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Corporate Social Responsibility as
Citizenship and Compliance
Initiatives on the Domestic, European and Global Level *
Lisa Whitehouse †
University of Hull, UK
This paper examines the concept of corporate social responsibility and the ambiguity
that has surrounded its meaning since its introduction in the 1930s. In an attempt
to add a degree of clarity to this worthwhile debate, this paper contends that corporate
social responsibility consists of two related but distinct models. The first is the
citizenship model, which views the company as an individual that should be encouraged to exceed its minimum legal obligations. The second is the compliance model,
which views the company as a public enterprise capable of exercising significant
power that can only be legitimated through the use of compulsory schemes. A review
of initiatives implemented recently by the United Nations, the European Commission
and the Department for Trade and Industry indicates clearly that the citizenship
model has found favour with policy-makers. While this approach has its advantages,
this paper will contend that, when used in isolation, it will fail to achieve consistent
and broad-based reform of corporate activity. It is essential, therefore, if corporate
social responsibility is to be achieved, that the citizenship and compliance models
be used in partnership.
Dr Lisa Whitehouse is a Senior Lecturer in law at the University of Hull, UK.
Her research interests include corporate social responsibility, globalisation
and regulation. She has recently completed a comparative study of the UK and
US approaches to corporate social responsibility, funded by the ESRC, the
British Academy, the Nuffield Foundation and the Socio-Legal Studies
Association.
● Corporate social
responsibility
● Corporate
citizenship
● United Nations
Global Compact
● Regulation
● EC Green Paper
u
The Law School, University of Hull,
Hull, HU6 7RX, UK
!
<
[email protected]
www.law.hull.ac.uk
* The research presented in this paper was undertaken during the author’s stay as a Visiting Researcher
at New York University’s School of Law.
† The author would like to thank the British Academy, the Economic and Social Research Council, the
Nuffield Foundation, the Socio-Legal Studies Association and the University of Hull for financing
this research.
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C
orporate social responsibility (csr) is a term that, since its
introduction in the 1930s, has become increasingly familiar within academic,
managerial and political debate. While it seems safe to suggest that the term is
concerned with the role that companies play within society, beyond this, it is difficult
to be more specific. The task of providing a more detailed definition of the term is
not assisted by a review of the vast amount of literature in this area, which reveals a
multitude of different interpretations ranging from CSR as philanthropy to CSR as a duty
on the part of companies to remedy many if not all social ills. The ambiguity apparent
in the meaning attributed to CSR has left the concept open to misinterpretation and
potential abuse by those who seek to use it in support of various claims and vested
interests (Van Buren 2001).
In an attempt to avoid misconception and to add a degree of clarity to the CSR debate,
this paper will contend that the various definitions apparent within the relevant literature serve to promote two different models of CSR. The first, and the one that has gained
increased popularity in recent decades, is the citizenship model. Founded on a conception of the company as an individual, endowed with rights and responsibilities in much
the same way as any other citizen, ‘corporate citizenship’ promotes the use of voluntary
schemes in the pursuit of greater corporate accountability. The second version, what
this paper will call the ‘compliance model’, is founded on a conception of the company
as a public enterprise, capable of exercising significant social power that can and should
be made legitimate through the use of mandatory schemes of regulation including
sanctions for non-compliance.
While these two versions of CSR are clearly evident within the academic literature, a
review of recent initiatives introduced by the United Nations (UN), the European
Commission (the Commission) and the Department for Trade and Industry (DTI) indicates that policy-makers have expressed a clear preference for the citizenship model.
The reasons for this preference will be explored and, while it is accepted that this
approach has its advantages, it will be argued that sole reliance on these voluntary
schemes will fail to ensure broad-based and effective reform of the adverse impact of
corporate activity.
It is essential, therefore, if immediate and effective CSR is to be achieved, that the
citizenship and compliance models be used in partnership. In an attempt to reinvigorate
the debate concerning the compliance model of CSR, this paper will conclude by offering
an account of how such a model might operate in practice. Whether there is sufficient
motivation on the part of academics, politicians and corporate managers to develop this
notion further remains to be seen.
Corporate social responsibility: general characteristics
The potential for large corporations to exercise significant powers that impact adversely
on the interests of individual citizens and communities on a national and international
scale has been recognised within both political and academic debate since the 1930s.
