HANDBOOK OF RESEARCH ON GLOBAL

CORPORATE CITIZENSHIP

Handbook of Research on
Global Corporate Citizenship

Edited by

Andreas Georg Scherer

Chair, IOU Institute of Organization and Administrative
Science, University of Zurich, Switzerland
and

Guido Palazzo
Professor of Business Ethics, School of Business and
Economics, University of Lausanne, Switzerland

Edward Elgar
Cheltenham, UK Northampton, MA, USA

 Andreas Georg Scherer and Guido Palazzo 2008

All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the
publisher.
Published by
Edward Elgar Publishing Limited
The Lypiatts
15 Lansdown Road
Cheltenham
Glos GL50 2JA
UK
Edward Elgar Publishing, Inc.
William Pratt House
9 Dewey Court
Northampton
Massachusetts 01060
USA

A catalogue record for this book

is available from the British Library
Library of Congress Control Number: 2008927949

ISBN 978 1 84542 836 5 (cased)

Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall

Contents
viii
xx

List of contributors
Preface
1 Introduction: corporate citizenship in a globalized world
Andreas Georg Scherer and Guido Palazzo
PART I

HISTORY AND CONCEPTUAL GROUNDWORK

2 The emergence of corporate citizenship: historical development

and alternative perspectives
25
Andrew Crane, Dirk Matten and Jeremy Moon
3 Corporate responsibility/corporate citizenship:
the development of a construct
50
Sandra Waddock
4 Dening the concept of good corporate citizenship in the
context of globalization: a paradigm shift from corporate
social responsibility to corporate social accountability
74
S. Prakash Sethi
5 Corporate citizenship and community stakeholders
99
Robert A. Phillips and R. Edward Freeman
6 Business ethics, corporate virtues and corporate citizenship
116
Robert C. Solomon
PART II

CONTEMPORARY ISSUES AND CHALLENGES

7 Responsibility and global justice: a social connection model

Iris Marion Young
8 Corporate citizenship and the environment
Paul Shrivastava
9 Corporations as citizens against corruption: an institutional
entrepreneurship perspective
Gary R. Weaver and Vilmos F. Misangyi
10 Corporate citizenship and global conicts: the baboon moment
Charles P. Koerber and Timothy L. Fort

137
166

185
208

vi

Contents

PART III ACTORS, INSTITUTIONS AND GLOBAL

GOVERNANCE
11 Emerging patterns of global governance: the new interplay
between the state, business and civil society
Klaus Dieter Wolf
12 Globalization, transnational corporations and the future of
global governance
Stephen J. Kobrin
13 Between confrontation and cooperation: corporate citizenship
and NGOs
Jonathan P. Doh
14 The politicization of economization? On the current relationship
between politics and economics
Michael Zrn

225

249

273

293

PART IV DISCIPLINARY PERSPECTIVES ON CORPORATE

CITIZENSHIP
15 The economic view of corporate citizenship
Jessica C. Ludescher, Abagail McWilliams and Donald S. Siegel
16 Human rights, corporations and the global economy:
an international law perspective
David Kinley and Justine Nolan
17 Global business as an agent of world benet: new international
business perspectives leading positive change
Nancy J. Adler

315

343

374

PART V IMPLICATIONS FOR MANAGEMENT THEORY

BUILDING
18 Structures, identities and politics: bringing corporate
citizenship into the corporation
Peter Edward and Hugh Willmott
19 Responsible leadership in a globalized world:
a cosmopolitan perspective
Thomas Maak and Nicola M. Pless
20 The political economy of corporate social responsibility
Subhabrata Bobby Banerjee
21 The interrelationship between global and corporate governance:
towards a democratization of the business rm?
Grahame F. Thompson

405

430
454

476

Contents
PART VI

vii

CRITICAL PERSPECTIVES

22 Transparency, integrity and openness: the Nike example

Frits Schipper and David M. Boj
23 The corporation and its fragments: corporate citizenship
and the legacies of imperialism
Raza Mir, Richard Marens and Ali Mir
24 The corporation as a political actor? A systems theory
perspective
Helmut Willke and Gerhard Willke

501

527

552

PART VII THE FUTURE OF GLOBAL CORPORATE

CITIZENSHIP
25 The future of global corporate citizenship: toward a new
theory of the rm as a political actor
Guido Palazzo and Andreas Georg Scherer

577

Index

591

Contributors
Nancy J. Adler holds the S. Bronfman Chair in Management at McGill
University. She received her doctorate from UCLA. Dr Adler conducts
research and consults on global leadership, cross-cultural management,
and women as global leaders. She has authored over 100 articles, produced
a lm, and published four books. She is a Fellow of the Academy of
Management, the Academy of International Business and the Royal
Society of Canada. She was named a 3M Fellow, recognizing her as one of
the top university-level teachers, among all disciplines, in Canada. Nancy
is also an artist working primarily in watercolor and ink.
Subhabrata Bobby Banerjee is Professor of Management and Associate
Dean of Research at the College of Business, University of Western
Sydney. His research interests include sustainability, corporate social
responsibility, postcolonialism and indigenous ecology. His rst book,
Corporate Social Responsibility: The Good, The Bad and The Ugly, was published by Edward Elgar in November 2007. He has published widely in
international scholarly journals and his work has appeared in the Journal
of Marketing, the Journal of Management Studies, Organization, Human
Relations, Organization Studies, Management Learning, the Journal of
Business Research and Organization and Environment.
David M. Boj holds the Bank of America Endowed Professorship of
Management (awarded September 2006), and is past Arthur Owens
Professorship in Business Administration (June 2003June 2006) in the
Management Department at New Mexico State University. His focus is on
the study of ethics, critical theory feminism, and power of language, discourse and stories in organizations. Recent books include Storytelling
Organization (Sage, 2007), Critical Theory of Business and Public
Administration (Information Age Press, 2007), and The Passion of
Organizing (with J. Brewis, S. Lindstead and A. OShea, Liber &
Copenhagen Business School Press, 2006). His book, Narrative Research
Methods for Communication Studies (Sage, 2001) is a widely used text in
teaching qualitative methods to PhD students.
Andrew Crane is Professor of Policy and holds the George R. Gardiner
Chair in Business Ethics at the Schulich School of Business, York
University, Toronto. He is interested in various aspects of business ethics,
viii

Contributors

ix

including the role of morality in marketing and consumption; the contribution of evolutionary narratives to environmental management; the
implementation of fair trade policies; and the contribution of Foucauldian
thought to business ethics. Recent work appeared in the Academy of
Management Review, the Journal of Business Research, Organization
Studies, the Journal of Business Ethics and Business Ethics Quarterly. He
holds a BSc from Warwick University and a PhD in Business Studies from
Nottingham University. Previously, he was Professor of Business Ethics
and Director of the MBA in CSR at Nottingham University Business
School, UK.
Jonathan P. Doh holds the Herbert G. Rammrath Chair in International
Business, is founding Director of the Center for Global Leadership, and
Associate Professor of Management at the Villanova School of Business,
Pennsylvania, USA. Jonathan is the author or co-author of more than 35
refereed articles, 20 chapters and ve books. His work has appeared in the
Academy of Management Review, California Management Review, the
Journal of International Business Studies, Organization Science, Sloan
Management Review and the Strategic Management Journal. He is
presently completing work on two books: Multinationals and Development
(Yale University Press) and Corporations and NGOs: Conict and
Collaboration (Cambridge University Press). He is a member of ve editorial boards and is an associate editor of Business and Society. He received
his PhD in Strategic and International Management from George
Washington University
Peter Edward is currently a PhD student at the Judge Business School,
University of Cambridge (UK). He has over 20 years experience as a chartered engineer and as a management consultant, the latter predominantly
in programme management of business transformations and business startups and mergers. His research interests are in using poststructural and critical theory to investigate the role of business at the intersection of Third
World development, business ethics, sustainability and global growth. His
work on global inequality, ethics of poverty and micronance has appeared
in World Development, Third World Quarterly and Perspectives on Global
Development and Technology. He is also convener for the CSR study group
of the UK and Ireland Development Studies Association.
Timothy L. Fort is the Lindner-Gambal Professor of Business Ethics,
Executive Director of the Institute for Corporate Responsibility and
Coordinator of the Peace Through Commerce Initiative at George
Washington University (Washington, DC). His research interests include

Contributors

how ethical business behavior can contribute to the reduction of violence

in the world and optimal organizational structures to foster aective ethical
sentiments in business. He is the author of four books including Business,
Integrity, and Peace (Cambridge University Press, 2007) and Prophets,
Prots and Peace (Yale University Press, forthcoming). He is a member of
the editorial boards of the Academy of Management Review, Business
Ethics Quarterly and the American Business Law Journal.
R. Edward Freeman is the Elis and Signe Olsson Professor of Business
Administration at the Darden School, University of Virginia,
Charlottesville, USA, Academic Director of the Business Roundtable
Institute for Corporate Ethics, and heads Dardens Olsson Center for
Applied Ethics. He is the author or editor of over 20 volumes in the areas
of stakeholder management, business strategy and business ethics as well
as more than 80 articles in a wide variety of publications. Freeman is
perhaps best known for his 1984 book, Strategic Management: A
Stakeholder Approach (Pitman). His latest book (with Jerey Harrison and
Andrew Wicks) is entitled Managing for Stakeholders: Survival, Reputation
and Success (Yale University Press, 2007). Freeman has a PhD in
Philosophy from Washington University and a BA in Mathematics and
Philosophy from Duke University.
David Kinley holds the inaugural Chair in Human Rights Law at the
University of Sydney, before which he was the founding Director of the
Castan Centre for Human Rights Law at Monash University (200005). He
has written or edited ve books and more than 60 articles, book chapters,
reports and papers. He was a Senior Fulbright Scholar in 2004, based in
Washington, DC, researching on the World Bank and human rights. He also
worked for 12 years as a consultant and adviser on human rights law in
Australia and overseas (especially in South and South-East Asia) for a range
of organizations including the UN, the World Bank, the Australian Human
Rights and Equal Opportunity Commission and many large NGOs and
transnational corporations. He has just completed editing Corporations and
Human Rights, to be published in early 2008 by Ashgate in its International
Library of Essays series, and is currently working on two new books: a
monograph entitled Human Rights and the Global Economy, to be published
by Cambridge University Press, and a jointly edited collection of essays
entitled Human Rights and the WTO, to be published by Edward Elgar.
Stephen J. Kobrin is the William Wurster Professor of Multinational
Management at the Wharton School of the University of Pennsylvania. His
research interests include globalization, international political economy and

Contributors

xi

multinational strategy. His work has appeared in International Organization,

the Journal of International Business Studies, the Review of International
Studies and Foreign Policy, and in numerous edited volumes and other journals. He is a past President of the Academy of International Business and
a fellow of the World Economic Forum. He has served on the editorial
boards of International Organization, the Journal of International Business
Studies, and the Academy of Management Journal.
Charles P. Koerber is a Doctoral Fellow in the Department of Strategic
Management and Public Policy at George Washington University
(Washington, DC). His research interests include nancial, ethical,
environmental and social reporting; peace through commerce; voluntary
environmental programs; and corporate responsibility.
Jessica C. Ludescher is Assistant Professor of Business Ethics in the Albers
School of Business and Economics at Seattle University. She holds a joint
appointment in Management and Philosophy. Her research interests
include corporate social responsibility, theories of the rm, social justice,
ethics, sustainability and philosophy of economics. She has contributed to
the CORE Project on, The Potential of CSR to Contribute to the
Implementation and Integration of EU Strategies and her work has
appeared in FEEMs Working Paper Series.
Thomas Maak is Research Director at the Institute for Business Ethics and
Assistant Professor of Corporate Responsibilty at the University of St
Gallen in Switzerland. As visiting faculty he also co-directs a research stream
within the PwC-INSEAD initiative on high-performing organizations at
INSEAD, France. He has held visiting positions at the School for
International and Public Aairs at Columbia University, New York and at
Georgetown Universitys McDonough School of Business in Washington,
DC. His research and teaching focuses on business ethics, corporate citizenship, integrity management and responsible leadership. He is a member of
the Executive Committee of the European Business Ethics Network, EBEN.
As consultant and advisor he has worked with leading corporations such as
Shell, PricewaterhouseCoopers, Volkswagen and DONG Energy. Among
his many publications are Responsible Leadership (with Nicola Pless;
London/New York: Routledge, 2006) and Integre Unternehmensfhrung
(with Peter Ulrich; Stuttgart: Scher-Poeschel, 2007). He has also served as
guest editor for the Journal of Business Ethics.
Richard Marens is Associate Professor of Management at California State
University, Sacramento. His research interests include the use of nancial

xii

Contributors

activism as a tactic by labor unions, the rise and fall of American middle
management as an occupation, and the redenition of business ethics and
corporate social responsibility during the 1980s. He has published in a
variety of journals, including Business Ethics Quarterly, Business and
Society, the Journal of Business Ethics, the Journal of Academic Ethics, the
Journal of Management Inquiry, Organization, the Journal of Management
History and the Journal of Business and Management. He serves on the editorial board of Organization and Management History.
Dirk Matten holds the Hewlett-Packard Chair in Corporate Social
Responsibility and is a Professor of Policy at the Schulich School of
Business, York University, Toronto. His doctoral degree and his
Habilitation are from Heinrich-Heine-University Dsseldorf in Germany.
He is interested in CSR, business ethics and international business. Dirk
has taught and done research at academic institutions in Australia,
Belgium, Britain, Canada, the Czech Republic, France, Germany, Italy and
the US. He has published 10 books and some 80 articles and book chapters, including papers in journals such as the Academy of Management
Review, the Journal of Management Studies, Organization Studies, the
British Journal of Management, Human Relations and Business Ethics
Quarterly. Recently, he co-edited the Oxford Handbook of CSR (with
Jeremy Moon, Oxford University Press, 2008) and co-authored
Corporations and Citizenship (with Jeremy Moon, Cambridge University
Press, 2008). Previously, he held a Chair in Business Ethics and was
Director of the Centre for Research into Sustainability at the University of
London/UK (Royal Holloway).
Abagail McWilliams is Executive Associate Dean and Professor of
Management in the College of Business Administration of the University
of Illinois at Chicago. Since 2002 she has also been a Visiting Professor in
the International Centre for Corporate Social Responsibility at the
University of Nottingham. Her research interests include strategic management, corporate social responsibility and research methodology. Her
work has appeared in the Academy of Management Journal, the Academy
of Management Review, the Strategic Management Journal, the Journal of
Management Studies, the Journal of Management and Organizational
Research Methods, as well as in several edited volumes and other journals.
Ali Mir is an Associate Professor of Management at the College of
Business, William Paterson University, New Jersey, USA. His research
interests center around the changing nature of work in late capitalism. His
recent work includes the examination of transnational labor migration, the

Contributors

xiii

transformation of labor processes and markets under economic globalization, and the issues surrounding business process outsourcing.
Raza Mir is an Associate Professor of Management at the College of
Business, William Paterson University, New Jersey, USA. His research
mainly concerns the transfer of knowledge across national boundaries in
multinational corporations, and issues relating to power and resistance in
organizations. He has published in journals from a variety of disciplines,
including the Academy of Management Learning and Education, Cultural
Dynamics, the Journal of Business Communication, Organizational
Research Methods and the Strategic Management Journal. He is a member
of the editorial boards of Organization, Group and Organization
Management and Critical Perspectives on International Business.
Vilmos F. Misangyi is an Assistant Professor in the Department of Business
Administration in the Alfred Lerner College of Business and Economics at
the University of Delaware. His research interests include CEO charisma,
institutional entrepreneurship, corruption and managerial discretion. His
work has appeared in several journals including the Academy of
Management Review, the Strategic Management Journal, the Journal of
Applied Psychology, Organizational Research Methods and Leadership
Quarterly. He serves as an ad hoc reviewer for the Academy of Management
Review, the Academy of Management Journal, Organization Science, the
Journal of Management and Business Ethics Quarterly.
Jeremy Moon is Professor and founding Director of the International
Centre for Corporate Social Responsibility at the University of
Nottingham, UK. He won a Beyond Grey Pinstripes European Faculty
award for preparing MBAs for social and environmental stewardship in
2005. He is a Fellow of the Royal Society for the Arts. He is the author or
editor of seven books and two special issues, and author of over 80 journal
articles and book chapters. He is co-editor of The Oxford Handbook of
CSR (with Dirk Matten, Oxford University Press, forthcoming) and coauthor of Corporations and Citizenship (with Dirk Matten, Cambridge
University Press, forthcoming). Journal publications on CSR include the
Academy of Management Review, the British Journal of Management, the
Journal of Management Studies, the Journal of Business Ethics, Business
Ethics Quarterly and Business and Society Review.
Justine Nolan is the Deputy Director of the Australian Human Rights
Centre and lectures in international human rights law at the University of
NSW, Australia (UNSW). Her research interests are in human rights,

xiv

Contributors

corporate accountability and labour rights. She has worked closely with a
broad range of representatives from NGOs, government, companies and
the UN in consulting on business and human rights issues. Prior to her
appointment at UNSW she was the Director of the Business and Human
Rights Program at the Lawyers Committee for Human Rights (now
Human Rights First) in the United States. She is an editor of the Human
Rights Defender.
Guido Palazzo is Professor of Business Ethics at the University of
Lausanne (Switzerland). His research interests are in ethical decisionmaking, global governance and corporate social responsibility. His work
has appeared in the Academy of Management Review, Business Ethics
Quarterly, the Journal of Business Ethics and in numerous volumes and
other journals. He is a member of the editorial board of Business Ethics
Quarterly and Business & Society. He has worked with numerous companies and NGOs on projects in organizational ethics and CSR.
Robert A. Phillips is on the faculty of the University of Richmonds Robins
School of Business, Richmond, Virginia, USA. His work has appeared in
Business Ethics Quarterly, the Journal of Business Ethics and Business and
Society Review among others. He is also author of Stakeholder Theory and
Organizational Ethics (Berrett-Koehler, 2003). His research interests
include organizational ethics and the eects of managerial discretion on
stakeholder management, ethics in network organizations and the commercial use of private military contractors. He currently serves on the
Board of Directors of the Society for Business Ethics. He holds a PhD from
the Darden School at the University of Virginia and also MBA and BS
degrees from the University of South Carolina and Appalachian State
University, respectively.
Nicola M. Pless is Research Director and Assistant Professor in
Responsible Leadership at the University of St Gallen in Switzerland. She
is also a Visiting Senior Research Fellow in INSEAD (France) where she
co-directs the INSEAD-PwC research stream on Developing Responsible
Leadership. She holds an MBA from the University of Bayreuth, a PhD in
organizational theory from the University of St Gallen and a diploma in
clinical organizational psychology from INSEAD. Prior to joining these
faculties, she worked as a vice president in the nancial services industry
and served at the World Bank Group in Washington, DC. Her research,
writing and teaching focuses on international management, responsible
leadership and leadership development. She has delivered training and consulting services for the International Finance Corporation, Deutsche

Contributors

xv

Telekom, Volkswagen, PricewaterhouseCoopers and DONG Energy. She

has published three books and several articles in practitioner and academic
journals. Her latest book on Responsible Leadership (with Thomas Maak)
was published by Routledge in 2006.
Andreas Georg Scherer is head of the Institute of Organization and
Administrative Science (IOU) and holds the Chair of Theories of the Firm
at the University of Zurich (Switzerland). His research interests are in
business ethics, critical theory, international management, organization
theory and the philosophy of science. He has published eight books. His
work has appeared in the Academy of Management Review, Business Ethics
Quarterly, the Journal of Business Ethics, Management International
Review, Organization, Organization Studies and in numerous volumes
and other journals. He is associate editor of Business Ethics Quarterly and
serves as a member of the editorial boards of Business & Society,
Organization and Organization Studies.
Frits Schipper studied physics and philosophy. He coordinates a masters
degree in the philosophy of management and organization, a joint venture
of the Department of Philosophy, Vrije Universiteit Amsterdam, and the
Department of Philosophy, Universiteit Utrecht. His research is in the philosophy of management and organization, in the context of which he has
a theoretical as well as a practical interest, the latter being the possible contribution of philosophy to organizational practice. He has published three
books, all in the Dutch language. His other publications have appeared in
national as well as international journals and dierent volumes. He is a
member of the editorial board of Philosophy of Management and chairman
of the board of the Vanwoodman Society.
S. Prakash Sethi is University Distinguished Professor at the Zicklin
School of Business, Baruch College, the City University of New York. In
addition to his academic responsibilities, he is the founder and President of
the International Center for Corporate Accountability Inc. (ICCA). ICCA
is an independent non-prot think-tank, which undertakes cutting-edge
research and public policy advocacy in the area of enhanced corporate
accountability through voluntary corporate codes of conduct. A fellow of
the International Academy of Management, Sethi has published 24 books
and over 135 articles in professional and scholarly journals and national
and international news media. He serves on the boards of directors/
advisors on various corporate and civil society organizations, and numerous editorial boards of various academic and professional journals.

xvi

Contributors

Paul Shrivastava is the Howard I. Scott Chair and Professor of

Management at Bucknell University, Pennsylvania, USA. He received his
PhD from the University of Pittsburgh. He was a tenured professor at New
York Universitys Stern School of Business. He has published 15 books and
over 100 articles in professional journals on sustainable strategic management and crisis management. He served on the boards of 10 leading management journals (including the Academy of Management Review, the
Strategic Management Journal and Organization and Environment. He
studied Japanese sustainability practices as a Fulbright Senior Scholar. He
founded the non-prot organization, the Industrial Crisis Institute. He was
co-founder and for ve years was the CEO of eSocrates, Inc., an online
training/education software company. Shrivastava is a consultant to major
multinational companies and serves on the Board of Trustees of DeSales
University. He is the organizer of the Steelman Triathlon and has a World
Tango Music radio show on WVBU 90.5FM Lewisburg, PA.
Donald S. Siegel gained his PhD from Columbia University. He is Professor
and Associate Dean of the A. Gary Anderson Graduate School
of Management at the University of California, Riverside. He is an editor
of the Journal of Technology Transfer, an associate editor of the Journal of
Business Venturing and the Journal of Productivity Analysis and serves on
the editorial boards of the Journal of Management Studies, Academy of
Management Perspectives, Academy of Management Learning and
Education, Corporate Governance: An International Review and the
Strategic Entrepreneurship Journal. His papers have appeared in the
American Economic Review, the Economic Journal, the Review of Economics
and Statistics, the Journal of Law and Economics, the Journal of Financial
Economics, Brookings Papers on Economic Activity, Research Policy, the
Academy of Management Review, the Academy of Management Journal, the
Strategic Management Journal, IEEE Transactions on Engineering
Management, the Journal of Business Venturing, the Journal of International
Business Studies, the Journal of Management Studies, Industrial and
Corporate Change, the Leadership Quarterly and the Journal of
Management. He recently completed two books for Oxford University
Press: Innovation, Entrepreneurship, and Technological Change and the
Handbook of Corporate Social Responsibility.
Robert C. Solomon was one of the most eminent scholars in business
ethics. He spent the past 20 years thinking, writing and lecturing about the
importance of ethics in business. He was the Quincy Lee Centennial
Professor and a member of the Academy of Distinguished Teachers at the
University of Texas at Austin. He also taught at Princeton, UCLA, Penn

Contributors

xvii

and Pittsburgh. He was the author or editor of more than 40 books in the
domains of business ethics, history of philosophy, philosophical psychology (with a focus on emotions). His books on business ethics include Above
the Bottom Line, Ethics and Excellence, Its Good Business, A Better Way
to Think about Business and Building Trust. Robert Solomon died on
2 January 2007.
Grahame F. Thompson is Professor of Political Economy at the Open
University. Long-term research interests are in the nature of network forms
of governance and the international system. He is currently engaged in
researching the fate of the categories of borders, territories and jurisdictions in debates about globalization, and the meaning of global corporate
citizenship. Recent book publications have included: Between Hierarchies
and Markets: The Logic and Limits of Network Forms of Organization
(Oxford University Press, 2003) and Globalization in Question (3rd edition,
Polity Press, 2008).
Sandra Waddock is Professor of Management at the Boston College
Carroll School of Management and Senior Research Fellow at BCs Center
for Corporate Citizenship, and for 200607 a visiting scholar in the CSR
initiative at the Kennedy School of Government at Harvard University. She
holds MBA and DBA degrees from Boston University and has published
widely on issues related to corporate responsibility/citizenship, multisector
collaboration and related topics. She received the Aspen Institutes 2005
Faculty Pioneer Award for External Impact.
Gary R. Weaver is Professor of Management at the University of Delaware
and editor in chief of Business Ethics Quarterly. His research focuses on psychological, sociological and philosophical aspects of ethics in business and
society. He is co-author of Managing Ethics in Business Organizations:
Social Scientic Perspectives (Stanford University Press, 2003). He also
serves on the editorial boards of the Academy of Management Review and
the Journal of Management, and his research has appeared in the Academy
of Management Journal, the Academy of Management Review, Organization
Studies, Business Ethics Quarterly, Human Relations, the Journal of
Management, Business and Society, California Management Review and
other scholarly journals.
Gerhard Willke is Professor of Economics at the University of Applied
Sciences at Nuertingen, Germany. He has published six books and numerous articles. His research areas are economic theory, the theory of capitalism, political economy and employment policy.

xviii

Contributors

Helmut Willke is Professor for State Theory and Global Governance at the
University of Bielefeld, Germany. His research activities are in the elds of
systems theory, systems governance, state theory, global governance and
governance of functional world systems. He has published 18 books and
some 150 articles in all relevant German journals. He is a member of the
editoral board of Jahrbuch fr Managementforschung.
Hugh Willmott is Research Professor in Organization Studies, Cardi
Business School. He has previously held professorial positions at the universities of Cambridge and Manchester and visiting appointments at the
universities of Copenhagen, Lund and Craneld. He has a strong interest
in the application of social theory, especially poststructuralist thinking, to
the eld of management and business. He has published 20 books including Managing Knowledge (2000); Management Lives (1999), Studying
Management Critically (2003) and Fragmenting Work (2004). He has also
published widely in social science and management journals, including the
Academy of Management Review, the Administrative Science Quarterly,
Sociological Review and Sociology.
Klaus Dieter Wolf is Professor of Political Science at Darmstadt University
of Technology and Deputy Director at the Peace Research Institute,
Frankfurt (PRIF). His current research areas are governance beyond the
state and the role of private actors in international relations. Among his
recent books are Macht und Ohnmacht internationaler Institutionen (2007,
co-edited with Andreas Hasenclever and Michael Zrn) and Staat und
Gesellschaft fhig zur Reform? (2007).
Iris Marion Young was Professor of Political Science at the University of
Chicago. Her research covered contemporary political theory, feminist
social theory and normative analysis of public policy. She was one of the
most inuential political philosophers of our time. Her writings have a
huge impact in a broad eld of domains, including theories of justice,
democracy and dierence, deliberative democracy, ethics and international
aairs. Iris Marion Young died on 1 August 2006.
Michael Zrn is Director of the Social Science Research Center Berlin
(WZB) and founding Dean of the Hertie School of Governance. In 1993 he
was appointed Professor of Political Science at the University of Bremen.
Since 1995 he has been Co-Director of the Institute for Intercultural and
International Studies (InIIS) concentrating on issues concerning globalization and global governance. From 1997 to 2000 he was Co-Director of
the Centre for European Law and Politics at the University of Bremen,

Contributors

xix

where he worked on an interdisciplinary basis on normative issues of

European integration and international juridication. Before his move to
the WZB in 2004 he was Director of the German Research Association
(DFG) Special Research Project State in Transformation. Zrn is a
member of the Berlin-Brandenburg Academy of Sciences and of the Senate
of the DFG.

Preface
The development of this book began in summer 2005 when we started to
approach authors to contribute to the Handbook of Research on Global
Corporate Citizenship. We were gratied that so many eminent scholars
from various disciplines were interested in this topic. We should like to
thank all the contributors for their hard work and timely cooperation. Also,
we should like to thank Francine OSullivan and the Edward Elgar sta for
their kind and reliable help. Christian Vgtlin prepared all the les for the
publisher and helped enormously with the editing of the chapters and the
preparation of the Handbook.
During the preparation, two scholars passed away soon after they had
sent us their papers. We were very sad to learn that Iris Marion Young died
on 1 August 2006, and that Robert Solomon passed away on 2 January
2007. We remember both these scholars as insightful thinkers and eminent
scholars in their disciplines.
Andreas Georg Scherer
Guido Palazzo
Zurich and Lausanne
December 2007

xx

Introduction: corporate citizenship in a

globalized world
Andreas Georg Scherer and Guido Palazzo

Corporate citizenship as a global challenge

In market societies economic exchange requires the existence and enforcement of rules that the market cannot generate itself. Although the dimensions and limits of state intervention have always been a matter of debate,
it is indisputable that certain rules need to be implemented for an
economy to function properly and contribute to the common good.
Consequently, many theories of society assume that these rules will be
created and enforced by national states. In this scenario the state determines formal regulations and delineates the sphere of private freedom
within which individual citizens and private businesses are entitled to conclude contracts and pursue their private interests. Formal rules as embodied in the law are complemented by the informal norms of common
decency which dene the regulatory framework of business behavior in
modern societies. With the help of this framework, modern society makes
ecient use of available resources and entrepreneurial capacity. If this
regulatory framework is properly dened and enforced, these governance
structures will establish incentives so that the egoistic motives of business
people in their consequences contribute to private prot as well as to the
common good.
Current theorizing on corporate social responsibility (CSR) builds on
the assumption of a more or less intact regulatory framework, in which
national legislation and the values and expectations of social communities
prescribe appropriate business behavior and dene the responsibilities of
business rms (Carroll 1991; Frederick 1998; Whetten et al. 2002; Schwartz
and Carroll 2003). However, the pluralization and globalization of modern
society results in a loss of cultural homogeneity and erodes the national
context of governance (Beck 2000; Habermas 2001; Kobrin 2001). Today,
multinational corporations (MNCs) operate in dierent environments with
heterogeneous regulatory requirements and enforcement mechanisms.
These business rms have to respond to contradictory expectations and
often have to operate under conditions of state failure or situations where
the rule of law is absent. Therefore, the synchronization of corporate
behavior with societal demands through national regulatory regimes no
1

Handbook of research on global corporate citizenship

longer operates as smoothly as it once did (Palazzo and Scherer 2006;

Scherer and Palazzo 2008).
During the last decade, the global regulatory decit has been abused systematically by some business rms that got involved in ecological disasters,
human rights violations such as child and slave labor, corruption, collaboration with repressive regimes, murder of union leaders and sweatshop conditions (see, for example, Mokhiber and Weissman 1999; Korten 2001). At
the same time, big corporations are using their increasing power to
inuence decision-making processes in the political system by aggressive
acts of lobbyism so that regulations get passed that are in favor of the interests of the rms (Schuler and Rehbein 1995; Siedel 2002; Shell 2004). On
the other hand, some MNCs attempt to promote positive social change. As
of 2007 about 4000 business rms and organizations have subscribed to the
UN Global Compact and have voluntarily committed to the support of
human rights, compliance with social and environmental standards and the
ght against corruption in their sphere of inuence (Williams 2004;
www.unglobalcompact.org). Apparently this is not just an occasional phenomenon; rather it has become a general trend. Bies et al. (2007, p. 788)
even hold: [t]hat corporations do sometimes act as social change agents is
not in dispute; it is an empirical reality around the world. Moreover it is
becoming a political reality as well.
Obviously, multinationals navigate in increasingly complex and unstable
global environments and have started to play a more active role in the
transnational attempt to dene and enforce governance policies, institutions and processes. Anecdotal evidence shows that some corporations have
already assumed responsibilities that once were regarded as belonging to
government (Matten and Crane 2005). They engage in public health projects, education and protection of human rights while operating in countries with repressive regimes. They address social ills such as AIDS,
malnutrition, homelessness and illiteracy (Margolis and Walsh 2003; Rosen
et al. 2003). They engage in self-regulation to ll gaps in legal regulations
(Scherer and Smid 2000; Cragg 2005) and to promote societal peace and
stability (Fort and Schipani 2004). Therefore, some corporations are not
simply complying with societal standards in legal and moral terms; they are
engaging in discourses that aim to redene those standards in a changing,
globalized world (Palazzo and Scherer 2006; Scherer and Palazzo 2007).
In a globalized world, global governance, referring to rule making and
enforcement on a global scale, is no longer the purview of governments
alone (Braithwaite and Drahos 2000; Reinicke and Deng 2000). Today,
MNCs as well as civil society groups participate in the formulation and
implementation of regulations in policy areas that were once regarded as the
sole responsibility of state agencies. These policy areas include protecting

Introduction

human rights, implementing social standards, preserving the environment,

ghting corruption and producing public goods (Kaul et al. 2003; Williams
2004). This development indicates a shift in global business regulation from
a state-centric mode toward new multilateral non-territorial modes with the
inclusion of private and non-governmental institutions as key actors
(Parker and Braithwaite 2003). Chandler and Mazlish (2005) even call
multinationals the new Leviathans of our time.
The activities summarized above go beyond the widely accepted understanding of stakeholder management (Freeman and McVea 2001) and corporate social responsibility (Carroll 1991). The globalization of society is
eroding established ideas about the division of labor between the political
and economic spheres, and it calls for a fresh view concerning the role of
business in society (Kobrin 2001; Dubbink 2004). These phenomena need
to be embedded in a new concept of the business rm as an economic and
political actor in society. As a consequence, we have recently discussed the
politicization of the corporation and proposed a new theory of political
corporate social responsibility (Palazzo and Scherer 2006; Scherer et al.
2006; Scherer and Palazzo 2007). The Handbook builds on this concept.
Given the discussions in political science, political philosophy, law and sociology that deal with the consequences of the postnational constellation,
our impression is that outside the management literature the term corporate citizenship (CC) is more common than CSR. Since this Handbook
aims at a transdisciplinary view on the consequences of globalization for the
role of business in society, we use the synonymous term of corporate citizenship instead of political CSR here.
The idea of corporate citizenship promises to contribute to this transdisciplinary discourse (Andriof and McIntosh 2001; Wood and Logsdon
2001). The notion that business rms have rights and responsibilities
toward society similar to those of citizens is borrowed from the political sciences and has gained wide attention both in academic research and in business practice (Habisch et al. 2001; Maignan and Ferrell 2001; Matten et al.
2003; Logsdon and Wood 2005; Matten and Crane 2005). In the political
sciences the citizen of the modern state is conceived as a bearer of private
rights such as the right to own property, to enter into private contracts and
to engage in market activities. Accompanying these private rights are the
right to education and healthcare (social rights) and the right to participate
in determining public rules and issues of common concern (political rights)
(Marshall 1965). At the same time, the citizen has obligations such as solidarity with his/her fellow citizens and a concern with the common good.
However, the status of business rms with regard to these rights and
obligations is not yet clear (Logsdon and Wood 2005; Matten and Crane
2005; Moon et al. 2005; von Oosterhout 2005; Norman and Nron 2008;

Handbook of research on global corporate citizenship

Wood and Logsdon 2008). While some scholars suggest that corporations
and business rms should be considered equivalent to citizens (Carroll
1998), others hold that the citizenship concept cannot easily be transferred
to corporations (Norman and Nron 2008). Rather, business rms should
be regarded as state-like agencies and not so much as citizens (Matten and
Crane 2005). This suggestion is based on the observation that often business rms adopt a state-like role and protect citizens rights in cases where
governments are neither able nor willing to perform this function.
Corporate citizenship as an interdisciplinary topic
The task of this volume is to discuss the consequences of the social and
political power and engagement of business rms and to examine the implications for the theory of the rm and the role of business rms in society.
Various disciplines such as political philosophy, political science, sociology,
legal studies, management studies and economics recently have begun to
reconsider the role of business in society in light of the ongoing process of
globalization.
In political philosophy, scholars have started to deconstruct the traditional nation-state-based concept of democracy (Habermas 1998, 2001),
examining the challenges of the current erosion of political power over economic actors and processes. Others have proposed to reconceptualize the
meaning of responsibility in a global context, drawing consequences for the
power balance and interaction between governmental, business and civil
society actors (for example, Dryzek 1999; Young 2004). In political science
and international relations, globalization has provoked discussions on
policy networks (Kenis and Schneider 1991), privatepublic partnerships
(Grimsey and Lewis 2004), global governance (Held 2004), the various
forms of governance without government (Zrn 2002) and the role and
legitimacy of private authority (Risse 2002; Fung 2003; Ruggie 2004;
Frynas 2005; Wolf 2005). In sociology, students have studied the inuence
of globalization on topics such as nationhood, culture, identity, communication, industrial relations, and social and economic institutions (for an
overview, see Cohen and Kennedy 2000). In particular, they have analyzed
the changing role of politics, economics and civil society groups such as
non-governmental organizations (NGOs) and social movements (Beck
2000; Davis et al. 2005). In legal studies, scholars have started to analyze the
challenge of holding MNCs accountable for issues that take place beyond
the territoriality of nation-states. They study, for example, the responsibilities of business rms for being involved in human rights violations abroad
(Kinley and Tadaki 2004; Taylor 2004; Clapham 2006; Kinley and
Chambers 2006). This is dicult within a framework of international law
that is traditionally targeting nation-states only, but does not directly

Introduction

include the legal responsibilities of non-state actors (see Kingsbury 2003).

Therefore, the conditions of a direct application of international law are
explored (Kinley and Tadaki 2004; Vagts 2003; Weissbrodt and Kruger
2003). Other legal scholars have analyzed the various forms of soft law
(Shelton 2000; Mrth 2004) and alternative forms of regulation (Parker
and Braithwaite 2003). In management studies, some scholars have started
to reect upon the consequences of globalization for the conceptualization
of corporate responsibility and corporate citizenship (Rowley and
Moldoveanu 2003; Teegen et al. 2004; Matten and Crane 2005; den Hond
and de Bakker 2007; Scherer and Palazzo 2007; Levy 2008). And some
management scholars dedicated to microeconomic theory have started to
explore this phenomenon with the help of economic methods (see, for
example, McWilliams and Siegel 2001; Husted and Salazar 2006;
McWilliams et al. 2006; Mackey et al. 2007), even though the majority of
students of economics are still reluctant to acknowledge a political responsibility of business rms and watch the trend toward CSR with suspicion
(for example, Friedman 1962, 1970; Baumol and Blackman 1991;
Henderson 2001, 2004; Jensen 2002).
However, with a few exceptions, these various discussions on the governmentbusinesscivil society interaction under a postnational constellation
(Habermas 2001), take place in disciplinary silos. Political philosophers
discuss among themselves, hardly referring to the debate in political science,
not to speak of sociology and law (for an exception see, for example,
Habermas 1996, 2006). Political scientists focus on the role of privatepublic
partnerships, society and NGOs, but they have mostly neglected the political
function of private business rms until recently (as an exception, see Ruggie
2004; Wolf 2005).1 And many management scholars who work in the eld of
corporate responsibility still build upon the assumption of the intact nationstate (see, for example, Sundaram and Inkpen 2004), thereby neglecting the
conceptual consequences of the analyzes of globalization advanced in other
disciplines (see, critically, Scherer and Palazzo 2007).
The concept of corporate citizenship is an important anchor which may
help to connect these various disciplinary discourses. This volume therefore
seeks to identify and foster emerging research on corporate citizenship in
various disciplines and to provide a framework for academic debate on the
role of business in a global society. Our goal for this volume is to advance
the discussion of managerial, economic, political and legal perspectives on
the new role of business in a global society. We have invited renowned
authors from various disciplines to leave their silos and to participate in this
transdisciplinary analysis of corporate citizenship in a globalizing world.
Many of the authors have already established bridges across disciplinary perspectives and now share their recent views on this topic, thereby advancing

Handbook of research on global corporate citizenship

theory and contributing to the most urgent questions that relate to corporate
citizenship.
Structure of the book
This volume contains original contributions that help us to better understand global corporate citizenship and the role of business in world
society.2 The chapters argue across relevant disciplines (for example,
organization studies, business ethics and corporate social responsibility,
legal studies, political theory and so on). The Handbook is structured in
seven parts, dealing with the phenomenon of corporate citizenship along
various topics or sub-dimensions and with the help of the involved disciplinary perspectives. After this introductory chapter, the book is structured as follows.
Part I History and conceptual groundwork
This part deals with the history and conceptual grounding of corporate
citizenship. The chapters also distinguish corporate citizenship from
related concepts such as corporate responsibility, corporate social performance or corporate reputation and consider the similarities and dierences
between corporate citizenship and established theories such as stakeholder
theory or business ethics. Chapters in Part I address questions such as the
following: what does corporate citizenship mean in a postnational world?
How did the concept emerge and what alternative perspectives are discussed in the literature? What are the future trends in corporate responsibility, corporate social responsibility, corporate social performance and
corporate reputation? How is corporate citizenship related to these concepts? Do companies have a political responsibility and if so how can it be
dened? How can economic rationality and political responsibility be reconciled in a globalized world? How are these issues treated in stakeholder
theory or business ethics? How do these schools of thought relate to corporate citizenship?
Part II Contemporary issues and challenges
This part deals with the contemporary challenges of global business regulation and the provision of global public goods. Each chapter addresses a
particular issue and discusses how responsible corporate citizens might
respond to the questions of regulation and production of public goods.
Authors emphasize possible achievements and limitations of corporate citizenship. Topics include the following: what are the human rights controversies in global business today and how can corporate citizenship
contribute to the resolution of these issues? What are the most important
environmental challenges and how can corporate citizenship contribute to

Introduction

the preservation of the physical environment? What are the challenges to

the integrity of business and how can companies help ght corruption?
What is the role of business in promoting democracy, peace, and social
stability?
Part III Actors, institutions and global governance
In this part, authors consider the roles of various actors and transnational
institutions. Topics include the following: what actors are involved in global
business regulation and how can the contributions of states, civil society
and business be balanced? What part do NGOs play in global business
regulation and what are the links to corporate citizenship? What are the
consequences of the decline of national sovereignty and the increase in the
political power of business?
Part IV Disciplinary perspectives on corporate citizenship
Here the phenomenon of corporate citizenship is discussed through the
lens of various disciplinary perspectives. Topics include the following: how
can corporate citizenship be conceived of from an economic point of view?
What is the international law perspective on corporate citizenship? What is
the international business research perspective on corporate citizenship
and what is the contribution of positive organizational scholarship to our
understanding of corporate citizenship?
Part V Implications for management theory building
The aim of this part is to discuss the role of various management structures
and functions in the implementation of corporate citizenship. In addition,
further aspects such as corporate governance and the democratization of
the business rm, and the development of a new theory of the rm are discussed. Topics include the following: what are the relationships between
organizational structures, politics, identity building and corporate citizenship? What structural consequences are produced by the responsibility
toward external constituencies? What are the consequences for the political
economy and the balance of power between business and politics? What is
the role of leadership in a societal context that emphasizes corporate citizenship? What does the future of democratic governance look like and
what is the corporate role therein? Can the activities of companies be controlled democratically?
Part VI Critical perspectives
This part provides critical perspectives on corporate citizenship from
various schools of thought such as postmodernism, poststructuralism,
postcolonialism and systems theory.

Handbook of research on global corporate citizenship

Part VII The future of global corporate citizenship

In the nal chapter, the editors attempt a synopsis of the discussion and
emphasize some future trends in corporate citizenship research.
Overview of the book chapters
The purpose of the chapter by Andrew Crane, Dirk Matten and Jeremy
Moon (Chapter 2) is to map out the territory of management research on
corporate citizenship, to analyze the various debates and to assess the
potential of using citizenship as a metaphor for businesssociety relationships. After providing a brief historical overview about how corporate citizenship entered the agenda in business and academia, Crane et al. critically
analyze the extant use of the terminology. Based on this literature survey,
they discuss the potential for using the citizenship metaphor to provide a
more expansive analysis of the political role of the corporation. The
authors suggest that there are three fundamental approaches to applying
citizenship to corporations. However, they hold that one has to be aware of
the facts that citizenship in itself is a dynamic concept and, moreover, that
corporations play quite a substantial role in transforming contemporary
notions of citizenship. Crane et al. conclude with a discussion of these
themes and an outlook on future perspectives.
Sandra Waddock (Chapter 3) illustrates the evolution of the terminology
that is used to describe corporate citizenship or corporate responsibility. She
highlights some of the conceptual confusion and briey assesses the current
state of thinking as it relates to practice. The forces of globalization and
growth of corporate power lead to shifting centers of power and inuence
in the world. In some cases, this shift has created a context in which MNCs
have begun to participate actively in the production of public goods such as
education, healthcare, poverty alleviation and standards setting. These business rms assume tasks that were formerly reserved for governments.
Simultaneously, the activism and inuence of NGOs and civil society organizations has changed dramatically. Today these organizations are able to
safeguard corporate activities and to put pressure on corporations, thus
compensating for the failure of state agencies and decits in public regulation. As a reaction to these developments, scholarly thinking about corporate citizenship, corporate social responsibility, corporate responsibility,
corporate social performance, business citizenship, business ethics, stakeholders and corporate reputation has virtually exploded in the past decade.
Therefore, this chapter provides an overview of the available concepts and
helps to create some order in this rapidly growing eld.
In has been suggested that corporations can do well by doing good and
that good ethics is good business. However, Prakash Sethi (Chapter 4)
argues that while socially responsible behavior is important and desirable,

Introduction

it plays rather a small role in motivating good corporate conduct. Instead,

it is the economic competitive conditions that dene the parameters and
opportunities for good corporate conduct and inuence the values and traditions of the corporations and their managers to exploit these opportunities. Sethi presents a framework that helps to analyze the competitive
conditions under which business rms operate and allows us to predict the
extent to which corporations may engage in ethical or unethical behavior.
The author suggests that from a societal perspective it would be more desirable to move away from the concept of corporate social responsibility
towards a notion of corporate social accountability. Under the widespread
conditions of market imperfections and the growth of corporate power,
information imbalance, bargaining power imbalance, and remedy and relief
imbalance are obstacles in holding corporations accountable. These are the
crucial factors that need to be changed so that society can enhance the likelihood of corporate ethical conduct.
Robert Phillips and Edward Freeman (Chapter 5) discuss the relationship between corporate citizenship and stakeholder theory. In particular,
they focus on the role of community stakeholders. They hold that in the
literature on corporate citizenship and corporate responsibilities there is
too much unreective use of stakeholder terminology. The authors emphasize the limits of organizational obligations to communities and suggest a
typology of potential relationships that organizations may have with communities. While Phillips and Freeman admit that their discussion of community stakeholders could be interpreted as a description of corporate
citizenship obligations, at the same time they are very skeptical of this use
of terminology. They hold that the concept of citizenship is too complex to
convincingly make such a case. Instead, Phillips and Freeman suggest that
rmcommunity relationships may be a potential lever in the complicated
matter of reconciling and distinguishing corporate citizenship and stakeholder theories.
In his critical analysis of the role of business in society, Robert Solomon
(Chapter 6) criticizes the atomic conceptualization of CC, CSR and stakeholder management in the current discussion. Building upon Aristotelian
philosophy, he emphasizes the relevance of a communitarian and virtuebased approach that perceives the individual as a part of the (corporate)
community and the latter as being embedded in a broader societal context
of values, traditions and responsibilities. Solomon criticizes the disembedding logic of an overstreched interpretation of the prot motive that separates the business role from the other societal obligations of individual
actors and business operations from society as a whole.
Iris Young (Chapter 7) attempts to clarify the status of political claims
about global justice and injustice that are increasingly discussed. Such

10

Handbook of research on global corporate citizenship

claims present a problem for political philosophy because until recently

most philosophical approaches to justice assumed that obligations of
justice hold only between those living under a common constitution within
a single political community. Young argues that obligations of justice arise
between persons by virtue of the social processes that connect them.
Political institutions are only the response to these obligations rather than
their basis. Today, for some issues, obligations of justice extend globally.
They are grounded in the fact that some structural social processes connect
people across the world without regard to political boundaries. The second
contribution of this chapter is to theorize the responsibilities that moral
agents may have in relation to such global social processes. How ought
moral agents, whether individual or institutional, conceptualize their
responsibilities in relation to global injustice? Young proposes a model of
responsibility from social connection as an interpretation of obligations of
justice arising from structural social processes. In order to illustrate their
case she advances the example of justice in transnational production and
supply chains in the clothing industry.
Paul Shrivastava (Chapter 8) focuses on contemporary challenges of
global business regulation and the provision of global environmental
public goods. The author suggests that the concept of citizenship cannot
be easily transferred to corporations that are considered as legal persons.
Therefore, he oers a more comprehensive understanding with the help of
an embodied concept of corporate citizenship and corporate environmental responsibilities. His approach extends the idea of corporations as
purely legal with economic purposes and centers the human body and the
physicality of nature as central in corporate social analysis. Shrivastava
articulates the new corporate responsibilities toward nature, the whole
person, natural and fabricated spaces, and the community. He articulates
some suggestions for practical implementation of these responsibilities,
and identies several issues that deserve further research.
Gary Weaver and Vilmos Misangyi (Chapter 9) review the concepts of
corruption and corporate citizenship. They summarize conventional
approaches to corruption and emphasize their limits. As an alternative,
they present a more expansive understanding of corruption and treat it as
embedded in the cognitive and behavioral components of an overarching
institutional logic. This institutional logic can be sustained or changed by
social actors in possession of economic, social and symbolic resources.
Based on this account of corruption, they discuss how corporations might
engage in anti-corruption eorts even though these spread beyond their
own boundaries. Weaver and Misangyi suggest that corporations can function as citizens in the sense of taking on social and political responsibilities
and as entrepreneurs in changing an institutional framework that enables

Introduction

11

corrupt behavior. The authors highlight certain potential corruptiondisabling roles for corporations. However, they also consider various obstacles that may dampen optimism that many corporations would engage in
wide-ranging citizen-like behavior against corruption.
Charles Koerber and Timothy Fort (Chapter 10) discuss some of the possible contributions and potential limitations of corporate citizenship to
peace through commerce. The notions of peace through commerce and
corporate citizenship are relatively new concepts which are distinct but
related. They both try to address the changing world in which we live and
highlight the various and complex shifts in global commerce and societal
interaction, including the decrease in power of nation-states and the
increase in power of MNCs. These concepts, as used in the business literature, are a reection of the struggle that practitioners and academics are
having with the changing relationships and interactions among businesses,
communities, governments and NGOs. These are not the only attempts by
academics and the business community to deal with our changing world
but they are both promising conceptions that deserve further thought and
research. Koerber and Fort, therefore, explore possible areas for future
research into the relationship between these two concepts.
Klaus Dieter Wolf (Chapter 11) deals with the emergence of the new
political forms of publicprivate governance patterns beyond the state. In
many ways the new interplay between the state, business and civil society in
global governance resembles the process of political modernization
changes which could be observed in the domestic sphere and is associated
with terms such as de-hierarchization or de-governmentalization that are
discussed in the political sciences. Wolf analyzes the implications of the
new modes of governance on the actors involved. Compared to its predecessors such as treaty-based intergovernmentalism, global governance is a
patchwork of dierent modes of governance, consisting of actors from
dierent environments who are equipped with very dierent resources, and
who are used to quite dierent compliance mechanisms. Wolf discusses
some of these mechanisms which presume that actors follow the interestbased logic of consequences. He also points to alternative mechanisms that
are based on the assumption that political actors follow the logic of appropriateness. In order to achieve a better understanding of these new modes
of governance, the author explores the various conditions under which
these dierent modes will emerge. Finally, Wolf covers some of the normative problems of the privatization of world politics and points to the
regulatory potential as well as limits of the new governing relations.
Stephen Kobrin (Chapter 12) suggests that we are in the midst of a transition from an international to a post-Westphalian politicaleconomic
system. He holds that we have not yet developed the modes of cooperation,

12

Handbook of research on global corporate citizenship

institutions or even the language necessary to govern an integrated world

economy eectively. This leads to a governance gap as politics lags behind
markets which extend beyond the reach of nation-states. Kobrin focuses on
the implications of this asymmetry and the problems of economic governance. He suggests a framework to analyze the various new modes of governance along two dimensions: the fragmentation of authority and changes in
the nature of space (territoriality). The author considers the implications for
multinational business rms and suggests that in a globalized world, private
political authority becomes a widespread phenomenon. Conclusively, the
separation between public and private spheres as it was assumed in classical
liberal theories of political economy is called in question as business rms
are both governed and governor. This, however, leads to problems of legitimacy and democracy that need to be addressed in future research.
Jonathan Doh (Chapter 13) explores two primary mechanisms by which
NGOs inuence corporate citizenship. The rst might be termed NGO
activism when NGOs target private business rms or public authorities and
advocate for changes in corporate behavior and of laws regulating corporations by protesting, boycotting, targeting and otherwise communicating
their concern. More recently, some NGOs have taken a dierent strategy.
Rather than targeting companies through advocacy campaigns, these NGOs
have developed cooperative relationships with companies through which
they collaborate on the resolution of the negative consequences of corporate
behavior and assist companies in developing corporate citizenship initiatives.
Doh discusses the history and the emerging role of NGOs as important institutional actors in global businesssociety relationships and corporate citizenship. He provides some basic denitions and classications to position
NGOs among the other institutional actors in business citizenship. Doh
focuses the relationship between business rms and NGOs and explores both
the confrontational and collaborative modes of engagement. However, he
suggests that cooperative interactions appear to have the potential to substantially inuence corporate citizenship behaviors. The chapter concludes
with some questions and future research directions.
Michael Zrn (Chapter 14) explores the changing nature of the relationship between market and nation-state politics. He holds that under the condition of globalization and in the specic context of post-industrial society,
the hierarchically organized nation-state loses some of its political steering
power to successfully intervene in market processes. As a consequence, new
regulatory instruments have gained in signicance. These instruments
include incentive systems created by the state, privatepublic partnerships,
and corporate social responsibility. At the same time, a strong trend toward
international regulations can be observed. In the course of these developments hierarchical governance is gradually replaced by market-compatible

Introduction

13

governance frequently implemented by non-state actors. The outcome of

this process leads neither to a powerless state nor to de-politicization. The
state remains an integral and necessary component of almost all new
arrangements. In the course of this process, however, both international
institutions and the actions of large corporations are becoming increasingly politicized. Therefore, Zrn argues that governance with and without
government is subject to the same normative claims as governance by
government.
Jessica Ludescher, Abagail McWilliams and Donald Siegel (Chapter 15)
develop an economic view on corporate citizenship. They hold that there is
growing interest in the economic consequences of CSR and CC, especially
for executives at multinational, multidivisional companies. These corporate
leaders are mindful of the fact that business norms and standards, regulatory frameworks and stakeholder demand for social contributions can vary
substantially across nations, regions and lines of business. Globalization
raises concerns for managers of MNCs because diering, and sometimes
competing, ethical expectations result in unpredictable and non-uniform
payos for social contributions. There is also growing awareness that some
issues, such as water and air pollution, cannot eectively be addressed
within national borders, and therefore, expectations for responsible activities are broader. Obviously, there are numerous antecedents and consequences of CSR and CC, which require managers to conceptualize and
estimate the economic returns to engagement with stakeholders and civil
society. The authors discuss the variety of economic theories and their contribution to the explanation of corporate citizenship and corporate social
responsibility. These theories may help us to better understand the complex
drivers of social engagement of business rms. The chapter concludes with
an agenda for theoretical and empirical research on the economic implications of CC.
David Kinley and Justine Nolan (Chapter 16) explore the interrelationship of human rights with business from an international law perspective.
They discuss the central role played by corporations in the global economy
and report on the growing concern of legal scholars and the fundamental
changes in corporate accountability that are discussed in their discipline.
The authors examine three points of intersection between human rights
and business: transnational commerce, trade and investment, and development aid. In many countries in the past decades the inuence of transnational business rms on their economic and political environment has
grown signicantly. At the same time, international law has barely
responded to the growing imbalance of power. Neither nation-states nor
international institutions have yet created ecient rules and mechanism of
enforcement. This results in a regulatory gap in global governance with

14

Handbook of research on global corporate citizenship

corporate related human rights abuses as an issue of particular concern.

The authors describe the key theoretical, practical and institutional features of the intersection with international human rights standards and the
global economy. Kinley and Nolan stress the growing importance of corporations in international law and the attendant international legal responsibilities and expectations that are now made of corporations in the quest
to better protect and promote human rights.
Nancy Adler (Chapter 17) comments on the relationship between global
business and society from an international business studies perspective. She
maintains that businesss search for mutually benecial advances that
address the worlds most pressing needs has become one of the dening
issues of the 21st century. Adler reminds us about the various projects and
initiatives throughout the world, where immense entrepreneurial energy is
nding expression, energy whose converging force is in direct proportion to
the turbulence, crises and the call of our times. Doing well by doing good
has become a viable option and calls into question the false dichotomy
embedded in what she calls the great trade-o illusion that is the belief that
rms must sacrice outstanding nancial performance if they choose to
strategically address societal challenges. The author builds upon recent
research on positive organizational scholarship and the role of business
rms as possible social change agents. Adler develops the vision of creating a sustainable society and planet with a global perspective and the right
mix of innovative leadership and scholarship. This vision she maintains
could become the international business opportunity of the 21st century.
Peter Edward and Hugh Willmott (Chapter 18) focus on the identication
of notions of corporate citizenship as they relate to two issues: the meanings attributed to corporate citizenship and the importance of processes of
identication for the realization of corporate citizenship. The rationale for
this approach is that any concern, or claim, to bring corporate citizenship
into the corporation requires some explication of the meaning(s) of the term
which ranges from forms of corporate philanthropy and paternalism to radically democratic forms of collective self-determination within organizations. The authors consider whether these meanings resonate with identities
of individuals within organizations and hence whether they gain or lose
grip. For corporate citizenship to become established in corporations,
these meanings must gain broad acceptance by employees. Edward and
Willmott suggest that corporate citizenship is not equivalent to the adoption of specic policies, formal procedures and/or reportable metrics but,
rather, is present within or absent from routine, skillful processes of reproducing and transforming organizing practice.
Much work on corporate citizenship is dedicated to organizational structures within and outside the corporation, while the role of individuals and

Introduction

15

leaders is widely neglected. Therefore, Thomas Maak and Nicola Pless

(Chapter 19) want to develop an understanding of the role of responsible
leaders as cosmopolitan citizens in a globalized business environment.
They argue that being responsible, that is, responding to the call of stakeholders (and the market), is a necessary but not a sucient condition for
responsible leadership. This endeavor ultimately requires responsible
global leaders who think and act as cosmopolitan citizens, as leaders with
responsible mindsets who are aware of the pressing problems in the world,
care for the needs of others and in particular for the distant needy, aspire
to make this world a better place and act in words and deeds as global and
responsible citizens. The authors contend that responsible leadership in a
globalized world requires business leaders who have a cosmopolitan
mindset, live and enact cosmopolitan ethics and fulll their cosmopolitan
role. Maak and Pless explore the concept of cosmopolitan leadership and
conclude with practical implications of a cosmopolitan approach to
responsible leadership for both business practice and future research.
Bobby Banerjee (Chapter 20) oers a critical analysis of the political
economy of the multinational enterprise (MNE). Drawing from theoretical perspectives in economic sociology and political economics, he discusses how power relationships between governments and MNEs
discursively produce particular forms of social arrangements of various
actors, institutions and networks. Banerjee examines the inclusions and
exclusions that result from these dynamics. He argues that power relations
between the political, economic and social spheres produce a particular
form of corporate rationality that determine the boundary conditions of
CSR. Based on institutional political economic theories, the author develops a political cultural approach to conceive of the corporation as a discursive formation that is embedded within an environment of institutional,
economic and discursive power.
The development of internationalized companies poses new problems
for both their internal corporate governance and their external regulation.
Grahame Thompson (Chapter 21) analyzes the relationship between internal governance and stakeholding. The argument is that companies are legal
subjects in their own right, ones that, in fact, own themselves. Once this is
recognized, other than a simple shareholder interest in respect to the governance becomes apparent. The pressures put upon companies through the
CSR movement lead to the expansion of stakeholder interests within
company governance structures and call for a new view on corporate governance. However, there are many problems associated with stakeholding,
particularly as companies have internationalized. Thompson then moves
on to discuss the external governance context in which companies are
placed as they have become multinational. MNCs are subject to various

16

Handbook of research on global corporate citizenship

forms of scrutiny, monitoring and regulation at the international level, all

designed in one way or another to encourage a sense of social responsibility by business rms. And many rms themselves have responded to these
developments by claiming to be global corporate citizens. In this chapter
the characteristics of the global governance regime for companies are
explored and their impact assessed. Finally, Thompson deals with the
dicult issue of the democratization of the internationalized rm and
explores how to extend the scope of corporate governance to encourage the
objective of greater democratic transparency and accountability.
In their critical analysis, Frits Schipper and David Boj (Chapter 22) do
not address corporate citizenship and corporate social responsibility per se;
rather, they consider the notions of transparency, integrity and openness
which they think are relevant to achieve some kind of meta understanding about the role of business in society. They hold that the relationships
between these terms are far from clear. For instance, transparency can function as an instrument of power, seriously damaging integrity. Demanding,
for example, transparency of incomes of CEOs can have an increasing
eect, thereby putting the integrity of these people and of the companies
they work for in jeopardy. Schipper and Boj want to develop a general
understanding of these relationships and dynamics. The authors build
upon concepts from the French philosopher Gilles Deleuze and the psychiatrist Pierre-Flix Guattari who worked together in Paris in the 1970s.
Schipper and Boj relate these concepts to entrepreneurship and images in
the case of branding and company identity. Against the background of
these terminological conceptualizations, the case of Nike, a major US
company that labeled its own governance in terms of transparency (see its
Transparency 101 program), is analyzed.
Raza Mir, Richard Marens and Ali Mir (Chapter 23) explore the ways in
which organizational theory has been deployed to naturalize the process of
colonialism and imperialism. The authors focus on the concept of corporate citizenship, which they think is nebulous and ill-articulated, even
though it has intrigued corporations as well as researchers over the past two
decades as a possible tool to legitimize corporate presence in an increasingly de-territorialized economic space. They hold that any hegemonic
denition of corporate citizenship is predicated upon an antecedent
homogenization of the concept of the corporation itself. Such an interlocked set of denitions of rm and rm behavior leaves out a variety of
actors in the shadows of theoretical debates on corporate behavior. Mir
et al. term these actors the fragments of the corporation and seek to
provide a voice to those fragments whose concerns are left unaddressed.
The authors analyze the theoretical debates around CSR in the United
States and identify the ideological context around which the concept of

Introduction

17

corporate citizenship has emerged. Finally, they highlight ways in which the
marginalized actors in this debate around corporate citizenship can make
their presence felt in the political as well as in the theoretical realm.
Helmut Willke and Gerhard Willke (Chapter 24) advance a rigorous critique of CC and CSR and emphasize the relations between economy and
politics. They hold that the debate on corporate citizenship features a new
type of imbrication between the two spheres by trying to transplant ethical
and political obligations (responsibilities) into the mentalities of economic
actors. The authors focus on the separation of nation-state politics and
private economy as it has developed during the process of modernization.
Willke and Willke suggest that in the discourse on corporate citizenship there
is a fundamental misunderstanding of this process and the architecture of
modern democratic societies. They argue that the CSR/CC approach is fundamentally mistaken about the role of enterprise in modern market societies.
Their argument is based on the distinction between the goals of individual
actors and the systemic outcomes of their actions. Finally, the authors oer
some insights into a system-theoretical approach to global governance and
what they claim is a more complex coupling of economy and politics. This
leads to a model of governance that is related to the knowledge society.
In the concluding chapter, Guido Palazzo and Andreas George Scherer
point to future research directions on corporate citizenship. They outline
topics that emerge from the discussions in the handbook and address the
open questions that are still to be solved. For example, the meaning and the
limits of responsibility for the corporation, the questions evolving around
a new concept of corporate politics, or the self-regulation of the corporation as seen in the debate on governance without government. Further, the
future debate on corporate citizenship needs to address the role of leadership in this context, as well as the question of the dark sides of responsibility. In this chapter, the authors summarize new challenges and point to
interesting directions for future research.
Notes
1. See also the volume edited by Goldstein et al. (2001) which enhances dialogue between
political scientists and legal scholars but does not consider the political role of business
rms.
2. The chapters of this volume are original contributions with two exceptions the papers
by Sandra Waddock and by Iris Young are modications of texts that have been published
elsewhere.

References
Andriof, J. and M. McIntosh (eds) (2001), Perspectives on Corporate Citizenship, Sheeld:
Greenleaf.
Baumol, W.J. with S.A.B. Blackman (1991), Perfect Markets and Easy Virtue: Business Ethics
and the Invisible Hand, Oxford, UK and Cambridge, MA: Blackwell.

18

Handbook of research on global corporate citizenship

Beck, U. (2000), What is Globalization?, Cambridge: Polity.

Bies, R.J., J.M. Bartunek, T.L. Fort and M.N. Zald (2007), Corporations as social change
agents: individual, interpersonal, institutional, and environmental dynamics, Academy of
Management Review, 32, 78893.
Braithwaite, J. and P. Drahos (2000), Global Business Regulation, Cambridge: Cambridge
University Press.
Carroll, A.B. (1991), The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders, Business Horizons, 34 (4), 3948.
Carroll, A.B. (1998), The four faces of corporate citizenship, Business and Society Review,
100, 17.
Chandler, A.D. and B. Mazlish (eds) (2005), Leviathans: Multinational Corporations and the
New Global History, Cambridge: Cambridge University Press.
Clapham, A. (2006), Human Rights Obligations of Non-state Actors, Oxford: Oxford University
Press.
Cohen, R. and P. Kennedy (2000), Global Sociology, London: Macmillan.
Cragg, W. (ed.) (2005), Ethics Codes, Corporations and the Challenge of Globalization,
Cheltenham, UK and Northampton, MA, USA: Edward Elgar.
Davis, G.F., D. McAdam, W.R. Scott and M.N. Zald (eds) (2005), Social Movements and
Organization Theory, Cambridge: Cambridge University Press.
den Hond, F. and F.G.A. de Bakker (2007), Ideologically motivated activism: how activist
groups inuence corporate social change activities, Academy of Management Review, 32,
90124.
Dryzek, J.S. (1999), Transnational democracy, Journal of Political Philosophy, 7 (1),
3051.
Dubbink, W. (2004), The fragile structure of free-market society, Business Ethics Quarterly,
14, 2346.
Fort, T.L. and C.A. Schipani (2004), The Role of Business in Fostering Peaceful Societies,
Cambridge: Cambridge University Press.
Frederick, W.C. (1998), Business and society, in G.L. Cooper and C. Argyris (eds), The
Concise Blackwell Encyclopaedia of Management, Oxford: Blackwell, pp. 546.
Freeman, R.E. and J. McVea (2001), A stakeholder approach to strategic management, in
M.A. Hitt, R.E. Freeman and J.S. Harrison (eds), The Blackwell Handbook of Strategic
Management, Oxford: Blackwell, pp. 189207.
Friedman, M. (1962), Capitalism and Freedom, Chicago, IL: University of Chicago Press.
Friedman, M. (1970), The social responsibility of business is to increase its prot, The New
York Times Magazine, 13 September, reprinted in T. Donaldson and P.H. Werhane (eds)
(1988), Ethical Issues in Business: A Philosophical Approach, Englewood Clis, NJ: PrenticeHall, pp. 21723.
Frynas, J.G. (2005), The false developmental promise of corporate social responsibility: evidence from multinational oil companies, International Aairs, 81, 58198.
Fung, A. (2003), Deliberative democracy and international labor standards, Governance, 16,
5171.
Goldstein, J., M. Kahler, R.O. Keohane and A.-M. Slaughter (eds) (2001), Legalization and
World Politics, Cambridge, MA: MIT Press.
Grimsey, D. and M.K. Lewis (2004), Public Private Partnerships: The Worldwide Revolution in
Infrastructure Provision and Project Finance, Cheltenham, UK and Northampton, MA,
USA: Edward Elgar.
Habermas, J. (1996), Between Facts and Norms: Contributions to a Discourse Theory of Law
and Democracy, Cambridge, MA: MIT Press.
Habermas, J. (1998), Three normative models of democracy, in J. Habermas, The Inclusion
of the Other: Studies in Political Theory, Cambridge, MA: MIT Press, pp. 23952.
Habermas, J. (2001), The Postnational Constellation, Cambridge, MA: MIT Press.
Habermas, J. (2006), The Divided West, Cambridge, MA: MIT Press.
Habisch, A., H.-P. Meister and R. Schmidpeter (eds) (2001), Corporate Citizenship as Investing
in Social Capital, Berlin: Logos.
Held, D. (2004), Global Governance and Public Accountability, Oxford: Blackwell.

Introduction

19

Henderson, P.D. (2001), Misguided Virtue: False Notions of Corporate Social Responsibility,
London: Institute of Economic Aairs.
Henderson, P.D. (2004), The Role of Business in the Modern World: Progress, Pressures and
Prospects for the Market Economy, London: Institute of Economic Aairs.
Husted, B.W. and J. de J. Salazar (2006), Taking Friedman seriously: maximizing prots and
social performance, Journal of Management Studies, 43, 7591.
Jensen, M.C. (2002), Value maximization, stakeholder theory, and the corporate objective
function, Business Ethics Quarterly, 12, 23556.
Kaul, I., P. Conceio, K. Le Goulven and R.U. Mendoza (eds) (2003), Providing Global
Public Goods, Oxford: Oxford University Press.
Kenis, P. and V. Schneider (1991), Policy networks and policy analysis: scrutinizing a new analytical toolbox, in B. Marin and R. Mayntz (eds), Policy Networks: Empirical Evidence and
Theoretical Considerations, Frankfurt/M.: Campus, pp. 2559.
Kingsbury, B. (2003), The international legal order, in P. Cane and M. Tushnet (eds), The
Oxford Handbook of Legal Studies, Oxford: Oxford University Press, pp. 27197.
Kinley, D. and R. Chambers (2006), The UN human rights norms for corporations: the
private implications of public international law, Human Rights Law Review, 6, 44797.
Kinley, D. and J. Tadaki (2004), From talk to walk: the emergence of human rights responsibilities for corporations at international law, Virginia Journal of International Law, 44,
9311022.
Kobrin, S.J. (2001), Sovereignty@Bay: globalization, multinational enterprise, and the international political system, in A.M. Rugman and T.L. Brewer (eds), The Oxford Handbook
of International Business, Oxford and New York: Oxford University Press, pp. 181205.
Korten, D.C. (2001), When Corporations Rule the World, San Francisco, CA: Berret-Koehler.
Levy, D.L. (2008), Political contestation in global production networks, Academy of
Management Review, 33, forthcoming.
Logsdon, J.M. and D.J. Wood (2005), Global business citizenship and voluntary codes of
ethical conduct, Journal of Business Ethics, 59, 5567.
Mackey, A., T.B. Mackey and J.B. Barney (2007), Corporate social responsibility and rm
performance: investor relations and corporate strategies, Academy of Management Review,
32, 81735.
Maignan, I. and O.C. Ferrell (2001), Corporate citizenship as a marketing instrument: concepts, evidence and research directions, European Journal of Marketing, 35, 45784.
Margolis, J.D. and J.P. Walsh (2003), Misery loves companies: rethinking social initiatives by
business, Administrative Science Quarterly, 48, 268305.
Marshall, T.H. (1965), Class, Citizenship and Social Development, New York: Anchor Books.
Matten, D. and A. Crane (2005), Corporate citizenship: towards an extended theoretical conceptualization, Academy of Management Review, 30, 16679.
Matten, D., A. Crane and W. Chapple (2003), Behind the mask: revealing the true face of corporate citizenship, Journal of Business Ethics, 45, 10920.
McWilliams, A. and D. Siegel (2001), Corporate social responsibility: a theory of the rm
perspective, Academy of Management Review, 26, 11727.
McWilliams, A., D. Siegel and P.M. Wright (2006), Corporate social responsibility: strategic
implications, Journal of Management Studies, 43, 118.
Mokhiber, R. and R. Weissman (1999), Corporate Predators: The Hunt for Mega-prots and
the Attack on Democracy, Monroe: Common Courage Press.
Moon, J., A. Crane and D. Matten (2005), Can corporations be citizens? Corporate citizenship
as a metaphor for business participation in society, Business Ethics Quarterly, 15, 42954.
Mrth, U. (ed.) (2004), Soft Law in Governance and Regulation: An Interdisciplinary Analysis,
Cheltenham, UK and Northampton, MA, USA: Edward Elgar.
Norman, W. and P.-Y. Nron (2008), Citizenship, Inc.: do we really want businesses to be
good corporate citizens?, Business Ethics Quarterly, 18 (1), forthcoming.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66, 7188.
Parker, C. and J. Braithwaite (2003), Regulation, in P. Cane and M. Tushnet (eds), The Oxford
Handbook of Legal Studies, Oxford: Oxford University Press, pp. 11945.

20

Handbook of research on global corporate citizenship

Reinicke, W.H. and F. Deng, with J.M. Witte, T. Benner, B. Whitaker and J. Gershman (2000),
Critical Choices: The United Nations, Networks, and the Future of Global Governance,
Ottawa: International Development Research Centre.
Risse, T. (2002), Transnational actors and world politics, in W. von Carlsnaes, T. Risse and
B. Simmons (eds), Handbook of International Relations, London: Sage, pp. 25574.
Rosen, S., J. Simon, J.R. Vincent, W. MacLeod, M. Fox and D.M. Thea (2003), AIDS is your
business, Harvard Business Review, 81 (2), 8087.
Rowley, T. and M.C. Moldoveanu (2003), When will stakeholders act? An interest and
identity-based model of stakeholder mobilization, Academy of Management Review, 28,
20419.
Ruggie, J.G. (2004), Reconstructing the global public domain: issues, actors, and practices,
European Journal of International Relations, 10, 499531.
Scherer, A.G. and G. Palazzo (2007), Toward a political conception of corporate responsibility: business and society seen from a Habermasian perspective, Academy of Management
Review, 32, 1096120.
Scherer, A.G. and G. Palazzo (2008), Globalization and corporate social responsibility, in
A. Crane, A. McWilliams, D. Matten, J. Moon and D. Siegel (eds), The Oxford Handbook
of Corporate Social Responsibility, Oxford: Oxford University Press, pp. 41331.
Scherer, A.G., G. Palazzo and D. Baumann (2006), Global rules and private actors: towards
a new role of the TNC in global governance, Business Ethics Quarterly, 16, 50532.
Scherer, A.G. and M. Smid (2000), The downward spiral and the U.S. model principles: why
MNEs should take responsibility for the improvement of world-wide social and environmental conditions, Management International Review, 40, 35171.
Schuler, D.A. and K. Rehbein (1995), Pursuing strategic advantage through political means:
a multivariate approach, Academy of Management Journal, 45, 65972.
Schwartz, M.S. and A.B. Carroll (2003), Corporate social responsibility: a three-domain
approach, Business Ethics Quarterly, 13, 50330.
Shell, G.R. (2004), Make the Rules or Your Rivals Will, New York: Crown Business.
Shelton, D. (ed.) (2000), Commitment and Compliance: The Role of Non-binding Norms in the
International Legal System, Cambridge: Cambridge University Press.
Siedel, G.J. (2002), Using the Law for Competitive Advantage, San Francisco, CA: Jossey-Bass.
Sundaram, A.K. and A.C. Inkpen (2004), The corporate objective revisited, Organization
Science, 15, 35063.
Taylor, K.M. (2004), Thicker than blood: holding ExxonMobil liable for human rights violations committed abroad, Syracuse Journal of International Law and Commerce, 31 (2),
27497.
Teegen, H., J.P. Doh and S. Vachani (2004), The importance of nongovernmental organizations (NGOs) in global governance and value creation: an international business research,
Journal of International Business Studies, 35, 46383.
Vagts, D.F. (2003), The UN norms for transnational corporations, Leiden Journal of
International Law, 16, 795802.
von Oosterhout, J. (2005), Corporate citizenship: an idea whose time has not yet come,
Academy of Management Review, 30, 67784.
Weissbrodt, D. and M. Kruger (2003), Norms on the responsibilities of transnational corporations and other business enterprises with regard to human rights, American Journal of
International Law, 97, 90122.
Whetten, D.A., G. Rands and P.O. Godfrey (2002), What are the responsibilities of business
to society?, in A. Pettigrew, H. Thomas and R. Whittington (eds), Handbook of Strategy
and Management, London: Sage, pp. 373408.
Williams, O.F. (2004), The UN Global Compact: the challenge and the promise, Business
Ethics Quarterly, 14, 75574.
Wolf, K.D. (2005), Private actors and the legitimacy of governance beyond the state: conceptional outlines and empirical explorations, in A. Benz and I. Papadopoulos (eds),
Governance and Democratic Legitimacy, London: Routledge, pp. 200227.
Wood, D.J. and J.M. Logsdon (2001), Theorizing business citizenship, in J. Andriof and
M. McIntosh (eds), Perspectives on Corporate Citizenship, Sheeld: Greenleaf, pp. 83103.

Introduction

21

Wood, D.J. and J.M. Logsdon (2008), Business citizenship as metaphor and reality, Business
Ethics Quarterly, 18, forthcoming.
Young, I.M. (2004), Responsibility and global labor justice, Journal of Political Philosophy,
12, 36588.
Zrn, M. (2002), From interdependence to globalization, in W. von Carlsnaes, T. Risse and
B. Simmons (eds), Handbook of International Relations, London: Sage, pp. 23554.

