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The International Journal of Organizational Analysis
THE FUTURE OF CORPORATE SOCIAL RESPONSIBILITY

Duane Windsor
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Duane Windsor, (2001),"THE FUTURE OF CORPORATE SOCIAL RESPONSIBILITY", The
International Journal of Organizational Analysis, Vol. 9 Iss 3 pp. 225 - 256
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The International Journal of Organizational Analysis
2001, Vol. 9, No. 3, pp. 225-256
THE FUTURE OF CORPORATE

SOCIAL RESPONSIBILITY
Duane Windsor
Rice University
Corporate social responsibility is one of the earliest and key concep-

tions in the academic study of business and society relations. This arti-
cle examines the future of corporate social responsibility. Bowen's
(1953) key question concerned whether the interests of business and
society merge in the long ran. That question is assessed in the present
and future contexts. There seem to be distinctly anti-responsibility
trends in recent academic literature and managerial views concerning
best practices. These trends raise significant doubts about the future
status of corporate social responsibility theory and practice. The vital
change is that a leitmotif of wealth creation progressively dominates the
managerial conception of responsibility. The article provides a devel-
opmental history of the corporate social responsibility notion from the
Progressive Era forward to the corporate social performance frame-
work and Carroll's pyramid of corporate social responsibilities. There
are three emerging alternatives or competitors to responsibility: (1) an
economic conception of responsibility; (2) global corporate citizenship;
and (3) stakeholder management practices. The article examines and
assesses each alternative. The article then assesses the prospects for
business responsibility in a global context. Two fundamentals of social
responsibility remain: (1) the prevailing psychology of the manager;
and (2) the normative framework for addressing how that psychology
should be shaped. Implications for practice and scholarship are consid-
ered.
Bowen (1953), in the seminal work establishing academic study of corporate
social responsibility, posed the following vital question: "To what extent do the
interests of business in the long run merge with the interests of society?" (p. 5).
(For a businessperson's view, see Wright, 1967). The form of Bowen's question
admits the likelihood of short run deviations between business and social interests.
This paper addresses Bowen's question in today's context. The paper assesses
future directions and prospects for corporate social responsibility in both scholar
ship (i.e., academic theory and evidence) and management (i.e., business practice
226 FUTURE OF CORPORATE SOCIAL RESPONSIBILITY-DRAFT
and application). The paper is a reflection and prediction piece rather than a formal
literature review. (Carroll, 1999, provides an excellent developmental history and
bibliography of the core academic literature; see also Preston, 1975.)
The author detects distinctly anti-responsibility trends in recent academic lit
erature and managerial views concerning best practices. These trends raise signifi
cant doubts about the future status of corporate social responsibility theory and
practice. A leitmotif of wealth creation progressively dominates the managerial
conception of responsibility. This leitmotif is entering into academic scholarship.
The leitmotif of wealth creation has a veneer of respectability, in that it is not sim
ply a resurgence of the philosophy of unrestrained greed that preceded the Progres
sive Era. Rather, the modern approach treats wealth creation as the best path to
social welfare improvement. Such a case is not unreasonable. But this leitmotif is
highly congenial to management practices, since it eliminates Bowen's long-
accepted conceptual duality separating wealth and responsibility. And the leitmotif
fails to examine whether there may be unavoidable managerial choices between
wealth seeking wrapped within a responsibility rhetoric and moral conduct at the
expense of wealth creation.
The author thus emphasizes two points—one conceptual, the other empirical.
Conceptually, there are significant difficulties in distinguishing whether business
behavior is truly moral conduct or instrumental adoption of an appearance of moral
conduct as useful reputational strategy. Voluntary acceptance of material loss may
serve to identify moral conduct, but material gain cannot serve to isolate reputa
tional strategy. Empirically, despite considerable effort in the academic literature to
discover a reliable relationship between responsible conduct and financial perform
ance, the evidence remains mixed at best. Where responsibility and wealth readily
associate, responsibility is simply a calculation. Where responsibility and wealth
conflict, theory and practice may prove difficult to reconcile unless one dominates
the other. The concern here is that wealth-oriented practice is dominating theory
development.
The author's concern is admittedly at variance with the mainstream view. Car
roll (1999) sees a "bright future" for corporate social responsibility in both scholar
ship and management. Carroll views the developmental history examined in the
next section as the steady embedding of the responsibility concept in both broader
theory and more enlightened practice. As one of the key leaders in the development
of the modern corporate social responsibility and performance literatures, Carroll's
views properly command considerable deference.
And viewed superficially, widespread academic and managerial use (see
Walker, 1994; World Business Council, 1999, 2000) of the language of corporate
social responsibility continues. It remains a "core construct" (Carroll, 1999). But
this use is partly a matter of academic belief and tradition, and partly an unavoid
able managerial rhetoric. No manager today can openly advocate greed or non-
responsibility. Rather, the terms of socially admissible debate concern various
opinions for defining corporate social responsibilities and the best path to social
welfare improvement. Embedded within these opinions is thus an important defini-
The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

D. WINDSOR 227
tional controversy concerning the proper meaning of corporate social responsibil

ity. The absence of specific definition leaves responsibility open to conflicting
interpretations.
Bowen (1953) intentionally avoided making a specific definition, preferring to
leave the matter to managers in light of concrete conditions. He approached respon
sibility as follows: "It refers to the obligations of businessmen to pursue those poli
cies, to make those decisions, or to follow those lines of action which are desirable
in terms of the objectives and values of our society" (p. 6). (Technically inter
preted, this definition leaves open the possibility that society cares only about
short-run profit maximization or suffers totalitarian absorption of business.) The
working assumption is one of a broad and morally acceptable set of social objec
tives and values in a democratic context. Bowen viewed a (voluntary) sense of
responsibility as operating in addition to controls on business due to competition,
custom, and law. Bowen perhaps conflated responsibility and responsiveness: "My
reluctance to attempt definitive formulations of the social responsibilities of busi
nessmen has been based on a belief that the way to greater responsiveness of busi
nessmen toward their social obligations lies in the processes of broadly based dis
cussion and individual soul-searching on the part of actual participants—not in the
spelling out of 'answers' by outside observers" (p. xi).
In evidence of his concern, the author points to several specific developments
in literature and practice.
Conceptually, the responsibility construct is now part of and subordinate to a
broader framework of corporate social performance. (This performance framework
traces at least to Kreps, 1940; see U.S. Department of Commerce, 1980). In signifi
cant measure, the growth of alternative, or arguably parallel, academic disciplines
of business ethics and environmentalist» supplants (other scholars may prefer "rein
forces") the responsibility construct. The high water mark of corporate social
responsibility may be today's socially responsible investment funds and screens.
These funds and screens reveal the key issue. They must show equal or greater
financial returns, or show the true opportunity cost of responsibility in lower finan
cial returns. While the corporate social performance framework conceptually aligns
corporate social responsibility with corporate social responsiveness, some literature
argues that the latter ought more simply to supersede the former in management
theory and practice (see Frederick, 1994). The difficulty of differentiating moral
responsibility from calculated responsiveness (i.e., reputational strategy) lies buried
deeply in the literature.
Managerially, the responsibility notion has tended to yield to newer rhetorics
of global corporate citizenship and management stewardship directed in significant
measure at stakeholder management practices. (Other scholars may prefer to view
these newer rhetorics as supplementing responsibility.) Globalization is a key
recent theme or mantra of justification. Stakeholder literature is beginning to
explore responsibilities of stakeholders to each other and to the firm (see Andriof,
Waddock, Rahman, & Husted, in press). This interest suggests a broadening of
what was traditionally corporate social responsibility to stakeholders' responsibili
ties. Corporate responsibility is but one dimension within the latter notion, which

includes stakeholders' responsibilities to the firm. The author argues that these
newer rhetorics reflect an increasing domination of academic conceptualization by
wealth-oriented practitioner views. The term rhetoric conveys that detailed con
structs are not available in the literature.
What amounts to a counter-reformation in academic theories of responsibility
and performance adopts a narrowly economic conception of responsibility readily
aligned with the marked success recently of shareholder value or economic value
creation strategies (see Jensen, 2000; McWilliams & Siegel, 2001a; cf. Husted &
Salazar, 2001, for a broader conception). The economists' long-standing criticism
of corporate social responsibility (Friedman, 1962, 1970) has returned with a
vengeance in the form of new models explicating a purely economic or private
cost-benefit conception of responsibility. This approach argues that firms are in
business for private wealth creation; and that every component of business
(including philanthropy and stakeholder management) should be directed to that
goal. Responsibility, like responsiveness, is in this view purely penultimate or
instrumental to wealth creation. If so, responsibility becomes indistinguishable from

responsiveness. The latter may be purely instrumental. But responsibility must have
a normative basis. The modern economic conception recognizes public policy (i.e.,
business-government relations) as a constraint. But thereby in this author's view the
conception discards business ethics as a decision consideration (whether serving as
goal or constraint). Part of the justification for an economic responsibility is prop
erty rights doctrine; part of the justification is the expected social welfare benefits
of wealth creation. The revived economic conception aligns to the dramatic success
stories associated with shareholder value and economic value creation strategies.
These stories date from Jack Welch's appointment as head of General Electric in
April 1981 (see "The revolutionary spirit," 1999; McTaggart, Kontes, & Mankins,
1994; Tully, 1993).
The remainder of this paper undertakes an assessment and prediction in the
following manner. The second section explains the origins, developmental history,
and key criticisms of the corporate social responsibility construct. The third section
examines three principal alternatives that have emerged: economic responsibility
theory, global corporate citizenship philosophy, and stakeholder management prac
tices. The concluding section makes some observations on the likely future of cor
porate social responsibility and the implications for scholarship and practice.
Corporate Social Responsibility: Developmental History