Initiated by the writings of Berle (1931) and Dodd (1932), the idea that corporate managers might consider interests other than those of their shareholders gained increased
momentum as corporations expanded in terms of size and global market reach
(Galbraith 1956; McIntosh et al. 2003: 15). While managers remain compelled by law to
prioritise the interests of their shareholders in the form of ‘profit maximisation’, the
concern to ensure that such decisions do not have a disproportionate impact on those
outside of the company has led to the creation of the concept of CSR.
While it seems reasonable to suggest that the concept is concerned with enhancing
the relationship between companies and society and with regulating the activities of
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companies so as to achieve outcomes that are ‘desirable in terms of objectives and values
of our society’ (Bowen 1953: 6), it is difficult to be any more specific about those
objectives or how we might go about achieving them. A review of the relevant literature
reveals a multitude of different definitions ranging from corporate philanthropy (see
Anderson 1989; Blumberg 1972; Henning 1973; Sheikh 1996) to philanthropy
combined with economic, legal and ethical concerns (Carroll 1991) to a responsibility
on the part of companies for ‘how the harms and benefits of their actions are allocated,
regardless of intentionality and regardless of cost to the firm’ (Wood and Logsdon 2001:
94).
For some, this ambiguity is unproblematic, placing CSR on a par with terms such as
the ‘public interest’ which, although familiar, are sufficiently vague to ensure that they
can be used in defence of any number of claims and ideologies. As Stone argues in
respect of CSR, ‘bad enough that the notion is fuzzy. Even worse, it is transparently this
very fuzziness that accounts for its broad consensus of support’ (Stone 1975: 72).
Ambiguity, however, also provides those who may seek to criticise the concept with
ample opportunity to raise concerns in respect of its potential impact.
The case against corporate social responsibility
In seeking to make the case against the regulation of companies based on a regime of
CSR, many critics, either implicitly or explicitly, suggest that such a regime will compel
companies to adopt extreme examples of ‘profit-sacrificing behaviour’ (Parkinson 1996:
261). Levitt’s description of the potential consequences flowing from the imposition of
CSR offers one such example:
The danger is that all these things will turn the corporation into a twentieth-century
equivalent of the medieval Church. The corporation would eventually invest itself with
all-embracing duties, obligations, and finally powers—ministering to the whole man and
moulding him and society in the image of the corporation’s narrow ambitions and its
essentially unsocial needs (Levitt 1958: 44).
In a similar manner, the most famous opponent of CSR, Milton Friedman, made good
use of the ambiguity surrounding the concept, as Clarkson suggests: ‘the move from
the innocuousness of social to the taint of socialism was made skilfully by this master of
rhetoric’ (Clarkson 1995: 103). Friedman’s view of CSR as a duty, imposed on managers,
to identify and pursue the ‘social interest’ (Friedman 1969: 133) led him to question the
democratic legitimacy of such a scheme, claiming that such a duty is a ‘fundamentally
governmental venture for which [the director] has never been democratically elected or
chosen’ (McClaughry 1972: 8). For this reason, Friedman (1969: 133) felt justified in
describing CSR as a ‘fundamentally subversive doctrine’.
Friedman’s claims highlight the danger in failing to establish the boundaries and
norms that underpin concepts such as CSR. As Van Buren (2001: 57) suggests,
without an adequate normative grounding, [CSR] may be used in such a variety of ways
by different groups (companies, NGOs, academics), all of which have vested interests in
particular definitions, that it fails to progress beyond being a metaphor.
In an attempt to counter such claims and to add a degree of clarity to the debate
surrounding the concept, this paper contends that it is possible to identify two versions
of CSR apparent within the relevant literature: namely, what may be called the citizenship
and compliance models. Although not articulated within the literature, it is clear that
certain academics advocate one model or the other. It is important, therefore, in order
to avoid confusion and ambiguity that a clear distinction be made between these two
models and the relationship between them explored. Beginning with the citizenship
model or, to give it its more common name, corporate citizenship, the following section
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of this paper examines these two models, their inherent characteristics and their potential for ensuring a more responsible corporate environment.
Corporate social responsibility and/or corporate citizenship?