PART I
HISTORY AND
CONCEPTUAL
GROUNDWORK

The emergence of corporate citizenship:

historical development and alternative
perspectives1
Andrew Crane, Dirk Matten and Jeremy Moon

Introduction
In this chapter we provide an overview of the advent, rise, current use and
future perspectives of corporate citizenship in the management literature.
The purpose of our chapter is to map out the territory of research on corporate citizenship and outline the major contestations, debates and the
potential of using citizenship as a metaphor for businesssociety relationships. After providing a brief overview about how corporate citizenship
entered the agenda in business and academia, we shall analyze and critically
categorize the extant use of the terminology. Based on this literature survey
we shall then proceed to focus on the potential for using the citizenship
metaphor to provide a more expansive analysis of the political role of the
corporation. This will pave the way to mapping out three fundamental
approaches to apply citizenship to corporations. We argue, however, that
such an application has to be cognizant of the facts that citizenship in itself
is a dynamic concept and, moreover, that corporations play quite a substantial role in transforming contemporary notions of citizenship. We conclude our foray into corporate citizenship with a discussion of these themes
and a review of future perspectives.
Corporate citizenship a new terminology in businesssociety relationships
Corporate citizenship (CC) has emerged as a prominent term in the management literature dealing with the social role of business. While the terminology of CC has been around for many years and was occasionally used
here and there prior to the 1980s (for example, Gossett 1957) we can witness
a massive growth in usage of CC mainly during the last two decades. This
occurred, rst of all, in the realm of management practice; having gained
momentum in US business circles in the 1980s (Altman and Vidaver-Cohen
2000), it has since begun to enter the language of the global business community. A landmark in this process has been the joint statement on Global
Corporate Citizenship The Leadership Challenge for CEOs and Boards,
signed during the World Economic Forum in New York in January 2002 by
CEOs from 34 of the worlds largest multinational corporations (MNCs),
25

26

Handbook of research on global corporate citizenship

including the Coca-Cola Company, Deutsche Bank, Diageo, Merck & Co.,
McDonalds Corporation, Philips and UBS (World Economic Forum
2002). Moreover, as a further indicator of the proliferation of citizenship
language in business, we would highlight the fact that in 2006, major global
companies such as Citigroup, Diageo, ExxonMobil, Hewlett-Packard,
Microsoft, Panasonic, Pzer or Xerox all labeled their annual non-nancial
reporting document as a citizenship report, a gobal citizenship report or
similar versions of the terminology.
However, the proliferation of the term is not conned to the corporate
sphere. There has been an escalating body of academic work specically
dedicated to CC issues (see Andriof and McIntosh 2001b for an
overview); there is now a dedicated Journal of Corporate Citizenship; and
a number of research centers framed explicitly around CC have emerged,
including those at Boston College in the US, Warwick University in
the UK, Deakin University in Australia and Eichsttt University in
Germany. Likewise, many consultants and business publications have
adopted the terminology of CC in reference to the rms social and environmental policies (Miller 1998; Wagner 2001; Roberts et al. 2002). This
cozy consensus around CC (Norman and Nron 2008) is also manifest
in a growing number of government units, consultancies and think-tanks
specically dedicated to CC, such as the US Chamber of Commerce
Center for Corporate Citizenship, the African Institute for Corporate
Citizenship, the Copenhagen Center and the London-based Corporate
Citizenship Company. In a similar vein, the inuential US magazine
Corporate Responsibility Ocer2 previously titled Business Ethics conspicuously labels its annual ranking of the 100 most socially responsible
companies as the list of the 100 Best Corporate Citizens in many ways
symbolizing a trend in current usage of terminology in the business
society eld.
Table 2.1 provides a avor of the usage of CC terminology by corporations. First, it is interesting to note that citizenship is often referred to by
a number of attributes, of which good corporate citizenship or global citizenship are by far the most popular ones. Furthermore, the overwhelming
gist of these statements focuses on the embedding of the corporation into
its direct local community and evokes notions of being a good neighbor
(BHP Billiton) with mutually benecial relations between companies and
their stakeholders (Microsoft). This includes compliance with local laws
(Toyota) and contributions to the ourishing of local communities, most
notably in developing countries (Manulife). Citizenship seems to be a
desired metaphor in the corporate world to counter notions of impersonal,
bureaucratic and inhumane power-players and replace those by the image
of the good guy next door who cares for you and looks after the interests

27

Industry and
country of
origin

Mining,
Australia

Insurance
and Financial
Services,
Canada

Software,
USA

Oil and Gas,

France

Automobiles,
Japan

BHP Billiton

Manulife

Microsoft

Total

Toyota

Toyotas aim is to become a trusted corporate citizen in international

society through open and fair business activities that honor the language
and spirit of the law of every nation

As a responsible corporate citizen with specialized expertise and an

obligation to explain the realities and constraints of our businesses, Total
has a stake in certain public debates being conducted in France, Europe
and worldwide

Microsofts ongoing work in the area of global citizenship is focused on

mobilizing our resources across the company to create opportunities in
communities around the world, to foster economic growth, and to serve
the public good through innovative technologies and partnerships with
government, industry, and community organizations

To Manulife, being a good corporate citizen is part of our corporate

culture. We are proud to participate in various education initiatives and
hope to help Vietnamese children have a better life and a brighter future

As stated in the BHP Billiton Charter, one of the indicators of success is

that the communities in which we operate value our citizenship.
Sustainable community development ensures communities benefit
throughout all phases of the life of an operation through development,
operation and closure

CC statement

Examples of corporate usage of CC terminology (emphasis added)

Company

Table 2.1

Sustainability Report
2006

Corporate Social
Responsibility
Report 2005

Citizenship Report
2005

2006 Public
Accountability
Statement

Sustainability Report
2006

Source

28

Handbook of research on global corporate citizenship

of those with whom, as it were, it rubs shoulders. CC can be said to highlight the fact that the corporation sees or recaptures its rightful place
in society, next to other citizens, with whom the corporation forms a community. Citizenship then focuses on rights and responsibilities of all
members of the community, which are mutually interlinked and dependent
upon each other (Waddell 2000).
In some cases, however, as the example of Total shows, citizenship is also
used to describe the corporate role in key debates in society and in
inuencing public decision making on contested political issues, such as in
this case, global warming. These political references, however, are relatively
scarce and the key orientation seems to be the local community. Toyota, for
instance, prides itself on an 80-employee Corporate Citizenship Division
whose primary focus is to coordinate corporate contributions to local communities in the worldwide operations of the company (Toyota 2007, p. 66).
It is evident, however, that in the management literature the usage of the
term CC has been far from consistent, and, we might suggest, not at all clear.
Indeed, we would suggest that there has yet to be a clear, specic and widely
accepted denition of CC. In the following subsections, we shall therefore
examine current usage of the term, and in so doing, delineate three dierent
perspectives on CC evident in the extant management literature.
Limited view of corporate citizenship3
Initially, CC was, and in many respects still is, used to identify the philanthropic role and responsibilities the rm voluntarily undertakes in the local
community, such as charitable donations. Carroll (1991), for example,
identies being a good corporate citizen with a specic element of corporate social responsibility (CSR), philanthropic responsibilities, his fourth
level of CSR. Accordingly, Carroll (1991) places CC at the top level of his
CSR pyramid, suggesting that it is a discretionary activity beyond that
which is expected of business. CC in this respect is regarded as a choice to
put something back into the community, but since it is merely desired by
the community it is, according to Carroll (1991, p. 42), less important than
the other three categories.
This limited view tends to present the specically new contribution of
CC to the debate on corporate philanthropy as its strategic focus. As
opposed to corporations engaging in charity simply for the sake of it, CC
presents a case for strategic philanthropy. For the rm, CC is generally
seen therefore as fueled by issues of self-interest including the insight that
a stable social, environmental and political environment ensures protable
business (Windsor 2001; Wood and Logsdon 2001). This understanding is
reected in most of the corporate examples given in Table 2.1, which is
typical for the limited view of CC in so far as it focuses mainly on the direct

The emergence of corporate citizenship

29

physical environment of the company, resulting in a strong focus on local

communities (Altman 1998). Following from this self-interested approach
is a considerable amount of literature which discusses CC as manifest in
specic investment decisions into the rms social environment (Warhurst
2001). Following the language of corporate nance, CC is rationalized in
terms of social investing (Waddock 2001) in order to build up social
capital (Habisch et al. 2001) or reputational capital (Fombrun et al. 2000;
Gardberg and Fombrun 2006), all of which ultimately help to improve the
economic performance of the corporation. This approach ultimately sees
the new contribution of CC to the debate on businesssociety relations in
its economic character as an approach to long-term maximization of
(enlightened) self-interest through corporate investment in the processes
and rules of the corporations social environment (Seitz 2002).
This usage of CC terminology, however, raises the question whether this
limited view of CC really justies the invention and usage of a new terminology. The element of self-interest in corporate philanthropy, the investment aspect of social engagement and the focus on local communities are
elements that are not completely new, and have already been discussed in
the literature on CSR, social performance or stakeholder theory (Stroup
and Neubert 1987; Burke and Logsdon 1996). Moreover, there seems to be
no common understanding about the precise denition of CC, and
qualications such as good CC further underline the elusive nature of this
view. Furthermore, there is only very poor reference to the fact that this new
concept of business and society makes use of the term citizenship, beyond
occasional reference to shared rights and duties with other members of
society. However, the limited view of CC has yet to explicitly explain, let
alone conceptualize the notion of citizenship in this respect. Although
there might be good reasons from the business viewpoint to reframe social
involvement as CC, the literature pertaining to this limited view does not
provide convincing evidence for the necessity of a new terminology. The
limited view preserves an economic orientation whereas citizenship is an
explicitly political concept.
Equivalent view of corporate citizenship
The second common understanding of CC is more general in scope and is
essentially a conation of CC with existing conceptions of CSR (or sometimes stakeholder management), without attempting to dene any new role
for the corporation. The most striking example of this use of CC is probably Carroll himself who, in a paper entitled The four faces of corporate citizenship (1998) denes CC exactly the same way as he initially dened CSR
two decades ago. This approach has been taken up by several authors,
although in some cases by using slightly dierent phrasing. So, for instance,

30

Handbook of research on global corporate citizenship

Andriof and McIntosh (2001a) talk of CC as corporate societal responsibility but use it synonymously with CSR. Similarly, in a number of papers,
Maignan and colleagues (Maignan et al. 1999; Maignan and Ferrell 2000)
dene CC as the extent to which businesses meet the economic, legal,
ethical and discretionary responsibilities imposed on them by their stakeholders (Maignan and Ferrell 2000, p. 284). This is largely synonymous
with the Carroll (1991) denition of CSR. Much of the CC literature currently uses the concept in this sense, stressing various aspects of CSR, such
as sustainability (Marsden 2000), the stewardship role of business (Reilly
and Kyj 1994) or drawing conceptual lines toward the stakeholder
approach (Davenport 2000).
One of the problems in conceptualizing CC in this way is that many
authors present a certain view of the debate in business and society relations so far and then attribute certain new issues and developments to the
new label of CC. Thus, CC just functions as a new way of presenting existing concepts, but applied to a wider range, or perhaps a dierent set, of
issues. Again, there tends to be little, if any, serious reection on the notion
of citizenship and its potential for surfacing new meaning. So, for
instance, Birch (2001) regards CC as an innovation to the CSR concept in
that CC causes business to see itself as part of the public culture, whereas
CSR is according to his perception more concerned with social responsibility as an external aair (Logan et al. 1997; McIntosh et al. 2003). CC,
from the perspective of these authors, is an extension to a very selectively
dened view of CSR, as exemplied in particular by Sundar (2000) from
an Indian perspective. Here, the CC label is simply used to rebrand and
relaunch existing ideas about businesssociety relations, probably to make
them more accessible and attractive to business audiences.
While this marketing of academic ideas is, in many respects, an important task, it is also in danger of raising skepticism about CC, CSR and so
on, on account of them being perceived as no more than ephemeral management fads and fashions. Furthermore, although in our interpretation,
the authors referring to CC in this way appear to be conating CC with
CSR, this body of literature is notably lacking a clear, direct and unambiguous denition of CC. Again, the terminology of CC is also taken up
without referring explicitly to the political notion of citizenship and
explaining the reasons for its usage in this context.
Extended view of corporate citizenship
A third view has also begun to emerge in the academic literature in recent
years, one that we initially referred to as an extended view of CC (Matten
et al. 2003) to indicate how it also extended to responsibilities beyond those
of philanthropy and CSR. The extended view, we suggest, takes seriously

The emergence of corporate citizenship

31

the idea that citizenship can provide a political conceptualization of the

corporation.
Among the rst contributors to have deliberately addressed the notion
of citizenship as a political concept within the CC literature are Donna
Wood and Jeanne Logsdon (Wood and Logsdon 2001; Logsdon and Wood
2002). Wood and Logsdon have developed a framework for understanding
in particular the implications of globalization on the social and political
role of the rm and have used their conceptualization to delineate implications for business practice (Wood et al. 2006).
In some of our own work, we have also utilized citizenship thinking to
specify forms of corporate participation in societal governance (Moon
et al. 2005), and corporate responsibilities for administering the citizenship
rights of individuals (Matten and Crane 2005). On the whole, though, the
eorts of understanding CC as based on a political notion of the rm are
relatively sparse (Jeurissen 2004) while the debate on whether and how citizenship can be applied to corporations is still ongoing and highly contested (Norman and Nron 2008).
In this chapter, we shall therefore take the extended view of CC as a platform for elaborating on a more expansive examination of how corporations
and citizenship can come together. In our view, the term corporate citizenship oers a unique way into exploring the corporation as a political
actor, but at the same time it does not do justice to the rich potential there
is in applying citizenship thinking to the corporation. For us, then, CC is
just one among several ways in which corporations can be analyzed as
political actors using the lens of citizenship.
Before we go ahead and detail these dierent ways, however, it is helpful
to explain why we believe that citizenship is indeed a powerful heuristic for
analyzing certain aspects of the political role of the corporation and, in
fact, what is it is we mean by citizenship in the rst place.
Corporations and citizenship
Traditionally, political debates about corporations have tended to focus on
their role in the inner circle of power elites (Useem 1984) and on their
involvement in pressure group activity through business associations, lobbying and political donations (Grant 1987; Lord 2000). Surprisingly,
perhaps, the corporation has more recently become much more central in
social and political analysis. This is evident among social critics, who point
to corporations responsibility for social and political ills concerning the
pathologies of mass consumption, disparities in economic and social development, and environmental degradation. But it is also true of those who
look to corporations as part of the solution to these same problems. For
sections of the left, while in the 1960s and 1970s the culprits were capitalism

32

Handbook of research on global corporate citizenship

and/or government, today they are more likely to be corporations. As such,

corporations also now feature in the non-business sections of mainstream
newspapers, and in popular books and lms about social and environmental problems, such as Blood Diamond, The Constant Gardener, Fast Food
Nation and Super Size Me.
This rise in prominence within social and political debates is in part a
function of the employment, production, investment and wealth that corporations account for, and in part a reection of their sheer size and domination of certain markets. However, although there are some features of
contemporary business that are certainly distinctive, the history of corporations has always been characterized by shifting balances between the
desire to bestow them the freedom necessary to achieve large-scale economic tasks eciently on the one hand and the fear of their power and the
concomitant need for protection of the public interest on the other. Thus
there has been talk about the proper roles and responsibilities of corporations for at least three hundred years. Why then would one choose to
enframe an analysis of the changing political role of the corporation by
means of the concept of citizenship? We believe that it is a useful conceptual lens for several particular reasons.
First, the very fact that corporations, consultants, academics and others
use the term corporate citizenship as one of several synonyms for the
social or community initiatives of business warrants taking seriously. We
acknowledge that the prospect of corporations claiming, or being assigned,
a political or legal status analogous to individual citizens is, quite rightly, a
cause of concern for some (for example, Palacios 2004; van Oosterhout
2005; Thompson 2006; Jones and Haigh 2007). However, in this way, we
can, at the very least, evaluate corporations in part on their own terms by
examining them through the lens of citizenship.
Second, citizenship is a concept which is expressly concerned with roles
and responsibilities. More specically, citizenship is an organizing principle
for aligning roles and responsibilities among members of political communities (that is, on a horizontal dimension), and between them and other
institutions wielding power and responsibility (that is, on a vertical dimension). This is important because current debates about the roles and responsibilities of corporations are specically animated by concerns about who
the corporation should be responsible to, why, and in which ways that
responsibility should be discharged. Citizenship oers us a way of working
through these relational issues using a set of ideas and frameworks that
have been well established in theory and practice for many years.
Third, and more broadly, the concept of citizenship is at the heart of
wider debates about societal governance of which corporations form a key
part. Thus, critiques of corporate power, for example, are often under-

The emergence of corporate citizenship

33

pinned by a view that citizenship autonomy and choice are being directly
structured by corporations and their agendas. Alternatively, there is the
view that human citizenship is being reshaped because the key institutional
representatives of citizens, democratic governments, are being superseded
by corporate power (Ikeda 2004). Yet more broadly, there is concern that
the contemporary forces of globalization and the weakening of national
governments are also inimical to eective citizenship (Schneiderman 2004;
Isin and Turner 2007). Although this last point does not necessarily directly
relate to corporations, by virtue of their role as agents of globalization they
are implicated in broader political debates about citizenship.
Fourth, the uniting of corporations with citizenship should not be seen
only as a one-way street where citizenship is simply used to help us understand certain facets of the corporation. Rather, the corporation can also be
used to examine the theory and practice of citizenship. At a time when our
ideas of citizenship are in ux and where scholars of political science and
sociology have become increasingly interested in the role of markets, multinationals and other economic factors in the transformation of citizenship
(Kymlicka and Norman 1994; Isin and Turner 2002a; Isin and Turner
2007), the time is ripe for a focused examination of the nature and impacts
of corporate actors on citizenship. Of course, to even begin this endeavor,
we need to identify at least some starting-points for what we mean by citizenship in this context, as we now discuss.
What is citizenship?
Ideas of citizenship form the bedrock of our political identity, yet the very
concept of citizenship is both uid and open to question. Indeed, the
meaning of citizenship within political debates has been transformed in the
space of the 20th century alone. This has been due to, for example, womens
enfranchisement, growth in multiculturalism and changes in political
boundaries and institutions. Thus, as Parry (1991, p. 168) notes, [a] totally
uncontested and uncontestable concept of citizenship appears to be particularly problematic.
Within the debate on citizenship there are, however, some underlying
themes that provide some common ground on what the subject of citizenship is about even if there is disagreement about the various manifestations of these themes. For the purposes of this chapter, we refer to these
themes as status, entitlements and process. These, we contend, are the
main issues around which mainstream debates about citizenship have taken
place.
Status is the basic dening characteristic of what it means to be a citizen.
Asking the question of who is or is not a citizen, or what it takes to become
a citizen, are essentially questions about how the status of citizenship is

34

Handbook of research on global corporate citizenship

acquired and by whom. In its traditional manifestation, citizenship is

regarded as a formal legal status within a specied political community
(historically the nation-state) that in turn provides the basis for various
rights for individuals and presumes upon them appropriate civic duties.
This brings us to the second main theme of citizenship, entitlements. The
citizenship paradigm that has been more or less dominant over the past
half-century (Turner 2001) the Marshallian concept of citizenship is
essentially a citizenship of entitlements. These entitlements consist of three
types civil, political and social rights which include among them
freedom of speech, the right to vote and welfare entitlements, respectively
(Marshall 1964). The importance of entitlements to theories of citizenship
is clear they are the benets we receive in lieu of our submission to a sovereign authority. However, entitlements are not just a matter for vertical
arrangements between members of a political community and their governors: battles over the distribution of entitlements among members of the
community the haves and the have-nots give rise to investigation of horizontal arrangements and allocations too. Indeed, even in contemporary
theories of citizenship (which mainly emphasize horizontal relationships)
entitlements remain to the fore, with Marshalls three types of rights augmented with additional rights such as cultural, human and ecological rights
(Turner 2001).
The third theme through which we characterize citizenship is process
or more precisely, processes of political participation. This provides an
active component to citizenship that is absent in the status and entitlement
components. Acknowledging criticisms that the dominant rights-based
paradigm of citizenship puts too much emphasis on entitlements at the
expense of duties, we include here some of the thicker elements of citizenship, including obligations to participate in democratic governance. By
bringing in the Aristotelian assumption about duties of citizenship, to each
other and to the polity as a whole, we understand the citizens participation
in politics not simply as a right to vote or hold oce, but also as a contribution to personal development and to societal ourishing.
Applications of citizenship to corporations
As the changing roles of corporations in businesssociety relations are
complex and multifaceted, we present three dierent ways in which the
concept of citizenship can and has been used to illumine businesssociety
relations. In each of these conceptions, we distinguish dierent roles and
relations for corporations, for governments and for citizens, the last also
including the third sector, or societal non-governmental organizations
(NGOs).

The emergence of corporate citizenship

35

Corporations as citizens
The rst conception focuses on the idea outlined in the rst part of the
chapter that corporations can be regarded as citizens. The idea that corporations are (not), or are (not) like, human citizens has been examined in
a number of recent works (Wood and Logsdon 2001; Schrader 2003;
Palacios 2004; Moon et al. 2005; Thompson 2006; Norman and Nron
2008). In this conception, corporations are examined on a similar horizontal relationship with other corporate citizens and human citizens (Figure
2.1). Like human citizens, corporate citizens are also examined on a vertical relationship of power with government in which the citizens author the
authority of government. Corporations can be considered as if they were
citizens in as much as they work with and participate in society and in
bringing their concerns to government and reacting to government legislation and executive action. The focus here, then, is particularly on how corporations share status and process elements of citizenship.
Arguments about corporations being like citizens can have a number of
sources, though these are not necessarily mutually consistent (Norman and
Nron 2008). Since medieval times, European businesspeople have engaged
in citizenship-like ways through their membership of and participation in
their guilds, the forerunners of business associations, which provided
systems of governance within individual trades and forms of mutual
support. In early phases of representative politics, business ownership
enabled people to meet a property franchise. Second, corporations could be
considered as part of society in that their members, be they owners, managers or employees, are human members of societies. Relatedly, traditions
of industrial paternalism or industrial philanthropy speak of the social face
of business. Theories of business legitimacy are often premised on the need
for corporations to win the approval of society for their individual and collective existence and success (Crane et al. 2008). See Figure 2.1.
The idea that corporations could be considered as if they were citizens
can also draw on the slightly dierent sort of argument, that corporations
have a distinct functional and legal identity: they are praised or blamed,
they make deals, enter into contracts and develop internal decision-making
systems and structures independent of the people within the company.
Businesses can enter into legal agreements, own property, employ workers,
sue and be sued. As a result, a company can be treated in the eyes of the
law as if it is an articial person. More generally, the application of the
citizen metaphor to corporations can draw on the argument that every
large corporation should be thought of as a social enterprise; that is, as an
entity whose existence and decisions can be justied only in so far as they
serve public or social purposes (Dahl 1985, p. 17, original emphasis).
Although there are clearly limits to the application of the citizenship

36

Handbook of research on global corporate citizenship

Governments

Citizens

Corporations

Political community as the

arena of citizenship

Figure 2.1

Corporations as citizens

metaphor to corporations particularly regarding their status (for example,

they do not vote or sit on juries), corporations can also enjoy some limited
entitlements which are akin to those of citizens such as protection under
the law and eligibility for subsidies under various public policy regimes (for
example, for training programs). None the less their main claim to be like
citizens is in the way that they participate in various processes of citizenship. Corporations come into the picture here in various ways. Next to traditional notions of lobbying or campaign nancing, they also participate in
governance through their everyday business: this ranges from providing
goods and services to society, over deciding, for instance, about hazardous
or ethically contested technologies, up to enabling certain citizenship identities by employing, supplying from or oering services to minorities, as is
the case, for instance, in the pink economy or the fair trade movement. We
also witness a surge in partnerships with civil society organizations to
address a host of governance issues, such as community development, education or healthcare (for example, Warner and Sullivan 2004; Seitanidi and
Ryan 2007). Corporations also play a role in processes of political deliberation in society: for instance, we are currently witnessing a lively debate on
global warming, and with governments often unwilling or unable to
address the issue, corporations for better or for worse have become some
of the key voices in the debate on how to address this global policy issue
(Levy and Kaplan 2008).
Corporations as governments
Here we refer to the ways in which corporations are examined as if they
were governments and are responsible for the delivery of public goods and

The emergence of corporate citizenship

Governments

37

Corporations

Citizens

Political community as
the arena of citizenship

Figure 2.2

Corporations as governments

for the allocation, denition and administration of rights. While this owes
much to popular chronicles of business power (for example, Korten 1995;
Hertz 2001), academic treatments of these relationships have also been
emerging (for example, Sellers 2003; Matten and Crane 2005).
In such a conception, the corporation shares a horizontal dimension
with government and is vertically aligned with human citizens within a
political community (Figure 2.2). The focus here, then, is how corporations
inform the status, processes and entitlements of people as citizens.
First, corporations might become involved in governing citizenship
where government ceases to do so. This situation mostly occurs as a result
of institutional failure and new political ideology in liberal democracies,
and in the shift from communist to capitalist systems in transitional
economies. This may happen either when corporations have opportunities
to step in where once only governments acted or where corporations are
already active but their role becomes more pronounced if governments
retreat. For example, corporations can become more responsible for providing (or not) citizen entitlements formerly the preserve of public organizations. Thus, we see corporations increasingly active in former public
services, such as public transport, postal services, healthcare, water, power
and education.
Second, corporations become active in the citizenship arena where government has not as yet assumed the task of governing. Historically, this was
the situation that gave rise to paternalistic employee welfare programs by
wealthy industrialists in the 19th century. More recently, exposure to this
situation for multinationals has arisen due to a lack of local governance in
developing countries, which presents corporations with a choice as to

38

Handbook of research on global corporate citizenship

whether to step in as surrogate governments. Corporations such as Nike,

Levi Strauss and others have ensured employees a living wage and nanced
the schooling of child laborers thereby entering into relationships concerning the entitlements of citizens of developing countries. Similarly, there
is evidence that corporations can encourage or discourage oppressive
regimes to honor citizenship status and entitlements. Examples are the role
of US corporations in the apartheid period of South Africa and more
recently in Burma, Chad, Uganda and Sudan.
Third, corporations can become involved where the governing of citizenship is beyond the reach of the nation-state. In transborder issues and
activities, corporations have become involved in various initiatives focused
on privatized or multisector governance of citizenship, for example, around
climate change and human rights.
There are, however, clear limitations and anxieties linked to conceiving
of corporations as governments. Foremost, we have to point to the simple
fact that corporations initially are not set up for these political tasks and in
many ways lack the apparatus, governance mechanisms and indeed the
skills for governing citizenship. In particular, their accountability procedures and the degree of transparency with which they are involved in the
governance of citizens entitlements are generally rather underdeveloped.
Ultimately, this shift in roles raises the question of a decline of citizenship
(Falk 2000) in conspicuous ways: if healthcare or education is administered
at the discretion of private, self-interest-driven, unaccountable corporations, they are no longer based on an inalienable right of a citizen. At a
minimum, we would argue, the shift in corporate roles as examined in this
section would require institutional and legal innovations for corporations
if we are still to talk about a citizens status and entitlements in any meaningful way.
Stakeholders as citizens
Our third conception of citizenship introduces a rather dierent perspective, whereby citizenship is used as a metaphor for understanding stakeholder relations within the arena of the corporation. Here, we can model
vertical relations between the governing body of the corporation and a
variety of stakeholders. Thus we are concerned not with governing the
political community (as in our rst and second conceptions) but with governing the corporation (or, of corporate governance). The focus here, then,
is on how corporations constitute an arena in which people can claim
certain entitlements from managers based on their status and engage in
governance processes (Figure 2.3).
Clearly the ways in which stakeholders relate to corporations varies enormously among individual stakeholder types such as investors, employees,

The emergence of corporate citizenship

39

Governing body of
the corporation

Customers

Employees

Civil society

Shareholders

Government

Suppliers

Corporation as the
arena of citizenship

Figure 2.3

Stakeholders as citizens

customers and societal groups, and also among national business systems,
and dierent models of the rm. However, the issue of rights has been
central to normative variants of stakeholder theory (Donaldson and
Preston 1995). In a similar vein, the debate on stakeholder democracy has
evoked the notion of understanding the rm and its stakeholder as an
arena governed by principles akin to the political sphere (Matten and
Crane 2005). More broadly, advocates of the political model of the rm
(Parkinson 2003) apply the norms of liberal democracy to stakeholder
rights and participation, suggesting that the corporation should be seen not
as a strictly private institution, but as a social and ultimately political one.
The import of citizenship terminology and concepts into various stakeholder relations may or may not be a conscious decision on the part of
those who are writing about them. Where it is conscious, the reasoning is
typically of the kind: if stakeholders are thought of as citizens of the corporation, then this would mean that they should have particular rights and
responsibilities commensurate with the status of citizens. Similarly,
authors might think along the following lines: a suitable model of workplace democracy can be found in models of political democracy. Hence,
the citizenship literature might be used as a source of inspiration for devising forms and norms of employee participation.
This type of deliberate incorporation of citizenship concepts and models
has started to feature in the burgeoning literature on CSR and stakeholder
management, not least because of greater attention in recent years to the

40

Handbook of research on global corporate citizenship

problem of making corporations more democratic through stakeholder

engagement and participation. The conscious and deliberate appropriation
of models of citizenship and democracy is also evident in numerous treatments of employees, though rarely so for other constituencies. For example,
Collins (1997) compares the roles of sovereigns and subjects in political,
economic and organization theories to argue for the ethical superiority
and inevitability of participatory employee relations over autocratic management. In so doing, he acknowledges that the rst key assumption is that
organizational systems are analogous to political and economic systems
(ibid., p. 491). More recently, Manville and Ober (2003) have attempted to
develop a new model of employee involvement from the Athenian model
of citizenship, and Boatright (2004, p. 4) has drawn on Robert Dahls conception of the corporation as a political system to argue that employees
have a right, similar to that of citizens, to participate in decisions that aect
them.
What we see here then is an explicit attempt to articulate and appraise
employee relations according to the touchstone of political models of citizenship. However, not all authors are as sanguine about the correspondence of political frameworks to organizational analysis. As Kerr (2004,
p. 82) points out in his examination of organizational democracy, the fact
is, no matter how appealing it may be as a political and intellectual construct, organizations are not societies in the political sense, and managements are not governments.
Outside of the literature dealing with employee participation, the explicit
and conscious use of citizenship concepts to discuss other stakeholder relations is rarer. This does not mean it is not in evidence, but it does show that
the application of citizenship thinking may be more problematic than for
employees. For instance, although notions of consumer sovereignty are at
the heart of economic theories of market exchange, contemporary marketing theory rarely, if ever, makes any explicit comparison between
citizensovereign and producerconsumer models. We have discussed in
some detail elsewhere the ways in which specic stakeholder relations can
be accommodated in this approach and the limitations in doing so (Crane
et al. 2004, 2008). The key point is that the basis for their status, entitlements and processes of participation will vary. Unlike citizens, all stakeholders are not expected to be equal, and so it is the vertical relations with
management, rather than horizontal relations among stakeholders that
have tended to predominate in this approach.
Corporate citizenship and contemporary notions of citizenship
So far in this chapter we have tried to map out main avenues of applying
the notion of citizenship to corporations. This has been predicated on the

The emergence of corporate citizenship

41

tacit assumption that indeed there is a relatively consistent, well-established

and robust understanding of citizenship in political science and political
philosophy, which is out there and can be taken as it were from the shelf
and examined with regard to its applicability to corporations. This,
however useful for a rst step into this uncharted territory, turns out to be
a somewhat simplistic assumption:
The modern conception of citizenship as merely status held under the authority
of the state has been contested and broadened to include various political and
social struggles of recognition and redistribution as instances of claim-making,
and hence, by extension of citizenship. As a result, various struggles based upon
identity and dierence (whether sexual, racial, ethnic, diasporic, ecological,
technological and cosmopolitan) have found ways of articulating their claims to
citizenship understood not simply as a legal status, but as political and social
recognition and economic redistribution. (Isin and Turner 2002a, p. 2)

As a result we nd a rather heterogeneous, multifaceted understanding

of citizenship which, admittedly, slightly complicates its application to the
corporation. While it is unrealistic to summarize this entire debate, in the
following we shall discuss three of the main contemporary recongurations
of citizenship that have signicant implications for corporations. These are:
cosmopolitan citizenship, ecological citizenship and identity-based (or
cultural) citizenship.
Cosmopolitan citizenship and the corporation 4
The most obvious transformation of citizenship has taken place in the
aftermath of globalization as the latter phenomenon has impacted
signicantly on the governing capacity of the key reference point of traditional notions of citizenship, the nation-state. The emerging phenomenon
of cosmopolitan citizenship (Delanty 2000; Linklater 2002) namely, a
citizenship enacted through transnational association reveals a rather colorful spectrum of transformed and extended forms of citizens entitlements, status and processes of participation. While concepts such as human
rights dominate the aspects of status and entitlements, we see a new arena
of participation in the multifaceted, some might even say messy, arena of
global civil society with its plethora of actors who dier signicantly from
one another with regard to power, legitimacy and interests. The debate on
cosmopolitan citizenship places emphasis on new ways of enacting citizenship, new modes of participation as well as broader and multiple reference
points for what constitutes the relevant political community. If anything,
one could argue that cosmopolitan citizenship not only provides new conceptual space for locating corporations in this global arena but moreover,
empirically, we witness an active role of corporations in transforming

42

Handbook of research on global corporate citizenship

nearly all of these global specics and characteristics of citizenship.

Arguably then, cosmopolitan citizenship provides a launch pad for considerably thicker notions of citizenship, in particular with regard to the corporate role in shaping citizenship.
The implications of the notion of CC at the global level are therefore
ambiguous. On the one hand, cosmopolitan citizenship provides ample
space for locating corporations in a variety of aspects of citizenship and
thus embeds them in the new landscape of global political governance. On
the other, this perspective also highlights some of the limits of corporations
in actively taking up this new political role. Besides the fairly modest aspirations that corporations reveal empirically when embarking on the language of global citizenship (see again Table 2.1), the arena of cosmopolitan
citizenship currently still appears as a rather uneven playing eld, assigning political roles to corporate actors who as yet insuciently provide corresponding degrees of transparency, accountability, self-restraint and
openness to civic deliberation and control.
Ecological citizenship and the corporation 5
Over the last decades, as a response to growing concerns about the environmental future of the planet, conceptualizing relations of citizenship
against the backdrop of the ecological environment has become an increasingly popular way of framing debates in environmental politics (Curtin
2002; Dobson 2003). At a basic level, ecological citizenship is concerned
with the status, entitlements and processes of participation that citizens
enjoy in relation to the natural environment. Again, the notions of ecological citizenship are multifaceted, varying from understanding citizenship as
intimate connection with a certain territory or as just an extension of traditional citizenship entitlements, thus including the right to a safe and
healthy natural environment. Similar to cosmopolitan citizenship, ecological perspectives can also signicantly extend rights and obligations of citizens, creating new civic links to individuals in dierent territorial regions
(who, for instance, are aected by emissions in another region) or even
future generations (who might be aected by the ecological impact of the
present generation).
Again, the perspective of ecological citizenship has a number of implications for understanding corporations as political actors. First, we see that
corporations have in fact been rather active in exporting and shaping notions
of (liberal) citizenship which disassociate individuals from their ecological
environment. In particular in conict with indigenous communities, for
instance in the mining industry, we have seen corporations at the forefront of
transplanting Western notions of property rights onto indigenous cultures,
which may clash with more ecologically informed mechanisms of belonging

The emergence of corporate citizenship

43

and territoriality among such groups. Corporations have also faced a

growing demand for respecting the ecological claims of their stakeholders
who increasingly understand that a safe environment is one of their fundamental civic entitlements. And nally, the current debate on adequate
responses to global climate change has confronted corporations with the
problem of identifying their relevant community of obligation. All things
considered, then, notions of ecological citizenship can contribute to a relocation of corporate responsibility toward both local and global communities, and toward future generations and non-humans.
Identity-based citizenship and the corporation 6
Next to the rather distinct extensions of cosmopolitan and ecological citizenship we have witnessed an avid proliferation of alternative citizenship
identities which are premised on social identities such as ethnicity, sexual
orientation, disability and age, to name just a few. Citizenship identity,
often referred to as cultural citizenship (Stephenson 2001), captures the
way groups understand and project themselves as internally integrated and
distinct from others in the polity. These characteristics are then used as a
basis for making claims either to share the wider citizenship status from
which they have been excluded or to win special citizenship advantages or
exemptions in terms of entitlements and/or process. One can possess
formal status as a citizen yet be excluded (in law or in fact) from certain
civil, political or social rights, or from forms of participation in the political process that are available to others (Calavita 2005). Typical examples
would be ethnic minorities or lesbian and gay people who, despite being citizens of a country, have struggled in many instances to fully develop and
live their specic interests, aspirations and lifestyles.
We can locate corporations in the purview of identity-based citizenship
in three basic ways. First, business can reect citizens identity. The most
prominent example would be what is often dubbed the pink economy, that
is, businesses that are run by and/or cater specically to gay and lesbian customers. We also see this manifest in food suppliers providing kosher or halal
food or with businesses such as the Body Shop or Ben & Jerrys which for
a long time reected the identities of an alternative lifestyle of particular
consumer groups.
Second, corporations can play a pivotal role in enabling citizenship identities. This can happen at the very basic level of providing people with a job
who otherwise would not have the right to stay in a certain country as is
the case with a great many legal and even illegal immigrants in industrialized countries. Furthermore, in an age where many aspects of citizenship are accessed through markets (Crouch 2003) employment as such
forms the basis of enacting basic features of citizenship. More specically,

44

Handbook of research on global corporate citizenship

corporations oer a plethora of goods and services which enable, for

instance, ethnic minorities or disabled people to enact various forms of participation in their wider communities.
Third, and as a ipside to the two aspects mentioned, companies have
often been associated with inhibiting citizenship identities. This can happen
by excluding certain ethnicities or sexual orientations from employment, by
restricting the advancement of, for instance, female employees through
glass ceilings, or by producing goods and services that actively contribute
to suppress the enactment of citizenship identities. An example of the last
is reected in the ambiguous role of internet service providers in supplying
the Chinese government with the necessary tools to censor and oppress religious or ethnic minorities and political dissenters.
Conclusions and future perspectives
So, from our initial examination of the rather unadventurous literature
specically devoted to corporate citizenship, we have substantially
expanded the horizon by thinking about some of the other ways in which
corporations and citizenship can come together. Our three relationships (as
citizen, government and arena) and our three recongurations of citizenship (cosmopolitan, ecological, identity) demonstrate that there are multiple ways to explore the corporation as a political actor with recourse to the
literature on citizenship. We shall not seek here to promote any particular
approach or agenda; we merely wish to emphasize that dierent horizontal
and vertical relations of authority can be examined, dierent levels of
analysis considered and dierent models of citizenship applied. Each, we
believe, can prove fruitful for further research as indeed might other relationships and recongurations. Each lens demonstrates some of the richness and complexity of the corporate role in citizenship; and together they
demonstrate the diculty of subscribing to a denitive assessment of the
corporations responsibilities. Since corporations do not t easily within a
single predened political role, and since citizenship is such a dynamic
concept, corporate responsibilities in the eld of citizenship are inherently
contestable. If we look at the corporation one way, we might suggest one
set of responsibilities, whereas if we look at it another way, we may suggest
another set entirely.
Perhaps it is not so surprising then that there is signicant resistance to
the introduction of citizenship into the analysis of corporations, and vice
versa. Conceptualizing corporations through a citizenship lens has been
brandished as an idea whose time has not yet come (van Oosterhout 2005,
p. 677) or, even as little more than neo-liberal propaganda (Jones and
Haigh 2007, p. 66). Such reluctance to embrace corporations within the terminology of citizenship is based on an assumption that to do so is to

The emergence of corporate citizenship

45

legitimize the corporations political role. Taking the notion of citizenship

seriously, however, helps to analyze political roles that corporations already
play, whether we agree with those activities or not, or whether we nd them
problematic or otherwise. Although citizenship theory does not supply any
instant ready-made solutions, it helps us to understand this new reality, and
enables us to explore its implications for democracy and societal governance in the 21st century. A debate about the political nature of the corporation has only just begun (for example, Scherer and Palazzo 2007) and
the unfolding of ideas about corporations and citizenship can provide an
important contribution to these deliberations.
The specic new contribution of citizenship thinking here is that it opens
up a debate on the conditions, prerequisites, typical patterns and limitations of corporate participation in power sharing in society either as
(un)equal citizens with other citizens on a horizontal level, or as actors
involved in the governance of citizenship on a vertical level. Further
research is clearly still needed here on what this might mean in practice for
managers and policy makers and on what the normative implications
might be of such developments. Our purpose in this chapter was to start to
map out the potential eld of inquiry, but multiple modes of investigation
theoretical, empirical, normative and practical will be necessary to
further our knowledge in this area.
Finally, we have also shown, especially in the three recongurations of
citizenship discussed in the nal section of this chapter, that when we look
at corporations in the context of citizenship we need to be mindful of the
possibility that corporations may actually have material impacts on what
we even mean by citizenship. Corporations are not passive players in a
stable landscape of citizenship institutions. The dynamics of citizenship are
at least partly shaped by the activities of corporations. In this context, we
would argue that there needs to be a much broader debate also in the neighboring disciplines of politics, international relations, philosophy, sociology
and law about the impact of corporations on the dynamics of modern citizenship thinking and practice. While the role of corporations has recently
received some attention in these disciplines (for example, Koenig-Archibugi
2002; Ruggie 2004), the debate on citizenship so far shows only limited
appreciation of the corporate role in actively shaping and transforming the
notion of citizenship. Journals such as Citizenship Studies have published
just a handful of articles dealing explicitly with corporations during the last
10 years and seminal contributions such as the Handbook of Citizenship
Studies (Isin and Turner 2002b) mention corporations just twice and in
passing. A serious debate about corporations and citizenship should ultimately be able to contribute to our understanding not only of corporations,
but also of the very notion of citizenship itself. It is here that one of the

46

Handbook of research on global corporate citizenship

most exciting and challenging paths of theoretical development still waits

to be discovered.
Notes
1. This chapter draws from several papers and chapters previously published by the authors,
namely Matten et al. (2003); Crane et al. (2004, 2008), Matten and Crane (2005) and
Moon et al. (2005).
2. See http://www.thecro.com/, accessed 5 October 2007.
3. While our terminology of limited, equivalent and extended views on CC, initially suggested in Matten et al. (2003), has been widely accepted, we acknowledge other
approaches. Recently, for instance, Norman and Nron (2008) have suggested a minimalist and expansionist conception of CC, which substantially, though, amounts to a
dierentiation similar to the one suggested here.
4. For details, see Chapter 7 in Crane et al. (2008), and Chapters 4, 1114, 17 and 22 of this
Handbook.
5. For details, see Chapter 6 in Crane et al. (2008), and Chapter 8 of this Handbook.
6. For details, see Chapter 5 in Crane et al. (2008).

References
Altman, Barbara W. (1998), Corporate community relations in 1990s: a study in transformation (Dissertation Abstract), Business and Society, 37 (2), 2217.
Altman, Barbara W. and Deborah Vidaver-Cohen (2000), A framework for understanding
corporate citizenship: introduction to the special edition of Business and Society
Review Corporate citizenship and the new millennium , Business and Society Review,
105 (1), 17.
Andriof, Jrg and Malcolm McIntosh (2001a), Introduction, in Andriof and McIntosh
(eds), pp. 1324.
Andriof, Jrg and Malcolm McIntosh (2001b), Perspectives on Corporate Citizenship,
Sheeld: Greenleaf.
Birch, David (2001), Corporate citizenship rethinking business beyond corporate social
responsibility, in Andriof and McIntosh (eds), pp. 5365.
Boatright, John R. (2004), Employee governance and the ownership of the rm, Business
Ethics Quarterly, 14 (1), 121.
Burke, L. and Jeanne M. Logsdon (1996), How corporate social responsibility pays o, Long
Range Planning, 29 (4), 495502.
Calavita, K. (2005), Law, citizenship, and the construction of (some) immigrant others ,
Law and Social Inquiry, 30, 40120.
Carroll, Archie B. (1991), The pyramid of corporate social responsibility: toward the moral
management of organizational stakeholders, Business Horizons, 34 (4), 3948.
Carroll, Archie B. (1998), The four faces of corporate citizenship, Business and Society
Review, 100 (1), 17.
Collins, Denis (1997), The ethical superiority and inevitability of participatory management
as an organizational system, Organization Science, 8 (5), 489507.
Crane, Andrew, Dirk Matten and Jeremy Moon (2004), Stakeholder as citizens? Rethinking
rights, participation and democracy, Journal of Business Ethics, 53 (12), 10722.
Crane, Andrew, Dirk Matten and Jeremy Moon (2008), Corporations and Citizenship,
Cambridge: Cambridge University Press.
Crouch, Colin (2003), Commercialization or Citizenship: Education Policy and the Future of
Public Services, Fabian Society: London.
Curtin, Deane (2002), Ecological citizenship, in Isin and Turner (eds), Citizenship Studies,
London: Sage, pp. 293304.
Dahl, R. (1985), A Preface to Economic Democracy, Berkeley, CA: University of California Press.
Davenport, Kim (2000), Corporate citizenship: a stakeholder approach for dening corpo-

The emergence of corporate citizenship

47

rate social performance and identifying measures for assessing it, Business and Society, 39
(2), 21019.
Delanty, Gerard (2000), Citizenship in a Global Age: Society, Culture, Politics, Buckingham:
Open University Press.
Dobson, Andrew (2003), Citizenship and the Environment, Oxford: Oxford University Press.
Donaldson, Thomas and Lee E. Preston (1995), The stakeholder theory of the corporation:
concepts, evidence, and implications, Academy of Management Review, 20 (1), 6591.
Falk, Richard (2000), The decline of citizenship in an era of globalization, Citizenship
Studies, 4 (1), 517.
Fombrun, Charles J., Naomi A. Gardberg and Michael L. Barnett (2000), Opportunity platforms and safety nets: corporate citizenship and reputational risk, Business and Society
Review, 105 (1), 85106.
Gardberg, Naomi A. and Charles J. Fombrun (2006), Corporate citizenship: creating intangible assets across institutional environments, Academy of Management Review, 31,
32946.
Gossett, William T. (1957), Corporate Citizenship, Lexington, VA: Washington and Lee
University Press.
Grant, Wyn (1987), Business and Politics in Britain, Basingstoke: Macmillan.
Habisch, Andr, Hans P. Meister and Ren Schmidpeter (2001), Corporate Citizenship as
Investing in Social Capital, Berlin: Logos,
Hertz, Noreena (2001), The Silent Takeover, London: Heinemann.
Ikeda, Satoshi (2004), Imperial subjects, national citizenship, and corporate subjects: cycles
of political participation/exclusion in the modern world-system, Citizenship Studies, 8 (4),
33347.
Isin, Engin F. and Bryan S. Turner (2002a), Citizenship studies: an introduction, in Isin and
Turner (eds), pp. 110.
Isin, Engin F. and Bryan S. Turner (eds) (2002b), Handbook of Citizenship Studies, London: Sage.
Isin, Engin F. and Bryan S. Turner (2007), Investigating citizenship: an agenda for citizenship
studies, Citizenship Studies, 11 (1), 517.
Jeurissen, Ronald (2004), The institutional conditions of corporate citizenship, Journal of
Business Ethics, 53, 8796.
Jones, Marc T. and Matthew Haigh (2007), The transnational corporation and new corporate citizenship theory: a critical analysis, Journal of Corporate Citizenship, 27, 5169.
Kerr, Jerey L. (2004), The limits of organizational democracy, Academy of Management
Executive, 18 (3), 8195.
Koenig-Archibugi, Mathias (2002), Transnational corporations and public accountability,
Government and Opposition, 39 (2), 23459.
Korten, David (1995), When Corporations Rule the World, London: Earthscan.
Kymlicka, Will and Wayne Norman (1994), Return of the citizen: a survey of recent work on
citizenship theory, Ethics, 104, 35281.
Levy, David and Rami Kaplan (2008), CSR and theories of global governance: strategic contestation in global issue arenas, in Andrew Crane, Abagail McWilliams, Dirk Matten,
Jeremy Moon and Donald Siegel (eds), The Oxford Handbook of Corporate Social
Responsibility, Oxford: Oxford University Press, pp. 43251.
Linklater, Andrew (2002), Cosmopolitan citizenship, in Isin and Turner (eds), pp. 31732.
Logan, David, Delwin Roy and Laurie Regelbrugge (1997), Global Corporate Citizenship
Rationale and Strategies, Washington, DC: Hitachi Foundation.
Logsdon, Jeanne M. and Donna J. Wood (2002), Business citizenship: from domestic to
global level of analysis, Business Ethics Quarterly, 12 (2), 15587.
Lord, Michael D. (2000), Corporate political strategy and legislative decision making,
Business and Society, 39 (1), 7693.
Maignan, Isabelle and O.C. Ferrell (2000), Measuring corporate citizenship in two countries:
the case of the United States and France, Journal of Business Ethics, 23, 28397.
Maignan, Isabelle, O.C. Ferrell, G. Thomas and M. Hult (1999), Corporate citizenship: cultural antecedents and business benets, Journal of the Academy of Marketing Science, 27
(4), 45569.

48

Handbook of research on global corporate citizenship

Manville, Brook and Josiah Ober (2003), Beyond empowerment: building a company of citizens, Harvard Business Review, January, 4853.
Marsden, Chris (2000), The new corporate citizenship of big business: part of the solution to
sustainability, Business and Society Review, 105 (1), 925.
Marshall, Thomas Humphrey (1964), Class, Citizenship and Social Development, London:
Heinemann.
Matten, Dirk and Andrew Crane (2005), What is stakeholder democracy? Perspectives and
issues, Business Ethics: A European Review, 14 (1), 613.
Matten, Dirk, Andrew Crane and Wendy Chapple (2003), Behind the mask: revealing the true
face of corporate citizenship, Journal of Business Ethics, 44 (12), 10920.
McIntosh, Malcolm, Ruth Thomas, Deborah Leipziger and Gill Coleman (2003), Living
Corporate Citizenship, Harlow: Financial Times/Prentice-Hall.
Miller, W.H. (1998), Citizenship thats hard to ignore, Industry Week, 2 September, 224.
Moon, Jeremy, Andrew Crane and Dirk Matten (2005), Can corporations be citizens?
Corporate citizenship as a metaphor for business participation in society, Business Ethics
Quarterly, 15 (3), 42953.
Norman, Wayne and Pierre-Yves Nron (2008), Citizenship Inc. do we really want businesses to be good corporate citizens?, Business Ethics Quarterly, 18 (1), 126.
Palacios, Juan Jos (2004 ), Corporate citizenship and social responsibility in a globalized
world, Citizenship Studies, 8 (4), 383402.
Parkinson, J.E. (2003), Models of the company and the employment relationship, British
Journal of Industrial Relations, 41 (3), 481509.
Parry, Geraint (1991), Conclusion: paths to citizenship, in Ursula Vogel and Michael Moran
(eds), The Frontiers of Citizenship, Basingstoke: Macmillan, pp. 166201.
Reilly, Bernard J. and Myron J. Kyj (1994), Corporate citizenship, Review of Business, 16 (1),
3743.
Roberts, Sarah, Justin Keeble and David Brown (2002), The business case for corporate citizenship, www.adlittle.com, accessed 15 March 2002.
Ruggie, John Gerard (2004), Reconstituting the public domain issues, actors, and practices,
European Journal of International Relations, 10 (4), 499531.
Scherer, Andreas Georg and Guido Palazzo (2007), Toward a political conception of corporate responsibility business and society seen from a Habermasian perspective, Academy
of Management Review, 32 (4), 1096120.
Schneiderman, David (2004), Habermas, market-friendly human rights, and the revisibility
of economic globalization, Citizenship Studies, 8 (4), 41936.
Schrader, Ulf (2003), Corporate Citizenship: Die Unternehmung als guter Brger? (Corporate
citizenship: the rm as a good citizen), Berlin: Logos.
Seitanidi, Maria May and Annmarie Ryan (2007), A critical review of forms of corporate
community involvement: from philanthropy to partnerships, International Journal of
Nonprot and Voluntary Sector Marketing, 12 (3), 24766.
Seitz, Bernhard (2002), Corporate Citizenship: Rechte und Pichten der Unternehmung im
Zeitalter der Globalitt (Corporate citizenship: rights and obligations of the rm in the age
of globalization), Wiesbaden: Deutscher Universitts-Verlag.
Sellers, Martin P. (2003), Privatization morphs into publicization: business looks a lot like
government, Public Administration, 81 (3), 60720.
Stephenson, Nick (2001), Culture and Citizenship, London: Sage.
Stroup, M.A. and R.L. Neubert (1987), The evolution of social responsibility, Business
Horizons, MarchApril, 224.
Sundar, Pushpa (2000), Beyond Business from Merchant Charity to Corporate Citizenship.
Indian Business Philanthropy through the Ages, New Delhi: Tata McGraw-Hill.
Thompson, Grahame (2006), Tracking global corporate citizenship: some reections on
lovesick companies, IIIS Discussion Paper No. 192, Dublin: Institute for International
Integration Studies.
Toyota (2007), Sustainability Report 2006, Tokyo: Toyota Motor Company.
Turner, Bryan S. (2001), The erosion of citizenship, British Journal of Sociology, 52 (2),
189209.

The emergence of corporate citizenship

49

Useem, Michael (1984), The Inner Circle: Large Corporations and the Rise of Business Political
Activity in the US and UK, Ithaca, NY: Cornell University Press.
van Oosterhout, Johannes (2005), Corporate citizenship: an idea whose time has not yet
come, Academy of Management Review, 30 (4), 67784.
Waddell, Steve (2000), New institutions for the practice of corporate citizenship: historical,
intersectoral, and developmental perspectives, Business and Society Review, 105 (1),
10726.
Waddock, Sandra (2001), The multiple bottom lines of corporate citizenship: social investing, reputation, and responsibility audits, Business and Society Review, 105 (3), 32345.
Wagner, C.G. (2001), Evaluating good citizenship, The Futurist, JulyAugust, 16.
Warhurst, Alyson (2001), Corporate citizenship as corporate social investment, Journal of
Corporate Citizenship, 1, 5773.
Warner, Michael and Rory Sullivan (2004), Putting Partnerships to Work: Strategic Alliances
for Development between Government, the Private Sector and Civil Society, Sheeld:
Greenleaf.
Windsor, Duane (2001), Corporate citizenship: evolution and interpretation, in Andriof and
McIntosh (eds), pp. 3952.
Wood, Donna J. and Jeanne M. Logsdon (2001), Theorising business citizenship, in Andriof
and McIntosh (eds), pp. 83103.
Wood, Donna J., Jeanne M. Logsdon, Patsy G. Lewellyn and Kim Davenport (2006), Global
Business Citizenship, Armonk, NY and London: M.E. Sharpe.
World Economic Forum (2002), Global Corporate Citizenship: The Leadership Challenge for
CEOs and Boards, Geneva: World Economic Forum and Prince of Wales Business Leaders
Forum.

Corporate responsibility/corporate
citizenship: the development of a
construct1
Sandra Waddock

A context for evolving corporate responsibility

The forces of globalization and the attendant growth of corporate power
have created shifting centers of power and inuence in the world, generally
weakening the role of governments (Bendell 2004; Rodriguez et al. 2006). In
some cases, this shift has created a context in which MNCs have begun to
participate actively in some matters of the public good, including education,
healthcare, poverty alleviation and standards setting. Simultaneously, the
role and activism of NGOs and CSOs, fueled in part by the internets capabilities to connect people (Crossley 2002), has created a constantly shifting
backdrop for businesses throughout the world. Because of the way they have
been conceived and developed in industrialized societies (see, Bakan 2004),
corporations values tend to be dominated by what Frederick (1995) labeled
economizing and power aggrandizing (while governments have coercive
and power aggrandizing values), rather than the more civilizing, relationally
oriented pressures that come from civil society (Waddock 2002 [2006]).
It may seem that much has changed since the early days of the business
in society eld in the US when lobbying the corporation (Vogel 1979)
began to draw attention to potential and actual corporate abuses against
society and its stakeholders and the natural environment. Or since the
ethics scandals of the 1970s and 1980s in the defense-contracting industry
that resulted in the creation of the Foreign Corrupt Practices Act and
spawned the implementation of codes of conduct in associated industries,
and, ultimately, the Ethics Ocers Association. Or since the wave mergers
and acquisitions in the 1980s and early 1990s that resulted in a whole new
rationale for getting rid of people: downsizing, rightsizing and restructuring, with all of the related social issues.
In the United Kingdom, Business in the Community (BITC) and later
the International Business Leaders Forum (IBLF), founded by the Prince
of Wales, were two of the early business-led coalitions focused on improving society. In the mid-1990s, Europe, and particularly Royal Dutch Shell,
were rocked by activism associated with the execution of Ken Saro-Wiwa
in Nigeria and Greenpeaces attempts to prevent the dumping of the Brent
50

Corporate responsibility/corporate citizenship

51

Spar oil rig in the North Sea. The company subsequently made eorts to
engage stakeholders and gain a reputation as a good corporate citizen by
publishing a new type of report focused on People, Planet and Prots,
which came to be known as a triple-bottom-line report (Elkington 1998).
By the late 1990s, a number of publications coming out of Europe had
begun to call these new company behaviors, not just corporate social
responsibility as the US terminology would have it, but corporate citizenship, implying a much broader set of responsibilities related not just to the
deliberate (and largely voluntary) eorts by companies to improve societies, but also to the way business was actually practiced (for example,
Logan et al. 1997; McIntosh et al. 1998; Murphy and Coleman 1999; also
Andriof and McIntosh 2001).
Although it would seem that corporate responsibility is simply good
management practice (see Waddock and Graves 1997; Waddock 2002
[2006]), there seems to be enormous resistance to putting it into practice
fully. Perhaps this resistance comes in part because particularly since the
ReaganThatcher revolution of the early 1980s, shareholders interests
have dominated much of the thinking about business. Concurrently the
world has experienced a revolution similar to the one that Alfred Chandler
(1962) described as the managerial revolution, which was fostered by
improved transportation and communication technologies. Since the mid1990s in particular, the rapid evolution of the internet has permitted a new
revolution toward highly networked transnational companies (TNCs) with
global reach and clout. Globalization and outsourced manufacturing have
created signicant labor and human rights issues in developing countries,
where labor, human rights and environmental standards are weak or
nonexistent, simultaneously weakening the economies of local (home)
communities and taking advantage of the disadvantaged systematically.
Companies in the US now broadly participate in politics through contributions to political action committees that at least have the appearance of
signicant and somewhat problematic inuence, while others are said to be
in certain respects taking over governmental responsibilities (for example,
Matten and Crane 2005; Scherer et al. 2006).
On the other hand, companies throughout the world, more than 3700 of
them, have become signatories to the UN Global Compact, with more than
300 being de-listed for inactivity in 2006. Some 180 of the worlds largest
global companies have joined the World Council for Sustainable
Development, and in 2006, some of the largest institutional investors in
16 nations of the world signed on to the Principles for Responsible
Investment. Simultaneously, even CEOs have begun to acknowledge the
need for shifting the focus of the nancial community away from the shortterm orientation that has characterized it in recent times. And these signs

52

Handbook of research on global corporate citizenship

are only the tip of an emerging iceberg around corporate responsibility

or responsible business practice (David Grayson, BITC, personal communication), which suggests that responsibility issues are potentially rapidly
being incorporated into the mainstream of business practice.
Dening corporate citizenship . . . and related terms
Below are some general denitions to guide this analysis, because common
denitions are needed to provide credibility and legitimacy to the eld. The
root concepts (see Figure 3.1), to my mind, are:
1.

2.

3.

4.

Corporate responsibility (CR). CR is manifested in the strategies and

operating practices a company develops in operationalizing its relationships with and impacts on societies, stakeholders and the natural
environment (Waddock 2002 [2006]). Some degree of responsibility
(on a scale from poor to excellent) is present in all of these relationships
and in the ways that companies treat stakeholders nature. Corporate
citizenship is an increasingly popular term in business practices, albeit
there is considerable controversy about whether a corporation can (or
should) act as a citizen.
Corporate citizenship (CC). CC carries many of the same meanings
that CR does, with the added implication that corporations are imbued
with legal rights and obligations that derive from a status akin to citizenship (Marsden 2000), and because they are powerful institutions in
modern societies, in some cases, corporations are assuming roles and
responsibilities that used to be considered governmental (Matten and
Crane 2005; Scherer et al. 2006).
Corporate social responsibility (CSR). CSR is the subset of corporate
responsibilities that deals with a companys voluntary/discretionary
relationships with its societal and community stakeholders. CSR is typically undertaken with some intent to improve an important aspect of
society or relationships with communities or NGOs (nonprots). CSR
is frequently operationalized as community relations, philanthropic,
multisector collaboration, or volunteer activities. CSR as generally
used falls into what Carroll (1979, 1998) termed the discretionary and
ethical responsibilities of business. Sometimes the term CSR is used
to mean what has been dened above as CR or CC.
Corporate social performance (CSP) (assessment). CSP (Wood 1991)
focuses on the principles of (social) responsibility at the institutional
(legitimacy), organizational (responsibility) and individual (managerial discretion) levels, the processes of responsiveness (said to be
environmental assessment, stakeholder management and issues
management), and outcomes (social impacts, programs and policies).

53

Figure 3.1

Descriptive
(Narrative)
Instrumental
Normative

Reputation

Spirituality/Meaning

CSR 5 Corporate
Stakeholder Responsibility

CR 4+ . . . Reputation,
Relationships, Religion
(Spirituality/Meaning)

Business Ethics

Macro
Public Policy

Micro . . .
Boundary Spanning
Functions

CCR
Corporate Community
Relations

Corporate Social
Performance

Corporate (Social)
Rectitude (Ethics, Values)

CSR2
Corporate Social
Responsiveness

A concept tree for corporate citizenship

Corporate
(Social)
Performance
(Assessment)

Stakeholder
Theory and
Practice

Corporate
Citizenship

Corporate
Responsibility

Guiding Vision
and Values

Root
Concepts

CSR1
Corporate Social
Responsibility

Corporate
Stakeholder

Codes, Values,
Principles

Corporate Citizen as
Policy Maker

Stakeholder
Engagement

Public Affairs, Employee

Relations, Investor Relations,
Public Relations, Customer
Relations, Supplier Relations,
Issues Management, etc.

Philanthropy, Volunteerism,
Multisector or -stakeholder
Collaboration

54

5.

6.

Handbook of research on global corporate citizenship

Basically, CSP provides a framework by which a companys relationship to and activities in society and with respect to stakeholders and
the natural environment can be assessed, illustrating that principles,
processes and outcomes all need to be taken into account. The CSP
framework was reoriented by Swanson (1995) in an eort to integrate
normative and descriptive approaches to business in society through
concepts of value neglect and attunement, thereby avoiding what
Freeman (1994) terms the separation thesis, which suggests that
values can be separated from practice.
Stakeholder theory. Popularized by R. Edward Freeman (1984; see also
Freeman et al. 2007), stakeholder theory essentially argues that a
companys relationships with stakeholders (and treatment of the
natural environment) is core to understanding how it operates and
adds value as a business; indeed, Freeman (2003; Freeman et al. 2007)
argues that stakeholder relationships are the very basis of value added
and strategic initiative. Stakeholder language has been widely adopted
in practice and is being integrated into concepts of corporate responsibility/citizenship by scholars who recognize that it is through a
companys decisions, actions and impacts on stakeholders and the
natural environment that a companys CR/CC is manifested.
Corporate stakeholder responsibility. Proposed as an alternative to the
original conception of CSR as inherently social in nature, corporate
stakeholder responsibility suggests that thinking about stakeholders is
equivalent to thinking about business (Freeman et al. 2007). A new
construct at the time of this writing, this CSR has yet to prove its mettle
as a root construct; however, since it expresses a core logic about the
nature of responsible business practice, that is, that it necessarily
focuses on the way a broad array of stakeholders are treated, it is
included in this listing.

Other denitions that will be useful for dierentiating among key constructs follow:
1.

Corporate community relations (CCR) or involvement (CCI). CCR is

a boundary-spanning corporate function that typically encompasses
corporate practices that enable the company to form (hopefully positive) relationships with members of communities in which it operates
or with which it has relationships, and with society at various levels
(local, state/provincial, regional, national and global). CCR typically
includes specic functions such as a foundation or philanthropic
program (corporate philanthropy), volunteer activities, in-kind giving,
and multi- or intersector partnerships and collaborations for social

Corporate responsibility/corporate citizenship

2.

55

benet. CCI can be thought of as the processes associated with

company interaction with community-based stakeholders, at whatever
level of community is appropriate.
Corporate reputation. Corporate reputation (Fombrun 1996) encompasses the perceptions that companies external and internal stakeholders have about their strategies, practices and products/services,
CR/CC and corporate performance across a broad range of stakeholder and environmental measures, not just nancial ones.

CSR14 and CSP

Without going through a complete history of the eld of business in society,
we can see that there has been considerable development of scholarship over
the past several decades. This assessment starts with the notion of corporate
social responsibility, CSR, which developed primarily in the United States.
We shall then move to more current conceptions of corporate stakeholder
responsibility, and corporate responsibility and citizenship, where European,
and particularly British, thought has played a major role.
In what became an important framework that continues to shape the
conceptualization of the eld, William C. Frederick (1987, 2006) argued
that there had been a progression of CSRs over a period of about 40 years.
Figure 3.1 depicts these and related concepts graphically. On the left of the
gure are foundational concepts now guiding the eld, albeit not in the
order in which they emerged. Company vision and values (at the top left)
guide the development of CR/CC, that is, the ways that company practices
impact on stakeholders and the natural environment. These broad and integral responsibilities of the rm (corporate responsibility or what the British
business-led coalition Business in the Community now calls responsible
business practice)2 are associated with the stakeholder, societal and natural
environmental impacts of the business model employed by the rm.
Stakeholder theory implies a similar integral managerial perspective on
rm responsibilities as they relate to how a business practices. As the
denitions above suggest, the term corporate social responsibility is used
here to reect the in-practice denition of the manifestation of companies
deliberate (and largely voluntary or discretionary) eorts to improve the
societies within which they operate, including the natural environment. The
emphasis of CSR, by this denition, is on the specically social (do-good,
volunteer, philanthropic, multisector collaborative) eorts. The arrows
suggest, in approximately the order in which they emerge, the specic terminology reected in the Frederick (1998) framework and later developments to be discussed below.
Complementing Fredericks CSR13, to be discussed below, are multiple
additional branches prominent since the 1980s: corporate responsibility,

56

Handbook of research on global corporate citizenship

corporate reputation and corporate relationships give us three CRs related

to the ways companies manifest their stakeholder/environmental relationships. It may be helpful to view them as branches from the trunk of corporate social responsibility, which rests on corporate responsibility, corporate
citizenship, stakeholder relationships and assessment of that performance
(corporate social performance), key root concepts in the eld today. These
concepts coexist, like an evolutionary tree with multiple branches that
coexist rather than a single successful evolutionary set of advances with a
lot of dead ends.3 In this evolutionary sense, responsibility is the trunk
(with integrity perhaps at the root) and multiple branches emerging over
time sometimes sequentially, sometimes simultaneously, not all of which t
directly under the CSR rubric, but all of which are related in terms of
content and focus.
CSR1: corporate social responsibility
The rst stage of business in society literature focused on corporate social
responsibility, CSR1, according to Frederick (1987, 2006). CSR1 basically
argued that the rights that companies demanded in society came with a series
of responsibilities and that as important and powerful actors in societies,
companies have an obligation to behave responsibly, meeting obligations voluntarily to avoid problems that would otherwise emerge. In practical usage,
the term tends to mean the socially benecial or do good things that companies undertake, for example, multisector collaboration and partnerships
aimed at bettering society in some way, community relations (CCR) activities, philanthropic or charitable programs and activities, and volunteer
activities. Under a CSR1 framework, companies could and should be held
responsible for their actions and decisions as they aected society and ought
to live up to a higher set of standards than simple adherence to the law for
the good of all, and they ought to contribute to the well-being of society.
CSR2: corporate social responsiveness
CSR1 was complemented in the mid-1970s by the advent of CSR2, corporate social responsiveness (Frederick 1987, 2006). The emergence of CSR2
reected a more proactive stance on the part of companies that was recognized most notably in the work of Preston and Post (1975). Responsiveness
means that companies take explicit and forward-looking actions to deal with
external constituencies, whom we would now call stakeholders, and about
social and public policy issues, typically by evolving what Preston and Post
termed boundary-spanning functions. Where CSR1 tends to be reactive,
CSR2 is more proactive in its orientation. Preston and Post (1975) argued
that corporatesociety interaction needed to be viewed not as separate and
non-interacting streams but through the lens of an interpenetrating systems

Corporate responsibility/corporate citizenship

57

model. Companies, using boundary-spanning functions, attempt to cope

more proactively than reactively with problems and issues raised by their
activities in spheres other than the economic sphere, inherently recognizing
their interdependence (interpenetration) with society.
Issues management became another branch of both practice and scholarship during the 1980s, continuing today (a Google search on the term
generates nearly a million hits, though the term has largely disappeared
from scholarship). Wartick (1988) made a link between corporate nancial
performance and the capacity to manage issues well, a perspective taken
globally by Nigh and Cochran (1994) and made strategic by Mahon and
Waddock (1992) using the life-cycle perspective popularized by Preston
and Post (1975).
According to Frederick (1987, 2006), CSR2 was more pragmatic or practice oriented than CSR1 had been. Indeed, CSR2 seems to have been drawn
from the experience of companies rather than from calls for more responsibility coming from scholars or activists such as Ralph Nader. Two substreams emerged from this thinking (Frederick 1987). One was a
micro-organizational stream emphasizing structural changes within the
company to enable it to be more responsive to external issues (for example,
Post 1978; Post et al. 1982), a stream whose progenitors were Ackerman
and Bauer (1976). The second stream within CSR2 was the macro dimension, which focused on public policy and was epitomized by the seminal
work of Preston and Post (1975). Although Preston and Post famously
spoke about the public responsibilities of managers, in practice, those
public responsibilities became subsumed soon enough to the at least theoretical responsibilities that managers bore to the shareholder.
CSR3: corporate social rectitude
The third iteration of CSR was, according to Frederick (1987), in somewhat unfortunate terminology that was never widely adopted, corporate
social rectitude or CSR3. CSR3 reected the dramatic growth of interest
in business ethics within the general business in society eld in the mid- and
later 1980s. CSR3, according to Frederick, emphasized both social values
derived from the sociopolitical environment and the emergence of a great
deal of conceptual writing about business ethics. Basically, CSR3 is meant
to acknowledge the inherent ethical dimensions of management strategies
and practices (Freeman 1994; Waddock 2002 [2006]; Freeman et al. 2007).
Led largely by converted philosophers, the business ethics component of
the business in society eld emphasized ethical decision-making processes,
codes of conduct, and eorts to infuse companies with a broader set of
values than narrow economic self-interest. As Frederick dened it, rectitude
or ethics involved a pervasive sense of rightness, respect, and humanity

58

Handbook of research on global corporate citizenship

(Frederick 1987, p. 157) that would put values and ethics at the center of a
companys concerns, its policies, and its major decisions (ibid.).
Unfortunately, in practice little of the sort happened, and as Liedtka (1998,
1999) pointed out, the eld of business ethics has had little demonstrable
eect on business practice, despite the common values across many management systems and approaches that she identied in that seminal but
undercited or acknowledged paper.
The broader focus on values, however, has had some impact on practice,
as is made clear in the work not only of Liedtka (1998, 1999) and Wicks
(2001), but also in the seminal management research of Collins and Porras
(1996, 1997) and Senge (1990), as both theorists and progressive practitioners began to recognize the power in articulating and deploying inspirational vision and values within companies.
CSP: corporate social performance
Another stream emerged around 1991 when Wood (1991), building on the
work of Wartick and Cochran (1985), drew up an integrated framework
CSP that linked the major streams to date using principles, processes and
outcomes as the guiding framework. The CSP framework focused dominantly on the social (versus broader stakeholder and environmental)
impacts of corporate performance and rightly belongs in the CSR1 and
CSR2 streams as identied by Frederick (1987). However, it largely ignores
(except for a bow to stakeholder management) the integral responsibilities
of companies associated with impacts on stakeholders that began to
surface with the evolution of stakeholder theory and emergence of the language of corporate citizenship in the late 1990s.
As Swanson (1995) pointed out, the CSP approach fails to integrate
ethical/value processes and the moral foundation for managerial and corporate action with the economic rationale that is notable in the economic
paradigm. In reorienting the CSP model, Swanson argued for an interactive orientation focused at four levels of analysis: CSR macro principles,
CSR micro principles, corporate culture and social impacts. Swanson
argues for integration of both the normative and descriptive approaches to
business in society through the concepts of value neglect (which highlights
the problems of lack of integration) and value attunement to bring the
responsibility and responsiveness streams together (Swanson 1999),
thereby attempting to overcome what Freeman (1994) has called the separation thesis (the separation of ethics and business practice).
CSR4: cosmos, science, religion (spirituality)
In a late 1990s keynote address to the Social Issues in Management (SIM)
division of the Academy of Management, claiming that scholars had

Corporate responsibility/corporate citizenship

59

exhausted the primary analytic framework of CSR, Frederick (1998)

added a fourth wave to his CSR framework. CSR4 invited the eld away
from a corporate centric focus toward a Cosmos (C) or naturalistic and
science-based orientation as a proxy for all of the natural sciences.
Frederick pushed for an understanding of the naturalistic basis on which
human social institutions arise, through the S in this wave, that is, Science
(S), and toward a type of understanding of mans search for meaning
embodied in Religion (R) or spirituality.
Fredericks (1998) eort to move the business in society eld toward a
less corporate-centric perspective builds on his important book, Values,
Nature and Culture in the American Corporation (1995), which used a
natural science perspective to analyze the fundamental values that underscore the role of business in society: economizing, or prudent and ecient
use of resources, commonly known as eciency and power aggrandizing,
or augmenting and preserving the power of managers and organizations.
These values stand in some tension with a third important value cluster
identied by Frederick, ecologizing processes, which like nature create
cyclical and sustainable processes and patterns of use and reuse of raw
materials (see also, Swanson 1995). In my own book, Leading Corporate
Citizens (2002 [2006]), I attempt to move these values to the sectors or
spheres that constitute human society (economic economizing values;
political power aggrandizing values; and civil society relationship or
civilizing values), along with the natural environment as underpinning
with its ecologizing values (see also Waddell 2002, for a further explication of the dierences in values within each of the broad sectors of
society).
All of this theorizing (and much in management practice) is complemented by the emergence in the mid-1980s of stakeholder theory.
Corporate stakeholder responsibility (CSR5)
Stakeholder theory has evolved rapidly both in theory and in practice since
Freemans (1984) seminal book rst popularized the concept. As with corporate responsibility theory, the language surrounding stakeholder theory
has also shifted over time. Freemans general idea (frequently misinterpreted) was that managing stakeholder relationships is essential to managing any enterprise eectively, and that stakeholders represent the very basis
on which companies are founded and managed, and are thus critical to
eective strategic and organizational management. Following this thinking, the title of the original book was Strategic Management: A Stakeholder
Approach. Drawing on the work of Preston and Post (1975), Clarkson
(1995) argued that both primary and secondary stakeholders depend on the
impacts of the company on them (or vice versa).

60

Handbook of research on global corporate citizenship

Notably, this managerial thinking lies at the core of Freemans current

thinking as well (2003; Freeman et al. 2007). Companies cannot, in this
view, exist without stakeholder relationships, and relationships by their
nature are inherently normative because of the mutuality of interests they
imply. This proposition avoids what Freeman has called the separation
hypothesis which either explicitly or implicitly implies that business and
ethics can be discussed independently of each other (Freeman 1994, 2003)
(or, implicitly, that corporate social responsibility can be divorced from
stakeholder or corporate responsibility). Companies, especially in todays
extended stakeholder enterprise, a form of network organization (Post
et al. 2002a, 2002b), will be more successful when they have better stakeholder relationships (see also, Waddock 2002 [2006]). Thus, in more recent
writings Freeman has argued for a new CSR, corporate stakeholder responsibility (Freeman 2007).
Over time, Freeman (1994) has proposed that narratives or stories about
company performance are central to building coherence in understanding
stakeholder relationships and company practices and performance.
Donaldson and Preston (1995) argued that three types of stakeholder
theory exist: descriptive, instrumental (see also Jones 1995), and normative.
Some theorists suggest that stakeholder theory should be considered core
to the theory of the rm (for example, Brenner and Cochran 1991; Hill and
Jones 1992; Donaldson and Preston 1995; Jones 1995; Jones and Wicks
1999).
Taking a systemic and network-oriented perspective based on some of
the literature on multisector collaboration, Austrom and Lad (1989) proposed that alliances might create a new context for organizations, new
values and new ways of thinking, some of which can today be seen to be
emerging in practice, for example, through the initiatives of the UN Global
Compact or the evolution of the Global Reporting Initiative as a multistakeholder eort. This early work anticipated the emergence of stakeholder engagement going beyond proactive actions by management to
interactive engagement (for example, Preston and Post 1975) that is
common today in many companies. Further, Donaldson (1992) published
an important book that linked international business, the forces of globalization and business ethics in an integral way.
Corporate (stakeholder) relationships (CR3)/stakeholder engagement
As stakeholder theory diused into corporate and popular parlance, the
term stakeholder management gained a degree of dominance, taking a
central place in important works like the Post et al. (2002a) book, Redening
the Corporation and their related paper, Managing the extended enterprise:
the new stakeholder view, in California Management Review (Post et al.

Corporate responsibility/corporate citizenship

61

2002b). Others, however, focused on the relational aspects of the stakeholder, emphasizing stakeholder engagement as a long-term process of
mutual interaction (for example, Freeman and Gilbert 1988; Harrison and
St. John 1996; Svendsen 1998) and recognizing that stakeholder relationships are the foundation of the perceptions that make up corporations
themselves (see also, Clarkson 1995).
Stakeholder relationship management frequently morphs into stakeholder management, with the attendant (and largely mistaken) implication
that all stakeholders can (should), in fact, be managed by companies (see
Andriof and Waddock 2002). The implicit power dynamic of this language,
however, makes it problematic for external stakeholders who are attempting to inuence corporate practice not to be under the dominance of the
company, and fails to recognize the inherent mutuality of stakeholder relationships, in more of a network structure that does not necessarily place the
interests of the rm at the center, but may sometimes place societys (or
other stakeholders or natures) interests rst. The most widely cited framework of stakeholder management is that of Mitchell et al. (1997), which
makes explicit the one-way operationalization of stakeholder dynamics, as
well as the power implications. The alternative language is stakeholder
relationships and stakeholder responsibility (Waddock 2002 [2006];
Freeman et al. 2007), which is related to the practices that many companies
have evolved to actually engage with stakeholders in a variety of ways.
Stakeholder engagement processes partially grew out of attention to
publicprivate partnerships, which have evolved into multistakeholder collaboration and dialogue (for example, Waddell and Brown 1997; Payne and
Calton 2002; Calton and Payne 2003) to bring multiple interests together
around important social, political and economic development issues.
Engagement on a relatively equal footing means power sharing, interaction
and partnership and is highlighted in emerging multistakeholder dialogues
being sponsored, for example, by the UNs Global Compacts Learning
Forum among numerous others.
Corporate responsibility (CR)
By the mid-to-late 1990s, new terminology and thinking about what we
shall from here on call corporate responsibility (CR or, more accurately,
CR1) began to emerge.
Corporate responsibility (CR1)
The term corporate responsibility drops the word social so popular in
previous terminology, to reect the emerging sense that responsibilities are
integral to corporate actions, decisions, behaviors and impacts and cannot
be separated even conceptually (Waddock 2001, 2002; see also Freeman

62

Handbook of research on global corporate citizenship

1994; Freeman et al. 2007). Generically, these decisions, behaviors and

impacts can be called corporate practices and those practices inherently
aect stakeholders and the natural environment. In turn, actions of stakeholders (and the status of the natural environment) aect a companys
ability to carry out its work, thus corporate responsibility (ne corporate
citizenship) integrally links corporate practices, stakeholders and the integral responsibilities associated with relationship.
During the 1990s and early 2000s, another two CRs became popular: corporate reputation and corporate relationships (including notions of stakeholder engagement). As corporate social responsibility partially morphed
into corporate responsibility (CR1) in the world of practice, companies also
began paying attention to their corporate reputation (CR2), in part as a
result of renewed anti-corporate activism during the 1990s. Simultaneously,
corporate (stakeholder) relationships (CR3) emerged as an important set of
operating principles and processes within the boundary-spanning functions
that companies had begun developing in the 1970s and 1980s.
Corporate reputation (CR2)
The work of Charles Fombrun (Fombrun and Shanley 1990, 1996, 1998,
2000) and colleagues brought considerable academic attention to the issue
of corporate reputation during the 1990s. Emerging partially from the perspective of protecting a companys brand image, and hence from the marketing eld, the study of corporate reputation drew attention to the reality
that underlying a companys public image (or public relations activities)
was a reputation that could either attract or turn away key stakeholders.
Fombrun started the Reputation Management Institute at New York
University, which both inuenced and made a bridge to practice, and also
began to conduct stakeholder-based surveys of companies reputation.
Additionally, the journal Corporate Reputation Review provided an outlet
for academic papers (focused somewhat on practice) that highlight issues
of corporate reputation.
Corporate citizenship (CC)
The term corporate responsibility is generally comparable in practical
usage to the term corporate citizenship (CC) in the broad denition given
earlier in this chapter (see also Marsden and Andriof 1998; McIntosh; et al.
1998; Marsden 2000), which largely emerged from British thinkers.
Marsden and Andriof (1998, pp. 32930), for example, dene corporate
citizenship in the following way: Good corporate citizenship, therefore, is
about understanding and managing an organisations inuences on and
relationships with the rest of society in a way that minimises the negative
and maximises the positive.

Corporate responsibility/corporate citizenship

63

Similarly, the denition of corporate citizenship given in Leading

Corporate Citizens (Waddock 2002 [2006]) pp. 45) is:
Leading corporate citizens are companies that live up to clear constructive
visions and core values consistent with those of the broader societies within
which they operate, respect the natural environment, and treat well the entire
range of stakeholders who risk capital in, have an interest in, or are linked to the
rm through primary and secondary impacts. They operationalize their corporate citizenship in all of their strategies and business practices by developing
respectful, mutually benecial relationships with stakeholders and by working
to maximize sustainability of the natural environment. They recognize that they
are responsible for their impacts and are willing to be held accountable for them.

The Boston College Center for Corporate Citizenship denes the term
as: Corporate citizenship is the business strategy that shapes the values
underpinning a companys mission and the choices made each day by its
executives, managers and employees as they engage with society. This
strategy is, in the Centers view, underpinned by four principles: minimize
harm, maximize benet, be accountable and responsive to key stakeholders, and support strong nancial results.4
The terms corporate responsibility and corporate citizenship integrate
stakeholder relationships into their operationalization, uniting the two
dominant streams in the business in society eld, because in addition to
focusing on the social implications of business activities, they also incorporate issues related to companies performance with respect to specic
stakeholders and the natural environment. This integration makes stakeholder- and environment-related performance central to CR (for example,
Marsden and Andriof 1998; McIntosh et al. 1998; Marsden 2000;
Waddock 2002). Mutual, holistic relationship-based interactions are part
of the core foundation of corporate citizenship. In addition, more recent
thinking suggests that because of the lack of a global governance structure
and the reality that some companies are more powerful than some governments, some MNCs are actually undertaking responsibilities previously
associated solely with governmental actors and that in that respect, the
term corporate citizen may be reasonable (for example, Scherer et al. 2006;
Scherer and Palazzo 2007).
Important work in the business ethics arena also typies the early emergence of corporate citizenship and responsibility terminology, particularly
Donaldson and Dunfees integrative social contracts theory (Donaldson
and Dunfee 1994; Donaldson 1996). Donaldson and Dunfee argue for the
existence of foundational values that they call hypernorms that are global
in scope and that can be applied in any context. Picking up on this term in
our study of responsibility management systems in corporate practice,
Charles Bodwell and I have argued for what we term foundational values

64

Handbook of research on global corporate citizenship

(Waddock and Bodwell 2002; Waddock et al. 2002; Waddock 2004), based
on internationally agreed treaties, as the basis for developing comparable
codes of conduct and stakeholder/ecological practices across companies in
dierent contexts.
Corporation as citizen
Criticism has arisen around the term corporate citizenship because
although they are considered to be persons in law (at least in some countries), corporations are not persons in actuality, and therefore cannot participate actively in democratic processes. It is clear that corporations are not
structured as democracies, nor do they vote as do individual citizens, even
though in the law they are treated as persons with certain rights and obligations. They simultaneously command many more resources than do most
individual citizens. Hence controversy and new thinking have arisen around
the term (Matten and Crane 2005; Moon et al. 2005).
Wood and Logsdon (2001; Logsdon and Wood 2002; Wood et al. 2006)
have attempted to develop a denition of what they call business citizenship in which they claim that a good business citizen is a responsible play
in its local environment [with an] [e]mphasis on volunteerism and charity,
as well as on the organizations rights and duties in and for the community
(Logsdon and Wood 2002, p. 156), though their book (Wood et al. 2006)
broadens the denition to be comparable to that of CC or CR as dened
above. As noted by Moon et al. (2005), however, the original denition is
very similar to CSR, and does not really address either the broader and
more integral responsibilities associated with companies business models,
strategies and practices that other denitions do, or the essentially political
nature of the term citizen.
The narrow denition of CC is typical of the early usage of CC; however,
recent scholarship deals seriously with the concept of citizenship (Matten
and Crane 2005), and also may reect some of the stages that appear to
occur in CC (see below). In their critique of CC, Moon et al. (2005, p. 434)
note that incorporation by its nature creates a legal entity that has rights and
responsibilities, typically associated with particular nations. As participants
in societies, however, Moon et al. and Scherer and colleagues (Scherer and
Palazzo 2005, 2007; Scherer et al. 2006) point out cogently that because of
the relative weakening of governments and strengthening of multinationals,
corporations today can and do participate in social governance structures
outside of the rm that actually serve at least some of the same functions as
governments traditionally have served. They do this collaboratively with
institutions in other sectors, including governments, NGOs and CSOs.
Matten and Crane (2005) and Moon et al. (2005) further make the claim
that corporations sometimes administer rights within the rm as well.

Corporate responsibility/corporate citizenship

65

Generally Moon et al. conclude that corporations do not meet minimal criteria for citizenship under minimalist criteria, but under a more deliberative frame that uses citizenship more metaphorically, and when they
participate in collaborative processes with governments and NGOs, they
are sharing in the doing of government like citizens (Moon et al. 2005,
p. 446, original emphasis). Following along with this argument, Matten and
Crane (2005, p. 173) provide a tentative denition of CC: CC describes the
role of the corporation in administering citizenship rights for individuals,
even though it could readily be argued that few companies are actually
doing this today.
Another current conceptualization of CC is that weakened governments
have resulted in a vacuum of power that some corporations have stepped
in to ll, as argued by Scherer and colleagues (Scherer and Palazzo 2005,
2007; Scherer et al. 2006). But this participation in an emerging global governance structure is a shared governance responsibility, and it is shared with
governments and NGOs (and CSOs), and not undertaken solely by corporations, whose predominant interests remain economic or as Frederick
(1995) indicates, economizing. The result is a process that is explained
using a perspective from Jrgen Habermas where the public interest is
dened as an outcome of a communication process that helps individuals
form their preferences (Scherer et al. 2006, p. 516) and works through multisector, multistakeholder collaborative processes that co-create the new
governance structure, a structure that Waddell calls global action networks (see also Waddell 2003).
A note on stages of development
Some of the conceptual development that has occurred around corporate
responsibility is the result of scholarship reecting shifts in the ways that
companies themselves are responding to external and stakeholder pressures. A framework for stages of corporate citizenship has been proposed
by Mirvis and Googins (2006), which encompasses ve stages: elementary,
engaged, innovative, integrated and transforming. Mirvis and Googins
suggest that some laggard companies are at the elementary stage, in a
compliance-driven modality that is actually probably pre-CSR1 in the
Frederick framing, while correspondingly few companies have reached the
transforming stage, which is about changing the game entirely. Most companies are engaged, which could be seen as a reactive (Preston and Post
1975) CSR1 (Frederick 2006) modality, or a more proactive CSR2 innovative stage, where they understand the business case for corporate responsibility and act on it. Some more progressive rms have entered an interactive
(Preston and Post 1975) CSR3, integrated stage in which they focus on sustainability, integrate CR across functions and into practices throughout the

66

Handbook of research on global corporate citizenship

company and involve themselves in numerous external partnerships to

ensure that they stay on top of issues. Thus, although these frameworks use
dierent terminologies, all imply a form of development as CR becomes
more embedded within the actual strategies and operating practices of the
rm.
Scholarship and the emerging responsibility infrastructure
The current wave of globalization has created a context in which traditional
rules of the game set by governments seem to many observers to be
insucient to contain or counteract the power of MNCs or hold them
accountable for their impacts. In eect, globalization has reshaped the
social contract that exists between companies, countries and citizens,
leaving many to wonder how companies, particularly large MNCs, can be
made accountable, responsible and transparent. Despite the dominance in
corporate and political thinking of neoliberalism and the neoclassical economics (for example, Jensen 2000), however, the level of interest in corporate responsibility both from practitioners and academics alike has fostered
the early stages of a global governance and responsibility assurance infrastructure that complements but is partially encompassed by theoretical
developments described earlier.
Frequently engaging coalitions comprising major actors from each of
the dominant societal sectors (business, government and civil society, see
also, Waddell and Brown 1997; Waddock 2002 [2006]) in the development
process, the emerging institutional responsibility infrastructure seems to be
a more or less direct response to the shifting social contract and an attempt
by concerned citizens and activists and some companies themselves to
create a countervailing set of forces focused on accountability and responsibility, or what I have elsewhere termed a responsibility infrastructure.
This new and largely voluntary global governance for responsibility assurance (see Waddock 2006b) is complemented by numerous other forces that
have eectively created a whole new architecture of institutions associated
with fostering corporate responsibility (Waddock 2006a).
The responsibility assurance infrastructure as it has evolved to this point
consists of two major elements:
1.

2.

Internal responsibility management systems: coherent, systemic and

holistic internal responsibility management systems that acknowledge
the mutuality of interests of companies and their stakeholders and the
natural environment (with appropriate external support from consultants and industry or related organizations/associations).
External responsibility assurance systems and processes, of which there
currently are three major types of institutions:

Corporate responsibility/corporate citizenship

a.

b.

c.

67

Generally (globally) accepted foundational principles and standards promulgated by credible institutions, such as the UN Global
Compacts 10 principles, the Caux Roundtable Principles, and the
OECD Guidelines for Multinational Corporations.
Globally accepted and credible reporting standards and guidelines
encompassing ecological, societal and governance (ESG) impacts
by companies, which resemble generally accepted accounting principles (GAAP) for these ESG aspects of business, of which the
leading institution is the Global Reporting Initiative (GRI).
Credible external verication, monitoring and certication systems,
which provide assurance that what is being reported by companies
is valid and truthful, for which leading institutions are SAI
International (SA 8000 labor standards, which are helpful for companies with long global supply chains), AA 1000 ESG standards
and the ISO 26 000 standards on corporate responsibility, due in
2008. Also included in this group might be organizations such as
Rugmark, Transfair, the Forest Stewardship Council, the Fair Trade
Labeling Organization and similar entities that create marks that
attest to the validity of no sweat, no child labor, ecological sustainability or fair trade claims made by companies.