This section examines the developmental history of the corporate social
responsibility construct and its managerial application. The proposed developmen
tal history comprises three phases: (1) rise and extension; (2) decline and absorp
tion; (3) and as proposed here a revival of the concept. Although responsibility
rhetoric remains, the responsibility construct has tended to evaporate under criti
cism of its alleged vagueness and internal inconsistency (Levitt, 1958; Friedman,
1962, 1970). What Carroll (1999, p. 268) calls "alternative themes" have suc
ceeded that construct: in academic circles, corporate social performance, stake-

D. WINDSOR 229
holder theory, and business ethics approaches; in managerial circles, global corpo
rate citizenship and stakeholder stewardship rhetorics focused in practice on an
emerging economic theory of profitable "responsibility."
The academic context of this developmental history is conceptually and
empirically disparate. Business and society studies comprise a very loose affiliation
of several research and teaching streams. While partly overlapping, these streams
do not organize around any widely accepted core paradigm (cf. Preston, 1975).
These streams include (at a minimum): business ethics, corporate social perform
ance, environmental protection, global corporate citizenship, international policy
regimes, public policy (i.e., business-government relations), and stakeholder man
agement theory. Loose alignment reflects the wide variety of scholarly associations
and journals. Chief candidate for a core paradigm would be an overarching integra
tion of corporate social performance (embedding responsibility and responsiveness
constructs) and stakeholder theory—extended by full incorporation of business

ethics and environmentalism (cf. Swanson, 1995). But even this assertion competes
with a more nature-oriented approach (Frederick, 1998).
The Progressive Era

Adam Smith (1776, Book 4, Ch. 2) pronounced explicitly that economic self-
interest is typically a more reliable path to social welfare improvement than affect
ing to act for the public interest. Laissez-faire market philosophy in the 19th cen
tury (enshrined in Spencer, 1851) was triumphant at law in private contract doc
trine. Reinforced by Social Darwinism (see Tindall, 1988, pp. 836-837), the phi
losophy emphasized unfettered pursuit of personal opportunity.
Responsibility and responsiveness emerged out of Progressivism. The Pro
gressive reform movement emerged in the U.S. at the turn of the century. The
movement was a broadly diffused and diversified set of reactions to the post-1865
Gilded Age. Progressivism was more "the common spirit of an age rather than . . .
an organized group or party" (Tindall, 1988, p. 941).
While the modern terminology did not develop until after World War II, busi
ness leaders have since the 1920s widely adhered to some conception of responsi
bility and responsiveness practices. But they did so as both business apologetics
and business methods for defusing conflict with potentially influential interest
groups. The Michigan Supreme Court in Dodge v. Ford Motor Co. (204 Mich. 459,
170 N.W. 668, 1919) supported the primary importance of profit maximization on
behalf of owners. It also supported the business judgment rule granting reasonable
discretion to managers (American Law Institute, 1994, pp. 70-71, summarizes the
legal history). Yet Drucker (1999, p. 59) states that managerial balancing of stake
holder interests dates to the 1920s. Freeman (1984), in his seminal book founding
stakeholder theorizing, conceded that, despite strictly product-market theories of
efficiency and effectiveness (p. 4), "Business has always dealt with non-market
place stakeholders" (p. 28). Mitchell (1989) "traced the emergence of corporate
social responsibility in the 1920s as an ideological movement intended to legitimize
the power of large corporations" (Oberman, 2000, p. 239).

Viewed in retrospect, the Progressive Era revealed three postures concerning

business responsibilities: (1) post-game philanthropy; (2) pre-game legal constraint;
and (3) in-game moral conduct. Carnegie (1900) preached essentially "richesse
oblige" (labeled here in imitation of "noblesse oblige"). But this philanthropy
occurred after retirement from the competitive race for personal opportunities
played without legal or moral restraints (see Chernow, 1999). Regulation sets pre-
game constraints on conduct (see Jenks, 1917). The modern "mixed economy" is a
blend of more and less regulated industries, leaving a large role for government
(Bowen, 1953, pp. 21, 25). Clark (1916) argued the in-game merits of broader
responsibilities of business relative to profit seeking. Bowen's notion of responsi
bility reflects this in-game approach.
Formalization of the Responsibility Construct

Bowen (1953, 1948) is the modern "Father of Corporate Social Responsibil

ity." He took a broad-gauged approach to business responsibilities. His construct
was a general rubric embracing responsiveness (1953, p. xi), stewardship (pp. 36,
39-40, 44, 243 ff.), social audit (pp. 155-156, 255), corporate citizenship (p. 5),
and a rudimentary version of stakeholder theory (pp. 41-42). There was, as Carroll
(1999) notes, a subsequent shift in terminology from social responsibilities (SR) of
business to corporate social responsibilities (CSR).
Levitt (1958), a distinguished Harvard Business School marketing professor,
early criticized the responsibility theme. He emphasized the dangers of social
responsibility. He subsequently advocated a "third sector" (i.e., voluntary philan
thropy) for creating "a responsive society" (Levitt, 1973). Preston (1975) viewed
that proposal as "simply a highly generalized version of the 'social responsibility'
thesis" (p. 445). The present author inclines to stronger distinctions between
responsibility and responsiveness and between business responsibilities and the
development of a "third sector" more independent of business.
Friedman (1962, 1970), a Nobel laureate in Economics and member of the so-
called Chicago School of economics, argued against discretionary social responsi
bilities by managers. They are fiduciary agents in public companies. Hence, discre
tionary action on their part is little more than "theft" from consumers, employees,
and owners. (Friedman, 1970, p. 124, exempted privately owned businesses. Their
owners could exercise moral sentiment directly; cf. Bowen, 1953, pp. 6-7.) Part of
this criticism is ideological. Friedman (1962) argued that "few trends could so
thoroughly undermine the very foundations of our free society as the acceptance by
corporate officials of a social responsibility other than to make as much money for
their stockholders as possible" (p. 133). Friedman also criticized the ambiguity and
poor logic of social responsibility reasoning. (Davis, 1967, viewed corporate social
responsibility as a puzzle.)
Friedman admitted the desirability of both legal and moral "rules of the
game." He saw a role for both public policy and business ethics. He also admitted
the strategic acceptability of prudential altruism, as distinct from discretionary
altruism. The latter can be a form of responsibility. But prudential altruism is a type

D.WINDSOR 231
of responsiveness. Another Nobel laureate in Economics, Samuelson (1971),

argued that "a large corporation these days not only may engage in social responsi
bility, it had damn well better try to do so" (p. 24). The argument substitutes the
term responsibility for responsiveness, but the latter is the more appropriate notion.
Carroll (1999) divides what the present paper treats as the rise of responsibil
ity into phases by decade: the 1950s (origin of notion), the 1960s (expansion of
literature), and the 1970s (proliferation of responsibility definitions). The 1970s
witnessed the rise of themes of corporate social performance and public responsi
bility. Preston and Post (1975) redirected attention from corporate to public
responsibility. They argued alignment of corporate responsibility to the limited
scope of the public policy process in distinction to the unlimited scope of individual
opinion and conscience. That defining responsibility should be the province of
public policy is a key theme picked up in modern economic conceptions. Carroll
views the 1980s as a shift to more empirical research applying his proposed four-
dimensional pyramid model of responsibility (discussed later) and also "a splinter
ing of writings into alternative concepts and themes" (p. 284). He argues that
responsibility did not die out but rather was "recast." For example, one can view
responsiveness as tempered by combination with responsibility in the corporate
social performance framework. The present author argues that responsibility, as
embedded in that broader framework, has declined in favor of more wealth-friendly
rhetorics. Responsibility requires a moral philosophy or normative basis of some
kind.
Figure 1 gives a reasonable picture of the current state of corporate social
responsibility theory and its role within the corporate social performance frame
work. The key components of the modern theoretical approach to responsibility are
the corporate social performance (CSP) framework reformulated by Wood (1991)
to combine responsibility (CSR1) and responsiveness (CSR2) with outcomes, Car
roll's (1991) pyramid of corporate social responsibilities (CSR1), and the stake
holder theory of the firm stemming from Freeman (1984). Figure 1 locates the
Wood CSP framework, the Carroll (1979) CSR1 responsibility pyramid, and the
stakeholder theory of the firm in relationship to one another. (The note to Figure 1
explains the CSP, CSR1, and CSR2 acronyms now commonly used in the business
and society literature.)
The Corporate Social Performance Framework
The CSP framework emerged through a long evolutionary process summa
rized and evaluated by Wood (1991). Wood's reformulation or reconstruction of
the CSP template argued a tripartite linking of three elements (each comprised in
turn of three subelements): (1) responsibility (CSR1) principles and motivators of
action and choice; (2) intraorganizational responsiveness (CSR2) processes for
determining action and choice; and (3) resulting outcomes of action and choice.
The present author separates Wood's outcomes logically into outputs of intraor
ganizational CSR2 processes—social policies and social programs, and the result
ing social impacts. Wood states explicitly that managers should use any discretion

morally. Managerial morality reflects social expectations of firm conduct and per
formance, and hence is difficult of separation from responsiveness.
Figure 1
Relationship Among the CSP Framework, CSR1 Pyramid,
and Stakeholder Theory
Social Outcomes
CSP = CSR1 + CSR2 + CSR2 + Social

