Three Models of Corporate Social Responsibility: Interrelationships between Theory, Research, and Practice

Abstract

Decades of debate on corporate social responsibility (CSR) have resulted in a substantial body of literature offering a number of philosophies that despite real and relevant differences among their theoretical assumptions express consensus about the fundamental idea that business corporations have an obligation to work for social betterment. All accounts of CSR recognize that business firms have many different kinds of responsibility, and seek to define both the scope of corporate responsibility in society and the criteria for measuring business performance in the social arena.11 For instance, Carroll, A. B., “A three-dimensional conceptual model of corporate performance,” Academy of Management Review 4, 4(1979): 497– 505; Clarkson, M. B. E., “A stakeholder framework for analyzing and evaluating corporate social performance,” Academy of Management Review 20, 1(1995): 92– 117; W. C. Frederick, Corporation, Be Good! (Indianapolis, IN: Dog Ear Publishing, 2006); Sethi, S. P., “Dimensions of corporate social responsibility: an analytical framework,” California Management Review 17, 3(1975): 58– 64; Swanson, D. L., “Addressing a theoretical problem by reorienting the social performance model,” Academy of Management Review 20, 1(1995): 43– 64; Waddock, S. A., “Creating corporate accountability: foundational principles to make corporate citizenship real.” Journal of Business Ethics 50, 4(2004): 313– 327; Wood, D. J., “Corporate social performance revisited,” Academy of Management Review 16, 4 (1991): 691– 718. Waddock22 Waddock, S. A., “Parallel universes: companies, academics, and the progress of corporate citizenship,” Business and Society Review 109, 1(2004): 5– 42. used the metaphor of a branching tree to describe how the field has evolved into its current understanding of CSR, an understanding that attempts to link the relatively parallel universes of theory and practice, and to illustrate how various conceptual branches are related to each other. Fruitful as the development of a comprehensive organizing framework for the field has been, we are still left with the same quagmire of definitional problems that beclouded the old debate about the exact nature of CSR. The old claim that CSR “means something, but not always the same thing to everybody”33 Votaw, D., “Genius becomes rare: a comment on the doctrine of social responsibility Part. I.” California Management Review 15, 2(1972): 25– 31. is no less true today. This article seeks to add clarity to CSR theory and research by focusing on the core responsibilities that form the trunk of the branching CSR tree. A comparative analysis of three recognized CSR models—represented graphically as a pyramid,44 For instance, Carroll, “A three-dimensional conceptual model of corporate performance.” intersecting circles,55 For instance, Jones, T. M., “An integrating framework for research in business and society: a step toward the elusive paradigm?” Academy of Management Review 8, 4(1983): 559– 564; Schwartz, M. S. and Carroll, A. B., “Corporate social responsibility: a three-domain approach.” Business Ethics Quarterly 13, 4 (2003): 503– 530. 6. Adapted here from the Committee for Economic Development (CED), Social Responsibilities of Business Corporations, (New York: Author, 1971). 7. W. C. Frederick, “Theories of corporate social performance,” in Business and Society: Dimensions of Conflict and Cooperation, eds. S. P. Sethi and C. Falbe (New York: Lexington Books, 1987): 142–161. and concentric circles6—might help locate and clarify ambiguities through revealing systematic differences in their underlying assumptions, conceptual structure, methodological tools, and managerial implications. In the following section I briefly review the evolution of the CSR concept and its extensions. I next present the three CSR models beginning with a critical analysis of Carroll's CSR pyramid, a dominant model that has enjoyed wide popularity among business and society scholars; I will then examine the intersecting circles (IC) model, a CSR configuration representing overlapping responsibility areas; I will conclude with the concentric circle (CON) model, originally developed by the Committee for Economic Development (CED), and reformulated here so as to adjust to recent developments in CSR thought. In each section of the comparative analysis, I will first portray the general idea of the model, and then discuss its theoretical assumptions and its implications for research and practice. The last section discusses some of the implications of this analysis for future CSR research and teaching. Early definitions of CSR, or CSR1 in