The Institutionalisation of Business Social Responsibility:
Evidence from Australia and the UK
Jeremy Moon
A paper for the 2001 Structure of Government Section of IPSA
University of Oklahoma
‘The New Public Philosophy:redrawing the Boundaries Between Public and Private’
(draft)
‘The institutions of politics are not simply echoes of social forces; and the polity
is something different from, or more than, an arena for competition among rival
interests… In short, the organisation of political life makes a difference,
institutions affect the flow of history.’ (March and Olsen 1989: 159)
Introduction
The relationships between business, democratic government and society have raised key
questions in social science and in debate about institutional design.i Business possesses
remarkable power by virtue of its command of the means of production and the capacity
for wealth-generation. This power creates certain dependencies. Government values the
surplus that business creates as a source of revenue (though tax is often imposed
indirectly on employees and consumers of business services and products). The electoral
appeal of government is often predicated on business success. Society values the
opportunities for employment and the commodities and services that business provides.
But this is not to say that power is all one-way.
Business depends on government authority for the legal and economic environment in
which it operates and for regulating aspects of business activity. Government provides or
coordinates infrastructure which no individual business would have either incentive to
provide or authority to coordinate. Business also depends on selective government
policies to support either aspects of wealth-creation (e.g. R&D, training) or particular
products and services. Democratic government also has an ear to society given its
interest in re-election. Business depends on society for workers and customers. A
peaceful society is a condition for most business activities.
The details and balances of these relationships are contingent and contested and are rarely
stable. They are, in the words of a most perspicacious analyst, subject to ‘shifting
involvements’ (Hirschman 1982). This is the stuff of politics and is the context in which
business social responsibility (BSR) is understood in this paper.ii
Currently sections of business perceive that western societies appear to expect them to be
ethically, environmentally and socially responsible, perhaps as a result of shareholder
activism, the ethical shareholding movement and the globalisation of information about
business practices overseas. In any event, many firms spend a lot of money on
advertising not their products or services but their sociable images.iii They are even
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prone to disassociating themselves from activities for which social and political criticism
might be anticipated.iv
But if this is spin alone, it will give rise to cynicism.v Social engagement offers more
substantial enhancement to a firm’s reputation and, in turn, its social right to trade (a term
now part of the BSR lexicon). This paper addresses the questions of whether and how
BSR can be institutionalised and what implications might arise for governance? The data
and discussion are presented in a conceptual framework. However, comparative themes
are also addressed.
It is easier to say that Australian and UK business organisation and relations with
government have differed from the neo-corporatist models than to describe and contrast
them. Business organisation and representation in both systems has varied substantially
by sector, by jurisdiction and by time. Over the last century, Australian business has
been the more fragmented of the two, reflecting its federal structure, the long-term
dichotomy between its export and protected domestic sectors, and its highly
particularistic industrial relations structure. Though these last two sources of
heterogeneity are diminishing. Australian business representation through national peak
bodies is weak compared to that provided by the Confederation of British Industry and its
predecessors. Yet many Australian sectoral business associations have been particularly
important in state and national interest representation and policy-making.vi Whilst BSR
in both countries lags behind that in the USA, its Australian manifestation probably lags
behind that in the UK by the measure of its value (Uren 1998) and aspects of its
institutionalisation (see below). This appears to reflect an clearer historic divide between
Australian public and private responsibilities.
Yet in the last two decades BSR has been increasing in Australia and the UK. One
source of motivation for BSR lies in the desire of companies to be associated with the
communities they operate so as to establish a reputation for sociability.vii Much is at the
local level but in addition there have been state and national BSR ‘vanguard’ groups and,
in the UK, a conspicuous BSR umbrella association. In addition, the national
governments of Australia and the UK have given conspicuous encouragement to BSR as
part and parcel of their emerging governance regimes. This has been in parallel with the
replacement of comparatively wide areas of monopoly government activity through their
respective public sectors by governance with other players be it through contracts and
markets or through partnerships (Moon 1999, Rhodes 1996).viii
In the UK, attempts to draw business further into governance during the Thatcher
government (1979 – 1990) were initially piece-meal and problem or policy-specific.
They were most conspicuous in the wake of the Liverpool and Bristol riots when the
Secretary of State for Employment, Sir Michael Heseltine, encouraged business to
contribute to urban re-generation. Towards the end of the 1980s the government replaced
the Manpower Services Commission, the last vestige of British neo-corporatism, with a
system of Training and Enterprise Centres (TECs). This was underpinned by local
business representation which incorporated market-based anti-unemployment
programmes and local labour market liberalisation. Although the Blair Labour
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government (1997 – present) has not attempted a policy design as ambitious as the TECs
it has solicited business interest in a range of policy roles.
