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Measuring Corporate Social Performance: A Review
Donna J. Wood
The David W. Wilson Chair in Business Ethics, University of Northern Iowa, Cedar Falls, IA 50614, USA Corresponding author email: email@example.com
This paper reviews the literature on corporate social performance (CSP) measurement and sets that literature into a theoretical context. Following a review of CSP theory development and the literature on relationships between CSP and corporate ﬁnancial performance, Wood’s CSP model (Wood, D.J. (1991). Corporate social performance revisited. Academy of Management Review, 16, pp. 691–718) is used as an organizing device to present and discuss studies that use particular measures of CSP. Conclusions emphasize the need for CSP scholars to refocus on stakeholders and society, and to incorporate relevant literatures from other scholarly domains.
Corporate social performance (CSP) and its sister concepts – corporate social responsibility, corporate social responsiveness, corporate citizenship – have been present in management scholarship for about 45 years. Notwithstanding this longevity, the CSP domain has remained controversial, ﬂuid, ambiguous and difﬁcult to research. To a large extent, CSP has been equated with ‘doing good’, and the search has been on for a statistical relationship between CSP and ﬁnancial performance (FP) so as to justify or delegitimize the normative calls for managers to pay attention to CSP. These two phenomena may be largely to blame for the lack of progress in CSP theory and measurement. It is possible, and I believe desirable, to take a different stance on CSP. Corporate social performance, as conceived in the Wood (1991) framework, is a set of descriptive categorizations of business activity, focusing on the impacts and outcomes for society, stakeholders and the ﬁrm itself. Types of relevant outcomes are determined by the ﬁrm’s linkages, both general and speciﬁc, as deﬁned by the structural principles of corporate social responsibility (CSR). The production, monitoring, evaluation, compensation and rectiﬁcation (or not) of these outcomes are deﬁned by the processes of corporate
social responsiveness – the boundary-spanning (or bridging) processes by which the ﬁrm connects itself to information, stakeholders and issues. All these elements can be measured and evaluated: impacts and outcomes; processes; and the speciﬁc guidance offered by structural principles. The aim of this paper is, ﬁrst, to describe brieﬂy the conceptual history of CSP and then to explain CSP as a set of structural categories that can be identiﬁed, described and measured (following Wood 1991 and modiﬁcations by Kang 1995; Swanson 1995, 1999; and Mitnick 1993, 1995, 2000). A ‘detour’ into CSP–FP research emphasizes how much attention has been paid to this aspect of the CSP domain and suggests that other research questions might now be more interesting. The paper then reviews the empirical literature in which some aspect of CSP is measured, showing how the measures themselves ﬁt into an expanded structural CSP model. An additional result of this analysis will be to spotlight the aspects of CSP that have gone relatively (or completely) unexamined, or that have not yet been considered generally as indicators of CSP. Finally, the analysis will suggest some overarching conclusions about existing CSP research which suggest fruitful paths for future work.
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Measuring Corporate Social Performance
51 Ever since discussions of CSR began, the primary question has been: to whom are corporations responsible, and for what, exactly? (See Frederick 2006, for a comprehensive account of the early days of CSR.) Open systems theory has the advantage of being a more realistic portrayal of the state of organizations, but it has the distinct disadvantage, from a scholarly point of view, of being incompletely identiﬁable and governable. The early history of CSP and CSR shows clearly that the intent of the (primarily US-based) scholars who introduced the concept into management literature was to encourage corporations to help solve intransigent social problems. Some made the causal assumption that business activity helped to create the problems; others made the normative assumption that business expertise and resources should be brought to bear in solving the problems. Bowen’s (1953) book argued that businesses were responsible for producing ‘social goods’ as well as goods and services for sale, and that every business had an obligation to give back to the communities that supported it. Bowen’s work was later used as a rationale by US scholars who surveyed the societal situation in the 1960s and early 1970s and saw bigticket problems such as war, poverty, urban decay, racism, sexism and pollution. A government in recovery from the McCarthy-era Communist hunt and still in the midst of the Cold War could not do it all. So attention turned to big business, even then the major institution of American society. McGuire’s (1963) book, Business and Society, was among the earliest texts to lay out a rationale for greater social responsibilities for businesses, and McGuire’s work illustrates the tentativeness with which 1960s scholars approached the questions of CSR. In his 1961 article in California Management Review (McGuire 1961), for example, McGuire lays out several models of the corporation, including traditional economic, game theoretic and behavioral perspectives, but only hints at the prospect of CSR as a viable business strategy. In 1969, he wrote about four approaches to CSR: traditional (the neoclassical economic view that CSR has no role in business), enlightened (CSR serves corporate self-interest), responsible (CSR may or may not pay, but it is the right thing to do), and confused (justifying CSR ethically while expecting it to pay off for the company) (McGuire 1969). And in 1977, McGuire was claiming that, if businesses embraced ‘the new egalitarianism’, they would have to give up (not moderate or balance, but give up) other values such as freedom, efﬁciency and meritocracy (McGuire 1977).
CSP as a set of structural categories
A review of measurement must necessarily take into account the nature and deﬁnition of that which is being measured. For CSP, this means investigating the theoretical and assumptional contexts of relevant empirical research. In this section, following a brief history of the construct, I will present and defend my conceptualization of CSP as a set of structural categories set within an open-systems model of the ﬁrm. I will then discuss the normative and theoretical implications of such a view of CSP. CSP’s conceptual history The intellectual roots of CSP scholarship can be found in the general systems theory that became popular in the 1950s. In particular, CSP derives from Boulding’s (1956) view of complex organizations as open systems, intricately connected to their larger environments. Much of the earlier thinking about business organizations had taken the view that ﬁrms are closed systems amenable to a rational approach to structuring and managing. Taylor’s (1911) scientiﬁc management, Weber’s (1948) theory of bureaucracy and Fayol’s (1967) administrative management are key examples of this approach. Scott (2003, pp. xvii–xviii) explains that ‘Boulding (1956) was among the ﬁrst to emphasize that organizations are open systems, characterized by a high level of complexity, reactivity, and looseness of coupling among system components’. An open system takes in resources from and emits outputs into its larger environment. Thus, in broad outline, CSP concerns the harms and beneﬁts that result from a business organization’s interactions with its larger environment, including the social, cultural, legal, political, economic and natural dimensions. The implicit moral underpinning of early CSP was that companies should work to increase the beneﬁts and reduce or eliminate the harms resulting from their activities. Otherwise, companies would fail to adapt appropriately to their environments, or they would lose access to critical resources, or their right to manage internal processes would be challenged and perhaps overturned by external stakeholders, or they would even lose legitimacy and thus the right to exist. (These proposals are most clearly articulated, though not with a CSP emphasis, in Thompson’s (1967) classic book, Organizations in Action.)
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52 McGuire’s work keenly illustrates how conﬂicted business and society scholars were about CSR in the early days of its development. The Committee for Economic Development (CED), a non-proﬁt organization with many business members, issued a major report in 1971 (CED 1971), urging business leaders to contribute to social wellbeing in ways beyond the provision of jobs, taxes, and goods and services. Scholars tried to help by listing social problems and thinking up reasons for businesses to be involved in their solution (e.g. Davis 1973). Leading businesses were not completely averse to participating, but naturally the list was bigger and more extensive than any business leader was willing to accommodate. Business pushback and scholarly concerns resulted in efforts to specify further the social responsibilities of business. In the 1970s, the idea of corporate social responsiveness emerged as a candidate for replacing the muddled and ambiguous CSR. Frederick (1994) named this phase CSR2 and cogently described it as marked by conceptualizations and investigations of how companies responded to social demands. This emphasis gave up the search for ‘responsibilities’ and focused in on corporate action, without the ethical underpinning that ‘duty’ or ‘responsibility’ implied. Thus, studies emerged of corporate public affairs (Post et al. 1981), issues management (Brown 1979; Fleming 1981) and lobbying (Mahon 1983; Maitland 1983), largely directed towards what Keim (1978a) called the ‘enlightened self-interest’ model of business–society relationships. Sethi’s (1979) typology of corporate responses as reactive, defensive, responsive and proactive served as a conceptual basis for categorizing the mode of corporate actions without regard to their intentions or outcomes. But the search for CSR speciﬁcs was not completely abandoned during the 1970s. In particular, an important book by Preston and Post (1975) and a landmark article by Carroll (1979) spotlighted CSR and offered enduring ways of thinking about it. For Preston and Post (1975), the answer to specifying CSR was found in the domain of public policy – broader than law and regulation, but narrower than the universe of social problems. Their argument was grounded in an understanding of the modern reality that social institutions (business, government, education, etc.) were not separate and distinct, but constituted ‘interpenetrating systems’ that continually affected each other. For these scholars, the argument that business held the economic function and that was its only job in society was simply untrue. They
Figure 1. Carroll’s (1979) hierarchy of CSR
had glimpsed the coming wave of globalization and complex interdependence well before most others, and in this they were ahead of their time. Carroll’s (1979) article laid out the ﬁrst conceptual model of CSP. Arguing that ‘responsibility’ suggested motivation and was not measurable, he opted instead for ‘performance’ as the operative term. He speciﬁed four domains of CSR (economic, legal, ethical, discretionary), then matrixed these with the social issues with which businesses should be concerned (consumerism, environment, discrimination, product safety, occupational safety and shareholders). Finally, he added a third dimension – philosophies of responsiveness (reaction, defense, accommodation, proaction) – to form a cube of CSP. Inside the cube were 96 cells (and this number could grow or shrink, depending on the number of issues included) in which CSP could presumably be assessed. Carroll’s pyramid (actually a very tall rectangle in the 1979 paper; see Figure 1) of CSR still enjoys considerable popularity among CSP scholars. Working from a structural–functionalist assumption that businesses represent the economic institution in society and thus have primary responsibilities for economic goals and outputs, Carroll then layered legal, ethical and discretionary responsibilities in decreasing order of implied attention, though not importance. In his own words, the different domain
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a ‘public responsibility principle’. Her elements. issue analysis and response development. B. promises are not made which are not intended to be fulﬁlled. also following Carroll. and resulted. Scholars cited one another but. but which contained surprisingly little critical analysis or cross-discussion. and ﬁnally outputs and outcomes. Wood organized the literature into structural (not philosophical) principles of responsibility as inputs. Carroll (1979) made a start. and were the processes that allowed businesses and their managers to respond to changing societal conditions and demands. 33). from business’s social contract with society and the fact that businesses acted as moral agents within society. It is important that: A. p. 499). they were responding as though they managed rationally in a closed system. when securing new business. saw that. Aupperle (1984) operationalized Carroll’s pyramid and tested its implied weighting of the four categories with a 20-item questionnaire. he also found ‘a strong inverse relationship between the economic and ethical dimensions which suggested a natural conﬂict of strategic choices’ (p. the literature on CSP appeared to be multiplying much more than building. according to Wartick and Cochran. ethical and discretionary. They presented. Their model incorporated three segments: principles. long-term return on investment is maximized. In addition. and Wartick and Cochran (1985) extended his effort. with some exceptions. reﬂecting Carroll’s four categories. and the results of those efforts. reactive. accommodative and proactive. processes of social responsiveness as throughputs. while Carroll might be accurately describing how managers saw their social responsibilities. and also to ecologize. Such policies helped companies to avoid surprises and determine which social policies were effective. managers and employees participate in voluntary and charitable activities within their local communities. C. ﬁnally. An example follows: 4. Managers did seem to spend most of their time dealing with the day-to-day details of running their businesses to generate proﬁt. defensive. The processes of responsiveness were. institutional and organizational orientations. Furthermore. He reported that factor analysis of the results from 241 CEOs showed relative weights of the four categories similar to Carroll’s visual weightings in the pyramid. Each item asked respondents to allocate 10 points across four possible answers to each item. Wood (1991) attempted to impose some order on three decades’ worth of scholarly literature which reﬂected wide variances in how CSP and social responsibility were viewed. critiqued and synthesized what they saw as three challenges to CSR: economic responsibility. public responsibility and social responsiveness. scholars talked across levels of analysis about CSP for managers. But. but Wood went farther. legal. which Aupperle then calculated the overall degree of importance placed upon items representing each of the four categories. D. CSP as a set of structural categories Wood (1991). cumulative or mutually exclusive (Carroll 1979. but were not additive. Wartick and Cochran (1985) updated Carroll’s model and folded in some additional concepts that made the CSP model more robust and logical. for industries and for the institution of business in society. 53 (1979): economic. reviewing Carroll’s (1979) model and subsequent extensions. did not intellectually incorporate past work into their own. legal responsibilities be seriously fulﬁlled. scholars often did not distinguish between the nature and source of corporate responsibilities. Using a basic systems framework. The principles of CSR were taken from Carroll © 2010 Blackwell Publishing Ltd and British Academy of Management . reﬂecting the tendency of all life forms to economize by squeezing as much energy as possible out of the resources available. including policies of issue identiﬁcation. In short. Policies. The structural principles of CSR include a ‘legitimacy principle’. as revised in 1994. they were not taking into account the sociological complexity of their roles in society and the effects their actions had on others. With little or no acknowledgement that they were doing so. are shown in Figure 2. Carroll (1991) later changed the discretionary category to philanthropic responsibility. which addresses business as a whole.Measuring Corporate Social Performance sizes reﬂected ‘relative magnitude’ and an order of evolution. were proposed to manage social issues. for individual ﬁrms. or act in ways that protect the commons or secure the larger welfare. Frederick (1995) later explained this ‘natural conﬂict’ as biological and evolutionary in origin. respectively. So. Carroll’s pyramid made intuitive sense to many as a way of describing the full set of managerial duties in social responsibility terms. processes and policies. the methods used to try to meet them. representing philosophical.