Following 50 years of vociferous debate, the CSR literature has witnessed the emergence
of new terminology in the form of ‘corporate citizenship’. Although apparent in the decisions of the US Supreme Court in the early 19th century (Waddell 2000; Windsor 2001),
it was during the 1990s that the term received ‘scholarly attention’ (Wood and Logsdon
2001: 85). The introduction of this new term necessarily raises questions regarding the
motives underlying it. Is this an attempt on the part of academics to rebrand the ageing
concept of CSR or to introduce an entirely new concept more suited to the policies of the
post-Reagan/Thatcher era? A review of the relevant literature reveals that there is no
easy answer to these questions. For some, like Andriof and McIntosh (2001), corporate
citizenship is a term used interchangeably with CSR. For others, corporate citizenship
is a concept related to but distinct from CSR: McIntosh et al., for example, describe it as
a ‘progression from CSR’ (McIntosh et al. 2003: 16), while Wood and Logsdon (2001:
83) suggest that ‘the concept of corporate social responsibility is being replaced by the
term “corporate citizenship” ’.
Despite the linguistic uncertainty that exists between the use of the terms corporate
citizenship and CSR, corporate citizenship can best be explained as a version of CSR. It
is clear that the two terms are directly related. Both derive from a concern to legitimate
the exercise of public power by large corporations and to ensure that corporations add
something of value to their local communities and society generally. Whereas CSR failed
to extend beyond these very general concerns, however, advocates of corporate citizenship have attempted to refine and focus the meaning and practical implications of a
corporate citizenship regime. To this extent, therefore, it is possible to argue that, rather
than serving as a replacement for CSR, corporate citizenship derives from and represents
a particular version of the more generic concept. By viewing corporate citizenship in
this light, one avoids the concerns raised by Wood and Logsdon (2001: 83) that ‘the core
content of social responsibility may be lost in favour of a more narrow and voluntaristic
concept of corporate community service’. Rather, corporate citizenship merely reflects
some of the characteristics apparent within CSR.
The citizenship model
As Box 1 indicates, corporate citizenship is founded on the assumption that companies
should be viewed as equivalent to other individuals, particularly as regards the endowment of rights and responsibilities, although, as Waddell (2000: 107) suggests, ‘promoters of the term tend to emphasize the responsibilities side’. It has been suggested
that more may be expected of the large and powerful corporate citizen but, ultimately,
the responsibilities are ‘equivalent to those expected of an individual ordinary citizen’
(Windsor 2001: 49-50). While the corporate citizenship literature advocates several
different models of ‘citizenship’ (see Altman 1998; Waddock and Smith 2000; Wood
and Logsdon 2001), it is possible to identify a number of inherent characteristics within
the corporate citizenship concept. One such characteristic is that corporations are
expected to abide by existing legal obligations with the aspiration that they will exceed
these minimum legal requirements by implementing behaviour that society deems to
be socially responsible; ‘just as individuals have citizenship-related responsibilities over
and above obeying the law, so do corporations’ (Van Buren 2001: 56).
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corporate social responsibility as citizenship and compliance
corporate social responsibility
t
Concerned with the relationship between companies and society
t Aims to legitimate corporate social power
+
the citizenship model
t
Company viewed as an individual
Voluntary schemes of regulation
t Consistent with neoliberalism
t Based in morality
t
Box 1 relationship between corporate social responsibility and corporate citizenship
A second characteristic is that corporate citizenship places heavy reliance on voluntary
action by companies. In conceiving of the corporation as an individual, corporate citizenship does not seek to impose any special or additional regulation on corporations but
simply to encourage them to abide by existing legal obligations, social mores and
voluntary schemes in order to make them good corporate citizens; as Carroll (2001: 140)
notes, ‘good corporate citizenship must go beyond the law—that is, business people
must engage in ethical practices’. The Business Impact Task Force (2000), for example,
has highlighted five key areas of corporate activity that a company should seek to improve
on if it wishes to be perceived as a good corporate citizen, including the treatment of the
workforce, its impact on the marketplace and the environment, and its commitment to
promoting human rights.