In Australia, the Hawke (1983 – 1993) and Keating (1993 – 1995) Labor governments’
means of institutionalising BSR was by drawing it into public training and counterunemployment programmes and was neo-corporatist in style. The Howard LiberalNational Coalition government (1995 – present) created a broader, national but
voluntarist BSR focus through the Prime Minister’s Business and Community
Roundtable. It introduced tax incentives for BSR and sponsored research on and
publicity for BSR. The approaches of the UK Blair and Australian Howard governments
are compared below.
Institutionalisation and Business
The question arises as to what institutionalisation is and how it is identified. Huntington
captures the significance of institutionalisation within governance:
Political community in a complex society [thus] depends upon the strength of
political organisations and procedures in the society. That strength, in turn,
depends upon the scope of support for the organisations and procedures and their
level of institutionalisation (1968: 12)
He defined institutions, by which he meant organisations and procedures, as: ‘stable,
valued, recurring patterns of behaviour’ and went on to argue that levels of
institutionalisation are defined by their adaptability; complexity, autonomy and coherence
(1968: 12).
March and Olsen see institutions as: ‘collections of rules and routines that define actions
in terms of relations between roles and situations’; which ‘not only respond to their
environments but create those environments at the same time’; and which ‘provide
important elements of order… also change’ (1989: 160, 162, 166).
Peters sees an institution as
a structural feature of the society and/or polity. That structure may be formal (a
legislature, an agency in the public bureaucracy, or a legal framework) or may be
informal (a network of interacting organizations, or a shared set of norms). (1999:
18)
Institutions enable predictable and patterned interactions, which are stable over time and
constrain individual behaviour, and which are associated with shared values and meaning
for those working in the institution. (Peters 1999: 18).
Institutionalisation of business, be it internal, among firms or by government, has arisen
as a result of a business interest in efficiency and risk minimisation (Moran forthcoming)
as well as of various societal and governmental pressures. Core business activity is
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regulated by company and commercial law. The principal interest here is primarily a
collective business one. Labour market, industrial relations and health and safety
regulation also concern internal business activities but they are a notional step away from
the core concern of profit-making and is a chief concern of organised labour. The
environmental impact of the core business activity through land-use and waste disposal,
for example, has prompted yet other forms of institutionalisation. A key source of
interest is from interest groups and social movements.
In contrast to these three cases, the institutionalisation of business relations with the yet
wider questions of social well-being lies several notional steps away from the core
activity of any particular business. The main interest is presumably that of the society but
the political expression of this interest is highly fragmented on the vertical (local,
regional and national) and horizontal (issue areas) planes. In democratic systems these
pressures may feed through into government. A key remaining question therefore
concerns the interest of business and the conditions in which and the extent to which it
identifies efficiency and risk minimisation opportunities through the institutionalisation
of BSR. The extent to which firms identify individual pay-offs of a sociable reputation
and collective pay-offs of social conditions propitious for wealth-creation appear to be
critical here (see Moon 1995, under review; Moon and Sochacki 1998, 1999).
The structure of the analysis is set out in Table 1. It distinguishes two dimensions of
institutionalisation, mode (norms, organisation, incentives, rules) and location (within
firms, among firms, with or by government.ix
Table 1
Whilst BSR can readily be institutionalised within and among firms, a number of factors
appear to constrain the third, or public, location of institutionalisation of BSR. First,
because BSR has tended to be at the firm level it is characterised by the values of
voluntarism, responsiveness and flexibility. Secondly, the fear of business exit may
dissuade communities and their governments from seeking to institutionalise BSR (see
Crenson 1971 for an analogy of this problem).x Thirdly, whereas a conventional form of
institutionalisation by government is to require all actors of a certain type (in this case
business) to conform, by definition, such a system of institutionalisation may be
incompatible with the meaning of BSR. It would instead constitute an exercise of
government authority.xi
Institutionalisation of Business Social Responsibility Within and Among Firms
It is not assumed that the institutionalisation of BSR within and among firms is a
sufficient condition for its institutionalisation with or by government: the causal
directions could go in the opposite direction or, more likely, the two are mutually
dependent. However, it is assumed that the first two dimensions would be a corollary of
BSR’s institutionalisation by or with government.
Table 2 presents ways in which social responsibility can be institutionalised within firms.
Although this entails no reference to other firms or to government such
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institutionalisation can nevertheless inform the behaviour of actors within the firm and its
partners or recipients in non-profit or community organisations.
Table 2
Norms often form the basis of other modes of institutionalisation. (Putman 1992)
Traditional conceptions of BSR rest on norms of company founders or long-term owners
(e.g. Carnegie, Rowntree). But new norms can be introduced to business (e.g. the impact
of the founders of the post-war Australian company Lend Lease and of the 1970s UK
Body Shop). In the modern corporation managers’ norms can be reflected in their
discretion over the use of a portion of company resources for BSR. Companies founded
on the principle of cooperation among members may extend their founding norms into
wider BSR (e.g. The Co-operative Bank).