Managerial Discretion: Managers and other employees are moral actors and have a duty to exercise discretion toward socially responsible. Wood believed that what counted in terms of performance and outcomes was what happened because of what corporations and their employees did. The processes of social responsiveness do not reﬂect modes of response. Wood’s (1991) depiction of CSP views the business organization (‘corporate’) as the locus of actions that have consequences for stakeholders and society as well as for itself (‘social performance’). deﬁned by the structural principles of CSR. more consis- © 2010 Blackwell Publishing Ltd and British Academy of Management . and so the hoary search for statistical links between CSP and FP is at best misguided and at worst disingenuous. 1994) policies. in Wood’s model. ethical outcomes. practices. This conceptualization is distinctly sociological – not managerial. political.J. and ethical environments. Public Responsibility: Businesses are responsible for outcomes related to their primary and secondary areas of involvement with society.g. analyze. OUTCOMES & IMPACTS OF PERFORMANCE Effects on people and organizations. The processes by which these outcomes are produced. and Wartick and Cochran used policies of social issues management as their outcomes variable. economic or philosophical – and it is explicitly based on organic open-systems assumptions. monitored. Note also that CSP deﬁned as ‘doing good’ for external stakeholders encompasses only a very narrow slice of the larger. Wood’s model of CSP D. applies to particular organizations. is a set of descriptive categorizations of business activity. e. Thus. They ﬁnd that their respondent managers emphasize philanthropy as their CSP involvement. So. Carroll’s model did not have an outcomes variable. Issues/Public Affairs Management: a set of processes that allow a company to identify. evaluated. both general and speciﬁc.54 PRINCIPLES OF SOCIAL RESPONSIBILITY Legitimacy: businesses that abuse the power society grants them will lose that power. more comprehensive concept. In short. Wood PROCESSES OF SOCIAL RESPONSIVENESS Environmental Scanning: gather the information needed to understand and analyze the firm’s social. Types of outcome are determined by the linkages. her outcome concepts include (with several later revisions. and. Jamali and Mirshak (2007) have attempted to combine the Carroll and Wood CSP frameworks to examine CSP practices among Lebanese companies. compensated and rectiﬁed (or not) are deﬁned by the processes of corporate social responsiveness. which refers speciﬁcally to the duties of individual employees as moral agents. and effects on society at large (Wood 1994). Figure 2. legal. programs. in a major reinterpretation of Carroll’s ‘discretionary’ category. derives from the improper juxtaposition of CSP (deﬁned as ‘doing good’) and FP (deﬁned as ‘doing well’) as competing claims upon organizational resources and managerial attention. --> --> Effects on the natural and physical environments. The search for CSP–FP relationships. represent a critical missing piece in earlier CSP models. conceived of properly in the Wood (1991) framework. Stakeholder Management: active and constructive engagement in relationships with stakeholders. a ﬁrm’s FP is seen as one dimension of its overall social performance – not as a competing or contrasting type of performance. as did those of Carroll and of Wartick and Cochran. not mechanistic and closed-systems views. stakeholder management and issues management. a ‘discretionary principle’. stakeholders and the ﬁrm. and act on the social or political issues that may affect it significantly. focusing on the impacts and outcomes for society. Effects on social systems and institutions. effects on stakeholders. but rather speciﬁc categories of processes for environmental scanning. Corporate social performance. Outcomes. then.
discussed below. Next. Otherwise. as shown in Figure 3. followed (for businesses) by economic responsibility. a particular business obeys those laws that pertain to its existence and operations (Carroll’s legal domain) and responds to its stakeholders’ needs and interests (Wood’s principle of public responsibility). arguing that moral responsibility is primary for all human institutions. In short. if doing so boosts proﬁts or saves the company from economic harm. This is not surprising. Level of analysis. if managers’ attention is consumed with economic responsibilities. business in general earns its right to be a social institution by providing the bulk of economic goods and services as well as wealth creation for society (Carroll’s economic domain and Wood’s principle of legitimacy). using Wood’s (1991) redeﬁnition of Carroll’s ‘discretionary’ category as managerial moral agency. (It is important to note that Carroll has always denied that this is a correct interpretation or would be an outcome of his model. forthcoming). Finally. there would be no reason to mention business’s social legitimacy. A basic premise of Kang’s analysis is that no speciﬁc business organization has a right to survive. and corporate responsibilities tent with Carroll’s model than with Wood’s. then society rightly will eliminate it. it is too easy to ﬁnd justiﬁcations for violating ethical standards and even the law. Fundamentally. followed by legal compliance. given Wood’s contention that Carroll’s model does a better job than hers of showing how managers actually think about CSR and CSP. In addition. the institution of business will support the delegitimization © 2010 Blackwell Publishing Ltd and British Academy of Management . Kang ﬁrst critiqued the ‘nomological hierarchy’ implicit in Carroll’s ordering and weighting of social responsibility domains on the grounds that. Kang argued that businesses were free to make money only after they had complied with ethical and legal requirements. it would be a fraudulent concept. Kang ﬂipped the Carroll model upside down. Kang (1995). corporate identity.) Kang then argued that corporate philanthropy was indeed ‘discretionary’ and could not legitimately be considered a responsibility of business. an important extension of Wood’s (1991) model was developed by Kang (1995. see also Kang and Wood 1995. Extensions of Wood’s CSP model As mentioned above. shows that Caroll’s responsibility categories have a nomological architecture which suggests economic responsibilities as the primary concern of companies and their managers – a view that can preclude CSP considerations when put into practice. At the organizational level of analysis. if it cannot be proﬁtable in legal and ethical ways. moral agency or discretionary responsibility relates to Wood’s principle of managerial discretion and operates at the individual level of analysis. at the institutional level of analysis. Kang’s (1995) ﬁnal major contribution was to link the new ‘Carroll upside-down’ hierarchy of business responsibilities to Wood’s three principles of CSR and to make explicit the relationship of CSR domains to levels of analysis.Measuring Corporate Social Performance 55 Figure 3.
Swanson explicitly adds normative dimensions. Swanson has continued to develop and reﬁne these © 2010 Blackwell Publishing Ltd and British Academy of Management . which it deﬁnitely is not. expressed in explanatory text. 514). not communicated to the executive ofﬁce. compared with ‘value-expanded external affairs’. deﬁned as ‘the possibility that organizations can select and recall many values for learned responses to their environments’ (p. Within every domain of corporate social responsibility. and that these social processes be formulated in terms of ethical values. CSR micro-principles. ‘normative myopia’. Wood’s (1991) CSP model was meant to be a descriptive consolidation of many threads of extant theorizing and conceptualization. and this is where Swanson makes her best contribution. explicitly examine managers’ speciﬁc positive duties. Wood’s discretionary principle reads as follows: ‘Managers are moral actors. compared with ‘value-attuned responsiveness’. drawn largely from rights and justice theories. she is wrestling with the difﬁculty of integrating descriptive (‘what is’) and normative (‘what should be’) approaches to CSP. p. Swanson’s argument centers upon the social control aspects of CSR (Jones 1983). in her view. it is true. Her revised categories of interest (comparable with Wood’s principles. and she misreads Wood’s discretionary principle as Carroll’s philanthropy. or the inability of a ﬁrm ‘to adapt effectively to social values that diverge from its own narrowly conceived ones’ (p. organizational. Swanson proposes that decisionmaking processes be added explicitly to the model. that decision-making be considered a social process rather than an individual one. they need to incorporate positive duty across their institutional. pro- D. 56–57).56 of rogue businesses because its own institutional legitimacy is at stake. deﬁned as the ‘perception that values and facts are inseparable in policy formulation’ (p. p. from being an effective way of answering the question of how businesses can contribute to the development of a ‘good society’: First. Wood cesses and outcomes) are CSR macro-principles. Swanson (1995) apparently did not believe that this was sufﬁcient to reﬂect the importance of business ethics. misconstrued. they are obliged to exercise such discretion as is available to them. the perception of ‘values as irrelevant to a factual diagnosis of policy’ (Swanson 1999. she also originated a series of paired contrasting and theoretically useful terms: 1. toward socially responsible outcomes’ (Wood 1991. 514). Second. they need to address the moral motivation that supports both negative and positive expressions of duty. including social contexts. or ‘detection of a wide range of social values by external affairs employees and the transmittal of this information to other organizational decision makers’ (p. said to be ‘the reinforcement and maintenance of value expansion in organizational culture’ (p. making the CSP model into a more comprehensive statement of what should happen with respect to CSP. Swanson extended her model in 1999. Within each category.J. and it did explicitly include consideration of moral agency in the principle of managerial discretion when it redeﬁned Carroll’s category of discretionary responsibility. and so she proposed the incorporation of a ‘duty-aligned perspective’. 516) ‘value-neglect responsiveness’. 2. Swanson’s critique revolves around three major points about Wood’s model that keep it. along with the standard (and often assumed) utilitarian view of economic explanations of the ﬁrm and its responsibilities. In this article. In subsequent publications with colleagues. compared with ‘value-discovery culture’. 515) ‘value-inert culture’. 513). 696). p. Her problem in this paper is somewhat different: instead of being concerned about the trade-offs and justiﬁcations between economic and duty-aligned perspectives on CSR. compared with ‘normative receptivity’. was that managers have choices in everything they do and cannot legitimately choose socially irresponsible acts on grounds that they are forced to do so or have no other choice. and individual levels. 3. 516). which occurs when ‘social values perceived as incongruent with the status quo would be de-emphasized. deﬁned as ‘the reinforcement and maintenance of value circumscription in the informal organization’ (p. Wood does not. The idea. motivations and considerations of possible outcomes. corporate culture and social impacts (pp. 52) To overcome these perceived deﬁciencies of Wood’s model. Here she uses the concepts of ‘value neglect’ to analyze the difﬁculties and ‘value attunement’ to highlight the advantages of such integration. 514). the principles need to hold social control to normative standards. 4. (Swanson 1995. or simply not detected in the ﬁrst place’ by corporate actors (p. 516) ‘value-restricted external affairs’. Finally.