Principles Processes Outputs Impacts
Institutional Level: Environmental Social Policies

Legitimacy Assessment
+ + +
Organizational Level: Stakeholder Social Programs

Public Responsibility Management
+ +
Individual Level: Issues

Managerial Discretion Management
CSR1 = Economic + Legal + Ethical + Charitable

Source: Carroll (1991, 1995), Epstein (1987), Wood (1991). Frederick (1994) provided a
shorthand or acronym distinction between corporate social responsibility (CSR1) and
responsiveness (CSR2) that he later extended to rectitude (CSR3) (1986) and CSR4 (cos
mos-science-religion) (1998).
The CSP framework appears at the top of the figure in the format of a logical
"equation" (derived from Epstein, 1987, and Carroll, 1995). The logical expression
The InternationalJournalofOrganizational Analysis, Vol. 9, No. 3, 2001

D. WINDSOR 233
proposed here is admittedly awkward but designed to definite purpose. Two logical
"operators" for connecting elements and subelements are shown simultaneously: (1)
"+" denotes that the elements and subelements of the framework are additive; and
(2) " " denotes a temporal ordering (logically conceived). Additivity may permit
variation or tradeoff among subelements (some possibly negative) still aggregating
to positive CSP overall. (Carnegie behaved "as i f post-game charity expiated in-
game misconduct.) Missing from the CSP template is a specific set of weights for
combining the subelements; and any explicit statement of minimum standards pre
scribed for each subelement. Such weights would define responsibilities concretely.
Temporal ordering means that, for example, impacts "flow" only from (i.e., occur
after) policies and programs. Temporal ordering is a necessary condition for cau
sality.
Carroll's Pyramid of Responsibilities

Wood (1991) retained Carroll's four CSR1 categories but effectively subordi
nated them to the notion of CSR1 principles or motivators. Figure 1 positions Car
roll's four-dimensional pyramid of responsibilities beneath the CSR1 principles.
The figure also positions stakeholder relationships as a crosswalking matrix from
responsibilities to outcomes (following Carroll, 1995) beneath social outcomes
(i.e., outputs and impacts).
Carroll (1991) organized the crude notion of multiple corporate social respon
sibilities into a pyramid construct. In this pyramid, economic responsibilities are the
foundation and philanthropy is the apex. The construction is such that the other
responsibilities cannot be achieved in the absence of economic performance (i.e.,
goods and services, jobs, profitability)—a bankrupt firm will cease to operate. Eco
nomic and legal responsibilities are socially required (i.e., mandatory); ethical
responsibilities are socially expected; philanthropy is socially desired. These com
ponents may be aggregative (Carroll, 1995, p. 49), as shown in Figure 1 below the
pyramid construction in another logical equation format (connected by "+" only
and not by "=>").
Carroll (1995) was explicit that all dimensions of responsibility are "infused
or embedded with ethical issues or overtones" (p. 49). Carroll means that economic
obligations "should coexist" (Kang & Wood, 1995, p. 408) with other obligations;
and that "social responsibility can only become reality if more managers become
moral instead of amoral or immoral" (Carroll, 1991, p. 39; also cited by Kang &
Wood, 1995, p. 415). The four components are simultaneously binding and specifi
cally not sequential although additive (Carroll, 1999, p. 289).
Carroll (1995) in effect places minimum moral conditions on each dimension.
These minimum conditions lack specification, and hence operate more as a spirit of
the times. Figure 1 suggests these minimum conditions by indeterminate dashed
lines within the pyramid.
Figure 1 suggests a modification to the pyramid construct. To the left of the
pyramid, the figure sketches a vertical axis. Along this axis the four responsibilities
aggregate to maximum wealth. Each responsibility beyond profitability is then a
subtraction from maximum wealth. Managers are likely to view matters in this
The International Journal of Organizational Analysis. Vol. 9. No. 3. 2001

fashion, or alternately to view responsibility dimensions as a strategy for wealth

maximization.
Kang and Wood's Attempted Reformulation
Kang and Wood (1995) undertook to reformulate (or reconstruct) the Carroll
pyramid. Their specific solution appears unsatisfactory overall and complex in
explication. Their difficulties suggest robustness of Carroll's construct. But vitally
they distinguish between after-profit responsiveness (cf. post-game philanthropy)
and before-profit responsibility (cf. pre-game morality). They argue that the litera
ture, and hence the Carroll model, had proceeded from a flawed assumption that
social responsibility occurs after (some minimum) profit, whereas responsibility (or
some part of it) must occur before profit. In their view, businesspeople tend to
articulate a profit-plus path to responsibility and expect market value added (or at
least low-cost duty fulfillment) in socially responsible management. The authors'

expressed concern was that this profit-oriented path had created a muddle in the
CSP literature and overlapped too much with neoclassical economics asserted as a
primacy of values. This concern accords with that of the present author.
Kang and Wood (1995) introduce a moral dimension (which is, however,
certainly not missing in Carroll's 1995 treatment), and then suppress Carroll's eth
ics-law distinction into an overarching social responsibility dimension. The term
"social" removes "the artificial and simplistic distinction between legal and ethical
responsibility in older models" (p. 414). As an intermediate step, abandoned as
unsatisfactory, Kang and Wood initially simply inverted the Carroll pyramid—so
that the hierarchy of responsibilities (or values) is turned upside down. This
approach was unsatisfactory. Since a simple inversion did not suffice, they under
took to reformulate or reconstruct the pyramid's design. They retain four steps to
the pyramid. Their proposed solution is a moral base (or foundation) to the pyra
mid, succeeded in declining relative importance by social responsibility and then
economic responsibility. Kang and Wood convert benevolence into a dotted tip of
the pyramid. Their purpose is to make a distinction between involuntary philan
thropy (representing a "moral or social obligation to stakeholders) and "purely vol
untary" philanthropy or benevolence. The distinction resembles Friedman's (1970)
notions of prudential and discretionary altruism. (There is also an effort to link the
reformulated pyramid to the three levels of CSR1 principles in Wood's, 1991,
reconstruction of the CSP template. The individual level links to moral responsi
bilities; the organizational level to social responsibilities; the institutional level to
economic responsibilities.)
While the Kang and Wood (1995) modifications are complex and ultimately
unsatisfactory, the present author does not read Carroll's seminal construction as
strictly simple in comparison. Complexity arises with the infusion of all dimensions
with morality, and with the broadening of economic responsibilities beyond profit
ability. There are in effect five dimensions, one invisibly (in Carroll's depiction)
permeating all of the other four. There is in effect both a normative (ideal or pre
scriptive) and a behavioral (realistic or descriptive) version of the pyramid. Argu
ment works back and forth between how people ought to behave (i.e., morally) and

D. WINDSOR 235
how people are likely to behave (i.e., amorally). Behavior (i.e., practice) may come
to dominate theory (i.e., ethics) by appeal to the desirability of material outcomes.
Three Emerging Alternatives to Responsibility

Three competitors to responsibility have emerged: (1) a revived and extended
economic conception of responsibility; (2) a global corporate citizenship philoso
phy; and (3) stakeholder management practices. This section assesses each alterna
tive in a separate subsection below.
The Economics of Responsibility
The American Enterprise Institute organized a debate between two economists
(Manne & Wallich, 1972). Their definition of responsibility involved: (1) reduced
marginal returns; (2) purely voluntary activity; and (3) actual corporate expenditure
rather than a conduit for individual philanthropy. The implication is that responsi
bility is costly. They similarly distinguished voluntary responsibility from legal
duty, but favored stockholder instructions on the matter. Drucker (1984) attempted
reconciliation through converting social responsibilities into profitable business
opportunities. (McWilliams & Siegel, 2001a, take up the theme that responsibility
is costly and should involve profitable opportunities.)
This last theme has become pronounced in a recent literature that revives and
extends the Friedman view that the sole (or primary) responsibility of business is
profitability seeking. The framework for this revival is broader than the Friedman
criticism of discretionary responsibility. Wealth creation (the modern conception) is
a goal and a motive. Business operates within parameters established by public
policy. (The social performance approach argues that managerial motives should
reflect moral and social determinants.) As Jensen (2000) makes clear, the perform
ance measure is not immediate profit maximization but long run wealth creation.
This revival reflects: (1) the perceived logical weaknesses of social responsibility
and performance theories (Sternberg, 1996; Jensen, 2000); (2) the reassertion of
traditional property rights doctrine (Sternberg, 1996); and (3) the evident success in
recent years of shareholder value and economic value maximization practices.
Superficially, an economic conception would appear reasonable. It links
wealth and social welfare. It admits of a social control context for the pursuit of
private economic interest. And this conception comes in the context of a significant
shift away from 19th century laissez-faire and Social Darwinism views. Therefore,
a detailed examination of this apparently reasonable conception follows.
Sternberg's Property Rights Conception. Sternberg (1994, 1996, 1999)
stresses owners' property rights. This argument holds that owners organized (or
alternately purchased) the firm (a presumption posited in financial-economics the
ory) and are ("constitutionally") entitled to the (residual) fruits of their financial
investment. Otherwise the organization is definitionally not-for-profit. The argu
ment in effect portrays stakeholder theorizing as theft of extant (and morally justifi
able) property rights of owners (cf. Friedman, 1970). For Sternberg, stakeholder