Other institutional architecture today supports this responsibility assurance infrastructure and adds dierent pressures onto businesses for greater
responsibility. This institutional architecture has been rapidly evolving
since the last decade of the 21st century and has created a new landscape
around the issue of corporate responsibility that could barely have been
conceived of by early scholars who hoped to generate greater corporate
responsibility through their attention to CSR, CR and CC in their various
iterations.
This still-evolving responsibility assurance system has relatively limited
reach into the business community to this point, and is quite new, which
means that there are ample opportunities for scholarly pursuits in understanding both how these developments have emerged and their impact, in
particular because that reach is growing quickly. For example, there are as
of this writing some 5000 signatories to the UN Global Compact and about
1000 companies formally using the GRI framework (and many more
adopting it informally). This rapid evolution is complemented and supported by another whole set of institutions that are dealing with dierent
aspects of corporate accountability and responsibility and a host of new
institutions and coalitions that create wholly new networks of organizations focused on these issues (for details, see Waddock 2006a). For example,
numerous NGObusiness coalitions, networks and dialogues have been

68

Handbook of research on global corporate citizenship

established. Some, such as the World Economic Forum, the Ethical Trading
Initiative and the World Social Forum are focused on specic issues. Others,
such as Corporation 20/20 in the US and Tomorrows Company in the UK,
are focused on asking what tomorrows corporation should look and be
like.
Companies have been pushed by the need to demonstrate their responsibility into new kinds of activities, assessments and communications. As a
result, wholly new consulting enterprises have been established to help companies cope with the plethora of social, ecological and governance
demands that they are now facing. Such consultancies include the Innovest
Strategic Advisors, and SmithOBrien, to name only a couple.
The socially responsible investment (SRI) movement alone constitutes
not only another whole set of pressures around responsible practices
facing modern corporations, but also another whole and rapidly evolving
set of institutions. Not only are there now according to the Social
Investment Forum some 173 socially responsible mutual funds (in 2007),
but there are numerous stock indices that specically track the nancial
and social performance of companies included on their lists (the most
notable of these are the Domini Index, FTSE4Good in the UK, and the
Dow Jones Sustainability Index). So quickly has SRI grown that since
1990, when the USs KLD Research and Analytics became the rst independent social research entity, there are now at least 11 countries with
research organizations that track the ESG performance of companies
domestically, all of which share data with the SIRI Group (Sustainable
Investment Research International) on a global basis. KLD and SIRI
Group planned to merge as of early 2008. SRI has spawned numerous professional organizations as well, including the Social Investment Forum
(both in the US and the UK) and the European Social Investment Forum,
among others. Other organizations exist, too, which help shape opinions
about responsible investment (for example, the Institute for Responsible
Investment), and foster activism (for example, the Interfaith Center on
Corporate Responsibility, which has been around for 35 years at this
writing and was one of the earliest such enterprises) and responsible
venture capital (Social Venture Network).
Much corporate, as well as activist, attention has gone to attempting to
determine whether there is in fact a fortune at the bottom of the pyramid
as Stuart Hart (2005) and C.K. Prahalad (2005) have argued together and
separately. This focus has been given reality in practice since the development of micro nancing by Mohammed Yunass Grameen Bank (see
Bornstein 1996) in the 1970s. Now not only has the United Nations
endorsed micro nance as an appropriate approach to some of the issues
associated with poverty but literally dozens of micro-nance organizations

Corporate responsibility/corporate citizenship

69

have sprung up around the world. The micro-nance model may prove
useful as more large and particularly small and medium-sized enterprises
attempt to tap into the potential of bottom-of-the-pyramid markets, or,
more realistically perhaps, attempt to create micro entrepreneurs who will
then have the capacity to both produce and consume, hopefully, as Hart
(2005) points out, in an ecologically sustainable way.
Other developments that highlight the rapid evolution of the business in
society eld include a proliferation of journals, handbooks, books and
popular press magazines and articles. Where scholars once complained
about locating places to publish their work, now mainstream academic
publications are publishing special issues on CSR and related topics (for
example, the Academy of Management Journal, the Journal of International
Business, the Journal of Management Studies) and journals, including the
Journal of Corporate Citizenship, Business and Society, Business Ethics
Quarterly and the Journal of Business Ethics, are devoted to the topic. All
of this activity had in 2005 created something of a backlash, with The
Economist publishing an anti-CSR cover story (more or less retracted in
2008), but in the main, such backlash attests to the growing popularity of
the emphasis on CR.
Complement all of this development with a proliferation of ratings and
rankings devoted to one aspect or other of CR, the establishment of
numerous academic institutes, centers and programs (including specialized
management education programs) on CR, and activities and actions by a
wide variety of both general and specialized watchdog and activist groups.
Add in the emergence of numerous multisector forums where business
leaders can interact with actors from NGOs, CSOs and governmental
bodies, and it will become clear that the landscape of CR has evolved dramatically since the mid-1970s, and particularly since the mid-1990s. Despite
the explosion of scholarly work that has accompanied that shifting landscape, it is clear there is still a need to determine whether CR is in fact integrated into corporate practices or remains, as much of the early CSR
activity was called, window dressing. It is likely these will remain open
question for scholars for many years to come.
Notes
1. This chapter is based on Sandra Waddock (2004), Parallel universes: companies, academics, and the progress of corporate citizenship, Business and Society Review, Autumn,
109 (1), 542. I would like to thank Robert Frederick, editor, for permission to use the
framework of the earlier paper for this Handbook and for permission to reprint large sections of that paper in this chapter.
2. David Grayson, personal communication, 2006.
3. Ironically, using this biological reference brings us to Fredericks (1995) more recent work
on the linkages between biology/nature and business ethics/responsibility.

70

Handbook of research on global corporate citizenship

4. Website for Boston College Center for Corporate Citizenship, http://www.bcccc.net/

index.cfm?fuseaction=Page.viewPage&pageID=567, accessed 15 November 2006.

References
Ackerman, R.W. and R.A. Bauer (1976), Corporate Social Responsiveness, Reston, VA:
Reston Publishing.
Andriof, J. and M. McIntosh (eds) (2001), Perspectives on Corporate Citizenship, Sheeld,
UK: Greenleaf.
Andriof, J. and S. Waddock (2002), Unfolding stakeholder engagement, in J. Andriof,
S. Waddock, B. Husted and S. Rahman (eds), Unfolding Stakeholder Thinking, Sheeld,
UK: Greenleaf, pp. 1942.
Austrom, D.R. and L.J. Lad (1989), Issues management alliances: new responses, new values,
and new logics, in J.E. Post (ed.), Research in Corporate Social Performance and Policy, vol.
11, Greenwich, CT: JAI Press, pp. 23356.
Bakan, J. (2004), The Corporation: The Pathological Pursuit of Prot and Power, New York:
Free Press.
Bendell, J. (2004), Barricades and Boardrooms: A Contemporary History of the Corporate
Accountability Movement, Geneva, Switzerland: United Nations Research Institute for
Social Development, Program Paper No. 13.
Bloweld, M. and B.K. Googins (2006), Step Up: A Call for Business Leadership in Society:
CEOs Examine the Role of Business in the 21st Century, Chestnut Hill, MA: Boston College
Center for Corporate Citizenship.
Bornstein, D. (1996), The Price of a Dream: The Story of the Grameen Bank, Chicago, IL:
University of Chicago Press.
Brenner, S. and P. Cochran (1991), A stakeholder theory of the rm, Proceedings of the
International Association of Business and Society, Sundance, UT: March, IABS.
Calton, J.M. and S.L. Payne (2003), Coping with paradox: multistakeholder learning dialogue as a pluralist sensemaking process for addressing messy problems, Business and
Society, 42 (1), 742.
Carroll, A.B. (1979), A three-dimensional conceptual model of corporate social performance, Academy of Management Review, 4, 497505.
Carroll, A.B. (1998), The four faces of corporate citizenship, Business and Society Review,
100101, 17.
Chandler, A. (1962), Strategy and Structure, Cambridge, MA: MIT Press.
Clarkson, M.B.E. (1995), A stakeholder framework for analyzing and evaluating corporate
social performance, Academy of Management Review, 20 (1), 92117.
Collins, J.C. and J.I. Porras (1996), Building your companys vision, Harvard Business Review,
SeptemberOctober, 6577.
Collins, J.C. and J.I. Porras (1997), Built to Last: Successful Habits of Visionary Companies,
New York: HarperBusiness.
Crossley, N. (2002), Global anti-corporate struggle: a preliminary analysis, British Journal of
Sociology, 53 (4), 26791.
Donaldson, T. (1992), The Ethics of International Business, Oxford: Oxford University Press.
Donaldson, T. (1996), Values in tension: ethics away from home, Harvard Business Review,
SeptemberOctober, Reprint 96402, 112.
Donaldson, T. and T.W. Dunfee (1994), Toward a unied conception of social contracts
theory, Academy of Management Review, 19 (2), 25284.
Donaldson, T. and L.E. Preston (1995), The stakeholder theory of the corporation: concepts,
evidence, and implications, Academy of Management Review, 20 (1), 6591.
Elkington, J. (1998), Cannibals with Forks: The Triple Bottom Line of Sustainability, Gabriola
Island: New Society Publishers.
Fombrun, C.J. (1996), Reputation: Realizing Value from the Corporate Image, Boston, MA:
Harvard Business School Press.
Fombrun, C.J. (1998), Indices of corporate reputation: an analysis of rankings and ratings
by social monitors, Corporate Reputation Review, 1 (4), 32740.

Corporate responsibility/corporate citizenship

71

Fombrun, C.J. (2000), Opportunity platforms and safety nets: corporate citizenship and reputational risk, Business and Society Review, 105 (1), 85107.
Fombrun, C. and M. Shanley (1990), Whats in a name? Reputation building and corporate
strategy, Academy of Management Journal, 33, 23358.
Frederick, W.C. (1987), Theories of corporate social performance, in S.P. Sethi and C.M.
Falbe (eds), Business and Society, Lexington, MA: Lexington Books.
Frederick, W.C. (1995), Values, Nature, and Culture in the American Corporation, Oxford and
New York: Oxford University Press.
Frederick, W.C. (1998), Moving to CSR4: what to pack for the trip, Business and Society,
37 (1), 4059.
Frederick, W.C. (2006), Corporation, Be Good: The Story of Corporate Social Responsibility,
Indianapolis, IN: Dog Ear Publishing.
Freeman, R.E. (1984), Strategic Management: A Stakeholder Approach, Boston, MA: Pitman.
Freeman, R.E. (1994), The politics of stakeholder theory: some future directions, Business
Ethics Quarterly, 4, 40922.
Freeman, R.E. (2003), Value creation and trade: a stakeholder approach, unpublished
working paper, University of Virginia.
Freeman, R.E. and D.R. Gilbert, Jr (1988), Corporate Strategy and the Search for Ethics,
Englewood Clis, NJ: Prentice-Hall.
Freeman, R.E., J. Harrison and A. Wicks (2007), Managing for Stakeholders: Business in the
21st Century, New Haven, CT: Yale University Press.
Harrison, J.S. and C.H. St. John (1996), Managing and partnering with external stakeholders, Academy of Management Executive, 10 (2), 4660.
Hart, S. (2005), Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving
the Worlds Most Dicult Problems, Philadelphia, PA: Wharton School Publishing.
Hill, Charles W.L. and T.M. Jones (1992), Stakeholderagency theory, Journal of
Management Studies, 29 (2), 13154.
Jensen, M.C. (2000), Value maximization, stakeholder theory, and the corporate objective
function, Journal of Applied Corporate Finance, 14 (3), 821.
Jones, T.M. (1995), Instrumental stakeholder theory: a synthesis of ethics and economics,
Academy of Management Review, 20, 40437.
Jones, T.M. and A.C. Wicks (1999), Convergent stakeholder theory, Academy of
Management Review, 24 (2), 20621.
Liedtka, J.M. (1998), Constructing an ethic for business practice: competing eectively and
doing good, Business and Society, 37 (3), 25480.
Liedtka, J.M. (1999), Linking competitive advantage with communities of practice, Journal
of Management Inquiry, 8 (1), 516.
Logan, D., D. Roy and L. Regelbrugge (1997), Global Corporate Citizenship: Rationale and
Strategies, Washington, DC: Hitachi Foundation.
Logsdon, J.M. and D.J. Wood (2002), Business citizenship: from domestic to global level of
analysis, Business Ethics Quarterly, 12 (2), 15588.
Mahon, J.F. and S.A. Waddock (1992), Strategic issues management: an integration of issue
life cycle perspectives, Business and Society, 31 (1), 1932.
Marsden, C. (2000), The new corporate citizenship of big business: part of the solution to
sustainability?, Business and Society Review, 105 (1), 926.
Marsden, C. and J. Andriof (1998), Towards an understanding of corporate citizenship and
how to inuence it, Citizenship Studies, 2 (2), 32952.
Matten, D. and A. Crane (2005), Corporate citizenship: towards an extended theoretical conceptualization, Academy of Management Review, 30, 16679.
McIntosh, M., D. Leipziger, K. Jones and G. Coleman (1998), Corporate Citizenship: Successful
Strategies for Responsible Companies, London: Financial Times/Pitman Publishing.
Mirvis, P. and B. Googins (2006), Stages of corporate citizenship, California Management
Review, 48 (2), 10426.
Mitchell, R.K., B.R. Agle and D.J. Wood (1997), Toward a theory of stakeholder
identication and salience: dening the principle of who and what really counts, Academy
of Management Review, 22 (4), 85386.

72

Handbook of research on global corporate citizenship

Moon, J., A. Crane and D. Matten (2005), Can corporations be citizens?, Business Ethics
Quarterly, 15 (3), 42751.
Murphy, D.F. and G. Coleman (1999), The global partnership for new corporate citizenship:
businesscivil society relations in a changing world, ILO Enterprise Forum 99 A New Spirit
of Enterprise: Articles and Cases, Geneva, Switzerland: International Labour Organization,
110.
Nigh, D. and P.L. Cochran (1994), Issues management and the multinational enterprise,
Management International Review, 34 (Special Issue), 519.
Payne, S.L. and J.M. Calton (2002), Towards a managerial practice of stakeholder engagement: developing multi-stakeholder learning dialogues, in J. Andriof, S. Waddock,
B. Husted and S. Rahman (eds) (2002), Unfolding Stakeholder Thinking, Sheeld, UK:
Greenleaf, pp. 12136.
Post, J.E. (1978), Corporate Behavior and Social Change, Reston, VA: Reston Publishing.
Post, J.E., E.A. Murray, Jr, R.B. Dickie and J.F. Mahon (1982), The public aairs function in
American corporations: development and relations with corporate planning, Long Range
Planning, 15 (2), 1221.
Post, J.E., L.E. Preston and S. Sachs (2002a), Redening the Corporation, Oxford and New
York: Oxford University Press.
Post, J.E., L.E. Preston and S. Sachs (2002b), Managing the extended enterprise: the new
stakeholder view, California Management Review, 45 (1), 629.
Prahalad, C.K. (2005), The Fortune at the Bottom of the Pyramid: Eradicating Poverty through
Prots, New Delhi: Pearson Education/Wharton School Publishing.
Preston, L.E. and J.E. Post (1975), Private Management and Public Policy: The Principle of
Public Responsibility, Englewood Clis, NJ: Prentice-Hall.
Rodriguez, P., D.S. Siegel, A. Hillman and L. Eden (2006), Three lenses on multinational
enterprise: politics, corruption, and corporate social responsibility, International Journal of
Business Studies, 37, 73346.
Scherer, A.G. and G. Palazzo (2005), Towards a political conception of corporate responsibility business and society seen from a Habermasian perspective, University of Zurich
working paper.
Scherer, A.G. and G. Palazzo (2007), Globalization and corporate social responsibility,
in A. Crane, A. McWilliams, D. Matten, J. Moon and D. Siegel (eds), The Oxford
Handbook of Corporate Social Responsibility, Oxford, UK: Oxford University Press,
forthcoming.
Scherer, A.G., G. Palazzo and D. Baumann (2006), Global rules and private actors towards
a new role of the TNC in the global governance, Business Ethics Quarterly, 16 (4), 404532.
Senge, P. (1990), The Fifth Discipline, New York: Free Press.
Svendsen, A. (1998), The Stakeholder Strategy: Proting from Collaborative Business
Relationships, San Francisco, CA: Berrett-Koehler.
Swanson, D.L. (1995), Addressing a theoretical problem by reorienting the corporate social
performance model, Academy of Management Review, 20 (1), 4364.
Swanson, D.L. (1999), Toward an integrative theory of business and society: a research
strategy for corporate social performance, Academy of Management Review, 24 (3),
406522.
Vogel, D. (1979), Lobbying the Corporation: Citizen Challenges to Business Authority, New
York: Basic Books.
Waddell, S. (2002), Six societal learning concepts in an era of engagement, Reections: The
SoL Journal, 3 (4), 1827.
Waddell, S. (2003), Global action networks: a global invention helping business make globalization work for all, Journal of Corporate Citizenship, 12, 2742.
Waddell, S. and L.D. Brown (1997), Fostering intersectoral partnering: a guide to promoting
cooperation among government, business, and civil society actors, IDR Reports, 13 (3).
Waddock, S. (2001), Integrity and mindfulness: foundations of corporate citizenship,
Journal of Corporate Citizenship, 1 (1), Spring, 2537.
Waddock, S. (2002 [2006]), Leading Corporate Citizens: Vision, Values, Value Added, New
York: McGraw-Hill.

Corporate responsibility/corporate citizenship

73

Waddock, S. (2004), Creating corporate accountability: foundational principles to make corporate citizenship real, Journal of Business Ethics, 50, 31327.
Waddock, S. (2006a), Building the institutional infrastructure for corporate responsibility,
Proceedings, Intercontinental Dialogue on Corporate Social Responsibility, University of
Quebec at Montreal, October.
Waddock, S. (2006b), Unfolding corporate citizenship: new demands for a new era, in
J. Allouche (ed.), Corporate Social Responsibility, London: Palgrave Macmillan.
Waddock, S. and C. Bodwell (2002), From TQM to TRM: the emerging evolution of total
responsibility management (TRM) systems, Journal of Corporate Citizenship, 2 (7),
11326.
Waddock, S., C. Bodwell and S.B. Graves (2002), Responsibility: the new business imperative, Academy of Management Executive, 16 (2), 13248.
Waddock, S.A. and S.B. Graves (1997), The corporate social performancenancial performance link, Strategic Management Journal, 18 (4), 30319.
Wartick, S.L. (1988), How issues management contributes to corporate performance,
Business Forum, 13 (2), 1622.
Wartick, S.L. and P.L. Cochran (1985), The evolution of the corporate social performance
model, Academy of Management Review, 10, 75869.
Wicks, A.C. (2001), The value dynamics of total quality management: ethics and the foundations of TQM, Business Ethics Quarterly, 11 (3), 40136.
Wood, D.J. (1991), Social issues in management: theory and research in corporate social performance, Journal of Management, 17 (2), 383406.
Wood, D.J. and J.M. Logsdon (2001), Theorizing business citizenship, in M. McIntosh and
J. Andriof (eds), Perspectives on Corporate Citizenship, Sheeld, UK: Greenleaf,
pp. 83103.
Wood, D.J., J.M. Logsdon, P.G. Lewellyn and K. Davenport (2006), Global Business
Citizenship: A Transformative Framework for Ethics and Sustainable Capitalism, Armonk,
NY: M.E. Sharpe.

Dening the concept of good corporate

citizenship in the context of globalization:
a paradigm shift from corporate social
responsibility to corporate social
accountability
S. Prakash Sethi

Introduction
Concerns about the proper role of business institutions in society have been
an ever-present phenomenon across all ages and cultures. At a cerebral
level, these concerns reveal themselves in the notions of possession of economic power and the rights of those who exercise such power. At a more
visceral level, economic institutions are evaluated in terms of the fairness
with which they acquire a societys resources, that is, factors of production,
the way they distribute the resultant output and the exchange values they
seek from those who consume this output. Although both these concepts
are interrelated, the former views the social role of the corporation in terms
of ones notion of a just society, that is, the role of corporate power, while
the latter focuses on what might be called distributive justice, that is, how
corporate power is exercised in exchange relationships with the corporations stakeholders (Sethi and Sama 1998).
In the period following the Second World War and the rising global
power and economic prosperity of the United States, the popular vision of
a good corporation that emerged was that of a nancially successful and
economically ecient company that would marry prot making with social
responsibility; provide stable and well-paid jobs with generous benets;
support culture and the arts; encourage employees to become involved in
their communities; and be a good corporate citizen. In a word, the good
corporation or the socially responsible corporation was synonymous with
large, highly successful and paternalistic corporations that may have done
business globally, but had their roots in local communities. The archetypes
of these corporations could be found in IBM and General Motors in the
US, Sony in Japan, the Tata Group in India and Siemens in Germany, to
name a few. They all shared a common rationale for doing well by the communities where they were domiciled and were considered pillars of their
societies.
74

Good corporate citizenship in the context of globalization

75

Corporate social responsibility (CSR) in this context is dened as actions

voluntarily taken by a company beyond what is legally required and which
meets societal expectations under dynamic sociopolitical conditions.
Similarly, corporate citizenship would convey the totality of corporate
actions, both in the sense of meeting legal and regulatory mandates, but also
satisfying the expectations of a companys signicant stakeholders and the
communitys needs. The more common term in this context is corporate
social performance (CSP), which not only includes CSR activities but also
their outcomes for the end users, that is, the society. In a word, a socially
responsible corporation was seen as an institution that was paternalistic and
benevolent. The reason why a good corporation was also a socially responsible corporation should be all too apparent. The status quo was ideally
suited to the prevailing macroeconomic and market-competitive conditions.
Most economies were essentially domestic in character and scope, where
large corporations dominated their relative markets under oligopolistic conditions. Government regulation was benign and pro-business and intervened mainly to restrain egregious anti-competitive conduct. Corporations
also exercised considerable pricing power and thus were able to maintain
a nancially acceptable level of protability while meeting their social
obligations.
Early attempts at dening CSR focused on common concerns of public
good which can be easily associated with corporate conduct that a society
can legitimately expect of a responsible corporation. The corporate leadership shares the ethical values and norms of social equity of the
countrycommunity where the corporation has its headquarters and core
operations. In Western societies, it was suggested that CSR was a necessary
prerequisite for a company to gain its social franchise. This expectation was
further bolstered by the notion that good conduct was embedded in the
ethical values of the managers and the corporate institution. The fact that
national markets were largely protected from international competitive
forces made it feasible and desirable to support the conventional notions of
a socially responsible corporation. It also made economic sense because it
helped provide a stable and loyal labor force, a supportive community and
a benign regulatory environment. It should not be underestimated that this
situation also elevated corporate executives to the status of visionary leaders
with high ethical values and legitimate custodians of a societys wealth. One
should not assume, however, that the paternalistic good corporation of the
recent past was almost always altruistic, or that the extent of paternalism
was uniformly shared across all industries and market segments.
Others have oered parallel though somewhat dierent visions of the
idyllic corporate welfare state where managers combine market-competitive
eciency with enlightened stakeholder management to achieve the best of

76

Handbook of research on global corporate citizenship

all possible worlds. This archetype of the good corporation holds whether
we use Western societies as our frame of reference or seek refuge in the
Asian values of the newly industrializing economies of the Pacic Rim
countries.
In Western societies, where competitive markets do not expect corporations to distribute their largesse to others not associated with the company
in a business relationship, we seek refuge in the notion of enlightened selfinterest and even go so far as to assert that one can only do well by doing
good. Or that good ethics is good business. In Asian societies, the justication comes from the notion of community as family, where group values
predominate over individual self-interest. Ergo, the most successful individuals or corporations could not have achieved their success without
support from their group (Sethi 1996).
Altered expectations of good corporate citizenship
It would, however, have been unrealistic to assume that our proverbial
good corporation would succeed under dierent economic and marketcompetitive conditions, or that our underlying ethical values and a sense
of social equity would prevail under dierent economic, and marketcompetitive conditions.
When confronted by a dierent set of competitive market conditions, the
change in the conduct of our large corporations was not long in coming.
Companies were quick to disavow their traditional persona of a socially
responsible corporation. It would seem that our hitherto good corporate
citizens were no longer able or willing to provide the wherewithal of a good
life to their various constituencies while going through the wrenching
experience of downsizing to meet the new realities of market competition
and develop a new set of priorities for the allocation of corporate resources.
Otherwise, how might one justify the conduct of large corporations over
the recent past where they have cumulatively laid o thousands of workers,
quite often unilaterally reduced their pensions and healthcare benets,
while at the same time managed to increase nancial returns to the
companys shareholders and enormous increases in executive salaries and
other forms of compensation. The situation was aptly described by Robert
Samuelson in a 1993 Newsweek article, in which, using the trials and travails of IBM as an example, he poignantly describes the demise of the
good corporation and the terrible loss and hurt this demise inicted on
hundreds and thousands of people and scores of institutions (Samuelson
1993). One could just as easily ask the same question from a dierent perspective, that is, whether IBM is now more or less good but whether IBM
has the luxury to be anything else. Those who put their naive faith in the
idea that corporations can do well by doing good, that is, good ethics is

Good corporate citizenship in the context of globalization

77

always good business, are either assuming away the market advantages that
these companies hold, or refusing to accept history as it exists and instead
substituting their perception of reality as it ought to be.
These altered circumstances provided the companies with an opportunity to redene their social responsibility and good corporate citizenship primarily in the arena of philanthropy, which required a miniscule amount of
monetary resources and did not call for any commitment toward achieving
a certain level of outcome or remediation of the underlying societal problems. At the same time, the corporation removed itself from taking any
responsibility toward the welfare of its traditional stakeholders, that is, customers, employees and the community, beyond what the market forces
would necessitate and regulatory regimes would require.
The changes in the corporate conduct and the resulting social and economic upheaval in large segments of the population also gave rise to a new
form of social activism in the United States and other Western countries.
The new social activism sought to nd ways by which to justify nonmarket-related and non-government-mandated responses from the business community to redress societys ills, both those that could be directly
related to corporate conduct and those where a small part of corporate
resources could be used to generate greater public good. These eorts, and
the rationale for their justication, underpin the contemporary movement
of CSR that has occupied scholarly attention and the public debate over
the last two decades.
Theoretical postulations for rationalizing post-paternalistic notions of CSR
and corporate citizenship
The uncoupling of corporate paternalism from CSR called for a
redenition of what constitutes CSR and good corporate citizenship.
It also required a new theoretical rationale be it philosophical or
pragmatic to justify changes in corporate conduct. The denition for what
would or should constitute CSR was easily forthcoming from all types of
constituencies who sought a share of corporate largesse and also a role in
the decision-making process that would be responsible for distributing the
corporate largesse.
To cite one example, a few years ago the editors of Business and Society
Review, a leading scholarly journal in the area of CSR, solicited the views
of a selected group of scholars, activists and government leaders on what
would be a future good corporation (Chappell 1993a; Kanter 1993;
Moskowitz 1993; Reich 1993). Their views ranged all over the map.
Professor Rosabeth Moss Kanter of Harvard Business School conjures up
a corporation committed to its workers, investing in human resources via a
continuous process of training and development, and developing a pool of

78

Handbook of research on global corporate citizenship

skilled workers to support future activities of the rm. Moving from

employees to customers, Tom Chappell, president of Toms of Main and
author of The Soul of a Business: Managing for Prot and the Common
Good (1993b), suggests that respect for customers generates needed feedback on companys products and services, and that competition should be
balanced by goodness, which he denes as a demonstration of care and
concern for people, nature and the community. Another contributor,
former US Secretary of Labor, Robert B. Reich, emphasizes the long-term
benets of good corporate citizenship, particularly vis--vis employees,
over the shorter-term payos of downsizing strategies. The boundaries of
corporate citizenship appeared to be constrained only by the proclivities of
various stakeholders who sought an even larger share of corporate
resources because they were deserving of this largesse and the corporation
could aord it.
Unfortunately, developments of theoretical underpinnings to rationalize
demands for new CSR have not been so easy, notwithstanding the tomes of
scholarly literature in philosophy, economics, political science, ethics and
management addressing this issue. These suggest an enormous range of
approaches reecting ones orientation, academic training, and notions of
desired outcomes (Bowen 1953; Goodpaster 1991; Carroll 1977; Freeman
1984, 1998; Bowie 1999; Matten and Crane 2005).
It would be well-nigh impossible to summarize this vast body of literature in this short chapter. Instead, we would limit our discussion to the two
major theoretical streams that provide primary rationalization for postpaternalistic notions of CSR. In developing a theoretical infrastructure for
the contemporary CSR movement, academic scholars faced a unique challenge. A socially acceptable and widely recognized rationale of corporate
conduct already existed in economic theories of competitive markets where
the outcomes of individual actions by corporations and their various stakeholders were determined through exchange transactions. Thus neither the
corporation nor its various constituencies were obliged or expected to
provide greater or dierent exchange values beyond what were freely and
voluntarily determined in the marketplace. Equally important, the logic of
the market-based acquisition of resources and distribution of their output
was politically legitimized and considered superior to non-market
approaches.
The advocates of new CSR generally did not choose to confront the
notion of ecient markets both as they existed in theory and also as they
operated in practice. The status quo was largely accepted as given, with failures attributed to the short-sightedness of individual corporate or industry
leaders. Instead, the advocates of new CSR oered their rationale as a way
to improve the workings of the corporation in the marketplace and would

Good corporate citizenship in the context of globalization

79

thus be benecial both for the business institutions and society at large.
When challenged as to why business institutions needed to be cajoled to do
something which was in their own self-interest, enlightened or otherwise,
escape was found in oblique references to short-term orientation of the
business leaders or structural aws in the system that would deter business
leaders from taking a long-term perspective of business operations and
their social consequences that would be inimical both to the corporations
and vital societal interests (Sethi 2003b). Such a determination is hard to
accept at face value when it is the same corporate leaders who would risk
billions of dollars on projects that would come to fruition long into the
future and with varying risks of technological, nancial and political
uncertainties attached to them.
In their excellent paper, Toward a political conception of corporate
responsibility: business and society seen from a Habermasian perspective,
Andreas Georg Scherer and Guido Palazzo (2007) oer a good literature
review summarizing various approaches and theoretical rationale to analyzing post-paternalistic CSR. Their review and analysis conclude that
post-paternalistic CSR rationalizations have not suciently integrated
various aspects of corporate conduct; individual and institutional motivations toward certain types of conduct; normal and value-oriented notions
of right and wrong in the context of a just and fair society; economic and
competitive forces that would exert dierent types of pressure on individual and institutional conduct; and the proclivities of those individuals and
institutions that would dierentiate their responses to given external
pressures.
In our analysis of this literature, we have combined them into two intellectual streams. The rst one considers the rationalizations for postpaternalistic CSR from the perspective of normative values and beliefs held
by individuals and institutions in a society. These values are embedded in a
societys psyche and commonly shared by all participants. We characterize
this approach as window out wherein a corporation shapes its conduct in
response to societal concerns in a manner that is primarily based on its
beliefs in ethical and social values. A more common nomenclature for this
intellectual stream would be the business ethics approach.
The second intellectual stream considers the source and relevance of
external pressures, that is, societal needs and the strength however
dened of the individuals and groups seeking corporate responses to their
preferred choices. This approach suggests a recognition on the part of the
corporation that certain socioeconomic considerations have adversely
impacted the economic and social well-being of these groups. Furthermore,
a voluntary and proactive response on the part of the corporation would
be preferable in order to minimize potentially more negative consequences

80

Handbook of research on global corporate citizenship

for the corporation. We characterize this approach as window in wherein

a corporation responds to external pressures in a manner that seeks to
create a winwin solution. A more common nomenclature for this intellectual stream would be the stakeholder approach.
Normative and ethical norms for determining CSR and good corporate
citizenship
The institutional context of business ethics has become an increasing
concern of enquiry among management scholars, other social scientists,
corporate executives and political leaders. To wit, what are the conditions,
that is, external sociopolitical and competitive structures, and intrainstitutional frameworks, that propel and instigate corporations and their
executives to indulge in unethical and even illegal actions that they would
otherwise condemn when undertaken by others. The point is not merely
rhetorical. It raises important issues of public policy and social organization. At the micro level, it is the individual conduct acting in a business
context that gets reected in the adverse social impact of the business institution. Philosophers and ethicists have almost invariably referred to this
aspect of business behavior, contending that moral values nd their expression only through human beings acting either individually or collectively.
The macro or the structural context of business ethics is even more important. As economic activity increases in complexity and technological orientation, it is unhinged from the mooring of individual actions. Large-scale
economic activity ironically calls for collective action where each individual
contributes but a tiny fraction to the whole. In such a situation, individual
acts are rewarded and punished not so much for their ethical content but on
the notion of ones loyalty to the institution, and where individual morality
and institutional welfare, however dened, are perceived to be in conict.
Under normative concepts of desired CSR conduct, it is assumed that in
pluralistic societies, a common set of values bind a societys members who
choose both as individuals and as groups to act in a manner that is compatible with a societys fundamental values (Bowie 1999; Trevio and
Weaver 1999; Scherer and Palazzo 2007). Ethically derived frameworks,
however, fail to provide consistent guidelines a priori as to how certain
ethical principles would apply to particular ethical dilemmas and what if
any moderating variables should be taken into consideration. Other
authors suggest certain basic principles that are fundamental universal
norms or human values that can be presumed to apply to human societies
(Wogaman 1986; Etzioni 1988; Walton 1988; Daly and Cobb 1989;
Donaldson 1989; De George 1993; Donaldson and Dunfee 1999).
Similarly, in the political arena, the International Labor Oce of the
United Nations as well as the European Community have advocated the

Good corporate citizenship in the context of globalization

81

creation of benchmark standards of workers rights and a Social Charter

involving corporations and their workers (Bercusson 1990; Hepple 1990;
Curwen 1992).
A third approach to making CSR compatible with competitive markets
is to assert that good ethics leads to good business. It is argued that enlightened self-interest would lead businesses to pursue ethical conduct because
it is more congruent with societys ethical and moral expectations and thus
would resonate with a companys stakeholders. Financial studies and consumer stakeholder surveys are cited where successful businesses were also
the ones to uphold higher ethical standards. Thus reduced to its bare essentials, the situation becomes one of costbenet analysis. To wit, how ethical
does a business have to be to maximize prots under a given competitive
situation? Notwithstanding the fact that most of these are at best corelational and rarely, if ever, demonstrate causality, calculating the market
price of being ethical is hardly an endorsement for ethical principles in
business (Baumhart 1961; Cochran and Wood 1984; Aupperle et al. 1985;
Wood 1991; Sethi and Sama 1998; Steinmann and Scherer 2000; Jensen
2002; Matten et al. 2003; Vogel 2005).
Concern about business ethics or lack thereof, seems to be a historical
phenomenon which appears with remarkable regularity through periods of
economic prosperity and hard times. One can easily recall signicant
periods in American history, and for that matter in the history of most capitalistic nations, when major business scandals assaulted the nations moral
psyche and its denizens pocketbooks (Fuller 1962; Herling 1962; Cook
1966). The 1980s will be remembered in the United States as much for
Reaganomics and get the government o peoples backs, as for the
decade of greed personied by such luminaries as Ivan Boesky, Mike
Milken and Charles Keating, to name a few (Lewis 1989; Lorsch and
MacIver 1989; Burrough and Helyar 1990; Stewart 1991; Vise and Coll
1991; Binstein and Bowden 1993; Day 1993).
Doing well by doing good
Good ethics is good business, we are told. We would not be discussing this
topic if this were indeed the case. Businesspeople, being rational, would not
need much prompting from outsiders to strive for ever higher standards of
ethical and socially responsible behavior. All empirical evidence and economic logic indicate otherwise, however. Under conditions of rising competitive intensity and an uncontrollable free-rider problem, companies
cannot and will not do well. Competition keeps businesses honest. It
should, therefore, follow that rms would act more ethically, even in the
economic sense of maximizing social welfare, as markets approximate the
ideal conditions of perfect competition (Sethi 1994; Sethi and Sama 1998).

82

Handbook of research on global corporate citizenship

Unfortunately, this is not the case when applied to business morality.

While ecient markets may prompt rms to act smart, they do not induce
them to act ethically, and perfect markets are highly imperfect in their
enforcement of business morality (Baumol 1991). Ethical lapses and illegal
behavior are not the domain of some sleazy rms operating at the fringes
of otherwise respectable and responsible companies. On the contrary, they
are to be found in every segment of business activity, aicting corporations large and small, and regardless of their nancial and market circumstances. While a large majority of all businesses operate within the
socially and legally acceptable standards of corporate behavior, the
deviant corporations and executives do not necessarily display structural,
institutional or even personal characteristics that are dierent from their
more ethical counterparts. It was only a few years ago that todays poster
bad boys, for example, Enron, Tyco and Global Crossing, were considered
the paragons of forward-looking, entrepreneurial and socially responsible
corporations.
The paramount question for us to examine involves the circumstances,
individual and contextual, that make businesspeople and business institutions act in socially harmful ways. We must ask whether there are levels of
unethical activity and immoral behavior that would persist under dierent
types of economic conditions and individual proclivities regardless of a
societys eorts to curb such behavior and which, therefore, must be
accepted as the necessary cost of doing business. Market systems with their
self-correcting discipline and competitive forces, however, are presumed to
keep such behavior at a minimum compared to alternative mechanisms for
organizing economic activity, that is, state control of production and distribution systems. Therefore, among a constellation of imperfect worlds, a
market economy with individuals exercising their free will to make choices,
is said to oer the least repugnant of alternatives and the one with the
greatest susceptibility toward responding to corrective mechanisms. It is
this proposition that is the subject of our investigation and to which we now
turn our attention.
Even under the best of circumstances, the good corporation can be
viewed as not all good and not good for everybody. It is easy to say, as
the old clich goes, make love not war, unless one asks the inevitable question: to wit, make love to whom and war against whom? We must, therefore, conclude that:
1.

Highly competitive markets are inimical to the creation and sustenance

of the good corporation. Although competition makes business
ecient, it does not make it virtuous. One could even argue that highly
competitive markets provide greater opportunities for illegal and

Good corporate citizenship in the context of globalization

2.

3.

83

unethical behavior (Baumol 1991; Sethi 1994). In other words, it is not

possible to sustain the axiom that a company can always do well by
doing good.
Most markets become imperfect as they become large and complex,
that is, consumers and other factors of production, for example, labor,
lose their ability to bargain and compete with corporations on an equal
footing.
Large corporations can survive only under conditions of imperfect
competition. Therefore, they would take all necessary action to maintain these market imperfections so as to sustain their above-normal
prots. The most logical behavior to expect from the corporation,
under these circumstances, would be to do good generally when it is
doing well, that is, it would be rst the economic imperative and only
secondarily the societal concerns that would largely dene both the
nature and extent of good corporate conduct.

Creating a climate for generalized socially responsible behavior

In the absence of economic rationale, a corporations socially responsible
behavior is in the nature of public goods available to all members of society
regardless of their individual contributions to such enhancement. This state
of aairs, however, creates real problems for those rms that wish to act in a
socially responsible manner for the benet of the entire society. The economic concept is that of a free rider where rms belonging to this group
benet from the social values and public goodwill created by the good rms.
They also put inexorable pressure on the good rms to create more and
more good deeds and receive fewer and fewer social rewards a situation that
is simply not viable. Therefore, from societys perspective, we should enhance
those socialstructural underpinnings and institutional frameworks that are
necessary for improving the ethical norms of corporate behavior. As economic activity increases in complexity and technological orientation, it
requires collective action where each individual and institution contributes
but a tiny fraction to the whole. The corporation can be either good or bad
depending on who is making the trade-os, at whose expense these trade-os
are being made, and the extent of discretionary resources available to the corporation and its managers: (a) to ameliorate some of the second-order
eects, that is, externalities, of their normal business activities; and (b) to voluntarily meet non-market societal needs (Sethi 1996).
The stakeholder theory of CSR and corporate citizenship
The second type of theoretical rationale underlying CSR and corporate citizenship is the window-in approach wherein a corporation engages its
various stakeholder groups in determining its strategy and modus operandi.

84

Handbook of research on global corporate citizenship

The stakeholder concept once articulated by Edward Freeman in his book

Strategic Management: A Stakeholder Approach (1984) has become ubiquitous in the business and society eld and the lodestar of good management
(Freeman 1984, 1998; Carroll 1995; Donaldson and Preston 1995; Freeman
and McVea 2001). The popularity of the stakeholder theory can be attested
from the massive volume of scholarly and practitioner-oriented publications
devoted to the topic. One can hardly nd a corporate CSR report that does
not allude to the companys responsibilities to its various stakeholders.
Senior corporate managers invariably speak of corporate survival, growth
and concern for all of the companys stakeholders in the same breath.
In general, stakeholder discourse has depicted management as facing a
wide range of interest groups, who make claims upon a companys
resources and may, also, have a determinative eect upon the companys
operations. Earlier postulations of an expanded role of stakeholders were
seen in essentially voluntary terms, that is, a corporation has a social
responsibility to other segments of society while its primary responsibility
as a private economic institution is to its owners, the shareholders.
Subsequently, the notion of corporate social obligation was developed.
It took into account market imperfections that in turn yielded non-market
power to corporations. It implied the mandatory nature of social contract
of the new relationship, which emanated from the fact that all corporate
activities create second-order eects or externalities that are further
magnied through market failures. Thus corporations become free
riders at the expense of other segments of society (Karmel 1993; Mitchell
et al. 1997; Orts 1997; Trevio and Weaver 1999; Jensen 2002).
The notion that corporate managers should be accountable to a larger
group of stakeholders is based on two assumptions.
First, management accountability to shareholders is best maintained as
a legal myth. In the real world, shareholders are neither interested in nor
capable of exercising eective control. For all intents and purposes, corporate management is a self-perpetuating oligarchy, accountable to no one but
itself. Evidence also shows that external market-based controls are inadequate as mechanisms for regulating top management behavior. Eorts at
improving shareholder accountability are unlikely to yield desired results
because of the changing character of stockholders; duciary obligations of
institutional shareholders; investor preference for portfolio diversication
as a strategy for risk minimization; and inability of individual shareholders to inuence management behavior (Shleifer and Vishny 1986; Hill and
Jones 1992; Sethi 1994; Orts 1997).
Second, even if it were possible to create new legal and market mechanisms
to make managers more accountable to stockholders, it would not necessarily remove all public policy concerns. Corporate performance under

Good corporate citizenship in the context of globalization

85

conditions of imperfect markets is impacted by a variety of constituent

groups whose legitimate concerns must be taken into account if corporations
expect to improve their performance and compete more eectively in the
marketplace. Therefore, unless corporations take into account the legitimate
interests of these groups, they risk the wrath of political system and invite
greater regulatory oversight.
Competitive markets and stakeholders
Under conditions of competitive markets, all stakeholder relations are determined through exchange transactions in the marketplace. Neither the rm
nor its various stakeholders, for example, customers, suppliers, employees,
expect or receive any other form of consideration. CSR literature has posited
various rationales for determining who should be considered a stakeholder.
These include, among others, the notions of relative power, dependency,
political (size of the stakeholders group) or moral agency to name a few.
These criteria follow the logic articulated by Novak (1982) in The Spirit of
Democratic Capitalism, which describes the institutional arrangements that
undergird market economics. Within such a framework, stakeholder theory
is based upon the theories of political economy, civil rights and economic
rights (Schumpeter 1942; Lindblom 1977; Phillips 2003).
Market imperfections raise two points relevant to stakeholders:
1.

2.

The competitive rights of stakeholders in terms of (a) fair access to information and (b) fair bargaining power. This competitive factor is an issue
of both procedural fairness (justice) as well as eciency. It clearly aects
all those usually classied as primary or direct stakeholders those
dealing with a company on the basis of explicit or implied contract
(owners, consumers, workers, suppliers). Asymmetries in information
and bargaining power between parties inhibit legitimate stakeholder
interests and provide a basis for just claims against oending parties and
for remedial action, either by the parties themselves (stakeholder management) or through public policy.
Externalities rights of stakeholders. As noted above, in market theory
third parties to either property ownership or contracts have rights as to
use the claims and an obligation to protect the commons. The second
major grouping of stakeholders (often called secondary or indirect
stakeholders) assert their claims based upon either positive or negative
externalities.

The most often cited approach to managing stakeholders is the familiar

hub and spoke graphic which describes relations between stakeholders
and management. However, it does little more than provide a checklist of

86

Handbook of research on global corporate citizenship

where managers should look in making decisions (Freeman 1984). Rather

than being a tight, univocal, unambiguous scientic denition, the term
stakeholder as currently applied is plastic and pluriform, and at the same
time conceptual and symbolic. Stakeholders include those groups and individuals who have an interest in the action of an organization, who have a
stake in the organization, who have the ability to inuence it (Sharplin and
Phelps 1989; Aggarwal and Chandra 1990; Savage et al.1991). Based on the
observed phenomena of interaction between groups, any theory of the rm
would normally incorporate the notion of stakeholders dened in most
general terms by Freeman as any group or individual who can aect or is
aected by the achievement of the rms objectives (Freeman 1984, p. 46;
see also Barton et al. 1989; Brenner and Cochran 1991). Mapping a set of
stakeholders is not a simple task because an individual or a group has many
stakeholder identities both in the sense of having a stake in dierent organizations as well as belonging to dierent organizations which themselves
have various sets of stakes. Furthermore, the meaning of a stake, or its
basis, may vary from political power to economic power, for example,
shareholder vote. Specic stakes are both dynamic and interconnected and,
in addition, may pose the possibility of conict as well as congruence with
a rms basic direction or mission.
For stakeholder theory to be a cogent basis for determining its relevance
to CSR, it must meet certain tests pertaining to theory building:
1.

2.
3.

4.
5.
6.
7.

There must be a priori criteria to determine who is a stakeholder. These

should include, among others, direct and indirect stakeholders, and
short versus long-term stakeholders.
What is the nature of the stake and how does it aect the importance
of the stakeholder?
How does one resolve conicting interests of various individualsgroups
within a single stakeholder group, for example, large versus small customers, unionized versus non-union employees, and workers located in
dierent countries?
What is the extent of corporate responsibility where the stakeholder
has the resources to make informed judgments to protect its interest?
How does the stakeholder theory protect stakeholders from the
adverse impact of negative externalities?
How does the system protect a good company from the costs associated with the free-rider problem?
How does stakeholder theory apply to situations where there are no
apparent stakeholders; where negative externalities fall outside the
range of current stakeholders but have a signicant long-term negative
impact as society, for example, environment in the long term?

Good corporate citizenship in the context of globalization

87

None of these issues is currently addressed in the CSR models of stakeholder theory. Furthermore, as we shall discuss in the next section on globalization, the challenges of dening stakeholders, their stake and their
relative ability to protect their legitimate interests become innitely more
complex and intractable (Krauss 1997; Banerjee 2003; Sethi 2003b).
Impact of globalization on the changing notions of CSR
The growing trend in globalization has shattered our idyllic world of the
good corporation. It has forced us to examine our assumptions as to what
would make these corporations more socially responsible and what would
be the parameters that would dene the notion of a socially responsible
corporation. A strong argument can be made that globalization and the
unrestricted ow of capital, goods and services lead to the creation of
wealth and prosperity among all participating nations. Comparative
advantage allows both the industrially advanced nations and developing
countries to maximize their gains from trade. Globalization also leads to
economic integration and convergence in economic policies around the
world. Multinational corporations (MNCs) have become an engine of
change through their injection of technology, organizational skills and a
competitive environment in foreign markets. They not only bring with them
new technologies and management systems, they also bring a dierent kind
of corporate culture and assumptions about the national governments and
the countrys economic and sociopolitical institutions (Dicken 1992; Orts
1995; Belloore 1999; Sercovich et al. 1999; Beck 2000; Hay and Marsh
2000; Batterson and Weidenbaum 2001; Sethi 2002b; Christmann 2004).
But there are costs as well. Globalization has led to greater income disparities and unequal sharing of the gains of globalization between countries and among dierent groups within individual countries. It has caused
a dislocation or dismantling of the social safety net. For the benets of
free trade to be distributed equitably, according to standard trade theory, it
is important that both capital and labor have maximum mobility, so that
each may maximize the rewards from its eorts. MNCs currently enjoy all
of the advantages of moving capital between dierent sectors and nations
in order to maximize their returns on investment. Workers, however, lack
such mobility. They cannot migrate easily, if at all, to countries of labor
shortages. The imbalance between the mobility of capital and goods, and
the immobility of labor are more characteristic of neo-mercantilism than
of truly free markets. MNCs use both the fact and threat of capital mobility to extract maximum productivity gains from cheap and abundant labor.
The control of overseas markets provides the MNCs with monopoly-like
power, which they use on local manufacturers to extract the lowest prices
possible and thus put extreme downward pressure on local wage rates. An

88

Handbook of research on global corporate citizenship

abundance of cheap labor leaves little incentive for MNCs to improve technology and thereby enhance labor productivity (Sachs and Warner 1995;
Strange 1996; Braithwaite and Drahos 2000; Sethi 2003a; Stiglitz 2003;
Stiglitz and Charlton 2005).
The mobility of capital has rendered an important segment of the local
governments tax base footloose, leaving governments with the unappetizing option of imposing disproportionately high taxes on income from
labor, agricultural products from even poorer rural areas, household consumption, and taxes on local property (Rodrik 1997, p. 7). Short of
resources, host country governments have been unwilling and unable to
exercise regulatory oversight, or to enforce the already rudimentary local
labor and environmental protection laws a practice that multinationals
nd quite agreeable (Steinmann and Scherer 1998, 2000; Varley 1998; Chan
2001; Moran 2002; Sethi 2003a; Young 2004).
MNCs responses to criticism a sea of red herrings
MNCs responses to public concern and criticism about their role in the
current phase of globalization can be grouped into two categories
(Bhagwati 1998; Rugman 2000): justications for their conduct, and proposals for institutionalizing changes in their conduct. MNCs contend that
they adhere to local laws and regulations in their own operations and insist
that their suppliers also adhere to similar standards of compliance. They
put the blame for poor working conditions largely on the shoulders of local
manufacturers and local labor authorities. At the same time, they condone
laxity in compliance as a necessary evil because developing countries
cannot aord the luxury of enforcing labor and environmental standards
similar to those that prevail in industrially advanced countries (Cohen
1998; Berry 2000; Rondinelli and Behrman 2000; Batterson and
Weidenbaum 2001; Bearak 2001; Kastein 2001; Sethi 2003a).
The second aspect of MNCs response to public criticism is more proactive. Recognizing that some allegations of poor and unfair working conditions may indeed be valid, individual companies and industry groups have
promulgated voluntary codes of conduct to govern their overseas operations and those of their local manufacturers and suppliers. However, both
the MNCs and their local partners refuse to publicly disclose the result of
their compliance eorts. Instead, they argue that disclosure would discourage local partners to cooperate in the MNCs eorts. An evaluation of
the substance and adequacy of their proactive responses toward improving
the lot of workers in developing countries, however, shows that MNCs
pledges toward reforms through code adoption are more rhetorical than
substantive. Most independent research by non-governmental organizations have demonstrated that in most cases these eorts have largely been

Good corporate citizenship in the context of globalization

89

public relations exercises to the extent that MNC eorts in code creation
and implementation are dismissed by informed observers as empty rhetoric
and meaningless exercises (Orts 1995; Beck 2000; Rondinelli 2002; Sethi
2003a; Young 2004).
Societal expectations of good corporate conduct in the era of increased
globalization
Emerging trends in globalization and their future direction make the following abundantly clear:
1.

2.

3.

MNCs would continue to exercise a large measure of discretion in

moving capital ows and technology among dierent countries and
thereby diminishing the inuence of nation-states in regulating within
their borders. An ancillary, and not entirely desirable, impact of this
trend would be to force national governments to provide similar
benets to their home-grown companies and thereby further exacerbate the adverse impact of negative externalities within their borders.
While MNCs may compete vigorously against each other in the marketplace, their strategic orientation calls for similar action in dealing
with negative externalities, that is, issues pertaining to environmental
protection; human rights, preservation of local cultures, adequate protections for employees in the workplace, and consumers and suppliers
in the marketplace; and corporate governance dealing with shareholder rights and transparency in corporate management. They are
also likely to maximize their free-rider gains at the expense of national
and regional political jurisdictions.
MNCs have continuously reduced their aliation to a single country
as their home base and often create multiple headquarters in dierent
countries. This weakens their ties to local economies beyond what is
minimally required.

From corporate social responsibility to corporate social accountability

These altered global circumstances require a fundamental change in our
understanding of the role of business organizations in general and MNCs
in particular, and our expectations of corporations as good corporate citizens. They call for a new paradigm in dening business society relationships
in the context of a social contract. The appropriate approach under this
paradigm would be to move away from the notion of CSR and into the
notion of corporate social accountability.
It would also encourage companies to voluntarily engage in corporate
philanthropy or other community-related activities for their own reasons.
However, these activities would most likely require a relatively insignicant

90

Handbook of research on global corporate citizenship

amount of a corporations monetary or human resources. Therefore, these

activities would not be considered necessary or sucient in evaluating a
socially acceptable standard of good corporate conduct. CSR may supplement, but it would not supplant, corporate social accountability.
The rationale for good corporate conduct would comprise three components, as follows.
Emphasis on core business operation
The impact of corporate conduct must relate to its core business operations, the negative externalities they create, and their adverse consequences on individuals and communities. These externalities may arise
from the inherent characteristics of a company or industry. These may
also result from the company/industrys power to exploit public goods as
free riders by reducing the impact of political-regulatory control on their
operations.
This approach would require that companies collaborate across industries and regions to develop standards for best practices. It would include
all elements of the broadened concept of good corporate conduct, that is,
environment, social issues and governance (ESG). Formulation of industry and regional standards would necessarily involve cooperation and consultation with various stakeholders, including international and regional
nancial and lending institutions, for example, the World Bank, civil
society organizations and national governments. It is also important that
the process of standard setting is transparent to ensure that the nal
product engenders public trust and credibility toward corporate actions.
Corrective imbalance between oligopolistic market power and stakeholders
interests
Globalization and imperfect markets have greatly enhanced the power of
large corporations in creating and exploiting these conditions. Therefore,
the rationale for the good corporation would be to correct the asymmetry
of relative power between the corporation and its constituent groups. These
can be dened as:
1.
2.
3.

information imbalance: the amount and quality of information available to the two parties prior to entering into a transaction or exchange;
bargaining and negotiating power imbalance: the relative bargaining
leverage of the opposing groups during negotiations; and
adjudication, remedy and relief imbalance: the ability of each group to
seek proper adjudication of disputes and gain restitution for harm
done when a transaction fails to yield desired and mutually satisfactory
results.

Good corporate citizenship in the context of globalization

91

These three imbalances are the principal means through which corporations exploit their external environment to gain above-average prots.
Therefore, we must nd ways to curb the corporate proclivity in these areas
if we are to make corporations more socially accountable for their conduct.
Information imbalance Corporations prot from information imbalance
because lack of accurate information induces customers to pay higher
prices, accept products of lower quality or choose dierent products/brands
altogether. The criteria for evaluating the good corporation in this case
would be:
1.

the extent to which a corporation provides its customers with information along the dimensions that he/she would need to make informed
choices; and
the degree to which the rm renders the customer able to evaluate postpurchase eects in terms of his/her expectations and the producers
claims.

2.

In one sense, there does not seem to be any dearth of information on

products and services available to the consumer. Companies annually
spend billions of dollars to promote their goods and services. In the logic
of competitive markets, individual rms would provide customers only
with the information that would encourage them to buy those companies
products. The customer is expected to learn about competitive products
from other companies advertising. However, in the real world, things do
not quite work out this way. In imperfect markets, rms put their major
emphasis on dierentiating their products and services on the basis of both
facts and perceived illusory dierences so as to make it extremely dicult,
if not impossible, for the customer to make direct pricevalue comparisons
among competing products and brands.
The information imbalance can be corrected at two levels:

The industry level Eorts should be made to create uniform standards of product usage, labeling and performance claims that
could be compared by the customer in making buying decisions. This
should be done through a cooperative eort among industry
members, government agencies and responsible consumer organizations. There are a number of problems that must be overcome if this
approach is to work. These include: the right of free speech, the sheer
enormity of the task in terms of products and brands, the cost of carrying out such a program and the diculty in persuading all
signicant stakeholders to participate in the process. Nevertheless, a

92

Handbook of research on global corporate citizenship

good start can be made by creating standards of accuracy and transparency, which the companies in the industry may be encouraged to
follow. In this case, the degree of progress measured against the
potential for progress would be one measure of the industrys social
responsiveness and accountability.
The rm level Companies should regularly survey consumers to
objectively assess their information needs and devise means to communicate such information to the consumer. The objective would be
to provide the consumer with the information that he/she would
want, in addition to the information that the rm would like the customer to have so as to make a pro-rm purchase decision. The
measure of the good corporation would be the extent to which this
information is provided voluntarily and the gap between the availability of such information and its importance to the customer.

Second, where relevant, companies should maintain and regularly

publish data on the volume and type of customer complaints and the
nature of the companies response to such complaints. This approach is
similar to the one used by rms in providing investors with information
concerning current and projected losses in a rms nancial statements. If
current and potential investors of publicly held companies can demand
such information to assess a rms quality of earnings, why should it be
unreasonable for the current and potential customers to demand information on the quality of product value for the rms oerings?
A similar argument can be made in the case of MNCs that source products from low-wage countries. MNCs have defended themselves from the
alleged charges of sweatshop-like working conditions by pleading competitive constraints. However, they have also refused to provide any information about their costs. This lack of transparency seriously undermines their
contention (Sethi 2002b, 2003a).
Bargaining and negotiating power imbalance Under conditions of imperfect markets, a handful of companies control signicant market share, avoid
price competition, and have a great deal of inuence on the nature of goods
to be produced and the manner in which they are to be sold. This market
dominance is further reinforced by mass advertising and the creation of customer brand loyalty based on real or illusory product attributes. Consumers,
on the other hand, are largely unorganized, insuciently informed and lack
bargaining power to deal with companies on an equitable basis.
The good corporation will, therefore, seek ways to enable consumers to
gain at least part of those benets in terms of product quality, service and
price that they would have achieved under conditions of a more level

Good corporate citizenship in the context of globalization

93

playing eld in terms of information, resources and organization. An

example of such an approach would be for the companies to oer assurances as to the eective and useful life of a product backed by independent insurance or other means to ensure that customers are in eect getting
what they believe they are paying for.
Adjudication, remedy and relief imbalance The third area of restoring
balance between producers and consumers has to do with adjudication of
disputes and the receipt of prompt and fair settlement of their claims. Most
consumers suer from a number of serious disadvantages in achieving this
objective. Their individual claims are often small, while their total impact
on the company is quite large. Therefore, while the company has every
incentive to ght such claims, the consumers have neither the time nor the
resources to ght for equitable remedies. The two current approaches, that
is, small claims court and class action suits, are awed from a macro perspective. In the former case, each claimant has to ght his/her dispute individually with no knowledge of the widespread nature of the problem and
its resolution. The class action suits are at best haphazard and end up
paying more to the lawyers than to the plaintis.
The good corporation would institute procedures whereby aected customers can automatically receive adjudication of their disputes as well as
fair settlement even when they did not have the knowledge of the harm
done to them or had not initiated action against the oending company.
The process suggested here could be termed the internalization of class
action suits wherein remedy and restitution would become an integral part
of doing business and would be automatically triggered upon the occurrence of certain events.
The following example will illustrate this point. Suppose a telephone
company serves a particular area. Because of the nature of technology and
usage patterns, a failure or malfunction rate of 2 per cent is considered
normal and has been factored into both the price of service and customers
quality expectations. Let us say that in a given period this rate has risen to
5 per cent. Under normal procedures, the phone company might be
expected to make refunds, but only to those customers whose service was
actually disrupted. However, we would assume that while there may not
have been actual disruption of service in other cases, there was deterioration in the overall quality of service in the area. The telephone company
should refund a portion of the service fee that it charged to all of its customers in the impacted area under the assumption of quality standards
requiring no more than 2 per cent malfunction rate. Similar measures can
be developed for application to a large variety of products and services
where the notion of useful life is applicable.

94

Handbook of research on global corporate citizenship

Accountability, compliance verication and transparency

The third element in the new framework pertains to creating public trust in
corporate actions and claims thereof. This element presupposes the voluntary character of the rst two elements and is intended to enhance their
eectiveness. It takes into account the three factors:
1.

The nature of negative externalities and transactional imbalances

would be dierent for companies and industries based on marketcompetitive conditions. Therefore, companies and industries are best
suited to assess relative costs and risks, and design systems that maximize societal benets while preserving corporate actions.
A voluntary approach provides the companies with the rst-mover
advantage and thus enhances corporate creditability and trust.
A voluntary approach also forestalls mandatory regulation, which may
be inuenced by external, political considerations and may impose a
costly and less rational solution.

2.
3.

The approach suggested here is that of voluntary codes of conduct that

could either be individual company based or industry wide. Unfortunately,
most companies and industry groups have hitherto been short-sighted in
creating and implementing these codes. Rather than using their codes to
create meaningful responses to societal changes, they have used them to
create a public impression of activity but have lacked substance in implementation.
A corporate code of conduct is in the nature of private law or a promise
voluntarily made whereby an institution makes a public commitment as to
certain standards of conduct. The nature of voluntariness and, by implication, the exibility aorded to a corporation, depends on the basic
premise that MNCs and their critics share a common interest in improving
the underlying conditions of the aected groups and regions, and it is in the
interest of all parties involved to create mutually satisfactory resolution of
the underlying issues (Sethi 2002a, 2003b). Therefore, it follows that for a
code of conduct to have any reasonable chance of meeting the expectations
of the parties involved, it must:

be economically viable for the corporation given the dynamics of

competition, industry structure, and the economic and sociopolitical realities of the developing countries where its operations are
located;
address substantive issues that are of importance, rst of all to the
workers themselves, and then to the corporations various constituencies, including foreign governments and other aected groups;

Good corporate citizenship in the context of globalization

95

be specic as to performance standards that can be objectively measured; and

be transparent as to performance, which is independently monitored
and the ndings made public.

References
Aggarwal, R. and A. Chandra (1990), Stateholder management: opportunities and challenges, Business, 40 (4), 4950.
Aupperle, K.E., A.B. Carroll and J.D. Harteld (1985), An empirical examination of the relationship between corporate social responsibility and protability, Academy of
Management Journal, 28, 44663.
Banerjee, S.B. (2003), The practice of stakeholder colonialism: national interest and colonial
discourses in the management of indigenous stakeholders, in A. Prasad (ed.), Postcolonial
Theory and Organizational Analysis, New York: Palgrave, pp. 25579.
Barton, S.L., N.C. Hill and S. Sundaram (1989), An empirical test of stakeholder theory predictions of capital structure, Financial Management, 18 (1), 3844.
Batterson, R. and M. Weidenbaum (2001), The Pros and Cons of Globalization, Center for the
Study of American Business, vol. 22, St. Louis, WA: Washington University.
Baumhart, R.C. (1961), How ethical are businessmen?, Harvard Business Review, 39 (4),
6176.
Baumol, W.J. (1991), Perfect Markets and Easy Virtue: Business Ethics and the Invisible Hand,
Oxford and Cambridge, MA: Blackwell.
Bearak, B. (2001), Lives held cheap in Bangladesh sweatshop, The New York Times, 15 April,
Section 1, p. 1.
Beck, U. (2000), What is Globalization?, Cambridge: Polity.
Belloore, R. (1999), Global Money, Capital Restructuring and the Changing Patterns of
Labour, Cheltenham, UK and Northampton, MA, USA: Edward Elgar.
Bercusson, B. (1990), The European Communitys charter of fundamental social rights of
workers, Modern Law Review, 53 (5), 62442.
Berry, J.M. (2000), This time, boom benets the poor; low-wage families lost ground in previous expansions, Washington Post, 11 February, p. A14.
Bhagwati, J. (1998), A Stream of Windows: Unsettling Reections on Trade, Immigration, and
Democracy, Cambridge, MA: MIT press.
Binstein, M. and C. Bowden (1993), Trust Me: Charles Keating and the Missing Billions, New
York: Random House.
Bowen, H.R. (1953), Social Responsibilities of the Businessman, New York: Harper & Row.
Bowie, N.E. (1999), Business Ethics: A Kantian Perspective, Oxford: Blackwell.
Braithwaite, J. and P. Drahos (2000), Global Business Regulation, Cambridge: Cambridge
University Press.
Brenner, S.N. and P.L. Cochran (1991), The stakeholder theory of the rm: implications for
business and society theory and research, in J.F. Mahon (ed.), Proceedings of the
International Association for Business and Society, Sundance, UT, pp. 44987.
Burrough, B. and J. Helyar (1990), Barbarians at the Gate: The Fall of RJR Nabisco, New
York: Harper & Row.
Carroll, A.B. (ed.) (1977), Managing Corporate Social Responsibility, Boston, MA: Little,
Brown.
Carroll, A.B. (1995), Stakeholder thinking in three models of management morality: a perspective with strategic implications, in J. Nsi (ed.), Understanding Stakeholder Thinking,
Helsinki: LRS Publications, pp. 4774.
Chan, A. (2001), Chinas Workers under Assault: The Exploitation of Labor in a Globalizing
Economy, New York: M.E. Sharpe.
Chappell, T. (1993a), The pursuit of goodness, Business and Society Review, 87, 17.
Chappell, T. (1993b), The Soul of a Business: Managing for Prot and the Common Good,
New York: Bantam Books.

96

Handbook of research on global corporate citizenship

Christmann, P. (2004), Multinational companies and the national environment: determinants

of global environmental policy standardization, Academy of Management Journal, 47,
74760.
Cochran, P.L. and R.A. Wood (1984), Corporate social responsibility and nancial performance, Academy of Management Journal, 27, 4256.
Cohen, D. (1998), The Wealth of the World and the Poverty of Nations, Cambridge, MA: MIT
Press.
Cook, F.J. (1966), The Corrupted Land: The Social Morality of Modern America, New York:
Macmillan.
Curwen, P. (1992), Social policy in the European Community, working paper.
Daly, H.E. and J.B. Cobb, Jr (1989), For the Common Good: Redirecting the Economy toward
Community, the Environment, and a Sustainable Future, Boston, MA: Beacon Press.
Day, K. (1993), S and L Hell: The People and the Politics behind the $1 Trillion Savings and
Loan Scandal, New York: Norton.
De George, R.T. (1993), Competing with Integrity in International Business, Oxford: Oxford
University Press.
Dicken, P. (1992), Global Shift: The Internationalization of Economic Activity, New York:
Guilford Press.
Donaldson, T. (1989), The Ethics of International Business, Oxford and New York: Oxford
University Press.
Donaldson, T. and T.W. Dunfee (1999), Ties that Bind, Boston, MA: Harvard Business School
Press.
Donaldson, T. and L.E. Preston (1995), The stakeholder theory of the corporation: concepts,
evidence, and implications, Academy of Management Review, 20 (1), 6591.
Etzioni, A. (1988), The Moral Dimension: Toward a New Economics, New York: Free Press.
Freeman, R.E. (1984), Strategic Management: A Stakeholder Approach, New York: Pitman.
Freeman, R.E. (1998), Stakeholder theory, in G.L. Cooper and C. Argyris (eds), The Concise
Blackwell Encyclopedia of Management, Oxford: Blackwell, pp. 61215.
Freeman, R.E. and J. McVea (2001), A stakeholder approach to strategic management, in
M.A. Hitt, R.E. Freeman and J.S. Harrison (eds), The Blackwell Handbook of Strategic
Management, Oxford: Blackwell, pp. 189207.
Fuller, J.G. (1962), The Gentleman Conspirators: The Story of the Price-xers in the Electrical
Industry, New York: Grove Press.
Goodpaster, K.E. (1991), Business ethics and stakeholder analysis, Business Ethics
Quarterly, 1 (1), 5373.
Hay, C. and D. Marsh (2000), Demystifying Globalization, New York: St. Martins Press.
Hepple, B. (1990), An integrating framework for research in business and society: a step
toward the elusive paradigm?, Academy of Management Review, 8, 55964.
Herling, J. (1962), The Great Price Conspiracy: The Story of the Antitrust Violations in the
Electrical Industry, Washington, DC: Robert B. Luce.
Hill, C.W.L. and T.M. Jones (1992), Stakeholderagency theory, Journal of Management
Studies, 29 (2), 13154.
Jensen, M.C. (2002), Value maximization, stakeholder theory, and the corporate objective
function, Business Ethics Quarterly, 12, 23556.
Kanter, R.M. (1993), Employability security, Business and Society Review, 87, 1114.
Karmel, R.S. (1993), Implications of the stakeholder model, George Washington Law
Review, 61 (4), 115676.
Kastein, E.B. (2001), The corporate ethics crusade, Foreign Aairs, 80 (5), 10519.
Krauss, M. (1997), How Nations Grow Rich, Oxford and New York: Oxford University Press.
Lewis M. (1989), Liars Poker: Rising through the Wreckage on Wall Street, New York: Norton.
Lindblom, C.E. (1977), Politics and Markets: The Worlds PoliticalEconomic Systems, New
York: Basic Books.
Lorsch, J.W. and E. MacIver (1989), Pawns or Potentates: The Reality of Americas Corporate
Boards, Boston, MA: Harvard Business School Press.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.

Good corporate citizenship in the context of globalization

97

Matten, D., A. Crane and W. Chapple (2003), Behind the mask: revealing the true face of corporate citizenship, Journal of Business Ethics, 45, 10920.
Mitchell, R.K., B.R. Agle and D.J. Wood (1997), Toward a theory of stakeholder
identication and salience: dening the principle of who and what really counts, Academy
of Management Review, 22, 85386.
Moran, T.H. (2002), Beyond Sweatshops: Foreign Direct Investment and Globalization in
Developing Countries, Washington, DC: Brookings Institution.
Moskowitz, M. (1993), In search of the good corporation, Business and Society Review, 87, 11.
Novak, M. (1982), The Spirit of Democratic Capitalism, New York: Simon & Schuster.
Orts, E.W. (1995), The legitimacy of multinational corporations, in L.E. Mitchell (ed.),
Progressive Corporate Law, Boulder, CO: Westview Press, pp. 24779.
Orts, E.W. (1997), A North American legal perspective on stakeholder management theory,
in F. Pateld (ed.), Perspectives on Company Law, vol. 2, London: Kluwer, pp. 16579.
Phillips, R. (2003), Stakeholder Theory and Organizational Ethics, San Francisco, CA: BerrettKoehler.
Reich, R.B. (1993), Stewardship of the future, Business and Society Review, 87, 10.
Rodrik, D. (1997), Has Globalization Gone Too Far?, Washington, DC: Institute for
International Economics.
Rondinelli, D.A. (2002), Transnational corporations: international citizens or new sovereigns?, Business and Society Review, 107, 391413.
Rondinelli, D. and J. Behrman (2000), The promise and pains of globalization, Global Focus,
12 (1), 6.
Rugman, A. (2000), The End of Globalization, London: Random House.
Sachs, J. and A. Warner (1995), Economic reform and process of global integration,
Brookings Papers on Economic Activity, 1, 1118.
Samuelson, R. (1993), The death of management, Newsweek, 121 (19), 55.
Savage, G.T., T.W. Nix, C.J. Whitehead and J.D. Blair (1991), Strategies for assessing and
managing organizational stakeholders, Academy of Management Executive, 5 (2), 6175.
Scherer, A.G. and G. Palazzo (2007), Toward a political conception of corporate responsibility: business and society seen from a Habermasian perspective, Academy of Management
Review, 32 (4), 1096120.
Schumpeter, J.A. (1942), Capitalism, Socialism and Democracy, New York: Harper Bros.
Sercovich, F., C. Ahn, C. Frischtak, M. Mrak, H. Muegge, W. Peres and S. Wangwe (1999),
Competition and the World Economy: Comparing Industrial Development Policies in the
Developing and Transition Economies, Cheltenham, UK and Northampton, MA, USA:
Edward Elgar.
Sethi, S.P. (1994), Imperfect markets: business ethics as an easy virtue, Journal of Business
Ethics, 13 (10), 80315.
Sethi, S.P. (1996), The notion of the good corporation in a competitive global economy
moving from a socially responsible to a socially accountable corporation, in J.W. Houck
and O.F. Williams (eds), Is the Good Corporation Dead? Social Responsibility in a Global
Economy, Lanham, MD: Rowman & Littleeld, pp. 83100.
Sethi, S.P. (2002a), Standards for corporate conduct in the international arena: challenges and
opportunities for multinational corporations, Business and Society Review, 107 (1), 2040.
Sethi, S.P. (2002b), Corporate codes of conduct and the success of globalization, Ethics and
International Aairs, 16 (1), New York: Carnegie Council on Ethics and International
Aairs, pp. 89106.
Sethi, S.P. (2003a), Setting Global Standards: Guidelines for Creating Codes of Conduct in
Multinational Corporations, Hoboken, NJ: John Wiley.
Sethi, S.P. (2003b), Globalization and the good corporation: a need for proactive coexistence, Journal of Business Ethics, 43 (12), 2131.
Sethi, S.P. and L. Sama (1998), Ethical behavior as strategic choice by large corporations: the
potential impact of industry structure and market place competition, Business Ethics
Quarterly, 8 (1), 6584.
Sharplin, A. and L.D. Phelps (1989), A stakeholder apologetic for management, Business and
Professional Ethics Journal, 8 (2), 4153.

98

Handbook of research on global corporate citizenship

Shleifer, A. and R.W. Vishny (1986), Large shareholders and corporate control, Journal of
Political Economy, 94 (3), 46188.
Steinmann, H. and A.G. Scherer (1998), Corporate ethics and global business: philosophical
considerations on intercultural management, in B.N. Kumar and H. Steinmann (eds),
Ethics in International Business, Berlin: de Gruyter, pp. 1346.
Steinmann, H. and A.G. Scherer (2000), Corporate ethics and management theory, in
P. Koslowski (ed.), Contemporary Economic Ethics and Business Ethics, Berlin: Springer,
pp. 14892.
Stewart, J.B., (1991), Den of Thieves, New York: Simon & Schuster.
Stiglitz, J.E. (2003), Globalization and Its Discontents, New York: W.W. Norton.
Stiglitz, J.E. and A. Charlton (2005), Fair Trade for All: How Trade Can Promote Development,
Oxford and New York: Oxford University Press.
Strange, S. (1996), The Retreat of the State, Cambridge: Cambridge University Press.
Trevio, L.K. and G.R. Weaver (1999), The stakeholder research tradition: converging theorists Not converging theory, Academy of Management Review, 24, 2227.
Varley, P. (1998), The Sweatshop Quandary: Corporate Responsibility on the Global Frontier,
Washington, DC: Investor Responsibility Research Center.
Vise, D.A. and S. Coll (1991), Eagle on the Street, New York: Scribners.
Vogel, D.J. (2005), Is there a market for virtue? The business case for corporate social responsibility, California Management Review, 47, 1945.
Walton, C.C. (1988), The Moral Manager, Cambridge, MA: Ballinger.
Wogaman, P. (1986), Economics and Ethics: A Christian Inquiry, Philadelphia, PA: Fortress
Press.
Wood, D.J. (1991), Corporate social performance revisited, Academy of Management
Review, 16, 691718.
Young, I.M. (2004), Responsibility and global labor justice, Journal of Political Philosophy,
12, 36588.

Corporate citizenship and community

stakeholders
Robert A. Phillips and R. Edward Freeman

Introduction
It is fair to say that the concept of corporate citizenship has witnessed a
meteoric rise in terms of scholarly attention since Logsdon and Wood presented their original paper (Wood and Logsdon 2001, 2002; Logsdon and
Wood 2002). Some elaborations and extensions of corporate citizenship
make reference to earlier scholarship, others do not. Stipulating that work
on corporate citizenship is intended to add to the conversation around the
role of business in society, it is reasonable to assume that scholars adopting (and adapting) the language of corporate citizenship nd something
there that allows for better description, analysis and synthesis of this role.
Though what better may mean here remains an open question, a sensible
place to begin considering the question is to compare and contrast corporate citizenship with more established ways of conceiving businesss role in
society such as, in the case of this chapter, stakeholder theory.
Among the challenges of comparing corporate citizenship and stakeholder theory is the fact that neither theory can currently claim a dening
consensus regarding the content and limits of their respective domains. To
diering degrees, both are less monolithic concepts than ways of conceiving of and arranging the complex relationships between business organizations and other social actors. A further diculty shared by both
corporate citizenship and stakeholder theory is that summarizing the literature may, or may not, include writings that unreectively use the terminology of citizenship or stakeholders without reference to any particularly
deep thoughtful or coherent conceptual foundations. Much of the heavy
lifting in numerous treatises on corporate citizenship is done by merely
inserting the word citizenship and assuming that author and reader have
the same understanding of what this denotes and implies. The identity of
the citizens, the basis of this status, and the rights, duties and obligations
of such status are only a few of the matters on which such agreement is
assumed, but often not made explicit. Logsdon and Wood (2002) pioneers
in the area of corporate citizenship recognize this ambiguity in the use of
citizen and briey address it; though Moon et al. (2005) have criticized the
suciency of these eorts and oer their own elaboration.
99

100

Handbook of research on global corporate citizenship

Similar to the unreective use of citizenship terminology, discussions of

corporate citizenship also employ the term stakeholder with little or no reference to the now extensive literature on these relationships. To be fair, corporate citizenship is hardly alone in this failure to consider the deeper
foundations and challenges of extant stakeholder scholarship, though
perhaps we should expect more of a literature stream so closely related in
subject matter to stakeholder theory. In many cases, studies of corporate citizenship employ the terminology of stakeholders suggesting a conation
of the two theories. Our reading of the literature on corporate citizenship
leads us to believe that the language of stakeholders is adopted nearly universally. This makes the failure to consider prior theorizing about stakeholder relationships still more troubling.
When used in this somewhat supercial fashion, corporate citizenship
may be fairly described as a recapitulation of well-rehearsed corporate
social responsibility (CSR) concepts with the added benets and dangers
of importing central and implied, but underexamined concepts of citizenship from political theory. Others, both within this volume and elsewhere
(Waddock 2001; Windsor 2001; Wood and Logsdon 2001; Moon et al. 2005)
have examined the relationship between corporate citizenship and historical
notions of both CSR and citizenship itself. We shall not repeat these eorts.
Nor shall we undertake here to remedy the dearth of conceptual depth concerning the citizenship within the corporate citizenship literature others
in this volume take on this question with greater expertise and focus.
Instead we shall focus on stakeholder theory. In particular, we shall focus
on community stakeholders. We discuss the source and limits of organizational obligations to communities and describe a typology of potential
relationships that organizations may have with communities. While this discussion of community stakeholders may well be interpreted as a description of corporate citizenship obligations and how they can or should be
discharged, we do not see this interpretation as necessary nor shall we
attempt to fully render such an interpretation. The concept of citizenship
is too complex to convincingly make such a case here. Our more humble
goal is to discuss rmcommunity relationships as one potential lever in
beginning this more complicated endeavor of reconciling and distinguishing corporate citizenship and stakeholder theories. And in the process, we
hope to highlight challenges involved with the unreective use of stakeholder terminology in discussions of corporate citizenship.
Corporate citizenship and community stakeholders
When considered in terms of stakeholder theory, corporate citizenship
focuses particular attention on the community as a stakeholder. It focuses
managerial and scholarly attention toward consideration of the role of the

Corporate citizenship and community stakeholders

101

organization in its community, with a concomitant de-emphasizing of

other core stakeholders. Although there are myriad ongoing debates about
the scope and content of stakeholder theory together with employees,
nanciers, suppliers and customers local communities are universally
counted among the archetypal ve stakeholders (Phillips 2003). But this
apparent agreement may itself mask ambiguities similar to those associated
with the concepts of citizenship and stakeholder alluded to above. That is,
stakeholder theorists may reasonably be accused of replacing citizen with
community member and running foul of a similar imprecision as corporate citizenship scholars.
As with corporate citizenship, there has been some eort to better specify
the content of community within stakeholder theory (Dunham et al. 2001,
2006). According to Dunham et al. (2006, p. 24), community as a stakeholder has come to represent something of a default, a sort of error term
containing all sorts of interests and externalities that fail to nd home
within customer, supplier, employee, or shareholder groups. They suggest
that communities can be subdivided into what they term communities of
place, communities of interest, communities of practice and virtual
advocacy groups. Communities of place are the shared geographic locations which most people associate, most of the time, with community.
Actors living in, more or less, close proximity to one another are, of necessity, mutually interdependent. At the very least these actors share the same
natural environment (for example, water, air) and infrastructure (for
example, roads, schools, police, retail establishments). And, typically, these
actors share even deeper interdependencies such as local norms of behavior, dress, language and other necessary aspects of consistent, ongoing
social interaction. These mutual interdependencies appear sucient in the
eyes of many stakeholder theorists to establish at least local communities
as organizational stakeholders. But, for any particular organizational issue,
the intensity of the local community members interest will vary.
This is not the case for what Dunham et al. (2006) call communities of
interest. Although they may be geographically local, the more relevant
indeed dening characteristic of these groups is their interest in a specic
topic. The stakeholder relevance of these groups is contingent upon the
organizations actual or potential ability to aect for better or worse this
interest. The coordination capacity of communities of interest has
increased dramatically with the advent of new innovations in communication and information technology. These innovations have also improved the
focal organizations ability to communicate and coordinate with these communities. Communities of interest are able to signicantly aid or harm the
focal organizations ability to achieve its goals. This ability to aect the
achievement of the rms objectives puts communities of interest squarely

102

Handbook of research on global corporate citizenship

within Freemans (1984) original denition of a stakeholder (that is, those

who can aect or are aected by the achievement of the rms objectives).
While communities of interest are often willing and able to help the rm
advance its goals, virtual advocacy groups according to Dunham et al.s
denition are consistently hostile. Relying even more extensively on information technology, the ties among the members of these groups may be
entirely conned to cyberspace. But, of course, this does not lessen their
ability to harm the achievement of the focal rms objectives. Dunham
et al.s identication of such virtual communities adds another layer of complexity to the already challenging elaboration of community stakeholders.
Finally, Dunham et al. invite readers to consider communities of practice as a new variant of community that has risen to prominence among
practitioners. They write that conceiving of a business organization as a
community of practice is:
to see it as held together by a shared concern for both the outcomes it achieves
for stakeholders (be they customers or shareholders) and the personal development and learning of its members. In fact, it sees these two as inseparable, in that
increased capabilities at the organizational level ow from development at the
individual level. (Dunham et al. 2006, p. 35)

A mirror image of virtual advocacy groups, Dunham et al.s elaboration

of communities of practice presents additional positive opportunities for
managers to reciprocally advance rm/community objectives.
Of particular relevance to this chapter, Dunham et al. suggest the
importance of the degree of symbiosis between the various community
types and the focal organization. The intensity and nature (that is, cooperative or hostile) of involvement between the organization and the community group in question are among the attributes a scholar or practitioner
must consider in determining what manner and intensity of attention is due
to a particular community stakeholder. That is, the manner and intensity
of a communitys interactions with an organization will tend to dene and
delimit the extent of an organizations stakeholder-based obligations
toward, and responsibility for, that community.
And here we may re-engage, more specically, the question of the relationship between stakeholder theory and corporate citizenship. Stakeholder
theory, as we conceive it, is more concerned with the core functions of a
rm than many elaborations of corporate citizenship with which we are
familiar. That is, the threshold of relevance for inclusion in a stakeholdertheoretic analysis involves a greater degree of symbiosis and reciprocal
impact between the community in question and the organization than
appears necessary for consideration on many accounts of corporate citizenship. We take this up in greater detail in the next section.

