Sustaining the Financial Value of Global CSR: Reconciling Corporate and Stakeholder Interests in a Less Regulated Environment

In this article we examine the association between corporate social responsibility (CSR) and firm value. This line of research is important since firms continue to invest in CSR even though past studies reveal a limited linkage between financial value and CSR. However, the business case for CSR or “doing good while making a profit,” appears to be advancing within the business ethics literature as a preferred conception of CSR. We conjecture that the greater unification and refinement of both profit maximization and stakeholder interests through corporate acts, not statements alone, will sustain the financial value of CSR in a less regulated global business environment. We study the triangle of what companies say, what companies do, and firm financial performance. We analyze Fortune 250 firms and find a positive association between what companies do based on KLD Research and Analytics, Inc. (KLD) ratings, and what companies state about ethics in their CSR statements. We then employ regression analysis and find that companies’ socially responsible acts are positively associated with overall firm value and financial performance. Yet we do not find a statistically significant association between what companies say regarding ethics in their CSR statements and their financial outcomes. These results suggest that firm value and financial performance is associated with what companies do and not what they say. Our results seem to be driven by multinational corporations (MNCs) and not by non‐MNCs. This is possibly because MNCs generally operate in a less regulated global business environment that often necessitates strong ethical corporate leadership to further stakeholder interests. Overall, these results help reconcile corporate and stakeholder objectives since evidence of a link between financial performance and doing good sustains global CSR.     

Beyond the “silo view” of strategic management and corporate governance: evidence from Fiat,Telecom Italia and Unicredit

While corporate governance and strategic management have for a long time suffered from artificial separation and, therefore, generally been tackled in a secluded manner, their combined organizational impact makes them stringently related to one another in the firms’ evolution. In this paper, we argue that, transcending the “silo view” of corporate governance and strategic management, time has come to acknowledge that, depending on circumstances and time periods, within a firm is possible to detect the relative dominance of corporate governance over strategic management, rather than the leadership of strategic management over corporate governance. Drawing on a contingency approach, we dissect the relationships (and the mechanisms that control it) between the strategic function (i.e., which defines the firms’ strategy and supervisions its implementation) and the governance function (i.e., the congruence assessment between the firm strategy selected and the interests of the ownership and of other relevant stakeholders represented in the board of directors and the effectiveness appraisal of the entrepreneurial action). Then, by performing a thorough retrospective qualitative analysis of three relevant case-histories of Italian firms (Fiat, Telecom Italia and Unicredit) operating in three different industries (automobile, banking and telecommunications), we surmise that, either in corporate governance (board) oriented or in strategic management (CEO) oriented companies, the ‘real’ problems arise when the quality of corporate governance or strategic management is poor. Interestingly, we eventually suggest to adopt a value-based approach to the relationship between corporate governance and strategy that may fruitfully complement the contingency perspective taken at the onset of the work.     

Unintended agency: Impression management support as a trigger of institutional change in corporate governance

In this paper we describe an emergent process of institutional change in which institutional entrepreneurs are unintentional contributors to the change process. Our theory suggests how change in the predominant institutional logic of corporate governance at public U.S. companies resulted not from deliberate attempts by corporate leaders to change the criteria by which governance is evaluated, but from the cumulative efforts of top executives to provide “impression management support” (IM support) for individual leaders of other firms. We first discuss how IM support has spread among corporate leaders through generalized social exchange. Then we suggest how individual leaders, in seeking to persuade journalists about the quality of corporate leadership at particular other firms, tend to invoke evaluative criteria that deviate from the prevailing institutional logic of governance. We further suggest how the rhetoric of IM support instigated a cascading social influence process that has contributed to changing perceptions about corporate governance among a broad range of other corporate stakeholders. We discuss the implications of our model for sociological perspectives on corporate governance and the corporate elite. Finally, we consider how the occasional negative commentary by corporate leaders about their peers, in combination with IM support, helps to sustain the credibility of the social system in which leaders, journalists, and other information intermediaries operate.     

Corporate planning in the Netherlands

This article is the result of an investigation into the practice of corporate planning in 20 major Dutch companies. The results emphazise some of the problems regarding the corporate planner and his role in the firm. Those problems are such that it is not unrealistic to speak of some sort of “identity crisis”.     

