Political Theories of CSR

 

Political theories are focusing on the responsible use of business power in the political area. Political theories approaches are (a) corporate constitutionalism that refers to the social responsibilities of the company that arises from the amount of a company’s social power, (b) Integartive social contract theory which looks at give and take between the corporation and the society in pursuit of economic objectives and (c) corporate citizenship that considers business to be mimicking the behavior of a responsible citizen of the nation

 

1.      Corporate Constitutionalism

 

Built o­n the idea that business is a social institution and must use power responsibly, subject to "the social power equation" ("The social responsibilities of business owners arise from the amount of social power that they have") and "the iron law of responsibility" ("Whoever does not use his social power responsibly will lose it.").

 

 It is encouraged by the development of the company as a business and societal entities that balances public and private interests. If there is a balance of public and private interests in the company, the application of CSR should be able to accommodate the public interest

The theory of corporate constitutionalism put deliberation as one of the principles to achieve the legitimacy of decision-making in the corporation. Through a process of deliberation formulation of CSR model with the community, not just the interests of shareholders that can be accommodated but also the interests of stakeholders. Thus, CSR can actually be instrumental in the global and local challenges.

The constituent groups of corporation define conditions of the responsible use of power by corporations and channel organizational power in a supportive way and to protect other interests against unreasonable organizational power.

Social responsibilities arise from the amount of social power that they have.

 

2.      Integrative Social Contract theory

 

Derived from Locke's philosophical thought, considers that social responsibilities come from consent, at two levels: a theoretical macrosocial contract appealing to all rational contractors, and a real microsocial contract by members of numerous localized communities.

Donaldson was the first to consider the relation between market and society in terms of a social contract (Donaldson 1982; quoted by Freeman and Werhane 2005 and Garriga and Melé 2004). According to the American philosopher, there would be a tacit social contract between society and the firm. To be more precise, when a firm is authorized by society to act in a certain community, it adopts some obligations towards it; these obligations form the basis of the contract between firm and society (Freeman and Werhane 2005 p. 559).
If on the one hand society engages in guaranteeing the firm’s economic free will, on the other the firm has to respect society’s expectations, that, in Donaldson’s opinion, concern the improvement of the general welfare through “the satisfaction of consumer and worker interests” (Donaldson 1982, p.44ff). The contractarian idea carried out by Donaldson had a great impact on CSR literature, because it offered a theoretical structure to the idea of corporate moral responsibility ⁷. However, his proposal did not consider the internal relations of the firm, namely stakeholders, since it focused on the firm’s obligations outwards, that is to say society as a whole.
In 1994, Donaldson and Dunfee resumed the social contract theory applied to the relation between society and firms in order to offer a more mature version, the Integrative Social Contracts Theory. This new theory aimed to integrate the first proposal of 1982 and to go beyond its limits. This goal was reached through the decomposition of the agreement between society and firms in two different contractarian phases: the first general phase, the macro-social contract, guarantees the moral standard for each social negotiation; while the second one, the following micro-social contracts, guarantees the autonomy of the members of the single economic communities in specifying one’s internal rules of behaviour. According to the two philosophers, it is possible to believe that a community of rational individuals would accept a hypothetical general macro social contract that would preserve a significant moral free space for individual economic communities, where it is possible to generate one’s norms of economic behaviour through micro social contracts (Donaldson and Dunfee 1995, p.95-6). As explained before, in the scheme of the integrative social contracts theory, the macro social contract provides  a moral standard that is valid for all the ensuing agreements. However, the content of its general norms has not been clearly defined yet. According to Donaldson and Dunfee, it could include sufficiently general and universal principles such as the respect of contracts, good faith, the respect of individuals’ fundamental rights and the right to non-discriminatory treatment, etc. (Donaldson and Dunfee 1995, p.95-6).
Even if not very clear about the content of general moral norms, the idea of a moral standard, even if still minimum, proposed by the ICST offers an important contribution to the literature on CSR. The macro social contract, indeed, guarantees the justification of CSR on an international scale, though respecting cultural or organizational differences existing in different territorial contexts.

 

3.      Corporate Citizenship

 

A revived concept with three different meanings: a limited view, comprising corporate philanthropy, social investment, and certain acknowledged responsibilities toward the local community; a view equivalent to CSR; and an extended view, of corporations entering the arena of citizenship at the point where governments fail to protect citizens, even in a global context. In spite of important differences within this group of theories, the authors point out the convergence o­n some points: a strong sense of business responsibility toward the local community; partnerships; and consideration for the environment. As companies become global, the concern for the local community has gradually become a global concern.

Corporate citizenship delivers value when companies optimize their core competencies to address opportunities, goals, and operating context issues in the environmental, social, and governance (ESG) aspects of business. Research reveals that strong corporate social and environmental performance is no longer simply a "nice to have" element of a company's overall strategy. In today's global economy, corporate responsibility is a business imperative. When companies create comprehensive CSR platforms that optimize their core competencies and work to address operating context issues, opportunities, and goals, they deliver measurable business value. Corporate Citizenship create both business and social value in countless ways, from establishing innovative community involvement partnerships to engaging with stakeholders to assess environmental, social, and governance (ESG) impacts and opportunities.

Although the idea of considering the firm as a citizen at the same level as other individuals has existed in literature since the Seventies (Davis 1973), as it was noted by Garriga and Melé, this concept has only recently become more relevant due to a series of factors, such as the crisis of the welfare system, the globalisation phenomenon and its deregulation, which have contributed to make multinational firms become stronger than whole countries from an economic as well as social point of view (Garriga and Melé 2004, pp.56-57).

This approach is based on the analogy with the concept of citizenship, valid for all citizens (Valor 2005). However, the concept of citizenship applied to firms, and all the obligations and rights that are mutually related to it, is confined to the economic activities carried out by the firm within a determined social and political community. In this sense, the idea of citizenship has the purpose of emphasizing the firm’s duty to support and cooperate with the government for the general welfare and social justice (Freeman and Werhane, p.563).

This view implies that corporations are legal and political entities in the countries in which they operate and moreover it implies that corporations have a set of political, legal and social entitlements in countries in which they operate (Marshall, 1965).

Although an univocal definition of corporate citizenship does not exist in literature, it is possible to find some elements, shared with several studies, among which the emphasis on the idea of responsibility towards the territorial community where the firm acts and the attention towards environmental issues (Garriga and Melé 2004).

Some authors (Crane et al., 2004; Matten, 2005; Matten & Crane, 2005; Oblesby, 2004) argue that the term corporate citizenship is legitimate since globalisation challenges the geographical, social, cultural and economic boundaries of nation-states, gives to corporations a pivotal role within economies and societies and challenges the role of state as the only guarantor of citizenship. The arguments emphasise that the process associated with globalisation requires a reshaping of the concept of citizenship (Crane et al., 2004; Matten & Crane, 2005).