Blog Editor’s note: Mike’s work, “The business case for corporate social responsibility: A critique and an indirect path forward”, is a finalist for Business & Society’s 2019 Best Paper. The paper is open access until December 31st.
Does it pay to be good? There are more than 6,200 studies of the performance implications of corporate social responsibility (Barnett, Henriques & Husted, 2020). Typically, these studies find that, in a variety of ways and across a myriad of settings, it pays to be good. That’s good! We take this as proof of a business case, by which firms profit from progressive practices toward people and our planet. Huzzah – the interests of business and society are aligned! Yet, look around you: people and the planet are still in trouble. If it pays to be good, how can this be? I argue that our field’s measure of good is bad and only getting worse. We have muddled stakeholder management with social responsibility, thereby making a business case for business as usual, not for society. We need to do better. It is time to monkey with the business case.
Recognizing that it pays to be good, both literature and practice have moved beyond managing for shareholders, now seeking to manage for stakeholders (e.g., Freeman, Harrison & Wicks, 2007), which is good. But this advancement falls well short of managing for society, and that is bad. The stakeholders that firms prioritize under the business case have power; the more powerful they are, the more they are prioritized (Mitchell, Agle & Wood, 1997). Prioritizing the powerful does not necessarily lead to doing good for society; in fact, it can dictate the opposite (Walsh, 2005). Most of those suffering social ills tend to lack power over firms. As we get better and better at refining instrumental stakeholder management – that is, at implementing the business case – firms only get farther and farther away from solving societal problems. Instead of bringing business and society into alignment, the business case has reified business as usual.
This does not mean that it does not pay to be good to society. It only means that despite the avalanche of studies, we have yet to prove it, because we have been studying it incorrectly. Most of the business case studies thus far have only shown that it pays to be good to powerful stakeholders. Look, we already knew that (cf. Pfeffer & Salancik, 1978), and it is not very interesting. The business case is much more interesting because it says that by being other-serving, a firm is actually self-serving. Achieving this seeming conundrum requires demonstrating an indirect relationship, one by which a firm improves its direct primary stakeholder relationships by doing things to help those who lack power over the firm. Admittedly, it does not look promising. Studies that have distinguished primary from secondary stakeholders have found that being good to secondary stakeholders does not pay (e.g., Hillman & Keim, 2001). But these studies have not looked at indirect returns to the primary stakeholder relationship. It is this indirect path that we must follow to test the business case.
In truly testing the business case, we confront a variety of difficulties in finding the sweet spot in which a firm can serve itself by serving others. And that is as it should be with any such conundrum. In a set of proposals, I argue that an act of CSR is more likely to improve primary stakeholder relationships and so benefit the firm if it entails self-sacrifice, is costly to the firm, occurs in advance of calls for such action, is a sustained effort, and is not self-promoted. This suggests that the more self-interested that CSR is – the more it hews to the business case logic – the less likely it is to achieve benefits for the firm. That is, the pursuit of self-interest through CSR can thwart the betterment of self-interest – quite a conundrum! Let’s test these propositions to find the true bounds of the business case. With more than 6,200 studies already under our collective belts, it seems that there is more than enough enthusiasm for such studies. Let’s point this tremendous scholarly energy in the right direction.
REFERENCES
Barnett, M. L. 2019. The business case for corporate social responsibility: A critique and an indirect path forward. Business & Society, 58(1): 167-190.
Barnett, M. L., I. Henriques & B. Husted. 2020. Beyond good intentions: Designing CSR initiatives for greater social impact. Journal of Management, 46(6): 973-964.
Freeman, R. E., J. S. Harrison & A. C. Wicks. 2007. Managing for stakeholders: Survival, reputation, and success. New Have, CT: Yale University Press.
Hillman, A. J. & G. D. Keim. 2001. Stakeholder value, stakeholder management, and social issues: What’s the bottom line? Strategic Management Journal, 22: 125-139.
Mitchell, R. K., B. R. Agle & D. J. Wood. 1997. Toward a theory of stakeholder identification and salience: Defining the principle of what and what really counts. Academy of Management Review, 22: 853-886.
Pfeffer, J. & G. R. Salancik. 1978. The external control of organizations: A resource dependence approach. New York, NY: Harper & Row.
Walsh, J. P. 2005. Book review essay: Taking stock of stakeholder management. Academy of Management Review, 30: 426-438.
One Response
Mike is awesome.