, York University, Toronto, Canada
fC
Mark S. Schwartz
School of Administrative Studies, York University, Toronto, Canada
oo

David Weitzner
Schulich School of Business, York University, Toronto, Canada
Pr
© Wesley Cragg, Mark S. Schwartz and David Weitzner 2009. For copyright of individual articles please
refer to the Acknowledgements.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or
transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise
without the prior permission of the publisher.

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.

Published by
Ashgate Publishing Limited
Wey Court East
Union Road

y
Farnham
Surrey GU9 7PT
England

Ashgate Publishing Company

Suite 420
101 Cherry Street
Burlington, VT 05401-4405
op
fC
USA

Ashgate website: http://www.ashgate.com

British Library Cataloguing in Publication Data

Corporate social responsibility. – (The library of
corporate responsibilities)
oo

1. Social responsibility of business.

I. Series II. Cragg, Wesley. III Schwartz, Mark S.
IV. Weitzner, David.
658.4'08-dc22
Pr

Library of Congress Control Number: 2009927293

ISBN: 978-0-7546-2830-9
Contents

Acknowledgements ix
Series Preface xiii
Introduction xv

PART I laying the foundations

1 E. Merrick Dodd (1932), ‘For Whom are Corporate Managers Trustees?’,

Harvard Law Review, 45, pp. 1145–63. 3
2 Keith Davis (1960), ‘Can Business Afford to Ignore Social Responsibilities?’,
California Management Review, 2, pp. 70–76. 23
3 Milton Friedman (1970), ‘The Social Responsibility of Business is to Increase
its Profits’, New York Times Magazine, 33, pp. 122–26. 31
4 Archie B. Carroll (1979), ‘A Three-Dimensional Conceptual Model of Corporate

y
Performance’, Academy of Management Review, 4, pp. 497–505.
5 Peter F. Drucker (1984), ‘The New Meaning of Corporate Social Responsibility’,
37
op
California Management Review, 26, pp. 53–63. 47
6 Donna J. Wood (1991), ‘Corporate Social Performance Revisited’, Academy of
Management Review, 16, pp. 691–718. 59
7 Peter A. French (1979), ‘The Corporation as a Moral Person’, American
Philosophical Quarterly, 16, pp. 207–15. 87
C

PART Ii DEFINITIONS AND ETHICAL JUSTIFICATIONS

8 Lance Moir (2001), ‘What do We Mean by Corporate Social Responsibility’,

f

Corporate Governance, 2, pp. 16–22. 99

9 Elisabet Garriga and Domènec Melé (2004), ‘Corporate Social Responsibility
oo

Theories: Mapping the Territory’, Journal of Business Ethics, 53, pp. 51–71. 107
10 Geoff Moore (1999), ‘Corporate Moral Agency: Review and Implications’,
Journal of Business Ethics, 21, pp. 329–43. 129
11 Wesley Cragg (2002), ‘Business Ethics and Stakeholder Theory’, Business Ethics
Quarterly, 12, pp. 113–42. 145
Pr

12 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. 175
13 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. 209
vi Corporate Social Responsibility

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 Mark S. 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 CSR AND MANAGEMENT: CRITICAL REFLECTIONS

17 Larue Tone Hosmer (1994) ‘Strategic Planning as if Ethics Mattered’, Strategic

Management Journal, 15, pp. 17–34. 321

y
18 Bert van de Ven and Ronald Jeurissen (2005), ‘Competing Responsibly’,
Business Ethics Quarterly, pp. 299–317. 339

op
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.
359

371
21 Sumantra Ghoshal (2005), ‘Bad Management Theories are Destroying Good
C
Management Practices’, Academy of Management Learning & Education, 4,
pp. 75–91. 383
22 Robert Phillips, R. Edward Freeman and Andrew C. Wicks (2003), ‘What
Stakeholder Theory is Not’, Business Ethics Quarterly, 13, pp. 479–502. 401
f
oo

PART IV ISSUES AND APPLICATIONS

23 Morton Winston (2002), ‘NGO Strategies for Promoting Corporate Social

Responsibility’, Ethics & International Affairs, 16, pp. 71–87. 427
24 Ian Holliday (2005), ‘Doing Business with Rights Violating Regimes: Corporate
Pr

Social Responsibility and Myanmar’s Military Junta’, Journal of Business Ethics,

61, pp. 329–42. 445
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, 4, pp. 194–206. 459
26 Graham Knight (2007), ‘Activism, Risk, and Communication 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. 473
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. 487
 Corporate Social Responsibility vii

28 R. Edward Freeman (2006), ‘The Wal-Mart Effect and Business, Ethics, and
Society’, Academy of Management Perspectives, 20, pp. 38–40. 507
29 Pankaj Ghemawat (2006), ‘Business, Society, and the “Wal-Mart Effect”’,
Academy of Management Perspectives, 20, pp. 41–3. 511

Name Index 515

y
op
fC
oo
Pr
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 Three-
Dimensional 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

y
Academy of Management Review.