Frederick's7 well-accepted classification, carried heavy philosophic overtones. The abstract and often highly elusive principles governing CSR1 yielded, toward the late 1970s, to the action-oriented managerial concept of corporate social responsiveness (CSR2) and corporate social performance (CSP). The new theoretical approaches to CSR went beyond the previous somewhat narrower focus and, instead, aimed to develop more comprehensive frameworks that incorporate operational and behavioral aspects of corporate endeavor, relate the corporation to its external environment, and ground CSR/CSP theory in one or more social sciences–humanities disciplines.88 For a detailed review, see for example, Carroll, A. B., “Corporate social responsibility: evolution of a definitional construct.” Business and Society 38, 3(1999): 268– 295; Frederick, Corporation, Be Good!; Waddock, “Parallel Universes.” 9. Carroll, “Three-Dimensional.” Carroll's foundational article on social performance9 provided a three-dimensional model defined by categories of CSR (economic, legal, ethical, and discretionary) on the first dimension, managerial philosophies or modes of social responsiveness (reaction, defense, accommodation, and proaction) on the second dimension, and the range of social issues that business must address (e.g., consumerism, environment, product safety) on the third dimension. Wartick and Cochran presented their evolution of the CSP model, which extended Carroll's model recasting his three dimensions of responsibility, responsiveness, and social issues into a framework of principles (using Carroll's four-part definition of CSR), processes (social responsiveness—the general means to the ends of satisfying corporate social obligations), and policies (social issues management).1010 Wartick, S. L. and Cochran, P. L., “The evolution of the corporate social performance model,” Academy of Management Review 10, 4(1985): 758– 769. 11. Wood, “Corporate social performance revisited,” 693. They emphasized that CSP can integrate the three dominant orientations in the field of business and society: the philosophical orientation (relates primarily to the principles of social responsibility), the institutional orientation (relates primarily to the process of social responsiveness), and the organizational orientation (relates primarily to the policies of social issues management). In what became an important framework that continues to shape the conceptualization of the field, Wood, building on Wartick and Cochran's CSP model, integrated much of the previous theoretical developments in an acknowledged definition of CSP as the “configuration of the principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm's societal relationships.”11 This definition permits CSP to be seen as an assessment tool, a guiding framework that provides an outline of what needs to be considered (policies, programs, processes, and social outcomes) in evaluating CSR. It, however, does not clarify whether or to what extent processes of responsiveness and observable social outcomes are linked to principles of responsibility. In other words, the CSP model escapes the central issue of defining the boundaries of CSR. Indeed, as Wood noted, one of the major attractions of the CSP model has been its ability to sever the implicit identity of responsibility, responsiveness, and social outcomes and to indicate, for example, that a firm having social programs and policies can be seen as responsive to social expectations, but not necessarily therefore as socially responsible. In an effort to integrate normative and descriptive approaches to CSP, Swanson reoriented Wood's framework through shifting the focus of attention from the CSP branches—processes of corporate social responsiveness, programs, policies, and social impacts of corporate behavior—to the CSP trunk: the core responsibilities that cannot be escaped because they are integral to action.1212 Swanson, “Addressing theoretical problem”; cf., Swanson, D. L., “Toward an integrative theory of business and society: a research strategy for corporate social performance,” Academy of Management Review 24, 4(1999): 506– 521. 13. W. C. Frederick, Values, Nature, and Culture in the American Corporation (New York: Oxford University Press, 1995). 14. Waddock, “Creating corporate accountability,” 313. 