Further guidance on the substantive content of a corporate citizenship regime has
also been provided by Waddock (2001: 28-29) who, in establishing the value-laden
nature of corporate citizenship, suggests that the values guiding it must be ‘constructive’
or ‘end values’, that is, ‘deeply felt core values, which inspire the human spirit’. Dion
(2001: 119-23) and Waddock (2001) offer some practical examples of such values taken
from certain companies, including ‘heroic customer service, worldwide reliability of
services and encouragement of individual initiative’ (Waddock 2001: 29). These examples are useful in identifying the objectives and content of a corporate citizenship regime
but it is no longer necessary to second-guess what such a regime might look like in
practice. This is due to the implementation of three schemes designed to encourage
companies to exceed voluntarily their minimum legal obligations in pursuit of a more
ethical business environment. In undertaking a brief review of these recent initiatives
on the domestic, European and global level, the following section of this paper offers an
insight into the practical operation of the citizenship model of CSR.
The United Nations Global Compact
The UN Global Compact represents the practical manifestation of the UN SecretaryGeneral Kofi Annan’s aspiration to ‘make globalization more equitable’ (Global Compact Office 2002: 3). Initiated by his speech at the World Economic Forum in Davos in
January 1999, the Global Compact was officially introduced in July 2000. Its aim is to
encourage participating transnational corporations (TNCs) to embrace nine universal
principles within the area of human rights, labour standards and the environment (see
page 34). Drawn from the Universal Declaration of Human Rights (1948) and the International Labour Organisation’s Fundamental Principles on Rights at Work (1977), the nine
core principles encourage participants to ensure that they are not complicit in human
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rights abuses, that they eliminate all forms of forced and compulsory labour and undertake initiatives to promote greater environmental responsibility (see McIntosh et al.
2003: 127).
By April 2003, at least 75 major multinationals and around 700 other companies were
engaged in the Global Compact1 including BMW, BP, Nike, BT, ICI and Royal Dutch/Shell.
In an attempt to encourage these companies to adopt the nine universal principles
willingly, rather than compelling them to do so, the UN has chosen to make use of ‘a
voluntary initiative that seeks to provide a global framework to promote sustainable
growth and good citizenship through committed and creative corporate leadership’
(Global Compact Office 2001: 1). Due to the lack of sanctions for non-observance of the
guidelines set out under the Global Compact, the UN is aware of the potential for abuse
and is keen to prevent corporations publicising their commitment to it without adopting
and providing evidence of positive action:
The Global Compact is not a regulatory instrument, a legally binding code of conduct or
a forum for policing management policies and practices. Nor is it a ‘safe-harbour’
allowing companies to sign-on without demonstrating real involvement and results
(Global Compact Office 2001: 1).
The means by which participating companies are expected to demonstrate their ‘real
involvement and results’ include the posting on the Global Compact’s website, once a
year, of a case study indicating ‘progress made or a lesson learned in implementing the
principles’ (Global Compact Office 2001: 2) and the publication by the company of its
commitment to the nine principles in mission statements, annual reports and newsletters. Due to the voluntary nature of the Global Compact, the UN is not willing to
publicise the names of those companies who fail to provide such information or those
who indicate a lack of effective commitment to the nine principles.
The strength and potential effectiveness of the Global Compact lies partly in the unique
qualities of the UN. As Cohen (2001: 186-87) indicates, there are few other institutions
that can match the UN’s ‘global reach, its constellation of agencies . . . its intergovernmental nature, numerous communication vehicles in the world’s major languages as
well as institutional credibility, particularly with the developing world’. The decision by
the UN to adopt a ‘facilitative’ rather than ‘enforcement’ role has, however, led to accusations that that the Global Compact is open to abuse and that the UN has surrendered
authority to global corporations (RAFI 2000). Support for these claims has been offered
by the UN itself in its report on the progress and activities of the Global Compact (Global
Compact Office 2002).
Through the mechanism of the Global Compact Learning Forum, the UN had hoped
to produce an ‘information bank of disparate experiences—some successful and some
not—describing company efforts to implement the Compact’s nine principles’ (Global
Compact Office 2002: 17). During its pilot phase in 2001, the Learning Forum received
30 submissions from participating companies (McIntosh et al. 2003: 199). Following a
review by a team of academics, however, all of the submissions were deemed to fall below
the standards required by the Global Compact and all the companies were asked to
resubmit their reports. As McIntosh et al. (2003: 200) explain, ‘in reality most companies did not resubmit their reports in light of the commentaries provided for them
by the expert team’, thereby undermining the Learning Forum’s goal of encouraging
companies to actively engage in the learning process. The content of these and more
recent case studies can be found on the Global Compact website.2
Despite these criticisms and the lacklustre performance of some of its participants,
the Global Compact’s fundamental aim of contributing to the emergence of ‘shared
1 www.unglobalcompact.org Æ Companies
2 www.unglobalcompact.org Æ Learning
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values and principles, which give a human face to the global market’ (Global Compact
Office 2001: 1) should be welcomed and supported. Whether the Global Compact has
the capacity to extend beyond its current role as a central information and discussion
forum for companies who wish to promote their reputation as good corporate citizens,
however, remains to be seen.