1995) tackled the challenge of sorting out the descriptive from the normative in CSP by applying the method of systematics to the three perspectives on CSR offered by Frederick (1978. As an example. e. hired and retained within given time periods impacts or terminal effects. Then. Mitnick then deﬁnes ‘normative commitment’ as ‘the degree to which the actor(s) in question adopt an explicit normative statement (ethic. commonly known as CSR1 (corporate social responsibility). outcomes production. Mitnick ﬁnishes his analysis by pointing to the theory of normative referencing – which includes processes of selection.g. normative principle) with normative content sufﬁcient to guide or choose among proposed behaviors of the actor(s)’ (p. Mitnick (2000) expanded his systematic analysis to the issues of CSP measurement. hiring and retention practices for minorities outputs (or activity performance). Mitnick suggests that there are these points of entry into CSP measurement: one can assess performance by measuring • qualities of the ﬁrm’s guidance component. indexed or combinatory performance. which could include assessments of mission statements. numerical hiring and retention goals for minorities the ﬁrm’s production processes. Mitnick (2000) offers an extensive set of propositions concerning what researchers might expect to ﬁnd if they examined and measured CSP systematically. or ‘placeholding’.Measuring Corporate Social Performance concepts (Orlitzky and Swanson 2002. In his paper. a placeholding instruction tells you that something is expected and you need to ﬁnd out what it is. CSR2 (corporate social responsiveness) and CSR3 (corporate social rectitude). Additional propositions suggest that responsiveness will also be affected by the actor’s preference for and attributed importance of adopted normative statements. some aggregate measure of performance with respect to minority hiring and retention (p. 429. 25). performance measurement. CSP is a complex system. Using the guided systems model.g. 2006). law. is not necessarily something to be simpliﬁed. commitment. 1987. To illustrate. he made the important point that the search for simplicity in CSP measurement was misguided. accounting and adjustment – as a way of framing the adoption and operations of CSR. value. administration. the greater the responsiveness to social concerns’ (p. etc.g. with the underlying assumption being © 2010 Blackwell Publishing Ltd and British Academy of Management . Orlitzky et al. the more the normative engagement and the less the normative placeholding. code of conduct. the centrality of adopted normative statements in the actor’s community (or organization). the number of minorities recruited. Mitnick (1995) sorts these according to whether they are ‘contentful’. as in ‘act toward your stakeholders as your values suggest’. A contentful instruction tells you precisely what is expected. e. Mitnick (1993. • • • • • Never content merely to list theoretical elements. and perceptions and beliefs about performance and its valuation. after more elaboration. Mitnick argues. 1994). The method is to unpack the conceptual elements of the theory or approach in question and then to reassemble them according to an underlying theory logic. Implications of normative vs structural CSP If CSP continues to develop as an explicitly normative concept. e. is it good CSP for a company to reduce its pollution emissions just because the government says it has to? Is it good CSP for a company to intend but fail to enhance worker safety? Is it good CSP if issues management processes are in place which result in the company winning its self-interested points in legislative or regulatory lobbying? Complexity.g. and the actor’s ﬁduciary role vis-à-vis adopted normative statements.) for actual behavioral standards (p. or ‘normative placeholding’ by adopting a standard that tells the actor where to look (values. Along the continuum of normative commitment. and its measurement requires complex tools. 23). examples added). within CSR3 there are various normative instructions. codes of conduct. 24).g. instruction. e. separately dis- 57 cussing three metrics: valuation (what we value). recruitment. implementation. Mitnick suggests a proposition using these concepts: ‘The more that a social setting is characterized by normative commitment. he uses a guided systems model (which he says can easily subsume Wood’s 1991 model) and examines the different interpretations of ‘good’ or ‘bad’ CSP that would be based on measuring one aspect or another. board or top executive directives system inputs. For example. an actor may exhibit ‘normative engagement’ by adopting a standard that actually guides behavior. satisfaction levels or performance levels of minority employees compared with non-minority employees overall. that is. as in ‘never harm your stakeholders’. e.
58 that corporations should engage in doing good. numerous CSP scholars have sought to justify their broad.g.J. stakeholders. among others: • • Debates will continue unresolved about what exactly ‘doing good’ means. D. or not. government agencies and branches. it emphasized the role of individuals and took the focus off organizations. meaningless and impossible to try to separate them. services and wealth. Wood ties is what Freeman (1994) and Wicks (1996) refer to as the ‘separation thesis’: the mistaken idea that one can make business decisions distinct from ethical ones (see also Harris and Freeman 2008). Friedman 1962) is that organizations specialize to serve the function(s) of their home institution. the educational institution created and transmitted knowledge. and society is most well off when organizations do not try to accomplish crossfunctional purposes. stakeholders and society. Research efforts will move away from CSP–FP links. as they see ﬁt and in whatever domain they consider relevant. Philosophers will be deeply involved in these debates. there are certain outcomes that can be expected. businesses should not try to serve governance functions. In Mitnick’s (2000) terms. economic) interests of their owners is a derivative of this structural–functionalist institutional division of labor. institutions and social systems. the good society. ambiguous or weak results. These efforts will be brieﬂy reviewed in the next section. Business ethics scholars were not much concerned with CSP. schools. who developed the crisp theoretical idea that societies consisted of relatively distinct (if structurally amorphous) institutions which performed particular functions: the economy produced and distributed goods. The core argument (e. religion provided sustainable meaning. enact and evaluate ‘responsibilities’ to individuals. adopting an organic open-systems view of corporations in their environments and a place-holding view of CSP in particular. the family reproduced and socialized. Each institution was represented by a class of organizations that carried out its work for society: businesses. Parsons 1951). including these. Research in business–society interfaces such as political action. These scholars point out that all business decisions have ethical implications and that it is fruitless. and places of worship. Given the prevalence of this single-minded view of corporate purpose and the resulting ‘separation thesis’. social science would provide the placeholders and describe empirically the content. interesting or beneﬁcial to the company or to themselves.) The introduction of ‘social’ into the corporate performance concept most likely derives from the inﬂuence of 1950s structural–functionalist theorists (e. family and household units. the polity governed and redistributed. society and the company itself. open-systems stance on corporate responsibility by trying to uncover a statistical relationship between CSP and ﬁrm FP. contributing essays on the nature of the good. Others have sought to establish a ‘business case’ for CSP – reasons for engaging in responsible behavior that might be convincing to a top management team. and the outcomes and impacts that are experienced as a result by individuals. while philosophy would explore the meanings and values attached to both the place-holders and the content. it is important to be clear that • • • But if CSP scholars shift their view to an explicitly structural and theoretical focus. towards theory-based hypothesis development and testing about the speciﬁc duties faced by speciﬁc types of companies. • • Why is it that scholars and managers alike think in terms of ‘social’ vs ‘ﬁnancial’ performance? The trade-off that Aupperle (1984) found in the way managers think about economic and ethical responsibili- © 2010 Blackwell Publishing Ltd and British Academy of Management . CSP scholars may even begin to capitalize on their collective breadth of expertise to construct a new theory of the ﬁrm. and so we shall leave most of their scholarly developments to another review. For now. The later-blooming idea that publicly owned businesses exist to serve the rational (i. (Ethics was a popular addition to business and society thought in the 1980s but. with the same mixed. the good corporation. a different set of outcomes can be expected: • Sets of propositions will develop that articulate how corporations identify. the good person. by and large. the processes by which they respond to those duties. governments should not try to serve economic functions. Meanwhile. strategic management and core functional operations will not be folded into work on CSP. social scientists will continue to research CSP–FP links.e.g. Business leaders will continue to ignore the scholars and ‘do good’. and so on. Thus.
by Margolis et al. Changing the questions. McWilliams and Siegel (2000). The moral underpinnings of CSP continue to be illuminated. the measurements themselves are presented in the section following. Lee (2008. For unbelievers. direct strategic connection made between the CSR behavior in question and corporate proﬁts (what McWilliams and Siegel (2001) call ‘proﬁtmaximizing social responsibility’). Supporters want to show that CSR is good for business in ways that reﬂect directly on the bottom line. but rather towards illuminating the structures and processes that mark functional and dysfunctional economic systems. as FP is a subcategory of CSP. unpredictable impacts of the larger environment. has dramatic consequences for measurement and method. (2003) and. measurement is all important because the question is not ‘how best to be responsible’ but ‘will it pay us to try?’ So. Thompson’s (1967) organization theory might suggest that managerial perceptions about the relative importance of various types of activities are ways of attempting to buffer the core functions from irregular. Corporate social performance scholars. This is the primary perspective driving instrumental approaches to CSP measurement. and here is where we ﬁnd most extant measures of CSP. And. The end results are wishy-washy at best – ‘doing good’ does not seem to hurt companies most of the time. Nothing could be further from the truth. schismatic view of CSP as something a ﬁrm ‘should’ do in addition to striving to meet its economic goals. Orlitzky et al. If one makes a moral argument for CSP. Pava and Krausz (1996). outputs and outcomes of behavior. And. by extension. Instrumental and ‘business case’ approaches to CSP 59 A detour into CSP–FP research The searches for a CSP–FP relationship and a ‘business case’ for CSP activity are both grounded in a normative. Grifﬁn and Mahon (1997). if one accepts the ‘strictly economic’ functional view of corporations. and ‘causing harm’ sometimes does hurt – but these results do not point to a need for more research on the question. studies. for example. Detractors want to show that CSR is costly and beyond the legitimate interests of corporations unless there is an open. one must ﬁnd an economic justiﬁcation for any behavior or expenditure that is not directly and obviously tied to those economic functions. environmental effects will occur. but if the argument is instrumental. the ‘business case’ for CSP is irrelevant. generally over the longer term. instrumental hypotheses abound. need to document that perceptual buffering is the organizational equivalent of psychological self-deception. but as strategic resources to be used to improve the bottom line performance of the corporation (McWilliams et al. whether managers see them or not. case descriptions and polemics. Ullmann (1985). the assumption is that CSP is something a ﬁrm ‘should not’ do because it takes valuable resources from the ﬁrm’s principal function. for CSP is not deﬁned in Wood’s model as ‘doing good’. including very substantial and informative review articles by Cochran and Wood (1984). Aupperle et al. These implicit views have generated hundreds of essays. Wood agrees that CSP scholarship should not be oriented towards company survival. (2007). The instrumental approach to CSR and CSP (Donaldson and Preston 1995) underlies the discussion about ‘the business case’ for CSP. Lee’s (2008) review of CSR theories includes a discussion of the ‘enlightened self-interest’ position on CSR. but for an abandonment of the CSP–FP question in favor of more theoretically sound and powerful ones. measurement is irrelevant except perhaps in the very practical sense of helping managers ‘get the most bang for their CSR bucks’. With Kang (1995). This section overviews the results obtained in these searches. most recently. Management scholars have been interested in ﬁnding CSP–FP links so as to justify their approval or disapproval of corporate responsibility behaviors. Yet measuring moral content is much more difﬁcult than measuring observable inputs. argue that Waddock and © 2010 Blackwell Publishing Ltd and British Academy of Management . particularly those suggesting a causal relationship between CSP and FP. Margolis and Walsh 2001. (1985). p. as we shall see in the ﬁnal section of the paper. 2006)’.Measuring Corporate Social Performance CSP–FP relationships are illogical in Wood’s CSP model. throughputs. Wood and Jones (1995). 2003. Frooman (1997). 62) boldly and incorrectly asserts that ‘corporate social responsibility is no longer conceived as a moral responsibility of corporate managers for greater social good or executives’ discretionary expenditure that could hamper a corporation’s proﬁtability. but rather as a set of impacts and outcomes that happen whether a business intends it or not. which merely proposes that corporations engage in CSR activities because they believe it to be in their best interests.