Institutionalisation of BSR is likely to be increased when such norms are translated into
internal organisation.xii This can include the specification of BSR in company aims
which provides an organising principle and a benchmark for evaluation. Firms may also
dedicate personnel to BSR. Some even establish company foundations with their own
organisational structure devoted wholly to BSR.xiii BSR may also feature in firms’
external relations thereby providing an institutional link to the second and third locations
of BSR.
Organisation of BSR may inform other modes of its institutionalisation. A number of
companies give incentives for employees to participate in BSR activities, through days
off work for charitable activity, and through offering to match funds raised for social
causes.xiv Among executives, experience of working with community or governmental
organisations is often valued an appropriate facet of career development. Rules for BSR
include budget allocations and procedures, and procedures for evaluating and prioritising
BSR alternatives. The requirement for an annual BSR audit can structure a whole range
of intra-firm BSR norms, organisations, incentives and rules, as well as provide a window
for public review and evaluation.
BSR within firms directed to community and voluntary bodies can contribute to social
well-being and thereby to the social reputation of individual businesses. It may also be a
requisite for the institutionalisation of BSR among firms. Table 3 presents ways in which
inter-firm BSR has been institutionalised.
Table 3
As noted above, the institutionalisation of Australian and UK commercial business
interests among firms has conventionally been through sectoral alliances. At the local
level long-standing general business associations such as Chambers of Commerce or
Rotary Clubs have combined services and social networks for business people and some
general representation of business opinion (Bennett 1990). Membership of such local
groups can provide a basis for norms of reciprocity. A common BSR manifestation of
this is the sharing of responsibility for support to community projects (e.g. through
alternating the provision of secondees and board members to community or charity
organisations). In contrast, BSR through sectoral business groups is rare, presumably
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reflecting their logic of representing a relatively narrow range of intensively shared
interests regarding the regulation of their.
General business umbrellas represent a much wider but often less intensively shared set
of business interests. In Britain, although the Confederation of British Industry’s (CBIxv)
status in national political debate and policy-making has declined, it did play a prominent
role in institutionalising BSR. In 1980 it established the Special Programmes Unit,
designed to encourage firms to provide places for trainees under counter-unemployment
schemesxvi and to participate in Community Action Programmes in selected towns
experiencing high unemployment. The Business Council of Australia, which since its
formation in 1983 has been the main Australian national business peak body, has had a
more modest but recently increasing role in BSR.
Inter-firm norms have informed the creation of local organisations which are more
explicitly-BSR oriented than the Chambers or Rotaries. The most prominent Australian
example is the network of local Group Training Companies (GTAs), an initiative of the
Lend Lease firm in partnership with the Australian Confederation of Trade Unions. This
was subsequently annexed by the Commonwealth government and named Group
Training Australia (see below ). Although these GTAs had some sectoral definition, there
were also cases of cross-sectoral groupings. Other examples include local business
alliances to support education (e.g. the Kwinana Industries Council) and a network of
AussieHost organisations which offer a community-based training programme focusing
on communication as an adjunct to customer-relations.xvii In the UK, a network of
Enterprise Trusts mushroomed during thew 1980s loosely modelled on the the
Community of St Helens Trust instigated by Pilkington Bros. These addressed a range of
employment and regeneration issues.
Vogel notes that the increased awareness among American businesses of common
concerns in the 1970s was not manifest through mass representative associations but
rather through something more akin to Lenin’s vanguard party in the form of the
Business Roundtable and issue-based ad hoc coalitions (1983: 35). The UK Business in
the Community (BITC) established in 1980 initially exemplified the vanguard model of
business representation to which Vogel alludes. It was created following a conference of
US and UK major corporations with the express purpose of supporting and encouraging
the creation of local enterprise trusts (see above). The idea was later incorporated in
partnerships devised by local governments (see below).
Other BSR vanguard groups have emerged in both countries combining a number of
roles. First they engage in ‘research-based advocacy’ not only directed towards
government but also towards business and community and charity organisations. They
are included in policy-making at the national, state, sectoral and local levels and can
become partners in implementation, again at all levels. They can act as non-profit
intermediaries between the non-profit sectors and business and government investors.xviii
BITC has out-grown its vanguard status and, following a merger with the CBI Special
Programmes Unit and with the imprimatur of the Prince of Wales, has become a BSR
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umbrella group. It has a membership of over 600 companies and regional sections. It
takes a lead in exploring and evaluating new approaches to the practice of BSR and
publicises these through seminars, newsletters and campaigns. In particular it explores
and encourages the adoption of norms, organisation, incentives and rules for BSR. (see
http://www.bitc.org.uk/). One corollary of the existence of a growing organisation like BITC
is the increase in perceived costs for firms remaining outside. A more tangible incentive
is that dedicated BSR organisations are developing kite-marks of community
responsibility. As with other kite-marks regarding standards and country of origin, this
can be seen as an adjunct to core commercial activity. As yet BITC has not developed
clear rules of membership (CHECK).