15. M. B. E. Clarkson, Principles of Stakeholder Management (Toronto: The Clarkson Centre for Business Ethics, 1999). Using Frederick's nature-based approach to foundational corporate values,13 it seems that Swanson was looking for a more process-oriented, dynamic model of CSP that could accommodate mutual influences and combined effects of different clusters of values. Consistent with Swanson's reorientation of the CSP model, there has been recently renewed interest in the core values or principles that provide the behavioral and philosophical rationale for socially responsible corporate practices. For example, Waddock suggests “generally agreed principles of corporate citizenship,”14 Clarkson lists seven principles for stakeholders management,15 Hemphill proposes sets of principles of excellence for managing corporate relationships with primary stakeholders,1616 Hemphill, T. A., “Corporate citizenship: the case for a new corporate governance model,” Business and Society Review 109, 3(2004): 339– 361. Logsdon and Wood provide a “relatively small set of basic universal principles”1717 Logsdon, J. M., and Wood, D. J., “Business citizenship: from domestic to global level of analysis,” Business Ethics Quarterly 12, 2(2002): 177. that govern the company's conduct, and Goodpaster presents the Caux Round Table Principles of global business as “one of the best known sets of transcultural principles available today.”1818 Goodpaster, K. E., “Some challenges of social screening,” Journal of Business Ethics 43, 3(2003): 239. 19. Carroll, “Corporate social responsibility.” Observing changes in social expectations from the business community, scholars may revise and adapt existing formulations of CSR, but, as Carroll noted,19 it seems unlikely that new concepts could develop apart and distinct from the groundwork that has been established to date. Rather than articulating a set of principles that purports to offer necessary and sufficient conditions for CSR, this article focuses on the conceptual structure of CSR and the relations between its elements as depicted in three different schematic descriptions (Figure 1): pyramid, intersecting circles, and concentric circles. Three Basic Models of CSR: Relationships between Domains of Responsibility.iFor the sake of comparison, Figure 1b includes all four domains of responsibility. This prototype model represents the general idea of intersecting circles, rather than trying to depict every one of the resultant categories. As Bacharach pointed out, “A theory is a statement of relations among concepts within a set of boundary assumptions and constraints.”2020 Bacharach, S. B., “Organizational theories: some criteria for evaluation.” Academy of Management Review 14, 4(1989): 496. A comparative analysis of the three conceptual models will show that the same terminology represents different meanings and different approaches to CSR. More specifically, the comparative analysis will demonstrate that the nature of CSR, its underlying boundary assumptions, the methodological tools, and the performance assessments are both the cause and the consequence of how the relationship between its elements is understood. Analysis of the differences in the conceptual structure across the three models (see Table 1) may assist in clarifying ambiguity in CSR theory and research through explicating the implicit assumptions by which each is bounded, unraveling inconsistent findings on the social impacts of corporate behavior, and removing impurities in managerial decision making. A leading model of CSR is Carroll's four-part pyramid.2121 Carroll, “Three-dimensional”; see also, Carroll, A. B., “The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders,” Business Horizons 34(July–August, 1991): 39– 48. 22. Ibid., 42. 23. Ibid., 41. 24. Ibid., 41. 25. Swanson, “Toward integrative theory.” 26. For instance, A. B. Carroll, “Social responsibility,” in The Blackwell Encyclopedic Dictionary of Business Ethics, eds. P. H. Werhane and R. E. Freeman (Oxford, UK: Blackwell Publishers Ltd. 1997): 593–595. 27. Ibid., 593–595. The CSR pyramid was framed to embrace the entire spectrum of society's expectations of business responsibilities and define them in terms of categories. According to the model (Figure 1a), four kinds of social responsibilities constitute total CSR: economic (“make profit”), legal (“obey the law”), ethical (“be ethical”), and philanthropic (“be a good corporate citizen”). According to Carroll, the use of a pyramid to depict the conceptual model of CSR is intended “to portray that the total CSR of business comprises distinct components that, taken together, constitute the whole.”22 The model categorizes the different responsibilities hierarchically in order of decreasing importance. The most fundamental is economic responsibility, “all other business responsibilities are predicated upon the economic responsibility of the firm, because without it the others become moot considerations.”23 Businesses are expected to operate within the framework of law, thus legal responsibility is depicted as the next layer of the pyramid. Following is ethical