He concluded that there was no discernable relationship between CSP and FP. in fact. using the Kinder. growth in earnings per share. but the theory that would draw out the logical connections and be amenable to empirical testing is not yet there. or social disclosure as an assumed surrogate. among the worst offenders in terms of pollution and other harmful outputs (Fry and Hock 1976). Wood students. or various efforts (by D. Lee 2008. and in part because there was no good reason – no theory – to connect the various measures of CSP and FP. operating earnings/ sales. using Moskowitz’s (1972. keeping employees motivated. developing technologies that yield competitive advantage. Data in search of a theory Ullmann’s (1985) landmark article on CSP–FP measurement was entitled ‘Data in search of a theory’ and.g. The ‘business case’ approach is narrower than the search for a CSP–FP relationship. Reviewing 31 empirical studies of the 1970s and early 1980s. e. Lydenberg. Typical justiﬁcations of a business case for CSP include the value of a good reputation and stakeholder goodwill. © 2010 Blackwell Publishing Ltd and British Academy of Management .J. which washes out the CSP–FP relationship when included in the econometric model. it is not surprising that no consistent relationships were found. reducing ‘campaign risk’ (being targeted by external activist groups). 3. Moskowitz’s reputational ratings and the earnings/sales ratio (Cochran and Wood 1984). operating earnings/assets. is ﬂawed because they did not account for company research and development investment. etc. and from there to FP. or the CEP’s pollution performance index. ﬁnally. (For recent expressions. one can only wonder. and enhancing the local quality of life for employee retention purposes. testable links from CSP activities to outcome such as these. 1975) reputational index. Weber 2008. Mallott (1993) discovered that managers talk about social responsibility and irresponsibility as distinctly different phenomena. cost reductions and operating efﬁciencies. including voluntary corporate social reporting and mandatory pollution reporting (from 1973 onward) and Ernst & Ernst’s rankings of corporate pollution disclosure ‘social performance’. Ullmann discerned three categories of measures: 1. ‘social disclosure’. net income. reliable measures were not available. reducing the threat of burdensome regulation. Most of the 31 studies examined by Ullmann (1985) used small samples of companies and. with the variety of measures represented. in part because good data and valid. Domini (KLD) social responsibility ratings (discussed below). excess market valuation. the Council on Economic Priorities (CEP). 25 years later. or between the CEP pollution performance index and normalized P/E ratios (Fogler and Nutt 1975)? Ullmann’s survey of early empirical works revealed that attempts to relate social disclosure to social performance were motivated by the desire to ﬁnd a readily available surrogate (social disclosure) for the more difﬁcult and elusive variable of social performance. And. say. net proﬁt margin and beta. despite some evidence that companies high on social disclosure were. see.) to rank corporations by social responsibility reputation. 2. for scholars bent on either of these instrumental approaches. while assuming that disclosure was an appropriate surrogate for performance. Why this would be so. or corporate selfdescriptions in returned surveys ‘economic performance’. attempts to relate social disclosure to economic performance were also motivated by this latter desire. So. but their result illustrates the attempts to bolster instrumental CSP and eliminate duty-bound versions. the question remains of how to draw measurable. median return on equity. better risk management. competitive advantage through product differentiation and/or premium pricing capability. the price/earnings ratio.60 Graves’ (1997b) ﬁnding of a positive relationship between CSP and FP. De Schutter 2008. measured for various selected years by stockholder returns. One continuum or two? A central problem of discerning CSP–FP links is that good CSP and bad CSP do not appear to be on a single continuum. it aims to provide convincing arguments about why it is in an organization’s best interest to be socially responsible. Attempts to relate social performance to economic performance were undertaken largely in the hopes of establishing a positive relationship that might be persuasive to business leaders who were skeptical about the value of CSP. Why would there be any relationship between. the search is still on. opening new markets.) These all seem to be common-sense outcomes of socially responsible corporate activities.
Harm can result from lone actors who sabotage safety controls or are careless or reckless.Measuring Corporate Social Performance Irresponsible acts cause unjustiﬁable harm or unacceptably increase risks to certain stakeholders. 227). for example. Bromiley and Marcus (1989) and Davidson and Worrell (1992). but this is not necessarily true. behaviors resulting in harmful outcomes) has in many cases shown clear and direct negative relationships with FP in terms of the gap between actual and expected stock price perfor- 61 mance in event studies. 232–233). reviewed by Wood and Jones (1995). Again. A single company can have a wildly divergent record on responsible and irresponsible acts. support for foreign rather than domestic workers. studies of market reactions to government-imposed taxes or to airplane crashes were not included. violation of societal rules and expectations. Wood and Jones (1995) point out that the consistent ﬁndings in these studies are wellgrounded in standard economic theory of the ﬁrm. hitting a chemical storage facility and causing an explosive release of toxics that harm nearby residents. but studies of market reactions to tax evasion penalties or to air safety violations were included. irresponsible rather than responsible processes. these ﬁndings are quite consistent with commonly accepted economic explanations of the direct and indirect effects of negative events on stakeholder trust and willingness to continue buying from or investing in the offending company. As we shall see in the next major section. local employment practices. Frooman’s statistical analysis led him to conclude that ‘abnormal returns [the difference between expected and actual returns following the event] are signiﬁcant and negative across the studies. harms to local businesses. employee practices (wages. These early studies. In addition. beneﬁts). or from the actions of others unrelated to the organization. FAA or FTC standards (pp. selling offensive material.) Costs of bad behavior Bad CSP (i. causal attributions can be very difﬁcult. and then compare the estimated value with the actual value of a stock following some critical event. working conditions. Responsible acts range from ordinary ethical behavior to extraordinary acts of beneﬁcence. These event studies are showing that shareholder wealth is decreased when ﬁrms act in a socially irresponsible or illegal manner’ (p. Pruitt and Peterson (1986). A number of early event studies using involuntary product recalls as a measure of bad CSP showed consistently negative returns to a company’s stock value. women and older consumers were more likely to judge retailers harshly for such behavior. One can attribute harmful outcomes to irresponsible corporate behavior. price-ﬁxing. A single act can be responsible towards some stakeholders and irresponsible towards others. are typically observable but not necessarily attributable to irresponsibility. fraud. Qualitative interviews elicited a large number of examples of bad behavior. (1988). thus. which he deﬁned as ‘an action by a ﬁrm. So.e. or from ‘acts of God’ that cannot be avoided or planned for. misrepresentation. product recalls are expensive and have a direct impact on proﬁtability and presumably an indirect impact as well in terms of reducing customer conﬁdence and willingness to buy. questionable sales practices. (The authors include their entire eye-opening list of bad behaviors as an Appendix. illegal pollution and violation of OSHA. (2008) to develop an instrument for assessing consumer evaluations of retailers’ socially irresponsible actions. mandated recalls for substandard or dangerous products. Frooman only examined event studies in which the CSR event was chosen by the company. even if good and bad CSP are measured on different scales. (Imagine. discrimination. Frooman chose studies that examined stock prices before and after a ‘CSR event’. tax evasion. which the researchers categorized in terms of harms to the natural environment. Event studies estimate the future value of a stock based on past performance. which the ﬁrm chooses to take. Hoffer et al. who nevertheless manage to cause harms traceable to it. an interesting study was conducted by Wagner et al. 241). dishonesty. for example. As an example. © 2010 Blackwell Publishing Ltd and British Academy of Management . include Jarrell and Peltzman (1985). based on the assumption that markets immediately absorb all relevant information into stock price. that an airplane vaporizes a ﬂock of geese and crashes. Frooman (1997) applied statistical meta-analysis techniques to 27 event studies examining stock market reactions to socially irresponsible or illegal corporate actions. The complete list of event types studied included antitrust violations. and questionable or unfair pricing policies. Among their respondents.) Harms. Furthermore. that substantially affects an identiﬁable social stakeholder’s welfare’ (p. CSP research – when it considers outcomes at all – tends to emphasize harms rather than beneﬁts.
no matter how much good was done for others (see. Recent meta-analyses of this literature. Margolis et al.62 Rewards of good behavior Good CSP. although numerous attempts have been made. Data therefore tend to be based on surrogate measures for actual social performance. considering all results to be of equal quality. No manager ever thinks. Still other problems are methodological. Orlitzky et al. the theoretical problems remain of proposing exactly why a particular measure of CSP should be positively related to a particular measure of FP. there is no compelling evidence that good CSP is too costly. they conclude that ‘the universally positive relationship varies (from highly positive to modestly positive) because of contingencies. Their complex and sophisticated analysis. has not been consistently linked to FP in data-based studies. (Speciﬁcs follow in a later section of this paper. market measures of CFP. thus potentially negating attributions of responsibility or ethics because the beneﬁcent acts would not be performed absent the self-interested result. 22) as follows: ‘After 35 years of research. e. 423. They conclude (p. the preponderance of evidence indicates a mildly positive relationship between CSP and corporate ﬁnancial performance. Finally. using case data from United Way and political action committee in-company contribution campaigns. which takes into account the possible contaminations of sampling error. nevertheless. results in the conclusion that ‘there is a positive association between CSP and CFP across industries and across study contexts’ (p. attitudes are assumed to be surrogates for behaviors. Margolis et al. processes and outcomes. (2007) also recently conducted a meta-analysis of 192 results from 167 CSP–FP studies for which they could convert the study’s results into an effect size r. Wood really going on across the large volume of studies attempting to ﬁnd a relationship between some measure of CSP and some measure of FP. 423). instead. including Belkaoui’s (1976) ﬁnding of a temporary positive relationship between the disclosure of pollution data in annual reports and a company’s monthly average residuals. measurement error. Two recent meta-analyses of empirical literature help us to understand what is D. (2003) performed a statistical metaanalysis of 388 results (‘effects’) from 52 studies of CSP–FP relationships for which they could convert the study’s results into an effect size r. clever manipulation or even suppression of the voices of the injured. responsible conduct often results in nothing more than a lack of visible harmful outcomes.) Another problem is that acts of responsibility or beneﬁcence. Their statistical analysis did not take into account the types of contaminations and methodological issues illuminated by Orlitzky et al. small sample sizes are used. This approach may account for their ﬁnding of a smaller overall positive relationship between CSP and FP than that obtained by Orlitzky et al. unsuitable statistical analyses are conducted. In addition. report a clear and consistent (if modest) positive relationship between CSP and FP. and the preponderance of evidence points to the opposite conclusion: it is costly to be socially irresponsible. Measuring structural CSP Agle and Kelley (2001). Both demonstrate a consistent and positive relationship between CSP and FP. however. disingenuous or outright false – are substituted for objectively observable outcomes and impacts. such as reputation effects. no matter how much good is done. Their argument supports Wood’s (1991) position that social responsibility is not accidental or just a by-product or add-on to a company’s search for good © 2010 Blackwell Publishing Ltd and British Academy of Management . self-reported company data – which may be incomplete. Causal pathways are poorly speciﬁed. or CSP disclosures’ (p.’ So. One signiﬁcant problem in determining a positive CSP–FP link is that ordinary responsible or ethical behavior is typically not rewarded or even noticed. however. time lags are not considered. ‘Wow! My team was really responsible this month! I’m giving them a nice bonus and letting all the stakeholders know!’ Ethical. (2007) did ﬁnd a consistent positive relationship. may be performed for purely self-interested reasons.J. but such a lack might be attributable instead to luck. (2003). have argued that measurement of CSP should incorporate all three of Wood’s domains: principles. (2003). Prince and File 2001). they adopted a one-study-onevote approach. Some truly incomprehensible results have been published. lag failures and more. emphasis in original). and so on. Mathematical meta-analysis is a technique that is gaining prominence as a way of summarizing the results of disparate studies within a single broad domain of research.g. possible mediating and moderating variables are ignored or poorly chosen.