The Commission of the European Communities Green Paper
In an attempt to initiate a debate on how the EU can promote CSR throughout Europe
and internationally, the Commission published in July 2001 the Green Paper Promoting
a European Framework for Corporate Social Responsibility. The paper makes explicit use
of the term ‘CSR’ but the definition of the term contained within the Green Paper indicates that it is promoting clearly the citizenship model: ‘[b]eing socially responsible
means not only fulfilling legal expectations, but also going beyond compliance and
investing “more” into human capital, the environment and the relations with stakeholders’ (Commission of the European Communities 2001: 6). Examples of the type of
activity envisaged by the Commission are set out in the Green Paper and include
improvements to human resources management, health and safety at work, and
management of environmental impacts.
In an effort to encourage corporations to view these proposals in a positive light, the
Green Paper seeks to promote the ‘business case’ (Commission of the European Communities 2001: 4), highlighting the benefits that corporations will gain if they adopt
socially responsible practices: ‘these activities can result in better performance and can
generate more profits and growth’ (Commission of the European Communities 2001:
7). Amid the traditional examples of activities that will lead to increased social and
environmental awareness, however, is a relatively controversial proposal concerning
restructuring. Reluctance on the part of policy-makers to intervene in the economic
decisions of private corporations has meant that issues such as restructuring and
rationalisation have been left to operate unhindered. The Commission, however, has
suggested that where job losses are consequent on restructuring, those affected should
be consulted and alternatives should be considered in an effort to reduce redundancies
(Commission of the European Communities 2001: 10).
The response to this and the other proposals contained in the Green Paper has been
substantial, with the Commission receiving 250 responses from Member States, corporations, civil-society organisations and trade unions (Commission of the European
Communities 2002: 3). Perhaps not surprisingly, these responses fall into two categories: namely, those that support voluntary compliance and those that call for mandatory
regulation. Even less of a surprise is the fact that those advocating the former tend to be
private corporations whereas those advocating the latter tend to be civil-society
organisations and trade unions. The Director of the WWF European Policy Office, Tony
Long, for example, suggests that ‘voluntary commitment alone is not sufficient’ (Long
2001: 3). This view is supported by the New Economics Foundation, which suggests that
‘the continued reliance on voluntary definitions of CSR and the “business case perspective” will limit the EU’s opportunities for ensuring appropriate policy interventions in
this area’ (New Economics Foundation 2001: 1).
These calls for the Commission to take a more proactive regulatory approach operate
in direct contrast to many of the responses received from corporations. Ford Motor
Company, for example, emphasises the need for voluntary and not compulsory mechanisms: ‘actions in connection with CSR should be voluntary and not expected to exceed
national legal requirements’ (Ford Motor Company 2001: 4). In a similar vein, the
Association of British Insurers (ABI) claims that success can only be achieved through
a process ‘that emphasises the alignment of interests rather than through the imposi-
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tion of arbitrary codes or regulations that alienate those who are supposed to implement
them’. (ABI 2001: 1). The Commission is also left in no doubt as to the likely response
of TNCs to mandatory regulation. GoodCorporation (a network of socially responsible
companies), for example, makes it clear that ‘most organisations would greet such an
[mandatory] approach negatively’ (GoodCorporation 2001: 1) while the ABI suggests that
the proposals on restructuring would be ‘highly detrimental to EU economic development’ (ABI 2001: 2).
On the basis of these responses, the Commission proposes to maintain the use of
voluntary initiatives in the pursuit of increased knowledge about the positive impact of
CSR, to foster CSR among TNCs and to integrate the concept into Community policies
(EC 2002: 8). The refusal to implement mandatory rules may be consistent with the view
that ‘CSR policies need to be driven from inside the company’ (Ford Motor Company
2001: 1); cynics might suggest, however, that it is indicative of the Commission’s fear of
upsetting big business.