At present there is no Australian equivalent BSR national umbrella. The BITC idea was
imported into Australia through state-based vanguard organisations of the same name
(but different acronym, BCI). These have had a much more tenuous existence than their
UK counterpart. Moreover, they have had a narrow range of activities, focused on
supporting the state-sponsored system of Business Enterprise Centres. In some states, the
BCIs did not prosper. The attempt to create a national umbrella group in the 1990s
failed.
The fact that Australian BSR among firms at the state or national levels appears to be
lagging behind that of the UK reflects the general weakness of broad-based Australian
business organisation. Moreover, Australia did not experience the shock of sudden rises
in unemployment and the threats of social disorder witnessed in the UK during the early
1980s which served as a motivating force for BSR. However, since the 1990s, Australian
governments have pointed to the continued high levels of unemployment despite
relatively high levels of economic growth in order to encourage BSR.
Lowi (1964) links different sorts of public policy questions (distributive, regulatory and
re-distributive) with different forms of political representation (respectively these are
firm-based, industry-based and broad-based). Following this logic, and given BSR’s
relatively greater re-distributive component, we would expect to see greater business
interest in social responsibility to be associated with cross-sectoral business organisation,
including vanguard groups which, although small, cover a wide range of business
activity. We have seen evidence of the growth of these at the local level in both
countries. Although Australia appears to lag behind the UK, in both countries there is
evidence of BSR vanguard organisations. The UK BITC has emerged as a very active
national BSR umbrella association.
Institutionalisation of BSR by or with Government
Can BSR be institutionalised by or with government? What is the significance of the
relative tardiness of BSR national institutionalisation among Australian firms?
Table 4 presents ways in which social responsibility has been institutionalised into
governance from outside firms by or with Australian and UK governments.
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Table 4
Norms
Norms about the political engagement of business in part reflect wider norms about the
place of government in society. Broadly speaking, Australian state and national
governments have assumed a wider scope of social and economic domestic
responsibilities than have their British counterparts. This was premised on their
involvement in the rapid economic development, population and social policies of the
late nineteenth and early twentieth centuries, sometimes known as ‘colonial socialism’
(see Butlin et al 1982; Moon and Sayers 1999).xix Thus, by 1930 it could be said that
‘Australian democracy has come to look upon the state as a vast public utility, whose
duty it is to provide the greatest happiness to then greatest number’ (Hancock1930: 72).
State government - business relations tended to be highly selective by sector and even by
company (e.g. Queensland government relations with coal companies concerning energy
policy and rail freight pricing Galligan 19??). Moreover, these relations have often been
highly personalised (O’Brien 19??), a feature that has sometimes extended to the national
sphere (McEachern 1991).
Although Australia has been characterised by very strong sectorally-based business
organisations which have had impacts on public policy, by comparison with the UK there
has been less business involvement in a wider set of issues than was the case for the CBI
and its predecessors. Although business ideologies are certainly subject to change
(Boswell and Peters 1997), it would be surprising if norms about BSR have not reflected
these distinctive broader assumptions about public and private responsibilities. Thus, at
the state and national levels it appears that Australian business leaders had not acquired
the norms conducive for BSR to the extent of their UK counterparts.xx Interviews reveal
that Australian business leaders are likely to attribute responsibility for a wide range of
issues to government and are afraid of being seen by government as a soft touch.
At the local level business people in both countries reveal the habits of broader
engagement with governmental decision-makers and this is reflected in BSR. Examples
include alternation of secondments and board memberships for such organisations as
Business Enterprise Centres (Australia) and Local Economic Partnerships and Training &
Enterprise Councils (UK) which combine representation from the government (local and
sometimes state or national), business and voluntary or community sectors.