and the outcome might be satisfactory for some stakeholders. How would CSP research be different if it conformed to the structural dimensions of Wood’s CSP model? This section considers the kinds of measures that have been and could be used to test propositions relevant to or resulting from Wood’s (1991) structural CSP model. They are shown to 63 illustrate the uses of various types of CSP measures in the literature. It is more than possible that I overlooked some studies that used measures different from those noted here. 2003. p. and observable outcomes as they relate to the ﬁrm’s societal relationships’. The search for relevant literature began with a search of online bibliographic databases (ABIInform. Swanson (1995. news stories and journalistic essays were eliminated. EBSCO. Because this paper’s primary focus is on CSP measurement. For example. industry-based or engineering sources. This example illustrates the complexity of the CSP measurement problem. But citations do not tell the real story of inﬂuence. but a process that involves coercing ‘voluntary’ contributions could hardly be considered socially responsible: it is an unwise use of power. Additional articles were located by mining the bibliographies of meta-analyses (especially Frooman 1997. Margolis et al. It should be clear to any knowledgeable reader of CSP literature that extensions. there are several structural CSP categories that are notably empty or almost empty of literature © 2010 Blackwell Publishing Ltd and British Academy of Management . which elicited terms such as ‘corporate social performance’. First. Third. The reliability of these groupings may reasonably be questioned. I did not have access. critiques. 2003. processes of social responsiveness. I did not consider working papers. summary reports of research. helpful. And. Each article was examined to determine the measure(s) of CSP employed. Some caveats are in order. parsimonious. many studies make use of the Fortune ‘Most Admired’ rankings and the KLD Socrates database and its predecessors. 1995. 693) deﬁnition of CSP as: ‘a business organization’s conﬁguration of principles of social responsibility. 1999) and Mitnick (1993. (2007) and Frederick’s classic paper from 1978. Wood’s 1991 CSP model does provide defensible structural categories that could reasonably guide CSP measurement development. for example. Nevertheless. A second caveat is that the grouping of measures by CSP structural category is admittedly based on my own perceptions and understandings. and it also violates the principle of moral autonomy for workers who should be able to make their own philanthropic and political contribution choices. I have listed enough studies using these two measures to show that they are among the more popular measures. tests or other actual research uses of Wood’s model are comparatively rare. Orlitzky et al. Proquest) for empirical literature with the key terms ‘corporate responsibility’ and ‘corporate social’. Most CSP studies give a nod in the direction of theoretical CSP developments. Duplicate listings. and yet comprehensive conceptualizations of CSP’. 411) defend their choice to screen literature by conformance to Wood’s model with the claim that Wood’s (1991) deﬁnition is ‘one of the most inﬂuential. Margolis and Walsh 2001. particularly since some measures are very difﬁcult to locate as a responsive process or as an outcome. I listed enough to establish a pattern of use. 2007. medical. and may indeed be relevant in both. Citation analysis suggests that Wood’s 1991 article is indeed among the most often-cited works in the ﬁeld. p. Orlitzky et al. Orlitzky et al. and policies. programs. which was eventually published in 1994. except for Margolis et al. The CSR principle of public responsibility to stakeholders might be met in such a case. The measures and the studies using them were then grouped according to their ﬁt with one or more of Wood’s structural CSP categories. They write. for example. and Wood and Jones 1995) and a ‘snowball’ approach of adding relevant articles found through other means. technical. Complex phenomena are rarely explained by simplistic theories and instrumental approaches. as potentially modiﬁed by Kang (1995). (2003. and violates the principle of legitimacy.Measuring Corporate Social Performance FP. I did not list all studies using a particular measure. including suggestions from reviewers. I did not search the literature in scientiﬁc. of the coercion experienced by many employees to contribute to their company’s United Way or PAC campaigns. Subsequent scholarship must take up the question of how to organize the results into a comprehensive and meaningful theory of CSP. 2000). ‘corporate social irresponsibility’ and ‘corporate social accountability’. to a number of European journals. ‘corporate social responsibility’. the search for relevant literature was extensive but not exhaustive. and then choose a CSP measure with minimal or no reference to any of those developments. the studies cited are not discussed in terms of their ﬁndings. Gage. (2003) subjected the CSP–FP literature examined in their meta-analysis to a test of whether each study’s CSP measure ﬁt with Wood’s (1991.
and pollution outputs and impacts. The ﬁndings of these literatures are waiting to be brought into the CSP fold. 2000 Ruf et al. and the accu- racy and reliability of observers. and this can happen when scholars stop focusing on trying to prove a ‘business case’ or a ﬁnancial incentive for responsibility. Empirical literature using measures that span more than one CSP category A number of CSP studies use measures that cannot readily be separated into principles. 2006 Lydenberg and Sinclair 2009 Chatterji et al. 2005 and measures. the appropriateness and power of measures rests on the quality of relevant theory. 1999 Johnson and Greening 1999 Greening and Turban 2000 Waddock et al. managerial decision-making. Because of these caveats. 1993 Graves and Waddock 1994 Thomas and Simerly 1995 Sharfman 1996 Waddock and Graves 1997b Grifﬁn and Mahon 1997 Turban and Greening 1997 Berman et al. 2009 Jamali 2008 Mahoney and Roberts 2004 Igalens and Gond 2005 Van de Velde et al.J. Wood Environmental reports Annual report social or environmental disclosures Company self-report and objective data Company self-report and objective data Multi-faceted CC measure KLD ratings Delphi methodology. expert panel 3rd-party assessment Multi-faceted CSP measure: Stiller’s Ethical Performance Scorecard (EPS) Canadian Social Investment Database (CSID) ratings ARESE ratings Vigeo ratings (Europe) 3rd-party assessment 3rd-party assessment 3rd-party assessment 3rd-party assessment Epstein et al.64 Table 1. The most widely used types are shown in Table 1. Multiple categories of action are considered in a way that makes it impossible to consider the measure as a responsive process or as an © 2010 Blackwell Publishing Ltd and British Academy of Management . corporate political action. the literature survey that follows should be considered illustrative rather than exhaustive. processes or outcomes. employee relations practices. 1986 Wiseman 1982 Lerner and Fryxell 1988 Davenport 1997. on organizational culture. There are vast literatures. Multi-category CSP measures CSP variable Social reports Type Company self-report and objective data Examples D. multi-dimensional construct that includes FP as one variable among many others that are relevant. it means that such literature has not typically been thought of as CSP-relevant and is not found in searches using CSP keywords. 1976 Rey 1980 Antal 1985 Dierkes and Antal 1986 Stanwick and Stanwick 2006 Belkaoui 1976 Ingram 1978 Ingram and Frazier 1980 Freedman and Jaggi 1982. the observability of relevant phenomena. suggestive rather than deﬁnitive. The studies cited in Table 1 that use social and/or environmental reporting as their CSP measure are doing so in a broader way than studies (cited in a subsequent section) that merely ask whether such a report has been issued. for example. normative principles of corporate ethics. and focus instead on CSP as an overarching. This does not mean that there is no literature available. 2000 Hillman and Keim 2001 Waddock and Graves 2006 Deckop et al. Ultimately.
a single measure that captures all the components accurately. KLD. Then positive screens were introduced. Thus. 2000) corporate citizenship (CC) measure was developed by a panel of experts in CSR and performance. hiring and promotion of minorities and women. only a few studies are listed in Table 2. In 1988. The principle of legitimacy is taken directly from the work of Davis (1973. and pollution performance. will tend to lose it. Inc. percentage of women and minorities in higher management and on the board of directors. for KLD Research & Analytics. employee relations and support for sustainable or organic agriculture. By 1996. 314).’ This principle operates at the institutional level of analysis. Her approach explicitly tracks Wood’s (1991) CSP model and adds. the key idea here is that every business ﬁrm has certain functional obligations as a member of the business institution. as do the social and environmental reporting studies. began by assessing only US-based ﬁrms.Measuring Corporate Social Performance outcome (e. It states: ‘Society grants legitimacy and power to business. consumer relations. but ﬁrst screened out companies that produced ‘sin and violence’ products such as tobacco. KLD added positive screens to their ratings database. KLD and similar ratings are sometimes used as aggregate measures of overall CSP. KLD included more than 800 ﬁrms in its assessments and was releasing the database for scholarly research. community relations). such as percentage of pretax earnings given to charities. These multi-dimensional rating schemes incorporate assessments of phenomena that can be used to illustrate company commitment (or lack thereof) to CSR principles. environmental practices.) began offering a mutual fund of US companies which mirrored the Standard & Poor 500 except for being screened for social responsibility factors. KLD’s data collection and assessments have become increasingly extensive and sophisticated (see Lydenberg and Sinclair 2009). because of respondent information. charitable giving. including assessments of companies’ environmental records. Domini and Company. Inc. (now commonly known as KLD. searching for ways to identify better and worse CSP for investors. © 2010 Blackwell Publishing Ltd and British Academy of Management . Davenport’s (1997. product quality. speciﬁc stakeholder-relevant items. Although KLD. or a low ranking for a company that causes little or no harm but is unremarkable in ‘doing good’. The socially responsible investment (SRI) community. Empirical literature relating to the structural principles of CSR Generally speaking. those who do not use power in a manner which society considers responsible. The possibility arises of a highly ranked company that performs abysmally on some key dimension. tobacco products. and outcomes for various stakeholders and the company itself. or assume. use of responsive processes. and they are not typically found under ‘corporate social performance’ keywords. Vigeo (France) and EPS (a template for CSP judgments by researchers or other observers) ratings studies are all multi-dimensional and difﬁcult to locate speciﬁcally as processes or outcomes. she explored ways in which social auditing could be used to measure CSP. In addition. In the long run. CSID (Canada). gambling and nuclear power. ARESE (France). community relations and voluntarism. charitable giving. The Domini Social Index Fund (DSEFX) consisted of about 400 large US companies chosen for their lack of participation in such ‘irresponsible’ ﬁelds as military contracting. did not immediately hit upon a multivariate. including measures such as workplace safety records. Additional screens came to be identiﬁed with speciﬁc types of stakeholders. South Africa. p. to attempt to answer this question. largely because they are third-party assessments of CSP and do not rely so heavily on company selfreports. These ratings are achieving great popularity as CSP measures. both by KLD and by the other schemes in use. Lydenberg. Their SOCRATES database is now widely 65 used as a way of calculating CSP in empirical studies. the literatures that relate best to Wood’s (1991) structural principles of social responsibility are not empirical but conceptual. treatment of minorities and women. it is noteworthy that the global nature of CSP concerns is now being addressed much better. but this seems unsound both theoretically and methodologically (see Wartick and Mahon 2009).g. multi-category stakeholder approach. Companies such as Philip Morris caught on quickly to this form of the CSP ratings game and initiated high-proﬁle and extensive charitable giving programs. ﬁrearms and military weaponry. As Kang (1995) has shown. the investment ﬁrm of Kinder. the earliest comprehensive rating scheme. using a classic Delphi methodology. Taking CSP as a multivariate construct does not necessarily mean that it is appropriate to search for. Over time.