rights (if any) are strictly secondary (i.e., subordinated) to the property rights of
owners.
Sternberg's argument is doctrinaire in the following sense. What property law
concerns is not who has ownership—i.e., actual possession; but rather who pos
sesses the best right—i.e., claim to such ownership. Otherwise progressive taxation
of income and wealth is not defensible.
Sternberg's corporate-governance argument conflicts with two different
views. Donaldson and Preston (1995) formulated a broader theory of property
rights, taking into account the investment "equities" of stakeholders other than
financial claimants. Blair (1995) formulated an argument for extending (on both
motivational and equity grounds) ownership shares (not necessarily with voting
rights) to knowledge workers.
Jensen's Wealth Creation Conception. Compared to 19th century laissez-
faire reasoning, today's more sophisticated argument holds that total long-run mar
ket value (i.e., financial-claim) creation by management is the best path to social
wealth creation ultimately benefiting all stakeholders. (Financial claimants include
equity, debt, preferred stock, and warrants—Jensen, 2000, p. 38.) Jensen argues
that the "value maximization proposition . . . has its roots in 200 years of research
in economics and finance" in contrast to stakeholder theory's "roots in sociology,
organizational behavior, the politics of special interests, and managerial self inter
est." Supporting the social welfare argument is the apparent success recently of
shareholder value and economic value creation strategies.
Jensen (2000) does add an intriguing wrinkle to the financial-economics
approach. He argues first that managers and employees require (logically and
behaviorally) a single-valued objective function (i.e., bottom-line value creation).
(For the competing viewpoint, see Bowden, Lane, & Martin, 2001; Elkington,
1998; Fombrun, 1997). He argues second that attention to stakeholder interests is
necessary for full motivation of managers and employees to pursue long-term value
creation. The wrinkle admits to an important psychological dimension to manage
rial and employee conduct (see Donaldson, 1999). Even so, his view basically is
that "enlightened stakeholder theory" (using his words) is a handmaiden of an
"enlightened value maximization" theory. The market game plays out from existing
conditions. Jensen holds that stakeholder practices amount to nothing more than
what managers must do in any case for long-run strategic performance of the firm.
They must deal with important stakeholders to their satisfaction (Jensen, 2000, pp.
42,44, 50), as must occur in any truly voluntary contracting.
Jensen's (2000) arguments hold within state-conditions determined by public
policy concerning externalities and monopolies. Public policy, a political game also
played from existing conditions, operates simultaneously to grapple with external
ities and monopolies. But business may instrumentally seek to influence public
policy. A growing economy (generating higher market values for firms) in associa
tion with reductions in externalities and monopolies is (more or less) moving in the
direction of greater social welfare. (Public policy is not here perfect. Rather with
respect to externalities and monopolies, market activities and change in public pol
icy are moving in parallel over time from whatever starting point historically.)

D. WINDSOR 237
The general approach in Jensen (2000) is to emphasize financial-economics

and strategic management of stakeholders, with problems of context (i.e., state-
conditions) addressed in public policy. This approach effectively sidesteps business
ethics. The general stance in economics has been to assume self-interested actors,
but that stance does not address whether such actors are moral or amoral (cf. Car
roll, 1995) in conduct. Self-interest can be duty abiding and benevolent. If all eco
nomic actors are purely self-interested, managers could not be trustworthy stew
ards.
McWilliams and Siegel's Economic Model. McWilliams and Siegel (2001a)
formalize the economic approach. They usefully outline "a supply and demand
model of corporate social responsibility (CSR)" treated as product or process
changes that "directly support social responsibility" or "signal the firm's commit
ment to CSR" (p. 117). The approach asks only whether a stakeholder claim's cost
and price effects yield a profit equal to ignoring the claim. (The reader should con
sult the exchange between McWilliams & Siegel, 2001b, and Windsor, 2001b, in
which the authors respond to this view.) The model's usefulness is that it highlights,
but does not resolve, some key issues delineated in Friedman and Carroll (2001a),
whom these authors cite. The authors model public firms' strictly wealth-maximiz
ing investment in responsibility (CSR) attributes as differentiated from legal com
pliance (not further addressed by the authors): "Here we define CSR as actions that
appear to further some social good, beyond the interests of the firm and that which
is required by law. . . . CSR means going beyond the law" (p. 117, underlining
added). The American Law Institute (1994) document explicitly criticizes legal
compliance based on a purely cost-benefit calculus (p. 60), because such compli
ance is a duty and not a calculation. Moreover, the authors' approach does not
address business ethics independently of law.
McWilliams and Siegel (2001a) differentiate CSR "demands from multiple
stakeholder groups" into "(1) [ultimate] consumer demand and (2) [penultimate]
demand from other stakeholders" (p. 119). The latter must translate into the former:
CSR-oriented supply occurs at higher cost (cf. Manne & Wallich, 1972). A purely
instrumental cost-benefit calculus invests in advertised CSR attributes-signals, sold
to consumers at higher prices, to the point at which additional revenue (reflecting
downward-sloping demand) equals additional cost (reflecting upward-sloping sup
ply). Absent barriers to resource mobility (suggestive of perfect competition), rates
of return equalize, and thus there is no prescriptive CSR investment level.
McWilliams and Siegel (2001a) conclude on variability of reported empirical
relationships between CSR and financial performance "there will generally be a
neutral relationship between CSR activity and firm financial performance" (p. 125).
While arguably balancing market-priced "demands" of multiple stakeholder groups,
the proposed model yields only a quite limited model οf profit-maximizing behavior
labeled as responsibility while explaining and reflecting the authors' empirical
findings of neutrality (see McWilliams & Siegel, 2000).
Neither Jensen (2000) nor McWilliams and Siegel (2000) address the well-
known difference beUveen corporate social responsibility (CSR1) and responsive
ness (CSR2). In fairness to these authors, Frederick (1994), not cited by them,

judges responsibility to be philosophical-ethical vagueness, and makes responsive

ness action-oriented realism. But Banfield (1985, p. 337) argued that pure respon
siveness to external conditions, undertaken on a cost-benefit calculus, is not moral
choice but simply pricing behavior. Responsibility may result in a situation that
imposes economic loss on the firm justified by some higher consideration. The
economic approach leaves moral choices and unprofitable demands to the uncertain
legal or public policy arenas.
Global Corporate Citizenship
The term "corporate citizenship" appears in Bowen (1953). Carroll (1999)
comments that, by 1991, he was suggesting that the philanthropy dimension
included corporate citizenship. But corporate citizenship has become an important
and practitioner-based movement only in recent years. Various recognition awards
are now given. Davenport (2000) states that "corporate citizenship became a com
monly used term by practitioners" in the 1990s and is a more accurate descriptor of
corporate behaviors than corporate social performance, which "is a theoretical con
struct from the academic community" (p. 211).
The key argument (Vidal, 1999) holds that citizenship activities enhance cor
porate reputation and hence long-term financial performance; or at least that a bad
reputation will damage long-term financial performance. The rhetoric is thus of
practical appeal to managers pursuing shareholder wealth or economic value crea
tion goals. Two terms are closely intertwined: citizenship conveys the sense of
responsibility for social impacts, good neighborliness the sense of local community
impacts. Carroll (1998) addressed corporate citizenship in terms of four faces (eco
nomic, legal, ethical, and philanthropic) adapted directly from the four-step pyra
mid of responsibility. The idea has global reach. A multinational enterprise operat
ing in an integrating world economy should practice global corporate citizenship: it
should be a good citizen (and good neighbor) in every host country in which it
operates.
A Criticism of Corporate Citizenship. The present author views corporate
citizenship adversely (see Windsor, 2001a). Corporate citizenship is a managerial
and philanthropic ideology; it is a strategic doctrine and movement evolved by
practitioners. The strategic doctrine amounts to investment in market development
and social stability viewed as global state-conditions for corporate wealth creation.
Corporate citizenship is consistent with voluntarism advocated by government.
Both strict compliance with law and limited if purely strategic benevolence accom
plish some social good. While corporate citizenship embeds older traditions of cor
porate social responsibility and responsiveness, fundamentally it crafts an instru
mental, self-serving view of the relationship between business and society.
Corporate citizenship is a marriage of two circumstances: (1) rising societal
expectations of corporate benefits in an age of governmental cutbacks; and (2)
strategic management aimed at value creation in all functions and activities of a
firm. It is a strategy for arguing that direct benefits (i.e., actual gains or reductions
in losses) are generated for all stakeholders of a firm through value creation orien
tation. If negative impacts of corporate activities were in fact reduced and mini-