Shared Services Transformation: Conceptualization and Valuation from the Perspective of Real Options

In today's volatile global economy, where many organizations face severe pressure to downsize, the “shared services” model, in which a firm merges common functions performed by multiple units into a single service delivery organization, provides an innovative approach to make business more efficient and effective. To successfully implement shared services, firms need to strategically decide whether and how to pursue various service transformation alternatives such as simplification, standardization, consolidation, insourcing, or outsourcing. In this study, we develop the notion of real options into a unique theoretical lens for conceptualizing service organizations and their transformation in an uncertain business environment. Specifically, we view service organization as a set of strategic options that give the firm preferential access to future transformation opportunities. We create a taxonomy of these options, and introduce a decision methodology for valuing alternative shared services transformation approaches. We illustrate this methodology by applying it in a real business case to justify a global firm's decision regarding the transformation of its finance organization.     

“Seeing to be seen”: The manager’s political economy of visibility in new ways of working

Recent changes in the world of work have modified the conditions of the exercise of management in ways that challenge managers’ traditional authority and identity, both symbolically and physically. In this context, we analyse the “visibilizing process” of managers, through which they attempt to make themselves more visible, in ways that reaffirm their authority and restore their identity as managers. To that end, we develop a Foucauldian framework on power and visibility, which sheds light on the “political economy of visibility” of the manager. We apply this framework to a case study that encouraged a re-spatialization of remote work in coworking spaces. The findings show how the manager in our case study staged his own visibility, by enhancing managerial control, to manage his invisibility and shape his intertwined identities. Through the visibilizing process, the manager legitimated his role, materialized his function, and restored his authority.     

Women's political leadership participation around the world: An institutional analysis

Understanding institutional systems is critical for the advancement of women's participation in leadership in varying contexts. A unique and global analysis of the contextual factors that affect women in political leadership, this paper extends prior research in the field. This is a cross-country study where we ask, “How are societal-level institutional forces related to women's participation in political leadership?” We collected data from 8 secondary sources on 181 countries and conducted linear regression analyses with six institutional influences: the business environment, societal development, the economic environment, physical and technological infrastructure, political freedom, and culture. Results indicate that to increase the political leadership participation of women, we need to evaluate the following: customs and trade regulations, graft, the gender gap in political empowerment, public spending on education, the economic viability of the country, access to power and the internet, political freedom, and cultural variables like performance orientation, collectivism, and power distance.     

Leadership in organisations: Meta,macro and micro

The study of leadership suffers from too many definitions, not too few. Much of this confusion springs from the fact that there are two fundamentally different perspectives on leadership. From these arise three common usages of the word. This article suggests that we recognise this diversity and abandon the search for a unique definition.The first perspective views leadership as “influence on individuals” without using power or authority. This “meta” leadership relates individuals to their environment through “visioning” — a complex interaction of perception, articulation, conviction and empathy (PACE).The second perspective views leadership as the “shaking and moving” of an organisation to face the future, cope with change and achieve results. It includes both the creation of a successful organisation, through “macro” leadership, and the accomplishment of specific jobs or tasks, through “micro” leadership.These three types of leadership — meta, macro and micro — are examined from the two perspectives. It is suggested that all three should be exercised by managers at all levels - no matter how junior.     

Institutional changes and organizational transformation in developing economies

An important component of globalization during the last two decades is the increased participation of developing economies in the global economy both as markets for goods and services as well as production sites. Institutional changes emanating from evolving political landscapes within individual countries and pressures from supra-national bodies have been instrumental in the liberalization of developing countries' economies and their integration into the global economy. A growing body of research has focused on the transformation of state-owned enterprises as they are privatized, with particular focus on the role of organizational and national heritages that enhance or constrain the evolution of these firms within a market-based institutional environment. In this introduction, we review this literature stream, introduce the papers in this special issue, and highlight the theoretical approaches that help explain how organizations in distinct national contexts overcome the pressure emanating from institutional changes in developing economies.     