publicity. Wood (1991. The principle of managerial discretion. among these ﬁrms. those obligations have to do with not abusing the great power wielded by that institution so that both the particular ﬁrm and the institution itself may retain legitimate standing in society. 2005 O’Shaughnessy et al. Wood’s (1991. Researchers found strong industry pressures for CSP behaviors. etc. national legal and regulatory frameworks. As we see in Table 2. national social pressures. research on stakeholder pressures – activism. Corporate social performance and stakeholder perspectives are sometimes thought to be competing. similar to KLD in breadth and methodology. Measures relating to structural (macro) principles of CSR CSP variable Legitimacy Governance: institutional ownership Type Objective data Examples D. 1997 Zalka et al. 697) phrasing is this: ‘Managers are moral actors. 2008 Jones 1985. Governance. p. boycotts. – intended to change corporate behavior could also be considered as indicators of the existence and content of corporate public responsibilities. especially those by Kolk and her colleagues as well as Adams et al. Data are available on percentage of institutional ownership and number of women and minorities on boards. 2007 Paul et al. and reported that. as we saw earlier. connecting the individual ﬁrm to a nexus of stakeholders set within a larger sociopolitical environment.’ This principle operates at the organizational level of analysis. Within every © 2010 Blackwell Publishing Ltd and British Academy of Management . CSP is viewed as a shared strategic asset. wherein scandal or disaster for one ﬁrm – especially a highly visible or powerful one – can tarnish an entire industry. 2005 Abreu et al. this principle of CSR offers a natural link to CSP theory and research. 2001 Kolk 1999. perhaps because they are very difﬁcult to observe. 2007). turns Carroll’s (1979) fourth category of ‘discretionary responsibility’ into a principle of moral autonomy and choice. (1998). 2002 Neubaum and Zahra 2006 Cox et al. Such studies can be included here as evidence concerning companies’ exposure to pressures derived from the principle of legitimacy. 1997 Meijer and Schuyt 2005 Longo et al. Wood Governance: board structure and shareholder lawsuits Social reporting Objective data Company self-reports and 3rd-party assessments Industry and network membership Public responsibility To customers: CSCSP scale KLD-like 3rd-party assessments Stakeholder attitude survey Coffey and Fryxell 1991 Graves and Waddock 1994 Kumar et al. emphasize the institutional pressures on companies to issue social reports. governance processes are not favored in CSP studies. The principle of public responsibility derives from the work of Preston and Post (1975). ﬁnance and organization theory. obtained the Japanese Institute for Corporate Citizenship rankings.66 Table 2. 1998 Kolk et al. but a great many of the studies noted in regard to responsive processes could be considered applicable. is the subject of vast literatures in ﬁelds such as law. 2004. and industry exposure to particular social issues. This ﬁnding clearly corresponds to the CSP principle of legitimacy. 2005 Boyle et al. covering 130 Japanese ﬁrms. for scholars interested in stakeholder theory and research. but it has not yet claimed its place as a powerful component of CSP.J. including globalization convergence. Another recent study (O’Shaughnessy et al. but these are weak surrogates for the strength and orientation of corporate governance. of course. 1986 Dierkes 1980 Adams et al. Also. 1997 Stakeholder expectations Discretion/moral autonomy Ethics policy adopted or agreed to Company self-report Company self-report In particular. legislative and regulatory initiatives. Very few studies are listed here. p. Some recent studies of social reporting. but in fact. 697) expresses it as follows: ‘Businesses are responsible for outcomes related to their primary and secondary areas of involvement with society.
but the keywords used to elicit CSP measures did not turn up any works that could be so classiﬁed. Charitable giving has been an especially popular CSP surrogate. as well as on corporate values statements and codes of conduct. It appears that assessments of the action mode are not in favor as a CSP measure. public affairs management would seem to be a proﬁtable approach to understanding how companies seek to respond to – or change – the institutional and stakeholder demands made of them. acquisition of NGO allies or paciﬁcation of potentially belligerent claimants. they are obliged to exercise such discretion as is available to them. Micro-principles. Employees. perhaps because data are so readily available and so generally reliable. There is a great deal of literature on moral choice in organizations. though not much of it is overtly related to CSP by scholars. 1999) called for a revision of Wood’s model to incorporate explicitly normative. or micro. of course. is rarely connected with CSP in research. 2006. leveling and bridging activities of ﬁrms. and the natural environment appear to be the stakeholders of choice for such studies. 1981). 1990. accommodative. Stakeholder management practices. Their enactment requires money. attention and training. accommodative on an issue that seems potentially beneﬁcial to the company. given that such assessments are invariably highly subjective and are too monolithic to reﬂect the realities of corporate responsiveness. Focused primarily on business–government relations. and proactive on an issue of deep company concern that stands a chance of being shifted towards company beneﬁt. Table 3 shows a large variety CSP measures related to the mode of corporate responsiveness (defensive. e. too. including legislative and regulatory lobbying as well as bundled campaign contributions through corporate political action committees. reactive. All the processes of responsiveness. proactive.) and to the three processes of responsiveness presented in Wood’s (1991) model. In short. and this is understandable. Public affairs and issues management are the subjects of a substantial literature. as well as consideration of organizational culture and managerial decision-making variables. customers. and sometimes studies are conducted to discover CSP implications of those practices on their own terms. This principle operates at the individual level of analysis.g. Particular 67 stakeholder management practices are often used as surrogates for overall CSP. time. Maitland and Park 1985. How would such a company’s action orientation be categorized? Environmental scanning. For example. but it tends to be found with ‘business ethics’ keywords and not with CSP. toward socially responsible outcomes’. and so they would seem a natural target for researchers interested in ﬁnding a CSP–FP link. Issues management is sometimes equivalent to public affairs and is sometimes conceived more broadly to include various stakeholder engagement practices (see Wartick and Mahon 1994). however. Bigelow et al. Company practices can be inferred from policies. so theoretical links must be made through constructs such as reputation enhancement. but the results are difﬁcult to interpret when charitable giving is correlated with FP measures. principles of social responsibility. are the subject of a great deal of CSP research. etc. Empirical literature relating to the processes of CSR The existence of responsive processes is much easier to document than their quality or comprehensive reach. Nevertheless. Thompson (1967) articulates a number of propositions concerning the buffering.Measuring Corporate Social Performance domain of corporate social responsibility. There are very large literatures on these subjects. it should be noted. Maitland 1983. organizational culture and decision-making Recall that Swanson (1995. thereby fulﬁlling or altering their social responsibilities. he proposes that a ﬁrm will attempt to protect its technical core – the actual production processes that reﬂect the company’s reason for existing – from the variable inﬂuences of the external environment. are boundaryspanning processes rather than technical core © 2010 Blackwell Publishing Ltd and British Academy of Management . and often they can be observed directly. and much of the research categorized as evidence of CSR2 processes substantiates this claim. these functions seem to be among the most powerful bridging mechanisms that companies bring to bear on their environments (see. Mitnick 1980. But there are far better theoretical reasons for continuing to expand and reﬁne research in this domain of CSP. Masters and Keim 1986. although there is a relevant literature in public affairs management. Cho et al. Mahon 1983. reactive on an issue that does not seem relevant to managers. Normally there is no direct ﬁnancial payoff to charity. a company may choose to be defensive on an issue where it has high liability exposure.
2007 Nehrt 1996 Judge and Douglas 1998 Dowell et al. 2008 Rundle-Thiele et al. 2008 Riordan et al. 2008 Pivato et al. 2008 Nakao et al. 2006 Lerner and Fryxell 1988 Coffey and Fryxell 1991 Waddock and Graves 2006 Chen et al.J. 2005 Kedia and Kuntz 1981 Mamic 2005 Maloni and Brown 2006 Biedermann 2006 Pedersen and Andersen 2006 Lindgreen et al. 2008 Coffey and Fryxell 1991 Thompson and Hood 1993 Roberts 1992 Brown et al. Wood Sturdivant and Ginter 1977 Cochran and Wood 1984 Clarkson 1988 Bauer and Aiman-Smith 1996 Newgren et al.68 Table 3. 2003.) Type ‘Proactive environmental stance’ Student ratings of company social orientation Moskowitz ratings of company responsiveness Company self-report Company self-report Company self-report Company self-report Company self-report Company self-reports and 3rd-party assessments Examples D. Responsive process measures CSP variable Action mode (defensive. 1997 Eilbert and Parket 1973 Corson and Steiner 1974 Parket and Eilbert 1975 Buehler and Shetty 1975 Holmes 1977 Anderson and Frankle 1980 Lerner and Fryxell 1988 Lerner and Fryxell 1988 Environmental scanning Environmental scanning: is it done? Stakeholder management Multiple stakeholder management practices Multiple stakeholder communication strategies Stakeholder practices: employees Stakeholder practices: customers Stakeholder practices: suppliers Charitable giving Objective data: % of pre-tax earnings or actual amount donated Charitable giving Existence of a corporate charitable foundation Afﬁrmative action and/or diversity practices Employee relations practices Environmental protection practices Environmental protection practices Company self-report Objective data Company self-report Company self-report Nikkei Environmental Management Survey Company self-report Product safety and quality practices Public service advertising Corporate image management practices Issues management Involvement in social issues Company self-report or 3rd-party assessment Objective data or company self-report Company self-report. Nigh and Kwok 1994 Posnikoff 1997 Wright and Ferris 1997 Wartick 1988 © 2010 Blackwell Publishing Ltd and British Academy of Management . 2004 Brammer and Millington 2004. checklist (one developed by Eilbert and Parket 1973. 2005 Abreu et al. 2000 Waddock and Graves 2006 Chen et al. one by Beresford 1974) Political contributions Public affairs commitments: existence and funding of public affairs unit Public affairs activities Lobbying and corporate PAC activity Divestiture from South Africa Issues Management Association membership Objective data Company self-report Company self-report Objective data Objective data Objective data Corley et al. etc. 2008 Chen et al. one from CED. 2005 Starik 1990 Longo et al. 1985 Morris 1997 Papasolomou-Doukakis et al. 2008 Chen et al. 2001 Masters and Keim 1986 Meznar. 2009 Ingram 1978 Keim 1978b Levy and Shatto 1980 Kedia and Kuntz 1981 Wokutch and Spencer 1987 Lerner and Fryxell 1988 Fombrun and Shanley 1990 Galaskiewicz 1997 Seifert et al.
Nevertheless. and thus the 1991 article did not make a contribution to a stakeholder perspective on CSP measurement beyond acknowledging that the perspective was important.Measuring Corporate Social Performance processes. but it is in fact fruitless and illogical to treat them this way. and for what?’ Wood and Jones (1995) updated Ullmann’s 1985 examination of CSP–FP studies to see whether a stakeholder approach could help make sense of the very disparate ﬁndings. which published a pollution performance index based on company questionnaires veriﬁed by external sources. perhaps. such data are the best available for pollution emissions information. or as an outcome relevant to a variety of stakeholders. The explicit addition of stakeholders to a CSP framework makes it possible to begin to answer the question. Measurement in these categories is especially important. responsive processes. and so better pollution data would indeed make a contribution to better CSP measurement. Others relied on the private non-proﬁt agency. A great deal could be learned about how CSP actually happens if more attention were paid to these boundary-spanning. but we have also seen that this type of research is empirically tricky and. Clarkson 1995). Disclosure. Stakeholders are the source of expectations about what constitutes desirable and undesirable ﬁrm performance. The Toxics Release Inventory (TRI) of the US Environmental Protection Agency. The European Union Polluting Emissions Register (EPER) provides similar data to TRI for European companies. Some researchers examined voluntary emissions reporting in corporate annual reports (Belkaoui 1976. of course. that it is difﬁcult to compare results from year to year. Examining 65 studies which used some measure of CSP as an independent variable. for understanding how business activity beneﬁts and harms stakeholders and the larger society. Wood (1991) did not leave out stakeholders or pose her model as a competitor to a stakeholder model. p. there is a great deal of research in which the outcome measure is corporate FP. reporting times and other key variables. the TRI has apparently had a salutary effect on the volume of toxic emissions (Hanson 1998). and there are no penalties for false reporting or failure to report 69 (Scorse 2005. outcomes and impacts are what CSP is all about. Sullivan and Gouldson (2007) suggest that. disclosure can be seen as a fulﬁllment of the principles of legitimacy and public responsibility. and should be standardized for purposes of better global comparisons. As we saw in an earlier section. A number of disclosure-based studies have been cited in other CSP categories. Furthermore. the CEP (1977). 1991) pyramid of social responsibility. Stakeholder-speciﬁc measures. Stakeholder responsiveness is built into Wartick and Cochran’s (1985) and Wood’s (1991) CSP models and is implicit in Carroll’s (1979. has undergone so many changes in chemicals included. There has been continuing scholarly controversy over the years about whether CSP and stakeholder theory are competing models. Table 4 shows the types of outcome and impact measures typically appearing in CSP research. not very interesting theoretically. Contrary to what some scholars have implied (e. and TRI data have been used in a few studies as a surrogate for CSP or as a stand-alone measure of corporate environmental performance. Wood and Jones (1995) theorized that stakeholders play at least four different roles that are relevant to measurement efforts in general and to ascertaining a CSP–FP relationship in speciﬁc: 1. with theoretically uninterpretable results. TRI data are self-reported by companies and may be based on estimates rather than actual measurements. Ingram 1978). However. and thus their ultimate aim is to help the ﬁrm survive by adapting to changing environmental conditions and pressures. A few studies are listed here simply to make the point that disclosure of information can be viewed from several angles. and indeed. ‘To whom are corporations responsible. or as a responsive process. despite ﬂaws and cross-country inconsistencies. 14). © 2010 Blackwell Publishing Ltd and British Academy of Management .g. do represent one important domain of CSP because of the actual and potential harms related to them. however. Empirical literature relating to the outcomes and impacts of CSP In a sense. Environmental outcomes/impacts. she did not specify what speciﬁc responsibilities might be owed to which speciﬁc stakeholders. Pollution emissions and prevention data became available for US corporations in the late 1970s and spawned a number of studies of CSP. Emissions. begun in 1987 after passage in 1986 of the Emergency Planning and Community Right to Know Act.