Corporate citizenship and community stakeholders

103

Stakeholders and global citizenship

Elsewhere (Phillips et al. 2003), we have attempted to describe some of the
limits to stakeholder theory that we believe render it more theoretically
rigorous and managerially useful. Among the delimitations we claim that
stakeholder theory does not apply to entire economies. We argue that,
Stakeholder is not synonymous with citizen or moral agent as
some wish to interpret it. Rather, a particular and much closer relationship between an organization and a constituency group is required for
stakeholder status. The theory is delimited and non-stakeholder should
remain a meaningful category (Phillips et al. 2003, p. 491). We believe
that this delimitation of the stakeholder domain as organizational ethics
rather than political philosophy is one point of distinction between stakeholder theory and much though not all elaboration of corporate
citizenship.
We would further assert that stakeholder theory is, or should be, importantly distinct from broader conceptions of CSR. While there are myriad
justications for ascribing social responsibilities to business rms, such
responsibilities often extend beyond core rm/stakeholder relationships.
While recognizing that many (perhaps most) writers on the subject of business, ethics and society employ the language of stakeholders and CSR
interchangeably, we maintain that stakeholder theorys focus on core business relationships entails signicant dierences between the two frameworks theoretically and practically. The implications of this distinction
are illustrated below using corporate philanthropy as an example.
As with CSR, the use of stakeholder terminology by the majority of corporate citizenship scholars suggests an implied synonymy between stakeholder theory and corporate citizenship. For example, Waddock (2001,
p. 27) writes, Relationships with stakeholders constitute the essence of corporate citizenship. Further, the similarities between CSR and corporate
citizenship may lead one to believe that some see all three as merely a
dierent language for discussing many of the same ideas. We believe that
there are important and useful distinctions to be made. These distinctions
return us to the topic of community stakeholders.
Figure 5.1 suggests a possible source of confusion and ambiguity both
in stakeholder theory itself as well as in corporate citizenships use of stakeholder concepts. As the gure indicates, it is dicult if not impossible to
draw a bright line distinguishing stakeholders from non-stakeholders.
More typically there are gradations. That is, there are groups who obviously
contribute to or threaten the value-creation activities of the rm. These
most intensive relationships are represented by the darkest areas of the
ovals. There are also groups whose relevance and connection to the rm is
tenuous or even nonexistent. The white space in Figure 5.1 is lled with

104

Handbook of research on global corporate citizenship

Financiers

G
L
O
B
A
L

Suppliers

Organization

Customers

Community

C
I
T
I
Z
E
N
S
H
I
P

Employees

Figure 5.1 Community stakeholders as transition between stakeholder

theory and corporate citizenship
such non-stakeholder groups. The challenge and diculty arises in the
darker and lighter gray areas within the ovals. Within each stakeholder
group, there are names and faces whose relevance, power and bases of
moral obligation are vague, perhaps even indeterminate. Potential stakeholders potential employees, potential suppliers, potential nanciers and
so on may reside in this gray area.
While a source of some vexation in delimiting stakeholders of all sorts,
the gradation of stakeholder obligation and responsibility presents particular diculties in sorting out prospective community stakeholders. As indicated in Figure 5.1, many writers have a tendency to use community far
too expansively a catch-all category for groups, individuals and causes
that do not t in one of the other categories, but which the author ardently
desires to be a stakeholder. Such treatment is represented by the conical
shape extending well outside the community oval. This way of engaging the
language of stakeholder theory subjects it to precisely the sort of criticism
from which we have tried elsewhere to rescue it. Specically, this conception of community makes stakeholder theory once more susceptible to
accusations that it is little more than warmed-over CSR and that such
excessive breadth threatens theoretical rigor (if everyones a stakeholder,
what value is added by use of the term?).
This diculty is more pronounced still when stakeholder concepts are
unreectively employed in the context of corporate citizenship. It is our

Corporate citizenship and community stakeholders

105

contention here that corporate citizenship begins to diverge from stakeholder theory as it begins to move into the conical extension of community.
Indeed, much of the writing on corporate citizenship we would place well
into the space labeled global citizenship. At this point, we argue that corporate citizenship bears little overlap with stakeholder theory and begins to
more closely resemble its CSR predecessors. Employing the language of
stakeholder theory to defend the idea of global citizenship runs contrary
to our understanding of stakeholder theory as limited to the core valueadding functions of the organization.
Corporate citizenship, stakeholder theory and philanthropy
As with the predecessor literature on CSR, corporate citizenship scholarship makes extensive reference to a rms charitable activities often as
a gauge of the quality of a rms citizenship behaviors. While in many
cases a laudable endeavor, we believe that philanthropy not related to the
rms core value-adding function lies outside the sphere of stakeholder
theorys concern. We should point out that philanthropy related to the
rms core business is more amenable to stakeholder analysis. When a
pharmaceutical company faces a decision regarding the provision of
free or discounted medicines which such companies may be specically
or uniquely qualied to provide (Hsieh 2004; Dunfee 2006), or if a microprocessor company conducts research on how to make a $100 laptop
computer, stakeholder theory may yield insight; or when a business
working in a lesser developed area provides social services for employees
and local citizens (Matten and Crane 2005, p. 166); or when philanthropy
relates directly to core stakeholder interests (for example, donation
matching programs, time o for employee charitable work, and so on),
stakeholder theory may be of some assistance. However, in the normal
course of events, corporate donations to groups lying outside of such core
rmstakeholder obligations are supererogatory that is, potentially
praiseworthy, but not obligatory.
That said, such donations are not always particularly praiseworthy.
Often such donations also have little impact on the nature and quality of
relationships between the rm and its stakeholders. Philanthropy unrelated
to the core business often has a limited, even negligible, impact on the
culture and character of the rm making such donations (we discuss in
more detail below the issue of who and what an organization would like to
be). Here we are talking about what we shall call checkbook citizenship.
Cash donations to some or other unrelated philanthropy have little eect
on the rm or its core stakeholders such donations generally have only a
tangential impact. It is tantamount to organizational values as an afterthought an appendage tacked on to what the rm really does.

106

Handbook of research on global corporate citizenship

A second danger associated with philanthropy unrelated to the rms

core value-adding functions is that, in all too many cases, it amounts to an
attempt to whitewash (or greenwash in the case of the natural environment
or bluewash in the case of eorts related to the United Nations) otherwise
harmful or dangerous rm activities. Such a company, thinks that singin
on Sundays gonna save his soul, now that Saturdays gone (Johnson
2003). These eorts appear to little inuence the rm, its stakeholders or
its core activities.
When unrelated charity and philanthropy are central to discussions of
corporate citizenship, such discussions diverge from our understanding of
stakeholder theory. Checkbook citizenship is not stakeholder theory; such
donations are outside the purview of core stakeholder responsibilities and
obligations. Although a complete discussion of what these stakeholder
responsibilities and obligations are is beyond the scope of this chapter (see,
for example, Phillips 2003), we shall spend the remainder of our space elaborating on the obligations and responsibilities to community stakeholders.
In so doing, we hope to show how a stakeholder-theoretic consideration of
communities delimited to discussion of core value-adding activities can
address a limited set of questions pertaining to corporate citizenship. We
shall consider a rm relationship with community stakeholders from two
overlapping perspectives. We shall rst discuss Phillipss obligations of
stakeholder fairness as a means of ascertaining the (necessarily imprecise)
limits of rm obligations to community stakeholders. We follow this discussion with an elaboration of possible postures a rm might take toward
community stakeholders thus delimited.
Obligations of stakeholder fairness
We have argued here that the concept of corporate citizenship as we
understand it bears a much larger footprint than stakeholder theory.
Figure 5.1 suggests that corporate citizenship (and the notion of global
corporate citizenship in particular) extends well beyond a rms obligatory
stakeholder concerns. Obligations extending indenitely and universally
are of limited use in managerial (or personal or political) decision making.
This leads us to inquire as to the source of such stakeholder obligations and
their limits. This is the question taken up by Phillips (2003) in his discussion of obligations of stakeholder fairness.
Obligations of stakeholder fairness make stakeholder status largely a
matter of reciprocity. Reciprocity is a widely perhaps universally recognized moral norm. Leaders since Odysseus1 (Donlan 1998) ignore the
demands of reciprocity at their own peril. Reciprocity is not only normatively ubiquitous, it is also a deeply and powerfully embedded feature of
human psychology (Cialdini 1984). One means, therefore, of establishing

Corporate citizenship and community stakeholders

107

obligations to stakeholders is through application of a principle of stakeholder fairness. That is,

whenever persons or groups of persons voluntarily accept the benets of a
mutually benecial scheme of co-operation requiring sacrice or contribution
on the parts of the participants and there exists the possibility of free-riding,
obligations of fairness are created among the participants in the co-operative
scheme in proportion to the benets accepted. (Phillips 1997, p. 57)

By voluntarily joining with groups of suppliers, customers, employees,

shareholders, communities and others for mutual social and economic
benet, reciprocity-based obligations of fairness are created within such
networks. Those particular groups and individuals to whom such obligations are owed are stakeholders.
This understanding of reciprocal stakeholder obligations allows scholars
and practitioners to place a limit on the extension of stakeholder-specic
responsibility of rms to communities. As a matter of stakeholder theory,
rms bear no additional responsibility for groups outside the cooperative
endeavor subject to the caveat below. One implication of this is that using
stakeholder terminology to describe responsibilities of global citizenship
is spurious. Such usage renders stakeholder theory a morass of everyone is
a stakeholder of everyone else. Such ambiguity is neither helpful nor useful
to corporate citizenship, stakeholder theory or managerial practice.
There are two important caveats that bear mention regarding the limits
of stakeholder-based obligations. The rst is that a group or individual may
be a stakeholder even without being the subject of a direct reciprocal stakeholder obligation. In addition to this direct moral stakeholder legitimacy, a
group may also bear an indirect legitimacy derived from a relationship with
the focal organization or its stakeholders. For example, if a group has the
power to aid or hinder the achievement of the rms core activities even
though not engaged in a reciprocal relationship with the rm that group
may be a derivative stakeholder. Dunham et al.s virtual advocacy groups
discussed above t this description. The groups power makes it a legitimate
object of managerial attention, even if the rm owes it no particular obligation beyond mitigating (in the case of hostile power) or embracing (in the
case of productive power) these potential eects.
In cases relevant to corporate citizenship, for example, philanthropy
related to the core value-adding activities of the rm may positively
inuence employee or community stakeholder relations. Or, such charity
may allay the harmful criticism of a particularly powerful activist group.
Donations are made, in these cases, due to the actual or potential eects on
other stakeholders, not due to any stakeholder obligation owed to the
charity itself or any obligation to the powerful, but hostile activist group.

108

Handbook of research on global corporate citizenship

Reciprocity between the rm and charity recipients or between the rm and

hostile activists is, at best, attenuated.
The second caveat to the limits on stakeholder obligation that bears
mention here is that stakeholder-based obligations are not the sole source
of moral obligation a rm may have. That is, actors may have nonreciprocal obligations, duties and responsibilities of many sorts. These
could be based on, for example, familial relations, human rights, and even
direct duties of charity and citizenship. The language of stakeholders
implies a particular sort of relationship characterized by an obligation
arising from an intentional exchange between actors as opposed to duties
arising from such unintentional characteristics as being human, a member
of a clan or a citizen of a state. The absence of a reciprocal stakeholder relationship does not give a rm license, for example, to violate the human
rights of a group or individual. It merely means that this particular form of
actor-generated moral relation is absent.
Thus, there may exist more general duties of philanthropy that a rm
must meet as a powerful social actor. But this does not make the donations
obligatory from a stakeholder perspective, nor does it make those in need
stakeholders. As an analogy, let us say that I agreed to write a book chapter
for you and thereby incurred an obligation to you. It may also be the case
that I have a generalized duty of charity that may be (partially) fullled by
helping rebuild post-hurricane Katrina New Orleans or going to Africa to
help with HIVAIDS missions. While all would be excellent uses of my
time, only one of these counts as an obligation I have voluntarily undertaken. Similarly, we would reserve the term stakeholder for those core
actors to whom the organization has a certain sort of reciprocal obligation
and those whose relevance can be derived from these specic stakeholder
relationships.
Relevant to corporate citizenship, this implies that there may be any
number of other moral relations between a rm and its fellow social actors.
For example, there may be a general duty of charity that may apply to rms
as repositories of enormous resources. There may also be more specic
duties of charity or assistance (Hsieh 2004; Dunfee 2006) between rms
with particular even unique capacity to help. Corporate citizenship
scholars may well appeal to these sources of duty, obligation and responsibility in advancing their claims. But these are distinct from reciprocitybased stakeholder obligations.
While we hope that the distinctions and clarications above add a
measure of increased precision to discussions of community stakeholders
and corporate citizenship, dicult cases remain. The case of second- and
third-tier suppliers in a network of nested supplier relationships continue
to defy easy placement within a stakeholder framework (Phillips and

Corporate citizenship and community stakeholders

109

Caldwell 2005). One widely discussed variant of this challenge is a rm that

contracts a portion perhaps all of its manufacturing to another, ostensibly independent rm. This subcontractor, in turn, may further outsource
some or all of this work to still another rm, and so on (for example, Nike,
Mattel, Wal-Mart, YUM! Brands, and so on ad innitum). What sort of
stakeholder obligations does the rst rm have vis--vis the second-, thirdand fourth-tier rm? Or the fourth-order rms employees and local community? Although we shall not attempt to systematically resolve this ambiguity at the nexus between community stakeholder obligations and duties
of corporate citizenship, its relevance as an increasingly prominent borderline case merits a few comments.
One reasonable question to ask when assessing the stakeholder-based
moral obligations of rms to second- and third-level suppliers is the actual
level of independence between the organizations. Independence within
such nested and networked value chains is a function of among other criteria perhaps the exclusivity of interaction. Briey, claims of independence between rm and supplier are attenuated to the degree that the rm
is the sole (or even super-majority) customer of that supplier. And so on
down the value chain. If a rm buys all, or nearly all, of a suppliers output
and this supplier itself buys all, or nearly all, of the output of its own suppliers, this value chain begins to more closely resemble a hierarchy or at
a minimum, a network organization (Powell 1990). Arguments for stakeholder obligations to such value chain members are strengthened as the
degree of transactional exclusivity rises. The frequency of rm/supplier
transactions and the duration and history of the relationship may also contribute to a general notion of the intensity of the value chain relationships
and hence the power of fairness-based stakeholder obligations.
Beyond claims to the normative stakeholder legitimacy of putatively
independent members of a rms value chain, there are also increasingly
prevalent and prominent attributions of value chain responsibility from
powerful stakeholders. When arising from powerful or otherwise morally
legitimate stakeholders, these attributions of value chain responsibility can
give rise to derivative stakeholder legitimacy. Issues relating to outsourced
manufacturing by Nike and Mattel are among the more prominent examples of companies that were compelled by stakeholder pressure to take
greater responsibility for actions occurring deep within their value chains.
But they are hardly alone.
There is, we have claimed, a point at which relationships with other value
chain members become so tenuous and distant from a businesss core valueadding activities that the framework of global citizenship becomes more
applicable than that of stakeholder theory. While exclusivity and duration of
relationships as well as other sources of derivative stakeholder obligations

110

Handbook of research on global corporate citizenship

are all suggestive of where the line between stakeholder obligation and global
corporate citizenship may be drawn in networked value chains, the line is
neither a bright nor a static one. The standards applied by local communities and other stakeholders create a line that moves around in the gray area,
often dramatically. Work remains for scholars and managers in better
dening these obligations and community expectations. With these points in
mind, we turn now to a discussion of the possible ways an organization
might engage with its relevant stakeholder communities.
A typology of community engagement
If the above is correct, there are many ways for companies to engage their
communities. We propose ve strategic postures that a company may take
with respect to a community. A strategic posture is like Porters (1980)
notion of generic strategy. It is a predisposition to act in a particular way
(Freeman and Gilbert 1987).
Companies may deal with communities as:
1.
2.
3.
4.
5.

community creators;
community builders;
community good citizens;
community apathetic citizens; and
community exploiters or destroyers.

This typology is merely a beginning way to conceptualize rmcommunity

relationships and should not be taken as denitive, mutually exclusive or
collectively exhaustive of such relationships. Obviously, in large complex
corporations, there may well be elements of several generic strategies, or
dierent postures may exist at dierent times. Just as clearly, a company
may intend to be a community builder, but in fact be a community
exploiter. These strategic postures work as follows.
Community creators
There are many examples of how companies have been community creators.
The most obvious and direct are so-called company towns. While there are
fewer companies intending to create company towns in todays global marketplace, company towns, in fact, still exist. Disneys planned community of
Celebration, Florida adjacent to its theme park near Orlando is a more recent
example of a company creating a community of place (Ross 2000). Disney
attempted, with mixed success, to institute a number of particularly progressive ideals in education, community and urban planning. Communities of
place can also be created by companies in conjunction with local governments; Levittown, PA is among the better-known historical examples of this.

Corporate citizenship and community stakeholders

111

More often today companies create communities of interest and communities of practice (recall the earlier discussion of Dunham et al.s (2006)
taxonomy of communities). Silicon Valley companies have created a community of interest around computer technology. Particular companies contribute to that community in a way that all may benet. Particular
companies such as eBay in eect create communities of interest by the very
nature of their services. A person can use eBay to nd other like-minded
actors to trade with. Of course, internet service providers, as well as companies such as YouTube, FaceBook and MySpace, create communities of
interest. Wikipedia creates a community of practice where stakeholders are
all engaged in a common task. Likewise, Linux and others create communities of practice where the lines between traditional stakeholder roles
become radically ambiguous.
Community builders
Community builders are like community creators. Perhaps they did not
have the original idea of creating the community, but their strategic posture is to try to maintain and improve the communities that they nd.
Community builders see healthy communities as places where their
employees, customers and other stakeholders live. Vibrant communities are
good for the company and its stakeholders. Community builders ask, what
can we do to make this community better for its citizens, and therefore ultimately, better for our company and its stakeholders as well?.
Community of practice builders try to nd places where stakeholder
interests are joint, where there is unrealized value to be created. They try to
nd places where the interests of employees, customers, suppliers and communities go in the same direction but this fact has gone unrecognized or
underemphasized. A classic example here is the Ronald McDonald House.
Here, McDonalds supports the administrative costs of taking donations
from customers and creating facilities to help families dealing with illness,
especially children. The actual funding comes from McDonalds customers.
McDonalds is helping their customers build better communities through
this coordination function. McDonalds facilitation role is an example
aligning the interests of local communities and customers. This activity
bears similarity to the better-known example of companies who match
employee contributions to charity. With such a strategy they work with
their employees to contribute to areas that the employees believe will build
a better community.
Community good citizens
Being a good citizen means obeying the law and doing what one is asked
to do if it is reasonable. However, community good citizens would take a

112

Handbook of research on global corporate citizenship

reactive rather than proactive approach. If the community builder is always

asking how to make the community better, the community good citizen is
usually willing to abide by community rules, contribute its share, but rarely
takes the lead in making the community better.
Many companies take a good citizen corporate posture to communities.
They often have a corporate philanthropy program to respond to community requests. They pay attention to obeying the letter and spirit of local
laws and customs. Companies that apply this approach to communities of
interest, pay special attention to obeying internet privacy laws, copyright
procedures and the like. They realize that by getting these issues wrong,
they can easily create and motivate the ire of virtual advocacy groups and
see community relations as a way to avoid conict and only secondarily as
a means of building positive value.
Community apathetic citizens
Apathetic postures yield doing the very minimum necessary. An analogy
can be drawn to the individual citizen who obeys the law, but does not vote,
lobby, give to charity or contribute to the conversation about how to
improve or maintain the community. The apathetic citizen is not intentionally destructive or exploitative of communities per se; nor is he/she
actively concerned about community. There is apathy in the defenses occasionally oered by companies doing business in developing nations prone
to conict or systematic human rights violations. Such a defense would say
something akin to, the harm to the community is independent of our presence or activities here. If we werent the ones engaged here, someone else
would be. We comply with the law, but cannot be expected to solve local
community diculties. Companies doing business in such nations have
been known to disavow responsibility for these eects so long as they are
within the letter of the local laws. Nor is this limited to developing nations.
In the context of advanced industrial societies, casinos, bars, landlls and
euent-generating rms of all kinds provide only a snapshot of industries,
some members of which have shown apathy toward the negative externalities of their operations.
Community exploiters or destroyers
There is a sense in which apathy in the sense described above can serve
to destroy communities. Beyond a minimalist, geographic sense, a community is an institution that requires active participation in order to ourish.
An organization that occupies a central, prominent role in a community
may have a destructive eect on that community through mere apathy.
Beyond this apathy, however, companies occasionally exploit communities more actively as a resource. Often these companies pit one community

Corporate citizenship and community stakeholders

113

against another for the best regulatory environment, tax breaks or the one
willing to make the biggest investment in infrastructure. These companies
are not content to live within the letter of the law, but actively lobby to
change the laws in order to make their exploitation more eective.
If the rmcommunity relationship always favors the company and
exploits the community, it is likely that (in a relatively free society) the community will turn against the company. Indeed, independent of the presence
of actual destruction or exploitation, in todays world it is enough for there
to be the perception of exploitation to negatively aect a companys bottom
line. Companies such as Wal-Mart have been charged (with wide disparities in the power and persuasiveness of the arguments presented) with
exploiting communities and have incurred massive costs to reduce that
perception.
Environmental issues are another area where many companies are seen
as community exploiters or destroyers. Although not unique to them, rms
in extractive industries in lesser developed countries are especially susceptible to such perceptions (again, with better and worse underlying bases for
such perceptions).
Often, being a community exploiter or destroyer is a logical devolution
from being a good citizen or apathetic citizen. Each of these postures views
the community stakeholder as secondary to the process of value creation.
And, when this happens, customers and employees, and those groups who
see themselves as advocates, often non-governmental organizations, rise to
speak for the community. Firms perceiving of the community in this
afterthought fashion are missing the reciprocal, value-adding possibilities
of closer community relationships such as those found among community
creator and community builder companies. Furthermore, we submit, the
failure to delimit core stakeholder relationships from concepts like global
corporate citizenship catalyze this perception of the community as secondary by overextending managerial and organizational decision-making
resources.
Conclusion
We have suggested that some aspects of corporate citizenship are part and
parcel of a nuanced view of stakeholder theory, with particular emphasis
on community stakeholders. Obviously our analysis does not do full justice
to the idea. It focuses only on the managerial aspect of corporate citizenship, especially in the private sector. While the United Nations may well be
able to delve into the meaning of global citizenship and its implications,
most managers simply want to understand how to deal with specic communities in the value-creation process. By thinking about creating, building, exploiting and so on, communities, they can begin to see communities

114

Handbook of research on global corporate citizenship

as vital stakeholders, and be explicit about the specic understanding of

community that they have, as well as their own posture. Such is not a recipe
for success (a rule for riches), but it is a way to stop the process of selfdeception and get on with the important task of value creation.
Note
1. The rule of reciprocity, that one gives of ones own accord, with the expectation that a
suitable return will follow, was a powerful regulator of social behaviour at every stage of
Greeces history. The Homeric epics provide our earliest observation of its operation
(Donlan 1998, p. 51).

References
Cialdini, R.B. (1984), Inuence, New York: Quill.
Donlan, W. (1998), Political reciprocity in Dark Age Greece: Odysseus and his hetairoi, in
C. Gill, N. Postlethwaite and R. Seaford (eds), Reciprocity in Ancient Greece, Oxford and
New York: Oxford University Press, pp. 5172.
Dunfee, T.W. (2006), Do rms with unique competencies for rescuing victims of human catastrophes have special obligations? Corporate responsibility and the AIDS catastrophe in
sub-Saharan Africa, Business Ethics Quarterly, 16 (2), 185210.
Dunham, L., R.E. Freeman and J. Liedtka (2001), The soft underbelly of stakeholder theory:
towards understanding community, Presentation to Society of Business Ethics Annual
Meeting, August, Washington, DC.
Dunham, L., R.E. Freeman and J. Liedtka (2006), Enhancing stakeholder practice: a particularized exploration of community, Business Ethics Quarterly, 16 (1), 2342.
Freeman, R.E. (1984), Strategic Management: A Stakeholder Approach, Boston, MA: Pitman.
Freeman, R.E. and D.R. Gilbert, Jr (1987), Corporate Strategy and the Search for Ethics,
Englewood Clis, NJ: Prentice-Hall.
Hsieh, N. (2004), The obligations of transnational corporations: Rawlsian justice and the
duty of assistance, Business Ethics Quarterly, 14 (4), 64361.
Johnson, J. (2003), Taylor, On and On, Brushre Records, Los Angeles, CA.
Logsdon, J.M. and D.J. Wood (2002), Business citizenship: from domestic to global level of
analysis, Business Ethics Quarterly, 12 (2), 15587.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
Moon, J., A. Crane and D. Matten (2005), Can corporations be citizens? Corporate citizenship as a metaphor for business participation in society, Business Ethics Quarterly, 15 (3),
42953.
Phillips, R.A. (1997), Stakeholder theory and a principle of fairness, Business Ethics
Quarterly, 7 (1), 5166.
Phillips, R.A. (2003), Stakeholder Theory and Organizational Ethics, San Francisco, CA:
Berrett-Koehler.
Phillips, R. and C. Caldwell (2005), Value chain responsibility: a farewell to arms length,
Business and Society Review, 110 (4), 34570.
Phillips, R., R.E. Freeman and A.C. Wicks (2003), What stakeholder theory is not, Business
Ethics Quarterly, 13 (4), 479502.
Porter, M.E. (1980), Competitive Strategy, New York: Free Press.
Powell, W.W. (1990), Neither market nor hierarchy: network forms of organization, in
B. Staw and L.L. Cummings (eds), Research in Organizational Behavior, Greenwich, CT:
JAI Press, pp. 295336.
Ross, A. (2000), The Celebration Chronicles: Life, Liberty and the Pursuit of Property Value in
Disneys New Town, New York: Ballantine Books.
Waddock, S.A. (2001), Integrity and mindfulness: foundations of corporate citizenship,
Journal of Corporate Citizenship, 1, 2538.

Corporate citizenship and community stakeholders

115

Windsor, D. (2001), Corporate citizenship: evolution and interpretation, in J. Andriof and

M. McIntosh (eds), Perspectives on Corporate Citizenship, Sheeld: Greenleaf, pp. 3952.
Wood, D. and J. Logsdon (2001), Theorising business citizenship, in J. Andriof and
M. McIntosh (eds), Perspectives on Corporate Citizenship, Sheeld: Greenleaf, pp. 83103.
Wood, D. and J. Logsdon (2002), Business citizenship: from individuals to organizations, in
R.E. Freeman and S. Venkatraman (eds), Ethics and Entrepreneurship, Run series 3,
Charlottesville, VA: Society for Business Ethics, pp. 5994.

Business ethics, corporate virtues and

corporate citizenship1
Robert C. Solomon

In our culture we know of no organized movement towards power which is not

bureaucratic and managerial in mode and we know of no justications for
authority other than those couched in terms of instrumental eectiveness.
(Alastair MacIntyre 1985)
Corporations are places where both individual human beings and human communities engage in caring activities which are aimed at mutual support and
unparalleled human achievement.
(R. Edward Freeman and Jeanne Liedtka 1991)

What is a corporation?
In the recent lm, The Corporation, one of the most evident entities in contemporary society, the corporation, is treated as something of a Frankenstein
monster, a benign creation of local governments that grew and grew, became
not only self-conscious but megalomaniac, and now threatens to take over
the world, destroying both nature and human beings in its pursuit of domination. Frankensteins monster, however, was recognizably human. Indeed,
in Mary Shelleys original version, he was quite a sympathetic creature, misunderstood and persecuted by the townspeople who were so terried of him.
Defenders of the corporation would no doubt leap to this extended comparison, insisting that the corporation, like the monster, has been greatly
misunderstood and wrongly persecuted. Mark Achbar and Jennifer Abbott,
who made this very successful documentary, chose to emphasize a very
dierent sense in which the corporation became a person, not by displaying
sympathetic human traits but rather by way of a legal sleight of hand. Taking
advantage of an Amendment to the American Constitution intended to
protect the rights of freed slaves in the South, clever corporate lawyers
managed to have the corporation declared a person, making it eligible to
sue for those same rights. But what kind of a person is the corporation,
Achbar and Abbott ask in the lm? Their answer is, a psychopath (that is,
someone with Antisocial Personality Disorder or APD), as dened by the
standard DSM-IV (The Diagnostic and Statistical Manual of Mental
Disorders). Thus the Frankenstein monster, who refuses to conform to social
norms, who is deceitful, impulsive, aggressive, who shows reckless disregard
for the safety of others, and is incapable of sustaining relationships.
116

Business ethics, corporate virtues and corporate citizenship

117

The lm is unabashedly polemical. I have rarely shown or watched it with

MBA students or corporate executives without someone exploding with
rage about this piece of leftist propaganda. To which I respond that it is
essential that they learn both to recognize propaganda and to see it critically, and that means appreciating what is right about it as well as what is
overstated, unfair, or just plain wrong. The corporation has become a
person (albeit ctitious) in the eyes of the law and the courts. At the same
time, corporations have taken on personalities (plural, for the lm is purely
polemical in so far as it implies that all corporations are the same, a point
which the lm itself quite emphatically makes). Corporations have personalities. Sometimes (and typically in their formative stages), the personality
of the corporations reects the personality of the founder. One thinks of
IBM and Hewlett-Packard, for example, or the Ford Motor Company
before Henry went o the deep end with politics and prejudice. But as corporations grow and develop and become more managerial in nature, they
further their personalities as well. They do not, for the most part, just
become more impersonal. Indeed, a few of them become more much
humane.
But the charge of the lm is one to be taken seriously. To what extent do
some (many?) corporations t the model of the APD, the psychopath? And
why do they do this? Unlike their esh and blood human counterparts, it
will do no good to look for the wayward gene or the abusive parent.
Understanding their origins and history will certainly provide some valuable clues, but no adequate account of corporate pathology or malfeasance
can avoid talking about the current structures of the company and the
atmosphere and environment in which the company operates. So there is a
good deal to be said about corporate structure, corporate governance and
corporate culture. There is also a good deal to investigate and challenge
with regard to short-term accounting procedures and what are called (by
way of an all-purpose excuse) market forces and, more recently, globalization. But that is not what I want to do here. I am more interested in what
one might call the atmosphere surrounding the corporation and the cultures that dene corporate lives, the very air that people breathe. The
atmosphere can be understood as the ideas that dene the corporation,
what keeps it going and denes its strategies and its culture. In particular, I
am interested in how we think about corporations and, even more important, how corporations think of themselves. Ideology, Sigmund Freud might
have said if he did business ethics, is destiny.
Here the central concern of The Corporation becomes very much our
center of focus as well. The lm does not talk much about how corporations actually think of themselves (that is, how the people who lead and
manage them think of both their corporations and of themselves), but the

118

Handbook of research on global corporate citizenship

implication is quite clear. Corporations (and the people who run them)
think of themselves as the law dictates as prot-making machines. From
this seemingly obvious idea, all the rest of it the pathology, the destruction of the environment, the amoral behavior quickly follows. It is not
unlike the dimmer students I teach in business classes when I ask them to
what do you aspire?. They respond, to make a lot of money. In so far as
a corporation thinks of itself as a prot-making machine, albeit in the guise
of a ctional person, we can continue to expect social irresponsibility on
a devastating scale.
Adam Smith on prots (its not what you think)
Adam Smith never used the phrase the prot motive. He probably would
have considered it nonsensical. The phrase was invented in the 19th century
(long after Smiths death) by social critics of the new economics who
wanted to caricature what they saw as the one-dimensional greed of the
new capitalists (another word Smith did not use). In fact, what Smith did
nd to be basic in human nature was the very opposite of what his later
defenders insisted was the sole human motive, self-interest or greed
(according to Gordon Gekko in Oliver Stones Wall Street, alias Ivan
Boesky in real life). Smith, au contraire, insisted that what was basic in
human nature was the moral sentiment of sympathy, a sense of fellow
feeling and community. That, in turn, was basic to the new economy. Smith
(of course) did not deny the importance of self-interest and the desire to
make a prot (accordingly his classic statement about the grocer). But commercial activity had as its precondition a civilized society, requiring a
modicum of trust and mutual understanding. In fact, I have argued that
one of the great historical virtues of the free market is the psychological
fact that people are required to care about what other people want as potential customers. Sympathy is not just a nice complement to self-interest in
the market. It is as much of a precondition of commercial life as muchtouted self-interest.
In so far as corporations are persons, what if we were to deny the implication that corporations are prot-making machines? I have all too often
heard the complaint that immediately follows: Are you against prots? Do
you suppose that a corporation can even survive without making a prot?
(well yes, they can and do: universities, charities, hospitals, governments
and many non-governmental organizations survive and have even thrived
for years without making a prot, but that is not the point to make with
these hysterical critics). What I tell them is that one need not attack prots
or deny the need to make a prot to understand that the purpose of business, and consequently the purpose of corporations, is something larger
than the bottom line. It has to do with making society a better place,

Business ethics, corporate virtues and corporate citizenship

119

providing jobs, useful products and services. That does not mean that one
needs to deny or demean the bottom line. What I say is this: every discipline
or profession has its own self-glorifying vocabulary. It is how they justify
themselves. It is how they sell themselves. It is how they think of themselves
and what they do. Business and corporations are no exception:
1.

2.

3.

4.

Politicians bask in the concept of public service even while they

pursue personal power and exploit the fears and prejudices of their
constituents. But no one would question the virtue of devoting oneself
to public service.
Lawyers defend justice and our rights on a handsome contingency
basis as they lead us through a thicket of regulations and liabilities
created by other lawyers. But no one would question the virtue of
devoting oneself to justice and rights.
Physicians (even those with bulging portfolios) heal and save lives,
an undeniably noble cause. No one would question the value of health
and human life.
University professors immodestly celebrate what they do in the noble
language of truth and knowledge even when they spend most of their
time battling each other for status in exquisitely petty but vicious
campus politics. But few people would question the value of dedication to the truth, enlightening young minds, and preserving the values
of Civilization.

In the case of business, however, the language of self-description is

neither noble nor self-glorifying. One of my businessman friends told me,
in business you always know how well you are doing. You just have to put
your hand in your pocket (I did not pursue the vulgar ambiguity of the suggestion). The simple phrase, the bottom line, and the vulgar verb, making
money, summarize a one-dimensional purely self-interested image of business that is not only unattering but, in the public perception, extremely
destructive. Surely such selsh activity should be regulated!
We can readily understand why we should applaud professionals who
devote themselves to public service, or defend our rights, or cure illness and
save lives, or search for truth and knowledge. It is not so easy to understand
why we should cheer for people who (as they themselves seem to claim) work
only for material gain for themselves. In so far as this is so, it leads to distressing self-realizations. Plunderers! gasps Ray Anderson, the now famous
CEO of Interface Corporation in The Corporation, Thats what we are. But
this is in fact what relatively few people in business think of themselves, at
least once they think beyond the usual clichs and New Yorker jokes. One
can put as much faith as one wishes in Adam Smiths imaginative invisible

120

Handbook of research on global corporate citizenship

hand and the theory that individual self-interest yields collective prosperity, but it does not follow that we should describe what we do in business
merely as making money. Corporations and business in general make possible most of the comforts and advantages of modern civilized life, and it is
an act of unspeakable cynicism to think that all of this is due to the unintended consequences of mere prot-making machines.
The social responsibility of business, writes Milton Friedman in a
famous polemical article, is to increase prots (Friedman 1970). He does
not include the word only, but it is clearly implied. Friedman argues that
the managers of a company have a duciary responsibility to the owners
(in a publicly held company, the stockholders), which is certainly true. But
note that Friedmans argument, although it is headlined in terms of prots,
is in fact concerned with the notion of responsibility, not a prot concept
at all. Managers and executives may make prots, but not (as such) for
themselves.
The most dangerous metaphors are those that present themselves not as
metaphors but as straight matter-of-fact description about the ways of the
world. Foremost among these is the idea that business at its very essence is
driven by a basic human urge called the prot motive. It is such talk of the
prot motive, I want to suggest, that causes more damage than any amount
of sleaziness or dishonest dealings on the part of the business community.
It is the narrow-minded language of the prot motive that gives rise to
public suspicion. Peter Drucker, in his magnum opus, Management, writes
of managers that it is their own rhetoric that is one of the main reasons for
hostility . . . There is only the prot motive [but] why that desire should be
indulged in by society any more than bigamy, for instance, is never
explained (Drucker 1974).
A better way to think about business
In the spirit of Adam Smith, I have developed a theoretical framework
which I call an Aristotelian approach to business. As Aristotle is famous
largely as the enemy of business, some justication of this approach would
seem to be in order. True, he was the rst economist (twenty centuries
before Smith), and he had much to say about the ethics of exchange. He
might well be the rst (known) business ethicist as well. But Aristotle distinguished two dierent senses of what we call economics, one of them
oecinomicus or household trading, which he approved of and thought
essential to the working of any even modestly complex society, and chrematisike, which is trade for prot. Aristotle declared the latter activity
wholly devoid of virtue. Aristotle despised the nancial community and,
more generally, all of what we would call prot seeking. He argued that
goods should be exchanged for their real value, their costs, including a

Business ethics, corporate virtues and corporate citizenship

121

fair wage for those who produced them, but he then concluded, mistakenly, that any prot (that is, over and above costs) required some sort of
theft (for where else would that surplus value come from).
Consequently, Aristotle called those who engaged in commerce parasites and had special disdain for money-lenders and the illicit, unproductive practice of usury, which until only a few centuries ago was still a crime
(usury did not originally mean excessive interest; it referred to any charge
over and above cost). Only outsiders at the fringe of society, not respectable
citizens, engaged in such practices (Shakespeares Shylock, in The Merchant
of Venice, was such an outsider and a usurer, though his idea of a forfeit
was a bit unusual). All trade, Aristotle believed, was a kind of exploitation.
Such was his view of what we call business. Aristotles greatest medieval
disciple, St Thomas Aquinas, shared the Philosophers disdain for commerce, even while he struggled to permit limited usury (never by that term,
of course) among his business patrons. (A charge for lost use of loaned
funds was not the same as charging interest, he argued.) Even Martin
Luther, at the door to modern times, insisted that usury was a sin and a
protable business was (at best) suspicious. Aristotles inuence on business, it could be argued, has been long-lasting and nothing less than
disastrous.
In particular, it can be argued that Aristotle had too little sense of the
importance of production and based his views wholly on the aristocratically proper urge for acquisition, thus introducing an unwarranted zerosum thinking into his economics. And, of course, it can be charged that
Aristotle, like his teacher Plato, was too much the spokesman for the aristocratic class and quite unfair to the commerce and livelihoods of foreigners and commoners. It is Aristotle who initiates so much of the history of
business ethics as the wholesale attack on business and its practices.
Aristotelian prejudices underlie much of business criticism and the contempt for nance that preoccupies so much of Christian ethics even to this
day, avaricious evangelicals notwithstanding. Even defenders of business
often end up presupposing Aristotelian prejudices in such Pyrrhonian
arguments as business is akin to poker and apart from the ethics of everyday life (Carr 1968) and the [only] social responsibility of business is to
increase it prots (Friedman 1970). But if it is just this schism between
business and the rest of life that so infuriated Aristotle, for whom life was
supposed to t together in a coherent whole, it is the same holistic idea
that businesspeople and corporations are rst of all part of a larger community, that drives business ethics today.
We can no longer accept the amoral idea that business is business (not
really a tautology but an excuse for being socially irresponsible and personally insensitive). According to Aristotle, one has to think of oneself as

122

Handbook of research on global corporate citizenship

a member of the larger community the polis for him, the corporation, the
neighborhood, the city or the country (and the world) for us and strive to
excel, to bring out what was best in ourselves and our shared enterprise.
What is best in us our virtues are in turn dened by that larger community, and there is therefore no ultimate split or antagonism between individual self-interest and the greater public good. Of course, there were no
corporations in those days, but Aristotle would certainly know what I mean
when I say that most people in business now identify themselves if
tenuously in terms of their companies, and corporate policies, much less
corporate codes of ethics, are not by themselves enough to constitute an
ethics. But corporations are not isolated city-states, not even the biggest
and most powerful of the multinationals (contrast the image of the sovereign state of ITT). They are part and parcel of a larger global community.
The people who work for corporations are thus citizens of (at least) two
communities at once, and one might think of business ethics as getting
straight about that dual citizenship. What we need to cultivate is a certain
way of thinking about ourselves in and out of the corporate context, and
this is the aim of ethical theory in business, as I understand it. It is not, let
me insist, anti-individualistic in any sense of individualism that is worth
defending. The Aristotelian approach to business ethics rather begins with
the two-pronged idea that it is individual virtue and integrity that counts,
but good corporate and social policy encourage and nourish individual
virtue and integrity. It is this picture of community, with reference to business and the corporation, that I want to explore here. One might speak of
communitarianism here, but it is not at all evident that one must give up, at
the same time, a robust sense of individuality (as opposed to self-interested
individualism). Community and virtue will form the core of the thesis I
want to defend here.
To call the approach Aristotelian is to emphasize the importance of
community, the business community as such (I want to consider corporations as, rst of all, communities) but also the larger community, even all
of humanity and, perhaps, much of nature too. This emphasis on community, however, should not be taken to eclipse the importance of the individual and individual responsibility. In fact, the contrary is true, it is only
within the context of community that individuality is developed and
dened, and our all-important sense of individual integrity is dependent
upon and not opposed to the community in which integrity gets both its
meaning and its chance to prove itself.
One of the most important aspects of the Aristotelian approach is the
emphasis on the purposiveness (or teleology) that denes every human
enterprise, including business. But that purposiveness transcends the realm
of business and denes its place in the larger society, though the popular

Business ethics, corporate virtues and corporate citizenship

123

term social responsibility makes this sound too much like an extraneous
concern rather than the purpose of business as such. On both an individual
and the corporate levels, the importance of the concept of excellence is
intricately tied to this overall teleology, for what counts as excellence is
dened both by its superiority in the practice and its role in serving larger
social purposes. Aristotelian too is a strong emphasis on individual character and the virtues (where a virtue is all-round personal excellence),
embedded in and of service to the larger community. It is the role of the
individual in the corporation (and of the corporation in society) that concerns me, not the individual alone, not the structure of the corporation
abstracted from the individuals that are its members (and not the nature of
capitalism, abstracted from the character of particular corporations and
the communities they serve). That is why the idea of business as a practice
is absolutely central to this approach: it views business as a human institution in service to humans and not as a prot-making machine or in terms
of the mysterious magic of the market.
Finally, it may be theoretically least interesting but it is polemically,
perhaps, most important, I prefer the name Aristotelian just because it
makes no pretensions of presenting something very new, the latest cuttingedge theory or technique of management but rather reminds us of something very, very old, a perspective and a debate that go all the way back to
ancient times. What Aristotle gives us, I want to suggest, is a set of doctrines that both conforms to and goes beyond historicism, namely, the
incessant appeal of ethics (including business ethics) to the standards of a
particular community but at the same time the standards of community as
such, that is, the very possibility of human beings living and working
together. What the Aristotelian approach promises is not something novel
and scientic but an approach that is very staid and above all very human.
The idea is not to infuse corporate life with one more excuse for brutal
changes, a new wave of experts and seminars and yet another downsizing
bloodbath. It is to emphasize the enduring importance of continuity and
stability, clearness of vision and constancy of purpose, corporate loyalty
and individual integrity for both nancial success and (more important) a
decent life.
The corporation as community
The Aristotelian approach begins with the idea that we are, rst of all,
members of organized groups, with shared histories and established practices governing everything from eating and working to worshipping. We are
not, as our favorite folklore would have it, rst of all individuals, that is,
autonomous, self-sustaining, self-dening creatures who, ideally, think
entirely for ourselves and determine what we are. The self-made man (or

124

Handbook of research on global corporate citizenship

woman) is a social creature, and he (or she) makes it by being an essential

part of society, however innovative or eccentric he or she may be. To say
that we are communal creatures is to say that we have shared interests, that
even in the most competitive community our self-interests are parasitic on
and largely dened in terms of our mutual interests. To think of the corporation as a community is to insist that it cannot be, no matter how vicious
its internal politics are, a mere collection of self-interested individuals. To
see business as a social activity is to see it as a practice that both thrives on
competition and presupposes a coherent community of mutually concerned as well as self-interested citizens.
To be sure, communities in the contemporary Western world are anything but homogeneous or harmonious, but the claim I am making here is
more metaphysical than nostalgic, and the claim is that what we call the
individual is socially constituted and socially situated. The individual
today is the product of a particularly mobile and entrepreneurial society in
which natural groups (notably the extended family or tribe) have been
replaced by articial organizations such as schools and corporations.
Movement between them is not only possible (as it is usually not between
tribes and families) but encouraged, even required. Human beings are not,
as such, individuals. They are separated by the boundaries of their epidermises, to be sure, and there is some (rather philosophically confusing) sense
in which each one has his or her own thoughts and emotions, even if these
are prompted by, learned from and the same as the thoughts and emotions
of other people. The individual was an invention of the 11th and 12th centuries in Europe, when families were separated by war and the tightly
arranged structures of feudalism were breaking apart. The individual
became increasingly important with the advent of capitalist and consumer
society, but (as so often in the overly materialist history of economics) he
or she became important rst because of changing religious conceptions,
with increased emphasis on personal faith and individual salvation. But
the individual was always a relative, context-dependent designation. An
individual in one society would be a sociopath in another. (The nail that
sticks out is the one that gets hammered, goes a traditional Japanese
proverb.)
What we call the individual is, from even the slightest outside perspective, very much a social, even a conformist conception. To show ones individuality in the nancial world, for example, it may be imperative to wear
the same tie as everyone else, usually of a color (red, yellow, pink) or a
pattern (paisley) that only a true eccentric would have chosen on his own.
To further emphasize individuality (which connotes creativity, even
genius), one might sport a moustache or a beard (though the range of styles
is very strictly circumscribed). But getting beyond trivial appearances, even

Business ethics, corporate virtues and corporate citizenship

125

our thoughts and feelings are, it is obvious, for the most part dened and
delineated by our society, in our conversations and confrontations with
other people. Princeton anthropologist Cliord Geertz once wrote that a
human being all alone in nature would not be a noble, autonomous being
but a pathetic, quivering creature with no identity and few defenses or
means of support. Our heroic conception of the individual often
exemplied by the lone (usually male) hero is a bit of bad but self-serving
anthropology. There are exceptional individuals, to be sure, but they are
social creations and become exceptional just because they serve the needs
of their society, more often than not by exemplifying precisely those forms
of excellence most essential to that society.2
We nd our identities and our meanings only within communities, and
for most of us that means at work in a company or an institution.
However we might prefer to think of ourselves, however important we
(rightly) insist on the importance of family and friends, however much we
might complain about our particular jobs or professional paths, we dene
ourselves largely in terms of them, even if, in desperation, in opposition to
them. Whether a person likes or hates his or her job will almost always turn
on relationships with the people one works for and works with, whether
there is mutual respect or animosity and callousness or indierence. Even
the lone entrepreneur the sidewalk jeweler or the nancial wizard will
succeed only if he or she has social skills, and enjoys (or seems to) his or
her customers or clients.
The philosophical myth that has grown almost cancerous in many business circles, the neo-Hobbesian view that business is every man [sic] for
himself and the Darwinian view that its a jungle out there are direct
denials of the Aristotelian view that we are rst of all members of a community and our self-interest is for the most part identical to the larger interests of the group. Competition presumes, it does not replace, an underlying
assumption of mutual interest and cooperation. Whether we do well,
whether we like ourselves, whether we live happy productive lives, depends
to a large extent on the companies we choose. As the Greeks used to say,
to live the good life one must live in a great city. To my business students
today, who are all too prone to choose a job on the basis of salary and startup bonus alone, I always say, to live a decent life choose the right
company. In business ethics the corporation becomes ones immediate
community and, for better or worse, the institution that denes the values
and the conicts of values within which one lives much of ones life. A corporation that encourages mutual cooperation and encourages individual
excellence as an essential part of teamwork is a very dierent place to work
and live from a corporation that incites either/or competition, antagonism
and continuous jostling for status and recognition. There is nothing more

126

Handbook of research on global corporate citizenship

natural about the latter, which is at least as much the structuring of an

organization (whether intended or not) as the cooperative ambience of the
former.
The rst principle of business ethics, at least in the eyes of American law,
is that the corporation is not only a ctional person but a citizen, a member
of the larger community and inconceivable without it. This is the idea that
has been argued over the past few decades as the principle of social responsibility, but the often attenuated and distorted arguments surrounding that
concept has been more than enough to convince me that the same idea
needed a dierent foundation. The notion of responsibility is very much
a part of the atomistic individualism that I am attacking as inadequate, and
the classic arguments for the social responsibilities of business all too
readily fall into the trap of beginning with the assumption of the corporation as an autonomous, independent entity, which then needs to consider
its obligations to the surrounding community. But corporations like individuals are part and parcel of the communities that created them, and the
responsibilities that they bear are not the products of argument or implicit
contracts but intrinsic to their very existence as social entities. There are
important and sometimes delicate questions, of course, about what the
social responsibilities of business or of a particular corporation might be,
but the question whether they have such responsibilities is a non-starter, a
bit of covert nonsense. Friedmans now-infamous idea that the social
responsibility of business is to increase its prots betrays a willful misunderstanding of the very nature of both social responsibility and business.
(Not surprisingly, the author of that doctrine has elsewhere protested,
alienating his friends along with his critics, that he is not pro-business but
pro-free enterprise.)
These claims are closely akin to the ideas captured in the pun-like notion
of a stakeholder, that broadening conception of the corporate constituency which includes a variety of aected (and eective) groups and all
sorts of dierent obligations and responsibilities.3 The term has become
something of a coverall, and so what considerable advantages it has provided in terms of breadth are to some extent now compromised by the
uncritical overuse of the word. For example, the notion of stakeholder
suggests discrete groups or entities whereas the primary source of dilemmas in business ethics is the fact that virtually all of us wear (at least) two
hats, for example as employees and as members of the larger community,
as consumers and as stockholders, as a manager and as a friend, and these
roles can come into conict with one another. As a program for ethical
analysis in business, the standard list of stakeholders is notoriously incomplete where it concerns ones competitors rather than ones constituents. In
an obvious sense, no one is more aected by ones actions (and, sometimes,

Business ethics, corporate virtues and corporate citizenship

127

no one is more eective in determining ones actions) than ones competitors. Good sportsmanship and fair play are essential obligations in business ethics. And yet it seems odd to say that the competition has a stake
in the company. The idea of community thus goes beyond the idea of particular responsibilities and obligations although it embraces the same
impetus toward larger thinking and citizenship endorsed by stakeholder
analysis.
What is a corporate community? To begin with, it is a heterogeneous conglomerate riddled with personality clashes, competing aims and methodologies, cliques and rivalries and criss-crossed loyalties. The very fact that
a corporation requires specialization and the division of labor makes
inevitable such heterogenity. Two young men working in a garage, pooling
their resources and their knowledge to produce a successful commodity
may, in the throes and thrills of development and struggle, experience an
uninterrupted sense of one-ness that would impress even a Buddhist. But
once the product is launched and marketing people and managers are
brought in to do the job, that primeval corporate unity is shattered and, as
in the most famous recent case of this kind, one or both of the founders of
the company may nd themselves displaced or even red by the assistants
they brought in to help them. There is an intrinsic antagonism to be
explained in terms of social class rather than economics and in terms of our
mythologies of work rather than the nature of the work itself between the
shop oor and the managerial oce, just as there is an obvious opposition
(not entirely nancial) between those divisions of the corporation that
always need to spend more money (advertising and research and development teams, for example) and those whose job it is to save it. Add to this
the many dierent characters and personalities who populate even the most
seemingly homogeneous company (although these dierences too are
already pre-established in the social types and classes who tend to one or
the other position or profession) and one can appreciate the foolishness in
our popular treatment of corporations as monolithic entities with a single
mind and a single motive.
And yet, there is an emergent phenomenon that does often speak with a
single voice and deserves to be treated (and not just by the law) as a singular entity, the corporation. Groups have personalities just as individuals
do, and heterogeneous, even fragmented groups can nevertheless have a singular character just as conicted people do. What this means, in terms of
collective responsibility, for example, is that it is a mistake to speak of corporations as only collections of individuals, both because the individuals
in question are themselves the creatures of the corporation and because the
corporation is one of those sums that is nevertheless greater than its many
constituent parts. Aristotelian ethics takes both the corporation and the

128

Handbook of research on global corporate citizenship

individual seriously without pretending that either is an autonomous entity

unto itself. Corporations are made up of people, and the people in corporations are dened by the corporation. Business ethics thus becomes a
matter of corporate ethics, emphatically not in the sense that what counts
is the ethics of the corporation, considered as an autonomous, autocratic
agent, ruling over its employees (perhaps exemplied by its corporate
code), or in the more innocent but naive sense that the ethics of the
corporation is nothing but the product of the collective morality of its
employees.
The morals of executives, particularly the exemplary morals of those
who are most visible in the corporation, are an important inuence on corporate morality, to be sure. But it is the nature and power of institutions
particularly those in which a person spends half of his or her adult waking
life to shape and sanction the morals of the individual, including most
top executives. There may well be (and often is) a gap or dichotomy between
a persons sense of ethics on the job and his or her sense of right and wrong
with friends and family. There may well be real ethical dierences within a
company, particularly between its various departments and divisions. But
even in diversity and conict the ethics of a corporation becomes clearly
and often soon visible to those most closely attached to, aliated with or
aected by it. Corporations can (and often do) get a bad rap, an institutional black eye caused by a tiny percentage of its employees. (Hertz Renta-Car was caught up in a monumental scandal a few years ago, which
turned out to involve some 20 dealers out of 20 000. Nevertheless, it was the
name Hertz that took the brunt of the abuse, and numbers were simply
not the issue.) Such apparent injustices throw a revealing light on a
company and its ethical standards, however, and give the best corporations
a chance to show their moral mettle. Communities are essential units of
morality, and corporations are ultimately judged not by the numbers but
by the coherence and cooperation both within their walls and with the
larger communities in which they play such an essential social as well as
economic role.
An Aristotelian metaphor: corporate culture
It is a sign of considerable progress that one of the dominant models of
current corporate thinking is the idea of a corporate culture. As with any
analogy or metaphor, there are, of course, disanalogies, and the concept of
corporations as cultures too quickly attained the status of a fad thus
marking it for easy ridicule and imminent obsolescence (Pastin 1986).4 But
some fads nevertheless contain important insights. This one in particular.
The concept of a corporate culture, rst and foremost, is distinctively
and irreducibly social. It presupposes the existence of an established

Business ethics, corporate virtues and corporate citizenship

129

community and it explicitly rejects atomistic individualism. Individuals are

part of a culture only in so far as they play a part in that culture, participate in its development and t into its structure. Cultures are by their very
nature (more or less) harmonious, that is, they are not possible unless
people cooperate and share some minimal outlook on life. There could not
be a completely competitive culture, only a Hobbesian jungle of mutually
disagreeable animals.5 Cultures have rules and rituals, particular modes of
dress and address; and most important of all (for our purposes) every
culture has an ethics, including those basic rules that hold the society
together and protect it from itself.
The various taboos of every culture, including our own (and most corporate cultures), may indeed (for reasons now forgotten) protect the
integrity of the community. Much of the corporate culture may be only the
way we do things around here and may be of signicance only because they
help dene the membership of the culture. But corporate cultures presuppose shared knowledge, experience and values. A corporate culture is an
essentially cooperative enterprise with public as well as private purposes. It
cannot be reduced to a legal ction or an economic mechanism or the
numbers in the annual report or anything else that is not rst and foremost
a group of people working together.
It is important to appreciate the signicance of the culture metaphor
against the backdrop of more vulgar, sometimes brutal, atomistic,
Darwinian and mechanical metaphors. Just as business (in general) has
been saddled (and saddled itself) with unattering and destructive concepts
and images, thus misunderstanding itself, corporations both in general
and as individual entities have too often tended to present themselves
(despite all of their public relations work and advertising to the contrary)
as giant juggernauts, mechanical monsters as faceless as the glass and steel
buildings that typically form their headquarters. Friendly and familiar corporate logos only go so far. Consumers realize that they are so many
numbers. Employees now recognize that they are only so many replaceable
parts. Even top executives come to learn that they are only part of the
mechanism. It is no wonder that most Americans who do not work for corporations think of them as inhuman and as inhumane places to work, and
those millions who do work in and for corporations nd themselves at a
serious conceptual disadvantage. What kind of a life is this, being a replaceable part in a giant machine, for which the only virtue is mere eciency?
Ironically the conception of a corporate culture, though relatively recent,
has its origins in the more familiar model of the bureaucracy. This developed during the French revolution and the Napoleonic era as a correction
to inherited privilege and incompetence, but it has its roots back in Rome,
in the labyrinthine organization of the medieval Catholic Church and, even

130

Handbook of research on global corporate citizenship

before that, in some of the ancient civilizations of the Middle East. The
concept of the bureaucracy was extensively promoted and popularized
(though with considerable misgivings) by the great German sociologist
Max Weber at the turn of the last century. The imagery of the bureaucracy
provided something of a compromise between the juggernaut and machine
imagery of the 18th-century enlightenment on the one hand and the
Renaissance and romantic demands for humanization on the other.
(Indeed the whole of the Western enlightenment was something of an odd
mix of machine metaphors and humanism, but that is another story; for
example, see Toulmin, 1989.)
Since Weber, bureaucracy has become something of a dirty word for
us, suggesting ineciency instead of the model of eciency it was once
intended to be. It calls up images of Soviet ineectiveness and Kafkaesque
catacombs. Even Weber charged that the bureaucracy had only instrumental rationality and was detrimental to human spirituality. And yet,
modern corporations are in large part bureaucracies, and this is not necessarily to say something against them. But what is important and progressive about bureaucracies is not just their traditional and now largely
discredited emphasis on eciency or even their still essential emphasis on
meritocracy. It is rather the humanization of the bureaucracy as culture
and the all-important shift of emphasis from machine-like eciency to
interpersonal cooperation and human productivity.
Bureaucracies, like cultures and unlike machines, are made up of people,
not parts. Bureaucracies have purposes. Bureaucracies involve people in
making judgments, employing their skills, working together in an organized way to produce results. Those results may be the maintenance of the
status quo, no easy trick in modern societies. For all of the obsessive talk
about innovation and competition, the essential function of most corporate bureaucracies that is, the larger part of the corporation by far is
just this maintenance of the status quo. One can understand and sympathize with the fear and uncertainty about the future that is part of most
markets without joining the myth-making chorus of future shocks and
megatrends. To be sure, change these days is both very real and very fast.
Maintaining the status quo in a fast-changing society requires being adaptive and organically tuned to the times, but it also requires a durable structure and a stable organization. Overemphasis on change and the sacrice
of stability as evidenced in so many corporate shake-ups and restructurings today weakens the corporation and makes it a far less ecient
competitor.
The idea of a corporate culture is an improvement over the more staid
image and impersonal nature of the bureaucracy in several respects, but in
one respect in particular. A culture is rst of all a structured community

Business ethics, corporate virtues and corporate citizenship

131

of individuals and their interrelationships. Bureaucracies, on the other

hand, remain subtly individualistic as well as mechanistic. People may work
together in their various capacities but this togetherness is a function of
the organization and not a relationship between them. They may not be
cogs in a machine but they are functionaries who are readily replaced by
anyone else with the same skills and knowledge. Our image of the bureaucracy, accordingly, is lots of people isolated in little oces (or bureaus)
doing their jobs and, if they are conscientious and ecient, not stopping to
talk to one another or chit-chat over the coee machine. Our image of a
culture, by way of contrast, essentially involves people talking with one
another (probably dancing, cooking and worshipping together as well).
Thus the image of the bureaucracy carries over the machine image of facelessness and an attitude of indierence toward individuals. In a culture, by
contrast, individuals are essential, not just as impersonal parts but as
members with personalities as well as functional roles.
In a corporate culture, people, not functions or mere functionaries, work
together for their shared and not merely mutual benet. People, unlike
functions and mere functionaries, have personalities, personal ambitions
and outside interests. They make friends (and enemies). They need a
moment to unwind, catch their breath, relieve themselves, express themselves, daily renew their personal contacts around the oce (how quickly
an oce can be disrupted when a manager just fails to say hello to
everyone that morning). Anal-retentive types may see this (wrongly) as
inecient, and such interpersonal behavior as gossip and chit-chat as a distraction, but this betrays a fatal misunderstanding of both people and
organizations. That is why I have insisted, with such seeming innocence and
insistence, that corporations are rst of all communities. They are social
groups with a shared social purpose (or purposes). That is what business
ethics is all about, not just attending to an abstract notion of social responsibility, much less pursuing prots within the constraints of law and compliance. It is about enlarging our sense of what we do and what business is
and, The Corporation notwithstanding, understanding corporations not as
socio-pathological persons but as healthy communities and potentially
good citizens.
Two challenges: globalization and conglomeration
This conscientiously humanistic Aristotelian model faces at least two major
challenges as we proceed headlong into the 21st century, 24 centuries after
Aristotle commented on the ethics of commerce in his own time. Aristotle
enjoyed the benets of a tightly knit, admirably democratic community of
25 000 or so, the Greek polis. That raises serious questions about the applicability of his model to populations that are measured by the billion (more

132

Handbook of research on global corporate citizenship

than a quarter billion in the USA, more than a billion in both India and
China). So, too, we need to ask whether the Aristotelian model, no matter
how attractive it may be, will survive the disruption of corporations by
virtue of globalization and conglomeration, in other words, mergers and
acquisitions and frequent downsizing. The Aristotelian model presumes a
stable corporate community, but as operations as well as capital are shifted
overseas and the site of the corporation is split and scattered around the
globe, there is a real question whether any humanistic model can stand up
to the more abstract and impersonal legal conception of a corporation.
But, then again, the global legal framework for business is by no means
settled either, and so one wonders what will remain of the very idea of the
corporation, over and above the brute fact of organized global power,
power which (it is often noted) equals or betters the power of most of the
governments in the world. Our answer, it seems to me, is that we must hold
onto something like the Aristotelian model. The nancial world may be
rapidly changing but peoples basic needs do not change, whatever the new
technology and our new and constantly shifting communities. We need
other people. We need security, predictability, and some sense of familiarity. It is true that there is a breed of humans who manage to exist seemingly
without such needs (and do very well in the new cultureless corporations as
a result), but the question that presses itself forward is the central question
of The Corporation, whether such a character is really a psychopath rather
than a new model for how to be human. So the challenge is how or
whether we can maintain our humanity in the face of globalization.
This is much the same challenge, often on a domestic level, as that following the disruption of corporations due to mergers and acquisitions and
frequent downsizing. Good companies such as IBM or VW, for instance,
went through the equivalent of hell when they were forced to re tens of
thousands of loyal employees, many of them lifelong employees. The
trauma was extreme. At IBM, for instance, there were suicides. But even for
those who survived the cuts, community life was radically dislocated as fear
and paranoia replaced camaraderie and the sense of joint person and
shared identity. The very idea of employment, accordingly, has changed in
the United States. The presumption of security and continuance has been
replaced by the concept of employment at will, with no assurances, much
less guarantees. This is made quite explicit as jobs are outsourced (often
to the same person who used to work in and for the corporation). But our
response should be the same. Without denying the necessity of corporations improving their eciency and eectiveness (which is not just to be
equated with improving the return to the shareholders), we need community, security, predictability and familiarity. A good corporation (the best
100 companies to work for) is not only a successful corporation but also a

Business ethics, corporate virtues and corporate citizenship

133

congenial and virtuous community, which in turn encourages congeniality

and virtue in its executives, managers and employees. That is a model we
must not let go of, for the alternative is a world, no matter how supercially
prosperous (measured by the wealth of its wealthiest citizens) that few
working people would want to live in.
Notes
1. Portions of this chapter have been adapted from my book, Ethics and Excellence, Oxford
University Press, 1991.
2. There is always the Star Trek myth, of course, the benign outsider who brings to a civilization some virtue that is sorely missing but wholly lacking (for example, Kirks courage,
Spocks rationality), and the more generic Joseph Campbell myth of the hero who leaves
his society and wanders o on his own, later returning with new virtues to save the society.
But the fact that these are myths should already tell us something about their sociological status. The virtues supposedly imported are already celebrated as such.
3. The term stakeholder began oating around the Business Roundtable about two or three
decades ago, but it gained currency in William Evan and R. Edward Freeman (1983), A
stakeholder theory of the modern corporation.
4. For example, see Mark Pastin (1986), The Hard Problems of Management: why corporations should have weak cultures and strong ethics. But one is tempted to speculate
whether Pastin, who learned ethics under the tutelage of Roderick (ideal observer
theory) Firth at Harvard, might not have too little respect for the shared mores that come
of participation of cultural life and too little concern for the dispassionate negotiations
of the social contract (ibid., p. 129), The lesson is clear. Forget culture and think about
fair agreements (p. 144), arguing that cultures are intrinsically conservative and strong
cultures put basic beliefs, attitudes and ways of doing things beyond question. Cultures
are hard to change, but this, I want to argue, is precisely their strength. Sometimes, ignoring the culture works best.
5. The most famous modern counterexample, the infamous Ik tribe of the mountain ranges
of Africa, has been often abused for this purpose. Colin Turnbulls careful description of
the comparative callousness and competitiveness of the Ik shows quite clearly that
beneath their selshness there is a cultural method, a sense of coherence even in the face
of a hostile and alienating environment. Within the context of a culture, the Ik do indeed
strike us as shockingly indierent to one anothers well-being (even to the welfare of their
own children), but nevertheless the culture itself displays the requisite structure of mutual
attention, shared goals and minimally harmonious cohesion if not exactly cooperation.

References
Carr, Alfred (1968), Is business blung ethical?, Harvard Business Review, 46 (1), 14353.
Drucker, Peter (1974), Management, New York: Harper & Row.
Evan, William and R. Edward Freeman (1983), A stakeholder theory of the modern corporation, reprinted in T. Beauchamp and N. Bowie (eds), Ethical Theory and Business,
Englewood Clis, NJ: Prentice-Hall, 4th edition, pp. 7584.
Freeman, R.E. and J. Liedtka (1991), Corporate social responsibility: a critical approach,
Business Horizons, 34 (4), 928.
Friedman, Milton (1970), The social responsibility of business is to increase its prots, New
York Times Magazine, 13 September.
MacIntyre, Alastair (1985), After Virtue, London: Duckworth, 2nd edition.
Pastin, Mark (1986), The Hard Problems of Management, San Francisco, CA: Jossey-Bass.
Solomon, Robert C. (1991), Ethics and Excellence, Oxford: Oxford University Press.
Toulmin, Stephen (1989), Cosmopolis: The Agenda of Modernity, New York: Free Press.
Turnbull, Colin M. (1972), The Mountain People, New York: Simon & Schuster.

PART II
CONTEMPORARY ISSUES
AND CHALLENGES

Responsibility and global justice: a social

connection model
Iris Marion Young1

Introduction
In this chapter I clarify the status of claims about global justice and injustice that are increasingly voiced and accepted in our world.2 Such claims
present a problem for political philosophy because until recently most
philosophical approaches to justice assumed that obligations of justice
hold only between those living under a common constitution within a
single political community. I shall argue that obligations of justice arise
between persons by virtue of the social processes that connect them; political institutions are the response to these obligations rather than their basis.
I develop an account of some such social processes as structural, and argue
that some harms come to people as a result of structural social injustice.
Claims that obligations of justice extend globally for some issues, then, are
grounded in the fact that some structural social processes connect people
across the world without regard to political boundaries.
The second and more central project of this chapter is to theorize the
responsibilities that moral agents may be said to have in relation to such
global social processes. How ought moral agents, whether individual or
institutional, conceptualize their responsibilities in relation to global injustice? I propose a model of responsibility from social connection as an interpretation of obligations of justice arising from structural social processes.
I use the example of justice in transnational processes of the production,
distribution and marketing of clothing to illustrate operations of structural
social processes that extend widely across regions of the world.3
The social connection model of responsibility says that all agents who
contribute by their actions to the structural processes that produce injustice have responsibilities to work to remedy these injustices. I distinguish
this model from a more standard model of responsibility, which I call a
liability model. I specify ve features of the social connection model
of responsibility that distinguish it from the liability model: it does not
isolate perpetrators; it judges background conditions of action; it is
more forward than backward looking; its responsibility is essentially
shared; and it can be discharged only through collective action. The nal
section of the chapter begins to articulate parameters of reasoning that
137

138

Handbook of research on global corporate citizenship

agents can use for thinking about their own action in relation to structural
injustice.
Global connections and obligations of justice
A widely accepted philosophical view continues to hold that the scope of
obligations of justice is dened by membership in a common political community. On this account, people have obligations of justice only to other
people with whom they live together under a common constitution, or
whom they recognize as belonging to the same nation as themselves. In all
of his writing on justice, for example, Rawls assumes that the scope of those
who have obligations of justice to one another is a single relatively closed
society (Rawls 1971 [1999], pp. 78). The members of each such society are
mutually bound by obligations of justice that they do not have to outsiders.
This is not to say that insiders have no moral obligations to outsiders. There
are some moral obligations that human beings have to one another as
humans; these are cosmopolitan obligations or obligations to respect
human rights. In The Law of Peoples, Rawls (1999) reiterates that principles of justice as fairness mutually oblige members of distinct societies to
one another, yet do not apply to the moral relationships among people
between societies across the globe. The law of peoples is broader and
thinner than justice as fairness (ibid., pp. 1122).
David Miller also conceives principles of justice as having in their scope
only relations among those persons who dwell together within the same
nation-state. Obligations to organize coercive institutions to ensure distributive fairness according to need, desert and equal respect obtain only
between persons who belong together in the same nation-state and who live
under a single political constitution (Miller 1995). Miller worries that a
globalizing world is making state sovereignty more porous and liable to
being aected by and aecting persons and circumstances outside these
nation-state borders. He concludes from this undeniable fact not that principles of justice should follow these globalizing trends, but rather that social
justice itself may be a historically specic idea and set of practices whose
time is past (Miller 1999, ch. 1).
As I understand the logic of this position, it holds that obligations of
justice presuppose the existence of shared political institutions. It is incoherent to say that relationships between people are unjust or just, on this
interpretation, in the absence of shared institutions for adjudicating such
claims or regulating their relations. Some more general and less stringent
obligations obtain between persons across political jurisdictions just
because they are human. But these are not obligations of justice.
A contrary position about moral obligation I shall call cosmopolitan
utilitarian. On this view, nation-state membership or any other sort of

Responsibility and global justice

139

particularist relationship among persons is irrelevant to assessing the

nature, depth or scope of obligations they have to one another. Moral agents
have identical obligations to all human beings and perhaps include other
creatures. There is a moral imperative to minimize suering, wherever it
occurs. Every agent is obliged to do what he or she can to minimize suering
everywhere, right up to the point where he or she begins to suer. Political
membership of either the agent or the suerers is relevant only instrumentally as providing ecient means of discharging obligations and distributing particular tasks. Much about global relationships, however, can override
this issue of convenience. Peter Singer (1993, chs 2 and 9) and Peter Unger
(1996) are two prominent examples of theorists who hold this view.
I think that each of these accounts is wanting. Critics of the cosmopolitan
utilitarian position argue that it is too demanding (see, for example, Scheer
2001). It ies in the face of moral intuition, moreover, to suggest that all moral
agents have exactly the same duties to all other agents and no special obligations to some subset of persons with whom an agent has a special relationship. While the basic moral respect owed to all persons grounds the
cosmopolitan obligations that Immanuel Kant calls hospitality (Kant 1795
[1983]), obligations of justice require more and are based on more than
common humanity.
Critics of the position that limits the scope of obligations of justice to
common political membership, on the other hand, are right to argue that it
is arbitrary to consider nation-state membership as a source of obligations
of justice. Political communities have evolved in contingent and arbitrary
ways more connected to power than moral right. People often stand in
dense relationships with others prior to, apart from, or outside political
communities. These relationships may be such that their actions aect one
another in ways that tend to produce conict. Or they cooperate with
numbers of others in ongoing practices and institutions that meet some
shared objectives. In such social relations we expect fair terms of conict
resolution and cooperation. Thus, against the cosmopolitanutilitarian
position, I believe that some account needs to be oered of the nature of
social relationships that grounds claims that people have obligations of
justice to one another. It is not enough to say that the others are human.
The nation-state position, however, makes prior what is posterior from a
moral point of view. Ontologically and morally speaking, though not
necessarily temporally, social connection is prior to political institutions.
This is the great insight of social contract theory. The social connections of
civil society may well exist without political institutions to govern them. A
society consists in connected or mutually inuencing institutions and practices through which people enact their projects and seek their happiness,
and in doing so aect the conditions under which others act, often

140

Handbook of research on global corporate citizenship

profoundly. A social contract theory like that of John Locke argues that the
need and desire for political institutions arises because socially connected
persons with multiple and sometimes conicting institutional commitments recognize that their relationships are liable to conict and inequalities of power that can lead to mistrust, violence, exploitation and
domination. The moral status of political institutions arises from the obligations of justice generated by social connection, as some of the instruments
through which these obligations can be discharged.
In his landmark work, Political Theory and International Relations,
Charles Beitz (1979) challenged Rawlss assumption that the scope of obligations of justice extends only between members of a single political community by arguing that there exists an international society even in the
absence of a comprehensive political constitution to regulate it. Ongoing
economic processes of production, investment and trade connect people in
diverse regions of the world, and these relationships are often unequal in
power and material resources. People move across borders, and institutions
of expression and communication are increasingly global in their reach. The
activities of many religious, artistic, scientic, legal and service-providing
institutions and networks extend to many parts of the world without too
much regard for nation-state membership and boundaries. Beitz concludes
that principles of justice like those Rawls argues for apply globally because
there are dense global social and economic relationships (Beitz 1979). A
need for political institutions suciently wide in scope and strong to regulate these relationships to ensure their fairness follows from the global scope
of obligations of justice, rather than grounding the obligations.
Onora ONeill argues somewhat dierently to a similar conclusion. The
scope of an agents moral obligation extends to all those whom the agent
assumes in conducting her or his activity. Each of us pursues our interests
and goals within the frame of specic institutions and practices, and within
which we know others do the same. Our actions are partly based on the
actions of others, in so far as we depend on them to carry out certain tasks,
and/or in so far as our general knowledge of what other people are doing
enable us to formulate expectations and predictions about events and institutional outcomes that aects us or condition our actions. In todays world
of globalized markets, interdependent states, rapid and dense communication, the scope of the actors we implicitly assume in many of our actions is
often global. The social relations that connect us to others are not restricted
to nation-state borders. Our actions are conditioned by and contribute to
institutions that aect distant others, and their actions contribute to the
operation of institutions that aect us. Because our actions assume these
others as condition for our own actions, ONeill argues, we have made practical moral commitments to them by virtue of our actions. That is, even

Responsibility and global justice

141

when we are not conscious of or actively deny a moral relationship to these

other people, to the extent that our actions depend on the assumption that
distant others are doing certain things, we have obligations of justice in
relation to them.
It is not possible to trace how each persons actions produce specic
eects on others because there are too many mediating actions and events.
Nevertheless, we have obligations to those who condition and enable our
own actions, as they do on us. There is an asymmetry in these obligations,
however, ONeill argues, in so far as some people are rendered more vulnerable to coercion, domination or deprivation by the institutional relations. While everyone in the system of structural and institutional relations
stands in circumstances of justice that give them obligations with respect to
all the others, those institutionally and materially situated to be able to do
more to aect the conditions of vulnerability have greater obligations
(ONeill 1985; 1996, ch. 4).4
I interpret both Beitz and ONeill, along with other theorists of global
justice such as Thomas Pogge (2002), as describing transnational social
structures and the injustices they may generate as structural injustice. Alan
Buchanan similarly argues that there exists a global basic structure that
generates obligations of justice between people across national boundaries
(Buchanan 2000; 2004, especially pp. 83 and 84). Before I conceptualize
structural injustice and introduce the concept of responsibility that corresponds to it, however, let me elaborate a particular example of claims about
injustice as involving transnational social connection, namely the antisweatshop movement.
Example of global injustice: sweatshops
Although I believe that the social connection model of responsibility
applies to every case of structural injustice, whether local or global, relationships in the global apparel industry oer a perspicuous example
through which I shall explain the logic of the social connection model of
responsibility. A vocal and multilayered anti-sweatshop movement, moreover, has in recent years pressed claims on a variety of agents to take
responsibility for sweatshop conditions.
Anti-sweatshop activists have made claims on institutions that purchase
clothing in bulk, such as city governments,5 or which market clothing with
their name on them, such as universities (Featherstone 2000; Gaus 2004),
to take responsibility for the poor conditions under which these garments
are produced, often in factories on the other side of the world. Social movement activists have also passed out leaets in front of brand-name apparel
stores such as Gap or Nike or Disney, or more generic clothing retailers
such as Target and Wal-Mart, detailing that much of the clothing sold in

142

Handbook of research on global corporate citizenship

those stores is made under sweatshop conditions, and calling upon consumers to take responsibility for those conditions.
Not a few institutions and individuals nd absurd the idea that consumers and retailers bear responsibility for working conditions in far away
factories, often in other countries. Not unreasonably, they say that even if
the workers producing items they buy suer wrongful exploitation and
injustice, we here have nothing to do with it. It is, rather, the owners and
managers of the factories who are to blame. Despite the apparent reasonableness of this dissociation, the claims of the anti-sweatshop movement
seem to have struck a chord with many individuals and institutions. I think
that it is important to understand why we need a conception of responsibility dierent from a standard notion of blame or liability.
What, then, are sweatshops? Much of the clothing, shoes and other
small consumer items whose production is labor intensive, are produced in
relatively small manufacturing centers in less developed countries, which
operate at the bottom of a chain of specication, distribution and marketing that often involves hundreds of distinct companies. Research on the
global apparel industry has brought to light that sweatshops abound in
North America and Europe (Bonacich and Appelbaum 2002; Kwong
2002). The vast majority of sweatshops, however, operate in less developed
countries. In 2000, 85 per cent of US consumption of footwear, and 50 per
cent of apparel, was imported (see Elliott and Freeman 2004, p. 55).
Conditions in such manufacturing facilities vary of course, but the following are typical. The vast majority of workers are female, and often as
young as 13 or 14. They are often treated in dominative and abusive ways
by bosses, and sexual harassment is common. Typically they work 1016hour days in peak seasons; if the manufacturer is behind on order the
workers may be forced to work through the night. They have few bathroom
breaks or other opportunities for rest during their long working day. Sick
leave or vacation time are generally unavailable; a worker too ill to work is
often red. Violations of the most basic health and safety standards are
normal. Factories are often excessively hot with no ventilation, insucient
lighting, excessive noise, little re equipment, blocked exists, poor sanitation, unhygienic canteens and bathrooms, and no access to clean drinking
water. Typically workers in these facilities have no freedom to organize
unions to bargain collectively with employers. Workers who complain and
try to organize are typically threatened, red, blacklisted, beaten, and even
killed. Local governments often actively or passively support such antiunion activity.6
There should be little doubt that conditions such as these violate basic
human rights. Many international agreements and conventions prohibit
violence and intimidation in the workplace as elsewhere, and stipulate that

Responsibility and global justice

143

workers not labor under conditions that threaten their basic health and
physical safety. The meaning of such rights, moreover, ought to vary little
with local culture or level of industrial development. Exhaustion and the
need to pee are cross-cultural experiences. The right to assemble and organize ought to be recognized everywhere, and it is everywhere wrong to
intimidate and beat people who try to exercise this right. To say these are
rights is to say precisely that there is no valid moral argument for trading
them o against prots, or policies designed to foster economic growth, or
the earnings of the workers. If many workers endure these violations
without complaint because they desperately need those earnings, this is a
measure of the coercive pressures of their circumstances rather than of
their consent.
But what of their earnings? Economists argue that wage levels for the
same kind of work appropriately vary with the local cost of living and labor
market conditions, and they are right. Those who argue that the standard
of living for workers in sweatshops is often higher than in the countryside
from which many of them have moved may be correct. The wage levels of
workers in the apparel industry is nevertheless often far below the legal
minimum wage.7 Employers too often renege, moreover, in paying even
these meager wages (Women Working World Wide 2007). The workers generally have no recourse when employers underpay them, because they often
have no formal employment contracts, and the employers keep poor or no
records of the hours employees have worked. It may be true that under
normal market conditions a rise in wages for some workers will mean loss
of jobs of others; where the wages of a massive number of workers are
below subsistence level, as they often are, this is more an argument against
accepting normal market conditions than against paying living wages.
Thus far I have cited typical conditions for garment workers in factories.
A signicant portion of the people who put garments together, however,
work from their home. Employers often prefer putting out to homeworkers because there they do not have to pay for facilities and overheads and
they are not legally responsible for working conditions. Workers, especially
women workers, often prefer home work to factory work even when it pays
less, because they can avoid long and potentially harassing travel to work,
stay with their children, and save face for their husbands who can pretend
that their wives are not working (Khattak 2002). Homeworkers are often
the poorest paid, however, and work the longest self-imposed hours. The
children or old people with whom the worker wants to stay home, moreover, are often enlisted to help with the work (Ross 2004, especially ch. 2).
The subject of this chapter is responsibility in relation to injustice. The
structure of the global apparel industry diuses responsibility for sweatshop conditions. Big-name retailers in North America or Europe rarely

144

Handbook of research on global corporate citizenship

themselves own and operate factories in which clothes made to their order
are manufactured. Instead, there is a complex chain of production and distribution involving dozens or thousands of contractually distinct entities
that bring the clothes manufactured in one place to the store in which
people buy them. In this system, each of the layers in the chain believes
itself to be operating close to the margin in a highly competitive environment, and usually is under heavy pressure to meet orders at low cost by
rms higher up the chain. The rms higher up the chain, however, often
have no legal responsibility for the policies and operations of the other
rms below with which they contract.
Facilities where garments and other items are manufactured are typically
small. Their activities are dicult to regulate or monitor because their
operations frequently shut down in one place and open up in another. The
export processing zone policies of many developing countries encourage
investment in such rms and generally turn a blind eye to the extent to
which they comply with local labor law.
Elliott and Freeman present the structure of one US retailer, J.C. Penny,
with its subcontracting relations in one developing country, the Philippines.
J.C. Penny purchases nished goods through a US importer, Renzo. Renzo
conveys J.C. Pennys specications to Robillard Resources, a Philippino
exporter, who contracts with a Philippino clothing contractor that organizes a production chain that includes numerous subcontracting factories.
These subcontractors in turn not only organize and supervise factory production of apparel parts, but also organize a system of putting out to
workers in their homes (Elliott and Freeman 2004, pp. 5054). According
to Elliott and Freeman, J.C. Penny alone contracts with over 2000 suppliers in more than 80 countries. Nordstrom has over 50 000 contractors and
subcontractors, and Disney licenses products in over 30 000 factories
around the world.
Another aspect of the structure of this industry relevant for issues of
assigning responsibility has to do with the way that the positions of
employer and employee are often blurred in this system. In some factories,
production line leaders act as subcontracting agents for home workers, with
the permission and assistance of management. Line and home workers
rarely receive written contracts; they are encouraged to think of themselves
as self-employed (Prugl and Tinker 1997; Women Working World Wide
2007).
In this complex system of production and distribution, the workers who
make garments are at the bottom of the chain. The wages they earn generally amount to a small portion of the retail price of an item, often under 6
per cent (see Miller 2003; Pollin et al. 2004). Each layer of subcontracting
that runs between the manufacturer and the store in which the consumer

Responsibility and global justice

145

buys items adds to the cost of items. Major logo retailers usually make
handsome prots from this system; as one moves down the chain of production and distribution, rms operate in more-competitive environments.
Small subcontractors in developing countries frequently operate at just the
edge of solvency.
Anti-sweatshop activists argue that the workers at the bottom of this
system suer injustice in the form of domination, coercion and need deprivation within a global system of vast inequalities. Because of the complexity of the system that brings items from production to sale, and the manner
in which it constrains the options of many of the actors within it, this is an
example of structural injustice. I shall now articulate that concept more
generally.
Structural injustice8
In A Theory of Justice, John Rawls (1971, p.7) says that the subject of
justice is the basic structure of society, which concerns the way in which
the major social institutions distribute fundamental rights and duties and
determine the division of advantages from social cooperation. Major institutions include, he says, the legal systems denition of basic rights and
duties, market relations, the system of property in the mean of production,
and family organization. To these I would add the basic kinds of positions
in the social division of labor.
Rawls says little more about what the concept of structure refers to,
however. Social theorists use the term in many ways, and I shall not review
them here.9 As I understand the concept, structures denote the conuence
of institutional rules and interactive routines, mobilization of resources, as
well as the built environment. These constitute the historical givens in relation to which individuals act, and which are relatively stable over time.
Social structures serve as background conditions for individual actions by
presenting actors with options; they provide channels that both enable
and constrain.10
I shall build up an account of structure and structural processes using
elements derived from several theorists. Peter Blau oers the following
denition: A social structure can be dened as a multidimensional space of
dierentiated social positions among which a population is distributed.
The social associations of people provide both the criterion for distinguishing social positions and the connections among them that make them
elements of a single social structure (Blau 1977, p. 4). Blau exploits the
spatial metaphor implied by the concept of structure. Individual people
occupy varying positions in the social space, and their positions stand in
determinate relation to other positions. Although Pierre Bourdieu uses very
dierent language and concepts for theorizing social structures, he too

146

Handbook of research on global corporate citizenship

begins from a spatial metaphor. He conceives structures as elds on which

individuals stand in varying positions in relation to one another, oering
possibilities for interpretation and action (Bourdieu 1980).
The structure consists in the connections among the positions and their
relationships, and the way the attributes of positions internally constitute
one another through those relationships. Young unskilled migrants from
the countryside to the city or from one country to another stand in a
certain structural class position in relation to the small entrepreneurs who
employ them for apparel manufacture. The entrepreneurs in turn stand in
structural positions in relation to investors in large exporting rms and
executives in the multinationals whose logos the clothes sport. The
workers and potential workers also occupy particular gendered positions
in relations to their employers; their positions may also be structured by
racial or ethnic dierences that render them vulnerable to exclusion or discrimination. These diering structural positions oer diering and
unequal opportunities and potential benets to their occupants, and their
relations are such that constrained opportunities and minimal benets for
some often correlate with wider opportunities and greater benets for
others.
It is misleading, however, to reify the metaphor of structure, to think of
social structures as entities independent of social actors, lying passively
around them easing or inhibiting their movement. On the contrary, social
structures exist only in the action and interaction of persons; they exist not
as states, but as processes. Anthony Giddens calls this process structuration. He denes social structures in terms of rules and resources, recursively implicated in the reproduction of social systems (Giddens 1984,
p. 25). In the idea of the duality of structure, Giddens theorizes how people
act on the basis of their knowledge of pre-existing structures and in so
acting reproduce those structures. We do so because we act according to
rules and expectations and because our relationally constituted positions
make or do not make certain resources available to us.
Much about the dynamics of the apparel industry, for example, presupposes practices of fashion. Consumers, especially auent consumers in the
North with disposable income, often want to be stylish, and look to friends
and media stars to determine what stylish means and whether it is changing. They often need new clothes even when those they own are in ne
shape. Major retailers both follow the trends and try to manipulate them.
Ideas of what is fashionable, as well as conventions of clothes marketed for
four or ve dierent seasons during the year, drive much about the size of
orders and speed with which they are expected to be delivered, which constrain manufacturers and lead them to overwork workers. Most of these
people act as though fashion is some kind of natural force, when in fact its

Responsibility and global justice

147

constraints are produced by the ideas that people have about it and the
actions they take presuming those ideas.
Dening structures in terms of the rules and resources brought to actions
and interactions, however, makes the emergence of structures sound too
much like the product of individual and intentional action. The concept of
social structure must also include conditions under which actors act, a collective outcome of action which is often impressed onto the physical environment. Jean-Paul Sartre calls this aspect of social structuration the
practico-inert (Sartre 1976, ch. 3). Most of the conditions under which
people act are socio-historical: they are the products of previous actions,
usually products of many coordinated and uncoordinated but mutually
inuencing actions. Those collective actions have left determinate eects on
the physical and cultural environment which condition future action in
specic ways. The gradual consolidation of landholdings by large rms has
left many peasants with poor or no land from which they can eke out subsistence, so many of them move in search of work, erecting shanty towns
at the edge of cities. The export processing zones many governments have
established where some of these migrants nd work are consequences of a
history of structural adjustment programs that many indebted governments have been pressured to implement by international nancial institutions. The background conditions of the lives of these young workers today
are structural consequences of decisions and aggregated economic
processes beginning more than three decades ago.
This leads us to a nal aspect of the concept of social structure. The
actions and interactions of dierently positioned persons drawing on the
rules and resources the structures oer take place not only on the basis of
past actions whose collective eects mark the physical conditions of action.
They also often have future eects beyond the immediate purposes and
intentions of the actors. Structured social action and interaction often have
collective results that no one intends and which may even be counter to the
best intentions of the actors. Sartre (1976, pp. 27792) calls such eects
counter-nalities. When a large number of investors make a speculative run
on currencies in anticipation of their devaluation, for example, they often
unintentionally but predictably produce a nancial crisis which throws some
people out of work and ruins the fortunes of others (see Stiglitz 2002, ch. 4).
Structural injustice exists when social processes put large categories of
persons under a systematic threat of domination or deprivation of the
means to develop and exercise their capacities, at the same time as they
enable others to dominate or have a wide range of opportunities for developing and exercising capacities. Structural injustice is a kind of moral wrong
distinct from the wrongful action of an individual agent or the willfully
repressive policies of a state. Structural injustice occurs as a consequence of

148

Handbook of research on global corporate citizenship

many individuals and institutions acting in pursuit of their particular goals

and interests, within given institutional rules and accepted norms. All the
persons who participate by their actions in the ongoing schemes of cooperation that constitute these structures are responsible for them, in the sense
that they are part of the process that causes them. They are not responsible,
however, in the sense of having directed the process or intended its outcomes.
Persons stand in systematically dierent and unequal social positions
due to the way institutions operate together. Rather than being a static condition, these factors that constrain and enable individual possibilities are
ongoing processes in which many actors participate. These constraints and
enablements occur not only by means of institutional rules and norms
enforced by sanctions, but by incentive structures that make some courses
of action particularly attractive and carry little cost for some, or make other
courses of action particularly costly for others. The injustice does not
consist in the bare fact that structures constrain actors, for all social structures constrain as well as enable. Rather, the injustice consists in the way
they constrain and enable, and how these constraints and enablements
expand or contract individuals opportunities. The institutional rules,
resources and practices through which people act do not constitute, in
Rawlss phrase, fair terms of cooperation.
When consumers who take yers in front of Disney stores react to information about sweatshop working conditions with shock or outrage, they
are implicitly making a judgment of injustice. They make the judgment that
the workers do not merely suer misfortune, as though a hurricane had
carried away their houses, but that the suering is socially caused.
Somebody, we are inclined to say, ought to do something about this. To
make the judgment that poor working conditions are unjust implies that
somebody bears responsibility for their current condition and for their
improvement. If the injustice has social structural causes, however, then it
would seem that all those who participate in producing and reproducing the
structures are implicated in that responsibility. When we say an injustice
such as working to exhaustion is structural, we are saying that the workers
are not simply victims of mean bosses, though this may be true.
Identication of the wrongs that individual actors perpetrate toward them
needs to be supplemented with an account of how macro-social processes
encourage such wrongs, why they are widespread and repeated. My question is: how shall we conceptualize responsibility for producing and rectifying structural injustice?
This question presents a puzzle, I suggest, because standard models of
responsibility in moral and legal theory do not supply a satisfactory answer.
Standard conceptions of legal and moral responsibility appear to require

Responsibility and global justice

149

that we trace a direct relationship between the action of an identiable

person or group and a harm. Although structural processes that produce
injustice result from the actions of many persons and the policies of many
organizations, in most cases it is not possible to trace which specic actions
of which specic agents cause which specic parts of the structural
processes or their outcomes. In what follows I oer some steps toward a
solution to this puzzle by means of a concept of responsibility in relation
to injustice that diers from standard models of moral and legal responsibility. A social connection model of responsibility, as I call it, better conceptualizes moral and political issues of responsibility in relation to
transnational structural injustice than does what I shall call a liability
model of responsibility.
Two models of responsibility: liability and social connection
Journalists, religious leaders, social movement activists and philosophers
today sometimes make claims that people in relatively free and auent
countries such as the United States, Canada or Germany have responsibilities in relation to the harms and deprivations experienced by millions of
people in the less developed world. The claims of the anti-sweatshop movement are one concrete example of such claims which have been relatively
successful in getting a hearing and motivating action. To make sense of
such claims, I suggest, we need a conception of responsibility dierent from
the most common conception, the liability model. In this section I oer
some elements of a conception of responsibility that I argue derives from
connection to structural social processes that produce injustice. I explicate
this social connection model of responsibility by contrasting it with the liability model.
Liability model
The most common model of assigning responsibility derives from legal reasoning to nd guilt or fault for a harm. Under this liability model, one
assigns responsibility to particular agents whose actions can be shown as
causally connected to the circumstances for which responsibility is sought.
This agent can be a collective entity, such as a corporation, but when it is
the analysis treats that entity as a single agent for the purposes of assigning responsibility (French 1984). The actions found causally connected to
the circumstances are shown to be voluntary and performed with adequate
knowledge of the situation. If candidates for responsibility can successfully
show that their action was not voluntary or that they were excusably ignorant, then their responsibility is usually mitigated if not dissolved. When
these conditions do exist, however, it is appropriate to blame the agents for
the harmful outcomes.11 A concept of strict liability departs from a fault or

150

Handbook of research on global corporate citizenship

blame model in that it holds an agent liable for a harm even if the agent did
not intend or was unable to control the outcome, such as when one persons
property accidentally causes damage to another persons property (see, for
example, Honore 1999). I include such non-blame conceptions of liability
together with blame or fault-based conceptions in one category of responsibility, because they share the conceptual and functional features I detail
below.
A liability model of responsibility for human rights violations in apparel
factories and subcontracting in the home is certainly appropriate to apply
in many situations. When factory owners and managers violate local labor
law, for example, as they often do, they ought to be punished.12 If states in
which factories operate fail to nd oenders and punish them, as they often
do, they ought morally to be blamed for this failure and the international
community should perhaps nd ways to apply sanctions to them. Bosses
who harass and intimidate workers, managers who put productivity above
workers health, and so on, certainly should be held responsible in a liability sense for wrongful harms that these workers suer.
As I have discussed, however, particular workers in particular facilities in
particular places stand within an extensive system of structural social
processes that connect the making of garments to those who wear them.
Within this system, it is often plausible for the rst-line agents of harm to
try to mitigate their responsibility by appeal to factors outside their control.
They may claim that they have little choice about the wages they pay, and
cannot aord to give workers time o or invest in better ventilation and
equipment. They operate in a highly competitive environment, they say,
where other operators constantly try to undercut them. They themselves
are operating at the edge of solvency and are not exactly making huge
prots. They can stay in business only by selling goods at or below the prices
of worldwide competitors, and they can do that only by keeping labor and
other production costs to a minimum.13 They are under heavy pressure
from the exporters who place orders with them to deliver, and the exporters
in turn are under heavy pressure from the big-name companies that have
placed orders with them. The factory owners and managers in which the
workers toil are small actors with relatively little power in this global
system.
A typical justication for state-enforced labor standards appeals to
the need to maintain a level playing eld among competitors. If there is a
human rights oor below which wages and working conditions should
not be allowed to fall, the state is the proper agent to guarantee such a
oor through regulation. In this way those employers who wish to be
decent to workers need not fear being undersold by less scrupulous
employers.