responsibility defined in terms of “those activities or practices that are expected or prohibited by society members even though they are not codified into law.”24 Last in importance, at the top of the pyramid, is philanthropic responsibility, which is discretionary in nature. In the main, the pyramid purports to describe a necessary and sufficient set of obligations that socially responsible businesses should simultaneously fulfill, taking into consideration their decreasing importance. The central assumptions underlying the CSR pyramid are presented below, followed by a discussion of their theoretical implications (see summary in Table 1). Nature of CSR Taking a managerial approach, the four-part pyramid defines CSR in terms of social expectations that responsible corporations should strive to meet. Prevailing social norms and expectations provide external criteria against which corporate performance can be measured; thus, the notion of responsibility in the pyramid model is reduced to normative restraints of responsiveness.25 In other words, CSR in the pyramid formulation is basically accommodative. Suggesting that businesses should treat CSR not as a goal to be maximized but as a constraint, the pyramid does in effect promote satisficing behavior rather than striving for excellence. Scope of responsibilities Understanding CSR as an array of separate domains naturally leads to narrow definitions of the different responsibilities. Thus, the economic role of the corporation is reduced in the pyramid model to the narrow emphasis on profit making of neoclassical economics.26 Likewise, legal responsibility is restricted to the “letter” of the law, while the “spirit” of law is reserved for the ethical domain.27 The ethical domain is further separated from the legal domain using a negative definition: ethical responsibility relates to those social expectations and norms not yet codified into law. In the same vein, philanthropic responsibility designates those areas of voluntary social involvement not specifically prohibited or demanded of companies because of their economic, legal, and ethical responsibilities. Total CSR The pyramid is a conjunction of separate domains of responsibility. In contrast to the ordinary view, the so-called separation thesis,2828 Freeman, R. E., “The politics of stakeholder theory: some future directions,” Business Ethics Quarterly 4, 4(1994): 409– 421. that businesses can focus either on profits or social concerns but not on both, the CSR pyramid “sought to argue that businesses can not only be profitable and ethical, but they should fulfill these obligations simultaneously.”2929 Carroll, A. B., “Ethical challenges for business in the new millennium: corporate social responsibility and models of management morality,” Business Ethics Quarterly 10, 1(2000), 35. 30. A. B. Carroll and A. K. Buchholtz, Business and Society: Ethics and Stakeholder Management, 6e. (Mason, OH: South-Western, Thomson, 2006): 40. 31. Carroll, “Pyramid of CSR,” 42. 32. Carroll, “Three-dimensional,” 499. 33. Ibid., 499. However, the clear-cut separation of the domains raises the problem of integration. At most, the pyramid model can postulate that while separate, the bundle of responsibilities—formulated as a simple arithmetic sum30—must apply simultaneously; it says nothing about how these responsibilities are interwoven. Order of importance If the four responsibilities taken together constitute a whole, what is the meaning of the decreasing order of importance? A number of explanations have been offered to answer this question: (1) the pyramid suggests a ranking of CSR priorities based on the level of essentiality—the most fundamental is economic responsibility, of smallest importance is the philanthropic category, which is a sort of “icing on the cake”;31 (2) the pyramid characterizes the social pressures imposed on the business sector in decreasing order of their strength—whereas economic and legal responsibilities are required of business and ethical practices are expected, philanthropic contributions, albeit desired, are voluntary; (3) the hierarchy of importance “simply suggest[s] the relative magnitude of each responsibility”;32 and lastly, (4) the four categories “are ordered in the figure only to suggest what might be termed their fundamental role in the evolution of importance. . . . [T]he history of business suggests an early emphasis on the economic and then legal aspects and a later concern for the ethical and discretionary aspects.”33 As it stands, the combination of simultaneity and hierarchy may explain the wide popularity of the pyramid model among ethicists and management theorists alike. Simultaneity reconciles the firm's profit-making concern with social