2002 Riordan et al. 2006 Beresford 1974 Belkaoui 1976 Fry and Hock 1976 Freedman and Jaggi 1982.J. 2008 Bosch and Lee 1994 Davidson and Worrell 1992 Hoffer et al. 2009 Hamilton 1995 Bragdon and Marlin 1972 Spicer 1978 Chen and Metcalf 1980 Ingram and Frazier 1980 Freedman and Jaggi 1982 Wiseman 1982 Shane and Spicer 1983 Lerner and Fryxell 1988 Pava and Krausz 1996 Sullivan and Gouldson 2007 Chatterji et al. 1997 Giacalone et al. 1997 Waddock and Graves 1997b Riordan et al. 1986 Rundle-Thiele et al. 1988 Peltzman 1981 Lydenberg et al. 2005 Meijer and Schuyt 2005 Pivato et al. 2008 Schuler and Cording 2006 Uhlaner et al. Wood Stanwick and Stanwick 2000. 1986 Freedman and Stagliano 1991 Hart and Ahuja 1996 Dooley and Fryxell 1999 Gerde and Logsdon 2001 Ragothaman and Carr 2008 Chatterji et al. 2008 Pivato et al. Superfund siting is objective 3rd-party assessment Objective data Objective data KLD ‘strengths and concerns’ Objective data Objective data Objective data Objective data Customer/consumer attitudes: the CSCSP scale Stakeholder self-report Customer/consumer trust Customer/consumer knowledge Customer/consumer values Customer/consumer satisfaction Employee outcomes/impacts Employer desirability/attractiveness Stakeholder self-report Stakeholder self-report Stakeholder self-report Stakeholder self-report Student assessments Employee satisfaction with management and board Employee job satisfaction and/or turnover intentions Stakeholder self-report Stakeholder self-report © 2010 Blackwell Publishing Ltd and British Academy of Management . 2009 Barth and McNichols 1995 Brammer et al. 2006 Jones and Rubin 2001 Karpoff et al. 1997 Environmental outcomes/impacts Toxic emissions: TRI Self-report Media coverage of TRI data Toxic emissions: CEP ranking Objective data 3rd-party assessment EPER Toxic emissions: regulatory ﬁnes Superfund site liability cost estimates Ethical Investment Research Service (EIRIS) audit of environmental performance Report of a negative environ-mental incident Report of environmental regulatory violation Customer/consumer outcomes/impacts Product safety FDA disciplinary actions Product recalls: mandated vs voluntary Automobile safety recalls FTC complaint of false advertising Customer/consumer choice Objective data Objective data Cost estimate. 2008 Paul et al. 2008 Schuler and Cording 2006 Rundle-Thiele et al. CSP outcome and impact measures CSP variable Disclosure Social/environmental reports (Is there such a report?) Is there social/environmental disclosure in the annual report? Type Objective data Objective data Examples D.70 Table 4. 2004 Bauer and Aiman-Smith 1996 Turban and Greening 1997 Greening and Turban 2000 Albinger and Freeman 2000 Backhaus et al. 1997 Zalka et al. 2005 Chen et al.
Measuring Corporate Social Performance Table 4. 1996 Gunthorpe 1997 Wagner et al. 2007 (review article of 167 CSP/FP studies) (and many other studies) Burchell and Cook 2006 Pavelin and Porter 2008 Company self-reports and 3rd party assessments Criminal conduct Announcement of corporate crime or regulatory violation Objective data Irresponsible behaviors towards stakeholders Reputation outcomes/impacts Reputation: Fortune ‘Most Admired’ rankings Researcher-generated list for retail 3rd-party assessment Reputation: perceptions of students. 2001 Morris 1997 Wright et al. 1995 Sharfman 1996 Brown 1997. 1988 Preston and Sapienza 1990 Brown and Perry 1994. 1998 Preston and O’Bannon 1997 Grifﬁn and Mahon 1997 Szwajkowski and Figlewicz 1997 Stanwick and Stanwick 1998 Alexander and Buchholz 1978 Belkaoui and Karpik 1989 Turban and Greening 1997 Greening and Turban 2000 Albinger and Freeman 2000 Van der Laan et al. 1994 Hersch 1991 Wright et al. 2008 Sharfman 1996 Starik 1990 Frooman 1997 (review article of 27 event studies) Margolis et al. businesspeople. of Labor award for afﬁrmative action practices Inclusion in Working Mother ‘best companies’ annual list Announcement of OSHA penalty (occupational safety and health) Afﬁrmative action lawsuit ﬁled Settlement of discrimination lawsuit or charge Supplier outcomes/impacts Stakeholder practices: suppliers Type Stakeholder self-report Examples Hansen and Wernerfelt 1989 71 Stakeholder self-report Stakeholder self-report Objective data Objective data (a place on the list) based on 3rd-party assessment Objective data Objective data Objective data Morris 1997 Corley et al. 1995 McWilliams and Siegel 1997 Mamic 2005 Maloni and Brown 2006 Biedermann 2006 Pedersen and Andersen 2006 Lindgreen et al. Continued CSP variable Survey of Organizations (SOO) report on perceptions of employee welfare and working conditions Employee perceptions of company CSP Employee perceptions of company moral climate US Dept. 1995 McWilliams and Siegel 1997 Chauvin and Guthrie 1994 Jones and Murrell 2001 Davidson et al. 2008 Spencer and Taylor 1987 Wokutch and Spencer 1987 McGuire et al. or general public Observer assessments Reputation: inclusion in socially responsible funds Reputation: stakeholder assessment Other outcomes/impacts for the company Event studies of impact of disclosure on stock price Objective data Stakeholder assessment Objective data. statistical manipulation Impacts of stakeholder dialogue practices Impacts of CSP practices on company innovation 3rd-party assessment and stakeholder reports Company self-reports © 2010 Blackwell Publishing Ltd and British Academy of Management . 2009 Staw and Szwajkowski 1975 Davidson and Worrell 1988 Karpoff and Lott 1993 Reichert et al.
) A later study (Giacalone et al. They ‘act upon their interests. stakeholder groups can have interests in corporate behavior and outcomes that are contradictory or inconsistent within-group and across-group. Measurement efforts on the outcomes and impacts related to customers have taken two distinct paths – one employing various kinds of perceptual or attitudinal data. Similar data are also available for European companies. Food and Drug Administration recalls and violations. which offered discussions of companies and their social responsibility efforts or lack thereof. Surprisingly few of these data make their way into CSP studies. that is. discriminatory bank lending practices. and might also illuminate the evaluations that consumers place on outcomes with direct implications for themselves. Rundle-Thiele et al. and this is a gap that could be readily ﬁlled. gratitude. They concluded that the alcohol industry’s ‘drink responsibly’ campaign would not result in higher CSP without a concomitant education campaign. and/or evaluations’. which gave consumers a handy brand-name product guide to companies considered better or worse social performers. false advertising or product-related regulatory violations. though as a hygienic or minimum factor rather than a true motivator for purchases. Their eventual aim was to relate consumers’ CSP attitudes to actual buying behaviors while driving out the possibility of social desirability bias D. (A noteworthy feature of this article is the authors’ review of early efforts from the 1970s and early 1980s in the marketing ﬁeld to develop CSR/ CSP attitude scales for consumers. consumers must know about a company’s social performance in order for a positive CSP–FP relationship to be enacted via trust. Wood in attitude measures. companies cannot assume that stakeholders will act on knowledge that they do not possess. as Freeman and Reed (1983) pointed out. Meijer and Schuyt (2005) tested the usefulness of the CSCSP among Dutch consumers and found that the measure was reliable. 1997). Paul et al.J. some objective data are available on. Stakeholders experience the effects of corporate behavior. experiences. and Shopping for a Better World (CEP 1988). adults simply did not have adequate information to ‘drink responsibly’. (2008) studied consumer trust as an intermediary between CSP and FP in the case of customers who purchased organic food products. spirituality and generativity) and the CSCSP. The aim of these works was to arm customers with information that could inform their shopping decisions. but positive CSCSP did not predict decisions to purchase. exactly. (1997) developed and validated an 11-item scale measuring consumer sensitivity to corporate social performance (CSCSP). and one using objective indicators such as safety recalls. Rating America’s Corporate Conscience (Lydenberg et al.72 2. Other scholars have approached the question of customer/consumer effects on the CSP–FP relationship from a variety of angles. expectations. a non-proﬁt public interest organization founded in 1968 by Alice Tepper Marlin. Stakeholders evaluate how well ﬁrms have met expectations and/or how ﬁrms’ behaviors have affected the groups and organizations in their environment. and much more. Wood and Jones (1995) found that consistent CSP–FP relationships were found only with those stakeholder groups known to have direct effects on proﬁtability – especially customers. This study emphasizes the important role of stakeholder knowledge as a two-way street. false or misleading advertising charges. (2008) published a suggestive study of alcohol use knowledge among a sample of Australian adults. they are the recipients of corporate actions and output. Pivato et al. Customer/consumer outcomes/impacts. That is. pioneered the idea of recruiting customers to the cause of CSR with their books: Guide to Corporations: a Social Perspective (Zalkind 1974). 3. and found that trust does indeed inﬂuence buying decisions. Developing a measure of consumer attitudes about CSP could provide evidence of how. Because of US regulatory requirements. auto safety recalls. Schuler and Cording (2006) developed a CSP–FP model using not just consumer knowledge (called © 2010 Blackwell Publishing Ltd and British Academy of Management . for example. 4. The authors note that an additional study performed in Great Britain and South Africa suggest that two of the 11 items on the CSCSP scale may be speciﬁc to US consumers (Zalka et al. 2005) found predictive relationships between several personality attributes from the growing ﬁeld of positive psychology (hope. Again the role of knowledge is highlighted. These different roles suggest a large variety of measurement strategies and. negative CSCSP could predict decisions not to purchase. 1986). whether or not that information was directly beneﬁcial to them as customers. The CEP. CSP and FP were related.