Responsibility and global justice

151

Certainly the states in which sweatshops operate must be blamed for

allowing them to exist. Many of these state agencies are inept and corrupt,
and often enough some of their ocials directly prot from the system that
exploits their poor compatriots. As the anti-sweatshop movement uncovers
the existence of factories with sweatshop conditions in the United States
and other states with supposedly high labor standards and good enforcement processes, it should certainly blame these agencies for not doing their
jobs.
There is no excuse for national and state governments in the United States
not to enforce labor standards in the apparel industry, or any other industry, and the record here is rather poor.14 Some governments of less developed countries, however, can say with some justication that they are under
severe constraints that prevent them from improving working conditions.
Some governments of less developed countries have indirectly encouraged
sweatshop practices by constituting special export processing zones whose
factories are exempt from taxation and regulation that apply to other enterprises in the country. They have often been advised to establish such zones
by international economic experts. These governments will say that they
desperately need investment and jobs, and that to get them they must
compete with other poor states to promote a favorable investment climate,
which includes low taxes and minimal regulation. To avoid or pay down
balance of trade decits they need companies that produce for export. They
have never had a strong enough public sector properly to monitor and
enforce compliance with labor regulations they develop, and it is dicult to
create one with their low tax base. Public sector regulating capacity has been
reduced further in some cases by policy responses to pressures from international nancial institutions, such as the International Monetary Fund
suggesting that the borrowing states should reduce public spending.
A concept of responsibility as blame or liability is indispensable for a
legal system and sense of moral right that respects agents as individuals and
expects them to behave in respectful ways toward others. When applying
this concept of responsibility, there must be clear rules of evidence, not only
for demonstrating the causal connection between this agent and a harm,
but also for evaluating the intentions, motives and consequences of the
actions. By proposing a social connection model of responsibility, I do not
aim to replace or reject the liability model of responsibility. The above considerations suggest, however, that where there is structural social injustice
a liability model is not sucient for assigning responsibility. The liability
model relies on a fairly direct interaction between wrongdoer and wronged
party. Where structural social processes constrain and enable many actors
in complex relations, however, those with the greatest power in the system,
or those who derive benets from its operations, may well be removed from

152

Handbook of research on global corporate citizenship

any interaction with those who are most harmed in it. While it is usually
inappropriate to blame those agents who are connected to but removed
from the harm, it is also inappropriate, I suggest, to allow them (us) to say
that they (we) have nothing to do with it. Thus I suggest that we need a
dierent conception of responsibility to refer to the obligations that agents
who participate in structural social processes with unjust outcomes have. I
call this a social connection model.
Social connection model
In ordinary language we use the term responsible in several ways. One I have
already discussed as paradigmatic of the liability model: to be responsible is
to be guilty or at fault for having caused a harm and without valid excuses.
We also say, however, that people have certain responsibilities by virtue of
their social roles or positions, as when we say a teacher has specic responsibilities, or we appeal to our responsibilities as citizens. In this meaning,
nding responsible does not imply nding at fault or liable for a past wrong,
but rather refers to agents carrying out activities in a morally appropriate
way and aiming for certain outcomes (see Goodin 1996; Richardson 1999).
What I propose as a social connection model of responsibility draws more
on the latter usage of the term responsibility than on the liability usage. It
does share with the liability usage, however, a reference to causes of wrongs,
here the form of structural processes that produce injustice.
The social connection model of responsibility says that individuals bear
responsibility for structural injustice because they contribute by their
actions to the processes that produce unjust outcomes. Our responsibility
derives from belonging together with others in a system of interdependent
processes of cooperation and competition through which we seek benets
and aim to realize projects. Even though we cannot trace the outcome we
may regret to our own particular actions in a direct causal chain, we bear
responsibility because we are part of the process. Within this scheme of
social cooperation, each of us expects justice toward ourselves, and others
can legitimately make claims on us. Responsibility in relation to injustice
thus derives not from living under a common constitution, but rather from
participation in the diverse institutional processes that produce structural
injustice. In todays world, as I suggested above, many of these structural
processes extend beyond nation-state boundaries to include globally dispersed persons. The structure and relationships of the global apparel industry illustrate starkly and concretely such transnational social connections.
I shall detail ve main features of the social connection model of responsibility by contrasting it with the liability model.
The rst feature is not isolating. The liability model of responsibility
seeks to mark out and isolate those responsible, thereby distinguishing

Responsibility and global justice

153

them from others, who by implication are not responsible. Such isolation
of the one or ones liable from the others is an important aspect of legal
responsibility, both in criminal and in tort law. Social practices of nding
guilty or nding faulty, or holding strictly liable, focus on particular agents
in order to sanction or demand compensation from them and them alone.
A system of moral rules and legal accountability should make clear that
agents who violate the rule may face accusation as individual agents.
When harms result from the participation of thousands or millions of
people in institutions and practices that produce unjust results, however,
such an isolating concept of responsibility is inadequate. Where there is
structural injustice, nding some people guilty of perpetrating specic
wrongful actions does not absolve others whose actions contribute to the
outcomes from bearing responsibility. Hired thugs who beat workers in
horribly equipped factories are personally guilty of crimes, as are the
factory managers who hire them and target particular workers. Finding
them guilty, however, does not absolve the multinational corporations from
responsibility for the widespread nature of poor working conditions in the
factories producing goods they market. Nor does it absolve those of us who
purchase the goods from some kind of responsibility to the workers who
make them.
The second feature is judging background conditions. In a liability
concept of responsibility, what counts as a wrong for which we seek a perpetrator and for which he or she might be required to compensate, we generally conceive as a deviation from a baseline. Implicitly we assume a
normal background situation that is morally acceptable, if not ideal. A
crime or an actionable harm consists in a morally and often legally unacceptable deviation from this background structure.15 The liability model
considers the process that brought about the harm as a discrete, bounded
event that breaks away from the ongoing normal ow. Punishment, redress
or compensation aims to restore normality or to make whole in relation
to the baseline circumstance.
A model of responsibility deriving from understanding the mediated connection that agents have to structural injustices, on the other hand, evaluates not harm that deviates from the normal and acceptable, but rather often
brings into question precisely the background conditions that ascriptions of
blame or fault assume as normal. When we judge that structural injustice
exists, we mean that at least some of the normal and accepted background
conditions of action are not morally acceptable. Most of us contribute to a
greater or lesser degree to the production and reproduction of structural
injustice precisely because we follow the accepted and expected rules and
conventions of the communities and institutions in which we act. Usually
we enact these conventions and practices in a habitual way, without explicit

154

Handbook of research on global corporate citizenship

reection and deliberation on what we do, having in the foreground of our

consciousness and intention immediate goals we want to achieve and the
particular people we need to interact with to achieve them.
We can think of many examples of accepted norms and institutional
practices that constitute the background conditions for sweatshops. I have
already referred to the fashion system and its seasons as one set of practices which most producers and consumers reinforce to some extent.
Executives at major multinational retailers typically devote more attention
and money to advertising campaigns to promote the image of the company
than to ensuring that the pay and working conditions of the workers who
make the clothes they sell are decent. It is normal in this consumer society
for companies to devote a large portion of their investment to advertising
rather than production. Levels of unemployment in many of the places
where sweatshops exist are normally high, and the social processes depriving peasants of the means to make an independent livelihood speedily
create more unemployed. One should expect under these circumstances
that each superexploitive sweatshop job opening will have multiple applicants, and that the workers in these jobs will normally be compliant and
urge their co-workers to be so as well. Today largely taken for granted, each
of these aspects of the global apparel system can and should come under
critical scrutiny, and questions can be asked about the responsibilities those
who act on these assumptions have in relation to the injustice to which they
serve as background.
The third feature is more forward than backward looking. Assigning
responsibility, whether under the liability model or the social connection
model, always has both backward- and forward-looking aspects. The liability and social connection models of responsibility nevertheless dier in
temporal emphasis. On most occasions, application of the liability model
is backward looking primarily. The social connection model, on the other
hand, emphasizes forward-looking issues.
Under the liability model of responsibility, the harm or circumstance for
which we seek to hold agents responsible is usually an isolatable action or
event that has reached a terminus. The robbery has taken place, or the
oil tanker has spewed its contents on the beach. Usually the purpose of
assigning responsibility in terms of blame, fault or liability, then, is to seek
retribution or compensation for this past action. To be sure, such backward-looking condemnation and sanction may have a forward-looking
purpose as well; often it aims to deter others from similar action in the
future, or to identify weak points in an institutional system that allows or
encourages such blameworthy actions, in order to reform institutions. Once
we take this latter step, however, we may be leaving the liability model and
moving toward the social connection model. The reform project likely

Responsibility and global justice

155

involves responsibility of many people to take actions directed at those

reforms, even though they are not to blame for past problems.
When conceptualizing responsibility in relation to structural injustice, on
the other hand, we are concerned with an ongoing set of processes that we
understand is likely to continue producing harms unless there are interventions in it. The temporality of assigning and taking responsibility, then,
is more forward than backward looking. Because the particular causal relationship of the actions of particular individuals or organizations to structural outcomes is often not possible to trace, there is no point in seeking to
exact compensation or redress from only and all those who have contributed to the outcome, and in proportion to their contribution. The injustices produced through structures have not reached a terminus, but rather
are ongoing. The point is not to blame, punish, or seek redress from those
who did it, but rather to enjoin those who participate by their actions in the
process of collective action to change it (see Jonas 1984).
The anti-sweatshop movement well illustrates this forward-looking
approach. When activists focus on particular factories or on multinationals who contract to manufacture goods under poor factory conditions, they
rarely call for shutting down the factory or otherwise simply punishing the
operators (see Elliott and Freeman 2004, ch. 3). The system of incentives
and organizational priorities make it likely that other factories will open in
the place of the one closed. Even when particular perpetrators are punished, workers continue to suer structural injustice.
The fourth feature is shared responsibility. From the observation that
the social connection model diers from the liability model in that it does
not isolate those liable in ways that implicitly absolve others, it follows that
all those who contribute by their actions to the structural processes producing injustice share responsibility for these harms. Larry May (1993) distinguishes shared responsibility from collective responsibility in that the
former is a distributed responsibility whereas the latter is not. A collective
of persons, such as a corporation, might be said to be responsible for a state
of aairs without any of its constituent individuals being determinately
responsible for it. Shared responsibility, on the other hand, is a personal
responsibility for outcomes or the risks of harmful outcomes, produced by
a group of persons. Each is personally responsible for outcomes in a partial
way, since he or she alone does not produce the outcomes; the specic part
that each plays in producing the outcome cannot be isolated and identied,
however, and thus the responsibility is essentially shared.16
A nal feature of the social connection model that distinguishes it from
a liability model of responsibility is that the forward-looking responsibility
can be discharged only by joining with others in collective action. This
feature follows from the essentially shared nature of the responsibility.

156

Handbook of research on global corporate citizenship

Thousands or even millions of agents contribute by our actions in particular institutional contexts to the processes that produce unjust outcomes.
Our forward-looking responsibility consists in changing the institutions
and processes so that their outcomes will be less unjust. Not one of us can
do this on our own. Even if it were possible to do so, a single shopper would
not change the working conditions of those toiling in sweatshops by refusing to buy all items she had reason to believe were produced under unjust
conditions. The structural processes can be altered only if many actors in
diverse social positions work together to intervene in them to produce
dierent outcomes.
Responsibility from social connection, then, is ultimately political
responsibility. Taking responsibility in a forward-looking sense under this
model involves joining with others to organize collective action to reform
the structures. Most fundamentally what I mean by politics here is public
communicative engagement with others for the sake of organizing our relationships and coordinating our actions most justly. Discharging my responsibility in relation to sweatshop workers might involve, then, that I try to
persuade others that these wrongs are unacceptable and that collectively we
can alter social practices and institutional rules and priorities to prevent
them. Our working through state institutions is often an eective means of
such collective action to change structural processes, but states are not the
only tools of eective collective action.17 In the next section I shall discuss
and evaluate some of the activities of the anti-sweatshop movement.
An important corollary of this feature of political responsibility is that
many of those properly thought to be victims of harm or injustice may nevertheless share such political responsibility in relation to it. On the liability
model of responsibility, blaming those who claim to be victims of injustice
usually functions to absolve others of responsibility for their plight. In the
social connection model, however, those who can properly be argued to be
victims of structural injustice can be called to a responsibility they share
with others in the structures in engage in actions directed at transforming
the structures.
This point certainly applies in anti-sweatshop activity. Workers themselves have the strongest interest in combating sweatshop conditions. They
also have information and relationships with one another useful in order to
mobilize productively to try to alter the structures that perpetuate their
exploitation. According to some researchers, employer-sponsored monitoring systems that aim to reform sweatshop conditions but fail to involve
workers in a meaningful way are often ineective or actually harm workers
(Esbenshade 2004). Even when they do not they tend toward parternalism
rather than empowerment of the workers. The workers share responsibility
for combating sweatshop conditions, and ought to be organized in order to

Responsibility and global justice

157

do so. Especially where freedom to organize is not recognized or not

enforced, however, they can discharge their responsibilities only with the
support of others, often far away and relatively privileged others, who make
public their grievances, put pressure on the agents that would block their
unionization, and give them material aid.
I have been arguing that a social connection model of responsibility
better corresponds, than does a liability model, to the intuitions expressed
in claims about the responsibilities agents have concerning global justice.
The social connection model not only has these philosophical advantages,
I suggest, but also has rhetorical advantages in public discussion that aims
to motivate people to take responsibility for rectifying social injustice.
Claims that some persons participate in producing injustice and ought to
stop too often are heard under a liability model of responsibility. The actors
addressed hear themselves being blamed for harms. More often than not,
agents who believe themselves being blamed react defensively: they look for
other agents to blame instead of them, or nd excuses that mitigate their
liability in cases where they admit that their actions do causally contribute
to the harm. In situations of structural injustice, it is easy to engage in such
blame shifting or excusing discourse, because in fact others are also responsible and there are structural constraints on most of the actors participating in the institutional processes that have unjust outcomes. In many
contexts where the issue is how to mobilize collective action for the sake of
social change and greater justice, such nger-pointing and blame-switching
lead more to resentment and refusal to take responsibility than to a useful
basis of action.18
When executives of multinational retailers or shoe buyers hear the claims
of anti-sweatshop activists as laying blame on them for the conditions
under which the shoes are produced, they rightly become indignant, or
sco at the absurd extremism of the movement. A social connection model
of responsibility distinct from and complementary to a liability model
allows us to call on one another to take responsibility together for sweatshop conditions, without blaming anyone in particular for the structures
that encourage their proliferation. This does not necessarily mean that all
who share responsibility have an equal responsibility. The power to
inuence the processes that produce unjust outcomes is an important factor
distinguishing degrees of responsibility.
Parameters of reasoning
I have proposed a conception of responsibility from social connection to
correspond to the intuition that those who participate by their actions in the
structural processes producing injustice bear some responsibility for correcting this injustice. In todays world of global interdependencies, many of

158

Handbook of research on global corporate citizenship

these structural injustices involve people widely dispersed across the globe,
and are by no means limited to processes within single nation-states.
What I have done so far is only to oer a way of thinking about responsibility in general. One might well object that the conception of responsibility as social connection raises as many questions as it answers. For
example, the model says that all who participate by their actions in
processes that produce injustice share responsibility for remedy. Does this
mean that all participants bear responsibility in the same way and to the
same degree? If not, then what are the bases of dierentiating kinds and
degrees of responsibility? Most of us participate in many structural
processes, moreover, that arguably have disadvantaging, harmful or unjust
consequences for others. It is asking too much for most of us to work
actively to restructure each and all of the structural injustices for which we
arguably share responsibility. How, then, shall we reason about the best
ways to use our limited time, resources and creative energy to respond to
structural injustice?
Adequately responding to questions like these would take at least
another full essay. Thus I shall only sketch answers here, and illustrate
the responses once again through the example of the anti-sweatshop
movement.
Some moral theorists argue that responsibility names a form of obligation distinct from duty. Joel Feinberg (1980), for example, distinguishes
between an ethic that focuses on obligation or duty and an ethic that
focuses on responsibility. A duty species a rule of action or delineates the
substance of what actions count as performing the duty. A responsibility,
on the other hand, while no less obligatory, is more open as to what counts
as carrying it out (Feinberg 1980, pp. 13540; May 1996, ch. 5). A person
with responsibilities is obliged to attend to outcomes the responsibilities
call for, and to orient her or his actions in ways demonstrably intended to
contribute to bringing about those outcomes. Because a person may face
many moral demands on his or her actions, and because changes in circumstances are often unpredictable, just how a person goes about discharging her or his responsibilities is a matter with considerable discretion
(see Goodin 1996; Richardson 1999). Given that a combination of responsibilities may be overdemanding, and given that agents have discretion in
how they choose to discharge them, it is reasonable to say that it is up to
each agent to decide what he or she can and should do under the circumstances, and how she should order her moral priorities. Others have the
right to question and criticize our decisions and actions, however, especially
when we depend on one another to perform eective collective action. Part
of what it means to be responsible on the social connection model is to be
accountable to others with whom one shares responsibility for what one has

Responsibility and global justice

159

decided to do regarding which structural injustices. When an agent is able

to give an account of what she has done and why in terms of shared responsibilities for structural injustice, then others usually ought to accept her
decision and the way she sets priorities for her actions.
These considerations begin an answer to the question I stated above,
namely, how should one reason about ones own action with respect to
which injustices? In a world with many and deep structural injustices, most
of us in principle share more responsibility than we can reasonably be
expected to discharge.19 Thus we must make choices about where our action
can be most useful or which injustices we regard as most urgent. While a
theory of responsibility from social connection will not give a list of
maxims or imperatives, it should oer some parameters for reasoning to
guide such decisions and action. These in turn address the rst question.
Dierent agents plausibly have dierent kinds of responsibilities in relation
to particular issues of justice, and some arguably have a greater degree of
responsibility than others.
These dierences of kind and degree correlate with an agents position
within the structural processes. By virtue of this structural positioning,
dierent agents have dierent opportunities and capacities, can draw on
dierent kinds and amounts of resources, or face dierent levels of constraint with respect to processes that can contribute to structural change. I
suggest that persons can reason about their action in relation to structural
injustice along parameters of power, privilege, interest and collective ability.
First, an agents position in structural processes usually carries dierent
degrees of potential or actual power or inuence over the processes that
produce the outcomes. Where individuals and organizations do not have
sucient energy and resources to respond to all structural injustices to
which they are connected, they should focus on those where they have more
capacity to inuence structural processes.
Despite the fact that they are often legally separated from the manufacturing facilities with working conditions and practices that violate human
rights, large multinational designers and retailers such as Calvin Klein or
J.C. Penny have much greater power in global trade processes than do small
manufacturers. The anti-sweatshop movement thus rightly concentrates its
eorts on pressuring these powerful agents actively to work with manufacturers, host governments, unions and civic organizations to improve wages
and factory conditions for the workers and at the same time protect the
workers from being laid o.
Because the agents with the greatest power in social structures often
have a vested interest in maintaining them as they are, however, external
pressure on the powerful is often necessary to move these agents to action,
and to prevent them from taking supercial steps rather than making

160

Handbook of research on global corporate citizenship

serious changes. Some of the larger exporters, importers and retailers in

the apparel industry, for example, would appear to be able to change the
proportion of the price of a pair of shoes that goes to pay workers and
improve working conditions, as compared with the proportion that pays
for distribution, marketing, advertising and decorating stores. Changing
those proportions, however, may reduce their own prots to some extent.
Public disclosure of a companys connection with poor working
conditions is not good for business, however, and public reporting of
support for change seems to be good for a companys stock price (see
Rock 2003).
Second, where there are structural injustices, these usually produce not
only victims of injustice, but persons who acquire relative privilege by virtue
of the structures. Most who occupy positions of power with respect to the
structures also have privileges that coincide with this power. In most situations of structural injustice, however, there are relatively privileged persons
who have relatively little power as individuals or in their institutional positions, at least with respect to the issue of injustice. Middle-class clothing
consumers in the global North, for example, stand in a privileged position
in the structures of the apparel industry. They benet from the large selection and aordable prices that the industry oers them. Persons who
benet relatively from structural injustices have special moral responsibilities to contribute to organized eorts to correct them, not because they are
to blame, but because they are able to adapt to changed circumstances
without suering serious deprivation. Lower-income clothing consumers,
whether in the developing or developed world, may be less able than more
auent consumers to spend more for clothing in order to ensure that the
workers who make it are treated fairly.20
The third parameter is interest. Dierent people and dierent organizations usually have divergent interests in the maintenance or transformation
of structures that produce injustice. Often those with the greatest interest
in reproducing the structures are also those with the greatest power to
inuence their transformation. Those who are victims of structural injustice often have a greater interest in structural transformation. Earlier I said
that one of the distinctive things about the social connection model of
responsibility is that victims of injustice share responsibility with others for
cooperating in projects to undermine the injustice. Victims of injustice have
the greatest interest in its elimination, and often have unique insights into
its social sources and the probable eects of proposals for change.
This point certainly applies in the case of labor conditions in the apparel
industry. Actual and potential sweatshop workers are the primary victims
of injustice. Analysts of some strategies in the movement to improve
conditions for these workers nd that they are sometimes ineectual or

Responsibility and global justice

161

paternalistic because the workers point of view and active participation

has not been properly included. Some corporate-sponsored monitoring
processes, for example, conduct inspections of factories without talking to
workers or only talking to workers on the factory site. Critics argue that
workers experience and complaints must denitely be a part of monitoring processes, but that workers must be interviewed away from the factory
sites when owners and managers are not present. Cooperation with local
civic organizations whom workers trust is usually necessary to facilitate
such interviews (Luibicic 1998; Esbenshade 2004).
Other analysts wonder whether the predominance of non-governmental
organizations (NGOs) such as monitoring organizations, education and
public accountability organizations, and so on, in the anti-sweatshop movement weakens the ability of workers to organize unions and allows local
governments to continue their lax labor law promulgation and enforcement
(Braun and Gearhart 2004; Lipschutz 2004). Most conclude that NGO
activity should work in support of unionization and to pressure for greater
government protection of workers rights to form or choose unions
(ORourke 2003; Compa 2004). In this case, as in many other cases of structural injustice, victims of injustice have a responsibility to work together to
improve their situation, but they are unlikely to succeed without the help
and support of other less vulnerable people who make industry behavior
public and pressure agents to change policies or restructure their relationships (Peason and Seyfang 2001; Fung 2003).
The nal parameter is collective ability. Sometimes a coincidence of
interest, power and existing organization enable people to act collectively
to inuence processes more easily regarding one issue of justice than
another. That is not always a reason to give priority to that issue, for it may
also be that such ease of organization is a sign that the action makes little
structural change. Nevertheless, given too many injustices that need
remedy, the relative ease with which people can organize collective action
to address them can be a useful decision principle.
The decision by some student groups to focus their anti-sweatshop
activism on their colleges and universities illustrates this parameter. The
universitys function as a large consumer of apparel for their sports teams
and also a purveyor through their book stores makes universities a target
because their decisions about purchase and marketing have more impact
than those of individual consumers. Campus campaigns politicizing such
decisions successfully raise awareness of issues of global labor justice even
among students and faculty who do not actively support the campaigns.
Universities can relatively easily organize with one another to make an
impact on the structural processes, as they have done by becoming members
of the Fair Labor Association and the Workers Rights Consortium.

162

Handbook of research on global corporate citizenship

Conclusion
Obviously each of these parameters for reasoning about the ways in which
individual persons or institutions might meet their responsibilities under a
social connection model power, privilege, interest and collective ability
needs further elaboration. This sketch should indicate how being positioned dierently in the structures that produce injustices suggests dierent
kinds of issues and directions for action by various agents. It also gives
more concreteness to the notion that under a social connection model
agents share responsibility with others dierently situated, with whom they
usually must cooperate in order to eect change. As the anti-sweatshop
movement example illustrates, however, such need for cooperation does not
mean that agents have no conicts or interest and no need for struggling
with one another. Sharing responsibility partly means that agents challenge
one another and call one another to account for what they are doing or not
doing. Global social and economic processes bring individuals and institutions into ongoing structural connection with one another across national
jurisdictions. Adopting a conception of responsibility that recognizes this
connection is an important element to theorizing global justice.
Notes
1.
2.
3.
4.
5.

6.
7.

8.
9.
10.
11.

This chapter is a reprint of the article from Iris Marion Young (2006), Responsibility
and global justice: a social connection model, Social Philosophy and Policy, 23 (1),
10230. Permission was granted by Cambridge University Press.
Thanks to David Alexander, Daniel Drezner, David Owen and Ellen Frankel Paul for
comments on an earlier version of this chapter. Thanks to David Newstone for research
assistance.
I have begun analysis of global labor justice focusing on the anti-sweatshop movement
in two previous papers: Young (2003, 2004).
Compare also Robert Goodin (1985) and Thomas Pogge (2002), especially Chapters 1,
2 and 4.
In April 2003, for example, the Milwaukee Common Council voted unanimously for an
ordinance requiring the procurement of apparel for city sta from manufacturers that
meet several labor rights conditions; see Sweatfree Communities Gain Ground,
Campaign for Labor Rights, clr@clrlabor.org, accessed 21 November 2007.
For an account of working conditions, see Naomi Klein (1999, especially ch. 9); Ellen
Israel Rosen (2002, ch. 2).
Most of the countries in which factories like those I am describing operate do have
minimum wage laws, as well as regulation of other labor conditions. In many cases these
laws could be more comprehensive and stronger, of course. For a comprehensive
country-by-country survey of labor regulation, see the Industrial Labor Organization,
www.ilo.org (accessed 21 November 2007). The primary problem with labor regulation
in much of the world, however, including arguably the United States, is lack of enforcement rather than lack of standards.
In previous work I have begun developing an account of structural injustice. See Young
(2000, especially ch. 3, 2001, 2002).
For one catalog of uses by English language theorists through the mid-1970s, see Peter
Blau (1975).
Jerey Reiman, among others, uses this channel metaphor (see Reiman 1989, p. 213).
See Fletcher (1999) for a clear statement of this model of responsibility.

Responsibility and global justice

163

12. As I discussed in a previous note, in most cases there are labor laws, and sweatshop conditions are often violating them. Sometimes this is because the host countries make
exceptions to their labor regulation standards in special manufacturing zones. In many
other cases, the problem is that factory operators, distributors, retailers and others
are able to ignore labor law with impunity. See Bonacich and Appelbaum (2002, chs 2
and 8).
13. For an account of the constraints on actors in the global apparel industry, see Rosen
(2002, ch. 11); see also Bonacich and Appelbaum (2002, chs 2 and 5).
14. See Jill Esbenshades (2004, ch. 1) discussion of sweatshops in the United States and
Department of Labor reports concerning these conditions.
15. See George Fletchers discussion of the way that the assignment of criminal liability
must distinguish between foregrounded deviations from background conditions
assumed as normal, and the background conditions themselves (Fletcher 1999,
pp. 6970).
16. Larry May (1993), Sharing Responsibility, ch. 2. As formulated in this book, Mays
theory of shared responsibility remains backward looking; he is concerned to assign a
responsibility for harms that have occurred and reached a terminus. Thus his theory is
more continuous with a liability model of responsibility than the theory I am developing here. May also focuses more on subjective states such as attitudes for linking persons
to responsibility for a wrong, and says little about more objective social structures that
connect persons to moral wrong or injustice. See my paper, Responsibility and global
labor justice (Young 2004).
17. Melanie Beth Oliviero and Adele Simmons recommend uses of civil society organizations for addressing issues of labor standards; see Oliviero and Simmons (2002). John
Braithwaite and Peter Drahos argue that as transnational social structures impinge on
state sovereignty, civil society organization gains increased ability to inuence labor and
other business practices; see Braithwaite and Drahos (2000, chs 5, 6 and 26).
18. William Connolly makes a similar distinction between responsibility as blame and a
more politically oriented responsibility. For him the resentment and counter-accusation
dialectic that accompanies blame in a discourse of public aairs makes political identity
overly rigid and paralyzes action. Thus he recommends a notion of political responsibility without blame and with a more uid and ambiguous understanding of the sources
of wrong than the implicitly Christian identication of the sinner (see Connolly 1993,
especially ch. 4). Melissa Orlie also distinguishes between a sentiment of resentment
exhibited in blaming and holding oneself and others politically responsible (see Orlie
1997, pp. 16973).
19. Liam Murphy (2000) develops a useful theory of moral responsibility under conditions
of injustice.
20. See Pollin et al. (2004). They nd that the amount that retail prices would need to rise to
bring workers a living wage raise is small, and consistent with increases that North
American consumers say they would be willing to pay if they could be assured of sweatfree conditions.

References
Beitz, Charles (1979), Political Theory and International Relations, Princeton, NJ: Princeton
University Press.
Blau, Peter (1975), Introduction: parellels and contrasts in structural inquiries, in Peter Blau
(ed.), Approaches to the Study of Social Structure, New York: Free Press, pp. 120.
Blau, Peter (1977), Inequality and Heterogeneity, New York: Free Press.
Bonacich, Edna and Richard P. Appelbaum (2002), Behind the Label: Inequality in the Los
Angeles Apparel Industry, Berkeley, CA: University of California Press.
Bourdieu, Pierre (1980), The Logic of Practice, Book I, Stanford, CA: Stanford University
Press.
Braithwaite, John and Peter Drahos (2000), Global Business Regulation, Cambridge:
Cambridge University Press.

164

Handbook of research on global corporate citizenship

Braun, Rainer and Judy Gearhart (2004), Who should code your conduct? Trade union and
NGO dierences in the ght for workers rights, Development in Practice, 14 (1 and 2),
18396.
Buchanan, Allen E. (2000), Rawlss Law of Peoples: rule for a vanished Westphalian world,
Ethics, 110 (4), 697721.
Buchanan, Allen E. (2004), Justice, Legitimacy, and Self-Determination: Moral Foundations
for International Law, Oxford: Oxford University Press.
Compa, Lance (2004), Trade unions, NGOs, and corporate codes of conduct, Development
in Practice, 14 (1 and 2), 21015.
Connolly, William (1993), Identity/Dierence, Ithaca, NY: Cornell University Press.
Elliott, Kimberly Ann and Richard B. Freeman (2004), Can Labor Standards Improve Under
Globalization?, Washington, DC: Institute for International Economics.
Esbenshade, Jill (2004), Monitoring Sweatshops: Workers, Consumers, and the Global Apparel
Industry, Philadelphia, PA: Temple University Press.
Featherstone, Lisa (2000), Students Against Sweatshops, London: Verso.
Feinberg, Joel (1980), Duties, rights, and claims, in Feinberg, Rights, Justice and the Bounds
of Liberty, Princeton, NJ: Princeton University Press.
Fletcher, George (1999), Basic Concepts of Criminal Law, Oxford: Oxford University Press.
French, Peter (1984), Collective and Corporate Responsibility, New York: Columbia
University Press.
Fung, Archon (2003), Deliberative democracy and international labor standards,
Governance: An International Journal of Policy, Administration, and Institutions, 16 (1),
5171.
Gaus, Micha (2004), The maturing movement against sweatshops, In These Times, 16
February, pp. 34 and 52.
Giddens, Anthony (1984), The Constitution of Society, Berkeley, CA: University of California
Press.
Goodin, Robert (1985), Protecting the Vulnerable, Chicago, IL: University of Chicago Press.
Goodin, Robert (1996), Apportioning responsibilities, in Goodin (ed.), Utilitarianism as a
Public Philosophy, Cambridge: Cambridge University Press, pp. 100118.
Honore, Tony (1999), Responsibility and luck: the moral basis of strict liability, in Honore
(ed.), Responsibility and Fault, Oxford: Oxford University Press, pp. 1440.
Jonas, Hans (1984), Imperative of Responsibility, Chicago, IL: University of Chicago Press,
pp. 90120.
Kant, Immanuel (1795), To perpetual peace: a philosophical sketch, in Ted Humphrey
(1983), trans., Perpetual Peace and Other Essays, Indianapolis, IN: Hackett Publishing,
pp. 10744.
Khattak, Saba Gul (2002), Subcontracted work and gender relations: the case of Pakistan,
in Radhika Balakrishnan (ed.), The Hidden Assembly Line: Gender Dynamics of
Subcontracted Work in a Global Economy, Bloomeld, CT: Kumarian Press, pp. 3562.
Klein, Naomi (1999), No Logo, New York: Preodor.
Kwong, Peter (2002), Forbidden workers and the U.S. labor movement, Critical Asian
Studies, 31 (1), 6988.
Lipschutz, Ronnie D. (2004), Sweating it out: NGO campaigns and trade union empowerment, Development in Practice, 14 (1 and 2).
Luibicic, Robert J. (1998), Corporate codes of conduct and product labeling schemes: the
limits and possibilities of promoting international labor rights through private initiatives,
Law and Public Policy in International Business, 30 (1), 11158.
May, Larry (1993), Sharing Responsibility, Chicago, IL: University of Chicago Press.
May, Larry (1996), The Socially Responsible Self: Social Theory and Professional Ethics,
Chicago, IL: University of Chicago Press.
Miller, David (1995), On Nationality, Oxford: Oxford University Press.
Miller, David (1999), Principles of Social Justice, Cambridge, MA: Harvard University Press,
Chapter 1.
Miller, John (2003), Why economists are wrong about sweatshops and the antisweatshop
movement, Challenge, 46 (1), 93122.

Responsibility and global justice

165

Murphy, Liam (2000), Moral Demands in Nonideal Theory, Oxford: Oxford University Press.
ONeill, Onora (1985), Faces of Hunger, London: Allen & Unwin.
ONeill, Onora (1996), Toward Justice and Virtue, Cambridge: Cambridge University Press.
ORourke, Dara (2003), Outsourcing regulation: analyzing nongovernmental systems of
labor standards and monitoring, Policy Studies Journal, 31 (1), 129.
Oliviero, Melanie Beth and Adele Simmons (2002), Whos minding the store? Global civil
society and corporate responsibility, in Marlies Glasius, Mary Kaldor and Melmut
Anheier (eds), Global Civil Society 2002, Oxford: Oxford University Press, pp. 77107.
Orlie, Melissa (1997), Living Ethically, Acting Politically, Ithaca, NY: Cornell University Press.
Peason, Ruth and Gill Seyfang (2001), New hope or false dawn? Voluntary codes of conduct,
labour regulation and social policy in a globalizing world, Global Social Policy, 1 (1),
4978.
Pogge, Thomas (2002), World Poverty and Human Rights, Cambridge: Polity.
Pollin, Robert, Justine Burns and James Heintz (2004), Global apparel production and sweatshop labour: can raising retail prices nance living wages?, Cambridge Journal of
Economics, 28, 15371.
Prugl, Elisabeth and Irene Tinker (1997), Microentrepreneurs and homeworkers: convergent
categories, World Development, 25 (9), 147182.
Rawls, John (1971 [1999]), A Theory of Justice, Cambridge, MA: Harvard University Press.
Rawls, John (1999), The Law of Peoples, Cambridge, MA: Harvard University Press.
Reiman, Jerey (1989), Justice and Modern Moral Philosophy, New Haven, CT: Yale
University Press.
Richardson, Henry S. (1999), Institutionally divided moral responsibility, in Ellen Frankel
Paul, Fred D. Miller, Jr and Jerey Paul, Responsibility, Cambridge: Cambridge University
Press, pp. 21849.
Rock, Michael T. (2003), Public disclosure of the sweatshop practices of American multinational garment/shoe makers/retailers: impacts on their stock prices, Competition and
Change, 7 (1), pp. 2338.
Rosen, Ellen Israel (2002), Making Sweatshops: The Globalization of the US Apparel Industry,
Berkeley, CA: University of California Press.
Ross, Andrew (2004), Low Pay, High Prole: The Global Push for Fair Labor, New York: New
Press.
Sartre, Jean Paul (1976), Critique of Dialectical Reason, Book I, trans. Alan Sheridan-Smith,
London: New Left Books.
Scheer, Samuel (2001), Boundaries and Allegiences: Problems of Responsibility and Justice in
Liberal Thought, Oxford: Oxford University Press.
Singer, Peter (1993), Practical Ethics, Cambridge: Cambridge University Press.
Stiglitz, Joseph E. (2002), Globalization and Its Discontents, New York: W.W. Norton.
Unger, Peter (1996), Living High and Letting Die: Our Illusion of Innocence, Oxford and New
York: Oxford University Press.
Women Working World Wide (2007), Garment industry subcontracting and workers rights,
www.cleanclothes.org, accessed 21 November 2007.
Young, Iris Marion (2000), Inclusion and Democracy, Oxford: Oxford University Press.
Young, Iris Marion (2001), Equality of whom? Social groups and judgments of injustice,
Journal of Political Philosophy, 9 (1), 118.
Young, Iris Marion (2002), Lived body vs. gender: reections on social structure and subjectivity, Ratio: An International Journal of Analytic Philosophy, 15 (4), 41128.
Young, Iris Marion (2003), From guilt to solidarity: sweatshops and political responsibility,
Dissent, Spring, 3945.
Young, Iris Marion (2004), Responsibility and global labor justice, Journal of Political
Philosophy, 12 (4), 36588.

Corporate citizenship and the

environment
Paul Shrivastava

Introduction
The Earths continuing degradation due to human activities is now a global
concern. For the past three decades, both governments and corporations around the world have struggled with contemporary challenges of
businessenvironmental regulation and the provision of global environmental public goods. Over 150 treaties have been proposed, signed and
implemented, the Montreal Protocol, the Kyoto Treaty, and numerous
Earth summits among them.
We are making good progress on some aspects of understanding and
controlling environmental degradation. For example, today as compared to
three or even two decades ago, we have much better scientic understanding of natural environmental assets, climate changes, and the impact of
human activities on them. We have better national and international policies and standards guiding ecological sustainability (Dowell et al. 2000).
There is better inspection surveillance and monitoring of environmental
pollution and natural resources than in the past, and there is better environmental regulation of corporations in most countries. Corporations have
acknowledged the importance of dealing with ecological sustainability
within the logic of their traditional business models. And there are calls to
adopt the triple-bottom-line model that argues for judging corporate performance on nancial, social and ecological performance measures (Savitz
and Weber 2006).
Corporate eorts focus on a wide range of issues, such as reducing the use
of virgin materials, using production methods that are more ecologically
ecient, preventing pollution, designing eco-friendly products and packaging, and managing waste in an ecologically sound way. Companies are
adopting environmental management programs that are technologically
easy, save costs and help improve revenues (harvesting the low-hanging
fruit). Many companies are also making deeper systemic changes by adopting ISO 14000 environmental management systems (Green et al. 2001). The
World Business Council on Sustainable Development (www.wbcsd.org) lists
numerous ecological sustainability programs adopted by the worlds largest
corporations (Sharma and Starik 2002).
166

Corporate citizenship and the environment

167

Corporate changes may be best characterized as incremental. Companies

cautiously engage environmental solutions that have clear nancial benets.
Some companies use green as a public relations strategy. They undertake
environmental projects for their publicity value and heavily publicize environmental accomplishments in the hope of gaining legitimacy and attracting
new customers. Broadly, there is still reluctance in companies to make largescale risky investments in sustainability ventures that would fundamentally
transform corporate strategies and operations (Roome 1998).
Despite the gains in government environmental policies and corporate
environmental performance, the big picture does not look very good.
Environmental degradation outpaces all these improvements, and we are witnessing a net decline in ecosystem quality around the world. The problems
of global warming, ozone depletion, declining biodiversity, environmental
pollution and energy sustainability continue to worsen as world population
increases and appetite for industrial growth expands (Worldwatch Institute
200005). Environmental risks to human health and living conditions continue to proliferate.
Some have argued that in highly technologized modern societies, environmental risks are co-produced with economic wealth, and such risks are
unavoidable. The more highly developed an economy the more environmental degradation and risks it is apt to experience (Beck 1992). As the
engines of wealth creation, corporations are the primary producers and
proliferators of environmental risks. The complex technological, economic
and social systems which society has created to produce, consume, transport and live our lives, are imbued with ever-increasing environmental risks.
Expansion of risks seems to be a basic condition of modernity. Technoenvironmental risks refer to the potential for harm to human health and the
natural environment imposed by technological and industrial products and
production systems. The social, political, administrative and corporate
processes for controlling such harm constitute risk management
(Shrivastava 1995).
For many years, progressive corporations have taken social responsibility
for their actions. They have acknowledged that they have the responsibility
for creating humane working conditions for employees, safe products for customers, and for supporting social change and cultural life in the communities that they operate in. Their view of social responsibility also, to some
extent, extends to their actions toward the environment. Companies invest in
environmental protection equipment, and often contribute a percentage of
their prots to their philanthropy foundations, which support various social
causes. However, this view of the responsibilities of a company to the community particularly emphasizes the social aspect, focusing only secondarily
on mitigating environmental risks. This is in part due to the tendency of large

168

Handbook of research on global corporate citizenship

companies to treat the environment as simply another of the many stakeholders that they are acknowledging responsibility toward, the same way
they are responsible to employees, customers, business associates, the government and community groups. Since the environment as a stakeholder is
an impersonal public good, it receives a lower priority than the other stakeholders, which are personalized, human entities.
Some researchers propose corporate citizenship to extend the concept
of corporate social responsibility (CSR) and combat the risk challenges
facing corporations (Matten and Crane 2005). The argument is that
modern corporations mediate many of the political and social rights of citizens, and may be considered citizens themselves. Corporate citizens
provide economic and social rights, enable civil rights and are channels for
political rights. Implicit in this concept of corporate citizenship is the
notion that corporations can voluntarily become enlightened stewards of
the natural environment (Livesey 2002). As members of society, they can
shoulder citizenship responsibilities, and at the same time continue to be
economically productive to the extent required by competitive and investor
pressures, while still preventing ecological harm or keeping it to long-term
sustainable levels. These expectations need better specication. What
exactly is meant by this type of corporate citizenship? In this chapter I
open a new discussion of how responsible corporate citizens might conceive environmental risks and how they may approach the provision of
environmental public goods.
Historically, corporate citizenship expectations regarding the natural
environment have focused on corporate operations and valuing nature as
an economic asset. Consider the following examples of environmental citizenship from leading international companies (Box 8.1).
Most statements of corporate citizenship acknowledge some responsibilities for maintaining balanced and sustainable use of the natural
environment. The concept sustainable development seeks to moderate
economic growth globally to levels that avoid jeopardizing future generations ability to meet their needs. It is a big concept with great promise, and
one that is hard to argue against. But translating sustainability into specic
corporate responsibilities and then creating the economic, legal and political conditions to implement it at the corporate and industry levels has
simply not happened yet. To become a driving concept, sustainable development will need to address inherent conicts between the North and the
South, between capital and labor, and between corporate responsibilities
toward investors and other societal stakeholders. While rhetorically, companies embrace sustainability and pro-environmental values, operationally
their environmental commitments remain limited, and subjugated to competitive pressures and investor demands for protability (Beder 2000).

Corporate citizenship and the environment

BOX 8.1

169

EXAMPLES OF ENVIRONMENTAL
CITIZENSHIP

Our commitment is not just good citizenship; its good business.The

bottom line is that our business depends on the health and sustainability of our planet and the natural resources we all share . . .
(Coca-Cola Company)
Motorola creates products and technologies that benefit society by
making things smarter and life better for people around the world.
We are dedicated to operating ethically, protecting the environment and supporting the communities in which we do business.
We are guided by our Code of Business Conduct, which is based
on our value of doing the right thing. (Motorola Inc.)
Humankind faces an enormous challenge: meeting the worlds
growing demand for energy, driven mainly by the desire for higher
living standards, while managing the environmental effects of the
increase in energy consumption. At ExxonMobil, we work to
balance these different needs. (ExxonMobil Inc.)

The corporate citizenship metaphor implies that corporations can take

human roles and responsibilities. Corporations are viewed as if they were
legal persons. Therefore, like people, corporations may be imbued with
qualities of citizenship. Abstracting out the body or physicality from the
concept of corporate person and reducing materiality to its economic asset
value, fundamentally emiserates corporate citizenship from considering
certain types of responsibilities. In the absence of a body focus, any discourse on corporate environmental remedies is disembodied. Disembodied
discourse is communicatively distorted. In such a discourse, corporations
are unseen or only partially seen participants. They think of the environment in abstractions as assets. They pursue remedies that are ineective
for serious environmental improvements.
The concept of corporate (environmental) citizenship needs to be
rethought to encompass full citizenhood. The present volume extends
Matten and Cranes (2005) and Scherer and Palazzos (2007) political conceptions of corporate citizenship and provides new approaches to this task.
The editors have opened up additional and wide-ranging discussions on
managerial, economic, political and legal perspectives on the new roles and

170

Handbook of research on global corporate citizenship

responsibilities of business in a global society. But most of these discussions treat corporations as disembodied abstract legal persons. When
corporations are deemed to be abstractions, their responsibilities are conceptual. This oers a skewed picture of their materiality and their impacts
on humans and the material environment. In the spirit of stretching our
thinking deeper into material manifestations and bodily impacts of corporations, this chapter seeks to develop the concept of embodied corporate
environmental citizenship. It focuses on the contemporary challenges of
providing global environmental public goods.
Most major environmental problems, such as ozone depletion, global
warming, species extinction, environmental pollution and waste disposal,
are transnational and global. Corporate rights and responsibilities for
dealing with these problems using past approaches have proven to be inadequate. We need to begin rethinking corporate environmental citizenship
from what this chapter loosely calls an embodiment perspective. This perspective sees human body and the physicality/materiality of nature as
central to corporate social analysis. It articulates new corporate responsibilities toward nature, the whole person, natural and fabricated spaces and
the community. The chapter oers some suggestions for practical implementation of these responsibilities and identies several issues that deserve
further research.
An embodiment perspective
Embodiment philosophy is about the relationship between the world of
substance and the world of spirit or culture (intentional objects). The core
idea views the body not as a vessel but as the being itself. The mind and
spirit are simply a method with which the body works. Thus body and mind
are fused into a single being. A key distinction between matter and person
is the way of observing the being. In this view a single process binds the
mind to its body, family and language, dissolving the subjective/objective
distinction. The mind extends beyond body and family, to its environment,
society, species and the planet (Bateson 1980). Even if we accept only some
limited biological aspects of embodiment as useful theory, it is easy to see
a more general application of it as an analytical approach in psychology,
sociology and the behavioral sciences.
In the eld of psychology, embodied analysis is a new approach seeking to
understand the social as the embodiment of sensate experience. It also refers
to the view that human mind/thoughts are a function of the brain and physiology. It seeks to understand the inherently embodied character of all psychological processes and social practices, including discursive practices. This
orientation was largely ignored in the dominant discourse of psychology.
Psychological research had spawned the understanding that universal

Corporate citizenship and the environment

171

psychological processes can be understood independent of their history,

culture, context, community, habitus and locale. The social constructionism
approach in psychology attempted to correct that error by including the role
of history, culture and community, but it still ignored embodiment. Even the
constructionism approach dealt only with the object-body (that is the body
that a third person observer can know). The exclusion of embodiment had
serious intellectual ramications in psychology. It kept psychology limited to
mental and ideational processes and missed opportunities for deeply examining mindbody and mindmaterial relations. An embodiment approach to
psychology would be particularly well suited to understanding the psychology of groups and organizations (Sampson 1996; Neidenthal et al. 2005).
Embodiment in sociology and social analysis is exemplied in the works
of Pierre Bourdieu and in the US in the work of Lako and Johnson (1999).
These writers straddle deep-seated antimonies of subjectivist and objectivist
that separate the analysis of the symbolic from that of materiality. They
reject dichotomies of structure and agency. Bourdieus work provides a
unied political economy of practice. He shows how symbolic power welds
phenomenological and structural approaches into universally applicable
social inquiry (Bourdieu and Wacquant 1992). He highlights the importance of focusing on embodied experience and the habitus of the experience.
Bourdieu pioneered methodological frameworks and terminologies such
as cultural, social and symbolic capital, and the concepts of eld, habitus
and symbolic violence to explain social dynamics. The concept of habitus
is particularly relevant to the notion of embodiment. Instead of analyzing
societies in terms of economic classes, he used the concept of eld a social
arena (social positions and power relationships) in which people maneuver
and struggle in pursuit of desirable resources. Habitus can be dened as a
system of subjectivity of dispositions (lasting, acquired schemes of perception, thought and action). People develop these dispositions in response
to the elds or objective conditions they encounter. They inculcate objective social structures into subjective mental experiences, and cognitive and
somatic dispositions. The interactivity of the eld and habitus create and
regulate social practices and social dynamics. Social practices to some
degree entail embodiment of objectives elds. Therefore, embodiment is a
useful lens for understanding social dynamics.
There is a growing concern in the behavioral sciences regarding the role
played by conceptual frameworks, models and metaphors. These conceptual
schemes mediate our experiences of the world. Wittgenstein explained language as the symbolic representation of sensory experience (Wittgenstein
1953). He clearly saw the dialectic relationship between language-games and
forms of life (experiences). He linked language to experiential forms of life,
to the body-subject in Maurice Merleau-Pontys terminology. From this

172

Handbook of research on global corporate citizenship

perspective meaning-giving (and taking) is an experiential aair, and not

only a cognitive one. These tasks require an analysis of peoples culturally
informed body, and their bodily structured sentiments. People use language
conned to these bodily and aective structures, and these structures are
framed by forms of life. Only such embodied analysis can explain what
presses people to experience the world in particular ways. The paradigm of
embodiment begins from the premise that the body is not an object to be
studied in relation to culture, but instead it is the subject or existential
ground of culture (Csordas 1990).
The political ramications of these ideas of embodiment for environmentalism can be far reaching. Embodiment implies both psychological and
political notions of environmentalism. It implies that the environment is a
continuity of the body. If so, then taking care of the environment is an
extension of taking care of our own bodies. Environmental responsibility is
personal responsibility, and personal responsibility is social responsibility.
Raising this argument to the corporate level, we can say that the embodiment perspective on corporate citizenship and corporateenvironment
relations signicantly raises the priority of the environment in relation to
human stakeholders. It deepens the level of environmental responsibility to
the same level as responsibility toward humans. And it also raises corporate responsibility toward humans to include the whole person. Embodied
analysis fosters primary interest in managing human and organizational
interactions with the natural world, in addition to reasoning about them.
How do corporations relate to the human bodyenvironment continuum,
and how should they? What would it mean for corporations to engage and
relate to embodied social needs beyond abstracting this issue to the traditional, but narrowly economistic concept of fair wage? In the traditional
view, a good corporate citizen is one who pays a fair wage in an employment relationship. Then the employee is deemed responsible for maintaining his or her own health and environmental well-being. By bringing the
human body centrally into the discourse, we can get some new openings on
corporate responsibilities toward humans and the natural environment. We
can begin examining in fresh ways a good corporate citizens responsibilities for bodies within it and around it, and touched by it through its products and services.
Embodied corporate citizenship
Developing a new understanding of corporate citizenship as an embodied
humancorporatenature relationship is justied in several ways.
First, we acknowledge that the central premise of embodiment theory is
that the human body and materiality have a key role in social analysis.
Body-centric corporate and social analysis gives high weight to bodily,

Corporate citizenship and the environment

173

physical and material relations between corporation as persons and their

environments. Corporations are not simply legal persons with economic
purposes. They are also social, political and material persons with material, bodily and emotional inuences on their employees, customers and
other stakeholders. Personalization of abstract inuences oers new
inection points in the debate on corporate social responsibilities. It raises
specic awareness of many forms of generalized and abstract corporate
environmental inuences that often go unnoticed. Embodied analysis is
thus more real.
Corporations create and shape material and symbolic culture, legitimacy
and power relations, and operate within a context of deliberative democracy. To remain viable they must be responsive to the demands of the pluralist, globalized, individualization processes in society. One aspect of
individualization is the fragmentation of cultural values and life-world
background. Another is the primacy granted to personal experiences
(including sensate) personal choices and preferences. The body as the
habitus of such individualization has a central place in corporate analysis
(Beck-Gernsheim and Beck 2002; Palazzo and Scherer 2006).
Second, the embodiment approach questions and rejects the subjective
objective dichotomy. It resists objectication in many forms and particularly objectication of labor which is a primary fruit of the body. Applying
this insight to the corporate arena argues for decommodication of labor.
Commodication and objectication of labor as wage-earning time, is
one of the biggest conceptual barriers to getting corporations to accept
broader responsibilities. By treating labor as a commodity, corporations
limit their responsibilities to explicit and implicit labor contracts. In
employing people, corporations do not just buy labor time. Todays knowledge economy operates in complex technological and social contexts, which
makes performing labor a much more intricate and involved human
endeavor. Employees prepare for performing labor through education,
and training, by developing social and cultural skills, by engaging emotionally, by planning career and life strategies. They arrange and periodically rearrange their living circumstances, transportation modalities and
communications. Reducing all these human activities and environmental
interactions into a single category of labor time is reductionist in the
extreme. The relationship between corporations and employees does not
begin and end in an employment contract. They cannot be treated as hamsters, rushing on the ever-turning hamster wheel of competitive labor.
Instead, corporations constitute and reproduce work and life processes.
A complete exegesis of decommodication of labor is beyond the limited
scope of this chapter. Minimally, decommodifying labor involves acknowledging the complex web of lifeworkenvironmental interactions that

174

Handbook of research on global corporate citizenship

result in the human performance in corporations, and consequently corporate performance. The embodiment perspective acknowledges the mind,
body and emotional aspects of work. It accepts the fact that corporations
employ the whole person and not some part of him/her. In the case of
senior managerial positions such as CEOs and presidents, the employment
may even impose expectations and requirements on the persons spouse,
family and lifestyle.
A third justication of the embodiment perspective comes from the need
to consider the whole person because modern corporate work deploys the
whole person. In the early years of industrialization, corporations assumed
that they were buying and using largely physical skills. Up until the middle
of the 21st century, physical labor (in construction and factory settings)
remained the primary basis of performance. With conversion of work from
factory and industrial production, to services and the information economy,
the primacy of physical eort was lost. Work did not necessarily lose the
physical exertion, but it certainly gained added dimensions of cognitive performance (judgment, analysis, decision making) and emotional performance
(customer care, social engagement, cultural nuances). Corporate work utilizes complete human beings with their physical performances, mental decision processes, and their emotional energies. A holistic conception of
employees is therefore fundamental to constituting embodied corporate
citizenship.
Corporations are a collection of humans supplemented with material
and nancial resources. What makes corporations successful is their full
engagement of people and their natural and social environments in performing work. For work to occur eectively, corporations must engage and
manage all elements that impact on their long-term performance. For pragmatic reasons it is compelling to conceive of corporate social and environmental inuences and responsibilities to include all relevant types of stakes
and stakeholders. The more complete the set of stakeholders the higher is
the probability of satisfying them and gaining long-term success.
Conceptualizing corporate citizenship responsibilities in a comprehensive way is a pragmatic imperative. Responsibilities toward more stakeholders and for more types of stakes are also imbued with moral power
under democratic norms. The customs of our democratic society give us the
obligation to accept responsibilities toward these stakes and stakeholders.
This is consistent with Bourdieus social analysis of collective action which
elucidates the pragmatic force of catering to the majority (Bourdieu and
Wacquant 1992). It should be acknowledged that currently such expanded
responsibilities are not mandated by codes of law in any country. From an
embodiment perspective, corporate citizenship responsibilities include the
welfare of (whole) human employees and other human stakeholders,

Corporate citizenship and the environment

175

fabricated spaces for corporate activities and the broader natural environment. These responsibilities are elaborated upon in the next section.
Corporate citizens human and environmental responsibilities
The schematic diagram in Figure 8.1 identies four sets of corporate
responsibilities that ow from our conception of corporate citizenship. It
depicts the interrelationships between them. These responsibilities include
responsibilities toward whole persons (physical, cognitive, emotional),
responsibilities toward communities, responsibilities toward fabricated
spaces, and responsibilities toward the natural environment. This model
implies a collective holistic responsibility at a new and higher level of comprehensiveness. The arrows linking the elements indicate that they are
mutually reinforcing and best understood as a network rather than as independent and isolated responsibilities.
Corporate whole-person responsibilities
Corporations as citizens are persons and they use and deal with people
including employees, customers and business associates. Articulating personcentered responsibilities begins by acknowledging the physical, cognitive and
emotional sides of people, and providing for the well-being of each. Physical
health and stamina both directly impact on work productivity and absenteeism. Providing for physical well-being in the form of wellness and preventive health services and medical care is a primary corporate responsibility.

Nature

Fabricated
spaces

Whole
person

Community

Figure 8.1 Corporate citizenship, human and environmental

responsibilities

176

Handbook of research on global corporate citizenship

Cognitive work takes many forms in corporations including analysis,

research, decision making, judgment, communications, reporting, computation and bargaining. Training, education and experience are enablers of
corporate work. Cognitive work tools and procedures serve as means for
accomplishing the work. Corporate responsibilities include providing
opportunities for workers to upgrade and maintain their cognitive performance. This includes making employees into lifelong learners with continual
knowledge and skills acquisition. Companies must also be committed to
providing work tools and techniques which in modern corporations require
large-scale implementation of databases, computer systems, application
programs and analytical processes.
Emotional work, emotional preparation for work and emotional recovery from work eects are core parts of corporate life. Providing employees
and other stakeholders with emotional support infrastructure falls squarely
within the purview of corporate citizenship. Corporate citizens can begin
by acknowledging their role in the emotional lives of employees. They can
make a huge contribution to the emotional well-being of employees by
designing work and organizational tasks using emotional performance as
important criteria (Fineman 2003; Frost 2003).
Embodied corporate community responsibilities
Corporate citizens are tightly integrated with the many communities in
which they participate. These communities are local, regional and global
depending on the extent and reach of corporate activities. Embodied corporate citizenship responsibilities toward community go beyond social
aspects to the physical health of community members. Public health has
historically been a responsibility of governments. The embodiment perspective does not imply that corporations should entirely take over this
responsibility. But there is a legitimate role for corporations in this arena.
Corporate citizens should be mindful of how their products and services,
their production and distribution activities, impact on public health.
Products of fast-food or tobacco and alcohol companies have implications
for public health. Similarly the operations of oil and power and chemical
companies have implications for public health. The public health issues are
technologically complex, politically sensitive, and have dierential impacts
on dierent racial and economic groups. Corporations have a responsibility to deeply understand these implications and engage communities in
resolving public health problems arising from them. More proactive corporations can develop public health enhancement opportunities in communities by supporting wellness, exercise, nutrition and sports programs.
Being a corporate citizen implies reciprocal relationships between the
corporation and respective communities. Cultivation of these relations

Corporate citizenship and the environment

177

through dialogue and engagement is the mutual responsibility of both.

Corporations can lay out the groundwork for this engagement by providing venues for issues to be debated and resolved.
Corporate fabricated spaces responsibilities
Corporations own land, buildings and transportation facilities necessary
for business. In fabricating their production, transportation, storage and
waste facilities, they change the land and surrounding landscape in temporary and permanent ways. In the past, companies have accepted responsibility for land largely as an economic asset. They deploy land to maximize
its economic use. An embodied concept of citizenship pushes these responsibilities further toward how people experience land and fabricated spaces.
People experience land and spaces in many ways physically, visually
and emotionally. They live and work within physical spaces. They see the
buildings and landscapes. Space and place are the habitus of emotion and
memories. Corporate transformation of spaces has many unacknowledged
and unintentional social impacts. For example, ruined and abandoned
industrial sites are not just a used-up economic asset. They are a visual
blight and source of emotional distress for the community and casual
observers. Each site has a social history and personal connection for people
who lived around it.
Good citizens understand their responsibilities toward maintaining the
look and feel of neighborhoods and landscapes. As an extension, embodied corporate citizenship includes a responsibility for sustainable use of
land resources. Conceiving of land as a venue of human and social experience, it seeks to preserve the natural qualities of land that support those
experiences.
Corporate nature responsibilities
Corporations footprint on the natural environment is a function of their
vision, inputs, throughput systems and outputs (products and wastes).
Comprehensive responsibilities toward nature must include thoughtful
approaches to managing these elements. Corporate vision must acknowledge stewardship responsibilities toward the natural world. These include
sustainable use of natural resources and programs to renew used resources
to maintain natural ecosystems. Corporate input of raw materials, energy
and human assets must be managed responsibly to ensure conservation and
an ecient cradle to cradle regenerative cycle. Throughput or production
systems should be designed for highest environmental performance
(Shrivastava 1996; McDonough and Braungart 2002).
A corporations outputs are their wastes as well as their products. With
respect to products, corporate responsibility includes abandoning product

178

Handbook of research on global corporate citizenship

designs that are deliberately wasteful and ecologically debilitating. For

example, the product design principle of planned obsolescence leads to
products that have a short designed life instead of maximum possible life.
So if an automobile is designed for a ve-year life, it is deliberately made
obsolete by its key components (say the engine or transmission) failing
after that period. This renders the whole automobile useless and wasted. It
represents a waste of parts that could have been used for many more years.
Similarly, the product design principle of disposability, leads to the creation of frequently disposed parts of entire products. The product design
principle of internal corporate standard (as opposed to industrywide
standard) leads electrical goods rms to make plugs/connectors that are
not interchangeable. Customers have to buy a specic manufacturers electrical connector to make their equipment work. If there are four cell phones
or computers in a household all of dierent brands, the user is forced to
acquire and maintain four dierent chargers, and connectors (Kalisvaart
and van der Horst 1995). Ecologically responsible product design abandons these market-driven principles in favor of more ecologically ecient
ones.
Corporate waste management is another signicant corporate citizenship responsibility. Production and oce waste are already a serious ecological problem in many countries. Taking cradle to grave responsibility for
their products, corporations can begin to see waste in a dierent light as
an underutilized asset. Minimizing waste and increasing reuse of materials
can be a source of nancial savings.
A primary challenge to accepting these added responsibilities is the perception of their high cost, and a fear that they can burden the corporation
right into nancial bankruptcy. Perceptions of costs are often not founded
on real-cost analysis. Not all programs are prohibitively costly. Some wellness and environmental programs actually save costs. For example, the 3M
Pollution Prevention Pays Program over the 30 years of its existence has
saved the companies over $1 billion, and eliminated over 2.5 billion pounds
of pollutants (3M Website 2007). Moreover, acting responsibly in this
broader sense is as much a question of values and attitude, as it is of
nancial investments. Taking an attitude of responsibility for certain
public goods does not equate to paying for all costs associated with them.
It simply means acknowledging their importance, being willing to engage
in addressing the needs, and exploring compromises and trade-os for feasible solutions.
Steps toward fullling corporate citizenship
Achieving this type of more environmentally engaged corporate citizenship
will take time, education and resources. The rst natural barrier is lack of

Corporate citizenship and the environment

179

motivation for business rms to voluntarily accept higher responsibilities.

Firms will accept such responsibilities when they understand how they are
linked to their current and future business models. Every year more companies are realizing the importance of sustainable management practices.
Some are able to parlay ecological eciencies and progressive human
resource policies into reducing costs, improving sales and thus advancing
corporate competitive advantage. Some industry leaders are starting to
show that economic competitive advantages can be established through
more comprehensive corporate response toward the environment and
society. Procter & Gamble in the consumer products industry, Toyota in the
auto industry, and Wal-Mart in the retailing industry, are recent examples
of large main-line companies that have publicly announced new sustainable
business models with wider and deeper engagement of environmental and
social issues that also benet their respective bottom lines. As these rst
successful models get established, they will create market pressure on the
rest of the companies to follow.
This voluntary move toward sustainability is also being prodded by
public pressure through non-governmental organizations and government
policy measures such as incentives and subsidies. More public awareness
coupled with governments incapacity to tackle large human-scale problems such as, global warming, poverty and the AIDS crisis, are thrusting
on corporations new expectations for solutions. Some corporations are
rising to these challenges, while others are feeling besieged and frustrated.
For example, Microsofts involvement with the AIDS crisis in Africa and
Mercks involvement with river blindness are leading examples of corporations pursuing broader citizenship responsibilities.
In moving toward the broader concept of corporate citizenship espoused
here, corporations will have to tackle other challenges including the
markets demand for high returns on investments, and shareholder value
orientation of the investment marketplace. This barrier is ameliorated to
some extent in the realization that there are winwin solutions in which ecological eciencies can simultaneously improve nancial and ecological performance. Wal-Mart is investing $1 billion in the next ve years in its
corporate sustainability programs and expects savings of $11 billion for its
suppliers and itself. Many companies are in a position to enjoy such benets
of simultaneous ecological and economic savings. When these are used up,
eventually companies will need to make nancial sacrices. Investors will
need to moderate their own expectations of prot maximization. Even this
task seems manageable. Already there are signs that investors (in socially
responsible mutual funds) and customers (in environmental niche markets)
are willing to take lower returns or pay high prices to support companies
that they nd consistent with their social and ecological values.

180

Handbook of research on global corporate citizenship

A few rst steps are delineated below to encourage managers and policy
makers to think about their new responsibilities in practical terms.
Managing personal and organizational ecological footprints
Embodied corporate citizenship cannot be simply a collective concept. At
some level it must be translated to personal responsibilities of individual
employees, managers, owners, directors and other key stakeholders. Each
person must understand his or her own ecological footprint. This footprint
refers to the amount of land and water area a human population needs to
support itself and to absorb its wastes using prevailing technology. Ones
personal ecological footprint measures the ecological resources a person
uses in global hectares (gha) per capita. For example, the average footprint
in the USA is 9.5 gha per capita, in Switzerland 4 gha per capita, and in
China 1.5 gha per capita. Numerous web resources allow people to estimate
their own or their organizations ecological footprint (http://ecofoot.org).
They provide suggestions for reducing or changing consumption patterns to
design more ecologically sustainable personal lifestyles and organizations.
Humanizing employment contracts
Current employment contracts commoditize labor and make the
relationship between companies and employees narrowly economistic.
Employment is reduced to hours of labor. Financial compensation (wages,
bonuses, prot sharing, stock options and so on) denes the limits of the
employers responsibilities. These contracts need to be amended to recognize that labor time, does not capture the deep emotional and intellectual
engagement necessary in todays workplace. Contracts should be improved
to incorporate work expectations from employees, and to take into account
the whole-person skills and performances necessary for each job. This
means employers accepting contractual responsibilities for the holistic
(physical, mental and emotional) health of employees. To encourage holistic work environments, individual work spaces, employee benets, contracts and work areas should be designed in an eco and health conscious
manner. For example, this could include work-integrated childcare, tness
services, ergonomic and creativity inducing work spaces, paternity/maternity leave and employer support for family and community involvement of
employees.
Ecologizing corporate policies
The broader view of corporate citizenship should be embedded in all corporate policies including corporate vision, strategies, products and operations. Every aspect of the company needs to be infused with a uniform
sense of environmental and social responsibility. This is best done by

Corporate citizenship and the environment

181

systematically incorporating corporate environmental responsibilities into

corporate policies and procedures (Savitz and Weber 2006). Companies
should move their business portfolios, product lines, production and logistic systems, and their overall business logic toward environmentally sustainable and socially engaged positions (Shrivastava 1996; Sharma and
Starik 2002).
Regulatory infrastructure
Moving toward an ecological sustainability-driven sense of corporate
environmental responsibility cannot occur entirely voluntarily. It must be
supported with fair standards and norms for all companies. A uniform
global regulatory infrastructure that makes the competitive environment
fair and even for all participants is essential. Such an infrastructure does
not exist currently. There are some elements in place such as the environmental laws in dierent countries, international environmental treaties, and
the ISO 14000 Environmental Management Standard. All companies
should be required to meet the existing relevant standards of environmental and human health performance.
Once this is accomplished, the next big challenge will be to extend the
regulatory system in several directions and make broader corporate citizenship legally binding. Enabling regulations that clarify environmental
and health standards and make them mandatory will create an even competitive playing eld for all companies. It should be noted that this would
have to be worldwide to be eective. This will help establish acceptance criteria and test methods for the introduction of new technologies. It will
improve value for customers and reduce techno-environmental risks globally. Corporations can choose to passively wait for government agencies to
create such regulations, or they can take the initiative and get involved in
shaping such regulations. Organizations such as the World Business
Council on Sustainable Development, the Business and Industry Oce of
the UN Environmental Program, and the World Trade Organizations
Global Environment and Trade Study may be parlayed to coordinate such
initiatives. Several chapters in this book address the emergence of global
institutional structures, and regulatory frameworks and standards.
In lieu of a conclusion
Environmental degradation caused by human and corporate activities is an
increasing global concern. Despite our good intentions, citizenship roles
and social responsibilities have not assuaged the environmental decline. A
more comprehensive understanding of corporate citizenship for environmental sustainability may allow companies to engage more deeply with the
problems of environmental degradation.

182

Handbook of research on global corporate citizenship

This chapter began the process of re-conceptualizing corporate citizenship from an embodiment perspective. By centering the body and materiality of nature in our analysis, we gain a fresh perspective on corporate
citizenship. This embodiment approach anchors the discourse on corporate
responsibility and citizenship in a dierent place the human body and
ecological materiality, instead of in economic and political concepts of
human labor and environmental resources. This allows us to access bodily
and material consequences of corporate activities in a more direct way. By
making direct links we avoid obfuscations made by some economic and
political arguments that mediate our understandings of humanenvironmental relationships. The embodiment approach supplements the insights
provided by economic and political concepts of CSR, and focuses centrally
on the health of human beings and the ecosystem.
This chapter represents a rst and largely denitional step toward an
embodied concept of CSR. More robust re-conceptualization and theory
development are needed to esh out the deeper sense of responsibility
implicit in this approach. Research is needed into all key elements of CSR
and citizenship. We need to understand how corporations and the work
within them relate to, shape and inuence whole persons and their personal, social and emotional lives. We need to uncover the deep links
between corporations and the communities they serve.
This does not mean giving more control to corporations over dierent
aspects of our lives. Corporate control of the community, polity and public
discourse, have been widely criticized in the literature, including some of
the chapters in this volume. The embodiment approach can restore humanized control over emotional and physical work into the hands of employees if it is rst acknowledged openly.
Embodiment implies that material changes are central to social analysis.
Corporations change the material world indelibly, continually and in many
instances irreversibly. We need much more research on corporate fabricated
spaces and corporate-nature impacts to understand the full material impact
of corporate activities. In management literature the focus of study has
been material changes within corporations in terms of production
processes. There are entire functional areas and elds of study devoted to
production and operations management. The preoccupation with internal
material transformation has led to ignoring external material changes from
corporate activities changes in landscape, buildings, logistics infrastructures and building materials. There is a major opportunity for researching
corporate landscaping of communities and society.
Another area of fruitful research is methodology. For traditional organizational scholars there is a need to develop new measures and scales
that allow us to quantify changes and carry out longitudinal studies of

Corporate citizenship and the environment

183

corporate-induced changes over time. However, the embodiment perspective denies the subjectiveobjective split that runs through current methodologies used in the elds of management and business studies. It seeks to
synthesize concepts and experiences into an incarnate understanding.
Therefore, the more useful methodological opportunity lies in expanding
our research methods so that we can focus on studying embodied experiences, feeling and emotions in a corporate work context.
While this chapters eort at re-conceptualizing CSR and corporate citizenship is a useful start, I do not believe that conceptual development
alone will resolve the grave global environmental problems we face today.
Making an impact on real problems requires action. The embodiment perspective is partial to action and practice. It is a theory of practice and
change. It supports advocacy of eco-centric values. Eco-centrism fosters
corporate engagement in environmental problems. While advocacy may be
anathema to traditional notions of scientic inquiry, it is a critical aspect
of the embodiment perspective.
References
3M Website (2007), http://solutions.3m.com/wps/portal/3M/en_US/global/sustainability/,
accessed 10 January 2007.
Bateson, G. (1980), Steps to an Ecology of Mind, New York: Bantam Books.
Beck, U. (1992), Risk Society, Towards a New Modernity, trans. from the German by M. Ritter,
London: Sage.
Beck-Gernsheim, E. and U. Beck (2002), Individualization: Institutionalized Individualism and
Its Social and Political Consequences, London: Sage.
Beder, S. (2000), Hijacking sustainable development: a critique of corporate environmentalism, Chain Reaction, 81, 810.
Bourdieu, P. and L.J.D. Wacquant (1992), An Invitation to Sociology, Chicago, IL: University
of Chicago Press.
Csordas, T.J. (1990), Embodiment as a paradigm for anthropology, Ethos, 18 (1), 547.
Dowell, G., S.L. Hart and B. Yeung (2000), Do corporate global environmental standards
create or destroy market value?, Management Science, 46 (8), 105974.
Fineman, S. (2003), Understanding Emotion at Work, Thousand Oaks, CA: Sage.
Frost, P.J. (2003), Toxic Emotions at Work: How Compassionate Managers Handle Pain and
Conict, Cambridge, MA: Harvard Business School Press.
Green, K., P. Groenewegen and P. Hofman (2001), Ahead of the Curve: Cases of Innovation in
Environmental Management (Eco-Eciency in Industry and Science), Amsterdam: Kluwer.
Kalisvaart, S. and T.J.J. van der Horst (1995), Implementing ecological product design,
World Class Design to Manufacture, 2 (6), 2130.
Lako, G. and M. Johnson (1999), Philosophy in the Flesh: The Embodied Mind and Its
Challenge to Western Thought, New York: Harper Collins.
Livesey, S. (2002), The discourse of the middle ground: citizen shell commits to sustainable
development, Management Communication Quarterly, 15 (2), 31349.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
McDonough, W. and M. Braungart (2002), Cradle to Cradle: Remaking the Way We Make
Things, New York: North Point Press.
Neidenthal, P., F. France, L.W. Barsalou, P. Winkielman, S. Krauth-Gruver and F. Ric (2005),
Embodiment in attitudes, social perception, and emotion, Personality and Social
Psychology Review, 9 (3), 184211.