Organisation
BSR Partnerships with Individual Public Organisations
Australian BSR appears comparatively decentralised through bi-lateral relations between
single firms and individual public organisations. For example, business support to
secondary education is founded on relations between individual firms and schools rather
than on governmental or inter-business organisations. Nonetheless, this was highly
appreciated by schools illustrating how norms of engagement, in the terms of Huntington,
March and Olsen, and Peters (above), constitute a powerful form of institutionalisation
(Moon and Sochacki 1998 xxi). It is also interesting to note here that education appears to
contradict the general impression of less BSR in Australia than the UK. Both the
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Thatcher and Blair governments went to considerable lengths to secure more individual
business support for schools and colleges but were re-buffed (see below). This signals a
greater propensity of UK business people to see education as a public responsibility (see
Beckett 1993) and may reflect the different institutional character of education in the two
countries.xxii
BSR Partnerships with Local Government
The concept of local partnerships is very broad and includes those which are created,
serviced and funded by state or national government as well as those which reflect local
government initiatives and resources. Moreover, there is often definitional blurring as the
creation and support of local partnerships often entails considerable mutual dependency
between different levels of government.
In the UK a host of such partnerships have been in operation for some time now.
Bottom-up cases include the Local Enterprise / Economic Partnerships. Two sorts of topdown can be distinguished. There are those that are neo-corporatist in design and whose
local structure and scope replicates and is connected with national patterns of
representation (e.g. the erstwhile Manpower Services Commission Area Manpower
Boards). This has been eclipsed by another top-down model in which resources and
design are centrally designed but whose implementation is more flexible (e.g. Training
and Enterprise Centres, Urban Programmes, City Challenges, English Partnerships). In
all these cases business has tended to be accorded a greater proportionate role than neocorporatism would presume.
Although it is difficult to quantify, the Australian cases of local business-government
partnerships seem fewer but, nonetheless, to be growing. Bottom-up examples include
the Local Economic Initiatives. The top-down neo-corporatist type is illustrated in the
Department of Education, Employment and Training Area Consultative Committees.
Again, there has been a proliferation in ‘post-corporatist’ models which are centrally
resourced and designed, with some particular expectation of business and locally
implemented (e.g. the system of state-based Business Enterprise Committees).
In these cases, especially in the post-corporatist model, the strengths and weaknesses of
the partnerships reflect the nature of the design; the adequacy of the funding; the
initiative, energy, complexion, cohesion and policy instruments of the local partnership;
and the particular local challenge. The nature and substance of the business contributions
will, accordingly, be highly variable.
BSR Partnerships with State and National Government
In the UK the neo-corporatist credentials of the MSC were clearly indicated in the peak
level membership of representatives of the CBI. But the work of the MSC in the 1980s
was also enriched by more voluntaristic business contributions such as those of Practical
Action which coordinated local contributions to national labour market programmes.
[Check TEC national body]
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Business in the Community and The Princes Trust have become partners of government
in various employment, training and youth programmes INSERT
In Australia, peak-level partnership in government programmes was mainly confined to
business representation on consultative commitees for Working Nation employment and
training programmes and for state-based Business Enterprise Centres. More recently,
however, individual firms, general business organisations and BSR associations have
been invited to participate with the Commonwealth government in a range of BSR
activities. These range from the programme specific Corporate Leaders for Indigenous
Employment programme to more wide-ranging design and advocacy such as the Prime
Minister’s Business Community Roundtable and Community Business Partnership Board.
Incentives
Political inducement
As indicated above in the last two decades both countries have seen clear calls from
national governments for BSR. Leaving aside cases of personal and partisan advantage
(see below), it could be expected that business leaders might assume that social
responsibility with government would present their firms as suitable partners in
commercial relationships with that government. Some business people may be attracted
by public honours which are monopolised by government in both countries. It is hard to
calculate the net effect of the Prince of Wales on UK BSR but suffice it to say that BITC,
The Prince’s Trust and the Prince of Wales Business Leaders Forum have succeeded in
attracting and mobilising large sections of the UK corporate sector.
Kite-marks
The attraction of kite-marks, discussed in the dimension of inter-business BSR, is
multiplied with the prospect of the imprimatur of government. The Australian Prime
Minister’s Roundtable has been considering ways of giving preference to socially
responsible firms bidding for government contracts by means of a ‘community
investment ratings system’ though there are no proposals to date (The Australian
Financial Review 19.VIII.1998).
Tax Incentives
The distinctive US levels of BSR are not only under-pinned by very strong norms of
association and a relatively small scope of government (Bremner 1988; King 1973) but
also by a tax regime that encourages philanthropic behaviour. This led one scholar to
describe American social policy less as a welfare state and more as a ‘welfare economy’.
(Rein 1982)
Interestingly, when UK sponsorship was made a tax deduction for companies in 1986, it
was because it was deemed legitimate company expenditure rather than because it
constituted a social contribution. (Shaw 1993: 11) CHECK TAX DEDUCTIONS FOR
GIFTS BY COMPANIES
In Australia recent tax changes are anticipated to deliver about $50mill worth of BSR per
year. The changes saw cultural gifts to public galleries, museums and libraries exempted
10
from capital gains tax; income tax deductions for donations such as real estate worth over
$5,000; capital gains tax removed from bequests to charities; and tax restrictions lifted
from the establishment of private charitable foundations.