D. WINDSOR 239
mized, and all affected parties received either such reduction or some gain, then
corporate citizenship would correspond to an increase in corporate social perform
ance. But these very circumstances would then be a standard and a test for serious
corporate citizenship.
Corporate citizenship is a two-edged sword to be handled carefully. One edge
admits both the ultimate power of society to impose corporate responsibilities and
the strategic advantages of business alignment with societal expectations. The other
edge advances a novel theory (rejected by the U.S. Supreme Court in the 19th cen
tury) that the corporation should be treated as a citizen in terms of legitimating the
political influence and activities of business executives. (The U.S. Supreme
Court—see Miller, 1968—explicitly rejected an early argument for treating corpo
rations as if citizens in 1839, and then much later accepted the corporate artificial
person fiction in 1886.) Such treatment would restrict corporate social responsibili
ties to be no more than the duties of ordinary individual citizens. This posture
refurbishes the 19th century legal doctrine of corporate personhood developed in
the U.S. Supreme Court as economic substantive due process. It serves to blunt any
possible development of progressive corporate responsibility. (It may be inaccurate
to argue that the posture was explicitly intended to do so. But the implicit opportu
nity for abuse must be evident, at least in the narrow sense of promoting tort
"reform" and retarding anti-business legal developments in criminal and civil
cases.)
The author views corporate citizenship as a managerial movement that effec
tively substitutes a different conception, as well as language, for responsibility. The
substitution is less a recognition of the vagueness of the responsibility construct
than an effort to transform obligation into rights conceptually while focusing
resource allocation on strategic reputation enhancement activities. A "citizen" has
rights as well as duties. The citizenship language places corporations on the same
constitutional plane as the individual citizen. At law, the corporation is an artificial
person and acquires certain privileges, including freedom of speech and political
activity in consequence; but a citizen has constitutional rights that only transfer to
the corporation through the circumstance that it is a collectivity of such citizens.
The Role of Corporate Philanthropy. A limited corporate philanthropy
meets the business judgment rule (American Law Institute, 1994). The American
Law Institute argues for allowing "corporate resources to be devoted to public wel
fare, humanitarian, educational, and philanthropic purposes even without a showing
of expected profits or ethical norms" (p. 65). The rationale is consideration of a
firm's social impact, its stakeholder concerns, and "the cooperation of corporations"
with public policy, including desirable diversity of philanthropic participation.
"However, corporate activity that is justified solely by social considerations should
be subject to a limit of reasonableness" (p. 65).
Orts (1992, pp. 71-72) warns against short-term concessions intended to gain
long-term benefits. His argument is that, in each succeeding round of owner-stake
holder interactions, stakeholder demands for more concessions may simply rise.
Friedman's (1970) critique of discretionary corporate social responsibility by
management explicitly conceded a plausible role for prudent altruism, as distinct

from discretionary altruism. He defined the former as strategic concessions for the
protection (or promotion) of long-term profits. A prudent appearance of altruism
does not make strategic investment a moral activity. The notion of prudent conduct
at least suggests a broader, stakeholder-responsive (if not, strictly speaking, a moral
responsibility) conception of business strategy.
The Need for Moral Judgment. Business has abandoned the 19th century
tradition of overt contempt for the public interest that prevailed prior to the Pro
gressive Era. The shift is a recognition of Davis's (1973) proposed "Iron Law of
Responsibility" holding that businesses misusing social power will lose social
legitimacy especially in the face of rising societal expectations. Davis defined
social responsibility as beginning where legal compliance ends: it must exceed
minimum legal obligations. But the "Iron Law" effectively makes such responsibil
ity nothing more than calculated responsiveness.
Historically, the attempted cutback in growth of governmental domestic
activities during the Reagan and Thatcher era of the 1980s greatly propelled the
corporate citizenship movement. Ideologically, conservative governments preferred
deregulation, privatization, tax reduction, and voluntarism (i.e., civic virtue). A
decline in public sector responsibility, coupled with government and philanthropic
calls for voluntary action by individuals and businesses, led on to the corporate
citizenship movement filling but arguably not resolving an intellectual void left by
the debate over social responsibility. This change in business-government relations
accompanied recognition of the evolution of a more integrated and competitive
world economy (see Conference Board, 1999; Tichy, McGill, & St. Clair, 1997).
Corporate citizenship is far more a matter of strategic policy including legal
compliance than any application of moral principle. At a minimum, corporate citi
zenship—understood explicitly as strategic investment in the firm's social and natu
ral environments for sustainable corporate growth and profitability—arguably
aligns corporate and social interests to mutual benefits in win-win outcomes for all
stakeholders of the firm. The essential idea thus arguably both broadens and
enriches the older notion of corporate social responsibility. If so, even gross imper
fection of motives should not be treated as the implacable enemy of at least some
good outcomes (to paraphrase and modify what has been said in another context).
True corporate citizenship requires moral leaders; but such ideal leaders may prove
relatively scarce.
The Fictional Nature of Corporate Citizenship. Corporate citizenship may
be an eminently practical rhetoric; but analogies, fictions, and metaphors alike
should receive careful scrutiny before one accepts the practical implications. Cor
porate citizenship is literally a fiction in two senses.
Firstly, citizenship tacitly portrays the domestic enterprise as equivalent to the
ordinary individual citizen. Citizenship conveys the sense of "one person, one vote"
and equality of constitutional, legal, and political standing in a democratic polity.
The corporate citizenship notion conflates citizen (which a firm cannot be) and
person (which a firm can be but only as a legal fiction). While a corporation is at
law a fictional "person" with rights of private contracting, public expression, and
political activities, the corporation cannot vote or hold office—the key hallmarks of

D.WINDSOR 241
citizenship defined as a share in sovereign power in a democratic polity. Any pre

sumption that the corporation is an association of citizens who thus in some sense
vote collectively ignores the agency problems resulting from separation of owner
ship and control. The corporation should arguably act if a non-voting citizen pre
cisely because of its power to affect others greatly. Corporate citizenship practices
may serve to blunt or channel that power. But fictional "personhood" is not a sound
basis for artificial "citizenship."
The current corporate citizenship approach suggests equivalence of the corpo
ration with ordinary individual citizens—an equivalence potentially of advantage in
criminal and civil cases against corporations. The American Law Institute (1994)
recommendations on corporate governance propose, in effect, that a corporate citi
zen be subject to the same, but not any greater, duties relative to the individual citi
zen. Citizenship thus both sounds more positive than corporate social responsibility
and yet is a more minimalist, voluntarist notion with natural liberty and freedom of
contract overtones that conceptually limits externally imposed responsibilities. Citi
zenship involves privileges and immunities, as well as obligations (see "Constitu

tional rights," 1982). The duties are mandatory; the key matter is whether the duties
ought to be higher for businesses than for ordinary individuals.
Secondly, global citizenship portrays the multinational enterprise as a citizen
of the world—a notion that constitutionally and legally does not exist. (There are as
yet no UN-chartered businesses.) Rather, the meaning of the terminology must
plainly be that the enterprise is a non-voting (if influential) force in each nation-
state in which it operates (i.e., direct effects) or which it otherwise affects (i.e., indi
rect effects). While some countries recognize dual citizenship, the notion has never
extended to embrace multiple citizenships of the sort suggested by global corporate
citizenship.
The notion of a home country—i.e., a nation-state whose interests are superior
to those of other countries in which the enterprise operates—evaporates. And this
evaporation may not prove consistently popular with national governments. The
notion of global corporate citizenship releases corporations from traditional
national sovereignty. Globally "footloose" firms might be less responsive to stake
holders' interests, precisely because the firm can more readily move activities to
less "costly" locations involving lower standards of conduct.
A Hitachi Foundation publication (Logan, Delwin, & Regelbrugge, 1997)
explicitly argues that the "home" of the multinational enterprise is "now much more
global and multicultural." The authors expand the scope of the term corporate citi
zenship to include "corporate responsibility, corporate community involvement,
corporate community investment, and corporate community responsibility" (cited
by Preston & Mihalko, 1999, p. 46). Global corporate citizenship may arguably
serve to integrate corporate social responsibility and stakeholder management
within a corporate social performance framework. The Hitachi Foundation publica
tion defines good corporate citizenship as "meeting, within reason, the expectations
of all its societal stakeholders to maximize the company's positive impact and
minimize the negative impact on its social and physical environment, while pro
viding a competitive return to its financial stakeholders" (Preston & Mihalko, 1999,

p. 46). The Hitachi Foundation publication explains global corporate citizenship in