184

Handbook of research on global corporate citizenship

Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative

framework, Journal of Business Ethics, 66 (1), 7188.
Roome, N. (1998), Sustainability Strategies for Industry: The Future of Corporate Practice,
Washington, DC: Island Press.
Sampson, E.E. (1996), Establishing embodiment in psychology, Theory and Psychology,
6 (4), 60124.
Savitz, A. and K. Weber (2006), The Triple Bottomline, New York: John Wiley.
Scherer, A.G. and G. Palazzo (2007), Towards a political conception of corporate social
responsibility businesss and society seen from a Habermasian perspective, Academy of
Management Review, 32 (4), 1096120.
Sharma, S. and M. Starik (eds) (2002), Research in Corporate Sustainability: The Evolving
Theory and Practice of Organisations in the Natural Environment, Cheltenham, UK and
Northampton, MA, USA: Edward Elgar.
Shrivastava, P. (1995), Ecocentric management in industrial ecosystems: management paradigm for a risk society, Academy of Management Review, 20 (1), 11837.
Shrivastava, P. (1996), Greening Business: Proting the Corporation and the Environment,
Cincinnati, OH: Thomson Executive Press.
Wittgenstein, L. (1953), Philosophical Investigations, New York: Prentice-Hall.
Worldwatch Institute (2000, 2001, 2002, 2003, 2004, 2005), State of the World Report,
Washington, DC: Worldwatch Institute.

Corporations as citizens against

corruption: an institutional
entrepreneurship perspective
Gary R. Weaver and Vilmos F. Misangyi1

Introduction
The wide-ranging and negative impacts of corruption (Mauro 1996;
Kaufmann 1997; Doh et al. 2003) have led many observers and policy
makers to regard it as one of the worlds greatest challenges (Errath et al.
2005). In addressing corruption, multiple anti-corruption agencies (for
example, the Organization for Economic Cooperation and Development
(OECD), the UN, Transparency International (TI), the World Bank)
increasingly have directed their attention beyond a conventional focus on
governmental anti-corruption programs to consider as well the role of corporations in the mitigation of corruption. For example, in a speech to
French business leaders, OECD Secretary-General Angel Gurria recently
asserted that the cessation of bribery will only happen if companies put in
place their own rules and controls against bribery. You are on the front line.
You have to decide whether to give in to solicitation or whether to try to
match or beat the bribe that your competitor may be willing to pay (Gurria
2006). Meanwhile, the World Banks Business, Competitiveness and
Development program involves the corporate sector actively in ghting corruption; the UN now includes ghting corruption as the 10th principle
within its Global Compact (UN Global Compact 2007); and nongovernmental organizations (NGOs) such as TI focus on the potential role
of the corporate sector in alleviating problems of corruption, advocating,
for example, eective controls and greater transparency in corporate
actions (TI 2007). Most parties to international discussions of corruption
also grant that the potential role of the corporate sector in ghting corruption is greater in societies with weak, ineective or seriously corrupted political systems. In such circumstances, corporations might be the only entities
with the capacity to address both individual and systemic corruption.
If corporations are to exercise a citizenship role, then, it seems reasonable to consider anti-corruption work as a potential element of that role. In
a narrow sense, the call for corporations to be good citizens regarding corruption might simply mean that corporations should more carefully
control their own actions vis--vis corruption, taking action to prevent
185

186

Handbook of research on global corporate citizenship

employees from committing corrupt acts or violating the law and fostering
an ethical, corruption-preventing organizational culture. But could corporate citizenship regarding corruption mean more than this, such that corporations become active agents of corruption-disabling change in society? If
so, just what might a broader notion of corporate anti-corruption work
involve? Can corporations act as citizens against systemic corruption?
Much research has examined how corporations can foster non-corrupt
behavior internally, on the part of their employees and managers (for
example, Trevio and Weaver 2003). But little has considered an outward
focus by which corporations function as sociopolitical actors working
against entrenched societal corruption.
We address this topic in this chapter. After briey reviewing the concepts
of corruption and corporate citizenship, we summarize conventional
approaches to corruption and their limits. In the light of these limits, we
present a more expansive understanding of corruption, treating it as
embedded in the cognitive and behavioral components of an overarching
institutional logic, which in turn can be sustained or changed by social
actors in possession of economic, cultural, social and symbolic resources.
Based on this alternative account of corruption (developed in greater detail
in Misangyi et al. 2008), we oer proposals as to how corporations might
engage in anti-corruption eorts that spread beyond their own (admittedly
porous) boundaries. In this, corporations function as citizens in the sense
of taking on social and political responsibilities and as entrepreneurs intent
on changing an institutional framework that enables corrupt behavior. But
although we highlight certain potential corruption-disabling roles for corporations, we also consider the potentially quixotic nature of any expectation that corporations can or would engage in wide-ranging citizen-like
behavior against corruption.
Corporate citizenship and corruption: basic concepts
Denitions of both corporate citizenship and corruption involve some controversy, and so it is useful to rst establish what we mean by each of these
concepts. For our purposes, we embrace what is at the root of most perspectives on corruption: (i) a social actor is entrusted within a social system
with the allocation of resources or benets (and costs) and (ii) the social
actor has some level of discretion over this allocation and uses it to increase
the social actors (or its patrons) welfare at the expense of overall system
welfare or the actors legally, contractually, socially or morally dened role
expectations.2
Several contentious perspectives on corporate citizenship exist within
practitioner and academic literatures (Logsdon and Wood 2002; Moon
et al. 2005; Crane and Matten 2008; DeGeorge 2008; Norman and Nron

Corporations as citizens against corruption

187

2008a, 2008b; Wood and Logsdon 2008). Some scholars reject the plausibility of the concept in any form (for example, van Oosterhout 2008).
Minimalist views of corporate citizenship conne it to philanthropic activity and/or behavior in conformity to law and morality (Saiia 2001; Matten
and Crane 2005; Norman and Nron 2008a). More generally, in this private
actor approach the corporation is a citizen in the sense of dutifully fullling
formal and informal societal expectations, but not in any sense stronger
than that. In other words, corporations are not acting as sociopolitical
actors in their citizenship role; only others (for example, governments,
NGOs, inuential individuals) act in that capacity. Corporations merely are
entities that follow societal rules and otherwise dispose of their property
and contract with others as they please (within the constraints of market
forces).
More expansive views treat corporations as sociopolitical actors responsible (with others) for maintaining or developing the overall framework of
society (Scherer et al. 2006; see also Matten and Crane 2005). Here, corporations take on an active, republican (that is, civic virtue-oriented) identity
(in contrast to a more private and reactive bourgeois liberal notion of citizenship; Scherer et al. 2006). Scholars working within this political actor
perspective of corporate citizenship put the corporation in the public
sphere and assume a state-like role of the corporation with regard to its corporate citizenship behavior (Scherer et al. 2006, pp. 51415, original
emphasis). For example, corporations might step into a breach vacated by
other institutions, as in situations of failed states. Corporations also raise
questions about their active sociopolitical role in so far as globalized,
transnational business activity creates new venues of collective action and
power that exceed the reach of traditional nation-states. But because corporations are not elected to administer political rights and obligations in
lieu of conventional forms of political governance, questions arise as to the
democratic legitimacy of corporate citizenship understood in this expansive way (Palazzo and Scherer 2006). Thus, Scherer et al. (2006) suggest that
corporate citizenship behavior must be informed by a republican (rather
than private, classically bourgeois liberal) political model of citizenship
(see Steinmann and Scherer 2000; Ulrich 2002; Moon et al. 2005), wherein
the corporation, as both a private citizen as well as a citizen of the community (Habermas 1998), takes on politically administrative functions
while guided by an inherent responsibility and capacity to benet the
commonwealth.
Applied to corporate action regarding corruption, a minimalist, corporation-as-law-abiding-and-moral-citizen (hereafter, private-actor) perspective on corporate citizenship suggests attention to intra-organizational
corporate practices aimed against corruption such as eorts to prevent

188

Handbook of research on global corporate citizenship

employees from paying or receiving bribes, to create an ethical corporate

culture, to monitor employee behavior, and so on. Thus anti-corruption
agencies sometimes recommend codes of conduct for corporations (for
example, the UN Global Compact, TI, the OECD, the World Bank). Intraorganizationally focused eorts to control corruption, of the sort appropriate to a private-actor view of corporate citizenship, have been addressed
extensively by much organizational behavior research (for example,
Ashforth and Anand 2003; Trevio and Weaver 2003). Our interest here, by
contrast, is in an expansive (political-actor) notion of citizenship, according to which corporations attend not only to their own aairs within general
legal and moral constraints (that is, the classically liberal sense of citizenship), but rather become sociopolitical actors with respect to the mitigation
of societal corruption. The key question implied by this expansive view is
this: are corporations well-positioned to act (perhaps with others) as citizens
taking on a corruption-disabling sociopolitical responsibility? Answering
this requires considering (i) the means by which corporations might engage,
as sociopolitical actors, in restructuring society so as to mitigate corruption,
much as governments and NGOs do; while also examining (ii) the potential
for corporate sociopolitical engagement vis--vis corruption to fail tests of
legitimacy or otherwise create problems. To address these questions we need
to consider a broader perspective that encompasses the insights of conventional accounts of corruption and its mitigation, while placing corruption
in a more complex institutional analysis.
Mitigating corruption: alternative approaches
Corruption typically has been viewed from an economic perspective
focused on rationally self-interested actors who respond to anti-corruption
incentives (that is, penalties and rewards) and controls (for example,
audits), and from an intra-organizational, behavioral perspective focused
on managing the internal culture and structure of an organization in ways
that foster good behavior and buer the organization from external inducements to corruption. We briey examine these perspectives before considering a wider-ranging institutional analysis of corruption (a fuller account
appears in Misangyi et al. 2008).
Economic approaches to corruption mitigation
Economically oriented approaches generally consider corruption to be the
abuse of public power for private benet (World Bank denition, see Tanzi
1998, p. 564), which arises when there exists control over economic costs or
benets and the discretionary power to appropriate gain from that control
(Shleifer and Vishny 1993; Mauro 1996). This account of corruption rests
upon a premise of self-interested behavior, and thus assumes that corruption

Corporations as citizens against corruption

189

(for example, bribery) will occur whenever it is rational for individuals to

engage in it: the opportunity exists (that is, discretion over allocations of
resources/economic rents; Mauro 1996), it is a preferable option (for
example, due to poverty, lack of trust and so on; Rose-Ackerman 2001), and
there is little chance of any punitive eects (Klitgaard 1988).
The obvious remedies for corruption, in this view, stem from these same
premises: curbing discretionary power or providing incentives to dissuade
corrupt activities. Thus an economically oriented approach suggests that
corruption can be mitigated by promoting: (i) market liberalization, in the
belief that ecient product and capital markets constrain corrupt managerial behavior, and/or (ii) regulatory structures, supported by penalties or
incentives, requiring accountability and transparency (Shleifer and Vishny
1993; Kaufmann 1997; Tanzi 1998). Evidence regarding these remedies,
however, is not encouraging. For example, market liberalization policies
implemented in some ex-Soviet countries (such as mass privatization in the
Czech Republic; Spicer et al. 2000) failed to curb corruption, resulting
instead in new forms of corruption (Kaufmann 1997; Open Society
Institute 2002). Similarly, relatively little evidence suggests that the imposition of comprehensive government-sponsored programs (for example, laws
requiring transparency, investigation and enforcement agencies, and public
awareness campaigns) eectively reduces entrenched corruption in some
settings (Tisn and Smilov 2004).
The organizational behavior perspective on corruption
Organizational behavior research in this area similarly recognizes selfinterest as a factor contributing to corrupt behaviors, but it also attends to
the normative and cognitive aspects of such behavior in organizations (for
example, Ashforth and Anand 2003; Trevio and Weaver 2003). Scholars
in this perspective have, for example, examined how corrupt actions can
become institutionalized in situationally dened role identities promulgated within organizations, with the result that normally honest people end
up engaging in corrupt practices in fulllment of their organizational roles
(Brief et al. 2001; Aquino and Reed 2002; Weaver and Agle 2002; Ashforth
and Anand 2003; Weaver 2006). Organizational behavior research is interested in corruption that results from the interaction of individual and situational factors within organizations, and thus focuses upon normative and
regulative controls within organizations as remedies (Trevio and Weaver
2003). Thus some scholars promote cultural change within organizations
as a means to mitigate intra-organizationally generated corruption, emphasizing that both formal elements (for example, incentive structures) and
informal elements (for example, exemplary leadership) must be addressed in order to encourage organization members identication with (and

190

Handbook of research on global corporate citizenship

thus commitment to) ethical modes of behavior (Weaver and Trevio 1999;
Weaver et al. 1999a; Trevio and Weaver 2003). Although these
approaches may succeed in changing individual behavior within organizations, they do not address enabling conditions for corruption that reside in
extra-organizational contexts.
An institutional approach to corruption and its mitigation
Economic perspectives on corruption lack attention to the complex role of
normative and cognitive processes; it is assumed that people act (deliberatively) based upon xed preferences (Fligstein and Mara-Drita 1996) and
thus questions of identity, roles, depersonalization and related phenomena
have no place in such accounts (Friedland and Alford 1991). Although
organizational behavioral accounts address normative and cognitive
processes, these approaches are limited by a primary focus on organizations
as the context for action, and consequent inattention to the institutional
environments within which both individuals and organizations are embedded (Granovetter 1985). This is important, because large-scale cultural and
institutional factors inuence behavior, cognition and aect in ways relevant to ethics in organizations (Weaver 2006).
Thus a more eective approach to mitigating widespread corruption
must move beyond conventional economic and organizational approaches
to consider the process by which institutional frameworks or, as we shall
describe them, institutional logics constituted by the identities, cognitive
frameworks and practices of people are formed and sustained, how those
logics enable corruption, and how they might be changed by social actors
(such as corporations) using the resources available to them (Misangyi et
al. 2008). This broader foundation for understanding societal corruption in
turn can inform thinking about how corporations might exercise citizenship roles by using their often vast resources to bring about institutional
change regarding corruption.
Institutional logics An institutional logic (Friedland and Alford 1991) is a
socially constructed, historical pattern of material practices, assumptions,
values, beliefs, and rules by which individuals produce and reproduce their
material substance, organize time and space, and provide meaning to their
social reality (Thornton and Ocasio 1999, p. 804). Institutional logics
provide a sense of meaning, coherence and order, as they incorporate social
identities and cognitive schemas and role expectations which in turn delineate and guide behavior (Berger and Luckman 1966; Scott 1995). Identities,
understood as cognitive self-schemas, motivate and guide behavior through
specic role expectations within social settings (see Ashforth 2001) and
through social categorization processes (for example, prototypical behavior,

Corporations as citizens against corruption

191

see Hogg and Terry 2000). Schemas, in turn, provide mental frameworks of
how relations occur within any particular situation (DiMaggio 1997) and
related cognitive scripts provide a ready stock of appropriate behavioral
routines for a situation (Barley and Tolbert 1997), thereby promoting
eciency and facilitating interaction. Taken together, these elements of an
institutional logic frame the way people understand their place in the world,
including their relationship to others, and provide them with a repertoire of
ways to act, think and feel.
The recursive relationships among identities, schemas/roles and practices
within institutional logics opens up the possibility of purposive institutional change: just as the symbolic realm (that is, identities and their attendant schemas and roles) inuences the substantive (that is, practices and
actions), so the latter realm also inuences the former (that is, practices help
to dene and shape identities, schemas and roles) (Giddens, 1976;
Friedland and Alford 1991; Barley and Tolbert 1997). Thus the actions of
individuals and organizations can aect the continued existence and
inuence of an institutional logic. Persistence of an institutional logic is not
inevitable (Giddens 1984; Sewell 1992), and change is more likely in situations that trigger the kind of self-conscious, deliberative thinking by
people that can make them aware of the logic and its inuence on thought
and action (Clemens and Cook 1999; Stinchcombe 1978). Such thinking
might be encouraged by a serious challenge to the normal workings and
outcomes of an institutional logic, such as a severe economic crisis
(Fligstein and Mara-Drita 1996). But it might also be prompted by social
actors within an institutional eld who articulate and propagate an alternative institutional logic (or an alternative interpretation of the reigning
logic), such that the established institutional logic no longer functions as a
brute fact, but rather as something to be evaluated or even replaced
(Friedland and Alford 1991; Sewell 1992; Barley and Tolbert 1997;
Emirbayer and Mische 1998; Seo and Creed 2002).
Social actors and their resources Institutional logics such as those that
enable or disable corruption cannot exist apart from the social actors that
embody, practice and change them (Zilber 2002). Social actors who attempt
to change institutional logics are, in eect, institutional entrepreneurs
(DiMaggio 1988; Seo and Creed 2002; Maguire et al. 2004). Their success
depends in part upon whether they have adequate resources for the change
eort (DiMaggio 1988; further discussed below) and on whether they can
infuse new beliefs, norms, and values into social structures (Rao et al.
2000, p. 240; see also Fligstein 1997). But institutional logics also have their
defenders, persons who, for whatever reason, use their resources, positions and inuence to maintain an existing institutional order, in part by

192

Handbook of research on global corporate citizenship

highlighting the lack of harmony between the prevailing institutional logic

and an emerging one (Henisz and Zelner 2005).
Any particular institutional logic is rooted in a foundation of resources
that provides social actors with the capacity for carrying out the practices
entailed by the logic, and for enacting the identities of the logic (Bourdieu
1985; Sewell 1992). For example, an institutional logic that normalizes
mobility in the pursuit of enhanced socioeconomic status presumes access
to certain transport and communication resources; another logic that
embodies a high degree of individualism might presume and foster a
certain degree of social isolation, whether in actual geographic terms or in
the density of social networks. Resources can be economic (for example,
material wealth), social (for example, social networks or status hierarchies),
symbolic (for example, legitimacy, and more importantly the capacity it
confers to further dene what is legitimate), or cultural (for example, ethnicities, religions) (Bourdieu 1990; Oakes et al. 1998). The importance of
any or all of these dierent types of resources is intricately tied not only to
how they support the prevailing institutional logic, but also to how they are
dened by it. Therefore, resource availability constrains the survivability of
an institutional logic, and at the same time, the very value of any particular resource is dependent upon its denition granted by the logic (Friedland
and Alford, 1991; Sewell 1992). Likewise, the spread of a new logic also
depends upon either existent or new forms of resources; social change will
be dicult for any institutional entrepreneur who lacks a sucient base of
resources in an existing institutional logic, at least in the absence of any
kind of crisis or other unintentional trigger for widespread deliberative
cognition which would enable the possibility for the redenition of resources toward those possessed by the would-be change agent.
Corporate citizenship and the mitigation of corruption
The foregoing analysis of corruption indicates two primary ways in which
corporations in citizen roles can act to mitigate corruption. Economic,
behavioral and institutional approaches to corruption all grant that corporations might work against corruption because they are compelled or
encouraged to do so for example, by law, by incentives or by legitimation
pressures such as reputational concerns. This view is common; governments and international bodies (for example, the UN, the World Bank),
NGOs (for example, TI) and inuential actors (for example, George Soros),
individually or in concert initiate formal or informal structures of inuence
that promote non-corrupt corporate behavior or enlist corporations in
eorts to thwart corruption by others. A corporations anti-corruption role,
in this private-actor view, is primarily reactive, as a dutiful citizen who
obeys informal and formal societal expectations.

Corporations as citizens against corruption

193

But from a political-actor account of corporate citizenship, corporations

have a role as anti-corruption institutional entrepreneurs that can address
the institutional logic within which corruption is embedded. This in turn
involves addressing patterns of identity, cognition and behavior, and the
social, economic, cultural and symbolic resources that sustain those patterns. In Matten and Cranes (2005) terminology, corporations might function as enablers, providers, or channels of civil-society-enhancing, and
corruption-disabling, practices in ways that go beyond putting their own
internal organizational houses in order or simply following the schemas,
rules and scripts of an anti-corrupt logic that is propagated by some other
social actors (for example, government). But can corporations do this
without raising questions of their overall tness and legitimacy for the task?
Corporate inuence on institutional logics
How can corporations inuence an institutional logic so as to create or
maintain the identities, schemas and roles that might either encourage or
undermine practices of corruption? In considering this question, we should
not simply be concerned with specically corrupt or anti-corrupt elements
of an institutional logic, but with any identities, schemas, roles and practices that might contribute to corruption in some way even if they themselves are not specically framed in terms of corrupt identities and
practices.
Corporate actors, individually and collectively, have clear impacts
whether intended or unintended on the institutional structure of any
society or any other institutional eld (see, for example, Fligstein 2001;
Maguire et al. 2004). Corporations engage in political action by waging
public campaigns on issues, having direct engagement with political decision makers, contributing to elected ocials campaigns, lobbying for or
against (and even writing) legislation, spinning the so-called revolving
door between corporate and government work and performing surrogate
government roles. Their inuence through economic action creates,
destroys or transfers wealth within and among societies, provides goods
and services to some or all, and has either productive (for example, suburban housing) or destructive (for example, suburban sprawl) consequences for some or all.
Corporations also function as creators or arbiters of individual citizens
identities. Their organizational structures embed persons in scripted repertoires of meaningful behavior and encourage persons to identify with particular social roles or statuses. But corporate inuence on meaning and
identity is not restricted to intra-organizational settings; in the eort to
create market niches for consumption of corporations goods, services and
social status markers (Rindova and Fombrun 1999), corporate discourse

194

Handbook of research on global corporate citizenship

(through engagement with or ownership of a wide array of media)

inuences individuals tastes and preferences and encourages persons to
identify with particular brands or other symbols, with particular social
roles and statuses (for example, elite class credit cards, or, more generally,
the fashion industry and lifestyle brands), and even with the corporations
themselves. For example, contemporary internalized expectations regarding the form and meaning of romance and love are integrally linked in both
genesis and form to the way such ideas have been symbolized in 20thcentury advertising and other media (Illouz 1997), and to the commodities
represented in those symbolic venues. Thus one cannot claim that corporations should not engage in actions to change institutional logics in
corruption-disabling ways on the grounds that corporations do not have
the capacity to do so; clearly they already exercise much capacity to
inuence institutional logics.
It is beyond our scope to discover and discuss every means by which corporate activity might aect the cognitive order of institutional logics in
ways that support or undermine corruption. But if corruption constitutes
a kind of taken-for-granted, or at least accepted, way of life arising from
the identities, schemas and roles of an institutional logic, we can at least
oer general insights as to how corporate decision makers, policy makers
and NGO leaders might think about the relationship between corporations
and the cognitive, aective and behavioral order of an institutional logic.
In keeping with our theoretical summary, above, we rst examine the
factors pointed to by our understanding of the cognitive and related orders
embedded in institutional logics identities, schemas, roles and rules and
then examine corporations as social actors with resources.
Identities As noted earlier, identities underlie much behavior, and
inuence the nature of behavior as corrupt/non-corrupt and corruption
enabling/disabling. In some cases this is because identity can be specically
moral in content (Aquino and Reed 2002; Weaver 2006). But even identities
rooted in larger institutional logics such as nationality, ethnicity, religion,
family and the workplace (Friedland and Alford 1991) which, in themselves, might be orthogonal to moral identity, nevertheless can contribute to
circumstances that make corruption more or less likely. For example, ethnicity can contribute to a corruption-enabling logic because ethnic identities, and the social barriers they create, generate structural impediments to
anti-corruption eorts (Misangyi et al. 2008). Thus advocates of corporate
citizenship regarding corruption need to consider how corporations might
inuence a wide range of corruption-relevant identities.
Along with the corporate inuences on identity described earlier (for
example, identication with a brand), we also can ask how corporations

Corporations as citizens against corruption

195

inuence the compartmentalization of identities (Weaver and Agle 2002;

Ashforth and Anand 2003; Weaver 2006), such that moral identity or other
forms of identity conducive to good behavior are rendered less salient to
individuals and thus less eective in guiding action. This occurs within
organizations, as individuals leave their ethics at the door. But corporateinuenced identity compartmentalization can occur outside the workplace,
if a compartmentalizing, narrowly market-oriented message about how life
is or should be constituted is proclaimed through a wide range of resources.
For example, contextual inuences present in the contemporary shopping
mall or hypermart might eectively divorce materialistic consumer identities from any other sense of self, so that shopping or consumption becomes
an end in itself and moral identities are made less salient with respect to consumption activities. Identity work by corporations can have further impacts
in so far as business or market axioms diuse into other arenas of social life,
becoming the standard by which (for example) political, educational, social
or religious life are understood and conducted (as when career counselors
advise potential job seekers to dene their own personal brand).
How, then, can corporations foster a more integrative approach to identity, helping (for example) moral identity and other corruption-disabling
identities to compete in salience with social identities that might enable corruption? The content and salience of corruption-relevant identities can be
inuenced by (for example) corporate actions that change social networks
so as to subject people to dierent socialcognitive inuences, or by structuring a corporations engagement in everyday commercial life so as to
present clear opportunities to exercise moral identity (for example, more
elaborate labeling with respect to positive or negative externalities arising
from the production of a purchased item). In addition, in so far as compartmentalized identities result from the social fragmentation and isolation
often attributed to modernity (Taylor 1989; Giddens 1991; Twenge 2000),
corporations also can foster anti-corruption institutionalized identities by
attending to the impact of their own actions on social fragmentation. Also,
if the development of features of a moral identity depends on involvement
in a teleologically meaningful collective as philosophers from Aristotle
(Nicomachean Ethics) to MacIntyre (1981) have argued, along with some
social scientists (for example, Hunter 2000) corporations concerned
about institutionalizing a moral identity can attend to the impact of their
actions on the possibility of teleologically meaningful social collectives. In
short, once we think about corruption in terms of institutional logics and
their embedded identities, we open ourselves to a wide range of imaginative means by which corporations might use their proven ability to inuence
social behavior (Ewen 1988) to foster identities in a manner that will help
to disestablish corrupt practices.

196

Handbook of research on global corporate citizenship

Schemas and language Institutional logics incorporate cognitive schemas

(including schemas of self-identity). But schematic cognition does not occur
in a vacuum, as the content of schemas is learned consciously or unconsciously from an individuals surrounding social context (DiMaggio 1997).
Thus attention to the content of schematic frameworks is essential for understanding how corruption can be entrenched, in so far as schemas move phenomena (such as corruption) to the periphery or center of awareness. For
example, social actors can minimize the signicance of their own corrupt
behavior through mechanisms of moral disengagement (Bandura 1999),
which involve the mental reconstruction or reinterpretation of outcomes in
ways that either minimize the actors role in the outcome or the (corrupt)
nature of the outcome, or denigrate or ignore the status of any victims.
Schematic cognition inuences an individuals ethical sensitivity,
accounting for why some persons are, or are not, aware of the ethical challenges around them (Sparks and Hunt 1998). Particular collective schemas
can enable or disable corruption. For example, a view of corruption as the
natural, inevitable order of society can be entrenched in a collective
schema, such that people believe they are helpless in the face of corruption.
Alternatively, a shared cognitive framework can direct judgments regarding who or what is responsible for desirable or undesirable outcomes (Jost
et al. 2004). In addition, shared cognitive frameworks can make it dicult
to imagine alternatives to existing and corrupt social orders, which is why
changes in institutional logics are more likely in conditions that foster
deliberate rather than schematic cognition (Emirbayer and Mische 1998;
Seo and Creed 2002). And closely related to schematic cognition is the
matter of the language used to label social phenomena. Thus, in one
schema, a particular kind of overt behavior (for example, hiring an
underqualied sibling) might be identied as corrupt (that is, nepotism),
while in another schema essentially the same overt behavior might be
identied as ethically proper (that is, loyalty).
Corporate actions can inuence both the content and availability of
identities and their attendant schemas, and the language used to articulate
them. Even the identity of corporate citizen and its associated schema is
a case in point. If this identity (corporate citizen) gets articulated
and schematically entrenched in a way that legitimates corporate anticorruption activity, it can contribute to a reduction in corruption as decision makers in corporations (and in the institutions that deal with them)
begin to think in terms of a political-actor corporate citizenship schema.
This is not inevitable, however, as any such schema faces sti competition
from other reigning schemas of social and economic life (for example, a
private-actor schema). Indeed, the growing prevalence of the corporate
citizen identity in part stems from visible corporate use of the idea, which

Corporations as citizens against corruption

197

often constructs the identity as merely philanthropic activity (Matten and

Crane 2005; Norman and Nron 2008a). To the extent that the schema
underlying a minimalist denition of a corporate citizen identity narrowly
involves rationally self-interested behavior, compartmentalization, and a
business is business mentality, a private-actor corporate citizenship
schema runs the risk of becoming just another window-dressing contributor to the problem of corruption. Such a schema most certainly conicts
with the corruption-disabling political-actor schema, preferred by many
academics, policy makers and NGOs, because a political-actor schema suggests that eective corporate citizenship understood as a sociopolitical
identity driving corporate eorts to remedy corruption should attend to
the impact of corporate practices on the promulgation of cognitive
schemas and the languages by which they are articulated.
Multiple corporate practices are implicated in such an eort. In so far as
language is essential to schematization and awareness with respect to corruption, it is essential for corporate actors to talk openly about corruption,
thereby both legitimating such discussion in public and helping to make corruption awareness a part of the shared schemas in a society. So corporate
activities with respect to communication media (for example, advertising)
are relevant. But so is funded research (via universities, think tanks and so
on), which often follows, rather than leads, practitioner concerns (Barley
et al. 1988). Corporations have substantial power to create or frame public
perceptions and categories of understanding, and they can use this power
to frame anti-corruption as a legitimate endeavor (for example, by aligning
themselves with other, more-informed but perhaps less powerful anticorruption institutional entrepreneurs). Indeed, the institutionalization of
any new logic depends upon framing processes that not only identify problems and oer solutions, but also delineate identities (of antagonists and
protagonists) and dene and motivate schemas, roles and behavior that constitute the new logic (Hunt et al. 1994; Misangyi et al. 2008). For example,
AES, the American energy company, after purchasing the privatized electricity distribution system in Tblisi, Georgia, in eect took on the role of
anti-corruption entrepreneur ghting entrenched corrupt interests in the
Georgian energy ministry and key industry sectors, complete with AES
executives engaging the Georgian public in awareness-building eorts by
means of mass media and personal interaction (Henisz and Zelner 2006). In
the process of doing this, AES spokespersons both framed the elimination
of corruption as a legitimate goal and also helped to identify antagonists
and protagonists in the struggle over entrenched corruption.
Scripts, roles and rules Closely related to the issues of schematic cognition
and identity is the role of corporations in fostering the behavioral scripts

198

Handbook of research on global corporate citizenship

and role expectations embedded in institutional logics. Identities understood cognitively incorporate sets of role expectations and scripted
behaviors. However, conict can arise among dierent sets of role expectations, and persons sometimes choose among multiple available behavioral
scripts in their responses to situations (Ashforth and Johnson 2001; Weaver
and Agle 2002).
Through their impact on organizational and societal cultures, corporations generate behavioral scripts and role expectations. This is particularly
true in the light of the increasing extent to which individuals interactions
are with large, relatively abstract and impersonal corporate systems (for
example, a call-center on a dierent continent) rather than with entities of
a more local scale (for example, a local service provider). In such situations,
high visibility actors (including large corporations and their executives) take
on increasing signicance as models and arbiters of behavior by their capacity to dene, propagate and embody behavioral scripts. Thus (for
example) celebrity chief executives foster scripts for management behavior
(for example, lean and mean); the design of products and commerce helps
to structure peoples lives; corporate involvement in land-use planning
processes ultimately inuences social interaction, with implications for the
kinds of role expectations that get developed out of such interaction
(because land-use decisions can inuence social network development).
Regarding corruption specically, the structure of work and careers is
highly subject to inuence by corporations, and thus corporations have the
potential to build corruption-relevant elements into the scripts, role expectations and schemas that constitute popular senses of career and work (for
example, so that reporting on corruption is seen as an in-role rather than
extra-role behavior). In addition, corporations can carve out certain areas
of social and economic life as guided by corruption-free scripts. Thus some
Indian corporations Infosys and the Tata group, for example by an incessant refusal to cooperate in traditional forms of corruption, have in eect
generated new company-specic scripts in the minds of public servants, such
that ocials typically dont even bother asking Tata executives for bribes
(Wehrfritz and Moreau 2005, p. 36). Such actions create a zone of economic
activity free of corruption-fostering scripts, and also legitimate corruption
reduction as a viable option within an overall institutional logic.
Corporations and their resources Resources are crucial for institutional
change, and so successful anti-corruption entrepreneurs must possess or
create the kinds of resources needed to bring about a change in institutional
logic (Misangyi et al. 2008). With regard to conventional anti-corruption
eorts, many of these resources are obvious: legal authority and enforcement
power; the ability to compel business partners to sign legally enforceable

Corporations as citizens against corruption

199

contracts; inuence in the media that can increase public awareness of

corruption; human resources sucient to disseminate knowledge of corruption and its impact; tangible or intangible support from other key social
actors; and so on. But also important is the status and resource base of those
who would maintain an existing, corruption-enabling logic. They, too,
might be able to deploy multiple resources, and, in so far as the corruptionenabling logic is integrally linked to elements of identity that appear, on the
surface, corruption neutral (for example, ethnicity, religion), they might have
high levels of legitimacy in the eyes of most participants in the institutional
logic.
Recognition of the symbolic and substantive resources needed for institutional change regarding corruption points toward anti-corruption institutional entrepreneurship as an element of corporate citizenship. In some
social settings, corporate actors might have more resources and legitimacy
than any other potential anti-corruption institutional entrepreneurs. Indeed,
corporations, whether individually or collectively, clearly have access to a
great variety of economic, cultural, social and symbolic resources, so the
possibility that they can act as institutional entrepreneurs is beyond question. Although their economic resources especially in the case of transnational corporations (TNCs) often are vast, enabling them to persist in
long-term eorts at social change as long as their shareholders (in the case
of public companies) would tolerate such, perhaps of more interest are their
cultural, social and symbolic resources.
Corporations have cultural resources, both internally and externally. As
mentioned above, their own internal cultures might function well as laboratories for social innovation (for example, new scripts, roles and rules).
The global reach of transnationals also gives them access to multiple cultures and those cultures varying approaches to problems and issues, which
then can be adapted into corporate eorts to mitigate corruption. That is,
TNCs can function as conduits for the diusion of anti-corruption strategies; AES in Georgia and elsewhere, for example, modeled a relatively
transparent and decentralized form of executive decision making (Paine
and Leamon 2000; Devlin 2003). In addition, in highly corrupt and politically unstable environments, non-corrupt corporations might function as
outposts of stability and order, providing a kind of sanctuary in which an
alternative schematic framework of identity and practice can be developed,
with the potential for gradual diusion into the surrounding environment.
Corporations also can have signicant social resources, in so far as they
are integrated into important and supportive local and global social networks. In some contexts, corporations also enjoy considerable symbolic
resources, either because of brand identication on the part of the public
or because of public identication with the corporation as a source of

200

Handbook of research on global corporate citizenship

something valued (for example, products, employment or simply as a

national symbol). Similarly, a respected position in an industry network
can enable a corporation to encourage other corporations to reduce their
respective involvement in corrupt practices.
Corporate citizens and corruption: private action or institutional
entrepreneurship?
Corporations face multiple opportunities to use their often extensive
resources to engage in institutional entrepreneurship against corruption.
Because of this, the potential exists to move beyond a conventional privateactor corporate citizenship approach to corruption mitigation to a politicalactor one in which corporations work actively to undo the institutional logic
of corruption. Conventional approaches, which rely on non-corporate institutional entrepreneurs to stimulate change (that is, national and international governmental bodies, NGOs, individuals) have their merits and
limits. Government enforcement of non-corrupt practices, for example,
sometimes works, but is limited in reach by national boundaries. In todays
global economy, the visible hand of conventional government policy might
not be strong or large enough to be eective against endemic corruption, yet
the invisible hand of market liberalization has an at best mixed track record
with regard to corruption mitigation (and, more generally, the historic
record of commerces inuence on institutional logics is open to serious
debate; see Hirschmans (1982) discussion of the contest between douxcommerce and the self-destruction theses about capitalism).
Yet anti-corruption initiatives by non-corporate institutional entrepreneurs such as NGOs and international agencies often get stuck in the diagnostic (that is, corruption is bad) or prognostic (that is, here is what to do
about it . . .) framing of the issue, failing to generate genuine change
because they fail to oer a motivational framework for other important
actors (including corporations). For example, the UN Global Compact, in
its 10th principle (which discusses the ght against corruption) takes a
step toward framing the appropriate conditions for a non-corrupt institutional logic (thereby dening as non-corrupt the identity of legitimate
corporations). But this is where it ends, leaving open questions as to how
this anti-corrupt identity is to be enacted (that is, schemas, roles, practices),
and leaving itself susceptible to merely symbolic (that is, window dressing), rather than substantive, corporate compliance with the principle.
Moreover, the success potential for conventional eorts clearly depends on
the resources available to governmental and NGO institutional entrepreneurs: the development of transnational corporations raises serious questions about the relative power of non-corporate actors with respect to
enlisting corporations in successful anti-corruption eorts.

Corporations as citizens against corruption

201

So perhaps we need to set aside questions of democratic legitimacy and

encourage corporations to adopt an expansive notion of corporate citizenship after all, one in which as republican, civic-virtue-oriented social
actors corporations actively seek to inuence institutional logics in ways
that reduce corruption. But why would corporations do this? What would
be their motivation? After all, corporate action regarding corruption
presently is limited by the institutional logics governing the corporate
world. And the logic of global capitalism and global markets might not
always mesh well with whatever is required for corruption mitigation in a
particular setting. In other words, if we take the identity/institutional logic
perspective on corruption seriously, there are things that corporations
could, in theory, do to help create anti-corruption institutional logics, but
whether they ever would do such under the varied constraints and expectations of the present institutional logic of global business is an open question. (For example, nancial pressures ultimately were sucient to
motivate the investors in AES to reign in a management team given to
talking rst about intra- and extra-organizational social goals and change,
and only secondarily about prot making.) And in the light of such constraints, whether corporations should engage in institutional entrepreneurship regarding corruption is an open and important question.
Thus, for example, it is fair to ask whether an institutional entrepreneur
that itself might be rooted in the logic of individualist consumer materialism (for example, a global brand company) is necessarily the appropriate
entity for enacting changes in an institutional logic in order to reduce corruption, in so far as corruption also arises from a self-interested framework. After all, typical conceptualizations of corruption dene it in terms
of private gains. Thus, would a social actor rooted in the market logic of
private gain (that is, a corporation) be able to challenge clearly the identities and underlying schemas of such an institutional logic, were they in need
of challenge with respect to corruption? Or would institutional entrepreneurship in such a situation end up involving not the mitigation of corruption as currently understood, but instead attempts to change the present
identities and schemas so that participants slowly learn to ignore or forget
corruption, or view it as a positive good, through processes of schema
change and redenition? Are there ways, in eect, in which corporate anticorruption eorts can end up not merely as decoupled window dressing
(Weaver et al. 1999b), but rather as something more akin to a through
the looking glass or quasi-Orwellian institutional logic that leaves the
beneciaries of corruption in place while yet providing the appearance of
corruption mitigation? This, then, is a paradox of a political-actor view of
corporate citizenship with respect to corruption: much as we might want
corporations to act to alter an institutional logic of corruption, their

202

Handbook of research on global corporate citizenship

embeddedness in an existing logic likely will inuence any institutional

entrepreneurship they exercise. So how, then, does real change become
possible?
Of course, corporations might engage in institutional entrepreneurship
against corruption if they were spurred into action by other social actors.
But the obvious candidates for that inuential role government, NGOs
and the occasional George Soros have unclear power and inuence
regarding TNCs (which, as noted earlier, is why the conventional privateactor approach to corruption is not enough), and it is that lack of clarity
that, in part, gives credence to the case for an expansive notion of corporate citizenship vis--vis corruption. The alternative is to attend to the role
of key corporate decision makers in guiding their organizations into a
newly conceived, sociopolitical notion of corporate citizenship. There is
precedent for this. Research on eorts and programs to foster ethics intraorganizationally in the corporate world highlight the key role played by top
managements commitment to that specic task as valuable in itself (and
not merely for any instrumental benets; Weaver and Trevio 1999; Weaver
et al. 1999a, 1999b), and to ethical leadership generally (Brown and Trevio
2006). Also, both theory (Barley and Tolbert 1997; Emirbayer and Mische
1998; Seo and Creed 2002) and the experience of some corporations suggests that corporate crises or incoherence surrounding ethics and corruption can give rise to deliberative cognition, leading to radically changed top
management attitudes regarding a corporations role as institutional entrepreneur about corruption, ethics or other issues (just as societal crises can
give rise to societal-wide reconsideration of an institutional logic and
encourage institutional entrepreneurs to take advantage of opportunities
to reshape conventional logics). For example, Royal Dutch Shell embarked
on a number of signicant initiatives with respect to sustainability and
stakeholder performance in part because of top management commitment
to those issues, which in turn was stimulated by several high-prole failures
to deal well with sustainability and stakeholder issues (Macalister 2003).
Hopefully most major TNCs will not go through crises of corruption of
the sort that stimulate institutional entrepreneurship regarding corruption;
there must be more benign ways to stimulate new forms of management
cognition. So for policy makers and NGOs there is a lesson in this: corporate institutional entrepreneurship regarding corruption might best be
achieved by leveraging forms of inuence over individual executives who in
turn can work to redirect their companies (and their companies constituents) toward signicant and meaningful anti-corruption institutional
entrepreneurship. As cognition and identity have strongly social elements
and strongly drive any kind of concern for ethical matters such as corruption (Weaver 2006), it is important to attend to the social network positions

Corporations as citizens against corruption

203

of key corporate decision makers, and to give policy makers and others
concerned with corruption some degree of entry into those networks.
Moreover, the adoption of an anti-corruption institutional entrepreneurship role by some corporations serves to put a competing institutional logic
in play in society, making it at least slightly more likely that other actors
will recognize and adopt that new logic (Friedland and Alford 1991).
Innovations spread when inuential or institutionally skilled organizations
adopt them; thus if policy makers and NGOs want to spur corporate anticorruption institutional entrepreneurship, they might target key decision
makers within potentially inuential corporations.
Conclusion
Our purpose in this chapter has been to examine the potential of corporations to exercise a citizenship role as institutional entrepreneurs in the mitigation of corruption. Corporations are increasingly being called to take on
such tasks, and whether we like it or not, in some cases they may be the only
social actors in the position to do so. For the most part, corporate citizens
are well equipped to take part in institutional entrepreneurial activities
aimed at mitigating corruption: they have the resources and social skills
(Fligstein 1997, p. 398) required for fostering the identities and institutional
logics that might encourage good behavior and undermine institutional
logics that support corruption. We have attempted to shed light upon some
of the ways that they can bring this capacity into action. But we have not
done so with blinders on, as it always is fair to question the legitimacy of a
corporate citizen in taking on a role such as this. This is not just an abstract
matter of cognitive or moral legitimacy (Suchman 1995), but a very practical question as well (Scherer et al. 2006): can individual citizens expect
corporate citizens to exercise their skills, power and discretion as institutional entrepreneurs in a manner that will benet the civic order? And
should individual citizens entrust such a task to corporations, and submit
to it? However, unless the power and inuence of conventional political
institutions parallels that of TNCs (that is, both strong or both weak), so
as to compel appropriate and relevant corporate action against corruption,
reliance on corporations as sociopolitical actors regarding corruption
might be not only possible but inevitable provided that corporations and
their decision makers are willing to take on the task.
Notes
1. Both authors contributed equally to this chapter.
2. In general, we use the term social actor to cover individuals, individuals acting as agents
of other social actors or collective actors such as corporations. However, our primary
focus here is on corporations as social actors in their larger economic and social contexts,
and therefore, although we typically refer just to corporations, we do so without denying

204

Handbook of research on global corporate citizenship

decision-making behavioral roles for the persons who individually or collectively act on
behalf of a corporation.

References
Aquino, K. and A. Reed (2002), The self-importance of moral identity, Journal of
Personality and Social Psychology, 83 (6), 142340.
Aristotle (1985), Nicomachean Ethics, T. Irwin (trans.), Indianapolis, IN: Hackett Publishing.
Ashforth, B.E. (2001), Role Transitions in Organizational Life: An Identity-based Perspective,
Mahwah, NJ: Lawrence Erlbaum.
Ashforth, B.E. and V. Anand (2003), The normalization of corruption in organizations, in
R.M. Kramer and B.M. Staw (eds), Research in Organizational Behavior, vol. 25, Oxford,
UK: Elsevier, pp. 152.
Ashforth, B. and S. Johnson (2001), Which hat to wear? The relative salience of multiple identities in organizational contexts, in M. Hogg and D. Terry (eds), Social Identity Processes
in Organizational Contexts, Philadelphia, PA: Taylor & Francis, pp. 3148.
Bandura, A. (1999), Moral disengagement in the perpetration of inhumanities, Personality
and Social Psychology Review, 3 (3), 193209.
Barley, S.R., G. Meyer and D. Gash (1988), Cultures of culture: academics, practitioners, and the pragmatics of normative control, Administrative Science Quarterly, 33 (1),
2460.
Barley, S.R. and P.S. Tolbert (1997), Institutionalization and structuration: studying the links
between action and institution, Organization Studies, 18 (1), 93117.
Berger, P.L. and T. Luckmann (1966), The Social Construction of Reality: A Treatise in the
Sociology of Knowledge, Garden City, NY: Doubleday.
Bourdieu, P. (1985), The social space and the genesis of groups, Theory and Society, 14 (6),
72344.
Bourdieu, P. (1990), The Logic of Practice, Cambridge, MA: Harvard University Press.
Brief, A.P., R.T. Buttram and J.M. Dukerich (2001), Collective corruption in the corporate
world: toward a process model, in M.E. Turner (ed.), Groups at Work: Theory and Research,
Mahwah, NJ: Erlbaum, pp. 47199.
Brown, M.E. and L.K. Trevio (2006), Ethical leadership: a review and future directions,
Leadership Quarterly, 17, 595616.
Clemens, E.S. and J.M. Cook (1999), Politics and institutionalism: explaining durability and
change, Annual Review of Sociology, 25 (1), 44166.
Crane, A. and D. Matten (2008), Incorporating the corporation in citizenship: a response to
Norman and Nron, Business Ethics Quarterly, 18 (1), 2734.
DeGeorge, R. (2008), Reections on Citizenship, Inc. , Business Ethics Quarterly, 18 (1),
4350.
Devlin, P. (2003), Power Trip (lm).
DiMaggio, P.J. (1988), Interest and agency in institutional theory, in L.G. Zucker (ed.),
Institutional Patterns and Organizations: Culture and Environment, Cambridge, MA:
Ballinger, pp. 322.
DiMaggio, P.J. (1997), Culture and cognition, Annual Review of Sociology, 23 (1), 26387.
Doh, J.P., P. Rodriguez, K. Uhlenbruck, J. Collins and L. Eden (2003), Coping with corruption in foreign markets, Academy of Management Executive, 17 (3), 11429.
Emirbayer, M. and A. Mische (1998), What is agency?, American Journal of Sociology, 103
(4), 9621023.
Errath, B., P. Brew, J. Moberg, J. Brooks and S. Cote-Freeman (2005), Business against corruption: a framework for action, UN Global Compact, International Business Leaders
Forum, and Transparency International, http://www.unglobalcompact.org/docs/issues_
doc/7.7/BACtextcoversmallFINAL.pdf, accessed 10 August 2007.
Ewen, S. (1988), All-consuming Images: The Politics of Style in Contemporary Culture, New
York: Basic Books.
Fligstein, N. (1997), Social skill and institutional theory, American Behavioral Scientist, 40
(4), 397405.

Corporations as citizens against corruption

205

Fligstein, N. (2001), The Architecture of Markets: An Economic Sociology of Twenty-rstcentury Capitalist Societies, Princeton, NJ: Princeton University Press.
Fligstein, N. and I. Mara-Drita (1996), How to make a market: reections on the attempt to
create a single market in the European Union, American Journal of Sociology, 102 (1),
133.
Friedland, R. and R.R. Alford (1991), Bringing society back in: symbols, practices, and
institutional contradictions, in W.W. Powell and P.J. DiMaggio (eds), The New
Institutionalism in Organizational Analysis, Chicago, IL: University of Chicago Press,
pp. 23263.
Giddens, A. (1976), New Rules of Sociological Method, London: Hutchinson.
Giddens, A. (1984), The Constitution of Society, Berkeley, CA: University of California Press.
Giddens, A. (1991), Modernity and Self-identity: Self and Society in Late Modern Age,
Stanford, CA: Stanford University Press.
Granovetter, M. (1985), Economic action and social structure: the problem of embeddedness, American Journal of Sociology, 91 (3), 481510.
Gurria, A. (2006), Principles for ghting corruption: from criminalization to self regulation?,
Mouvement des Entreprises de France Colloquium on Fighting Corruption, Paris,
http://www.medef.fr/medias/les/106227_FICHIER_0.pdf, accessed 9 March 2007.
Habermas, J. (1998), Three normative models of democracy, in J. Habermas (ed.), The
Inclusion of the Other, Cambridge, MA: MIT Press, pp. 23952.
Henisz, W. and B. Zelner (2005), Legitimacy, interest group pressures and change in emergent
institutions: the case of foreign investors and host country governments, Academy of
Management Review, 30 (2), 36182.
Henisz, W. and B. Zelner (2006), AESTelasi: power trip or power play?, Philadelphia, PA:
Wharton School of the University of Pennsylvania, case study.
Hirschman, A.O. (1982), Rival interpretations of market society: civilizing, destructive, or
feeble?, Journal of Economic Literature, 20 (4), 146384.
Hogg, M.A. and D.J. Terry (2000), Social identity and self-categorization processes in organizational contexts, Academy of Management Review, 25 (1), 12140.
Hunt, S.A., R.D. Benford and D.A. Snow (1994), Identity elds: framing processes and the
social construction of movement identities, in E. Laraa, H. Johnston and J.R. Guseld
(eds), New Social Movements: From Ideology to Identity, Philadelphia, PA: Temple
University Press, pp. 185208.
Hunter, J.D. (2000), The Death of Character: Moral Education in an Age without Good or Evil,
New York: Basic Books.
Illouz, E. (1997), Consuming the Romantic Utopia: Love and the Cultural Contradictions of
Capitalism, Berkeley, CA: University of California Press.
Jost, J.T., M.R. Banaji and B.A. Nosek (2004), A decade of system justication theory: accumulated evidence of conscious and unconscious bolstering of the status quo, Political
Psychology, 25 (6), 881919.
Kaufmann, D. (1997), Corruption: the facts, Foreign Policy, 107, Summer, 11431.
Klitgaard, R.E. (1988), Controlling Corruption, Berkeley: CA, University of California Press.
Logsdon, J.M. and D.J. Wood (2002), Business citizenship: from domestic to global level of
analysis, Business Ethics Quarterly, 12 (2), 15587.
Macalister, T. (2003), Angels angle: interview with Sir Mark Moody-Stuart, The Guardian,
11 January, http://www.guardian.co.uk/business/2003/jan/11/mbas.highereducation, accessed 9 October 2007.
MacIntyre, A. (1981), After Virtue, Notre Dame, IN: University of Notre Dame Press.
Maguire, S., C. Hardy and T.B. Lawrence (2004), Institutional entrepreneurship in emerging
elds: HIV/AIDS treatment advocacy in Canada, Academy of Management Journal, 47 (5),
65780.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
Mauro, P. (1996), The eects of corruption on growth, investment, and government expenditure, IMF Working Paper no. WP/96/98, International Monetary Fund, Policy
Development and Review Department, Washington, DC.

206

Handbook of research on global corporate citizenship

Misangyi, V., G. Weaver and H. Elms (2008), Ending corruption: the interplay among institutional logics, resources, and institutional entrepreneurs, Academy of Management
Review, 33 (3), in press.
Moon, J., A. Crane and D. Matten (2005), Can corporations be citizens? Corporate citizenship as a metaphor for business participation in society, Business Ethics Quarterly, 15 (3),
42953.
Norman, W. and PY. Nron (2008a), Citizenship, Inc.: do we really want businesses to be
good corporate citizens?, Business Ethics Quarterly, 18 (1), 126.
Norman, W. and PY. Nron (2008b), Corporations as citizens: political not metaphorical,
Business Ethics Quarterly, 18 (1), 616.
Oakes, L.S., B. Townley and D.J. Cooper (1998), Business planning as pedagogy: language and
control in a changing institutional eld, Administrative Science Quarterly, 43 (2), 25792.
Open Society Institute (2002), EUMAP reports on corruption policy and judicial capacity,
http://www.soros.org/resources/articles_publications/publications/eupolicy_20021107, accessed 30 January 2005.
Paine, L.S. and A. Leamon (2000), AES Hungarian project, Boston, MA: Harvard Business
School Publishing, case study.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66 (1), 7188.
Rao, H., C. Morrill and M.N. Zald (2000), Power plays: how social movements and collective action create new organizational forms, in R.L. Sutton and B.M. Staw (eds), Research
in Organizational Behavior, vol. 22, Greenwich, CT: JAI Press, pp. 23982.
Rindova, V.P. and C.J. Fombrun (1999), Constructing competitive advantage: the role of
rmconstituent interactions, Strategic Management Journal, 20 (8), 691710.
Rose-Ackerman, S. (2001), Trust, honesty, and corruption: theories and evidence from postsocialist societies, Working Paper prepared for the Workshop on Honesty and Trust in
Post-Socialist Societies at Collegium Budapest, 2526 May.
Saiia, D.H. (2001), Philanthropy and corporate citizenship: strategic philanthropy is good
corporate citizenship, Journal of Corporate Citizenship, 1 (2), 5774.
Scherer, A.G., G. Palazzo and D. Baumann (2006), Global rules and private actors towards
a new role of the TNC in global governance, Business Ethics Quarterly, 16 (4), 50532.
Scott, W.R. (1995), Institutions and Organizations, Thousand Oaks, CA: Sage.
Seo, M.G. and W.E.D. Creed (2002), Institutional contradictions, praxis, and institutional
change: a dialectical perspective, Academy of Management Review, 27 (2), 22247.
Sewell, W.H., Jr (1992), A theory of structure: duality, agency, and transformation, American
Journal of Sociology, 98 (1), 129.
Shleifer, A. and R.W. Vishny (1993), Corruption, Quarterly Journal of Economics, 108 (3),
599617.
Sparks, J.R. and S.D. Hunt (1998), Marketing researcher ethical sensitivity: conceptualization, measurement, and exploratory investigation, Journal of Marketing, 62 (2), 92109.
Spicer, A., G.A. McDermott and B. Kogut (2000), Entrepreneurship and privatization in
central Europe: the tenuous balance between destruction and creation, Academy of
Management Review, 25 (3), 63049.
Steinmann, H. and A.G. Scherer (1998), Corporate ethics and global business: philosophical
considerations on intercultural management, in B.N. Kumar and H. Steinmann (eds),
Ethics in International Business, Berlin and New York: De Gruyter, pp. 1346.
Steinmann, H. and A.G. Scherer (2000), Corporate ethics and management theory, in
P. Koslowski (ed.), Contemporary Economic Ethics and Business Ethics, Berlin, Heidelberg
and New York: Springer, pp. 14892.
Stinchcombe, A. (1978), Theoretical Methods in Social History, New York: Academic Press.
Suchman, M.C. (1995), Managing legitimacy: strategic and institutional approaches,
Academy of Management Review, 20 (3), 571610.
Tanzi, V. (1998), Corruption around the world: causes, consequences, scope, and cures, IMF
Sta Papers, 45 (4), 55994.
Taylor, C. (1989), Sources of the Self: The Making of the Modern Identity, Cambridge, MA:
Harvard University Press.

Corporations as citizens against corruption

207

Thornton, P.H. and W. Ocasio (1999), Institutional logics and the historical contingency of
power in organizations: executive succession in the higher education publishing industry,
19581990, American Journal of Sociology, 105 (3), 80143.
Tisn, M. and D. Smilov (2004), From the Ground Up: Assessing the Record of Anticorruption
Assistance in Southeastern Europe, Budapest, Hungary: Center for Policy Studies, Central
European University.
Transparency International (TI) (2007), Anti-corruption handbook, http://www.transparency.
org/policy_research/ach/non_governmental, accessed 10 March 2007.
Trevio, L.K. and G. Weaver (2003), Managing Ethics in Business Organizations: Social
Scientic Perspectives, Stanford, CA: Stanford University Press.
Twenge, J. (2000), The age of anxiety: the birth cohort change in anxiety and neuroticism,
19521993, Journal of Personality and Social Psychology, 79 (6), 100721.
Ulrich, P. (2002), Ethics and economics, in L. Zsolnai (ed.), Ethics in the Economy, Oxford,
UK: Peter Lang.
United Nations Global Compact (2007), Ten principles, http://www.unglobalcompact.
org/AboutTheGC/TheTenPrinciples/index.html, accessed 10 March 2007.
van Oosterhout, J. (2008), Transcending the connes of economic and political organization?
The misguided metaphor of corporate citizenship, Business Ethics Quarterly, 18 (1), 3542.
Weaver, G.R. (2006), Virtue in organizations: moral identity as a foundation for moral
agency, Organization Studies, 27 (3), 34168.
Weaver, G.R. and B. Agle (2002), Religiosity and ethical behavior in organizations: a symbolic interactionist perspective, Academy of Management Review, 27 (3), 7797.
Weaver, G.R. and L.K. Trevio (1999), Compliance and values oriented ethics programs:
inuences on employees attitudes and behavior, Business Ethics Quarterly, 9 (2), 31537.
Weaver, G.R., L.K. Trevio and P.L. Cochran (1999a), Corporate ethics programs as control
systems: inuences of executive commitment and environmental factors, Academy of
Management Journal, 42 (1), 4157.
Weaver, G.R., L.K. Trevio and P.L. Cochran (1999b), Integrated and decoupled corporate
social performance: management commitments, external pressures, and corporate ethics
practices, Academy of Management Journal, 42 (5), 53952.
Wehrfritz, G. and R. Moreau (2005), A kinder, gentler, conglomerate, Newsweek, 31
October, 36.
Wood, D.J. and J.M. Logsdon (2008), Business citizenship as metaphor and reality, Business
Ethics Quarterly, 18 (1), 5160.
Zilber, T.B. (2002), Institutionalization as an interplay between actions, meanings, and actors:
the case of a rape crisis center in Israel, Academy of Management Journal, 45 (1), 23454.

10 Corporate citizenship and global

conicts: the baboon moment
Charles P. Koerber and Timothy L. Fort

Introduction
In a 2006 Foreign Aairs article, anthropologist Robert Sapolsky related the
story of the Forest Troop. The Forest Troop was a community of baboons
living on the edge of a tourist camp. The Troop feasted on the leftover food
of campers. In particular, the alpha males splurged, gorging themselves on
food and competing ercely for it. The Forest Troop was violent and competitive; it was not noted for sharing.
Then tuberculosis swept through the camp, killing the alpha males.
The Forest Troop survivors were the females and the less aggressive
males. With the alpha males gone, the culture of the baboons changed.
Rather than being competitive and violent, the group became less violent
and far more sharing. This would not be too surprising, but what followed was.
Baboon males circulate. They go from troop to troop, one might say, so
that there is a regular, new inux of new males into the group. Those new
males were also aggressive alpha males and so one would expect that when
they arrived on the scene, the Forest Troop would return to its violent ways.
It didnt. Instead, the alpha males changed their behavior so that they too
joined in the sharing and nurturing of the troop. In short, through successive generations, the entire culture of the Forest Troop changed.
Sapolsky compares this event to modern nation-states. He argues that
countries have changed too. Countries once violent have made conscious
decisions to eschew violence and develop new cultures. Germany and Japan
are very dierent compared to 70 years ago. Switzerland and Sweden are
dierent compared to a few centuries ago. What were once violent countries have become far more peaceful.
Just how baboons and how countries make this change may well be the
topic of several volumes. We introduce our chapter with Sapolskys story
not because we want to make a denitive argument as to how such change
occurs, but to suggest, impressionistically, that there is a provocative comparison. One can pose the learning of these examples to corporations too.
Corporations may be thought of as competitive and having little regard to
social conditions. That includes peace. Thinking of the contributions that
208

Corporate citizenship and global conicts

209

businesses can make to peace has not been part of their corporate culture.
Yet, if baboons can change, why cant corporations?
The rise of peace through commerce and corporate citizenship
In recent decades multinational corporations (MNCs) have emerged as
signicant actors in world aairs with the power to inuence and impact
on global economic, social and environmental systems (Korten 1995;
Bakan 2004; Chua 2004). Some MNCs are larger than the small countries
in which they operate. For example, ExxonMobils 2006 revenue of over
$377 billion is estimated to be larger than the gross domestic product of all
but 25 nations (Mufson 2007). In discussing businesses relatively recent
focus on corporate social responsibility, Andriof and McIntosh (2001,
p. 17) argue that consumers and employees now acknowledge the corporation as the most powerful social construct in the present era. Along with
a shift in power from governments to corporations over time, many of the
services, protections and institutions once provided by governments or
social service groups (for example, training workers, maintaining environmental standards, providing healthcare to workers) have been transitioned
to MNCs (Matten and Crane 2005; Waddock 2005; Palazzo and Scherer
2006). A recent New York Times article highlights the recent dramatic
increase in the US governments use of contract workers (many of whom
are employed by large corporations) and the increased scope of contracted
activities which now include activities traditionally done by governments
such as tax collection, intelligence analysis and disaster relief (Shane and
Nixon 2007). Total US government contracting expenditures were approximately $400 billion in 2006 compared to approximately $207 billion in 2000
(ibid.).
Globalization is a signicant factor in the changing relationship between
business, individuals and social groups and in the rise of MNCs. Barriers
to trade and communication are diminishing at an astonishing rate and
individuals, societies, cultures, corporations and non-governmental organizations (NGOs) are interconnected now more than ever. Labor, technology, products and ideas ow with relative ease from country to country
(Friedman 2005). However, not everyone has embraced globalization and
the associated intended and unintended consequences. The protests accompanying the World Trade Organization meetings in Seattle in 1999 highlighted the concerns many diverse groups have with the apparent eects of
globalization and trends in international commerce. For example, an oftencited concern is that developed nations are beneting disproportionately
from the globalization of commerce and that rules promulgated by the
World Trade Organization lead to the economic and environmental
exploitation of developing countries. As the power of corporations grows,

210

Handbook of research on global corporate citizenship

there are concerns that current nation-based institutions and structures

are incapable of providing needed oversight. As Scherer et al. (2006) note,
we are moving to a postnational world where MNCs are operating in
some respects outside the scope of state-based regulatory systems. Selfregulation and self-restraint by MNCs is needed now more than ever.
Because of the lack of international governance mechanisms for MNCs,
many are creating their own global codes of conduct or are subscribing to
international governance programs developed by various NGOs. Through
this and other roles, NGOs and formal intergovernmental institutions (for
example, the United Nations) now play an important part in global corporate governance.
The notions of peace through commerce and corporate citizenship are
relatively new concepts which are distinct but related. They both try to
address the changing world in which we live the various and complex
shifts in global commerce and societal interaction including the decrease in
power of nation-states and the increase in power of MNCs. These concepts,
as used in the business literature, are a reection of the struggles that practitioners and academics are having with the changing relationships and
interactions between businesses, communities, governments and NGOs.
These are not the only attempts by academics and the business community
to deal with our changing world but they are both promising conceptions
that deserve further thought and research. After a brief introduction to corporate citizenship and to peace through commerce, we shall consider some
of the possible contributions (and potential limitations) of corporate citizenship to peace through commerce and will explore possible areas for
future research into the relationship between these two concepts.
Corporate citizenship
Corporate citizenship is a relatively new term with roots in work done primarily by European scholars and by business practitioners (Waddock
2004b). A large number of MNCs and other businesses around the world
(for example, Ford, Nike and ExxonMobil) have embraced the language of
corporate citizenship in their communications with stockholders, the
media and other stakeholders (Glazebrook 2001; Matten and Crane 2005).
In the academic business literature there are very dierent meanings and
uses of the term. Some scholars use it as a synonym for corporate social
responsibility while others try to embrace its political lineage (Waddock
2004a; Matten and Crane 2005; Windsor 2006). Although invoked by many
scholars, the analogy of corporate citizenship to individual citizenship is
complex and imperfect (Windsor 2001). In tracing the development of the
term, Waddock (2004b) sees corporate citizenship as emerging from
previous work in corporate social responsibility and corporate social

Corporate citizenship and global conicts

211

performance and ultimately as integrating these research streams with

stakeholder theory research. Andriof and McIntosh (2001, p. 14) believe
that the concept of corporate citizenship is closely related to the idea of sustainability, and suggest that the term is synonymous with what they call
corporate societal responsibility. Windsor (2001) suggests that the essence
of corporate citizenship is that corporations should (and often do) act in
the way that virtuous citizens and good neighbors act. Other scholars have
tried to modify and adapt corporate citizenship to adjust for perceived
weaknesses in existing conceptualizations. For example, Wood and
Logsdon (2001, p. 83) extract key aspects of individual citizenship and
apply them to corporations as part of the development of what they call
business citizenship (later developed into global business citizenship)
(Wood and Logsdon 2002).
A number of researchers, primarily in Europe, are drawing corporate
citizenship away from notions of corporate social responsibility popular in
the US and toward the concepts roots in political theory (Matten and
Crane 2005; Moon et al. 2005; Scherer et al. 2006). Moon et al. are critical
of previous denitions of corporate citizenship that largely equate the term
with corporate social responsibility and instead propose a shift in focus to
the political notion of citizenship. Matten and Crane (2005, p. 173) suggest
that corporate citizenship describes the role of the corporation in administering citizenship rights for individuals. This denition rejects the view of
the corporation being or acting like a citizen and instead focuses (in a
descriptive manner) on the way in which corporations have taken over the
functions of government in protecting various social, civil and political
rights (Matten and Crane 2005). This conception of corporate citizenship
becomes much more interesting and important when combined with the
idea that we are currently living in a postnational world where MNCs are
growing in size and power and where international governance mechanisms
are lacking (Scherer et al. 2006).
Although the various meanings and conceptualizations of corporate citizenship are dierent, they share a general sense that corporations play a
signicant role in society and that there are certain responsibilities associated with that role. As discussed in more detail in the next sections, the
notion of peace through commerce suggests that the way corporations see
their role in society and the way they act toward and collaborate with their
various stakeholders might contribute to the reduction of violence in the
world (Fort 2007).
Peace through commerce
In 2001 a conference titled Corporate Governance and Sustainable Peace
was held at the University of Michigans William Davidson Institute. At the

212

Handbook of research on global corporate citizenship

time it might have seemed like a strange topic for an interdisciplinary conference. At that point the events of September 11th had yet to change the
way many of us think about terrorism, violence and globalization. Over the
last six years, a number of scholars in diverse disciplines such as law, nance
and business have been advancing the notion that business can play a meaningful role in fostering peace.
The term peace has various meanings and uses. Perhaps most fundamentally, peace can be dened as the absence of violence. Sustainable
peace refers to an absence of violence coupled with an ongoing sense of
stability (Dunfee and Fort 2003). More expansive notions of the term, especially sustainable peace, are associated with the protection of basic and
civic rights, participatory government, equality and justice (for example,
Peck 1998). In order to narrow our arguments we primarily refer to the
notion of peace in its most basic form the absence of violence. Our focus
on this fundamental meaning does not suggest in any way that businesses
do not have the potential to play a positive role in the creation of just, equitable and participatory societies.
Since that rst peace through commerce conference at the University of
Michigan there have been a number of other conferences (for example,
follow-up conferences at the William Davidson Institute at the University
of Michigan, a 2006 conference at George Washington Universitys
Institute for Corporate Responsibility Program on Peace Through
Commerce and a 2006 conference at the University of Notre Dame held in
conjunction with the United Nations), journal special issues (for example,
of the Vanderbilt Journal of Transnational Law, the America Business Law
Journal and the Journal of Corporate Citizenship) and books (Fort and
Schipani 2004; Fort 2007). Recently the Association to Advance Collegiate
Schools of Business created a Peace Through Commerce Task Force and
issued a report titled A World of Good: Business, Business Schools, and
Peace illustrating how schools of business could contribute to furthering
the idea of peace through commerce (AACSB International 2006).
It may seem strange that so much activity would surround business and
peace. Throughout history business has often been associated with violence not peace. The history of commerce is often tied with colonialism
and mercantilism where businesses were used as tools of government and
engaged in violent conict to advance their interests and the interests of
their nation-states. For example, the British South Africa Company used
less than peaceful means to advance its commercial interests and the interests of its chartering country (Great Britain) in Africa. Cecil Rhodes, who
founded the British South Africa Company, used the rms paramilitary
forces to take over diamond mines in Africa as it extended its territorial and
economic reach over much of the southern portion of the continent

Corporate citizenship and global conicts

213

(Thomas 1996). Businesses have also engaged in militaristic and violent

behavior apart from their role in advancing state interests. For example,
Cornelius Vanderbilt amassed a tremendous empire in the United States in
the mid-19th century in part by organizing a company militia to handle
competitors.
More recently, in the mid-1990s a number of large oil companies (for
example, Texaco, Amoco) and consumer products companies (for example,
Pepsi) were criticized for their involvement in Burma now know as
Myanmar. Critics allege that rms making investments and doing business
in Burma during this time were supporting the brutal and illegitimate military government that took control of the country and engaged in severe
human rights abuses (Billenness 1993). Today, perhaps even more so than
in past conicts, the corporate defense establishment prots from the outsourcing of military responsibilities and the almost seamless integration
of commercial and military operations and interests.
However, throughout history, philosophers and economists (for
example, Immanuel Kant, Charles Montesquieu and Friedrich Hayek)
have suggested that within limits, a benet to increased trade would be
reduced violence (Nichols 1999; Fort and Schipani 2004). Despite a long
association with violence, there are examples of business contributing to
peace. As Mohammad Yunus noted in his speech accepting the Nobel
Peace Prize for his work with the Grameen Bank, the reduction of poverty
through economic development and commerce are key to sustainable peace
(Yunus 2006). In 2006, General Motors (GM) received the US Department
of States Award for Corporate Excellence for its work in Columbia. The
award was established by the US State Department to recognize US businesses serving as good corporate citizens around the world. The companys
Columbian subsidiary GM Colmotores, in conjunction with the nonprot
organization Juan Bosco Obrero, works to train, employ and reintegrate
former members of paramilitary groups. In presenting the award, Secretary
of State Condoleezza Rice noted that GMs eorts will have a lasting positive eect on the ongoing peace process within Colombia (Rice 2006).
Beyond multinationals there are examples of businesses working at the
local level to further the goal of sustainable peace. In Sri Lanka in 2001,
prominent members of the Colombo (the commercial capital of the
country) business community created Sri Lanka First, an alliance to create
public, business and government support for peace (International Alert
2006). One of the goals of Sri Lanka First is to promote inclusiveness in
the peace process. In the wake of a bombing at Colombos international
airport, the group organized a public demonstration and launched a media
campaign calling for peace and for businesses to do what they can to foster
peace. The group stresses the economic and social benets of peace to

214

Handbook of research on global corporate citizenship

Sri Lanka a country stuck in an ongoing struggle between government

forces and the Tamil separatist movement. In the Democratic Republic of
Congo, local entrepreneurs in the area once known as Kivu helped foster
the peace process following years of violent conict after the fall of the
Mobutu Sese Seko regime in 1997 (ibid.). Local business leaders used their
inuence (at times in support of a UN mission in the country) to improve
political, economic and social stability. These entrepreneurs invested a
portion of their prots in local projects designed to stabilize the community and made a conscious eort to hire former combatants to work in their
businesses.
The essence of peace through commerce is the notion that ethical business behavior may ultimately reduce violence (Fort and Schipani 2004). By
engaging with stakeholders (for example, local communities, NGOs and
governments), avoiding corruption and operating in a transparent manner,
business can contribute to and foster the development of the institutions
through which societies maintain peace. There may in fact be an unexpected payo for business acting ethically. Business may have a role in creating peace and may benet from the stability associated with sustainable
peace (Fort 2007, p. 23). The societal institutions and norms often associated with peace (for example, a functional judicial system and respect for
the rule of law, respect for rights and so on) are often consistent with those
that businesses often depend on (for example, property rights).
Fort and Schipani (2004) have identied a number of specic ways in
which business can potentially contribute to sustainable peace. First, business can foster economic development. A strong link has been shown
between underdevelopment and violence (Post-Conict Unit of the World
Bank 1999). One reason for this is because the competition for scarce
resources among those without any can become desperate, leading to violence. A second reason is because poverty is, almost by denition, associated with unemployment or underemployment, making those without
productive work susceptible to the overtures of those wanting to use their
energies for violence. In addition, the World Bank has shown correlations
between civil war and commodity export. When the main export product
of a country is a commodity, the country is prone to civil war. Although
businesses might contribute to peace by providing resources and employment opportunities, it is important to note that not all economic activity is
equally helpful in creating sustainable peace. It is not dicult to imagine
the negative impacts that corrupt and unethical business activities could
have in socially and politically unstable environments. We argue that ethical
business practices that respect stakeholders, engage local communities and
support economic development can further the conditions necessary for
sustainable peace.

Corporate citizenship and global conicts

215

Second, business can exercise track two diplomacy. Businesses frequently

serve as unocial ambassadors for a country and have the potential to serve
as ecient information conduits for sensitive negotiations between countries. To the extent that these roles serve to de-escalate tensions and speed
the ow of information, they are potentially helpful in avoiding violent
conict. Through involvement in multistakeholder dialogues, businesses
have the potential to supplement and foster ocial negotiations and peace
processes and can help provide the exibility and creativity needed to avoid
or end conict (Oetzel et al. 2007, p. 334). In a direct sense businesses can
serve as conduits for information and even become involved to some degree
in the dialogue between countries (Fort and Schipani 2004). An often-cited
example is Thomas Friedmans description of the role of business executives
in helping relieve nuclear tensions between India and Pakistan (Friedman
2002). Indeed, the Global Compact of the United Nations has focused considerable time on developing standards of practice for corporations operating in zones of conict. Those standards feature multistakeholder dialogues
as well as emphasizing the importance of transparency in operations.
Although a business, if not careful, could make a conict worse if it wanders
into a conict whose intricacies they know little about.
Third, businesses can adopt external evaluation principles and support
the rule of law. For example, US Steel received the Secretary of States 2003
Award for Corporate Excellence in part for implementing a widely publicized and transparent organizational and personal ethics program in one
of its Eastern European operations. US Steel implemented the program for
employees and suppliers in 2000 when they purchased a state-owned steel
plant in Slovakia (Weiser 2003). By obeying the law and operating in a
transparent manner, businesses buttress the economic and social institutions needed for the maintenance of peace. Corruption, for instance, is
associated with violence. From the opposite perspective, rule of law, transparency and protection of property and contract rights are associated
with stability and peace. To the extent that companies can encourage the
development of social and political institutions that regularize these practices and to the extent that companies can practice them on their own, they
can help to create a societal tradition that leads away from attributes of
violence.
Fourth, businesses can nourish a sense of community inside their organizations as well as in the areas where they operate. This has both external
and internal dimensions. Externally, corporations can be, as we suggest in
this chapter, good corporate citizens, respectful of local communities, their
traditions and their ecology. In addition, businesses can create themselves
as communities which authentically respect the voice and the rights of their
employees. Corporations and the communities they create can serve as

216

Handbook of research on global corporate citizenship

mediating institutions which promote peaceful means of conict resolution

and can supply a sense of security and identity for community members
(Fort and Schipani 2004, p. 127). In an attempt to respond to increasing
violence in the communities in which it operates, Interconexion Electrica
S.A. (ISA), a large electricity transmission company in Colombia, invested
heavily in creating what they term Peace and Development Programmes
(International Alert 2006). These programs, focused on the underlying
drivers of violence, were specically designed to engage the local community, strengthen local institutions, provide educational opportunities and
meet other local needs. ISA also formed relationships and alliance with
business stakeholders and local inuential religious organizations to help
ensure the success of their programs in reducing violence in Columbia.
In essence, economic development, the protection of human rights,
transparency and development of true communities are crucial for sustaining peace. The focus of the activities listed above is the creation of the
conditions, background institutions, stakeholder relationships and practices (for example, through spillover eects) that can prevent violence in the
long term. There is probably very little that MNCs can do to stop open hostilities (besides perhaps helping with humanitarian relief) once the violence
has commenced, although they may be able to mitigate its impact in the
immediate aftermath of a spasm of violence.
As MNCs struggle with globalization and changing expectations with
respect to their activities (especially in developing countries), perhaps the
notion of sustainable peace could help unite executives, managers and
employees as a superordinate goal. Fort (2007) suggests that perhaps sustainable peace could become an overriding goal or telos for individual businesses and the business community as a whole.
Corporate citizenship and peace
At rst glance, corporate citizenship and the notion of peace through commerce might seem to be only tangentially related. In some respects both are
attempts to deal with the decline in the power of governments in a globalized postnational world, the rise in the power of MNCs and increasing
demands by the citizens of the world for the protection of basic and nonbasic individual rights and adequate background institutions. However,
corporate citizenship, with roots in political philosophy, seems to be
focused on the issues facing the larger institutions of liberal democracies
(for example, what is the meaning of participation when considering citizenship in a corporate context) whereas work in peace through commerce
to date has focused on how corporate behavior might translate directly into
fostering a reduction in violence. In addition, some of the most recent work
on corporate citizenship (for example, Matten and Crane 2005) has been

Corporate citizenship and global conicts

217

largely descriptive in nature, whereas much of the work in peace through

commerce has been descriptive (for example, exploring the relationship
between business behavior and peace) and normative how corporations
should act to create sustainable peace.
Much of the normative grounding for the idea of peace through commerce has been aspirational in nature. For example, Dunfee and Fort (2003)
have suggested that if the empirical relationship between ethical business
behavior and peace can be suciently established, peace through commerce would serve as a worthy goal for businesses to pursue. This aspirational focus, as compared to a managerial duty or moral obligation to
pursue peace through their activities, could serve as an appropriate and
motivational goal for managers and employees to pursue ethical business
behavior (ibid.; Fort and Schipani 2007).
When examined in more detail, there is the possibility for corporate citizenship and peace through commerce to be reinforcing concepts. The types
of activities suggested by advocates of corporate citizenship (and many
descriptive observations of corporate citizenship behavior such as the protection of citizenship rights) seem consistent with those advanced by proponents of peace through commerce. Some conceptions of corporate
citizenship might encourage managers to examine the role of their corporations in society and consider making more ethical choices. A transnational corporation operating in a developing nation lacking in needed
background institutions might, through its corporate citizen role, protect
the rights of local citizens (for example, the right to healthcare) by operating a local health clinic. Such activity is likely to nourish a sense of community and ultimately might lead to less violence in the society. The
business entrepreneurs in the Democratic Republic of Congo helped create
stability and economic development through targeted investments in community projects. GM Colmotores, noted as a good corporate citizen by the
US State Department, helped promote peace and foster a local sense of
community by training and employing former members of paramilitary
groups in Columbia.
At this juncture, there is no denitive model for how this will occur. The
most comprehensive model has been oered by Fort and Schipani (2004),
but they specically caution that their argument is a prima facie case.
That is, the contributions they identify are plausible, but they do not claim
that they are denitive. Instead, Fort and Schipani specically invite
empirical scholars to test their proposals in order to rene and improve
them. At this point in time, those studies are just beginning and so the most
that can be said is that the Fort/Schipani model stands as the most complete extant framework, yet the proponents themselves collaboratively
invite improvement.

218

Handbook of research on global corporate citizenship

Peace and stability are crucial to the eective and ecient operation of
human societies and markets for goods and services. Businesses need stability in order to prosper (ibid., p. 20). The group of Sri Lankan business
leaders that created Sri Lanka First recognized this and used their collective resources to bring citizens and businesses together, to foster a sense of
community and to promote the notion of a peace dividend. In sum, as
Bennett (2002, p. 714) notes, the case for business to join local and international NGOs and governments in conict prevention is simple and compelling. Most of these business sectors have a vested interest in stability and
peace.
Will the connection between business and stability be enough to motivate a manager to make the suggested contributions to sustainable peace?
The answer is likely to be mixed and be so because of a myriad of psychological and societal variables. Some managers may nd the connection so
compelling as to transform their company. The reasons for that attitude
may range from the arguments connecting with religious belief to a personal experience to something entirely dierent. On the other hand, other
managers may simply eschew any responsibility for engagement. Given the
embryonic nature of peace through commerce research, what we can say is
that the connection may give rise to some consideration by managers as to
what they might do to contribute to sustainable peace. However, it would
take a major socialpsychological study to pinpoint the determinative variables that would move individuals positively or negatively. This is a scholarly project we heartily recommend for future work, but is far beyond the
scope of this particular chapter.
To the extent that corporate citizenship leads to more ethical behavior by
businesses, it has the potential to have a positive impact on the creation of
sustainable peace. However, there are certainly limits to the impact that
corporate citizenship could have on reducing violence. The origins of
violent conict are often deep-seated and dicult for those outside the
conict to understand. It would be unrealistic to think that by incorporating certain behaviors (for example, treating employees well, operating in a
transparent manner) businesses would be able to single-handedly bring
about world peace. There is also the potential risk that the language of corporate citizenship and peace through commerce (which are currently far
from being dominant global management paradigms) could be co-opted by
business interests satised with the status quo and indierent to the changing roles, responsibilities and opportunities for business. Wood and
Logsdon (2002) worry that more robust notions of business responsibility
(for example, corporate social responsibility which considers issues at the
societal level) might be replaced by a more narrowly focused and voluntary
version of corporate citizenship. Despite the limitations there is likely a role

Corporate citizenship and global conicts

219

for business in creating the conditions of sustainable peace. MNCs have an

important opportunity as powerful actors in the global economy (and in a
majority of the worlds societies) to contribute to creating the necessary
conditions for peace.
The future of corporate citizenship and peace through commerce
As noted above, corporate citizenship and peace through commerce are relatively new concepts. As such, much more research is needed to advance
both ideas individually and collectively. Normative work is needed to
advance and clarify exactly what corporations should be doing with respect
to corporate citizenship and peace through commerce. Should corporations be engaged in providing various rights? Should corporations actively
pursue the goal of creating lasting peace through their processes, procedures and decisions? Empirical research is needed to determine how corporations conceive of corporation citizenship and peace through
commerce, as well as if and how corporations are engaging in corporate citizenship and peace through commerce behaviors.
Work to date has laid the groundwork for empirical research through
anecdotal evidence and preliminary correlational studies. For example,
although not directly related to corporate citizenship or peace through
commerce per se, a recent study on the relationship between political corruption and aspects of foreign direct investment (FDI) indicates the potential for research in these areas.
Using data for over 100 countries over 30 years, Kwok and Tadesse
(2006, p. 781) explored how MNCs may shape the institutional environment of corruption over time. After examining corruption levels and FDIs
over time they conclude that there is a causal eect owing from FDI to
corruption and suggest that over time FDI could lead to a reduction in corruption within a given country. This study when combined with research
showing a correlation between corruption and violence (Fort and Schipani
2004) oers a potential example of how corporate behaviors (that is, FDI
and the activities associated with it) might lead to a reduction in violence.
So far no causal link has been established between business behavior and
the avoidance of violence. Based on anecdotal evidence there is perhaps
enough evidence to support a prima facie case that business can have a role
in fostering peace. However, the existing evidence and historical record are
far from conclusive for the idea that businesses signicantly improve the
chances for sustainable peace. Research is needed to established a causal
link and explore correlations between business activities and peace. Are
corporate behaviors actually contributing to a reduction in violence in the
world? If so, how are they contributing? Avenues for future research
include the specic practices described above through which business can

220

Handbook of research on global corporate citizenship

contribute to sustainable peace. For example, more research is needed to

determine how eective the adoption of external evaluation principles by
corporations is in creating the conditions for peace. There is also little existing research on the role of business in two-track diplomacy. More detailed
case studies are needed to expand our limited collection of anecdotal examples of business playing a role in brokering peace (for example, the oftencited involvement of high-tech businesses in defusing tensions between
India and Pakistan) (Friedman 2002). In addition, there is a large body of
work on corporate culture and community but very little research linking
specic aspects of organization community to the larger goal of peace.
Corporate citizenship and peace through commerce are promising areas
of scholarship that could have profound and benecial impacts for everyone living on the planet especially those in areas prone to violent conict.
Individually and collectively they oer hope that MNCs can help address
the economic, social and environmental challenges we all face.
References
AACSB International (2006), A World of Good: Business, Business Schools, and Peace, Tampa,
FL: AACSB International.
Andriof, J. and M. McIntosh (2001), Introduction, in J. Andriof and M. McIntosh (eds),
Perspectives on Corporate Citizenship, Sheeld: Greenleaf, pp. 1324.
Bakan, J. (2004), The Corporation, New York: Free Press.
Bennett, J. (2002), Public private partnerships: the role of the private sector in preventing
funding conict, Vanderbilt Journal of Transnational Law, 35, 71117.
Billenness, S. (1993), Beyond South Africa: new frontiers in corporate responsibility,
Business and Society Review, 86, 2830.
Chua, A. (2004), World on Fire, New York: Anchor Books.
Dunfee, T.W. and T.L. Fort (2003), Corporate hypergoals, sustainable peace, and the adapted
rm, Vanderbilt Journal of Transnational Law, 36, 563617.
Fort, T.L. (2007), Business, Integrity, and Peace: Beyond Geopolitical and Disciplinary
Boundaries, Cambridge: Cambridge University Press.
Fort, T.L. and C.A. Schipani (2004), The Role of Business in Fostering Peaceful Societies,
Cambridge: Cambridge University Press.
Fort, T.L. and C.A. Schipani (2007), An action plan for the role of business in fostering peace,
American Business Law Journal, 44 (2), 35977.
Friedman, T.L. (2002), India, Pakistan and G.E., The New York Times, 11 April, 4.13.
Friedman, T.L. (2005), The World is Flat, New York: Farrar, Straus & Giroux.
Glazebrook, M. (2001), How Australias Top 500 companies are becoming corporate citizens, in J. Andriof and M. McIntosh (eds), Perspectives of Corporate Citizenship, Sheeld:
Greenleaf, pp. 15265.
International Alert (2006), Local business, local peace: the peacebuilding potential of the
domestic private sector, www.internationalalert.org/our_work/themes/LBLP.php#
download, accessed 18 February 2007.
Korten, D.C. (1995), When Corporations Rule the World, West Hartford, CT: Kumarian Press.
Kwok, C. and S. Tadesse (2006), The MNC as an agent of change for host-country institutions: FDI and corruption, Journal of International Business Studies, 37, 76785.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
Moon, J., A. Crane and D. Matten (2005), Can corporations be citizens?, Business Ethics
Quarterly, 15 (3), 42953.