Transforming leadership in organisations: Bringing meta “visioning” into the macro leadershop rôle

A decade ago, Burns used the term transforming leadership to describe a type of noncoercive political leadership that engaged people, was morally elevating and, in turn, sparked leadership in them. In applying this concept to organisations, there has been a tendency to broaden the meaning of transforming in a way that tends to obscure its original intent. This springs, in effect, from the unconscious intermingling of two fundamentally different perspectives on leadership. These are illustrated by examples drawn from recently published studies by Bass, Bennis and Nanus, and Tichy and Devanna.Burns viewed transforming leadership from the noncoercive influence-on-individuals perspective: people were transformed by becoming “engaged” and this, in turn, could produce a transformation in the organisation. As it happens, however, a transformation can also be produced by leadership from the opposite perspective i.e. the power-wielding shaker-and-mover. The successful autocrat can transform the fortunes of an organisation but is far from Burns' concept of a transforming leader.In this article, the author suggests this confusion can be clarified by realising that the transformation produced by the shaker-and-mover comes from success in performing the macro leadership role of path-finding and culture-building. True transforming leadership in organisations only occurs when the “visioning” of meta leadership is applied to performance of the macro leadership role. In this way, enthusiastic followers are created as people become “engaged”, doubts are removed and energy is released.     

The dynamics of effective corrupt leadership: Lessons from Rafik Hariri's political career in Lebanon

This article introduces the notion of “effective corrupt leadership” to distinguish those in public office who engage in corrupt practice, who are more effective, and better for their people, than alternatives. The paper examines a case of such leadership by discussing the career of the late Rafik Hariri, the Lebanese Prime Minister who initiated and achieved the rebuilding of Beirut after the Lebanese civil war between 1975 and 1990. Using the historical case-study method, an examination of Hariri's activities allows us to appreciate the difficulties of achieving tangible welfare benefits in corrupt circumstances. Notably, the moralizing attacks by Hariri's rivals show that while achieving and sustaining political power may require corrupt practice, such practice can ultimately undermine the leader authority and power. This “blifil paradox” demonstrates how difficult it is to lead effectively in corrupt circumstances. Through a discussion of these difficulties and challenges, the article attempts to demonstrate the significance of “effective corrupt leadership”, both in terms of its impact upon people, and its importance for the refinement of our understanding of leadership.     

Calling in a Debt: Government's Role in Creating the Capacity for Explicit Corporate Social Responsibility

Before the field of business and society can adequately analyze the relationship between governmental policies and corporate social responsibility (CSR), either as a reality or an ideal, it is first necessary to understand exactly how governments nurtured the development of the autonomous corporation. The roles assigned to government by the economics and management literatures—regulator, standard setter, protector, and adjudicator—ignore the crucial part played by state violence and government expenditures in the rise and sustained success of the corporate economy. An examination of the history of the American case, crucial for the development of the modern corporation as well as the “explicit” form of CSR that eventually followed it, highlights these roles: the willingness of the state to intervene with force in labor conflicts bolstered the managerial autonomy that defined the large corporation, and the way government expenditures promoted innovation and firm success. Acknowledging how corporations depended on government assistance in their development is a necessary step for both assessing the responsibilities owed stakeholders and for advancing the theoretical development of the field.     

The effect of corporate governance on sustainability disclosure

Drawing on stakeholder theory, this paper examines the relationship of board composition, leadership and structure on sustainability disclosure. We discuss that good corporate governance and sustainability disclosure can be seen as complementary mechanisms of legitimacy that companies may use to dialogue with stakeholders. Specifically we claim that, as disclosure policies emanate from the board of directors, sustainability disclosure may be a function of the board attributes: we investigate the relationship between different characteristics of the board and sustainability disclosures among US and European companies. Our results show that in order to explain the effect of board composition on sustainability disclosure we need to go beyond the narrow and traditional distinction between insider and independent directors, focusing on the specific characteristics of each director.     

Corporate Political Activity: A Literature Review and Research Agenda

This paper reviews the diverse literature on corporate political activity (CPA) and develops a framework that details and integrates existing research in this field. A systematic analysis of extant CPA literatures is conducted to order them into domains that have implications for organizational performance. The paper is structured into three such domain emphases, which require further research investigation: resources and capabilities focus; institutional focus; and political environment focus. The contribution of each to an understanding of CPA in pursuit or defence of corporate competitive advantage is discussed. The authors also suggest that the internationalization of business, including the more recent emergence of developing country economies and companies, presents scholars with the challenge of understanding CPA in more varied institutional settings. CPA practices continue to expand as commerce goes increasingly global and, consequently, involves a wider array of political actors and institutions. The paper contributes by increasing the clarity of CPA classification, reflecting on the implications of a multi‐polar world for CPA research and advancing future agendas for scholars in this research community.     