Academy of Management Learning and Education for the essay: Sumantra Ghoshal (2005),
op
‘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 Wal-
fC

Mart 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 of Management Perspectives, 20, pp. 41–43.
oo

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.
Pr

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.
 Corporate Social Responsibility

Oxford University Press for the essay: Graham Knight (2007), ‘Activism, Risk, and
Communication 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 ©

y
2003 Business Ethics Quarterly.

Sage Publications for the essay: Mark S. Schwartz and Archie B. Carroll (2008), ‘Integrating

op
and Unifying Competing and Complementary Frameworks: The Search for a Common Core
in the Business and Society Field’, Business & Society, 47, pp. 148–86. Copyright © 2008
Sage Publications.

Springer Science and Business Media for the essays: Elisabet Garriga and Domènec Melé
(2004), ‘Corporate Social Responsibility Theories: Mapping the Territory’, Journal of
C
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
f

and Communion’, Journal of Business Ethics, 44, pp. 95–105. Copyright © 2003 Kluwer
oo

Academic Publishers; Bryan W. Husted and David B. Allen (2000), ‘Is it Ethical to Use Ethics
as Strategy?’, Journal of Business 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.
Pr

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 (1994) ‘Strategic Planning as if Ethics Mattered’, Strategic Management Journal, 15,
pp. 17–34. Copyright © 1994 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. Ite (2006), ‘Corporate–Community Relations in
Nigeria’s Oil Industry: Challenges and Imperatives’, Corporate Social Responsibility and
Environmental Management, 13, 4, pp. 194–206. Copyright © 2006 John Wiley and Sons Ltd.
Reproduced with permission.
 Corporate Social Responsibility xi

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.

y
op
fC
oo
Pr
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.
xiv Corporate Social Responsibility

Corporate Social Responsibility (Vol. III), 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 of the 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 of the 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

y
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
op
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 III, ‘CSR and Management: Critical Reflections’,
fC

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.
oo

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
Pr

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.
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. 28ff).
xvi Corporate Social Responsibility

modern period of European history with the actual incorporation of business enterprises.
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).

y
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

op
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
fC
general terms, the social responsibilities of corporations.
However, it is not the end but only the beginning of the story of the modern 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
oo

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.
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 modern shareholder-owned corporation (see McLean, 1999, p. 130, who attributes this
Pr

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 of the history and evolution of the 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.
 Corporate Social Responsibility xvii

What emerged in law to take its place was the view that the 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
modern understandings of the obligations of the modern 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

y
of the state’ (Horwitz, 1992, p.106). Emerging with it was the view that corporations were
an expression of the right of freedom of association. Both views gave implicit backing to

op
the thesis that the primary obligation of corporations was to those who created them. Both
views had the effect of encouraging sceptical treatment of the thesis that corporations had an
obligation to advance public interests broadly defined. 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.
fC
Development in United States corporate law at the turn 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.
oo

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
Pr

language of corporate social responsibility. A good example is a 1916 essay by John Clark, a
University of Chicago 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-first-
century 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).
xviii Corporate Social Responsibility

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 view that neither the state nor the market can 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

y
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

op
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)
fC
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 modern 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
oo

owners have little to say about the day-to-day operations of the corporations in which they
hold shares, they observe. The modern 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
Pr

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)
 Corporate Social Responsibility xix

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

y
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

op
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
C
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
f
responsibilities of the modern corporation in today’s world. A second empirical marker of the
emerging importance of the concept is the fact that the immediate post-war period signalled the
oo

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 of the businessmen responding
to a Fortune magazine survey in 1946 agreed that the responsibilities of business went beyond
financial bottom line considerations.
Pr

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.
xx Corporate Social Responsibility

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 of CSR 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, 1916). 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

y
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

op
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 of social responsibility leads
fC
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
oo

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
Pr

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 (Caroll,
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 (CED) 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
 Corporate Social Responsibility xxi

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

y
A response to this expanded and expanding view of the social responsibilities of business

op
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
C
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.
f

It provided a clear picture of the nature of the social responsibilities of business by tying
oo

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
Pr

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 of CSR 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.
xxii Corporate Social Responsibility

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

y
advocating a broad definition of CSR 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

op
its focus on profit maximization.