Corporate citizenship and global conicts

221

Mufson, S. (2007), Higher oil prices help Exxon again set record prot, Washington Post, 2
February, D01.
Nichols, P.M. (1999), Regulating transnational bribery in times of globalization and fragmentation, Yale Journal of International Law, 24 (1), 257303.
Oetzel, J., K.A. Getz and S. Ladek (2007), The Role of multinational enterprises in responding to violent conict: a conceptual model and framework for research, American Business
Law Journal, 44 (2), 33158.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66, 7188.
Peck, C. (1998), Sustainable Peace: The Role of the UN and Regional Organizations in
Preventing Conict, New York: Rowman & Littleeld.
Post-Conict Unit of the World Bank (1999), Security, Poverty Reduction and Sustainable
Development: Challenges for the New Millennium, Washington, DC, September.
Rice, C. (2006), Remarks at the 2006 Award for Corporate Excellence Ceremony,
www.state.gov/secretary/rm/2006/75589.htm, accessed 16 February 2007.
Sapolsky, R.M. (2006), A natural history of peace, Foreign Aairs, 85 (1), 10420.
Scherer, A.G., G. Palazzo and D. Baumann (2006), Global rules and private actors: toward a
new role of the transnational corporation in global governance, Business Ethics Quarterly,
16 (4), 50532.
Shane, S. and R. Nixon (2007), In Washington, contractors take on biggest role ever, The
New York Times, 4 February, Section 1, p. 1.
Thomas, A. (1996), Rhodes: Race for Africa, New York: St. Martins Press.
Waddock, S. (2004a), Creating corporate accountability: foundational principles to make
corporate citizenship real, Journal of Business Ethics, 50 (4), 31327.
Waddock, S. (2004b), Parallel universes: companies, academics, and the progress of corporate citizenship, Business and Society Review, 109 (1), 542.
Waddock, S. (2005), Corporate citizens: stepping into the breach of societys broken contracts, Journal of Corporate Citizenship, 19, 2024.
Weiser, R. (2003), U.S. Department of State: remarks at Award for Corporate Excellence,
www.state.gov/e/eeb/rls/rm/2003/25236.htm, accessed 5 September 2007.
Windsor, D. (2001), Corporate citizenship: evolution and interpretation, in J. Andriof and
M. McIntosh (eds), Perspectives on Corporate Citizenship, Sheeld: Greenleaf, pp. 3952.
Windsor, D. (2006), Corporate social responsibility: three key approaches, Journal of
Management Studies, 43 (1), 93114.
Wood, D.J. and J.M. Logsdon (2001), Theorizing business citizenship, in J. Andriof and
M. McIntosh (eds), Perspectives on Corporate Citizenship, Sheeld: Greenleaf, pp. 83103.
Wood, D.J. and J.M. Logsdon (2002), Business citizenship: from individuals to organizations, in R.E. Freeman and S. Venkataraman (eds), Ethics and Entrepreneurship, Run
Series No. 3, Charlottesville, VA: Society of Business Ethics, pp. 5994.
Yunus, M. (2006), Nobel Lecture, www.nobelprize.org, accessed 11 January 2007.

PART III
ACTORS, INSTITUTIONS
AND GLOBAL
GOVERNANCE

11 Emerging patterns of global governance:

the new interplay between the state,
business and civil society
Klaus Dieter Wolf

Introduction
According to the traditional distinction between domestic and international politics, governing within the state was conceived as a hierarchical
command and control process. Only governments were authorized to take
collectively binding decisions. In contrast, the political space beyond the
state lacked the central political authority of a world government and was
consequently described either as an anarchical system (Waltz 1977) governed by self-help and power politics, or as a society of states (Bull 1977)
governed by horizontal arrangements, such as treaty-based relationships
which regulated the peaceful coexistence between nation-states. In both
spheres, the national and the international, governing functions were
reserved to public actors, that is to national governments or the intergovernmental institutions created by them. The main dierence existed in the
prevalence of a one-way or an interactive model of governing.
This traditional domesticinternational distinction has been completely
overthrown by the growing governance demands. In the interdependent
world of today, collective action problems cover an ever-increasing
number of issue areas other than national security, such as environmental
matters, social and economic human rights. These problems straddle the
existing territorial boundaries of political units and call for the extension
of public policy beyond the state. Economic globalization creates challenges for political steering which exceed the capabilities of any single
state. It has produced a growing need (and claim) to make use of the
problem-solving potential of non-state actors in order to master these
challenges more eectively. As a consequence, these new demands have
also blurred the dividing lines between the national and the international
sphere, and, increasingly so, those between the public and the private
sectors. They call for socialpolitical governance in the sense of arrangements in which public as well as private actors aim at solving societal problems or create opportunities, and aim at the care for the societal
institutions within which these governing activities take place (Kooiman
2000, p. 139).
225

226

Handbook of research on global corporate citizenship

The challenges emerging from this process of de-nationalization

brought together public and private governors in multistakeholder, multilevel and multimode sectoral governing arrangements which add up to
the complex interaction patterns of global governance. This new political agenda also made it obsolete to keep the analytical tool-kits of the
dierent subdisciplines of political science separate from each other any
longer: on the one hand, public policy research and normative political
theory were both unfamiliar with the context beyond the state to which
their core research issues, such as eective problem solving or democratic
legitimacy, respectively, were emigrating; on the other hand, the study of
international relations was likewise unprepared to deal with these
new questions.1 Today, the need to integrate the dierent analytical perspectives is no longer seriously questioned because of the obvious drain
of economic, social and political processes into the sphere beyond the
state.
In the next section I shall deal with the emergence of the new
socialpolitical forms of publicprivate governance patterns beyond the
state. In many ways the new interplay between the state, business and civil
society in global governance resembles the process of political modernization changes which could be observed in the domestic sphere and is
associated with terms such as de-hierarchization (Scharpf 1991) or degovernmentalization (Zrn 1998; Wolf 1999).2 The following section
analyses the implications of the new modes of governance on the actors
involved. With their involvement in new governance arrangements, the
roles of governments, international organizations, civil society and the
private sector are shifting. All of these actors are still in the process of
redening their traditional roles, identities and functions in the light of the
regulatory demands to which they are exposed. The subsequent section
deals with the new interplay between the state, business and civil society.
Compared to its predecessor, that is treaty-based intergovernmentalism,
global governance is a patchwork of dierent modes of governance, consisting of actors from dierent environments who are equipped with very
dierent resources, and who are used to quite dierent compliance mechanisms. Some of these mechanisms presume that actors follow the interestbased logic of consequences, whereas others are based on the assumption
that political actors follow the logic of appropriateness.3 To achieve a
better understanding of these new modes of governance I shall suggest
some categories for the way they correspond with certain actors constellations and the way they function. The nal section takes up normative
considerations about the desirability of a the privatization of world politics and evaluate the regulatory potential as well as limits of the new governing relations.

Emerging patterns of global governance

227

Political modernization: re-organizing political regulation in the domestic

context and beyond the state
The emergence of new governing relations in the sphere beyond the state is
best conceived of as the international follow-up of the domestic political
modernization process which took place within most of the OECD countries before. Domestically and at the international level, it resulted from
market failure and the failure of the traditional media of political steering
that is, regulative law and nancial incentives to correct them. The
limitations of traditional public command-and-control as a governing
mechanism (Kooiman 2000, p. 139) became obvious with the regulatory
overstretch of the modern welfare state. When the promises of national
governments to provide public goods or to prevent public bads in such
elds as macroeconomic planning or social safety entered the turbulent
waters of globalization, they were confronted with a new collective action
problem: they met challenges the causes of which and the resources
needed to meet them were beyond the command of any single government, or even beyond the world of states as a whole.
Among the numerous strategies employed by national governments to
increase their problem-solving capability, the more direct involvement of
the former societal addressees of public regulation into the governance
process was one. This step towards societal participation was not primarily
motivated by democratic concerns, but rather followed the rationale to
increase problem-solving eectiveness by utilizing the knowledge and other
resources that only private actors could provide, and to increase the support
and acceptance of political decisions by co-opting the former addressees as
partners in decision making.
In the traditional pluralist model of domestic policy making and interest
intermediation, societal lobbying groups were competing for access to and
inuence on public policy decisions. At the domestic level, this model was
rst challenged when big corporate actors were integrated and allowed to
participate in consensual corporatist policy formulation and implementation. In their new roles, however, they were still dependent on the recognition of the state (Schmitter and Lehmbruch 1979). But the next step of
political modernization even left these corporatist patterns of interest intermediation behind and promoted a further de-hierarchization of the relations
between public and private actors. Increasingly bypassing the traditional
political institutions, horizontal decision-making structures emerged which
operated according to the modes of bargaining and arguing. On the one
hand, the state had to respond to societal actors claiming participation in
the political process, while, on the other hand, cooperation with these actors
oers the state the opportunity to obtain informational resources and can
improve the acceptance of certain political decisions (Mayntz 1993, p. 41,

228

Handbook of research on global corporate citizenship

Table 11.1 Changing forms of political regulation within the state: from
government to governance
Organizational form

Pluralist

Corporatist

Partnership

Relationship of the
state with business
and civil society

Dierent societal
lobbies compete
to influence
public policy
decisions taken
by the state

Institutionalized
(incorporated)
participation by
major associations
in consensual
formulation and
implementation of
public policy
decisions

Various forms of
horizontal
deliberative
cooperation in
governance
networks

Source:

Bressel and Wolf (2005, p. 188).

own translation). In the domestic context the traditional notion of hierarchical statesociety relations gave way to the idea of the negotiating, enabling
or cooperative state. Even this stage of political modernization in the domestic context still counts and depends on the state, but it does so in terms
of a new functional division of labour and authority between public and
non-state actors from which additional problem-solving resources are
expected (Ronit and Schneider 2000). Table 11.1 summarizes the emergence
of the new governing relations within the state.
The limitations of hierarchical governing mechanisms become particularly obvious when we employ Jan Kooimans (2000, pp. 15461) distinction between rst-, second- and third-order or meta governing.4 The
demand for such a new division of labour is strongest at the levels of meta
and rst-order governing. With regard to the creation of normative standards (meta governing), the command-and-control approach is unlikely to
meet the high demand of normative consensus which can only be achieved
in the public exchange of good reasons; with regard to nding solutions for
concrete day-to-day problems (rst-order governing), it cannot provide
resources, such as factual knowledge, which depend on the involvement of
professional expertise.
International governance
In the political space beyond the state, horizontal governance however as
a purely intergovernmental enterprise had always been the rule because
of the lack of the central authority of a world state. The world of states
took its rst step out of its original stage of anarchy when national governments entered into voluntary self-commitments as sovereign subjects of

Emerging patterns of global governance

229

international law. By institutionalizing international relations with the creation of international organizations and regimes, they transferred sectoral
governance functions from the domestic to the intergovernmental public
sphere. In terms of political modernization, the treaty-based institutionalization of the society of states is a remarkable achievement because it established the rule of law against the original right of self-help, which included
the arbitrary use of violence. While this process of legalization was more
or less eective in civilizing the interaction among states, its problemsolving capacity came under severe criticism in the face of challenges that
did not originate from the world of states. On the one hand, the legitimacy
of internationalizing political decision-making processes was questioned
because it strengthened the role of the national executives vis--vis parliamentary control (Wolf 1999); on the other hand, the economic, social and
environmental challenges of globalization resulted in regulatory and implementation gaps which individual governments, as well as the intergovernmental institutions created by them, were unwilling or unable to close
eectively. In the face of growing world market competition, for example,
neither the International Labour Organization nor the World Trade
Organization had succeeded in generating, proliferating and enforcing
minimum legal standards eectively with regard to business activities
involving abuses of human rights, compulsory labour or child labour. In a
similar fashion, the change of the global climate raised the challenge of reprogramming economic systems in accordance with excessive demands of
sustainable economic development which the heads of the leading industrial nations who coordinate their policies in the G-8 are reluctant or unable
to meet. As a consequence, private actors increasingly engaged in authoritative decision-making that was previously the prerogative of sovereign
states (Cutler et al. 1999b, p. 16), thus reecting the transition of the
society of states into a world society.
Beyond international governance
Domestic de-regulation and the delegation of authority to non-state actors
is increasingly . . . creeping into the international sphere (ibid., p. 15).
Today there seems to be a general belief that very similar to what had previously been experienced in the national realm intergovernmental regimes
and organizations are inadequate political instruments for solving the collective action problems emanating from de-nationalized economic, social
and environmental processes. To regard states as the sole providers of public
goods has become an increasingly inappropriate over-simplication because
technological and commercial forces, notably the market-driven diusion of
information technology, alter the relative capabilities of dierent types of
actors to solve . . . collective action problems, in particular increasing the

230

Handbook of research on global corporate citizenship

capacity of non-state actors relative to states (Florini 2000, pp. 15, 21). The
former Secretary-General of the United Nations, Ko Annan, accurately
described the need to overcome the limits of international governance in
order to cope with the fundamental problems in world society when he stated
that peace and prosperity cannot be achieved without partnerships involving Governments, international organisations, the business community and
civil society. In todays world, we depend on each other (Annan 1998).
Following this course, the political modernization of international governance has given rise to various new kinds of transnational governance
arrangements in which public and private actors pool resources, share
responsibilities and re-dene themselves.
Shifting roles: new identities of states, business and civil society as political
agents
Statehood in transition
The traditional role of the state is most severely aected by its interplay with
private actors in governing processes. However, it is generally more appropriate to speak of shifting roles of government rather than of shrinking roles
of government as part of such changing relationships (Kooiman 2000,
p. 139, original emphasis). Governmental retreat from the classical
command-and-control governing mechanism in the course of the de-hierarchization of statesociety relations may of course not only be described as
political modernization, as I did in the previous section. This description
follows what may be called a policy-for-problem-solving paradigm of political steering and governance. From the perspective of political realism, for
instance, the role shift of governments would rather be conceptualized as a
power shift, as a relative decline of states and the rise of nonstate actors
(Mathews 1997, p. 51; see also Strange 1996; Reinalda and Verbeek 2001).
However, sharing powers does not necessarily make the state weaker as a
provider of public goods than its interventionist elder brother. The shadow
of hierarchy is still present; the whip is still in the window. But the negotiating, enabling or cooperative state is less keen on running things from above
than on regulating and monitoring self-regulation. The new regulatory state
is interested in reducing its governance contributions to functions which can
exclusively, or most eectively, be provided by the public sector: establishing
operational meta rules, setting the legal framework for private governance
contributions and regulating externalities. Political modernization thus still
counts and depends on the state, but it does so in terms of a new functional division of labour and authority between public and non-state actors.
With regard to domestic governance, Christoph Knill and Dirk
Lehmkuhl (2002) have distinguished certain circumstances under which

Emerging patterns of global governance

231

governments change their role from providers to enablers of public goods.

According to them, the assumed distribution of problem-solving resources
among the public and private sectors determines which role the state will
take up vis--vis private actors. If public problem-solving capabilities are
high and private capabilities are low, we are likely to observe the traditional
hierarchical state; high capabilities on both sides favour the role model of
the cooperative state; the complementary state will be the result of low
public and high private capabilities; if the capabilities of public and private
actors are low, the state is likely to act as an intervening state.
Although these role models have been developed for describing the
changing role of the state in the course of domestic political modernization, these categories may also be helpful to describe publicprivate interaction patterns in governance beyond the state. However, one crucial
dierence has to be taken into account: national governments lose their
unique qualities as holders of public authority as soon as they want to exercise power over actors not belonging to the domestic realm. At the global
level, national governments are no longer automatically in authority due
to their quality as public actors (Wolf 2006, p. 212). Rather, they have to
arrange themselves with private actors making equally legitimate claims to
market or moral authority based on normative, uncoerced consent or
recognition (Hall and Biersteker 2002, p. 5).
The new roles of civil society
Paul Wapners denition of civil society as a domain of associational life
situated above the individual and below the state (Wapner 1997, p. 65) is
still valid. In domestic societies, as well as in world society, this domain is
populated by civic groups who are private in form, because unlike governments they are not and do not want to become part of the state apparatus, but public in purpose, because unlike companies they understand
their activities not as commercial but as value oriented and as direct contributions to the provision of public goods (Reinalda 2001). This has contributed to shaping their image as the better half of world society (Take
2000). The broad range of increasingly important roles (Mathews 1997)
which actors from civil society have played is reected in a number of labels
(see among others Princen and Finger 1994; Keck and Sikkink 1998;
Scholte 2000): activists, transnational social movement organizations,
grassroots organizations or advocacy groups, coalitions or networks. Jan
Aart Scholte (2000, p. 177) summed up these dierent appearances as
follows: In sum, civil society exists whenever people mobilize through voluntary associations in initiatives to shape social order.
The general importance of civil society participation in global governance has been under dispute time and again in the academic debate.5

232

Handbook of research on global corporate citizenship

However, civic groups do matter. They can provide access to otherwise

restricted information and thereby contribute to the equal regard of outsiders interests otherwise not represented; or they can provide a channel of
accountability (Buchanan and Keohane 2006, p. 436). Furthermore, they
can help states and multilateral institutions to formulate, implement,
monitor and enforce policies (Scholte 2000, p. 174).
As agenda setters, civic groups originally acted as external agents, most
memorably in the streets of Seattle in 1999. Many of them still prefer confrontational tactics in order to mobilize public support for policy alternatives, keen on not losing their independence by being co-opted or by
cooperating too closely with public authorities or market actors. Others try
to aect decision-making processes by making their way into the institutions which have so far been dominated by governments: as lobbyists, as
consultants to national delegations, or as observers to international organizations and conferences.
With regard to implementation, actors from civil society can either play
a more cooperative role, for example when they full operative functions
(such as carrying out projects or being instrumental as monitoring agencies) delegated to them by public actors, or act as independent watchdogs
by criticizing public or business actors who do not implement or comply
with certain legal or voluntary commitments. In this watchdog function,
civil society actors may enter into unocial coalitions with like-minded
national governments or international agencies against norm-violating
states, as is typically the case in the eld of human rights, and thereby contribute signicantly to strengthening the status of international norms.
Civil society actors possess political inuence to the extent that they can
muster widespread support and consent to their authority, which stems
from their role as credible providers of expert advice or from the moral
authority accorded to them. They act as epistemic actors whose basic political resource is information. Civil society actors can initiate deliberative
processes in order to promote certain standards of appropriateness, to
reframe certain issues and/or to change the preferences of other actors.
They may also use normative reasoning strategically in order to impose
social costs on other actors by shaming them in the eyes of the general
public. They may even switch between deliberative and strategic modes of
interaction according to the institutional environment.6
With their interaction with intergovernmental institutions increasing,
actors from civil society have also changed their roles, behaviour and sometimes identities. One may dispute whether this identity shift has been caused
primarily by external or internal dynamics (Martens 2005); however, there
is little doubt that external pressures and expectations are increasingly
raised vis--vis civil society actors, for example by invitations to collaborate

Emerging patterns of global governance

233

in UN-sponsored initiatives like the Global Compact. If one takes a closer

look both at the dierent functions in which dierent non-governmental
organizations perceive themselves, and at the mode of interaction which
prevails in the global governance institutions to which they relate, it would
be inaccurate to generalize their role shift in terms of from outside spectators to ocial participants. In fact, civic groups have shown very dierent
responses to such invitations, often as part of a strategic division of labour
among them.
The most signicant role change occurred with regard to the more direct
involvement of transnational civic actors in the core of regulatory functions: originally their role had focused either on the input phases of the
political process, that is agenda setting, norm generation, programme
development or, further down the output side of the political process, on
norm implementation or the evaluation of policies. Now their involvement
is shifting from these peripheries to the actual centre of decision making
within publicprivate or multi-stakeholder self-regulation.
The new role of business: once problem causers, now problem solvers?
Since the 1990s the scholarly debate on the role of transnational actors in
world politics7 seems to have primarily dealt with transnational civil
society. However, transnational corporations have a much longer history of
academic interest, and had appeared in the role of political actors in world
politics already as early as in the mid-16th century, particularly in colonial
areas to which todays governance would refer as areas with limited statehood (Risse and Lehmkuhl 2006). Historians rightly point to the important role that chartered private merchandising companies played right until
the end of the 19th century when they ran commercial and trading empires
which covered vast territories (Griths 1974; Keay 1993). The Hudsons
Bay Company, for example, originally operated on the basis of a Royal
Charter by King Charles II in 1670, which granted the company absolute
power to establish and enforce laws . . . as well as have its own soldiers,
maintain a navy and make peace or war (Andra-Warner 2003, p. 37).
In the meantime, business went through a number of stages as a highly
disputed object of political and scholarly debates. In most cases, transnational corporations were subject to scrutiny as originators of regulatory
problems rather than as problem solvers, as addressees of public legal regulation rather than as private regulators or partners in publicprivate governance arrangements (see, among others, Baade 1980; Fikentscher 1980).
The major innovation of the present political and academic debate about
the role of corporations in world politics lies in their rediscovery as political actors through the lens of global governance. Instead of continuing to
look at them solely as economic actors in globalizing markets who have

234

Handbook of research on global corporate citizenship

outgrown the regulatory capabilities of each individual state, their regulatory potential and the limits to it are investigated once again (Cutler et al.
1999a; Graz and Nlke 2007). Corporate responsibility, corporate social
responsibility, or corporate citizenship (see, among others, Ruggie 2002;
Matten and Crane 2005; Scherer and Palazzo 2007) are used as concepts to
re-dene the role of business vis--vis the state and civil society and to readjust the distribution of rights and obligations among the three sectors in the
face of state failure as well as market failure. Notions associated with these
concepts may vary widely, but they all go beyond the traditional understanding of corporations as actors who are private in form and private, that
is commercial, in purpose. Understandings are quite dierent, however,
with regard to the voluntary nature of corporate contributions to the provision of public goods. The philantropic charity view of doing good after
work diers substantially from the self-commitments expected by the UN
Global Compact from corporate citizens (Global Compact Oce 2004)
as part of their core business activities. Even more far-reaching is the
understanding of corporate responsibility as norm entrepreneurship in the
sense of commitments not only to support and enact certain core values
when doing their business, which would only blur the traditional boundaries between business and civil society, but also to actively engage in selfregulatory activities of norm generation and implementation, which of
course also blurs the boundaries between the private sector and the state.
All of these notions seem to contradict conventional wisdom, which
starts out from the actor-centred assumption that the prime motivation for
business actors is, and has to be, prot maximization. Survival in the marketplace rules out norm-oriented behaviour, and whenever companies enter
into individual or collective self-commitments, no such codes of conduct
would ultimately be capable of setting constraining limits to this logic of
action. However, this assumption and the consequences derived from it are
an inappropriate oversimplication. They neglect the fact that the marketplace is not the only environment which makes demands on business.
Rational business actors have to take into account the challenges posed by
globalized markets, but also those emanating from the world of states and
transnational civil society. The interaction of the three worlds of market,
state and civil society makes up a normatively enriched environment, so
that market rationalism may acquire a dierent meaning under these
altering context conditions. In the face of public pressure or the threat of
state regulation, doing good may even be the most rational strategy to
evade the risks associated with adverse campaigning or public regulation
(Conzelmann and Wolf 2007).
Such rationalist conceptualizations still rely on fear of coercion and selfinterest as the only drivers for business contributions to global governance.

Emerging patterns of global governance

235

In contrast to them, constructivists employ the assumptions of the logic of

appropriateness and point to the emergence of a global epistemic community made up of like-minded corporate leaders, scientists and public regulators that have dened certain standards of appropriate behaviour for
rms (Hauer 1999, p. 215).
On the basis of these considerations, and in trying to dene its new role
vis--vis the public sector and transnational civil society, business actors
have to make their choice among three ideal-type role models: they can
follow a narrow market rationalism, a complex market rationalism, or an
intrinsically norm-oriented behaviour. While narrow market rationalism
would consider societal and political forces as inuential only in so far as
they can be translated into short-term risks and opportunities in the marketplace, complex market rationality would anticipate reputational and
political costs in the costbenet calculations of business actors. Finally,
the existence of a normatively textured environment may also give rise to
an increased reection on corporate responsibility and to the recognition
of certain values as guiding principles for business conduct. The result may
be an intrinsic motivation of business to observe and implement ethical
principles even where there is no clear economic or political incentive to do
so. In the light of the choices described here, and without giving up the
notion that corporations still are and will remain private in form and
private in purpose, the potential of business actors to contribute to the
provision of public goods in the context of global governance should not
be underestimated.
New modes of governance between the state, business and civil society
The underlying key question of this chapter regards the conditions under
which non-state actors can be expected to make meaningful contributions
to global governance, for example by acceding to and complying with codes
of conduct. To answer this question at the actor level, the motivations of
these non-state actors have to be discussed; on a structural level, however,
the environmental conditions under which they act have also to be taken
into account.8
The transition from international to global governance has increased the
degree of complexity of governance beyond the state substantially.
Hierarchical governing modes dominated by the public sector (or taking
place in the strong shadow of hierarchy cast by it), publicprivate cogoverning, private self-governing, and all kinds of hybrid mixtures of these
ideal types add up to an irritating patchwork of sectoral regulatory mechanisms. The multidimensionality of this complex global governance patchwork perfectly described as komplexes Weltregieren by Zrn (1998)
results from the amalgamation of the dierent political resources brought

236

Handbook of research on global corporate citizenship

in by dierent actors from dierent playing elds: originally coming from

the domestic politicalinstitutional setting, the national governments have
the monopoly of the legal authority to set collectively binding rules and to
implement these rules with coercive power. Business corporations are
equipped with the economic and technological know-how and the nancial
resources necessary to be successful competitors on the market. Actors
from civil society, nally, often have moral authority and factual knowledge
at their disposal as politically relevant resources.
In addition, in their original environments all of these actors have been
socialized into specic modes of interaction: hierarchical legal or administrative regulation is the traditional way of governing by the state.
Horizontal bargaining and arguing characterize interactions in the market
or in public discourse, respectively. Making the interplay between them
even more complex, each of these modes of interaction relies on a specic
causal mechanism for achieving compliance. The compliance mechanism
characteristic of interactions dominated by the state is fear of sanctions.
Compliance in market relations, on the other hand, primarily rests on material or non-material costbenet expectations and follows the interestbased logic of consequences. Making things even more complicated, the
compliance mechanism characteristic of the sphere of public discourse presupposes actors whose behaviour is guided by a logic of appropriateness
rather than by rationalist costbenet calculations. In this realm, actors are
expected to comply only if they are convinced of the normative appropriateness of rules which they rst internalize and then obey. Table 11.2 illustrates the dierent dimensions of context-specic traditions which have to
be reconciled when the state, business and civil society enter into in to collective governing activities.
Given this variety of resources, context-specic logics and rationalities
which govern the behaviour of the dierent actors in their respective spheres,
their interaction inevitably must produce hybrid forms of governance which
Table 11.2

Contextual backgrounds of the state, business and civil society

State

Business

Civil society

Resources

Legal authority
Coercive power

Money
Moral and
Technical expertise factual authority

Sphere

Political institutions Market

Public discourse

Mode of interaction Hierarchical

Bargaining

Information,
arguing

Compliance
mechanism

Self-interest

Belief in
appropriateness

Fear of coercion

Emerging patterns of global governance

237

are characterized by the mixture of dierent resources, interaction modes

and compliance mechanisms, often combining elements which may not be
compatible or which may neutralize each others impact. Conditions which
facilitate governance in the mode of bargaining may be detrimental to those
under which arguing can be eective. For example, the relevance of trust or
mistrust, transparency or secrecy, alters dramatically according to the
respective modes of interaction.
New actors constellations
At a rst and very elementary descriptive level, the new modes of governance resulting from the interplay between the state, business and civil
society can be distinguished according to dierent actors constellations:
governance arrangements beyond the state which involve private actors
can:
1.

2.

3.

still be initiated, sponsored, or even dominated by the public sector. In

this category the shadow of (public) hierarchy is still present, but the
darkness of the shade may vary. In this kind of publicly embedded selfregulation the degree of de-governmentalization would still be low;
consist of multistakeholder initiatives, where more horizontal patterns
of interaction prevail and the state, civic groups and corporations meet
on an equal footing; and
be pure instances of private self-regulation with no direct public sector
involvement, neither by the state nor by intergovernmental organizations, neither in a hierarchical manner nor in any other way as equals.
Here of course the highest degree of de-governmentalization can be
observed.

In Table 11.3, some empirical examples are given of global governance

initiatives representing the three dierent types of actors constellations.
They also show that all types can be found in the main issue areas of global
governance.
New modes of interaction
The fact that accession to and compliance with these self-regulatory initiatives are voluntary gives rise to the suspicion that they are only symbolic
and serve to greenwash business and take o the pressure from governments to put in place an eective and forceful regulation (Conzelmann and
Wolf 2007). This widespread criticism starts out from a certain notion of
how compliance mechanisms should operate in order to be eective. At
least implicitly, it still favours public intervention by administrative law,
backed by the coercive power of the state, over soft and horizontal modes

238

Handbook of research on global corporate citizenship

Table 11.3 Public, multistakeholder and private self-regulation in dierent

policy areas
Environment

Security and human

rights

Corruption and
organized crime

With public
sector
participation

Global Compact

Kimberley Process

United Nations
Convention
Against
Corruption

Multistakeholder
governance
initiatives

Forest
Stewardship
Council

Voluntary
Principles on
Security and
Human Rights

Business
Principles for
Countering
Bribery

Private
self-regulation

Responsible Care

Antwerp Resolution
of the World
Diamond Council

Wolfsberg
Principles

of governance. However, this traditional hierarchical mode of public governance by government, has lost part of its signicance in the course of the
domestic political modernization processes discussed above. For governance beyond the state, it was never appropriate as a model. Global governance institutions very much like the above-mentioned intergovernmental
institutions characteristic of the period of international governance are
typically based on compromise or consent rather than on fear of coercion,
simply because there is no Leviathan available in an international system
consisting of sovereign territorial states. Given these conditions, in the
international sphere even national governments perform their regulatory
functions best, not if they can impose norms, but because of consent, that
is, if the norms and rules they generate and try to implement are regarded
as legitimate and/or as serving the self-interest of those who are subject to
those rules (see also Buchanan and Keohane 2006, pp. 40910). In that
sense, it becomes important to go beyond the fear of coercion as compliance mechanism and to discuss alternative conduits by which non-state
actors may contribute to the provision of public goods.
Fear of public regulation
In the context of transnational private self-regulation, even the potential
threat of governments imposing binding legal regulation in the case of voluntary self-commitments failing to show the expected eects may improve
the robustness, reliability and sustainability of self-regulation among private
actors. This expectation rests on the assumption that private self-regulation,

Emerging patterns of global governance

239

which typically falls into the category of soft and voluntary modes of norm
generation and implementation, is driven by business intention to avoid
state intervention in the market. In order to achieve this goal, they are
doomed to success. But this embeddedness in pending public regulation
could have yet another impact on private eorts trying to anticipate them:
even if, at a later stage, public regulation would follow, its substance would
already be pre-shaped by the norms and rules of private self-regulation.
These expectations as to the potential impact of a pending fear of coercion
on private self-regulation go along with the suspicion that in the absence of
this whip in the window the reliability of voluntary self-commitments
would suer. Private self-regulation, in order to meet certain demands on
political regulation, would therefore always depend on the capability and the
willingness of public actors to intervene.
Material market incentives
How far can private self-regulation contribute to the provision of public
goods, if market forces are the only mechanism to secure compliance? In
this case, in a narrow costbenet calculation, doing good is only rational
if and as long as it helps companies to do well, for example, by improving
the image of a certain brand in relation to competitors. This causal mechanism rests on a rationalist background according to which rules are
obeyed when they are in line with the self-interest of rule followers to
maximize individual benets and to minimize individual costs. However,
as Buchanan and Keohane (2006, p. 410) rightly point out, support
for an institution based on reasons other than self-interest or the fear of
coercion . . . may be more stable.
Social costs by public shaming
The threat of intervention by legally binding public regulation is not the
only environmental factor which can potentially raise the quality of the
contributions that private self-regulation can make to the provision of
public goods. Another factor originates from the embeddedness of selfregulation in a societal environment in which civic groups are vigilant and
strong enough to raise public attention concerning the conduct of businesses. In this case, the underlying assumption is that the reputational costs
associated with public shaming will increase the likelihood that voluntary
unilateral or multilateral self-commitments of companies come into existence and that their rules are actually implemented. Even if companies proclaim normative self-commitments only for strategic reasons, without
actually being convinced of their appropriateness, the importance of the
societal environment lies in securing rule-consistent behaviour by helping
the logic of rhetorical self-entrapment to unfold.9 This consideration leads

240

Handbook of research on global corporate citizenship

us to a fourth causal mechanism with which we leave the theoretical background of rationalism behind and employ basic assumptions of social
constructivism.
Legitimacy assumptions and moral obligations
Apart from fear of coercion and self-interest (in its narrow and its more
complex meaning), rule following may also be caused by the legitimacy
assumptions which the subjects of regulation attribute to global governance institutions and by the sense of appropriateness attached to their
rules. Such legitimacy assumptions can grow on the basis of moral reasons,
but also on factual knowledge about how an institution works and about
the degree to which it contributes to the provision of public goods without
committing serious injustices, such as violating human rights (Buchanan
and Keohane 2006, p. 420). As the author of this chapter has pointed out
elsewhere (Conzelmann and Wolf 2007), any public order, domestic or
beyond the state that rested exclusively on sanctions and deterrence of
potential transgressors would demand enormous resources. Therefore, the
weight on these hard compliance mechanisms is usually sought to be lightened by creating moral obligations to follow norms, for example, by appealing to collective identities or by highlighting the legitimacy of these norms.
As a consequence, the binding force of regulations may actually originate from several sources: the sense of obligation created by the norms and
rules on which they are based; actors rational calculation of the gains they
can expect from rule compliance; and the subordination by the threat or use
of force. With regard to global governance arrangements which are characterized by the interplay among states, business and civic groups, the political challenge is not necessarily to increase the regulatory and sanctioning
capacity of public bodies at the international level, but rather to increase
the legitimacy of global governance institutions so that compliance with
their rules can also count as appropriate conduct.
All institutional designs and compliance mechanisms discussed in this
section have their specic strengths and weaknesses as far as their
eectiveness, the likelihood of operating in the general interest and the
validity of assumptions made about the motives of actors are concerned.
As most of the governance arrangements which are already based on role
shifts of the participating actors are still new, we do not have enough empirical evidence to substantiate generalizing judgements. In so far, and unlike
regulatory initiatives that rely exclusively on the logic of sanctions and
deterrence or material market incentives, they have the privilege of not yet
having had the opportunity to reveal their weaknesses. However, some
general remarks can be made that are based on the compatibility of certain
compliance mechanisms with the dierent regulatory challenges that have

Emerging patterns of global governance

241

to be met at the levels of meta, second- and rst-order governing: It is very

likely that shared legitimacy assumption will result in a stronger commitment to the normative standards established at the meta level of governing.
This means that the shadow of state hierarchy is a negligible factor in this
context and that voice is more important than vote here. The availability
of the unique coercive instruments of the state may, however, become of
crucial importance for issues of second-order governing, in particular when
it comes to safeguarding by legally binding rules the institutional conditions under which rst-order problem solving can take place with full and
equal stakeholder participation. At the level of rst-order governing,
nally, the availability of a broad range of problem-solving resources and
a public which can set into motion shaming mechanisms speaks in favour
of multistakeholder arrangements and compliance mechanisms which rely
on factual expertise on the input side of the political process, on transparency on the throughput phase, and on public monitoring of implementation measures.
Institutional demands for the legitimacy of transnational global governance
In this chapter we rst described the emergence of new modes of governance beyond the state; then dealt with the role shifts of actors that went
along with this process; subsequently, taking into account dierent
assumptions about actors motivations, I analysed the conditions under
which private actors might be expected to provide meaningful contributions to global governance in the interplay among the state, business and
civil society. The following nal section takes up again the issue of strengths
and weaknesses, but places it in the broader context of the general desirability and limitations of the privatization of governance beyond the state.
This normative discussion will result in some considerations about institutional demands for the legitimacy of transnational global governance.
Theoretical perspectives on the legitimacy of global governance institutions may be distinguished according to their state-centredness and the
degree to which they adhere to, or transcend, the normative demands
derived from the ideal type of the parliamentary democracy of the territorially based nation-state. A very basic rst distinction stems from dierent
constitutional assumptions about the international system: is it desirable to
establish democratic statehood at the supranational level, as envisaged by
cosmopolitan approaches (Held 2005), or do we conceive of the political
space beyond the state as a non-state polity characterized by functional
self-regulation, that is by horizontal modes and sectoral scopes of policy
making? Leaving state-centrism behind, a second cluster of distinctions
refers to the way in which certain governance functions should be assigned
to certain levels within a multilevel governance setting in order to achieve

242

Handbook of research on global corporate citizenship

maximum legitimacy. In his search for a political constitution for a pluralist world society, Habermas, for example, allocates juridical functions to the
supranational level and political functions to the level of horizontal selfcoordination (Habermas 2005). Lastly, the publicprivate axis of distinction picks out as a central theme of the implications of the new interplay
among the state, international institutions and private actors for the legitimacy of governance. Obviously these are of particular interest here. In
what follows I shall therefore concentrate on the publicprivate dimension
of the legitimacy issue by linking it with Kooimans (2000) functional distinction between rst-order, second-order and meta governing which has
already been introduced.
Despite the general lack of a commonly agreed-upon set of positive normative criteria for the legitimacy of global governance institutions, there is
at least some agreement on the unrealistic view that legitimacy for these
institutions requires the same democratic standards that are now applied to
states (Buchanan and Keohane 2006, p. 405). Rather, institutional designs
should take the specic contexts of governance beyond the state more seriously and venture into context-adequate standards of legitimacy (Wolf
2002, 2006). With regard to the inclusion of private actors, in particular,
there seems to be no fundamental contradiction between the privatization
of governance beyond the state and the provision of public goods, because
none of the three types of actors dealt with above pursues a genuine public
interest in this sphere. In fact, the boundaries between what is public and
what is private, and hence which actors act in the public interest, are much
less clear in the political space beyond the state. In this context even
(national) governments follow private, that is particularistic, purposes of
their own (namely, their national interest). Public and private actors turn
out to be much more similar units in the international sphere than this
general distinction would suggest. In fact, some (private) actors from civil
society may be the most likely candidates as protagonists of what is generally perceived to be the common good.
How far does the new interplay between the state, business and civil
society aect legitimacy, and what kind of legitimacy standards should be
applied to transnational global governance? A rst answer to these questions could be the objection against applying any legitimacy standards to
this sphere which go beyond certain demands of output eectiveness with
regard to the provision of public goods in the general interest. This argument could be based on the voluntary nature of self-regulation which does
not produce any necessity for maintaining self-determination, nor for
checks and balances to control power and maintain the rule of law. Where
no one exerts power, there is no need to control it. Following Max Webers
(1921 [1976]) concept of legitimacy as the legitimate authority to use power

Emerging patterns of global governance

243

in order to enforce collectively binding decisions, one could conclude:

where we have no collective subordination by coercion, there is no need for
legitimacy either; where no one rules, there is no need to legitimize anyones
right to rule.
The functional bias of the more output-oriented governance debate
tends to support this view (Mayntz 2006, p. 12). Under the governance paradigm, the notion of the nature of politics has shifted from exerting power
to solving collective problems. Rather than treating these two notions as
separate, the following considerations are based on the assumption of a
functional linkage between eectiveness and legitimacy, according to which
an institutions right to rule is accepted and its rules are obeyed as being
binding because they are regarded as legitimate. This view provides us
with a better understanding of the reexivity and interconnectedness of
eectiveness demands and the normative demands of legitimacy derived
from democratic theory. From both perspectives, participation plays a
crucial role.
However, criteria for inclusion dier: eectiveness (or output legitimacy)
demands procedural mechanisms which respond to factual knowledge
problems and guarantee a meaningful participation by those aected by
rules. At the level of rst-order governing, these demands of output legitimacy can be met, for example, by the inclusion of experts or specialists
because they can contribute knowledge-based problem-solving resources,
the lack of which would otherwise hinder eectiveness. Those aected by
rules also have to be included because their cooptation is likely to facilitate
the success of rule implementation. In both cases, inclusion means voice
rather than vote because matters of neither self-determination nor power
control are primarily at stake here. Thus, the day-to-day routines of formulating and implementing concrete sectoral problem-solving policies leave
abundant space for private involvement, with the eect of mobilizing additional sources of output legitimacy, as long as practical solutions are in
accordance with the standards of appropriateness established at the level of
meta governing. At that level, similar legitimacy gains can be achieved by
including private actors in the discourse about the normative standards by
which the appropriateness of certain approaches to problem solving is to be
judged, as long as these actors nd recognition as being an authority in
the sense of holding the expertise of a scholar or an expert or specialist
(Cutler et al. 1999c, p. 367) and accept the rule of impartial reasoning. In
sum, the inclusion of the argumentative and knowledge-based authority of
private actors from business and civil society can improve the output legitimacy of governance processes at both levels by their substantial contributions, based on factual expertise (at the level of rst-order governing) or on
moral credibility (at the level of meta governing). However, the recognition

244

Handbook of research on global corporate citizenship

as being an authority provides a sucient source for the legitimacy of

private actors claims to inclusion in policy processes of voluntary and horizontal self-regulation, but not in the context of coercive subordination and
command models of political obligation which still depend on legal (public)
authority.10
In contrast, democratic (input and throughput) legitimacy demands procedural mechanisms for participation which are not directly geared at
increasing the concrete problem-solving capability of global governance
institutions or the quality of the exchange of moral reasons, but which primarily aim at controlling the use of power. In order to achieve this goal, the
institutional architecture of transnational governance arrangements must
guarantee a certain transparency of the political process; furthermore, it
needs participation mechanisms that are vote rather than voice oriented
and guarantee formal equality. It is only under these conditions that the
subjects of regulation and those aected by it can be provided with the necessary information and leverage to hold institutional agents accountable
and to attach costs if they fail to provide certain public goods; in other
words, and reiterating the interconnectedness of input and output concerns: those aected by regulation must have the means to evaluate the performance of a global governance institution and, if necessary, to initiate
institutional reforms.
If and by how far such means are at hand, depends on decisions at the
level of second-order governing, which deals exactly with the shaping of
institutional settings within which governing at the two other levels can
take place. There is still little evidence as to what extent and at what costs
private actors can be expected to provide, maintain and protect the constitutional framework within which they operate, whether they are capable of
allocating institutional capabilities eectively, securing formal equality
and protecting the weak against the power of the strong. All these secondorder governing functions may require enforcement and subordination.
Although some of the private and multistakeholder governance initiatives
listed in Table 11.3 operate as most interesting governance laboratories in
that respect as well, notably the Forest Stewardship Council (Pattberg 2005,
2006), non-state standard setting and implementation still seems to depend
on its complementary relationship with state or interstate public regulation.
Even the most prominent functional equivalents to the checks and balances
institutionalized within the political systems of democratic states, such as
functioning market mechanisms and eective access to open public discourses as prerequisites for securing the accountability of privately dominated global governance networks, cannot be provided by private actors
alone. Therefore, the overall legitimacy of global governance arrangements
has to rely on some kind of public sector participation at least on its

Emerging patterns of global governance

245

visibility as the whip in the window, capable of intervening with legally

binding regulation at the national or intergovernmental level in case voluntary private self-regulation fails to operate and provide public goods in
accordance with the meta rules established at the level of meta governing.
Notes
1.

2.

3.
4.

5.
6.

7.
8.
9.

10.

The research on international regimes is a good example to illustrate this: originally,

private regimes (Hauer 1993) or regime consequences (Breitmeier and Wolf 1993) were
still only an appendix to the mainstream of regime analysis (see Rittberger and Mayer
1993). The North American mandarins only recently took up the normative turn seriously by seeking support in political theory (see Buchanan and Keohane 2006).
Governance beyond the state does of course still take place with the participation of governments, but it is de-governmentalized in more than one sense now: it inherited the predominantly horizontal modes of interaction from the former intergovernmentalism
which also lacked the shadow of hierarchy that the existence of a (world) state could
provide; but furthermore, it is also de-nationalized in that political processes have dispersed over several levels of policy-making, of which the national level is only one, and
the national governments share responsibilities with international organizations and
private actors from business and civil society (see also Reinicke 1998).
According to the logic of appropriateness (see March and Olsen 1984, 1989) the normative environment may lead to processes of reorientation and learning, and is potentially able to change identities and interests of business actors.
According to Kooimans (2000, p. 154) typology, [f]irst-order governing aims to solve
problems directly. . . . Second-order governing attempts to inuence the conditions
under which rst-order problem-solving or opportunity creation takes place. Thirdorder, or meta governing, deals with the creation of the normative standards by which
the appropriateness and legitimacy of concrete policy programmes and the demands on
an enabling institutional setting can be evaluated.
Virginia Hauer does not even regard civil society actors as strong enough to have a
serious impact as independent agents: Either they will be used as instruments of state
policy, or they will use states to implement their own goals (Hauer 1993, p. 106).
The establishment of the International Criminal Court shows how civil society can even
combine both strategies by acting as norm-entrepreneurs who strategically prepare the
conditions under which new norms can be generated in deliberative processes (see
Deitelho 2006).
For an excellent and well-balanced overview, see Risse (2002).
With the exception of some alterations, this passage follows Conzelmann and Wolf
(2007).
For the role of shaming, see Finnemore and Sikkink (1998) or Keck and Sikkink (1998);
Risse et. al (1999). For rhetorical self-entrapment, see Schimmelfennig (2001). The basic
argument claims a causal mechanism by which under the conditions of a functioning
public sphere and an already existing reputation sensitivity initial opportunistic and
strategically motivated commitments to certain norms oer a starting-point for shaming,
and in the long run can change actors behaviour and even become internalized.
This conceptualization of the legitimacy of private authority in contrast to the legal
authority carried by the state is reminiscent of Webers distinction between the legitimacy sources of legal and charismatic authority (Weber 1921 [1976], pp. 12430,
14044).

References
Andra-Warner, Elle (2003), Hudsons Bay Company Adventures, Canmore, Canada: Altitude.
Annan, Ko (1998), The Secretary-Generals Address to the World Economic Forum:
Markets for a Better World, UN Press Release SG/SM/98/16, 31 January.

246

Handbook of research on global corporate citizenship

Baade, Hans W. (1980), The legal eects of codes of conduct for MNEs, in Norbert Horn
(ed.), Legal Problems of Codes of Conduct for Multinational Enterprises, Deventer: Kluwer,
pp. 338.
Breitmeier, Helmut and Klaus Dieter Wolf (1993), Analysing regime consequences: conceptual outlines and environmental explorations, in Rittberger and Mayer (eds), pp. 33960.
Bressel, Nina and Klaus Dieter Wolf (2005), Forest certication as a political regulation concept
in the context of global governance, in Dietrich Burger, Barbara Lang and Jrgen Hess (eds),
Forest Certication: An Innovative Instrument in the Service of Sustainable Development?,
Eschborn: Deutsche Gesellschaft fr Technische Zusammenarbeit, pp. 18794.
Buchanan, Allen and Robert O. Keohane (2006), The legitimacy of global governance institutions, Ethics and International Aairs, 20 (4), 40537.
Bull, Hedley (1977), The Anarchical Society: A Study of Order in World Politics, Basingstoke:
Macmillan.
Conzelmann, Thomas and Klaus Dieter Wolf (2007), The potential and limits of governance
by private codes of conduct, in Graz and Nlke (eds), pp. 98114.
Cutler, A. Claire, Virginia Hauer and Tony Porter (eds) (1999a), Private Authority and
International Aairs, New York: State University of New York Press.
Cutler, A. Claire, Virginia Hauer and Tony Porter (1999b), Private authority and international aairs, in Cutler et al. (eds) (1999a), pp. 328.
Cutler, A. Claire, Virginia Hauer and Tony Porter (1999c), The contours and signiance of
private authority in international aairs, in Cutler et al. (eds) (1999a), pp. 33376.
Deitelho, Nicole (2006), berzeugung in der Politik: Grundzge einer Diskurstheorie internationalen Regierens (Persuasion in politics: outline of a discourse theory of international
governance), Frankfurt a. M.: Suhrkamp.
Fikentscher, Wolfgang (1980), The Draft International Code of Conduct on the Transfer of
Technology, Munich: Max Planck Institute for Foreign and International Patent,
Copyright, and Competition Law.
Finnemore, Martha and Kathryn Sikkink (1998), International norm dynamics and political
change, International Organization, 52 (4), 887917.
Florini, Ann M. (2000), Who does what? Collective action and the changing nature of
authority, in Richard A. Higgott, Georey R.D. Underhill and Andreas Bieler (eds), NonState Actors and Authority in the Global System, London: Routledge, pp. 1531.
Global Compact Oce (2004), The Global Compact: Corporate Citizenship in the World
Economy, New York: United Nations.
Graz, Jean-Christophe and Andreas Nlke (eds) (2007), Transnational Private Governance and
its Limits, London: Routledge.
Griths, Percival Joseph (1974), A Licence to Trade: The History of English Chartered
Companies, London: E. Benn.
Habermas, Jrgen (2005), Eine politische Verfassung fr die pluralistische Weltgesellschaft,
in Jrgen Habermas, Zwischen Naturalismus und Religion, Frankfurt a. M.: Suhrkamp,
pp. 32465 (forthcoming in 2008 as A political constitution for the pluralist world society,
in Between Naturalism and Religion, Cambridge: Polity).
Hall, Rodney B. and Thomas Biersteker (2002), The emergence of private authority in the
international system, in Rodney B. Hall and Thomas J. Biersteker (eds), The Emergence of
Private Authority in Global Governance, Cambridge: Cambridge University Press, pp. 322.
Hauer, Virginia (1993), Crossing the boundary between public and private: international
regimes and non-state actors, in Rittberger and Mayer (eds), pp. 94111.
Hauer, Virginia (1999), Self-regulation and business norms: political risk, political activism,
in Cutler et al. (eds) (1999a) pp. 199222.
Held, David (2005), Principles of cosmopolitan order, in Gillian Brock and Harry Brighouse
(eds), The Political Philosophy of Cosmopolitanism, Cambridge: Cambridge University
Press, pp. 1027.
Keay, John (1993), The Honourable Company: A History of the English East India Company,
London: HarperCollins.
Keck, Margaret E. and Kathryn Sikkink (1998), Activists Beyond Borders, Ithaca, NY: Cornell
University Press.

Emerging patterns of global governance

247

Knill, Christoph and Dirk Lehmkuhl (2002), Private actors and the state: internationalization and changing patterns of governance, Governance, 5 (1), 4164.
Kooiman, Jan (2000), Societal governance: levels, modes, and orders of socialpolitical interaction, in Jon Pierre (ed.), Debating Governance, Oxford: Oxford University Press,
pp. 13864.
March, James G. and Johan P. Olsen (1984), The new institutionalism: organizational factors
in political life, American Political Science Review, 78, 73449.
March, James G. and Johan P. Olsen (1989), Rediscovering Institutions: The Organizational
Basis of Politics, New York: Free Press.
Martens, Kerstin (2005), NGOs and the United Nations: Institutionalization, Professionalization
and Adaption, Basingstoke: Palgrave.
Mathews, Jessica T. (1997), Power Shift, Foreign Aairs, 76 (1), 5066.
Matten, Dirk and Andy Crane (2005), Corporate citizenship: towards an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
Mayntz, Renate (1993), Policy-Netzwerke und die Logik von Verhandlungssystemen (Policynetworks and the logic of bargaining systems), in Adrienne Hritier (ed.), Policy-Analyse:
Kritik und Neuorientierung, Special Issue of Politische Jahresschrift 24, Opladen:
Westdeutscher Verlag, pp. 3957.
Mayntz, Renate (2006), Governance Theory als fortentwickelte Steuerungstheorie?
(Governance theory as an advanced theory of political steering?), in Gunnar Folke
Schuppert (ed.), Governance-Forschung, Baden-Baden: Nomos, pp. 1120.
Pattberg, Philipp (2005), The Forest Stewardship Council: risk and potential of private forest
governance, Journal of Environment Development, 14 (3), 35674.
Pattberg, Philipp (2006), Private governance and the South: lessons from global forest politics, Third World Quarterly, 27 (4), 57993.
Princen, Thomas and Matthias Finger (eds) (1994), Environmental NGOs in World Politics,
London: Routledge.
Reinalda, Bob (2001), Private in form, public in purpose. NGOs in international relations
theory, in Bas Arts, Math Noortman and Bob Reinalda (eds), Non-State Actors in
International Relations, Cheltentham, UK and Northampton, MA, USA: Edward Elgar,
pp. 1140.
Reinalda, Bob and Bertjan Verbeek (2001), Theorising power relations between NGOs, intergovernmental organisations and states, in Bas Arts Math Noortmann and Bob Reinalda
(eds), Non-State Actors in International Relations, Cheltenham, UK and Northampton,
MA, USA: Edward Elgar, pp. 14558.
Reinicke, Wolfgang H. (1998), Global Public Policy: Governing without Government?,
Washington, DC: Brookings Institution.
Risse, Thomas (2002), Transnational actors and world politics, in Walter Carlsnaes, Thomas
Risse and Beth A. Simmons (eds), Handbook of International Relations, London: Sage,
pp. 25574.
Risse, Thomas and Ursula Lehmkuhl (2006), Governance in areas of limited statehood
new modes of governance? Research program of the Research Center (SFB) 700,
www.sfb-governance.de/en/publikationen/sfbgov_wp/ index.html, accessed 4 September
2007.
Risse, Thomas, Stephen C. Ropp and Kathryn Sikkink (eds) (1999), The Power of Human
Rights. International Norms and Domestic Change, Cambridge: Cambridge University Press.
Rittberger, Volker and Peter Mayer (eds) (1993), Regime Theory and International Relations,
Oxford: Oxford University Press.
Ronit, Karsten and Volker Schneider (2000), Private organizations and their contribution to
problem-solving in the global arena, in Ronit and Schneider (eds), Private Organizations in
Global Politics, London: Routledge, pp. 133.
Ruggie, John Gerard (2002), Corporate social responsibility and the Global Compact,
Journal of Corporate Citizenship, 5, 2736.
Scharpf, Fritz W. (1991), Die Handlungsfhigkeit des Staates am Ende des zwanzigsten
Jahrhunderts (The States capability to act at the end of the twentieth century), Politische
Vierteljahresschrift, 32 (4), 62134.

248

Handbook of research on global corporate citizenship

Scherer, Andreas Georg and Guido Palazzo (2007), Towards a political conception of corporate responsibility: business and society seen from a Habermasian perspective, Academy
of Management Review, 32 (4), 1096120.
Schimmelfennig, Frank (2001), The Community trap: liberal norms, rhetorical action, and
the Eastern enlargement of the European Union, International Organization, 55 (1), 4780.
Schmitter, Philippe and Gerhard Lehmbruch (eds) (1979), Trends Toward Corporatist
Intermediation, Beverly Hills, CA: Sage.
Scholte, Jan Aart (2000), Global civil society, in Ngaire Woods (ed.), The Political Economy
of Globalization, Basingstoke: Macmillan, pp. 173201.
Strange, Susan (1996), The Retreat of the State: The Diusion of Power in the World Economy,
Cambridge: Cambridge University Press.
Take, Ingo (2000), The better half of world society, in Mathias Albert, Lothar Brock and
Klaus Dieter Wolf (eds), Civilizing World Politics: Society and Community Beyond the State,
Lanham, MD: Rowman & Littleeld, pp. 199214.
Waltz, Kenneth (1977), Theory of International Politics, Reading, MA: Addison-Wesley.
Wapner, Paul (1997), Governance in global civil society, in Oran R. Young (ed.), Global
Governance: Drawing Insights from the Environmental Experience, Cambridge, MA: MIT
Press, pp. 6584.
Weber, Max (1921), Wirtschaft und Gesellschaft (Economy and society), edited by J.
Winkelmann (1976), Tbingen: Mohr.
Wolf, Klaus Dieter (1999), The new raison dtat as a problem for democracy in world
society, European Journal of International Relations, 5 (3), 33363.
Wolf, Klaus Dieter (2002), Contextualizing normative standards for legitimate governance
beyond the state, in Jrgen R. Grote and Bernard Gbikpi (eds), Participatory Governance,
Opladen: Leske & Budrich, pp. 3550.
Wolf, Klaus Dieter (2006), Private actors and the legitimacy of governance beyond the state,
in Arthur Benz and Yannis Papadopoulos (eds), Governance and Democracy, London:
Routledge, pp. 200227.
Zrn, Michael (1998), Regieren jenseits des Nationalstaates (Governance beyond the nation
state), Frankfurt a. M.: Suhrkamp.

12 Globalization, transnational corporations

and the future of global governance
Stephen J. Kobrin

Introduction
Globalization is still very partial and incomplete. While the world economy
may be global, law, regulation, politics and society are still largely national,
only slowly emerging from bounds imposed by the modern international or
Westphalian states system. There is a governance gap as politics lags behind
markets which extend beyond the reach of nation-states (Habermas 2001);
global markets have grown rapidly without the parallel development of
economic and social institutions necessary for their smooth and equitable
functioning (World Commission on the Social Dimension of Globalization
2004, p. xi).
We are in the midst of a transition from an international to a transnational or post-Westphalian politicaleconomic system and have not yet
developed the modes of cooperation, institutions or even the language
necessary to govern an integrated world economy eectively. My concerns
in this chapter are the implications of this asymmetry and of the emergence
of a transnational world order, for problems of economic governance. I
shall focus on problems rather than solutions, on the changing parameters
of a new governance regime rather than its precise denition. My objective
is to frame the problems that systemic evolution poses for societal control
of the economy and economic actors.
The post-Westphalian transition
The modern Westphalian international order was a coherent system with a
well-dened structure. First, it was state-centric: states were the only actors
in international politics and the only subjects of public international law.
There was a clear distinction between the public sphere of politics and government and the private sphere of markets and economic transactions.
Second, it was inherently geographic, based on borders, mutually exclusive
territorial jurisdiction and sovereignty. Last, it was anarchic, lacking any
central authority.
The sovereign, territorial state, which was the primary container of politics, provided a territorially bounded space in which the struggles for
democracy, the nurturing of social solidarities, and constitutional forms of
249

250

Handbook of research on global corporate citizenship

government could develop within the framework of the rule of law

(McGrew 1997, p. 5). International politics entailed interactions among
states as governments and the international economy comprised discrete
cross-border transactions. The only public international interests were state
interests: the public domain, the interstate sphere and the realm of governance were largely coterminous (Ruggie 2004, p. 505).
We are in the midst of deep-seated change in the organization of the
world economy and world politics, a transition to a transnational or postWestphalian order that is in some ways comparable to the transition from
the medieval to the modern era in the 16th and 17th centuries (Kobrin
1998). Three aspects of that transition are directly relevant to problems
of economic governance: the fragmentation of political authority; the
diusion of the boundary between the public and private spheres; and
changes in the nature and meaning of geographic space.
In a prescient article over thirty years ago, Nye and Keohane (1971,
p. xxi) foresaw the emergence of a transnational order dening world politics as all political interactions between signicant actors in a world
system in which a signicant actor is any somewhat autonomous individual or organization that controls substantial resources and participates in
political relationships with other actors across state lines. While states certainly remain important (perhaps the most important) actors, the system is
no longer state-centric: non-governmental organizations (NGOs), multinational corporations and international organizations such as the World
Trade Organization (WTO) have emerged as signicant transnational
actors in world politics.
The once clear distinction between the public and private spheres,
between politics, law and regulation on the one hand and the market and
economic activities on the other has broken down. Public authorities
engage directly in economic activities through state-owned or -controlled
companies, and private rms take on public functions such as setting standards or providing healthcare. The rise of the competition state and the
dramatic expansion of the social responsibilities of business rms have
blurred the once clear line between public and private sectors.
Last, globalization and the revolution in information technology have
changed the economic and political meaning of space. Borders are transcended rather than crossed, relations become increasingly supraterritorial as distance, borders and geographic space itself lose economic and
political signicance (Scholte 1997). Markets no longer need to be dened
in terms of geographic proximity and, in some circumstances, the location
of transactions and organizations has become indeterminate.
Ruggie characterizes this evolving order as a newly emerging global
public domain that is no longer conterminous with the system of states. It

Globalization, TNCs and the future of global governance 251

exists in transnational non-territorial spatial formations, and is anchored
in norms and expectations as well as institutional networks and circuits
within, across and beyond states (Ruggie 2004, p. 519).
Importantly, it is a system in transition, a world of partial globalization.
States are not replaced but rather embedded in a broader and deeper
transnational arena. In Rosenaus (1990) terms, sovereignty free and
sovereignty bound actors coexist with one another. Supraterritoriality
coexists with territorial spaces where locality, distance and borders still
matter. It is a system in the throes of evolution where uncertainty about
structures and relationships abounds.
Economic governance
Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such
an institution could not exist for any length of time without annihilating the
human and natural substance of society; it would have physically destroyed man
and transformed his surroundings into a wilderness. Inevitably, society took
measures to protect itself, but whatever measures it took impaired the selfregulation of the market, disorganized industrial life, and thus endangered
society in yet another way. (Polanyi 1944 [1977], p. 3)

Polyani thus described the double movement governing the dynamics of

a market society: the continuous expansion of the self-regulating market
was met forcibly by a countermovement seeking to re-embed the market
in the fabric of society. He argued that there was nothing natural
about laissez-faire, that the development of the market required an enormous increase in the administrative functions of the state (ibid., p. 139);
his thesis that a self-regulating market cannot exist in isolation, that it
must be embedded in a social and political order to function, is widely
accepted.
At a minimum, markets require the establishment of property rights
(including intellectual property), contractual conditions, procedures for
civil redress and a supply of public goods to function: Economic activities
require the existence of rules and their enforcement as preconditions that
the market cannot generate itself (Scherer et al. 2006, p. 505). Under the
modern international states system, economic governance was synonymous with government, it was provided by territorially sovereign states; the
structure of the system assumed a geographic congruity between politics,
economics and social relations, that the space encompassed by borders had
meaning as a politicaleconomic construct. While there was considerable
variety in specic political and economic institutions (Hall and Soskice
2001), each state established the rules and provided the enforcement mechanisms necessary for a market to function.

252

Handbook of research on global corporate citizenship

To a large extent, this was true internationally as well, the international

world economy was embedded in the system of sovereign states, both individually and collectively. An international economy is perfectly consistent
with the structural characteristics of the Westphalian system: it comprises
territorially dened national markets as its constituent units; transactions
take the form of discrete cross-border ows of goods and capital;
and markets and the location of transactions are xed in terms of twodimensional space.
The problems posed by cross-border ows of trade and investment did
not violate the norms or assumptions of the Westphalian international
system: they tended to involve the collective determination (by states) of
rules governing international transactions and jurisdictional issues of
extraterritoriality and overlap in areas such as the enforcement of sanctions
or boycotts and taxation. Jurisdictional conicts, which were the exception
rather than the rule, were dealt with by sovereign territorial governments,
either individually or collectively. To the extent that the realist distinction
between internal and external aairs was preserved and disputes were
resolved through traditional interstate mechanisms, the outcomes reected
the norms and values of a political community comprising the sovereign
states collectively.
Bull (1977, p. 13) dened international society as common interests,
rules and institutions of states: an international society exists when a
group of states, conscious of certain common interests and common
values, form a society in the sense that they conceive of themselves to be
bound by a common set of rules in their relations with one another, and
share in the working of common institutions. He argued that an element
of international society has always been present in the modern international system. The international economy, comprising national markets
and discrete cross-border transactions, was embedded in this international
society, a political community and social order that consisted of the
Westphalian states system.
As will be seen, given the fragmentation of political authority and the
impact of the digital revolution on the meaning of economic space, borders
and territorial jurisdiction, the problems of economic governance are
dierent in kind in a transnational world order. Globalization at this point
is partial and incomplete: while the international, territorially rooted
system may have been compromised, it has not been replaced by anything
approaching a coherent transnational order. There is no transnational
social system or political community in which to embed an integrated
global economy.
I shall next turn to a discussion of the emergence of multinational rms
as signicant political actors with private political authority. I shall then

Globalization, TNCs and the future of global governance 253

consider the impact of spatial reorganization on governance, particularly
the transition from territorial national markets to disaggregated value
chains as the constituent units of the world economy. The more general issue
of economic governance in a transnational system will then be discussed in
the context of a need for a hybrid publicprivate structure which reects the
idea of a new global public domain. Finally, I consider the potential
impact of this transition to a transnational world order on the rm.
Multinational rms as political actors
Individuals become part of mass movements for change and action . . . Business
gets involved in politics, not as partisans of a political party, but as important
actors in global debate. (Blair 2007)

In this speech, Tony Blair recognized the fundamental change that has
taken place in the political role of the corporation. Traditional multinational rms are products of the Westphalian international system, corporations which have their home in one country but which operate and live
under the laws and customs of other countries as well (Lilienthal 1960,
p. 119). Each unit of a multinational corporation (MNC) lives within a
state, it owes its very existence as a legal entity to the government of the
national territory in which it is incorporated. [F]or private business enterprises operating transnationally, legal personality is conferred under
national and municipal laws, and corporate rights, duties, and remedies
remain a function of national law (Cutler 2001, p. 141).
The multinational rm exercised economic rather than political power.
It reected the relatively clear separation of the private and public spheres,
of markets and economic activity on the one hand and politics, law and
regulation on the other.
That has changed, in practice if not in theory, with the emergence of a
postmodern system, the fragmentation of political authority, the rise of
signicant non-state actors and the blurring of the line between the private
and public spheres. A growing number of non-state actors have political
authority in the international system: [w]hile these new actors are not
states, are not state-based, and do not rely exclusively on the actions or
explicit support of states in the international arena, they often convey
and/or appear to have been accorded some form of legitimate authority
(Hall and Biersteker 2002, p. 4). Cutler et al. (1999) argue that private
authority involves an organization not associated with government institutions exerting decision-making power which is regarded as legitimate in a
particular issue area. Private institutions can become authoritative, and
thus be perceived as legitimate, because of perceived expertise, historical
practice or an explicit or implicit grant of power by states.

254

Handbook of research on global corporate citizenship

Ruggie discusses private authority and private governance in terms of

the apparent assumption by TNCs [transnational corporations] and global
business associations of roles traditionally associated with public authorities, sometimes in conjunction with CSOs [civil society organizations], but
more widely on their own (Ruggie 2004, p. 502). In 2002 the United
Nations announced that it had abandoned its policy of relying on governments to deal with HIV/AIDS in developing countries and that it would
now help fund corporate eorts to provide anti-retroviral drugs. The
change in policy was seen as an acknowledgement that companies have the
resources to nd health solutions where governments and NGOs are overstretched or failing (Lamont 2002). The battle against AIDS is but one
example of multinational rms being asked to take on duties that were historically the responsibilities of governments.
The activities of rating agencies provide a second example of the provision of public goods by a private rm. While there are advantages as well
as disadvantages to having an independent, private rm judging the creditworthiness of sovereign states, there is no question that the major credit
rating agencies are private sector rms who exercise considerable inuence
over the capacity of sovereign nations to access international capital
(Abdelal and Brunder 2005, p. 1). Firms such as Standard & Poors and
Dun & Bradstreet perform a public function that might well be the province
of an international organization, supplying an international public good
that can aect the economic and political power of states signicantly.
They function as actors in the international political system, exercising
private political authority.
The inclusion of Trade-Related Aspects of Intellectual Property
(TRIPS) in the 1994 agreement establishing the WTO provides an excellent
example of MNCs functioning as autonomous actors in world politics. As
Susan Sell (2003, p. 1) notes, the central player in this drama was . . . the
ad hoc US-based twelve member Intellectual Property Committee (IPC).
In 1986 the IPC mobilized a group of American, European and Japanese
rms who drove TRIPS through the GATT/WTO negotiations. While the
American government was not opposed to TRIPS, it largely followed the
lead of the IPC. There is little question that the IPC functioned as an independent actor in international politics: What is new in this case is that
industry identied a trade problem, devised a solution, and reduced it to a
concrete proposal that it then advanced to governments . . . In eect, twelve
corporations made public law for the world (ibid., p. 96).
There is an admittedly ne line between business rms as interest groups
lobbying their respective governments or international organizations and
MNCs as actors in international politics exerting private political authority.
In this case, it is clear that the IPC played a direct role in the Uruguay Round

Globalization, TNCs and the future of global governance 255

negotiations: it put the item on the agenda; developed the standards to be
negotiated; determined that the best course of action would be to set
minimum standards rather than try to harmonize intellectual property
rules; and was instrumental in reaching the eventual TRIPS agreement
(Santoro 1995; Sell 2003).
Private political authority is no longer an oxymoron. The multinational
rms role in international politics is no longer restricted to indirect participation through lobbying governments and attempting to inuence policy
positions: they can set standards, supply public goods and participate in
international negotiations. They are transnational actors who possess private
political authority and are increasingly engaged in authoritative decision
making that was previously the prerogative of sovereign states (Cutler et al.
1999, p. 16). They participate in the formulation and implementation of
rules in policy areas that were once the sole responsibility of the state or
international governmental organizations (Scherer et al. 2006, p. 506).
Ruggie (2004, p. 519) describes this blurring of the privatepublic
boundary in terms of a new global public domain:
I dene the new global public domain as an institutionalized arena of discourse,
contestation, and action organized around the production of public goods. It is
constituted by interactions among non-state actors as well as states. It permits
the direct expression and pursuit of a variety of human interests, not merely
those mediated (ltered, interpreted, promoted) by states. (Ibid., p. 519)

The fragmentation of political authority and the rise of signicant nonstate actors complicate the problem of economic governance in a transnational world order in a number of ways. First, governance is no longer
synonymous with government, in terms of either individual governments
or relations among them in the interstate system. Multiple actors provide
public goods and exert signicant, legitimate authority in international politics. Any system of governance must reect this fragmentation
of authority: it must involve multiple actors in rule making and rule
enforcing.
Second, we are in the midst of a transition to a transnational world
system, and the political order or society in which the market is to be
embedded is far from clear. While I argued above that the Westphalian
states system collectively constituted a political order or community in
which to embed markets at least in a metaphorical sense that no longer
will suce. In fact, given the blurring of the line between public and private,
between politics and markets, the concept itself may require reformulation.
Markets require a supporting structure that they cannot generate. The institution or institutions that will provide this supporting structure in a
transnational world order is a critical and unresolved question.

256

Handbook of research on global corporate citizenship

The meaning of space

The medieval to modern transformation was associated with a transformation
in how space and time were experienced, conceptualised and represented. With
contemporary globalization we may now be experiencing a similarly radical
modern-to-postmodern transformation, with similarly radical consequences for
existing territoriality. (Anderson 1996, p. 142)

The medieval to modern transformation (conventionally associated with

the Treaty of Westphalia in 1648) entailed the territorialization of politics,
the replacement of overlapping and interlaced feudal hierarchies by a
system of territorially sovereign states. The cardinal organizing principle of
the modern state system is the division of the earths surface into mutually
exclusive territorial jurisdictions enclosed by discrete and meaningful
borders (Ruggie 1993): the state is inherently geographic, with political
authority both based upon and dened as a territorial construct (Spruyt
1994).
As noted above, a geographically organized international system assumes
that the state is the primary container of politics and that there is a geographic congruity between politics, economics and social relations; that geographic space has meaning as a politicaleconomic construct. Conceptually,
that implies the states authority over all economic actors and economic
transactions within its borders and over economic activity conducted by its
nationals abroad. While that principle led to conicts over extraterritoriality attempts to exercise authority over non-nationals abroad they were
limited, the exception rather than the rule (Kobrin 2001).
As Anderson suggests, the postmodern transition may well have radical
consequences for a politicaleconomic system rooted in mutually exclusive
territoriality. I shall discuss four aspects of this transition which impinge
on the meaning of space as a politicaleconomic construct and the problems of economic governance: the viability of discrete borders; the increasing indeterminacy of location; the increasing irrelevance of geographic
proximity; and the reorganization of international production as a result of
the disaggregation of production. All four are, in large part, a function of
the digital revolution.
If a border is to have signicance as an economic construct the relevant
government must be able to exert control over ows across it. While no
authority has been able to exert complete control over a border smuggling
and illegal migration have always been with us at this point, the exceptions are becoming the rule. A digital version of a song, movie or book can
be transmitted electronically over the internet with the push of a key, rendering borders immaterial in a very real sense. While governments have
attempted to exert control over websites in other jurisdictions, successful

Globalization, TNCs and the future of global governance 257

eorts are few and far between. It is far from clear that governmental
authorities can exert signicant control over cross-border ows of digital
transactions or that they are even aware of the vast majority of them.
Even if the senders and recipients computers are located in dierent
jurisdictions, the idea of crossing a border applies only metaphorically. It
is more reasonable to conceive of the book or song rematerializing on the
recipients computer. Similarly, an Indian technology rm can maintain a
New York banks computer over the internet without any discrete or
observable cross-border exchanges taking place. In fact, it is far from clear
whether the Indian rms eort can be classied as an export in the traditional sense.
Borders have become increasingly irrelevant to civil society groups.
While NGOs such as Amnesty International have organized global human
rights campaigns for some time, they now use the internet to provide peernetworked human rights activism (Reynolds 2006, p. 103). A coordinated
eort by elements of an NGO located in dierent states to protest the violation of worker rights by an MNC, for example, is clearly global political activity even if none of the participants leaves his/her home country:
given access to interconnected global electronic networks, borders become
less signicant and less of a barrier.
Economic governance has traditionally required that transactions and
institutions can be located precisely in two-dimensional geographic space.
Taxation, consumer protection, corporate regulation and the very legal
personality of the corporation itself all depend on being able to establish
territorial jurisdiction precisely: we ask where the transaction took place,
where the investment originated, where equity capital was raised and where
the corporation is located (Kobrin 2002).
The question of where a digital transaction takes place, where it is located
in two-dimensional geographic space, may no longer be conceptually relevant. If I use my computer in Philadelphia to view a painting on the
Louvres website, is the digital image in Paris or in Pennsylvania? While the
question is debatable, I would argue that in this case, it is not really material. The question, however, has proven to be non-trivial.
Two examples will suce. In 2000, a French court ordered Yahoo to
remove auctions of Nazi memorabilia from its US website. Trading in Nazi
artifacts is illegal in France, but perfectly legal in the United States. While
the case is complex, the French court argued that the fact that the website
could be viewed in France gave it jurisdiction, that access by French internet users to the auction website . . . constituted a contravention of French
law (Akdeniz 2001, p. 110). While territorial sovereignty certainly gives
the French government the right to prevent its citizens from purchasing
Nazi goods and to ban imports at the border, does it have the right to claim

258

Handbook of research on global corporate citizenship

jurisdiction over a US website simply because it can be viewed in France?

Would that give every jurisdiction control over every website, regardless of
location? Is it even possible for the French authorities to be aware of every
website around the world oering, for example, electronic copies of Mein
Kampf?
The problem of internet gambling, which is a major online business, provides a second example of the indeterminacy of location in cyberspace:
eight million Americans bet $6 billion annually on the internet (Richtel and
Timmons 2006). Internet gambling is legal in a number of locations such
as Antigua but illegal in the United States. However, the US government
has gone after o-shore gambling operations rather than individual
Americans who play electronic poker or bet on horse races on the net. In
response, Antigua brought a dispute to the WTO, accusing the US of protectionism against international gambling companies. As of early 2007, the
WTO tribunal agreed with Antigua, arguing that the US discriminated
between domestic and foreign companies (Pimlott 2007).
As with the Yahoo case, the question of the relevance of geographic location arises again. It is far from clear where the transaction actually takes
place and it may be dicult to determine where the gambler and website
are physically located. Both cases raise serious questions about the viability of a system of economic governance based on territorial jurisdiction
when the underlying assumption of locational determinacy is violated.
Marshall (1890, p. 384) (citing W.S. Jevons) notes that while the term
market originally connoted a specic place, this distinction of locality is
not necessary. The traders may be spread over a whole town, or region of
country, and yet make a market, if they are, by means of fairs, meetings,
published price lists, the post-oce or otherwise, in close communication
with each other. Two points are important here: markets are dened in
terms of geographic jurisdiction (Marshall does allow for world markets as
an exception) and actual proximity is not necessary if close communication is possible. In practice, while markets could be dened broadly, actual
transactions required proximity.
The digital revolution has eliminated the need for proximity in many
transactions and made geographic or jurisdictional denitions of markets
problematic. Marshalls exception of world markets is becoming the rule,
especially in services. Again, two brief examples will suce. The Indian
technology sector has exploded in the last decade and it is now common for
software rms in Bangalore to develop both code for American rms and
service computers located in New York or London via the internet (Kobrin
2000). It is also increasing common for CAT scans or MRIs (magnetic resonance imaging) obtained after the normal working day to be read by
groups of radiologists located in India or Australia: the term Nighthawks

Globalization, TNCs and the future of global governance 259

has been applied to these groups. With the advent of digital imaging devices
and the internet, a service, which in the recent past required a patient and
doctor in immediate physical proximity (reading an X-ray) now can be performed anywhere in the wired world (Brody 2004). The problems this poses
for governance based on territorial jurisdiction are obvious.
The indeterminacy of location and the increasing irrelevance of geographic proximity are components of a signicant change in the organization of the world economy which has important implications for
governance. Baldwin (2006, p. 7) conceives of successive waves of globalization as two great unbundlings. The rst reected the decreasing importance of geographic proximity, the need to locate the production of goods
close to their consumption. The second, a function of rapidly falling communication and coordination costs, allows the dierent stages in the value
chain itself to be geographically dispersed.
Grossman and Rossi-Hansberg (2006, p. 4) describe this phenomenon as
a trade in tasks, arguing that the transport and communications revolution has weakened the link between specialization and geographic concentration, allowing for the separation of tasks in the value chain in space and
time. International competition plays out not just at the level of the industry, or even the rm, but right down at the level of individual tasks assembly, packaging, data entry that cut across whole sectors of the economy
(Economics Focus 2007, p. 86).
The net result is the geographic fragmentation of production processes,
or more generally, the disaggregation of supply chains. Firms are less likely
to simply make products and export them; they increasingly participate in
highly complex cross-border arrangements that involve a wide array of
partners, customers and suppliers (Gere 2005, p. 2). The disaggregation
of supply chains and the resulting trade in tasks are manifestations of a
seismic reorganization of the global economy: from the organization of
production in terms of national markets and discrete cross-border ows to
transnational production and supply networks (Gere 2005).
The basic constituent unit of the global economy is in the process of
evolving from territorially dened national markets to disaggregated
supply chains comprising in large part trade in individual tasks. The emerging globally integrated enterprise is a company that fashions its strategy,
its management, and its operations in pursuit of a new goal: the integration of production and value delivery world wide. State borders dene less
and less the boundaries of corporate thinking or practice (Palmisano 2006,
p. 129).
Increasingly, the tasks themselves are non-material: they entail the
manipulation of ideas and information that can be transmitted anywhere in
an instant. While most tasks can be located in two-dimensional geographic

260

Handbook of research on global corporate citizenship

space (multilocational digital eorts might be an exception), in aggregate

the complex supply chain renders location, geographic proximity and territoriality increasingly irrelevant. The implications for economic governance
are signicant and it is to that topic that I now turn.
Economic governance in a transnational world order
We have fading borders and this means the instruments of the national states are
being constantly eroded. It is no longer possible for the individual states to
dictate the rules of the economic game . . . (Benoit 2007, p. 8)

In this interview with the Financial Times, Franz Mntefering, Germanys

Vice-Chancellor, asked whether governments can continue to shape the
laws that rule the world and do so in a manner that avoids destruction of
the social dimension. Bull (1977) asked the same question thirty years ago,
trying to imagine alternatives to the international states system.
He dened the essential attributes of the system as sovereign states, interaction among them to form a system, and, as noted above, a degree of
acceptance of common rules and institutions in respect of which they form
a society (ibid., p. 225). He then asked what the world order would look
like if one or more of these attributes disappeared: a world made up of
states and interaction among them without a society would imply the
demise of the international order due to the disappearance of common
values, rules and institutions; sovereign states without a system would
result in isolated states where interaction was minimal.
Bull foresaw a world order comprising a system and society without sovereign states, the third alternative, taking the form of either a world government or a new medievalism made up of overlapping authorities and
cross-cutting loyalties (ibid., p. 246).1 However, Bull wrote before the rise
of autonomous transnational actors, private political authority and the
digital transformation of space, before the outlines of the emerging postWestphalian transition became obvious. While neither a world government
nor the complete abandonment of state sovereignty is likely, the systemic
changes taking place in the international politicaleconomic order can be
reconceptualized in terms of two underlying dimensions: the fragmentation of authority as multiple actors emerge from a state-centric system
where states were the only legitimate sources of authority and the only subjects of public international law; and changes in the nature of space as
borders become more permeable, location less determinate, proximity less
important and the root principle of mutually exclusive territoriality
increasingly compromised.
In Figure 12.1, possible changes in the politicaleconomic system are
visualized in terms of four quadrants comprising these two dimensions.