The Department for Trade and Industry’s report
The approach adopted by the Commission to the issue of CSR has been mirrored by the
UK government. Having indicated its strong commitment to improved corporate
behaviour by appointing, in March 2000, the world’s first Minister for Corporate Social
Responsibility, further evidence has been provided by the DTI’s (2002) report Business
and Society which sets out the activities and policies of the UK government. Like that of
the Commission, the framework envisaged by the DTI adopts and promotes the citizenship model, as indicated by the definition of CSR as ‘behaviours that go beyond basic
legal compliance’ (DTI 2002: 7).
In seeking to encourage companies to act responsibly, the report highlights the many
advantages to be gained in converting corporate citizenship principles into practice, not
least the capacity for reducing risk, enhancing brand value, opening doors, creating
goodwill and improving staff efficiency and morale (DTI 2002: 7). In an attempt to
enhance the opportunities for companies to take advantage of these benefits, the
government has sought to introduce ‘enabling’ legislation in the form of the changes
made to the Pensions Act 1995. These will require pension funds to disclose ‘the extent
to which they take social, environmental and ethical issues into account when investing
money’ (DTI 2002: 12). It does not, however, require pension funds to undertake any
particular action.
Combined with these changes to the Pension Act 1995 are fiscal incentives designed
to encourage employees and companies to donate money to disadvantaged communities, including Payroll Giving and the Community Investment Tax Credit (DTI 2002: 1516). This constitutes the total sum of government action to implement CSR. All other
measures referred to in the report are either pre-existing rules ‘supported’ by the
government (e.g. the International Labour Organisation’s Declaration on Fundamental
Principles and Rights at Work), proposals not yet in force (for example, proposals put
forward by the Company Law Review Steering Group) or initiatives implemented by
other organisations (for example, FTSE4Good, Business in the Community and Aston
Reinvestment Trust).
This view of the government’s policy on CSR may be viewed as unfair by a government
that has appointed ‘Green Ministers’ in all government departments, has published
guidelines on environmental reporting, and has entered into dialogue with corporations
in an attempt to engender social awareness and sustainable development. It is clear,
however, that, rather than specifying the type of action that would be consistent with the
government’s conception of CSR and compelling companies to abide by it, the government has indicated a preference for voluntary participation and corporate discretion in
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respect of what constitutes socially responsible behaviour. This is despite the government’s admission that ‘there are still many organisations that are not adopting socially
and environmentally responsible practices’ (DTI 2002: 43).
The advantages and disadvantages of voluntary and mandatory regulation
The initiatives described above promote one recurrent theme, which is that corporations
should be encouraged and not compelled to behave in a socially responsible manner.
Regardless of the reasons underlying this preference for self-regulation, it is clear that
this approach has its advantages. The Institute for Public Policy Research (IPPR) has
explored the advantages and disadvantages of both mandatory and voluntary regulation,
suggesting that ‘prescriptive legislation often leads to tokenistic responses and regulation can quickly become an inaccurate reflection of society’s concerns, lagging behind
public opinion’ (Joseph 2002: 96). This view is supported by Carroll (2001: 140) who
suggests that ‘laws cannot cover every conceivable situation a manager may face; there
are gaps that must be addressed by some other way of thinking’.
Although cautious about the efficacy of voluntary schemes, the IPPR does suggest that
‘corporate practices advocated in codes of conduct . . . can in theory be a formidable
force for improvements in behaviour’ (Joseph 2002: 96), provided that they are
supported by pressure from stakeholders. The Cabinet Office’s Performance and Innovation Unit (2000) has also indicated its preference for self-regulation: ‘voluntary
initiatives allow for flexible, timely and tailored responses to . . . issues as well as the
opportunity to develop consensus, expertise and shared understanding in the context of
growing trade tensions’ (Performance and Innovation Unit 2000: para. 9).