Harnessing SD and CSR within Corporate Self‐regulation of Weak Economies— A Meta‐regulation Approach

The semantic of the terms “sustainable development” and “corporate social responsibility” have changed over time to a point where these concepts have become two interrelated processes for ensuring the far‐reaching development of society. Their convergence has given dimension to the environmental and corporate regulation mechanisms in strong economies. This article deals with the question of how the ethos of this convergence could be incorporated into the self‐regulation of businesses in weak economies where nonlegal drivers are either inadequate or inefficient. It proposes that the policies for this incorporation should be based on the precepts of meta‐regulation that have the potential to hold force majeure, economic incentives, and assistance‐related strategies to reach an objective from the perspective of weak economies.     

From primacy to purpose commitment: How emerging profit-with-purpose corporations open new corporate governance avenues

This paper aims at contributing to corporate governance theory by developing a model of governance that takes into account a recent legal innovation: the introduction of purpose-driven legal business forms in the corporate law of several countries. Current debates in such theory oppose models that grant “primacy” (i.e., ultimate control rights) to different constituencies. The resulting uncertainty proves problematic in the face of new, urgent social and environmental stakes that are difficult to represent in traditional governance bodies. Newly adopted profit-with-purpose corporate forms' introduction of a “purpose” in corporate contracts renews these debates. We show that through the “purpose commitment” model it enables, the distribution of control rights in the governance system is decoupled from the objectives assigned to the corporation. This new approach renews the formal role of management, and corporations’ accountability to society. We explore the theoretical, practical, and political consequences of this new model.     

Evaluation of corporate governance systems by credit rating agencies

In periods of high market volatility, and in order to minimize their risks, some investors prefer to invest their funds in well-governed companies. This paper aims to describe the methodology used by rating agencies to assess corporate governance systems (CGS) and to compare agencies’ practices. More and more the shareholders and creditors incorporate mechanisms related to CGS in the assessment of risks. Using a sample of five rating agencies, we distill 51 governance criteria to two governance factors using principal components analysis. The first factor represents the “shareholders rights and board of directors”. The second one is related to “remuneration policy and convergence of interests for shareholders and managers”. We identify three different business models for the corporate governance rating process.     

Wem droht die Zinsschranke? Eine empirische Untersuchung zur Identifikation der Einflussfaktoren

One important aspect of the German corporate tax reform 2008/2009 is the introduction of an EBITDA-based interest deduction limitation. This article focuses on the questions how many and which companies are threatened by this so-called “interest ceiling rule”. Based on an analysis of 77.464 financial statements of German corporations this limitation is relevant for 561 up to 1.511 companies. Thus, this thin-capitalization rule affects more companies than expected by politics. Additionally, we derived several hypotheses from theory concerning possible distortions caused by this rule and tested them empirically. As a result, the “interest ceiling” does affect systematically large, less profitable companies, those with high collaterals as well as holding and real estate companies. Consequently, domestic corporate decisions will be distorted and the theorem of production efficiency is violated.     

Political Organizations,Interest Groups and Citizens Engagement: An Integrated Model of Democracy

The paper starts with a theoretical reinterpretation of some classical topics in the public choice literature, where specific elements of contract theory and the theory of the firm are introduced. By putting into contact these completely different fields of economics, it defines a general theoretical framework for political behaviors whose implications go beyond those determined by the standard self-interest assumption. Political organizations, as suppliers of public policies, are supposed to maximize a residual quantum consisting in the public authority that can actually be exercised after all the electoral commitments, with voters and interests groups, have been fulfilled. This residual right—which can be seen also as a degree of discretion necessary for ruling parties to deal with unforeseen contingencies—is based on the reputational capital (goodwill) accumulated over time by political organizations and represents the intangible asset that secures voters’ loyalty and, consequently, the legitimacy to exercise public authority in the long run. When a deficit of goodwill occurs, a chain of “exit” strategies by voters can lead to undesirable results unless an effective “voice” option for citizens exists.