receive attention in other literatures but not so much in CSP research. found that Portuguese ﬁrms attended to external social performance domains and did not pay so much attention to employees’ needs and concerns (cited in Jamali 2008. Corley et al. they found that corporate image had a direct as well as an indirect relationship with employee turnover intentions. including ‘employees’ health and safety at work. However. quality of work. but there is no reason to believe that this is a valid or reliable CSP measure. Supplier outcomes/impacts. In addition. Albinger and Freeman (2000) found that high CSP helped in attracting employees who themselves had a high degree of job choice. which in turn would predict job turnover. (1997) at ﬁrst theorized that corporate image would mediate between assessment of and satisfaction with management and the board of directors as independent variables. and job satisfaction as the dependent variable. employees and customers. They predicted that greater intensity of information about CSP would affect consumers’ attitudes about companies. and a subsequent positive effect on employee recruiting. training on codes of conduct and public issues. Government-mandated disclosures of worker safety records. a good public image and reputation. Mamic 2005. using a similar approach. p. Longo et al. In an interesting and suggestive study. an active public affairs ofﬁce and the seriousness of enforcement of the company’s code of conduct. educated or experienced applicants. Lindgreen et al. (2005). attitudes and perceptions about CSP. reﬂected especially in good treatment of owners. (2005) extended this approach by examining a number of employee-related issues as indicators of CSP. pp. but for the less skilled. Examples of SMDs are the existence of an ethics committee of the board. Van Buren (2005) proposed a signiﬁcant revision of the CSP model to focus on employee concerns. 217–218).Measuring Corporate Social Performance ‘information intensity’) but also consumers’ moral values as intermediary variables. 2009. newsletter articles about social programs. their data showed that assessment of. and much more are typically part of composite ratings such as KLD’s. she learned that both the quantity and intensity of SMDs – even though most were oriented toward external stakeholders – had positive effects on respondents’ expectations that good CSP would ‘lead to beneﬁcial consequences like long-term proﬁtability. but that moral values would be the deciding factor in purchase decisions. The psychological consequences of layoffs and plant closings. Surveying managers from 112 US companies. Recent research on supply chain management appeared earlier in this paper as examples of responsive stakeholder management practices (e. Abreu et al. but much more interesting work remains to be done to discover the antecedents and correlates of employeerelated outcomes and impacts. considering that no amount of information can make a person act a certain way if the person’s values are oriented in a different direction. (2001) offered evidence that the actions of public affairs managers can have unintended consequences for internal stakeholders. © 2010 Blackwell Publishing Ltd and British Academy of Management . discrimination lawsuits and regulatory complaints. positive relationship with job satisfaction. proportions of women and minorities in various workforce slices. Maloni and Brown 2006. rather than satisfaction with. for example. Greening and Turban (2000) combined signaling theory and social identity theory to hypothesize that companies will use their CSP activities to attract high-quality job applicants. There is much more that could be done with measurement of outcomes and impacts for employees. Riordan et al. Waddock and Graves (1997a) reported that good CSP. 421). wellbeing and satisfaction of workers. management and the board was related to corporate image for employees.g. Other scholars have also examined the speciﬁcs of employees and CSP. This theoretical paper was actually preceded by an earlier empirical study (Turban and Greening 1997). Morris (1997) examined the relationships between stake- 73 holder management devices (SMDs. and social equity’ (cited in Jamali 2008. She developed a scale measuring the extent of SMDs and the intensity with which they were implemented. development of workers’ skills. resulted in a ﬁrm’s management being rated as of higher quality. Their proposal makes sense. primarily employees. and some CSP studies use such objective measures. CSP apparently played no role. Employee outcomes/impacts. roughly corresponding to speciﬁc examples of Wood’s (1991) processes of corporate social responsiveness) and employees’ expectations. Measures of employee satisfaction have occasionally been used as a surrogate for CSP. 217). and that satisfaction with management had a direct. CSR and the organization’s moral climate. and avoidance of government regulations’ (p. Biedermann 2006. which showed a positive relationship between CSP and corporate reputation.
The Fortune magazine ratings gained prominence among CSP researchers in the mid-1980s.g. Criminal conduct. the KLD database and social investment information from the CEP and other agencies. He concluded that the halo-adjusted Fortune ratings should be used with caution by researchers. and Business Ethics magazine published for several years a list of the top 100 corporate performers on a variety of CSP measures. The annual list of ‘Most Admired Corporations’ was a composite reputational measure that asked ﬁnancial analysts and senior-level executives to rate companies on a number of dimensions. but rarely as having CSP consequences. Much has also been written about corporate scandals such as accounting frauds or the 2006 stock options backdating scandal. however. but this literature goes relatively unnoticed by CSP scholars. Logsdon and Wartick (1995) appreciated Brown and Perry’s efforts in adjusting the Fortune database and suggested additional uses for it.74 Pedersen and Andersen 2006). reliable measures of CSP. the attempts to ﬁlter out a presumed ﬁnancial halo may be equally misguided. They call for a more complex approach to CSP measurement and to questions of a CSP–FP relationship: © 2010 Blackwell Publishing Ltd and British Academy of Management . The centerpiece of the forum was an article by Brown and Perry (1995) showing that there was a ‘ﬁnancial halo’ over the ratings and providing a ‘halo-removed D. concluding that. and to bring in relevant literature that is being published in other ﬁelds. The phenomenon of supplier capture. In 1995. It seems the same as asking the foxes how well they take care of things down at the henhouse . There is. merely prolonged the life of a terminally ill measure. altering raters’ perceptions of companies’ CSP and FP. They propose instead that researchers pursue the possibility of an ‘excellence halo’. although the Fortune data may be ﬂawed as a measure of CSP. researchers needed to get the views of other stakeholders to have a well-rounded measure of CSP. Brown and Perry’s companion piece. and ﬁnancial analysts – is itself a fatal blow to using the measure in any objective sense. regulatory violation or disaster likely to result in criminal charges as an ‘event’ to measure subsequent expected and actual stock price performance. The Fortune data cannot and should not be used as a true measure of CSP. as an indicator of a ﬁrm’s reputation among the business community regarding corporate community and environmental performance – just what the measure says it is – the data are potentially useful. . Baucus and Dworkin 1998. Baucus (1995). The next step for CSP research in this domain is to begin documenting the consequences of company policies with respect to suppliers. but overall were idiosyncratic reﬂections of the raters’ perceptions and could not be considered valid. Milton Moskowitz. . offered periodic rankings of the best and worst CSP performers. child labor and other practices considered exploitative. adjusted or unadjusted. Wood (1995. Global supply chain issues such as product safety and information transparency. Reputational measures were among the earliest surrogates for CSP. including The Economist magazine’s ratings. represented only the business community’s judgments. founder and long-time editor of Business and Society Review. other top executives. Four commentaries on Brown and Perry’s work were also published in the forum. Sodeman pointed to other databases. and the economic development aspects of global sourcing deserve to be considered in CSP research. the scholarly journal Business & Society published a special forum on the use of the Fortune ‘Most Admired’ rankings as a surrogate for CSP. ﬁnally. Baucus and Baucus 1997. but argued that they also have their ﬂaws and disadvantages. Sodeman (1995) made the point that ‘the Fortune survey was created to enhance the magazine’s reputation’ and not as a contribution to management studies. Szwajkowski and Figlewicz (1997) published a detailed critique of the Business & Society special issue forum from 1995. These early reputational rankings were occasionally used in research. an informative literature on the antecedents and correlates of corporate crime and whistle blowing (e. appeared in the Academy of Management Journal in 1994. made the case that ‘haloadjusting’ the Fortune ratings. Most of the CSP-related research on corporate criminal conduct has used the announcement of a crime. 198) had this to say about the Fortune ratings in her introduction to the special forum: It seems to me that the nature of the input – reputational ratings by CEOs.J. which suffer from many reliability and validity issues. is well-known in strategy. for example. including a single indicator for ‘responsibility to community and environment’ (Wood 1995). detailing their rationale and methodology. Wood residuals’ database for future research use. p. although they also noted that Fortune’s ratings. However. Baucus and Near 1991).
Nevertheless. methodological and theoretical issues surrounding it. The details of speciﬁc variable relationships and causal pathways remain to be worked out. rather than correlate reputation with measures of FP. Because there is so much variance across those systems. And some companies. within the contexts of those stakeholders’ value systems. the Global Compact. underlying relationships. Conclusion This analysis has taken us into the details of Wood’s (1991) structural CSP model and the empirical studies that can be brought to bear within the descriptive categories. especially as indicated by ranking on the Fortune ‘Most Admired’ list. The second conclusion is that a huge volume of empirical CSP work focuses on outcomes of ‘socially responsible’ (or irresponsible) behaviors of various sorts on the ﬁrm itself – not just its FP per se. This is totally understandable. or how employees beneﬁt from on-site daycare. if not more so. or how various stakeholders respond to social and environmental disclosure. many companies appear to be making honest attempts at greater transparency. it is clear. both apparent and actual. or how companies are attempting to reduce their carbon footprints. (2007) and Wood et al. innovation. 382) 75 ing. Therefore. and bad performance is likely to result in ﬁnancial harm. Finally. Recent books by den Hond et al. including standards and data from SA8000. Studies of how consumers are harmed by false or misleading advertising. such as FRS and SOCRATES. have not typically Reputation. It should be noted that part of the problem that CSP scholars face is the inaccessibility. p. product recalls and law-breaking. but also reputation. new sources are beginning to be available to scholars. 2003). or how cancer clusters correlate with toxic waste emissions. and the Global Reporting Initiative. 2007. (2006) provide much more extensive and detailed information on these newer measurement methods for CSP than can be accommodated here. many of the studies assessing the consequences of corporate behavior are designed to test the effect of bad behavior or good on stock price or on accounting measures of FP. it is only at the same level of abstraction that the interpretations drawn from them will have the ring of truth. Orlitzky et al. a theoretically strange focus on the ﬁrm rather than stakeholders and societies. and it is positive. given that most CSP scholars live in business schools driven by a focus on the ﬁrm. it should be with the realization that such a simple conclusion can only be a general one. the net effect on the ﬁrm and its reputation is nearly always mixed to some extent. of good data. However. The ﬁrst major conclusion I draw from this research is that the CSP–FP connection is now reasonably well established in general. Overall. The nature of the CSP construct suggests that consequences to stakeholders and to society in general are at least equally important. naturally. is more often used as an independent variable than as an outcome or dependent variable. is on the ﬁrm and not the affected stakeholder. it would seem more productive to consider reputation as a mediating variable between.Measuring Corporate Social Performance Through various stakeholders. good performance results in a better bottom line for the ﬁrm. but as my second and third conclusions suggest. if modest (Margolis et al. operate. 2003). Companies have good reasons for being non-transparent about their buffer- © 2010 Blackwell Publishing Ltd and British Academy of Management . (Szwajkowski and Figlewicz 1997. product safety and quality practices and consumer satisfaction measures. leveling and bridging activities and the outcomes of their processes. this may not be the most fruitful avenue for continued research at this time. access to needed resources. Also. related to FP. and large gaps in research. say. when researchers conclude that social performance is positively. despite the remaining measurement. The focus of such studies. and so on. An overview of this body of work suggests that there are areas of over-emphasis. safety issues. or negatively. The application of modern statistical techniques of meta-analysis shows that there is such a relationship. some of which could be ﬁlled by incorporating approaches and ﬁndings from other disciplines and scholarly domains. and a large number of these studies were noted in an earlier section. but it is not what CSP is really about (see Walsh et al. Other outcomes/impacts for the company. masking a host of complex. or how employee culture is affected by class action discrimination lawsuits or by the behaviors provoking them. and regulatory and legal reporting offers fairly rich sources of data on indicators such as regulatory violations. are outright manipulative or deceptive in their provision of relevant information. It is only at this high level of abstraction that perceptual databases. society judges these actions and their attributed motives.
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