Despite the potential for voluntary schemes to offer a more flexible approach to
regulation, the Commission’s Green Paper, in particular, has been criticised for failing
to keep pace with the businesses most likely to subscribe to its principles. As Long
suggests, ‘the growing number of ethical investment institutions . . . are already a sign
that corporate practice is ahead of the Commission’s Green Paper’ (Long 2001: 3). This
may be viewed as a failure on the part of the Commission rather than an inherent defect
within voluntary regulation. There are, however, a number of disadvantages associated
with this regulatory approach, the most prominent being its inability to achieve consistent and systematic reform of corporate activity. While those who participate in
initiatives such as the Global Compact, for example, may alter their behaviour in a
manner consistent with its principles, the behaviour of these corporations taken as a
whole may be less than perfect, as McIntosh indicates in relation to charitable donations:
the company that is viable economically through its good use of financial, social and
environmental resources may not be good for society. If the company then distributes
some of its wealth through philanthropy, it does not necessarily make the company
socially responsible (McIntosh 2001: 4).
While the ad hoc implementation of socially responsible practices may be problematic, a more significant concern relates to those corporations who choose not to participate in such schemes, as Page suggests in relation to self-regulation: ‘[s]ince adherence
is voluntary it is not universal and those whose activities are most in need of regulation
are least likely to subscribe to them’ (Page 1980: 28). While it is possible to argue that
stakeholder pressure may go some way in ensuring that corporations participate in
corporate citizenship initiatives, ‘many companies continue to “do well” in the absence
of “doing good” ’ (New Economics Foundation 2001: 3).
It seems evident, therefore, that despite its obvious advantages, corporate citizenship,
when used in isolation, will prove ineffective in regulating the worst excesses of
corporate behaviour. When used in combination with the second model of CSR, however,
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it may well have the potential to achieve meaningful and effective corporate social
responsibility.
The compliance model
While the preference for the citizenship model, examined above, may be indicative of
the prevailing views regarding the content and objectives of CSR in the 21st century, there
is evidence within the relevant literature of an alternative model (see Box 2) or ‘second
limb’ to CSR which has not found favour in recent decades.
corporate social responsibility
t
Concerned with the relationship between companies and society
t Aims to legitimate corporate social power
the citizenship model
Company as an individual
t Voluntary
t Consistent with neoliberalism
t Based in morality
t
the compliance model
Company as a public institution
t Compulsory
t Inconsistent with neoliberalism
t Based in law
t
Box 2 relationship between corporate social responsibility, the citizenship model and the
compliance model
Operating as the mirror image of corporate citizenship, the compliance model of CSR
views the corporation not as a citizen but as a ‘social enterprise; that is, as an entity whose
existence and decisions can be justified only insofar as they serve public or social
purposes’ (Dahl 1972: 17). While this may appear to be a subtle variation on a recurrent
theme, the manner in which we conceive of the corporation alters dramatically the
manner in which we seek to regulate it.
In viewing the corporation as a social enterprise and a source of vast and ‘unbridled
power’ (Stokes 1986: 156), it becomes necessary, in an attempt to legitimate that power,
to have recourse to democratic principles and the rule of law (see, for example, Mason
1959: 6; Stone 1975: 30). The benefit of making use of the law as a means of regulating
corporations is that the question as to whether a company is acting in a socially
responsible manner becomes not ‘whether the decision violates any moral standards’
(Velasquez 1988: 13) but whether the decision violates particular legal standards. To use
Friedman’s (1969 : 133) famous phrase, by using law as the mechanism by which to
implement CSR, we bring CSR ‘within the rules of the game’.
This is not an innovative concept within Western liberal democracies, for companies
are already required to operate within a complex framework of legal rules including
criminal and tortious liability for harms caused by the company or its employees.
Managers are, therefore, constrained in their pursuit of profit maximisation by the
prevailing legal context. If legal mechanisms were to be introduced in order to implement principles and objectives consistent with CSR—for example, by facilitating ‘the
reception and proper weighting of third-party interests in corporate decision-making’
(Parkinson 1996: 43)—then these would operate simply as additional rules of the game.
While the UK and other Western democracies have implemented ad hoc legal rules
consistent with CSR, there exists no overarching regime founded on CSR principles;
companies, therefore, remain free to exercise a large degree of ‘social decision-making
power’ (Parkinson 1996: 22) in an unaccountable and unregulated manner. This failure
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corporate social responsibility as citizenship and compliance
to implement rules consistent with CSR derives, in part, from the failure on the part of
advocates of CSR to reach consensus as to the norms that should inform such a regime
(see Whitehouse 2003). In an attempt to offer a starting point from which to reach such
a consensus, the following section of this paper presents an example of how the
compliance model might operate in practice.