terms of the business need to increase the consumption capacity of developing
countries as the essential basis for maintaining "profitability and growth rates" in
circumstances in which the "industrialized world has become saturated with pro
ducers" (Preston & Mihalko, p. 47).
Two Examples of Bad Corporate Citizenship. A journalist criticized Cater
pillar for flunking the corporate citizenship test in York County, Pennsylvania
(Hicks, 1996). Hicks lists historical evidence of the firm's previous good citizen
ship: jobs, high compensation, community participation (especially philanthropy),
and job training. According to Hicks, however, Caterpillar allegedly "ceased being
a good corporate citizen in York County when it placed" profits ahead of employee
safety.
Philip Morris Cos. has long positioned itself as a good corporate citizen. One
could find on a company website a corporate citizenship report stating: "We have
had a prominent international corporate citizenship program for more than 30 years
in the many communities where we do business." The three main businesses of the
corporation are foods, beer, and tobacco. The Czech affiliate of Philip Morris inde
pendently commissioned Arthur D. Little International, consultants, to conduct a
study into the social impacts of smoking. The report concluded that cigarette use
was not a financial drain on the Czech state, because government saves money on
"health care, pensions and housing when smokers die prematurely" (Reuters, 2001).
Philip Morris Cos. apologized for the study distributed in the Czech Republic, and
effectively repudiated the action.
A Progressive Responsibilities Conception. If one is to take corporate citi
zenship seriously, then contrary to the current approach of equal responsibilities for
businesses and individuals, unequal distributions of wealth and power in society
imply a fundamentally different theory of progressive responsibilities for corpora
tions. The more powerful and wealthy the firm, the greater that firm's responsibili
ties to neighbors and the community must be. The argument is strongest for legal
and moral compliance. It is useless to construct a case for increasing corporate
altruism (which must come out of monies belonging to owners or consumers),
which must always be strategic calculation. Public policy may induce or compel
philanthropy as a direct substitute for government taxation. But then business
engages in responsiveness and not responsibility.
The U.S. has embraced in this century progressive income and wealth taxa
tion. Progressive citizenship responsibility is, for individuals, built into the notion
of graduated income tax liabilities. Progressive taxation rests arguably on an uneasy
case (Blum & Kalven, 1970), but Adam Smith (1776) in The Wealth of Nations
made the case for ability-to-pay taxation.
A progressive responsibility case that applies to individual citizens must apply
most particularly to large and hence influential corporations (see Windsor, 2001a).
More is expected of Bill Gates, not the same or less, with respect to his conduct of
Microsoft's business precisely because of its success. Where an individual and a
large corporation's employee pour a single can of oil on the ground (neither should
do so, of course), the responsibility is greater for the corporation, not simply equal
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D. WINDSOR 243
to that of the individual. The current notion of corporate citizen promotes a mini
mization of socially imposed responsibilities equivalent to those expected of an
individual ordinary citizen.
Stakeholder Management Practices
Blair (1995) and Clarkson (1995) conceded the conceptual vagueness of
responsibility, as argued by Friedman, and asserted the superiority of stakeholder
theory. Clarkson viewed stakeholder management practices as a superior path to
corporate social performance compared to any responsibility concept. Corporate
citizenship can readily translate into action in response to and/or on behalf of vari
ous stakeholder groups. U.S. Secretary of Labor Reich (1996) stated the citizenship
argument with respect to employees, their families, and local communities as fol
lows: "If the government is to do less, then the private sector will have to do more"
in terms of "responsibility for Americans' economic well-being."
Stakeholder theory is attractive in that it addresses concrete interests and
practices. In favor of stakeholder thinking is Carroll's (1995) argument that "Stake

holder thinking is a powerful way of visualizing organizations and their social
responsibilities" (p. 71). Jensen (2000), however, argues that "stakeholder theory is
incomplete as a specification for the corporate purpose or objective function" (p.
38). Also critical of stakeholder thinking is Campbell and Alexander's (1997)
observation that the approach does not determine any specific business strategy.
Reich (1996) notes: In a 1951 address that was typical of the era, Frank
Abrams, chairman of Standard Oil of New Jersey, proclaimed, "The job of man
agement is to maintain an equitable and working balance among the claims of the
variously directly interested groups . . . stockholders, employees, customers and the
public at large." The entire notion of balancing of partially conflicting interests,
however, requires more careful scrutiny than has occurred (see Windsor, 1999).
Developmental History of Stakeholder Theory. The stakeholder theory of
the firm, in recognizable modem form, originated at the Stanford Research Institute
(in a 1963 SRI internal memo; Freeman, 1984, pp. 31, 49). In retrospect, one can
identify some earlier stakeholder-like reasoning approaches (Dodd, 1932). The
post-1945 management-labor arrangements in Germany and Japan were stake
holder-like (Donaldson & Preston, 1995, p. 76). Drucker (1999, p. 59) argues,
however, that the arrangements were simply to avoid industrial strife. There was a
parallel Scandinavian theory effort (Rhenman, 1964/1968; Rhenman & Stymne,
1965). Stakeholder theory received active academic interest following Freeman's
(1984) seminal book.
In origin, stakeholder theorizing was explicitly and intendedly a softening of
(if not implicitly a fundamental challenge to) strict stockholder doctrine (Freeman,
1984, p. 32) then prevailing in U.S. (i.e., state-level) corporate-governance law
since at least Dodge v. Ford (1919). Stockholder doctrine posits that shareholder
return is the primary purpose of a business corporation (other purposes, if any, are
then strictly secondary). Such return is certainly the primary purpose of financial
claimants. "The SRI researchers argued that unless executives understood the needs
and concerns of . . . stakeholder groups, they could not formulate corporate objec-

tives which would receive the necessary support for the continued survival of a
firm" (Freeman, 1984, p. 32; cf. Clarkson, 1995).
A large and diverse stakeholder literature has blossomed since 1984, with a
marked surge of stakeholder publications in and after 1995, partly in connection
with the Sloan Foundation-supported Redefining the Corporation research project
operated through the University of Toronto's Clarkson Centre for Business Ethics.
The stakeholder viewpoint informs so-called constituency statutes adopted in some
29 U.S. states (Orts, 1992, pp. 72-73; Jensen, 2000, p. 55, citing Sternberg, 1994).
Orts argues, however, that such statutes merely increase the discretion of managers
while weakening the power of owners without increasing the power of other stake
holders. Corporate-governance reform reports issued during the 1990s (American
Law Institute, 1994; Dey, 1994; Hampel, 1998; Peters, 1997) all included language
highlighting in some form stakeholder considerations as well as improved account
ability of management to shareholders. Jensen (2000, p. 55) cites Sternberg (1996)
on the acceptance of stakeholder theory by the Business Roundtable and the Finan-
cial Times (of London). The Blair government (Labour Party) in the UK endorsed a
stakeholder theory of the economy (Jensen, 2000, 55; see also Blair, 1996).
The surge of stakeholder publications in 1995 marked not simply a triumph of
the approach, but deliberate efforts at explicit reformulation or extension.
Donaldson and Preston (1995) argue that much of stakeholder literature has
engaged in implicit theorizing through lack of separation of implicit descriptive,
instrumental, and normative arguments.
One key problem has concerned the proper definition or scope of stakeholder-
ship. The. definitional controversy is not a minor matter. Freeman emphasized
capacity to affect or be affected by a focal firm (i.e., a broad concept of influence).
Rhenman (1964/1968) defined "stakeholders" more narrowly in terms of mutual
dependence. Jensen (2000) uses a narrow definition focused, in effect, on power
(he does not use that term) to "affect the welfare the firm" (p. 38). The Sloan Foun
dation project has emphasized a broadened theory of property rights (relative to
stockholder doctrine) treating various stakeholders as (or "as if morally) holding
investments-at-risk in the focal firm. These claims are equal morally and practically
in importance to the investments of financial claimants. (The argument is that all
"investments" are equally necessary to success of the firm—see Clarkson Centre for
Business Ethics, 1999, 2000.)
A second problem has concerned the status of nature: can, and if so, should
nature be defined as or treated as if enjoying stakeholder rights or status? Jensen
(2000) is dubious. The alternative view, grounded ultimately in Kant, is that only
humans can be stakeholders, so that the role of nature must be apprehended in
terms of stakeholders' interests.
The Relationship of Stakeholder Practices to Wealth Creation. There are
conflicting views concerning the connection between stakeholder practices and
wealth creation. Jensen (2000) argues that "enlightened stakeholder practices" can
support wealth creation. Mayer (1996) argues that stakeholder practices in Europe
have come at an economic cost, such that stakeholder management and wealth
creation are not coincidental. Preston and Donaldson (1999) report that stakeholder

D. WINDSOR 245
management practices can enhance "organizational wealth" defined as "the aggre

gate value of a going concern."
Donaldson and Preston (1995) assert a redistribution of property rights as the
normative core of stakeholder theory. In contrast, the recent empirical evidence
suggests that managers behave in such a purely instrumental manner with respect to
stakeholders (see Agle, Mitchell, & Sonnenfeld, 1999; Ogden & Watson, 1999).
Sutton, Harris, Kaysen, and Tobin (1956) argued that social responsibility is
only a voluntary activity within the managerial creed and is not a "right" of the
recipients (cited by Preston, 1975, p. 435). Extending this argument to stakeholder
theory would leave practice susceptible to a purely instrumental approach for dis
arming and exploiting stakeholders to the benefit of management (and through
fiduciary responsibility, to the benefit of investors). The relationship is then simply
one of relative power and its exercise.
The Prospects for Business Responsibility