concerns; the hierarchy of priorities provides the flexibility necessary to management decision making. In the ideal case, a responsible firm will simultaneously fulfill all component parts of the CSR pyramid. But this “win-win” outcome is not always possible. In daily life, where different corporate responsibilities often come into conflict, the good corporate citizen, though striving to fulfill all its responsibilities, will actually apply the proposed order of priorities to resolve the conflict.3434 Acar, W., Aupperle, K. E. and Lowy, R. M., “An empirical exploration of measures of social responsibility across the spectrum of organizational types,” International Journal of Organizational Analysis 9, 1(2001): 26– 57. 35. Carroll, “Pyramid of CSR,” 42. 36. Ibid., 43. 37. Carroll, “Corporate social responsibility”; Hemphill, “Corporate citizenship.” 38. Clarkson, “Stakeholder framework,” 94. The role of philanthropy The role of philanthropy has been discussed in the context of the CSR pyramid from two perspectives: inwards—as compared to other components of CSR, and outwards—as compared to other notions of CSR. Inwards, the question arises whether the philanthropic category can be correctly considered a responsibility in itself. To the extent that responsibility is conceived as a normative restraint or an obligation it clearly contradicts the discretionary nature of philanthropy. In an attempt to reconcile this difficulty, Carroll has argued that in fact, “philanthropy is highly desired and prized but actually less important than the other three categories of social responsibility.”35 Looking outwards, philanthropy is often regarded as the defining component of CSR. Milton Friedman's statement that management is to make as much money as possible within the limits of the law and ethical custom embraces three components of the CSR pyramid—economic, legal, and ethical.36 A central tenet of present-day thinking on CSR is that businesses have a responsibility that goes beyond the demands of law and common morality. Philanthropy, which is usually understood as exceeding this minimum, appears to serve as the distinguishing point between the neoclassical economic position and the new widely accepted notion of corporate citizenship, which highlights the importance of corporate giving.37 However, given the discretionary nature of philanthropy, its role as the distinguishing component of CSR creates a boundary problem that, as shown below, will lead to two different resolutions. The pyramid model of CSR has served as a platform for some of the major research developments in the field. As Clarkson claimed, “the strength of its influence can best be judged by its longevity and that of its progeny.”38 A considerable number of empirical studies published in recent years have focused first on operationalizing the framework, and then on developing and testing a set of hypotheses regarding the determinants and consequences of CSR. Operationalization There has been extensive research on the issue of CSR in general and in reference to the pyramid model in particular.3939 For a general review of the empirical studies on CSR and the associated measurement problems see, for example, Acar et al., “Empirical exploration”; Waddock, S. A. and Graves, S. B., “The corporate social performance-financial performance link,” Strategic Management Journal 18, 4(1997): 303– 319. Here, I shall focus on the operationalization of the pyramid model. As Aupperle, Carroll and Hatfield claimed, the attractive feature of the CSR pyramid was its definition of CSR through four components.4040 Aupperle, K. E., Carroll, A. B. and Hatfield, J. D., “An empirical examination of the relationship between corporate social responsibility and profitability,” Academy of Management Journal 28, 2(1985): 446– 463. They viewed this comprehensive quality as particularly conducive to the construction of a research instrument, which could allow assessment of orientations toward social responsibility of corporate executives as well as inquiry into whether or not four separate components of CSR exist, and, if they do, whether they exist in the weighted proportions implied by the pyramid. The most widely used research tool in CSR pyramid studies is the constant-sum instrument deployed by Aupperle.4141 Aupperle, K. E., “An empirical measure of corporate orientation,” Research in Corporate Social Performance and Policy 6(1984): 27– 54. 