Rules
As noted above, when government makes rules, particularly regarding business activity,
it is normally assumed that they will apply uniformly. Thus legislating for social
responsibility would thereby undermine its voluntary essence. However, it is possible to
imagine some rules that might be made about BSR rather than those which require it.
Government can require transparency as to a firm’s social goals and activities. The UK
government has recently unveiled a policy which requires pension funds to disclose
whether they take account of the ethical impact of their investments (The Times
4.VII.2000). The Co-operative Bank asked the government to extend this logic by
legislating to require providers of stakeholders and occupational pensions to produce a
statement of their social and ethical objectives (The Times 23.1.2001).
Robert Reich suggested that in the USA companies could be penalised for social
irresponsibility but this has not been enacted yet.
BSR Institutionalisation Strategies of Prime Ministers Blair and Howard Compared
Prime Minister Blair and Howard appear to have approached the question of
institutionalising BSR more energetically than their predecessors. Although both have
eschewed neo-corporatist models, they have urged business to see its interest in and
responsibility to contribute to social cohesion. Howard has indicated that he wants to
create ‘a new social coalition’ and ‘a greater philanthropic tradition in Australia. Blair
has spoke of his interest in business and government having a ‘shared vision’. Both
governments have deployed other ministers to substantiate and focus these messages.xxiii
The idea of BSR is consistent with Howard’s blend of neo-liberalism (a belief in business
practices) and conservatism (a rather traditional sense of community) and he appears to
have approached the challenge of its institutionalisation more systematically than has
Blair. His strategy has combined high-level advocacy of his vision not only at business
but also at community and voluntary sector forums. He has created an active Roundtable
that has formed working groups in the areas of recognition, taxation, education, best
practice and information. The report of the working party on taxation informed the new
incentives described above.
Howard has complemented this research-based approach to policy with activism through
the formation of the Prime Minister’s Community Partnership. This organisation,
contracted for a three year periodxxiv, administers the Prime Minister’s Best Practice
Awards and works to form business partnerships. Significantly, perhaps, one of its
commissions is to establish a national BSR umbrella organisation.
Although the efforts of the Blair government look less systematic than those of
Howard’s, it must be remembered that the Australian government sees itself as playing a
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‘catching up’ game, part of which entails compensating for the lack of an effective BSR
umbrella. For the BITC along with other prominent vanguard groups now performs the
policy advocacy and activism roles in alliance building which the Prime Minister’s
creations are currently meeting.
The institutionalisation of BSR certainly echoes the ‘third way’ theme with which the
Blair government has been associated (Mulgan and Landry 1995). Blair himself has
presented a vision of a ‘Shared Agenda’ in which he envisaged 2000 business members
by the year 2000. This does not appear to have materialised (CHECK).
Similarly, shortly after coming to office in 1997, the Blair government established
Education Action Zones (EAZs) to attract private sector cash to re-energise schools in
deprived areas particularly. Four years later the Secretary of State for Education shelved
bidding for another round of zones. An independent report concluded that the seventythree zones in operation serve 1,444 schools and about 6% of the school population. It
added that because such a high percentage of contributions were ‘in-kind’ the flexibility
of the EAZs was constrained. Moreover, the report accuses the government of
exaggerating the amount of private money raised (Watling and Hallgarten 2001). This
confirms the comparative point above (CHECK) that education is an exception that
proves the rule about the greater readiness UK than Australian firms to engage in BSR.
More generally, the fact the lack institutionalisation of BSR with the UK national
government has meant that several contributions (e.g. to the Millenium Dome) have
raised questions about sleaze previously associated not only with its Conservative
predecessors (ref ) and with Australian government (see above).
Evaluation
There are numerous approaches that could be taken to evaluate the findings. What is the
effectiveness of the institutional developments I have depicted?
Haas, Keohane and Levy (1993) identify three variables for evaluating the effectiveness
of international environmental institutions: Concern, Contracts and Capacity. Concern
refers to their ability to ensure that governments will prompt adequate resources to be
directed at the problem. Contracts are to ensure that rules are kept in the individual
agreements. Capacity refers to the political and administrative means of ensuring that the
necessary changes are enacted. Stewart and Jones (1999) confirmed the usefulness of
this framework when they applied it to Australian national environmental policy. As they
note, Haas et al’s model has the virtue of combining
rational actor models which relate institutional structures to costs and benefits
(contracts); and policy process models which stress the interrelated and contingent
nature of issue formation, agenda management and policy networks (concern
being about agenda formation and capacity about ongoing network building)
(1999: 170)
They note, though, that concern and capacity may impinge on rational decisions about
contracts. The framework appears particularly apposite for thinking about BSR as it
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shares with environmental policy problems of control, evaluation and a potential for freeriders.