The present edifice of business and society studies is undoubtedly ramshackle.
Even so, its moral and intellectual location is extraordinarily valuable "real estate."
(The author adapts here an oral statement by McKenzie, 2001). Corporate social
responsibility was the earliest notion in business and society studies (as post-game
philanthropy was the earliest notion in managerial philosophy). It is still in common
usage as a widely accepted "core construct" (Carroll, 1999) for academics and
managers.
The central issue is where to go with responsibility in the face of the compet
ing alternatives discussed earlier. This section considers the following matters.
First, global operations raise far more complex responsibility issues. Second, the
two fundamentals of responsibility concern managerial psychology and a well-
defined normative framework for educating that psychology. Third, what matters
most is the morality and accountability of managers. The existing responsibility
construct does not successfully address that combination of key considerations. The
competing alternatives examined here are even less successful. They all emphasize
the leitmotif of wealth creation. The section ends with a discussion of implications
for responsibility theory and practice.
Global Enterprises
The context for corporate social responsibility has shifted to a world economy
in which multinational enterprises are key actors. Scherer and Smid (2000) argue
the case for why multinational enterprises "should take responsibility for the
improvement of world-wide social and environmental conditions" (p. 351). The
authors' basic thesis is that conditions are beyond the capabilities of governments
and must therefore be addressed by the world's multinational corporations. This
thesis flatly contradicts Adam Smith's (1776) caution concerning affecting to trade
for the public interest. It was argued elsewhare that serving the poor in developing
areas can be highly profitable business, as well as good sustainable development

strategy. The poor are underserved due to lack of entrepreneurial innovativeness in

providing goods and services (Hamto, 2001).
Talisman Energy (in Calgary) is a Canadian firm operating in the war-torn
Sudan (where the non-Muslim black southern region seeks independence from an
Arab-dominated fundamentalist Islamic government), where the government may
be harboring al-Qaida terrorists ("Firm responds," 2001). Talisman has a 25 per
cent stake in the Greater Nile Petroleum Operating Co., which produces oil in south
central Sudan. According to the news report cited here, the CEO, James Buckee,
stated (before the Royal Institute of International Affairs in London) that "it is
socially responsible for a corporation to invest in certain places that some elements
of popular opinion find objectionable." The statement argues that (1) opinion and
hence public policy are sharply divided on the issue, and (2) oil is important for the
development of the Sudan, ultimately contributing to peace in the region, and oil is
important to the functioning of the global economy. Mr. Buckee does not assert
laissez-faire theory but rather a position on social responsibility.
The World Bank and International Monetary Fund (IMF) were recently
expected to fund "a controversial energy project" in the West African countries of
Chad and Cameroon (Ivanovich, 2000). Oil fields in landlocked Chad with a pipe
line to the Atlantic coast through neighboring Cameroon would transform the two
countries. An oil company spokesman stated: "We believe that the citizens of Chad
deserve the right to benefit from responsible development of their resources." The
opposition comes chiefly from environmentalists and human rights advocates con
cerned with "possible disruption of the lifestyle of local Pygmies" and "long-term
survival of the black rhinoceros." Cameroon ranked worst globally on the 1999
Corruption Perceptions Index published by Transparency International (of Berlin),
and Chad has been through a civil war. Ivanovich characterizes both countries as
corrupt and abusive of human rights. (There have also been criticisms that the two
countries are receiving an inadequate share of the projected oil revenues.)
There are fundamental differences of opinions and values in the global econ
omy, well beyond those found in U.S. domestic politics. Gilpin (1987) argues that
"ideologies of liberalism, nationalism, and Marxism have divided humanity" (and
continue to do so) and that "The conflict among these three moral and intellectual
positions has revolved around the role and significance of the market in the organi
zation of society and economic affairs" (p. 25). (One might add anarchism, reli
gious fundamentalism, and totalitarianism—but these ideologies concern control of
state power rather than economic organization.) "These three ideologies are funda
mentally different in their conceptions of the relationships among society, state, and
market" (p. 25).
The context for the thesis may now have to embrace the origins and effects of
global terrorism (see Fish, 2001). Phillips (2001) argues that the essential strategy
in combating terrorism is "to change the environment" so as to minimize the supply
of "desperate or frustrated" young men "drawn to terrorism." (Phillips' forecast is
that a small supply of hundreds of terrorists can develop into a large supply of mil
lions of terrorists.) Phillips does not explain in any detail how environmental

D. WINDSOR 247
change is to be obtained. But logically his path may converge with Scherer and
Smid's argument concerning business global responsibilities.
Two Fundamentals of Social Responsibility
Corporate social responsibility reasoning must grapple with two fundamen
tals. One fundamental is the prevailing psychology of the manager (see Donaldson,
1999). The other fundamental is a normative framework for addressing how that
psychology should be shaped.
What managers believe presumably affects how they behave. Much of the
business and society literature has aimed at shaping managerial psychology and
hence influencing exercise of any managerial discretion. Today's managers are
different, at least with respect to rhetoric concerning wealth creation for social wel
fare improvement and acceptance of public policy limits on freedom of action, from
their laissez-faire predecessors of the 19th century.

A Fortune ("Fortune management," 1946) survey of business executives con
cerned their social responsibilities where 93.5% of respondents agreed with the
statement that "social consciousness" meant being responsible for wider conse
quences of business actions not measured in financial statements; 29.2% reported
half of businessmen had "social consciousness," 26.7% three-quarters, and 3% all.
That psychology has, however, yielded to the modem leitmotif of wealth
creation. Reich (1996) asserted that there was an "implicit social compact between
corporations, their employees and communities" for benefit sharing during the
1950s through the 1970s. That "compact" subsequently disappeared due to
increased competition (resulting from information technologies, deregulation,
global competition, and decline of market entry barriers). In Reich's words, "this
'electronic capitalism' has replaced the gentlemanly investment system that had
given 'industrial statesmen' the discretion to balance the interests of shareholders
against those of employees and communities." So characterized, such "discretion"
(cf. Wood, 1991) must have rested on both management autonomy from investor
controls and corporate market power relative to customers. Whitman (1999) argues
that power has shifted toward investors and consumers. These assertions by Reich
and Whitman suggest that markets are functioning more efficiently (i.e., immedi
ately) than formerly. (Whether greater market efficiency, so defined, is socially
desirable is a different matter.) If so, the shift in power has been away from other
stakeholders, such as employees and communities.
The specific content of corporate social responsibility was always ambiguous
once one moved beyond establishing a kind of firewall against 19th century capi
talist apologetics (see Preston, 1975, p. 434). The notion has been subject to multi
ple interpretations (Votaw & Sethi, 1973, pp. 11-12).
The Committee on Economic Development (1971) defined social responsibil
ity in terms of three concentric (i.e., nested) circles. The circles work outward from
economic function (e.g., products, jobs, growth) through awareness of changing
social values and priorities (e.g., environmental conservation, employee relations,
customer expectations) to newly emerging and amorphous responsibilities to

improve pro-actively the social environment (e.g., poverty, urban blight). This
approach emphasized economic performance, defined more broadly than wealth
creation. It then diffuses into amorphous considerations, left by Jensen (2000) and
McWilliams and Siegel (2001a) to public policy.
Accountability and Morality of Managers
Both Dodd (1932) and Jensen (2000) favor making managers more account
able to something external and arguably more objective. Dodd (Weiner, 1964) was
critical of increasing the discretionary responsibility of managers for stakeholders'
interests. Dodd advocated increasing the legal rights of consumers and employees,
in particular. Where they differ is that Jensen absorbs much of stakeholder reason
ing directly into managerial choice, guided by value creation, whereas Dodd pre
ferred something more reliable.
Davis (1960) viewed responsibility as nebulous but tied to long-term eco

nomic return and stated an "Iron Law of Responsibility" requiring conduct com
mensurate with social power of business. Davis (1973) offered the definition that
responsibility "refers to the firm's consideration of, and response to, issues beyond
the narrow economic, technical, and legal requirements of the firm" (p. 312). The
present author has argued here that it is difficult to distinguish responsibility and
responsiveness on such bases.
Corporate social responsibility was intendedly normative or value-concerned
in orientation. (Bowen's 1953 work was part of a six-volume study sponsored by
the Federal Council of Churches.) In this long and steady tradition, Donaldson and
Preston (1995) characterized stakeholder theory in terms of three separate but
linked dimensions organized like an onion: (1) a normative theory at the core; (2)
an instrumental theory serving as linkage beUveen core and surface; and (3) a
descriptive (empirical or behavioral) theory at the surface.
It matters greatly whether managers are moral. If corporate social responsibil
ity in fact evolved in the 1920s as a managerial ideology (as argued by Mitchell,
1989), then what vouchsafes today's corporate citizenship movement unless modern
managers are truly different in motive (see Jackall, 1988, who characterizes corpo
rate life in terms of moral mazes)? Carroll (1991), cited previously, suggests that
the supply of moral managers (those who embrace responsibility) is thin relative to
the supply of amoral managers (those who practice responsiveness as calculated
reputational strategy) and the supply of immoral managers (those who practice irre
sponsible laissez-faire opportunism).
The distinguishing characteristic of economic, citizenship, and stakeholder
management approaches is their shared emphasis on an instrumental interpretation
of "responsibility." This emphasis is a vital shift in conceptualization and rhetoric
as well as in language, in the direction of managerial practice. In McWilliams and
Siegel's (2001a) treatment, management evaluates "demands" by stakeholders in
terms of bottom-line result. Only if a "demand" can be met at equal or higher profit,
should management "respond." An economic calculus takes place, within the law
(or public policy), to which all other considerations are assigned. McWilliams and
Siegel propose simply to define requirements at law (public policy embedding eco-