In terms of identifying its substantive aims, Stone (1975: 30), in questioning what we
want the law to accomplish, identifies two interrelated goals. The first is ‘distributive’:
to redistribute losses so that corporations pay or compensate for the damage they cause.
The second is ‘reductive’, designed to deter such losses from being occasioned in the
first place. In an attempt to establish the means by which these two objectives can be
achieved, it seems appropriate, when one considers that the compliance model tends to
view the corporation as a public institution, to have recourse to the means by which the
activities of public bodies are made legitimate. In relation to these bodies within the UK,
it is the ‘potential for being called to account’ (Feintuck 1994: 39) that justifies the
exercise of social decision-making power. One means of achieving legitimacy in respect
of corporations, therefore, would be to apply the concept of ‘accountability’ to the
decision-making process, a concept that Feintuck defines as:
the processes whereby those that exercise power are subjected to effective scrutiny, and
if necessary effective challenge and sanction, in order to seek to ensure that the exercise
of power is within prescribed limits, and within the terms of a conception of the public
will (Feintuck 1994: 39).
Although this definition relates to public bodies specifically, it reflects clearly a concern to limit the exercise of power generally. It is perhaps important to note that not all
decisions taken by companies will be subjected to effective scrutiny, challenge and
sanction; rather, it will be limited to those that have social consequences or incur ‘social
costs’, as Wood suggests:
Businesses are not responsible for solving all social problems. They are, however, responsible for solving problems that they have caused, and they are responsible for helping to
solve problems and social issues related to their business operations and interests (Wood
1991: 697).
The difficulty in holding companies to account for the social costs that arise out of
their activities is that these costs tend to fall outside the ambit of regulation, as Kapp
suggests in defining social costs as ‘all those harmful consequences and damages which
third persons or the community sustain as a result of the productive process, and for
which private entrepreneurs are not easily held accountable’ (Kapp 1971: 14). If
regulation is to prove successful, therefore, it will be necessary to extend the liability of
companies to cover these costs. The extension of liability to include new types of harm
is not unusual, the best example of this being the creation, by the House of Lords in the
case of Donoghue v. Stevenson ([1932] AC 562), of a general duty of care in negligence. It
is conceivable, therefore, if one were to extend the comparison with the duty of care in
negligence, that companies could owe a duty of care to parties with whom they have a
sufficiently proximate relationship in respect of foreseeable social harm.
The inclusion of social costs as a proper species of harm actionable at law would result
in companies having a minimal ‘obligation to avoid creating social injury and to correct
any past social injuries for which they can be held directly responsible’ (Bagley and Page
1999: 912). In practice, this would oblige companies to consider the interests of those
likely to be affected by their decision and would provide those affected with the
opportunity of preventing foreseeable social harm or seeking redress for harm already
occasioned.
While this account offers one potential route by which to implement the compliance
model of CSR within common law jurisdictions, it would seem reasonable to suggest
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that, in the current political climate, it will be extremely unlikely that Western democracies will seek to compel companies to abide by such principles. Until such time as
they do, we will have to continue to rely on the goodwill of companies to behave as good
corporate citizens.
Conclusion
In an attempt to clarify much of the confusion and ambiguity that has surrounded the
CSR debate over the last 70 years, this paper has identified two possible approaches to
reforming corporate activity. The first, the citizenship model, seeks to encourage companies through voluntary schemes to behave as good corporate citizens. The second, the
compliance model, seeks to compel corporations, through legal means, to remedy or
prevent social harm. The identification of these two models is important in two respects.
In the first instance, it assists in clarifying and categorising the views advocated by
academics and policy-makers. While it remains possible to use CSR as a generic term,
individuals’ preference for voluntary or mandatory regulation coupled with their conception of the nature of the company will identify them as advocating one model or the
other.
Second, and perhaps more significant, it allows for an examination of the relationship
between these two models and how they might operate in practice. Although distinct,
the citizenship and compliance models operate as inherent and interdependent elements of CSR. As a review of recent corporate citizenship initiatives and the advantages
and disadvantages of both voluntary and mandatory regulation indicates, when used in
isolation, these two models would appear to become less effective than when used in
combination. It is imperative, therefore, that academics and policy-makers alike continue their pursuit of effective corporate citizenship schemes but this must be coupled
with the revitalisation of the compliance model; only then can CSR be achieved in
practice.
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