Phase Three

The third phase in the evolution of the concept of corporate social responsibility takes up the
fC
challenge posed by the re-emergence of the profit maximization thesis in phase two. Key to
this effort is a re-evaluation of the 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
oo

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)
Pr

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 of the fundamental contributions
of commentators in this phase of the evolution of the concept to contemporary discussion of
corporate social responsibility. 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.
 Corporate Social Responsibility xxiii

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

y
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

op
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
C
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
f

elements of good management in all its various dimensions. Nor, on Drucker’s view, is there a
oo

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
Pr

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

Exploring this particular theme is the task of another of the volumes in this series and is not taken
10

up or critically examined in this volume.

xxiv Corporate Social Responsibility

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

y
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

op
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).
fC
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
oo

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’
Pr

(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.
 Corporate Social Responsibility xxv

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.

y
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

op
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
fC
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
oo

whom something of value is put at risk voluntarily or involuntarily (Clarkson, 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
Pr

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 (1985), 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
xxvi Corporate Social Responsibility

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 decision-
making 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

y
the discussion around CSR builds on the assumption that corporations are moral agents.
It is on these foundations, then, that contemporary discussion of CSR builds. We track those
discussions in three subsequent parts. Part II looks at the ongoing debate over definitions of CSR

op
as well as justifications and defences of the idea that corporations have social responsibilities.
Part III looks more specifically at the implications of CSR for the management of modern
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.
fC
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
oo

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 of that discussion.
Pr

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 Domènec Melé 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.
 Corporate Social Responsibility xxvii

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
10), 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

y
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,

op
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.
C
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:
f

Integrative Social Contract Theory’ (Chapter 12). Building on philosophical theories of social
oo

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
Pr

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
xxviii Corporate Social Responsibility

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. 100) 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.

y
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

op
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.
fC
CSR and Management: Critical Reflections

This part takes a closer look at the strained relationship between the field of strategic
management and the discourse of CSR and ethics. The first three essays come from strategists
oo

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
Pr

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 of the firm.
In Chapter 18 ‘Competing Responsibly’, Bert van de Ven 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 of moral legitimacy of firm 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.
 Corporate Social Responsibility xxix

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 Kramer argue that the prevailing 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
of the 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

y
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

op
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.
C
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
f

Practices’ (Chapter 21). Ghoshal argues that business schools do not need to do more in
oo

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
Pr

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.
xxx Corporate Social Responsibility

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 of the largest multinational in the world, Wal-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 non-
governmental 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.

y
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

op
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
fC
approach and can actually extend the frontiers of global corporate social responsibility.
Chapter 25, Uwafiokun Idemudia and Uwem Ite’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
oo

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
Pr

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 life-
world. 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
 Corporate Social Responsibility xxxi

this has contributed to a shift in corporate communication practices with the development of
CSR.
Finally, in ‘The Wal-Mart Effect and a Decent Society: Who Knew Shopping was So
Important?’ (Chapter 27), Charles Fishman starts off with a critical dialogue on Wal-Mart’s
impact, both good and bad, on our society. He coins the term ‘the Wal-Mart effect’ to
describe the range of impacts resulting from Wal-Mart’s way of doing business. Wal-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 Wal-Mart has no rivals and appears impervious to challenge and accountability. Fishman
notes the problems created by Wal-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 Wal-Mart Effect and Business, Ethics, and Society’ (Chapter 28), Edward
Freeman suggests that ‘the Wal-Mart effect’ can be better described as ‘the stakeholder effect’.

y
Viewed through the lens of stakeholder theory, what is wrong and what is right about Wal-
Mart quickly becomes apparent. Pankaj Ghemawat (2006) suggests in Chapter 29 ‘Business,

op
Society, and the “Wal-Mart Effect”’ that while Fishman presents a relatively balanced picture,
there is more to the story that critics often forget.

References
fC
Alexander, G.S. (1992), Commodity and Propriety, Chicago: University of Chicago Press.
Berle, A., Jr. and Means, G. (1932), The Modern Corporation and Private Property, New York:
Macmillan.
Blair, M.(1995), 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
oo

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
Pr

& 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 of Self Regulation, London and Cheltenham: Edward Elgar.
Davis, J.P. (1905), Corporations: A Study of the Origin and Development of Great 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 CSR1 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.
 xxxii Corporate Social Responsibility

Horwitz, M.J. (1992), ‘Santa Clara Revisited: The Development of Corporate Theory’, in The
Transformation of American Law 1870–1960: The Crisis of Legal Orthodoxy, New York, NY: Oxford
University Press, pp. 65–108.
McLean, J. (1999), ‘Personality and Public Law Doctrine’, University of Toronto 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.

y
op
fC
oo
Pr

View publication stats