The issue of Concern, reflects agenda formation and issue definition. This seems to be
the strongest element in the latest phases of BSR institutionalisation. Paradoxically,
perhaps, the triumph of capitalism achieved by the collapse of communism, has been
succeeded by concerns among even its friends about the dangers both of dislocation of
business from society and of social dislocation itself. The language of ‘stakeholders’ and
community’ has not only permeated journals of social science, forums of opinion and
politico-speech. It has also permeated the language of business and informed such
concepts as ‘social responsibility’ and ‘social license to trade’. The sceptics fear that this
is simply spin and there is certainly evidence that in its ‘teenage years’ (ref), BSR can be
excessively prone to the marketing as opposed to the social pay-off.
This leads directly to the question of Contracts. It should be noted that in one sense
contracts may be incompatible with BSR which emphasises voluntarism and networks.
However, it is possible to envisage that firms to commit their non-profit activity to
contractual relations. In view of the possible incompatibility problem, we will use the
term Accountability. With reference to the problem of spin (above), it is interesting to
note that as BSR is enunciated it is easier for firms to be held to account. This is because
they set up standards by which they can be judged. For the sake of their reputation, firms
would thereby have an incentive to live up to the BSR message. Moreover, in order to
consolidate their BSR reputation, there may be a greater tendency to increase its
institutionalisation. Even at the intra-firm level this could lead to audits which enables
third party eveluation. Inter-firm institutionalisation could lead to mutual watch-dogs.
The requirement for transparency which could emerge from institutionalisation with
government. This is a positive speculation based on the interpretation of the trends
towards institutionalisation and the motor of reputation. It remains the case that BSR is
less accountable than many activities of modern democratic government.
With respect to Hass et al’s third variable, Capacity, the institutionalisation we have
identified has not developed so far that it can offer political and administrative means to
secure compliance. The main vehicle for compliance is the recognition that what were
the benefits of free-riding turn into the costs of being a non-participant. The other vehicle
which is still developing in the UK and Australia is the deployment of incentives and
though there are clear signs of development here, the different sorts of political and
administrative capacity are called for.
This is a less sure basis for governance than that associated with the post-war modern
democratic state, but is symptomatic of much that is new in governance. Many public
policies are increasingly premised upon the voluntary participation of a plurality of
particularisms characterised by particular perspectives of ethnicity, religion, gender,
sexuality, environmental commitment etc. Thus the fact that business brings its own
agendas and that its participation is not guaranteed by the authority of government is
hardly unique.
13
capacity and contracts. In contrast to governments which have immense fiscal capacity,
firms’s social responsibility is very often in the form of in-kind contributions (e.g.
executive services, equipment, premises, employee time). Although governments have
not always lived up to their aspirations to deliver equal and reliable services across
political systems, their capacity seriously outweighs that of firms. As a result the
capacities of BSR are probably best deployed where the norms of diversity and
appropriateness for local conditions are to the fore. More generally, there is still more
work to be done on identifying and estimating the capacity of BSR.
In sum, not only has BSR appeared to increase but its significance and form have
changed. BSR is more engaged with government and community organisations. It is
also increasingly institutionalised from the firm level to that of relations with
government. To that extent, in March and Olsen’s (1989: 159) it is ‘making a
difference’.
14
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18
Table 1 Dimensions of Business Institutionalisation
Mode
Norms
Organisation
Incentives
Rules
Within Firm
Location
Among Firms
By/ with
Government
Table 2 Institutionalisation of BSR Within Firms
Norms
Of owners /
managers
Cooperative
foundation
and tradition
Organisation
Specification in aims
Incentives
BSR days for
employees
BSR as promotion
avenue for
executives
Dedicated manager;
committee; section;
department
Company foundations
Rules
Dedicated budget
allocations
Specific budget
procedures
Evaluation
procedures for
requests,
alternatives
Audits
External relations
Table 3 Institutionalisation of BSR Among
Norms
Organisation
Other business
Existing business
networks
association
Sharing support
Local / regional BSR
to community
alliances
projects
>Vanguard= BSR
groups
Umbrella BSR
associations
Firms
Incentives
Business
networks
Kite-marks
Rules
Audits,
benchmarking
Table 4 Institutionalisation of BSR by or with Government
Norms
By-product of
other business
Organisation
Incentives
Partnerships with
individual public
Political / Social
inducements
19
Rules
Requirements re
transparency
roles with
government
organisations
Partnerships with
local/regional
governments
Partnerships with
state / national
governments
Kite-marks
(Penalties for
social
irresponsibility)
Tax incentives
Notes
On business and politics see Dahl (1985), Lindblom (1977) and Vogel (1983, 1987).