D. WINDSOR 249
nomic as well as legal performance) and then to treat expectations and desires as
demands arising from particular stakeholder interests and subject only to an inves
tor cost-benefit evaluation. Jensen views stakeholder interests in a broader (i.e.,
"enlightened") context, but only to the extent that managers' and employees' moti
vations for effort are affected.
A response to this line of criticism is that made by Keynes (1936, p. 378), that
it was not the logic of classical economics that was at fault but rather the failure of
its tacit assumptions to correspond to the real world. The key difficulty in strong
economic cases for market action is that they tend to shunt the problems over to
public policy, while leaving firms (their managers and owners) free to influence
that context through the use of wealth. The approach reduces everything to markets
and laws, on a tacit assumption that the combination will work in the long run. Self-
interested managers, imbued with the mental model that capitalism is the salvation
of the world (cf. Werhane, 2000), akin to an "economic theology" (Heilbroner,

1953, p. 314, citing J. K. Galbraith), will simply treat all stakeholders as abstrac
tions (see Selekman, 1958). And they will treat moral issues as subsumed within the
public policy process, itself subject to intervention by managers.
The instrumental view relies on the long-term dynamics of capitalist market
development and growth. Adam Smith (1776) suggested that rising wealth,
obtained through freer market exchange, released people's natural sympathies for
the situation of others. He also advised moral education.
The need for moral education of managers is as follows. There is, in addition
to the difficulties of externalities, information asymmetries, and monopolies, a per
sistent tradeoff problem: "It is the dynamic nature of capitalism—very tough on
specific individuals in the short run, highly beneficial for almost everyone in the
long run. In place of the jobs lost will be new jobs from upstart companies and
from large companies that are doing well" (Tobias, 2001, p. 5). As Wilson (1989,
p. 63) points out, capitalism is not moral; but it has a morally desirable outcome,
reduction of poverty for many (not creation of wealth for some), in the long run. A
difficulty in this line of reasoning is that the long run may be so far off as not to
matter (cf. Keynes, 1936). Corporate social responsibility addresses short run
deviations between the interests of business and society.
Some Implications for Practice and Scholarship
This paper offers caveats concerning the future directions and prospects for
corporate social responsibility theory and practice. The management-friendly leit
motif of wealth creation is progressively dominating scholarly conceptions of
responsibility. Part of the difficulty is that the responsibility construct is now
embedded within the broader corporate social performance (CSP) framework. The
embedding occurred partly due to criticisms of the responsibility construct, and
partly due to the perceived need to link responsibility and responsiveness con
structs. Part of the difficulty is that managers are adhering to corporate citizenship
and stakeholder management views as instruments for wealth creation. Part of the
difficulty is a counter-reformation aimed at promoting a more economic conception
of responsibility along those wealth creation lines. Judgments of this sort involve,

of course, subtleties; and one can reasonably depict a much more positive picture of
the situation. But given the increasing importance of the wealth creation leitmotif,
the present author selects caution over optimism.
A key difficulty is overturning the presumption in favor of wealth creation. As
Jensen (2000) rightly observes, there is 200 years of evidence for the long-run
wealth creation effects of freer market economies. Whether this evidence points in
the direction of a single-value objective function for managers is more debatable.
The empirical evidence on the financial performance effects of responsible behav
ior is highly mixed (see especially McWilliams & Siegel, 2000). Griffin and Mahon
(1997) note methodological deficiencies in the literature. Verschoor (1998) con
cludes that, among the 500 largest U.S. public corporations, the 26.8 percent com
mitting in annual reports to ethical behavior toward stakeholders or compliance
with corporate code of conduct have higher financial performance measures than
the other firms that do not. But as noted previously, both Agle et al. (1999) and
Ogden and Watson (1999) concluded that managers appear to behave instrumen-
tally with respect to stakeholder practices. The caveats raised here have important
implications for managerial practice and academic scholarship.
Managers should understand that there are serious deviations between short
run impacts of business activities and the long run alignment of business and social
interests in wealth creation. These deviations leave ample scope for abuse of mar
ket power and irresponsible conduct. The recent collapse of Enron Corp., which
was politically and philanthropically active, is a good illustration. The leitmotif of
wealth creation can easily lead to both moral misconduct and financial manipula
tions ultimately destructive of social purposes and stakeholders' welfare. There is a
subtle attractiveness to substitute rhetorics of corporate citizenship and stakeholder
management. This attractiveness is due to the promise that such practices will align
reputation and wealth creation. A reasonable guide for the prudent manager may
well be that moral conduct is costly. Such a test is crystal clear.
Academic scholarship needs to reexamine the responsibility construct and its
role. A marked tendency in the relevant literature has been the willingness to
examine alternatives—such as citizenship or stakeholder management—precisely
because of the difficulties inherent in the responsibility construct. This tendency is
both good and bad. It is good in that it promotes continuing inquiry and an open
ness to new ideas. It is bad in that it tends to step around the very difficulties inher
ent in asking managers to be socially responsible. Guidance to managers is easy
where responsibility and wealth readily associate. Academic scholarship, both con
ceptual and empirical, needs to focus more attention on what to do where responsi
bility and wealth do not readily associate. The Enron collapse is a reminder that
such deviation is never far away in the increasingly competitive landscape of global
business operations.

D.WINDSOR 251
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The Internationaljournal of Organizational Analysis, Vol. 9, No. 3, 2001

Biographical Note
Duane Windsor
Jones Graduate School of Management
Rice University
Houston, TX 77251-1892
Phone/Fax: 713-348-5372/5251
Email: odw@rice.edu
Dr. Windsor (Ph.D., Harvard University) is Lynette S. Autrey Professor of Management.
He is an alumnus of Rice University (B.A.). He teaches business ethics and leadership in the
Executive MBA program, and organizational politics in the regular MBA program. His
research focuses on corruption, corporate citizenship, social responsibility, and stakeholder
theory.
Received: August 15, 2001
Accepted by M. A. Rahim after three revisions: February 1, 2002

♥
TheInternationalJournalof Organizational Analysis, Vol. 9, No. 3, 2001

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The International Journal of Organizational Analysis

THE FUTURE OF CORPORATE SOCIAL RESPONSIBILITY

THE FUTURE OF CORPORATE

Corporate social responsibility is one of the earliest and key concep-

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

tional controversy concerning the proper meaning of corporate social responsibil­

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

instrumental to wealth creation. If so, responsibility becomes indistinguishable from

Corporate Social Responsibility: Developmental History

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

constructs) and stakeholder theory—extended by full incorporation of business

The Progressive Era

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

Viewed in retrospect, the Progressive Era revealed three postures concerning

Formalization of the Responsibility Construct

Bowen (1953, 1948) is the modern "Father of Corporate Social Responsibil­

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

of responsiveness. Another Nobel laureate in Economics, Samuelson (1971),

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

CSP = CSR1 + CSR2 + CSR2 + Social

Institutional Level: Environmental Social Policies

Organizational Level: Stakeholder Social Programs

Individual Level: Issues

CSR1 = Economic + Legal + Ethical + Charitable

The InternationalJournalofOrganizational Analysis, Vol. 9, No. 3, 2001

Carroll's Pyramid of Responsibilities

The International Journal of Organizational Analysis. Vol. 9. No. 3. 2001

fashion, or alternately to view responsibility dimensions as a strategy for wealth

least low-cost duty fulfillment) in socially responsible management. The authors'

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

Three Emerging Alternatives to Responsibility

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

The general approach in Jensen (2000) is to emphasize financial-economics

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

judges responsibility to be philosophical-ethical vagueness, and makes responsive­

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

citizenship defined as a share in sovereign power in a democratic polity. Any pre­

zenship involves privileges and immunities, as well as obligations (see "Constitu­

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

p. 46). The Hitachi Foundation publication explains global corporate citizenship in

TheInternationalJournalof Organizational Analysis, Vol. 9, No. 3, 2001

practices. In favor of stakeholder thinking is Carroll's (1995) argument that "Stake­

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

management practices can enhance "organizational wealth" defined as "the aggre­

The Prospects for Business Responsibility

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

strategy. The poor are underserved due to lack of entrepreneurial innovativeness in

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

their laissez-faire predecessors of the 19th century.

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

Davis (1960) viewed responsibility as nebulous but tied to long-term eco­

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

of the world (cf. Werhane, 2000), akin to an "economic theology" (Heilbroner,

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

Hampel Report. (1998). Committee on corporate governance: Final report. London:

The International Journal of Organizational Analysis, Vol. 9, No. 3, 2001

tional controversy concerning the proper meaning of corporate social responsibil

Bowen (1953, 1948) is the modern "Father of Corporate Social Responsibil

judges responsibility to be philosophical-ethical vagueness, and makes responsive

citizenship defined as a share in sovereign power in a democratic polity. Any pre

zenship involves privileges and immunities, as well as obligations (see "Constitu

practices. In favor of stakeholder thinking is Carroll's (1995) argument that "Stake

management practices can enhance "organizational wealth" defined as "the aggre

Davis (1960) viewed responsibility as nebulous but tied to long-term eco