42. For instance, Acar et al., “Empirical exploration”; Aupperle et al., “Empirical examination.” This sort of comparative rating scale involves relative judgments of the importance of each component with direct reference to the other components being evaluated. Raters are instructed to allocate a given sum (e.g., 10 or 100 points) among statements in each of several sets of four statements. Each statement in a set corresponds to one of the four components of the CSR pyramid. The results of content validity studies appear to support model and instrument as regards reliability, the number of CSR components, their content, internal consistency, and relative weightings.42 Note, however, that the more reliable the measure, the higher the similarity between the different attempts to measure the same construct, and, accordingly, the narrower the scope of this construct. The partitioning of CSR in connection with the constant-sum method introduces, perhaps as an unintended artifact, a trade-off assumption. Adopting this method means assuming that societal concerns and concern for economic performance are mutually subversive rather than mutually supportive. This assumption has attracted widespread criticism in business and society literature,4343 For instance, Jones, T. M. and Wicks, A. C., “Convergent stakeholder theory,” Academy of Management Review 24, 2(1999): 206– 221. 44. Clarkson, “Stakeholder framework.” and certainly cannot be justified in the framework of the pyramid that requires simultaneous fulfillment of all four responsibilities. It is worth noting here that trade-offs among responsibilities must not be confused with trade-offs among outcomes. To be sure, many managerial decisions involve trade-offs among outcomes, not responsibilities. One may assume full responsibility and still make difficult decisions demanding high economic or social price. While the constant-sum method does allow more insight into the relative ranking of CSR components, it does not readily lend itself to assessing total CSR. A different approach to evaluating total CSR is based on measuring CSP, the pyramid providing the framework for data gathering on each of its four components. Commonly, the measure of economic responsibility is profitability as presented in annual reports; legal responsibility is assessed by the absence of litigation and allegations of illegal corporate behavior or environmental or safety problems; ethical responsibility is evaluated by the existence of corporate code of ethics and other ethical programs and initiatives; and discretionary responsibility is defined in terms of the extent of the corporation's philanthropic activities.44 The fundamental problem with this method, besides problems of accessibility to corporate data, is one of validity; namely, of determining the types of behavior that can serve as valid indicators of, or surrogates for the corresponding responsibilities. For example, is the absence of allegations a valid indicator of legal responsibility? Is the existence of a corporate code of ethics a valid surrogate for ethical responsibility? Several researchers have used Aupperle's constant-sum instrument to examine the impact of different factors, especially demographics and social context, on people's orientation toward CSR4545 For instance, Burton, B. K. and Hegarty, W. H., “Some determinants of student corporate social responsibility orientation,” Business and Society 38, 2(1999): 188– 205; Edmondson, V. C. and Carroll, A. B., “Giving back: an examination of the philanthropic motivations, orientations and activities of large black-owned businesses,” Journal of Business Ethics 19, 2(1999): 171– 179. and to investigate whether and how society's changing expectations affect priority in CSR orientations across cultures and over time.4646 For instance, Maignan, I. and Ferrell, O. C., “Measuring corporate citizenship in two countries: the case of the United States and France,” Journal of Business Ethics 23, 3(2000): 283– 297; Pinkston, T. S. and Carroll, A. B., “A retrospective examination of csr orientations: have they changed?” Journal of Business Ethics 15, 2(1996): 199– 206. Given the globalization of business activities, more and more organizations need to gain insight into the nature of CSR orientations in different countries and as public expectations put increasing demands on the business community. Research in this important direction is still in its infancy. CSR–CFP relationship The question of CSR contributions can be approached from a normative as well as from an instrumental point of view. The former holds that no matter what the consequences of CSR, it must be adopted because it is the morally right thing to do; the latter emphasizes the connection between CSR principles and outcomes: CSR should be adopted because it may pay. Although corporate financial performance (CFP) is only one, and not necessarily the primary, expected consequence of adopting a CSR approach, the great bulk of empirical research on CSR contributions has focused on