On business and institutional design see Moran (forthcoming).
i
BSR is defined here as the non-profit activity or community involvement. Sponsorship
of the community, artistic and sporting events, for example, is rather a gray area.
Business usually identifies some commercial advantage but also socially valuable
activities are supported.
ii
BP advertises itself as a supporter of a charity for disabled children; Alcoa advertises
itself as a conservationist; Shell advertises itself as a human rights activist and
environmentalist. Sensitivity about image varies by firm activities. High street firms and
very large companies are particularly in the public view. R&D firms need worry less
about their popular profile as their success depends on persuading other firms to buy their
product. BSR is, of course, institutionally defined. In the UK sponsorship of charities and
the arts became tax deductable in 1986 (Shaw 1993: 11).
iii
E.g. The Royal Bank of Scotland decided to call in its loan to Huntingdon Life
Sciences following revelations of experiments on animals (The Times 17.I.2001); Proctor
and Gamble withdrew sponsorship of a TV station which scheduled a series hosted by a
prominent anti-gay advice-giver (New York Times 19.V.2000); the Commonwealth Bank
threatened to withdraw sponsorship from a New South Wales high school soccer league
following all-in brawl (The Australian 21.VII.1997).
iv
Warren (1999) reports on record low approval rates of UK approval of business; Shell
was accused of a ‘sham price cut’ (The Times 4.I.2001).
v
See Bell 1994, 1995; Matthews 1983, 1994 (Australia); Grant 199?; Grant and Marsh
1977 (UK).
vi
Mulgan and Landry refer to the third wave of business generosity as ‘giving to
increase a company’s name recognition among customers and employees’ (1995: 97).
vii
viii
These issues are fleshed out in Moon (under review).
20
In practice the distinctions are not so clear e.g. regulation within or among firms may
be licensed by government; rules are often predicated upon organisation.
ix
Nb the costs of capital mobility, other than that of finance capital, are sometimes
under-estimated. Some companies’ mobility is restricted by the locations of the resource
that is their trade. The costs for a manufacturer of abandoning or shifting plant and
acquiring a new workforce are considerable. For retailers, entry into new markets may
also entail considerable costs. Conversely can collectively benefit from regulation (as a
means of avoiding free-rider problems) and from the socialised costs of education,
training and health of their workforces and infrastructure .
x
This characterises the contributions to wealth re-distribution that business makes
through taxation and it appears that many companies in western economies have accepted
relatively high taxation regimes. Compulsory contributions have also been extracted in
the area of training e.g. by the 1563 Statute of Artificers (repealed in 1814) which
established a statutory apprenticeship regime (Jones 1999: 75).
xi
The following discussion draws upon Beesley and Evans (1978), Moore and
Richardson (1988) and Moon and Sochacki (1998).
xii
Single company foundations for BSR, although common in the USA, are still
comparatively rare in Australia and the UK. One case in Australia is the Lend Lease
Foundation.
xiii
Examples are legion see my own publications, the publications of Business in the
Community (UK) and the Prime Ministers Community Business Partnership (Australia).
xiv
Formed in 1965 from the of three long standing broad-based business associations, the
Federation of British Industry, the British Employers’ Confederation, and the National
Association of British Manufacturers.
xv
The SPU was in large measure responsible for a watershed in the attitudes and
practice of UK business at large. It also represented a form of BSR by virtue of the
resources expended by the member companies (Moon and Richardson 1985).
xvi
xvii
These are all discussed in Moon and Sochacki (1998).
xviii
In the UK these included the former CBI Special Programmes Unit and Practical
Action, The Prince’s Trust, the London Benchmarking Group, the Institute for Social and
Ethical Accountability, the New Economics Foundation and the Prince of Wales Business
Leaders Forum (which specialises in international BSR). In Australia these include the
Centre for Corporate Public Affairs (which now has over 100 affiliates), the Australian
Corporate Citizenship Alliance, Philanthropy Australia.
21
An important exception here is education: whereas ??% of UK schools are in the
private sector, 27% of Australian schools (see below).
xix
Nettl (1965) goes so far as to argue that the extent of inter-penetration of British
government and business elites undermines the organisation of distinctive business
interests.
xx
xxi
The findings were of equal levels of support for public and private schools.
Whereas about 3% of UK children attend private schools, 27% do in Australia. The
private (including religious) education sector does receive public subsidy.
xxii
E.g. in Australia the ministers for Arts, Community Services, Aboriginal Affairs and
in the UK the ministers for Health, Education and Employment.
xxiii
The agency combines two features of new governance: markets and contracts (in its
own relationship with government) and partnership (in its aims).
xxiv
22