Fragmented: multiple
authorities

Parallel universes

Transnational
transformation

State-centric

AUTHORITY

Globalization, TNCs and the future of global governance 261

International states
system

Transgovernmental
relations

Mutually exclusive
territorial jurisdiction

Space as relational:
territoriality compromised

TERRITORIALITY

Figure 12.1

Possible politicaleconomic systems

The lower left quadrant captures the traditional international system, a

state-centric world order based upon mutually exclusive territoriality where
all three of Bulls attributes remain intact. The lower right envisages a world
where states remain as the only actors in the system, but territoriality is
compromised. A possibility here is Slaughters (2004) idea of disaggregated
states with transnational governance exercised through networks of government ocials preserving the system and society. It is somewhat more
dicult to conceive of a system that is based upon mutually exclusive territoriality where political authority has fragmented (upper left). While it
may stretch the concept, Rosenaus (1990) multicentric world of parallel
universes of sovereign and non-sovereign actors may apply here
The upper right quadrant describes a world where both state-centric political authority and territorial sovereignty are compromised, a transnational
transformation where all three of Bulls (1977) attributes of the international
states system are in ux: territorial sovereignty; modes of international
interaction; and the nature of an international society.
Bulls underlying question remains relevant: how can we reconstruct a
system of governance that takes multiple actors, private political authority
and the decreased viability of territorial jurisdiction into account and
provide a society rules and institutions perceived as both authoritative

262

Handbook of research on global corporate citizenship

and legitimate in which to embed the global market? In essence, we need

to provide both a system of interaction and some form of transnational
society that encompasses both the fragmentation of authority and the dramatic changes into the nature of space. In this chapter I can provide only
the barest outline of an answer to that question and suggest some of the
implications for governance of the rm.
Governance without government
Lamy (2006) notes that the concept of governance disappeared in the 16th
century with the emergence of nation-states and the state-centric international system. Government belongs to Westphalian nation states and their
particular modes of government, legitimacy and representativeness; a
society such as medieval Europe or the current international order without
any organized central power needs governance (ibid., p. 1).
In dening the idea of governance without government, Rosenau (1992,
p. 1) asked a critical question: if governance connotes a system of rule, and
if it is not sustained by an organized government, who makes and implements the rules?. He goes on to note that to presume the presence of governance without governments is to conceive of functions that have to be
performed in any viable human system irrespective of whether the system
has evolved organizations and institutions explicitly charged with performing them (ibid., p. 3).
Any eective post-Westphalian system of economic governance will have
to be consistent with the parameters of the evolving transnational order,
including the fragmentation of authority, the rise of multiple actors in
international politics and the decreased viability of territoriality. Gere
(2005, p. 37) denes market governance as those institutions, governmental and non-governmental, that both enable and constrain the behavior of
markets and market actors. He argues that three developments may allow
the international system to adapt to the task of governing a global market:
the thickening of international institutions; the emergence of private forms
of governance; and capacity building in developing countries. The rst two
are directly relevant here.
Resolving the asymmetry of partial globalization requires a mechanism
to allow politics to catch up with global markets. In the absence of a world
government, that will have to include both empowered and authoritative
international institutions that bring multiple actors (states, MNCs and
NGOs) into the policy formation and decision-making process and hybrid
or publicprivate forms of governance that are perceived as legitimate and
authoritative. I shall focus on the latter here.
There is increasing interest in the emergence of private locations of
authority in the international system, and their implications for the future

Globalization, TNCs and the future of global governance 263

of international order and global governance (Hall and Biersteker 2002,
p. 7). The concept has been discussed in terms of industry self-regulation
(Hauer 2001), private international regimes (Cutler 2002), non-state
market-driven governance systems (Cashore 2002) and civil business regulation (Vogel 2006).
While the idea of private governance of markets and economic actors is
often discussed in terms of business self-regulation, the concept can certainly include cooperative eorts among multiple actors such as business
rms and civil society groups, as well as public authorities. Cutler (2005)
notes that international legal theory, which is premised on the authority of
the territorial state, is at odds with the reality of increasingly authoritative
non-state actors and non-state law. She describes the involvement of
states in this process as a deterritorialization and reterritorialization of law,
law made by private actors enforced through the apparatus of the state.
Regimes have been dened as sets of implicit or explicit principles,
norms, rules, and decision making procedures around which actors expectations converge (Krasner 1982, p. 186). While regime theory was originally
conceived in terms of informal arrangements in traditional international
politics, more recently the idea has been applied to non-state actors with a
private regime dened in terms of an integrated complex of formal and
informal institutions that is a source of governance for an economic issue
area as a whole (Cutler et al. 1999, p. 13).
Similarly, Vogel (2006, p. 2) denes civil regulation in terms of private or
non-state regulatory frameworks to govern multinational rms and global
supply networks. Its dening feature is that its legitimacy, governance and
implementation is not rooted in public authority. It is based on soft law
or private law. The concept of soft law is important here. Its primary characteristic is that it is non-binding: soft law instruments range from treaties
with non-binding obligations, resolutions and codes formulated and
accepted by international or regional organizations to statements by
private actors which purport to formulate international principles (RohtArriaza 1995).
Kenneth Abbott and Duncan Snidal (2000) distinguish between hard
and soft law in terms of three characteristics: the degree to which rules are
obligatory or legally binding; the precision of the rules; and the delegation
of functions such as monitoring and implementation to third parties. Hard
law then refers to legally binding, precise obligations that delegate authority for interpreting and implementing the law. Soft law results from relaxing each of these criteria, particularly the rst.
A number of points are important. First, the hardsoft law distinction is
continuous rather than binary. Second, the lack of legally binding obligations does not mean that adherence to soft law is completely voluntary:

264

Handbook of research on global corporate citizenship

agreements may be enforced through a variety of control mechanisms such

as political pressure or public opinion. Third, there are numerous instances
of soft law commitments evolving over time into hard international law as
much of the soft law of today becomes part of the hard law of tomorrow
(Dupuy 1990; Hillgenberg 1999).
There are a number of examples of private or hybrid public/private
governance regimes that have provided eective governance through soft
law in a variety of issue areas. The International Organization for
Standardization (ISO), founded in 1946, is a network of the national standards institutes of 156 countries with a central secretariat in Geneva. Each
national committee determines its own composition:
ISO occupies a special position between the public and private sectors. This is
because, on the one hand, many of its member institutes are part of the governmental structure of their countries, or are mandated by their government. On
the other hand, other members have their roots uniquely in the private sector,
having been set up by national partnerships of industry associations. (ISO 2007)

The ISOs standards are voluntary. However, as Roht-Arriaza observes,

the process is neither fully private nor fully voluntary:
The standards may aect the public regulatory process in a number of ways:
global and regional trade agreements may explicitly recognize them; government
regulations may refer to them for denition of terms; and government procurement rules may adopt them. Further, market pressure from consumers,
nanciers, insurers, and competitors may convert them to prerequisites for companies wanting to do business in large markets. (Roht-Arriaza 1995, p. 487)

The ISO engages in what has been termed a form of private lawmaking.
It broadened its reach considerably with its 9000 quality control standards
in 1987 and is blurring the line between the private and public spheres with
its 14000 environmental standards now under consideration. Increasingly,
the ISO sets industry standards in conjunction with or in addition to those
set by domestic regulators (Spiro 1996, p. 967).
Cashore (2002) describes the Forest Stewardship Council which involves
both industry and civil society groups and uses eco-labeling to identify
forest companies and landowners who practice sustainable forestry. He
describes the program as a non-state market-driven entity, as an example
of transnational private governance systems that derive their policy
making authority not from the state, but from the manipulation of global
markets and attention to consumer preferences (ibid., p. 504).
The idea of governance does not imply that government is irrelevant:
while state power has certainly eroded as markets have become global, it has
not disappeared. There are still a large number of economic transactions

Globalization, TNCs and the future of global governance 265

that can be governed by states on the basis of territorial sovereignty.
However, while states remain essential players, to a considerable and
growing extent, rule making, as well as rule elaboration and application . . .
are taking place in global settings that, even if established by states . . .
conduct their activities . . . with some de facto decision making independence from their creators (Cohen and Sabel 2006, p. 165).
An eective system of governance of global markets must transcend
both mutually exclusive territoriality and sovereign authority. It must exert
non-territorial control and involve multiple actors to reect the fragmentation of political authority. What appears to be evolving is some combination of inclusive and authoritative international organizations and
private, soft law-based, governance regimes.
Bulls second concern was a society in which to embed markets and economic actors; some system of norms, rules and institutions. I argued above
that under the Westphalian system, international markets comprising discrete cross-border transactions were, to a large extent, embedded in the
international state system as a political community with international institutions seen essentially as instruments that states use to achieve common
purposes (Keohane and Nye 2003, p. 387). If government by states and the
states system is replaced (at least in part) by a system of transnational governance, what will constitute the political community or society to confer
authority and legitimacy on governance institutions?
A critical assumption of the Westphalian system is that of the state as a
container, of a congruity between the politics, economics and social relations. Territorial borders delimit political space and provide the basis on
which individuals are included and excluded from participation in decisions
aecting their lives (Held 2006, p. 292). That is no longer the case in an
interconnected world where it is increasingly likely that individuals will be
aected by decisions made by other states in the system, by private political authorities and by autonomous international organizations. There is
less and less congruence between the groups of participants in a collective
political decision and the total of all of those aected by the decision
(Habermas 2001, p. 70). It is dicult to stretch the traditional idea of a
political community, either within the bounds of a state or as a society of
states, to encompass this complex transnational world order.
I have noted elsewhere that our modes of thought are trapped in the
modern state system . . . we can only express our concepts of political and
economic authority in terms of borders and territorial jurisdiction (Kobrin
2004, p. 129). The very concept of territorial jurisdiction is entwined with
conceptions of space, distance and identity (Berman 2002). It is dicult to
conceive of a society that is not both territorially delimited and based on
sovereign authority.

266

Handbook of research on global corporate citizenship

Reconceptualizing the concept of a society in transnational terms

requires relational rather than geographic concepts, spaces of ows rather
than spaces of spaces (Castells 2000). The transnational space is lled with
multiple and overlapping networks of supply chains, multinational rms,
transgovernmental relations, international organizations, civil society organizations and private regimes and governance systems. It is reasonable to
argue that each of these constitutes a political community or society in
Bulls terms common norms, rules and institutions.
Given the interwoven and networked nature of the transnational political space, it is possible that over time a larger political community will
emerge that is congruent with the global economy, a society comprising
generally accepted norms and rules:
The evolution of intersubjective consensuses based on shared fates and common
histories, the possession of information and knowledge, the pressure of active or
mobilizing publics, and/or the use of careful planning, good timing, clever
manipulation, and hard bargaining, can either separately or in combination
foster control mechanisms that sustain governance without government.
(Rosenau 1997, p. 147)

We are immersed in the post-Westphalian transition and can only dimly

perceive the emerging outlines of a transnational world order. It is clear,
however, that the emergence of eective global economic governance will
be a dicult and drawn-out process. We are likely to be left with partial
globalization, and all of the problems that entails for governance of the
economy and economic actors for some time to come.
Implications for the rm
Rosenau (1990, pp. 249, 252) posits the coexistence of state- and multicentric worlds where both sovereignty-bound and sovereignty-free actors have
come to dene themselves as the subject of world politics, while viewing the
other as objects. That contradiction is critical: in a transnational system,
multinational rms are both governed and governor, both objects and subjects of international politics.
Cutler (2001, p. 137) terms this the problem of the subject. She notes that
the implications of treating corporations, like individuals, as objects and not
as subjects are deeply troubling empirically and normatively. When one
reviews the activities of business corporations it becomes clear that while they
may be objects at law (de jure), they are, in fact, operating as subjects (de facto)
(ibid., p. 3). Multinational rms are now part of the governance process, entities with duties as well as rights: private political authority is a reality.
The idea of private political authority calls into question the liberal distinction between the public and private spheres. Under the Westphalian

Globalization, TNCs and the future of global governance 267

system the state was seen as the locus of political and legal authority and
the self-regulating market as an apolitical arena for private economic relations (Cutler 2001). That is no longer a reasonable picture of reality as
multinational rms as well as NGOs and international organizations
are becoming part of a hybrid transnational system of governance.
While the very extensive literature on corporate social responsibility
acknowledges that corporations have responsibilities to stakeholders over
and above their owners (shareholders), few suggest that the corporation has
a responsibility to undertake activities that have no relation to protability
(Vogel 2005). At this point, however, an MNCs public responsibilities
could well include the provision of healthcare (for example, dealing with
AIDS in Africa), promoting rather than merely observing human rights,
maintaining order in failed states and more generally, acting as a provider
of public goods. These duties tend to be imposed on the rm as a result of
its capabilities and its role as a political actor, and there is no obvious
reason why they should bear a relationship to protability. That raises very
basic questions about the social denition of a corporation, and the
responsibilities of its managers, which are as yet unresolved.
More tangibly, the transnational transformation and its impact on the
role and very denition of the MNC raise profound strategic issues for the
rm. While non-market or political strategies have been part of the international business literature for some time (Boddewyn and Brewer 1994),
transnational politics the implications of the rm as subject will have to
be incorporated directly into the core strategy of the multinational rm.
Since the early pioneering work of Fayerweather (1982), the fundamental strategic problem of the MNCs has been expressed in terms of the
tension between exploiting the considerable advantages of the rms global
footprint and the need to respond to unique political, social and cultural
dierences in individual markets. Fayerweather expressed this as a tension
between pressures for unication and fragmentation of strategy.
Bartlett and Ghoshal (1989) greatly developed and expanded the
concept. They argued that to fully exploit its strategic potential the rm
must simultaneously respond to pressures for adaptation through national
responsiveness and eciency through global integration. Firms which can
gain meaningful eciency benets through integration (for example, scale,
scope or learning) and who face minimal pressures to respond to market
dierences are classied as globally integrated. Those to whom returns to
eciency are limited and the pressures to respond to market dierences are
strong are nationally responsive. Firms in industries such as pharmaceuticals who simultaneously face strong pressures both to integrate across
borders (due to enormous R&D costs) and to respond to national
dierences (in drug regulation and purchasing) are transnational.

268

Handbook of research on global corporate citizenship

Formulating the core strategic problem of the multinational rm in

terms of simultaneous pressures to obtain eciencies through integration
and to adapt through responsiveness is consistent with the Westphalian
international order. It reects a world of borders and territoriality where
the dening aspect of the MNC involved expansion of the operating
horizon of the enterprise beyond the borders of the home nation (Tallman
and Yip 2003, p. 320). In essence, the framework forces managers to think
about when cross-border dierences can, and should be, ignored, and when
they must be dealt with directly.
In a transnational strategic context, borders and territoriality are of
diminished import, the line between the public and private spheres has
blurred and private political authority is a reality. Increasingly, multinational rms are both objects and subjects, governed and governors, they
have duties as well as rights and are increasingly likely to be part of a hybrid,
transnational governance regime. This newly emerging non-territorial
context requires that pressures for global governance be added to the
responsivenessintegration framework. Many multinational rms must
now respond strategically to both territorial and non-territorial imperatives.
This new third dimension reects the degree to which rms are likely to
have public responsibilities imposed on them (for example, the provision
of public goods), exercise private political authority or be incorporated in
transnational governance regimes. Some rms (or industries) are likely to
be unaected by governance pressures: they remain private market-based
economic actors who are objects rather than subjects. Others exercise political power, have explicit duties as well as rights and are part of the governance structure. They are hybrid entities with a presence in both the private
and public spheres.
I can do no more than speculate on the strategic implications of this
added privatehybrid dimension here. One obvious problem is that it does
not t cleanly into the earlier geographically-rooted formulation of an
MNCs strategic calculus. It is a third dimension that is hard to insert into
a two-dimensional territorial space. There is no question, however, that it
must be dealt with.
The extent to which a multinational rm is subject to pressures to
respond nationally or integrate globally is a function of industry characteristics. Pressures to function as a hybrid (as opposed to a purely private
rm) should also reect industry characteristics such as political salience
(oil or minerals), the degree of oligopoly, whether or not the product is
essential (for example, pharmaceuticals), visibility (upstream versus downstream operations) and the impact on the environment or human rights.
However, other factors may well come into play here such as region of
origin. For example, rms based in democratic societies may be more

Globalization, TNCs and the future of global governance 269

subject to public pressure, and thus more susceptible to accepting public
responsibilities, than those based in autocratic regimes.
There is no reason to suspect that transnational governance is correlated
with either national responsiveness or global integration. Clothing or food
rms, where responding to national dierences is critical, may well nd
themselves part of a hybrid regime with NGOs and international organizations which attempts to agree on a schedule of worker rights and perhaps
even monitor and sanction violations. Pharmaceutical companies, which
are the epitome of a transnational rm, are clearly actors exercising private
political authority and an industry which has been successfully pressured
to supply public goods.
The addition of a governance dimension will signicantly complicate the
strategic problems faced by multinational rms. First, and most obviously,
it requires that the rm deal with three dimensions rather than two simultaneously. More importantly, the new governance dimension is dierent in
kind from the other two. As noted above, there is no reason to assume that
governance activities will bear a direct, and perhaps even an indirect, relationship to returns and protability: they result from the dramatically
changed role of the multinational rm in a transnational order. While
managers will have to develop strategies that deal simultaneously with integration, responsiveness and governance, to a very real extent, that will
entail juggling apples and oranges. The governance dimension may be
dicult to evaluate using the metrics common to the other two.
Furthermore, if rms are functioning as subjects rather than objects, if
they are political actors involved in the determination of political outcomes, then questions of authority, legitimacy and democracy need to be
dealt with. Managers of MNEs are certainly not elected nor are they
subject to democratic control (Scherer et al. 2006). That raises extremely
complex questions of accountability which are not normally relevant in the
process of determining strategy (see Keohane and Nye 2003; KoenigArchibugi 2004; Held 2006; Scherer et al. 2006 for a more complete discussion of these issues).
Note
1. See Kobrin (1998) for a discussion of neomedievalism.

References
Abbott, Kenneth W. and Duncan Snidal (2000), Hard and soft law in international governance, International Organization, 54 (3), 42156.
Abdelal, Rawi and Christopher M. Brunder (2005), Private Capital and Public Policy:
Standard & Poors Sovereign Credit Ratings, Boston, MA: Harvard Business School Case.
Akdeniz, Yaman (2001), Case analysis of League Against Racism and Antisemitism
(LICRA), French Union of Jewish Students, v Yahoo Inc. (USA), Yahoo France, Tribunal

270

Handbook of research on global corporate citizenship

de Grande Instance de Paris (Country Court of Paris), Interim Court Order, 20, November
2000, in Electronic Business Law Reports, 1 (3), 11020.
Anderson, James (1996), The shifting stage of politics: new medieval and postmodern territorialities, Environment and Planning D: Society and Space, 14, 13353.
Baldwin, Richard (2006), Globalization: The Great Unbundling, Helsinki: Economic Council
of Finland.
Bartlett, Christopher A. and Sumantra Ghoshal (1989), Managing Across Borders: The
Transnational Solution, Boston, MA: Harvard Business School Press.
Benoit, Bertrand (2007), SPD chief stands by call to tackle locusts , Financial Times,
London, 14 February, p. 8.
Berman, Paul Schi (2002), The Globalization of Jurisdiction: Cyberspace, Nation States, and
Community Denition, 166, Hartford, CT: University of Connecticut School of Law.
Blair, Tony (2007), Speech to the World Economic Forum Annual Meeting, 27 January,
Davos, Switzerland.
Boddewyn, Jean and Thomas Brewer (1994), International business and political behavior:
new theoretical directions, Academy of Management Review, 20 (2), 397413.
Brody, William R. (2004), Nighthawks: global outsourcing comes to radiology, in
Crossroads, http://www.hopkinsmedicine.org/about/Crossroads/09_09_04.html, accessed 3
November 2007.
Bull, Hedley (1977), The Anarchical Society: A Study of Order in World Politics, New York:
Columbia University Press.
Cashore, Benjamin (2002), Legitimacy and the privatization of environmental governance:
how non-state market-driven (NMSD) governance systems gain rule-making authority,
Governance, 15 (4), 50329.
Castells, Manuel (2000), The Rise of the Network Society, Oxford, UK and Malden, MA:
Blackwell.
Cohen, Joshua and Charles Sabel (2006), Extra Rempublicam Nulla Justitia?, Philosophy
and Public Aairs, 34 (2), 14875.
Cutler, A. Claire (2001), Critical reections on the Westphalian assumptions of international
law and organization: a crisis of legitimacy, Review of International Studies, 27, 13350.
Cutler, A. Claire (2002), Private international regimes and interrm cooperation, in Rodney
Bruce Hall and Thomas J. Biersteker (eds), The Emergence of Private Authority in Global
Governance, Cambridge: Cambridge University Press, pp. 2340.
Cutler, A. Claire (2005), Critical globalization studies and international law under conditions
of post modernity and late capitalism, in P. Appelbaum and William I. Robinson (eds),
Critical Globalization Studies, New York and London: Routledge, pp. 197205.
Cutler, A. Claire, Virginia Hauer and Tony Porter (1999), Private authority and international aairs, in Cutler, Hauer and Porter, Private Authority and International Aairs,
Albany, NY: State University of New York Press, pp. 328.
Dupuy, Pierre-Marie (1990), Soft law and the international law of the environment,
Michigan Journal of International Law, 12, 42035.
Economics Focus (2007), The great unbundling, The Economist, 18 January, p. 86.
Fayerweather, John (1982), International Business Strategy and Administration, Cambridge,
MA: Ballinger.
Gere, Gary (2005), The new oshoring of jobs and global development, paper presented
at ILO 7th Nobel Peace Prize, Social Policy Lectures, Kingston, Jamaica, 57 December.
Grossman, Gene and Esteban Rossi-Hansberg (2006), The Rise of Oshoring: Its Not Wine
for Cloth Anymore, Princeton, NJ: Princeton University Press.
Habermas, Jrgen (2001), The Postnational Coalition: Political Essays, Cambridge: MIT
Press.
Hall, Peter and David Soskice (2001), Varieties of Capitalism, Oxford: Oxford University Press.
Hall, Rodney Bruce and Thomas J. Biersteker (2002), The emergence of private authority in
the international system, in Hall and Biersteker (eds), The Emergence of Private Authority
in Global Governance, Cambridge: Cambridge University Press, pp. 322.
Hauer, Virginia (2001), A Public Role for the Private Sector: Industry Self-Regulation in a
Global Economy, Washington, DC: Carnegie Endowment for International Peace.

Globalization, TNCs and the future of global governance 271

Held, David (2006), Models of Democracy, Stanford, CA: Stanford University Press.
Hillgenberg, Hartmut (1999), A fresh look at soft law, European Journal of International Law,
10 (3), 499515.
ISO (2007), http://www.iso.org/iso/en/aboutiso/introduction/index.html, accessed 21 September
2007.
Keohane, Robert O. and Joseph S. Nye (2003), Redening accountability for global governance, in Miles Kahler and David Lake (eds), Governance in a Global Economy: Political
Authority in Transition, Princeton, NJ: Princeton University Press, pp. 386412.
Kobrin, Stephen J. (1998), Back to the future: neomedievalism and the postmodern digital
world economy, Journal of International Aairs, 51 (2), 36186.
Kobrin, Stephen J. (2000), Development after industrialization: poor countries in an electronically integrated global economy, in Neil Hood and Stephen Young (eds), The
Globalization of Multinational Enterprise Activity and Economic Development, New York:
St. Martins Press, pp. 13354.
Kobrin, Stephen J. (2001), Sovereignty@Bay: globalization, multinational enterprise
and the international political system, in Thomas Brewer and Allan Rugman
(eds), Oxford Handbook of International Business, Oxford: Oxford University Press,
pp. 181205.
Kobrin, Stephen J. (2002), Economic governance in an electronically neworked global
economy, in Rodney Bruce Hall and Thomas J. Biersteker (eds), The Emergence of
Private Authority in Global Governance, Cambridge: Cambridge University Press,
pp. 4375.
Kobrin, Stephen J. (2004), Safe harbors are hard to nd: the trans-Atlantic data privacy
dispute, territorial jurisdiction and global governance, Review of International Studies, 30,
11131.
Koenig-Archibugi, Mathias (2004), Transnational corporations and public accountability,
Government and Opposition, 39 (2), 23459.
Krasner, Stephen (1982), Structural causes and regime consequences: regimes as intervening
variables, International Organization, 36 (2), 185205.
Lamont, James (2002), UN seeks help from companies in war on HIV/AIDS, Financial
Times, 1, 30 August, London, p. 1.
Lamy, Pascal (2006), Globalization and global governance, in The Globalist, http://www.
theglobalist.com/DBWeb/getArticle.aspx?StoryId=5740, accessed 3 November 2007.
Lilienthal, David (1960), The multinational corporation, in Ashen Melvin and G.L. Bach
(eds), Management and Corporations, 1985, New York: McGraw-Hill, pp. 11959.
Marshall, Alfred (1890), Principles of Economics, New York: Macmillan.
McGrew, Anthony (1997), Globalization and territorial democracy: an introduction, in
McGrew (ed.), The Transformation of Democracy, London: Polity, pp. 124.
Nye, Joseph S., Jr and Robert O. Keohane (1971), Transnational relations and world politics:
an introduction, in Keohane and Nye (eds), Transnational Relations and World Politics,
Cambridge, MA: Harvard University Press, pp. ixxxix.
Palmisano, Samuel (2006), The globally integrated enterprise, Foreign Aairs, 85 (3),
12736.
Pimlott, Daniel (2007), WTO rules against US in internet gambling case, Financial Times,
London, 27 January, p. 7.
Polanyi, Karl (1944 [1977]), The Great Transformation, Boston, MA: Beacon Press.
Reynolds, Glenn Harlan (2006), Does power grow out of the barrel of a modem: some
thoughts on Jack Goldsmith and Tim Wus Who Controls the Internet?, Stanford Law and
Policy Review, 20, 1017.
Richtel, Matt and Heather Timmons (2006), The gambling is virtual; the money is real,
New York Times, New York, 25 July, p. 1, section C.
Roht-Arriaza, Naomi (1995), Shifting the point of regulation: the international organization
for standardization and global lawmaking on trade and the environment, Ecology Law
Quarterly, 22, 479539.
Rosenau, James N. (1990), Turbulence in World Politics, Princeton, NJ: Princeton University
Press.

272

Handbook of research on global corporate citizenship

Rosenau, James N. (1992), Governance, order and change in world politics, in Rosenau and
Ernst-Otto Czempiel (eds), Governance without Government: Order and Change in World
Politics, Cambridge: Cambridge University Press, pp. 129.
Rosenau, James N. (1997), Along the DomesticForeign Frontier: Exploring Governance in a
Turbulent World, Cambridge and New York: Cambridge University Press.
Ruggie, John Gerard (1993), Territoriality and beyond: problematizing modernity in international relations, International Organization, 47 (1), 13974.
Ruggie, John Gerard (2004), Reconstituting the global public domain: issues, actors and practices, European Journal of International Relations, 10 (4), 499531.
Santoro, Michael A. (1995), Pzer: Global Protection of Intellectual Property, Boston, MA:
Harvard Business School Case.
Scherer, Andreas Georg, Guido Palazzo and Dorothee Baumann (2006), Global rules and
new private actors: toward a new role of the transnational corporation in global governance, Business Ethics Quarterly, 16 (4), 50532.
Scholte, Jan Aart (1997), Global capitalism and the state, International Aairs, 73 (3), 42752.
Sell, Susan K. (2003), Private Power, Public Law: The Globalization of Intellectual Property
Rights, Cambridge: Cambridge University Press.
Slaughter, Anne-Marie (2004), A New World Order, Princeton, NJ: Princeton University Press.
Spiro, Peter J. (1996), New global potentates: nongovernmental organizations and the
unregulated market place, Cardzo Law Review, 18, 95769.
Spruyt, Hendrik (1994), The Sovereign State and Its Competitors, Princeton, NJ: Princeton
University Press.
Tallman, Stephen B. and George S. Yip (2003), Strategy and the multinational enterprise, in
Alan M. Rugman and Thomas Brewer (eds), The Oxford Handbook of International
Business, Oxford: Oxford University Press, pp. 31748.
Vogel, David (2005), The Market for Virtue, Washington, DC: Brookings Insitute Press.
Vogel, David (2006), The Private Regulation of Global Corporate Conduct, Berkeley, CA:
Department of Political Science, University of California.
World Commission on the Social Dimension of Globalization (2004), A Fair Globalization:
Creating Opportunities for All, Geneva: International Labour Oce.

13 Between confrontation and cooperation:

corporate citizenship and NGOs
Jonathan P. Doh

Introduction
This book is concerned with the process and impact of corporate citizenship. It seeks to identify and analyze antecedents, actions and outcomes of
corporate citizenship behaviors. One important set of institutional actors
that have had a substantial inuence on corporate citizenship are civil
society and non-governmental organizations (CSOs or NGOs).1 According
to Matten and Crane (2005, p. 171), probably the most important transition raising the prospect of corporate involvement in citizenship rights is
the failure of nation-states to be the sole guarantor of these (citizenship)
rights any longer. This same reality has resulted in increasing involvement
of NGOs in helping to redene the citizenship obligations of companies,
and the mechanisms through which rms respond to those obligations.
In this chapter, two primary mechanisms by which NGOs inuence corporate citizenship are explored. The rst might be termed NGO activism
or advocacy. NGOs have been among the most vocal and inuential
critics of the inuence of corporations on society. These criticisms have
ranged from broad indictments of the negative inuence of globalization
and multinational corporations (MNEs) on the social and environmental
fabric of societies, to specic assertions regarding workplace practices of
companies doing business in the developing world. NGOs have thus advocated for changes in corporate behavior and of laws regulating corporations by protesting, boycotting, targeting and otherwise communicating
their displeasure. These actions have had real and tangible eects.
More recently, some NGOs have taken a dierent tack. Rather than
target companies through various types of advocacy campaigns, these
NGOs have developed cooperative relationships with companies through
which they collaborate on solutions to some of the negative consequences
of corporate behavior and more broadly, assist companies in developing
corporate citizenship initiatives.
In this chapter, I discuss the emerging role of NGOs as important institutional actors in global businesssociety relationships and corporate citizenship. I begin with some basic denitions and classications to position
NGOs among the other institutional actors in business citizenship. I then
273

274

Handbook of research on global corporate citizenship

turn to the historical background and growing inuences of NGOs on

global governance before exploring corporateNGO relationships. Here, I
focus on both the confrontational and collaborative relationships but
emphasize the latter because it is these more cooperative interactions that
appear to have the potential to substantially inuence corporate citizenship
behaviors. I conclude with some questions and future research directions.
Non-governmental organizations: denitions and classications
NGOs constitute an important and inuential set of actors within the
broad context of business and society and corporate citizenship. NGOs
have emerged as critical players in shaping governmental policy and practice, inuencing legal and governance structures globally, and, ideally,
directly shaping corporate and business activities. Although NGOs or their
equivalents have been part of human societies for centuries, in recent
decades they have grown in number, power and inuence. They have been
inuential in a range of major public policy debates and NGO activism has
been responsible for major changes in public policy, law and regulation,
and in reform of corporate behavior and governance (Doh and Teegen
2003; van Tuijl 1999).
Estimates of the number of NGOs vary widely, although almost all analysts agree that the number is increasing dramatically. In 1993, the United
Nations Development Program identied 50 000 NGOs worldwide (Kellow
1999). In 2002, the total size of the independent sector (non-rm, nongovernment) in the United States was estimated at 1.4 million organizations,
with revenues of nearly $680 billion and an estimated 11.7 million employees (Independent Sector 2004). Despite dierences in estimates, most
observers agree that NGOs are important organizations within society. Hart
and Milstein (2003, p. 58) note, as the power of national governments
has eroded in the wake of global trade regimes, non-governmental
organizations (NGOs) and other civil society groups have stepped into the
breach.
Civil society, also referred to as the third sector or the nonprot sector,
is used to broadly describe all aspects of society that extend beyond the
realm of the public sector and the traditional private sector. Although the
term NGO is relatively recent, associations among like-minded individuals
have been part of ancient and modern history. When Alexis de Tocqueville
(180559) rst visited the United States, he was impressed that Americans
were forever forming associations (de Tocqueville 1835, p. 513).
When individuals or groups within civil society work together to advance
a broad common set of interests and these interests become a signicant
force in shaping the direction of society, social movements emerge as the
outcomes of this process. Social movements are broad societal initiatives

Between confrontation and cooperation

275

organized around a particular issue, trend or priority. Modern examples

include the environmental movement and the feminist movement. When
civil society groups band together to form organized relationships, the
emergent entities are often referred to as NGOs.
NGO is a broad term that somewhat loosely refers to all organizations
that are not ocial parts of government (at any level), nor private, for-prot
enterprises. Within the NGO category, however, are many dierent types,
characteristics and purposes. We can rst separate club and social
purpose NGOs (Teegen et al. 2004). Those that arise from social movements are social purpose NGOs. These are accountable primarily to the
clients they serve, such as environmental, human rights, poverty relief and
health NGOs. Club NGOs are membership associations designed primarily to provide a benet to their members, generally because of pooling
interests. Examples of club NGOs are unions, business associations, sports
clubs and other voluntary associations. In most of the contemporary literature on NGOs, the focus is on those who operate within the social purpose
realm.
The United Nations describes an NGO as:
Any non-prot, voluntary citizens group which is organized on a local, national,
or international level. Task-oriented and driven by people with a common interest, NGOs perform a variety of services and humanitarian functions, bring citizens concerns to governments, monitor policies and encourage political
participation at the community level. They provide analysis and expertise, serve
as early warning mechanisms, and help monitor and implement international
agreements. (UN 2003, Paragraph 1)

A more succinct denition is oered by Teegen et al. (2004, p. 466). They

describe social purpose NGOs as private, not-for-prot organizations that
aim to serve particular societal interests by focusing advocacy and/or operational eorts on social, political and economic goals, including equity,
education, health, environmental protection and human rights. Broadly
speaking, NGOs contribute to codes of conduct, provide training, oer
resource access and knowledge concerning the delivery of goods and services, share best practices and create and support institutional settings that
promote social welfare.
Teegen et al. further dierentiate among various functions of NGOs.
Advocacy NGOs work on behalf of others who lack the voice or access to
promote their interests. They engage in lobbying, serve as representatives
and advisory experts to decision makers, conduct research, hold conferences, stage citizen tribunals, monitor and expose actions (and inactions)
of others, disseminate information to key constituencies, set and dene
agendas, develop and promote codes of conduct, and organize boycotts or

276

Handbook of research on global corporate citizenship

investor actions. In these ways, NGOs give voice and provide access to institutions to promote social gain or mitigate negative spillovers from other
economic activity.
Operational (or programmatic or service-oriented) NGOs provide
goods and services to clients with unmet needs. NGOs have long stepped in
to serve as critical safety nets, where politically challenged, indebted or
corrupt states are unable or unwilling to provide for unmet needs, and
where global problems defy neat nation-state responsibilities. Examples of
such operational activities include relief eorts provided by the Red Cross
or Red Crescent, environmental monitoring and programming by the
World Wide Fund for Nature (WWF), and the distribution of medicinal
drugs by Doctors without Borders.
Although some NGOs focus primarily on advocacy or operational
service delivery, many pursue both sets of activities simultaneously, or
evolve from one to the other. For example, Oxfam, the global development
and poverty relief organization, advocates for changes in public policy that
would provide greater support to its eorts while also contributing directly
to health, education and food security in the developing countries in which
it operates. Similarly, Doctors without Borders and WWF are active on the
ground, delivering services in their respective domains, but also simultaneously lobby in the political and regulatory arenas.
A brief example illustrates the relationship among civil society, social
movements and the emergence (and convergence) of dierent types of
NGOs. Environmental conservation has long been of concern to civil
society in North America. A strong and ongoing conservation movement
gave rise to two service-oriented environmental organizations, the Nature
Conservancy, founded in 1951, and the World Wildlife Fund, founded in
1961. This longstanding movement, in conjunction with a growing social
movement and related activism over civil rights and the Vietnam War in the
early and mid-1960s, gave rise to the environmental movement of the 1960s.
This movement gained momentum after the publication of Rachel
Carsons Silent Spring (1962) which exposed the hazards of the pesticide
DDT, eloquently questioned humanitys faith in technological progress
and helped set the stage for the environmental movement. This movement, in turn, paved the way for the creation of a number of environmental advocacy organizations, such as the Environmental Defense Fund
(founded in 1967) and the National Resource Defense Council (founded
in 1970). Over time, many environmental advocacy organizations developed more of a service focus, and many service NGOs began to take positions on environmental policy issues, creating some convergence in these
organizations and their missions. Figure 13.1 presents a stylized depiction
of this evolution.

Between confrontation and cooperation

277

Civil Society

Social
Movement
(1960s Civil Rights/
Advocacy)

Social
Movement
(Environmental
Movement)

Advocacy NGOs
(Environmental
Defense Fund,
National Resources
Defense Council)

Social
Movement
(Conservation
Movement)

Operation NGOs
(World Wildlife
Fund,
The Nature
Conservancy)

Figure 13.1 Relationship among civil society, social movements and

NGOs: the example of the environmental movement
The growing inuence of NGOs on global governance
There is increasing interest in and awareness of the role of NGOs in
global governance. According to Lindenberg (1999), scal crises, ideological shifts and privatization have all led to a decline in the scope and capacity of the state. In response, a growing global not-for-prot sector has
emerged that, in part, has begun to ll the humanitarian vacuum left by the
corporate sector and the nation-state. The number of NGOs in the world
has swelled in recent decades (Spar and La Mure 2003). As noted above, a
number of global events have led to this increase. One impetus in the recent
resurgence in civil society is the political failures of centrally planned
economies such as the former Soviet Union and Central and Eastern
Europe. NGOs have also emerged as a result of political and social pressures, as represented in the Reagan and Thatcher governments, which have
resulted in the decline of the state in certain domains (Lindenberg 1999).
Globalization is another important force in NGO history. Some NGOs
have focused on the negative externalities of globalization and targeted
MNCs in their campaigns. According to Argenti (2004, p. 93), NGO
analyst Simon Heap argues that as the balance of power shifted from

278

Handbook of research on global corporate citizenship

governments to multinational corporations, NGOs had no choice but to

change their approach to social problems. Paradoxically, globalization has
also provided NGOs with tools and means to advance their agenda, such
as the creation of virtual networks and electronic fora to recruit members,
mobilize actions and publicize information.
The modern era of NGO activism can be traced to the 1960s and 1970s
when a number of civil rights, environmental and womens groups emerged
to advocate for changes in public policy and corporate practices in a range
of areas. In the late 1970s, a number of NGOs initiated a boycott of Nestl
over its marketing and distribution of an infant formula (see Sethi 1994;
Newton 1999). In particular, Nestl S.A. was accused by a number of
activist investors, such as the Interfaith Center for Corporate Responsibility
(ICCR) and NGOs such as the Infant Formula Action Coalition (INFACT)
of adopting deceptive hard-sell promotional practices to scare mothers
in the developing world into using formula over breast milk (Newton 1999).
Another important milestone in the modern era of NGO activism can be
traced to 1984, when a range of NGOs, including church and community
groups, human rights organizations and other anti-apartheid activists, built
strong networks and pressed US cities and states to divest their public
pension funds of companies doing business in South Africa. The Act banned
new US investment in South Africa, export sales to the police and military,
and new bank loans, except to support trade. The combination of domestic
unrest, international governmental pressures and capital ight posed a
direct, sustained and ultimately successful challenge to the white minority
rule, resulting in the collapse of apartheid (Doh and Guay 2004).
According to OBrien et al. (2000), the contest to shape global governance is increasingly being conducted on a number of levels and among a
diverse set of actors. One facet of this broadening is the increasing engagement between international institutions and sectors of civil society that are
producing new forms of international organization. OBrien et al. examine
the relationship between the multilateral economic institutions (MEIs) and
global social movements (GSMs), arguing that the interactions between
MEIs and GSMs constitute a new form of complex multilateralism. They
examine the International Monetary Fund (IMF), the World Bank and the
World Trade Organization, and their interactions with the environmental,
labor and womens movements. They show how civil society organizations
(NGOs) are becoming increasingly intertwined in the governance mechanisms and policy initiatives of these organizations.
More specically, NGOs have pushed to have greater access to trade
policy and international governmental agreements and processes, systems
that have historically been limited to governments acting as agents of their
domestic constituencies. NGOs have expressed a great deal of interest in

Between confrontation and cooperation

279

the trade policy dispute settlement mechanism under the General

Agreement on Taris and Trade (GATT) and its successor agreement, the
World Trade Organization (WTO) and regional agreements such as the
European Union (EU) and the North American Free Trade Agreement
(NAFTA). Indeed, substantial reforms to the WTO, the World Bank and
the IMF in the areas of transparency and access are due, in part, to NGO
pressure. Among the key events that led to this change are the political
debate in the United States over NAFTA which included active NGO participation, protests (sometimes violent) in key capitals around the world at
meetings of the WTO, IMF/World Bank, G-7/8, World Economic Forum
and others, as well as the changing nature of issues under consideration at
these institutions that naturally involve actors that were traditional constituencies of these organizations.
One case was especially critical in helping to catalyze NGO involvement
in trade matters, the so-called tunadolphin case. This case was somewhat
of a landmark in launching NGO activism in the tradeenvironmental
arena and also became a cause clbre in the NAFTA negotiations. Under
the Marine Mammal Protection Act (MMPA), the United States banned
the importation of tuna from certain countries that were caught in a
manner that also caused harm to dolphins. The United States faced a
GATT challenge from Mexico and Venezuela, two of the countries from
which tuna had been banned over these restrictions. The Panel ruled
against the United States in both cases, in 1991 and 1992, and the reaction
from environmental NGOs constituted a rallying cry to eorts by activists
to gain access to multilateral trade dispute settlement processes and to
incorporate environmental commitments in government-negotiated trade
agreements. While the panel decision was never adopted by the GATT
members (before the reform of the Dispute Resolution system in the
Uruguay Round of multilateral negotiations, adoption of the ndings of a
panel could be blocked by a single member, including the country found to
be in violation), eventually, the matter was resolved through bilateral negotiations that led to the creation of an international dolphin conservation
program. More broadly, NGOs were emboldened by this experience and
have become a permanent xture in global and regional trade discussions
(see Doh and Kotschwar 2004).
NGOs have also been very active in collective eorts to develop, implement and enforce industry-wide standards, codes of conduct and agreements. Examples of intergovernmental agreements that were shaped and
inuenced by NGOs include the environmental and labor agreements
negotiated as part of the NAFTA, the UN Global Compact on business
responsibility, the International Labour Organization Declaration of
Principles concerning Multinational Enterprises and Social Policy and the

280

Handbook of research on global corporate citizenship

Organization for Economic Cooperation Guidelines for MNEs. Examples

of international codes sponsored directly by not-for-prot NGOs include
the Social Accountability International SA8000 standard, Rugmark, a
standard that certies rugs and carpets as meeting basic standards for
labour and human rights and the Forest Stewardship Council (FSC) standard that certies lumber as consistent with sustainable practices. There are
many, many other global codes, agreements and standards that have been
developed, in part or whole, by NGOs acting alone or in conjunction with
governments and companies. An interesting example is the Extractive
Industries Transparency Initiative (EITI).
During the late 1980s and 1990s, NGOs such as Catholic Relief Services,
Oxfam International, Global Witness and others became increasingly
concened about the human rights, labor and workforce conditions, and
environmental consequences of extractive industries such as oil and gas,
mining and forestry. As a result of aggressive actions by these NGOs
and many developed country governments, the EITI was announced by
UK Prime Minister Tony Blair at the World Summit on Sustainable
Development in Johannesburg in September 2002. Its goal is to increase
transparency over payments by companies to governments and to government-linked entities, as well as transparency over revenues by those host
country governments. The objective is to increase accountability and transparency in these revenues and to increase the likelihood that greater shares
of these revenues will be used for positive economic and social development
in these countries. EITI has issued a set of reporting guidelines, a Statement
of Principles, available on its ocial website and six criteria which represent the global minimum standard for EITI implementation. EITI
received ocial endorsement from the World Bank Group, and in May 2005
an International Advisory Group (IAG) was established under the
Chairmanship of Peter Eigen, which includes governments, MNEs and
NGOs.
NGOs are also major actors in foreign aid. Over 15 per cent of total overseas development aid is channeled through NGOs. Indeed, a report published by the United Nations and the NGO SustainAbility notes that the
global nonprot sector, with its more than $1 trillion turnover, could rank
as the worlds eighth largest economy. Teegen et al. (2004) argue that the
emergence of civil society in general, and the activism of civic NGOs in
particular, have broad implications for the role, scope and denition of corporations in the global economy. Doh and Teegen (2003) point out that the
emergence of NGOs, in some cases, has supplanted the role of host governments in the historic businessgovernment bargaining relationship such
that NGOs yield signicant power over the MNEs right to operate in
developing countries.

Between confrontation and cooperation

281

Another vehicle used by NGOs to advance their agenda is shareholder

activism. Increasingly, these activities are global in scope. NGOs may buy
shares of corporations and use ownership to promote proxies and other
resolutions to eect change. They often use their status to urge institutional
shareholders, such as large public employee pension and retirement funds,
to pressure changes in corporate governance and conduct. They also work
with and through socially responsible investment funds, serving as advisors
and experts on ethical and social responsibility screens used to determine
the composition of such funds and by drawing attention to shortcomings
in the mechanisms used by such funds to choose and retain specic stocks
(Guay et al. 2004).
NGOs and business: confrontation and cooperation
NGOs and corporations are experiencing increasing interactions of both a
cooperative and confrontational nature. Concerns about the consequences
of globalization, economic integration and expansion of capitalist business
systems and practices provoke close scrutiny of the activities of corporations. These concerns have also stimulated the growth of an active NGO
sector dedicated to improving the social welfare of communities and societies, especially in areas such as human rights, poverty relief, health and
safety, and environmental protection. Some NGOs have explicitly targeted
corporations through various campaigns, seeking to pressure companies
and managers to assume greater responsibility for the perceived negative
spillovers of their action. Corporate citizenship and corporate responsibility have increased contacts between NGOs and corporations. The mechanisms by which rms achieve their citizenship goals are broad. However,
increasingly these strategies involve some kind of relationship with NGOs.
Den Hond and De Bakker (2007, p. 901) argue that as the responsibility for addressing a variety of social issues is being transferred from the
state to the private sector, activist groups increasingly challenge rms to
take up such issues, seeking to inuence the nature and level of corporate
social change activities. They propose that ideological dierences among
activist groups motivate them to choose dierent inuence tactics to
support their claims within contextual environments that vary in terms of
their institutional state. In this section, the focus is primarily on the more
cooperative and collaborative relationships.
Collaborations among corporations and NGOs are a growing subject of
management research (Hess et al. 2002; Doh and Teegen 2003; Rondinelli
and London 2003). Sometimes termed social partnerships, collaborative
social initiatives and social alliances, relationships between NGOs and
companies comprise an exchange of complementary resources not unlike
those that occur in other types of alliances among private sector rms

282

Handbook of research on global corporate citizenship

(Waddock 1988; Pearce and Doh 2005). For NGOs, partnerships with corporation may yield nancial, human resources and reputation benets. For
corporate partners, relationships with NGOs provide access to skills, competencies and capabilities that support their corporate social responsibility
eorts and are otherwise unavailable within their organization or from
alliances with for-prot rms. These combinative capabilities have the
potential to provide both partners with discernible benets (Kogut and
Zander 1992). One challenge in reviewing literature and contributions on
corporateNGO engagement, especially that involving collaborative or
cooperative relations, is that studies of CSSPs [cross-sectoral social partnerships, corporateNGO relationships] emerge from various disciplines
such as organization studies, public policy and administration, economics,
nonprot management, healthcare, education, and the natural environment (Selsky and Parker 2005, p. 850).
Within the business and society/social issues in management literature,
this type of collaboration has been dened as a temporary social arrangement in which two or more social actors work together toward a single
common end requiring the transmutation of materials, ideas, and/or social
relations to achieve that end (Roberts and Bradley 1991, p. 212, as quoted
in Parker and Selsky 2004, p. 460). Hess et al. (2002, p. 110) report that
many of these new corporate social initiatives are taking on aspects more
commonly associated with corporate strategy than community relations;
they are grounded in the core competencies of the rm and related to the
rms long-term strategy. As Selsky and Parker note in their review of
literature on CSSPs, the terminology for these relationships vary, and
include social partnerships (Waddock 1988, 1991), intersectoral partnerships (Waddell 2000), social alliances (Berger et al. 2004), issues management alliances (Austrom and Lad 1989), and strategic partnerships
(Ashman 2001).
BusinessNGO cooperation may also be viewed within the realm of
network theory, an extension of the resource-dependency perspective.
From this vantage, relationships among corporations and NGOs may comprise an exchange of complementary resources not unlike those that occur
in other types of alliances among private sector rms (Eisenhardt and
Schoonhoven 1996). Alliances involve resource complementarities among
rms (Harrison et al. 2001), some of which include social eects, including
legitimacy (Eisenhardt and Schoonhoven 1996; Das and Teng 1998) which
appears to be a principal goal of corporations in their cooperative behavior toward NGOs. Argenti (2004), for example, details Starbucks ongoing
relationship with Conservation International and other NGOs.
More broadly, perceived mutual dependencies have been shown to motivate potential partners to come together. Resource dependence theorists

Between confrontation and cooperation

283

have suggested that the development of interorganizational ties such as

strategic alliances result from underlying resource dependencies (Pfeer and
Nowak 1976). Several studies in the 1960s and 1970s showed that an important reason for ties between human service agencies was their perceived
strategic interdependence with each other (for a review, see Oliver 1990).
This research suggested that organizations enter partnerships when they
perceive critical strategic interdependence with other organizations in their
environment (Schermerhorn 1975; Whetten 1977). More recently, Gulati
(1995) tested how the social context emerging from prior alliances and considerations of strategic interdependence inuence partnership decisions
between rms. He found that this social network facilitates new alliances by
providing valuable information to rms about the specic capabilities and
reliability of potential partners. He also found that connected rms would
enter alliances more frequently if the rms were interdependent to begin
with and that there would thus be interactions between interdependence and
common ties and between interdependence and distance.
Trust is a fundamental principle in social network theory and perspectives
on social capital (Burt 2000). Research has shown the reciprocal eects of
trust in alliance relationships, demonstrating that trust leads partners to integrate the alliance into their own strategic framework (Johnson et al. 1996).
Another study of strategic alliances suggests that trust plays a stronger
role in improving alliance performance than do sales or protability (Luo
1998).
BusinessNGO relationships are dynamic and evolutionary. Austin
(2000) describes three stages in the Collaborative Continuum in the US:
philanthropic, transactional and integrative. The philanthropic stage is the
most traditional and common relationship, where business generally makes
a monetary donation to the nonprot sector. The transactional stage
includes specic activities and a two-way value exchange. The integrative
stage is still small (but growing), and sees the collaboration combining
values, missions and strategies. According to Austin, there is a signicant
shift among businesses in the US to the transactional stage, with some evidence that corporations and NGOs are increasingly pursuing integrative
relationships. Building on Austins typology, Lindenberg (2001) argues that
nonprotbusiness partnerships can be conceptualized along a continuum
that includes suspicion, interaction, philanthropy, transactional and integrative behavior (see Figure 13.2).
Parker and Selsky (2004, p. 458) examined the behavioral dynamics of
cause-based partnerships (CBPs). They argue that the dynamics of these
relationships can be best understood in terms of an emergent culture. They
present three scenarios integration, reculturation and separation to
illustrate how participants in CBPs continually negotiate a workable set of

284

Handbook of research on global corporate citizenship

Suspicion

Interaction

Philanthropy

Transactional

Integrative

Sources: Adapted from Austin (2000) and Lindenberg (2001).

Figure 13.2

Continuum of corporateNGO engagement

cultural practices among themselves. In their review of literature on corporate, not-for-prot and public sector relationships, Selsky and Parker
(2005) suggest that project-based CSSPs occur in four arenas: businessnonprot, businessgovernment, governmentnonprot and trisector. They argue that demands for corporate social responsibility encourage
businesses to partner, nonprots are motivated by demands for improved
eciency and accountability, and governments are encouraged to provide
more benets and services while being both less intrusive and more transparent (ibid., pp. 85051).
There is some evidence that direct and ongoing engagement with NGOs
is more likely in the more advanced stages in development of corporate citizenship policies and that companies in earlier stages are less equipped to
take on the challenges associated with close collaborations (Mirvis and
Googins 2006). Although there have been limited attempts to provide
generic classications of corporate approaches to these relationships (for
example, proactive versus reactive, see Rondinelli and London 2003),
there have been few systematic eorts to locate these relationships within
the broader relationships among stakeholders in business and society, with
some exceptions (Doh and Teegen 2003; Spar and La Mure 2003; Yaziji
2004).
It is important to note that engagement in a cross-sector alliance presents
challenges for both corporate and NGO participants. Corporations and
NGOs have fundamentally dierent structures and values (Rondinelli and
London 2003). Relations between corporations and NGOs have often been
characterized by hostility and mistrust. Cross-sector alliances face an additional challenge because organizational learning generally requires some
level of common experience, a condition that is often weak or missing in
alliances between prot-making and nonprot organizations (ibid.). This
lack of common experience, trust and communication can sometimes result
in conict, even when partnerships have been established that appear to
signal shared values and commitments. Indeed, partnerships with NGOs
may sometimes open a path to escalating (and potentially unrealistic)
demands for rms to upgrade their commitment to social development,
placing greater, not lesser, regulatory pressure on the rm.

Between confrontation and cooperation

285

In their review of the evolution of development of NGOs, Brown and

Kalegaonkar (2002) observe that material resource scarcity is one of the
chief challenges facing NGOs and that the collaboration with the business
community is one solution to the problem in an era of declining resources
for the state. Although many NGOs have challenged business practices that
exploit marginalized groups, NGOs have increasingly mobilized resources
from business to implement programs valued by both NGO and business.
Brown and Kalegaonkar give the example of commercial bank support for
NGO educational innovations in Brazil. They also observe that strategic
alliances that advance core goals of both parties, such as the initiatives of
Philippine Business for Social Progress, contributed to political stability for
the business community and sustainable development for grassroots groups.
Lindenberg and Dobel (1999, p. 8) echo Brown and Kalegaonkars interpretation of the response of the NGO sector to the challenges of globalization. In particular, they report that NGOs have emerged to ll voids in
the declining role and impact of national government commitment to
development support and of outmoded international institutions. And yet,
ironically, without a state to actually provide services or security NGOs
face the task of how to rebuild communities and provide service often
without the eective public power needed to sustain them (ibid., p. 11).
They argue that new technology, declining public resources, and unmet
needs of refugees and poverty populations have resulted in the growth of
NGOs around the world and that this creates major dilemmas in how to
cooperate with state and corporate sectors in gaining resources (p. 8).
Lindenberg and Dobel (p. 12) note that much of the new corporate wealth
is resolutely antistatist and more inclined to work with the NGO sector.
New partnerships between corporations and NGOs are being developed in
various communities around the world.
Despite the obvious funding benets, NGOs may also experience reputation and legitimacy gains. Some NGOs are perceived as fringe, peripheral, inexible and ineective, and aliation with a corporation in good
public standing may mitigate some of these perceptions. Perhaps more
likely, NGOs may suer reputation costs and accusations that NGOs have
modied or softened their positions in exchange for corporate donations.
This greenwashing has emerged as a genuine concern for many NGOs
seeking to maintain independence and autonomy while engaging corporations for both resources and expertise.
Lindenbergs (2001, p. 605) research has suggested that NGOs and
private sector organizations have had diculty developing strong and sustainable partnerships. Building on Austins (2000) continuum, Lindenberg
(2001) asserts that because of distrust between potential partners, few
NGObusiness relationships have progressed to the integrated stage.

286

Handbook of research on global corporate citizenship

However, it is likely that by the end of the next decade, more extensive
transactional and integrative partnerships will be in evidence.
NGOs also have reason to be concerned about the net benets that may
be accrue to them from relations with corporations. Indeed, according to
one study, costs appear to outweigh the benets. Ashman (2001) examined
ten cases of collaboration between CSOs (NGOs) engaged in development
and businesses in Brazil, India and South Africa. Her ndings suggest a
sobering view of the benets that civil society organizations and their constituencies can expect from collaboration (ibid., p. 1097). Somewhat paralleling Pearce and Dohs (2005) observations on the corporate side,
Ashman nds that development impacts are more likely in sectors related
to business interests, such as education and employment generation. She
also nds that capacity-building objectives are more likely to be realized
than are those of citizen empowerment. Finally, NGOs tend to absorb the
bulk of the costs of collaboration while businesses often dominate decision
making.
Illustrations of corporateNGO interactions
Starbucks relationships with NGOs have been the subject of a number of
cases and research eorts. Lindenberg (2001), for example, documents
Starbucks long-standing relationship with CARE, one of the leading
humanitarian organizations ghting global poverty, working alone and
through partners in 66 countries. Beginning in 1991, one of CAREs managers in the northwest region approached a Starbucks sta member regarding CARE programs and development seminars. Starbucks had already
carved out a strong social responsibility position, and given that Starbucks
sourced coee from regions where CARE was active, some kind of relationship seemed logical and appropriate (ibid.). Thus, the relationship
began as a philanthropic one in which CARE received $2 from the sale of
coee samplers. Subsequently, reports Lindenberg, the relationship became
more transactional with Starbucks donating resources directly to CARE
projects. By the late 1990s, the relationship moved from the transactional
to more integrative stage in which CARE sta members were oered opportunities for training and sabbaticals in Starbucks corporate units, such as
human resources and marketing (ibid., p. 605). Ultimately, Starbucks
began to consult CARE on issues related to codes of conduct and standards
regarding its overseas business practices, including Starbucks decision to
move into sale of Fair Trade coee. By 2001, Starbucks had contributed
more than $1.8 million to CARE (Argenti 2004).
Since 1998, Starbucks has also had a close alliance with Conservation
International (CI), one of the big 3 global conservation organizations.
Through this alliance, Starbucks and CI have worked on a range of

Between confrontation and cooperation

287

practices to promote sustainable coee production. The initial project in

Chiapas, Mexico, resulted in the incorporation of shade-grown coee into
the Starbucks product line (Austin 2002). According to Argenti (2004),
shade acreage increased by 220 per cent while farmers received a price
premium of 65 per cent above the market price and increased exports by
50 per cent. During this period, Starbucks had also been targeted by a
more activist NGO, Global Exchange. Global Exchange engaged in a
range of interventions, including protests at Starbucks outlets, aggressive
questioning at Starbucks shareholder meetings, and other eorts to
encourage Starbucks to carry Fair Trade coee in all of its US outlets
(ibid.). Starbucks ultimately pursued a middle ground by agreeing to sell
Fair Trade coee in its domestic company-owned stores, with the understanding that they would re-evaluate the decision in a year and decide
whether to continue serving the coee. Starbucks also developed a
project-based relationship with Oxfam America, the Oaxacan State
Coee Producers Network (CEPCO), and the Ford Foundation. Oxfam
America, a member of Oxfam International, is an NGO dedicated to
increase the supply of high-quality Certied Fair Trade coee for the
United States specialty coee market from small-farmer cooperatives;
improve the skills of small-scale coee farmers by providing resources
and training to implement and standardize post-harvest quality improvement; provide information and support to enable farmers to earn
premium prices for their coee by producing a high-quality product; and
enable the farmers to disseminate their learnings to other coee cooperatives (ibid.).
Oxfam has been the subject of a number of analyses of its relationship
with corporations. Oxfams approach to these relationships could generally be characterized as engagement as opposed to close partnership.
Lindenberg (2001) reports that Oxfam Great Britain has pursued an evolving, comprehensive strategy that involves real complexity and multiple corporate relationships:
Oxfams corporate engagement strategy includes three dimensions: funding and
cooperation, policy dialogue with joint standard setting and monitoring, and
pressure tactics. Oxfam GBs president denes funding and cooperative relationships as ones in which Oxfam and its corporate partners have similar longterm values and goals about the development process, not unlike the
decade-long relationship between CARE and Starbucks. Oxfam has such relationships with Northern Foods and the Cooperative Bank, two U.K. corporations. When Oxfam engages in policy dialogue, the second dimension of its
strategy, neither Oxfam nor the corporations involved are under any illusions
that their values or basic objectives are highly compatible. Rather, their commitment is to engage in civil discussion about issues of common concern.
(Lindenberg 2001, p. 605)

288

Handbook of research on global corporate citizenship

None the less, Oxfam has recently worked more closely with corporations in areas that include its Making Trade Fair campaign and related initiatives regarding Fair Trade certied coee. According to an article
published in 1999 and co-authored by Oxfam Americas President, the
most innovative international NGOs of the future will have moved from the
hands-on operational style of the 1960s to a highly complex and diverse set
of institutional partnerships, joint ventures, and networking relationships
(Oenheiser et al. 1999, p. 137).
In the case of Starbucks and CARE, the relationship appears to have
begun as philanthropic and progressed to a more transactional one. In the
case of Starbucks interactions with Conservation International and
Oxfam, the interactions began as transactional, and progressed to more
integrative, at least with CI. Oxfams engagement with corporations tends
to be transactional by design, because Oxfam is especially sensitive to the
appearance of inuence by its corporate partners.
The future of NGOs in corporate citizenship
The role of NGOs in businesssociety relationships and in corporate citizenship behavior is neither rmly established nor widely understood. The
theoretical and case illustrations presented here highlight a number of critical issues in the examination of NGOrm relationships to the eld of corporate citizenship. Hence, much more research on these relationships is
both necessary and desirable. Below I briey review a few of these, each of
which has interesting implications for future research.
First, the role of NGOs within the broader businesssociety context is
complex and evolving. Figure 13.3 illustrates some of the challenges
facing NGOs as a result of the changing private, public and NGO roles in
society (Lindenberg and Dobel 1999). It locates corporateNGO interactions within the broader context of businesssociety relationships and
captures the dynamic interactions among the three sectors, public,
private and nonprot. It also points up both the challenges and opportunities presented as a result of the decline of the state sector and the emergence of business, NGO and rmNGO partnerships as a way to meet
these challenges. The emergent role of NGOs is underscored by the questions posed at the bottom of the gure which are further elaborated on
here.
Second, NGO collaborations with rms may signal to governments that
they can continue extracting themselves from pressing social problems, yet
many NGOs continue to believe that governments should have a role
often the primary role in meeting these social needs. How, then, can
NGOs demonstrate their competence and utility in responding to these
problems while preventing a further erosion of the state?

Between confrontation and cooperation

Expanding
Private Sector

Shrinking
Public Sector

289

Expanding
NGO Sector

Eroding trust in
government

Growth of
markets

Cutbacks in public
resources

Growth and
change in
NGO sector

Privatization

Economic
globalization

Declining state
capacity

Some Consequences
New forms of wealth and poverty
in many parts of the world (new rich
in Soviet Union, homelessness in US
and Europe)

Growing sense of helplessness and

public indignation

New Strategic Dilemmas for NGO Sector

Do we partner or put pressure on
private sector or both?
Do we lead in the search for
private sector codes of conduct?

Source:

Do we fill vacuum in public sector by

expanding direct delivery of services?
Do we pressure governments to protect
political, economic, environmental,
human rights?

Adapted from Lindenberg and Dobel (1999).

Figure 13.3 Changing private, public, NGO roles and dilemmas for
expanding NGO sector
Third, as NGOs take on greater responsibilities alone or in consort
with other organizations they also invite greater scrutiny, as was recently
evidenced by a Russian law that would appear to limit their ability to mobilize. In front of an audience made up of Russian civil society leaders,
President Vladimir Putin said that Russia would not tolerate foreign money
being used to nance the political activities of NGOs. Putin said, we are
against overseas funding for the political activities [of NGOs] in Russia. I
categorically object (Medetsky 2005, p. 1).
This example also points out how variations in national context can challenge NGOs (Hsia and White 2002; Wiktorowicz 2002) and create global
asymmetries in terms of where and how NGOs are able to operate.
Fourth, NGOs are facing criticism and pressures over the perception that
they are often less accountable for their actions than their government and
business counterparts. Specically, the corporate governance scandals in

290

Handbook of research on global corporate citizenship

the United States and around the world have resulted in increasing attention to the role of boards, interlocking board directorates and the overlapping board membership among corporations and nonprot NGOs. The
American Enterprise Institute, in cooperation with the Federalist Society
for Law and Public Policy Studies, has launched a program initiative
called NGO Watch whose mission is to highlight issues of transparency
and accountability in the operations of non-governmental organizations
(NGOs) and international organization (IOs) (AEI, 2006). This is an area
that will certainly see more research and practical investigation.
Finally, NGOs are becoming more multinational and multidimensional,
a reality pointed out by Teegen et al. (2004). Further exploration of the
range of organizational, managerial and individual challenges associated
with the evolution of NGO organizations themselves should provide rich
terrain for management scholars for years to come.
Note
1. I shall use the term non-governmental organizations (or NGOs) throughout this chapter
as it is the more widely accepted term.

References
American Enterprise Institute (AEI) (2006), NGO watch, http://www.ngowatch.org/,
accessed 20 July 2006.
Argenti, P. (2004), Collaborating with activists: how Starbucks works with NGOs, California
Management Review, 47, 91116.
Ashman, D. (2001), Civil society collaboration with business: bringing empowerment back
in, World Development, 29 (7), 1097114.
Austin, J. (2000), The Collaboration Challenge: How Nonprots and Businesses Succeed
through Strategic Alliance, San Francisco, CA: Jossey-Bass.
Austin, J. (2002), Starbucks and Conservation International, Harvard Business School Case
9303055.
Austrom, D. and L. Lad (1989), Issues management alliances: new responses, new values, and
new logics, Research in Corporate Social Performance and Policy, 11, 23355.
Berger, I.E., P.H. Cunningham and M.E. Drumwright (2004), Social alliances:
company/nonprot collaboration, California Management Review, 47 (1), 5890.
Brown, L.D. and A. Kalegaonkar (2002), Support organizations and the evolution of the
NGO sector, Nonprot and Voluntary Sector Quarterly, 31 (2), 23158.
Burt, R.S. (2000), The network structure of social capital, Research in Organizational
Behavior, 22, 345423.
Carson, R. (1962), Silent Spring, Boston, MA: Houghton Miin.
Das, T.K. and B.-S. Teng (1998), Between trust and control: developing condence in partner
cooperation in alliances, Academy of Management Review, 23 (3), 491512.
de Tocqueville, A. (1835), Democracy in America, trans. Harvey C. Manseld and Delba
Winthrop, Chicago, IL: University of Chicago Press.
Den Hond, F. and F.G.A. De Bakker (2007), Ideologically motivated activism: how activist
groups inuence corporate social change activities, Academy of Management Review,
32 (3), 90124.
Doh, J.P. and T.R. Guay (2004), Globalization and corporate social responsibility: how nongovernmental organizations inuence labor and environmental codes of conduct,
Management International Review, 44, 730.

Between confrontation and cooperation

291

Doh, J.P. and B. Kotschwar (2004), Participation by civil society and non-governmental
organizations in Western hemisphere economic integration, in A. Rugman (ed.), North
American Regional Economic and Financial Integration, Research in Global Strategic
Management, vol. 10, London: Elsevier, pp. 31738.
Doh, J.P. and H. Teegen (eds) (2003), Globalization and NGOs: Transforming Business,
Government, and Society, Westport, CT: Praeger.
Eisenhardt, K.M. and C.B. Schoonhoven (1996), Resource-based view of strategic alliance
formation: strategic and social eects in entrepreneurial rms, Organizational Science, 7
(2), 13650.
Guay, T.R., J.P. Doh and G. Sinclair (2004), Nongovernmental organizations, shareholder
activism, and socially responsible investments: ethical, strategic, and governance implications, Journal of Business Ethics, 52, 12539.
Gulati, R. (1995), Social structure and alliance formation patterns: a longitudinal analysis,
Administrative Science Quarterly, 40 (4), 61952.
Harrison, J.S., M.A. Hitt, R.E. Hoskisson and R.D. Ireland (2001), Resource complementarity in business combinations: extending the logic to organizational alliances, Journal of
Management, 27 (6), 67990.
Hart, S.L. and M.B. Milstein (2003), Creating sustainable value, Academy of Management
Executive, 17, 5667.
Hess, D., N. Rogovsky and T.W. Dunfee (2002), The next wave of corporate community
involvement, California Management Review, 44 (2), 11025.
Hsia, R.Y.-J. and L.T. White III (2002), Working amid corporatism and confusion: foreign
NGOs in China, Nonprot and Voluntary Sector Quarterly, 31, 32951.
Independent Sector (2004), The New Nonprot Almanac, Washington, DC: Independent
Sector.
Johnson, J.L., J.B. Cullen, T. Sakano and H. Takenouchi (1996), Setting the stage for trust
and strategic integration in JapaneseU.S. cooperative alliances, Journal of International
Business Studies, 27 (5), 9811005.
Kellow, A. (1999), Norms, interests, and environment NGOs: the limits of cosmopolitanism,
Environmental Politics, 9, 122.
Kogut B. and U. Zander (1992), Knowledge of the rm, combinative capabilities, and the
replication of technology, Organization Science, 3 (3), 38397.
Lindenberg, M. (1999), Declining state capacity, voluntarism, and the globalization of the
not-for-prot sector, Nonprot and Voluntary Sector Quarterly, 28, 14767.
Lindenberg, M. (2001), Reaching beyond the family: new nongovernmental organization
alliances for global poverty alleviation and emergency response, Nonprot and Voluntary
Sector Quarterly, 30, 60315.
Lindenberg, M. and J.P. Dobel (1999), The challenges of globalization for northern international relief and development NGOs, Nonprot and Voluntary Sector Quarterly, 28, 424.
Luo, Y. (1998), Joint venture success in China: how should we select a good partner?, Journal
of World Business, 33 (2), 14567.
Matten, D. and A. Crane (2005), Corporate citizenship: towards an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
Medetsky, A. (2005), Putin warns politically active NGOs, Moscow Times, 21 July, p. 1.
Mirvis, P. and B. Googins (2006), Stages of corporate citizenship, California Management
Review, 48 (2), 10426.
Newton, L.H. (1999), Truth is the daughter of time: the real story of the Nestl case, Business
and Society Review, 104, 36795.
OBrien, R., J.A. Scholte, A.-M. Goetz and M. Williams (2000), Contesting Global
Governance: Multilateral Economic Institutions and Global Social Movements, Cambridge:
Cambridge University Press.
Oenheiser, R., S. Holcombe and N. Hopkins (1999), Grappling with globalization, partnership, and learning: a look inside Oxfam America, Nonprot and Voluntary Sector
Quarterly, 28, 12139.
Oliver, C. (1990), Determinants of interorganizational relationships: integration and future
directions, Academy of Management Review, 15, 24165.

292

Handbook of research on global corporate citizenship

Parker, B. and J.W. Selsky (2004), Interface dynamics in cause-based partnerships: an exploration of emergent culture, Nonprot and Voluntary Sector Quarterly, 33, 45888.
Pearce, J.A., II and J.P. Doh (2005), The high impact of collaborative social initiatives, Sloan
Management Review, 46 (2), 3039.
Pfeer, J. and P. Nowak (1976), Joint ventures and inter-organizational interdependence,
Administrative Science Quarterly, 21, 398418.
Roberts, N. and R. Bradley (1991), Stakeholder collaboration and innovation: a study of
public policy initiation at the state level, Journal of Applied Behavioral Science, 27 (2),
20927.
Rondinelli, D. and T. London (2003), How corporations and environmental groups collaborate: assessing cross-sector collaborations and alliances, Academy of Management
Executive, 17 (1), 6176.
Schermerhorn, J.R. Jr (1975), Determinants of interorganizational cooperation, Academy of
Management Journal, 18, 84656.
Selsky, J.W. and B. Parker (2005), Cross-sector partnerships to address social issues: challenges
to theory and practice, Journal of Management, 31, 84973.
Sethi, P. (1994), Multinational Corporations and the Impact of Public Advocacy on Corporate
Strategy: Nestl and the Infant Formula Controversy, New York: Kluwer.
Smith, C. (2003), Corporate social responsibility: whether or how?, California Management
Review, 45 (4), 5276.
Spar, D.L. and L.T. La Mure (2003), The power of activism: assessing the impact of NGOs
on global business, California Management Review, 45, 78101.
Teegen, H., J.P. Doh and S. Vachani (2004), The importance of nongovernmental organizations (NGOs) in global governance and value creation: an international business research
agenda, Journal of International Business Studies, 35 (6), 46383.
United Nations (UN) (2003), NGO Committee concludes 2002 resumed session, with nal recommendations on economic and social council consultative status, UN Press Release
NGO/494, http://www.un.org/News/Press/docs/2003/ngo494.doc.htm, accessed 10 June
2006.
United States Agency for International Development (USAID) (2006), The Global
Development Alliance: PublicPrivate Alliances for Transformational Development,
Washington, DC: USAID Oce of Global Development Alliances.
van Tuijl, P. (1999), NGOs and human rights: sources of justice and democracy, Journal of
International Aairs, 52, 493512.
Waddell, S. (2000), New institutions for the practice of corporate citizenship: historical, intersectoral, and developmental perspectives, Business and Society Review, 105 (1), 10726.
Waddock, S. (1988), Building successful social partnerships, Sloan Management Review,
29 (4), 1723.
Waddock, S. (1991), A typology of social partnership organizations, Administration and
Society, 22 (4), 480516.
Whetten, D.A. (1977), Toward a contingency model for designing interorganizational service
delivery systems, Organization and Administrative Sciences, 4, 7796.
Wiktorowicz, Q. (2002), The political limits to nongovernmental organizations in Jordan,
World Development, 30, 7793.
Yaziji, M. (2004), Turning gadies into allies, Harvard Business Review, 82 (2), 11015.

14 The politicization of economization? On

the current relationship between politics
and economics
Michael Zrn

Introduction
In the course of economic denationalization and in the specic context of
post-industrial society, some of the standard instruments for political intervention in market processes by the hierarchically organized nation-state
emerge as precarious. As a rst consequence of this, new regulatory instruments which are more compatible with the logic of markets have gained in
signicance. These instruments include incentive systems created by the
state, private-public partnerships and corporate social responsibility
(CSR). Second, a strong trend can be observed that aspires to international
regulations which, likewise, must largely renounce hierarchical implementation mechanisms, irrespective of whether such mechanisms are based on
intergovernmental or transnational sponsorship. Thus hierarchically conceived control by the democratic nation-state is becoming less important,
relatively speaking; conversely, market-compatible governance, frequently
implemented by non-state actors, is becoming more prominent.
This is not the end of the story, however. The outcome of this process
leads neither to a powerless state nor to depoliticization. The state remains
an integral and necessary component of almost all new arrangements. It no
longer acts unilaterally, but nevertheless it remains central in its signicance.
And according to the central thesis of this chapter this gradual replacement of hierarchical governance by market-compatible non-state governance does not lead to depoliticization, even in cases where the new
regulatory instruments have largely replaced traditional and nation-state
policies. On the contrary, both international institutions and the actions of
large corporations are becoming increasingly politicized. Thus, governance
with and without government is subject to the same normative claims as
governance by government. Or, to put it more directly: as the market gains
ground on politics, the market becomes politicized.
The democratic interventionist state
Politics and economics emerge as dierent social spheres in the course
of the dierentiation of modern societies. The object of economics is the
293

294

Handbook of research on global corporate citizenship

generation of prosperity. The market is the most ecient means of achieving this because, under the right conditions, it transforms the self-serving
endeavors of all actors into a general gain in welfare. The aim of politics,
on the other hand, is to maintain peace, provide security and uphold justice.
The best means to achieve these ends has traditionally been seen as the
democratic form of the nation-state with a division of powers, which successfully channels the real power ambitions of individual political actors
and can, therefore, promote the common good. What is decisive in our
context is that, in this model, a formal hierarchy (at least an imagined one)
is established between politics and the market. Politics produces binding
regulation with which market actors must comply (see Lindblom 1977).
Politics therefore sets the rules for the market. This imagined hierarchy does
not in any way exclude the possibility of market actors playing an
inuential role in, or even dominating, the political process. Formally,
however, the primacy of politics applies. Even the most powerful economic
actor must resort to politics to organize rule setting in line with his/her
interests. On this point of view, the market does not dier from the other
spheres of society such as culture and science: all societal spheres are
subject to political regulation.
In the democratic interventionist state of the 21st century, politics is
assigned three substantial tasks in relation to the market.1 First, it should
create the preconditions necessary for the smoothest possible running of
transactions within the market. In a typology of policies, such measures
can be described as market making (Windho-Heritier 1987). The best
example of such a measure is the removal of trade barriers, be they tari
related or not. Second, the negative externalities of the market, which can
be classied as self-threatening, should be curbed. Thus, for example,
environmental policy measures must ensure that the natural resources on
which the economy is based are not overgrazed, and banking-related measures should ensure that the nancing of companies remains secure, even
in times of crisis. What are involved here are market-stabilizing or marketbraking policies. Finally, politics should correct socially undesired
market outcomes. In other words, it should take measures that correct the
market. An example of such a market-correcting measure would be the
imposition of a wealth tax for the purpose of increasing social security
benets.
The fully developed democratic constitutional interventionist state
fullled these three tasks relatively well (Leibfried and Zrn 2005, ch. 1). In
the case of the highly developed countries at the center of the OECD world
today, it is possible to identify three dierent phases during which a particular type of policy predominated: (i) creation of the market, (ii) market stabilization, and (iii) market correction:2

The politicization of economization? 295

1.

2.

3.

After the establishment of the domestic monopoly on the use of force

and its increasing civilization in terms of the rule of law, a transformation took place with respect to economic philosophy, which was
accompanied by the complete dierentiation of the political and economic subspheres. The principle of increasing state power through
mercantilism then began to be challenged by the notion of an economic order which would enable ecient economic exchange and the
emergence of a national market. The establishment of property rights,
freedom of contract, the reduction or abolition of domestic barriers to
the exchange of goods, capital and labor, and the provision of a
national infrastructure for transport and communication created the
regulatory policy framework that made the industrial revolution of the
19th century possible. Thus, the welfare objective was able to free itself
from the aim of external security. The creation of the market was the
focus of attention at this time.
The vulnerability of such a political economy to crises became apparent at the latest during the major global economic crisis of the 1870s.
In the aftermath of this crisis, the insight gradually prevailed that a free
market economy requires external intervention to ensure that the force
of destabilizing processes does not bring the system to the point of collapse. The corresponding measures initially included controls on banks
and regulations governing currency and exchange for the purpose of
economic management. However, even this was not enough to prevent
Black Friday in 1929. The concept of global macroeconomic control
did not become established until after the Second World War.
Following the success of the New Deal in the USA, a policy was established in Western Europe in particular, which aimed to alleviate the
eects of economic crises and promote the active structural organization of the national economy. The intention was to balance out economic highs and lows through the state control of demand. At the
same time, the state actively intervened in the control of certain economic sectors to promote industrial structural change and to alleviate
its costs. All of these measures taken together can be interpreted as
market stabilization.
The development of a national market economy and the industrial revolution created a hitherto unknown level of prosperity. At the same
time, they resulted in the relative impoverishment of broad social
classes, because they destroyed the social safeguards originally provided by village communities organized on a feudal basis. As a result,
strong social and political conict (that is, the social question) led to
the development of state policy designed to alleviate social misery.
Thus, from the late 19th century onward, state-sponsored social policy

296

Handbook of research on global corporate citizenship

developed, which was intended to correct market performance on
social grounds, and took over the responsibility for the individual
(Marshall 1975, p. 15). Of course, all of these measures merely represented an initial development. At the turn of the century, around 1 per
cent of Germanys gross national product (GNP) was spent on social
insurance. At this level, Germanys social expenditure ratio was the
highest in the world, and this remained the case until 1960 when the
social expenditure ratio in other Western European democracies
reached between 8 and 10 per cent. Today, Germany has a social expenditure ratio of 29.5 per cent, while Sweden some cutbacks notwithstanding now tops the league with 32.9 per cent (Eurostat 2004).
Social policy in the democratic welfare state is mainly characterized by
the fact that it becomes operative whenever unemployment or illness
occurs, that it is organized at national level, and that it is based on an
individual legal claim and cannot, therefore, be accompanied by political discrimination. In this sense, social policy corrects the primary
income distribution which is produced by the market. Anyone wishing
to know about the material distribution of goods in a society must
examine so-called secondary income distribution in the democratic
interventionist state. From this point of view, such measures taken in
total may be viewed as the correction of market performance.

The democratic constitutional and interventionist state banked on two

dominant instruments for the purpose of market making and, subsequently, the control of market processes and correction of market performance: hierarchically conceived and state-implemented regulations and,
later, plant-level co-determination. Together with scal levies and the allocation of nancial resources, regulatory legislation and administration by
the state are the traditional tools of a policy which simultaneously creates
a market and targets the management of externalities with the dual aim of
stabilizing the market and partially correcting its performance.
Plant-level co-determination was only added to this mix at a later stage
(Streeck and Kluge 1999). What was basically involved here was not the
external control of the behavior of companies through prohibitions and
orders, but the internalization of additional perspectives into the decisionmaking processes through which the exclusive focus of companies on prot
making would be relativized. Forms of sociopolitical order such as the
social market economy, economic democracy, Rhine capitalism and the
stakeholder society adopted the older coalition theory of the commercial
enterprise. According to this theory, participants in the coalition are not just
company owners and managers, but also employees, trade unions, and possibly even consumers, suppliers, neighbors, banks and so on that is,

The politicization of economization? 297

economic and civil society actors with interests, the protection of which is
deemed to be justied. Whereas the economic stakeholders like consumers and suppliers (excluding lenders on the supervisory boards) were not
allocated any formal rights of co-determination, the participation of
organizational stakeholders (on this distinction, see Werther and Chandler
2006, p. 4) via plant-level co-determination was safeguarded by legal rights
of status and co-determination.
New challenges for the democratic interventionist state
The democratic constitutional and interventionist state approached the
political taming of the market through prohibitions and orders, and plantlevel co-determination. These two instruments proved increasingly precarious, however, in the course of economic denationalization (Zrn 1992) and
in the context of the specic problems of post-industrial society (Bell 1973).
In the post-industrial society, theoretical knowledge became central and
the services sector gained the upper hand over the manufacturing economy.
According to Bell, the axial institution in the industrial society was private
property; contrary to this, in post-industrial society, the central focus has
shifted to theoretical knowledge. As a result of this development, the institutions built on the axial principle of property distribution have diminished
in their inuence.
This development has heightened in the course of societal denationalization. Societal denationalization can be quantied as the share of crossborder transactions out of all societal transactions (Beisheim et al. 1999;
Kearney 2003). Whereas a relative increase in the proportion of crossborder action contexts is indicative of a growing interdependence between
dierent units, the concept of societal denationalization relates to a level on
which state borders relinquish their signicance or even disappear. In the
words of Karl W. Deutsch: National borders dissolve when there is no
more critical reduction in the frequency of social transactions (Deutsch
1969, p. 99).
Corresponding empirical studies show that the increase in cross-border
exchange processes inter alia in the areas of trade and direct foreign
investment, and also in the areas of migration, the exchange of information and knowledge, and the import and export of cultural goods
increased so evidently in the 1970s and 1980s that the high level of integration achieved in 1914 was surpassed once again. A further push took place
in the 1990s. In addition, the cross-border production (as opposed to
exchange) of goods and bads (a phenomenon which emerged in and has
increased steadily since the early 1990s), constitutes a completely new
development. The internet, organized crime, global climate change, and
nancial markets represent a qualitatively new dimension. Terms like

298

Handbook of research on global corporate citizenship

deterritorialization (Albrow 1996), debordering (Entgrenzung) (Brock

and Albert 1995) and globalization (Scholte 2000) seem most appropriate
with respect to these instances of production of common goods.
As a result of these developments, the boundaries of societal transactions in many areas today lie beyond the political borders of the nationstate. In other words, all national societies are subject to considerable
external inuences. Thus, nation-state governance is systematically faced
with two problems (see Zrn 1998, ch. 2). The rst of these constitutes a
problem of policy scope. In view of the expansion of societal and economic
spaces, market-stabilizing intervention at the national level is ineective if
it only covers a part of the aected activities, because its impact is counteracted by externalities produced elsewhere. In the Federal Republic of
Germany, for example, there are stricter prohibitions on radical right-wing
propaganda than in other countries, and with good reason. If, however, the
provider of such material resides in the USA and supplies it to the internet
from there, then the German prohibitions are of no consequence. Even if
the material is identied by investigators and could be blocked from all
mainframe computers and all online service providers in Germany, the supplier cannot be prosecuted.
It is important to distinguish this problem from the second one, that of
policy competition. Nation-state regulations can remain capable of achieving a desired objective even in the face of denationalization. For example,
the eects of increased social benets on the side of the recipients remain
undisputed, even in the age of societal denationalization. However, these
benets can undermine the attractiveness of a country as an economic location, and hence countries could fall into the race-to-the-bottom trap (Cerny
1995). Exaggerated bureaucratic regulations can also increase production
costs, with the result that goods can be produced abroad more economically. The same argument can also be applied to product-related environmental regulations. To the extent that exactly the same thinking prevails in
other countries, there is an acute danger of a deregulation spiral a competition of the obsessed as Krugman (1996) labeled it. Market-stabilizing
and above all market-correcting measures are aected by this; against this
background, the traditional instruments for the domestication of the
market via nation-state policies prove precarious.
As a result, state regulations come under pressure, and this limits the
options for stabilizing and correcting the market. In the meantime, much
research has been carried out on the real impacts of globalization and
economic denationalization on the eectiveness of nation-state regulation of the markets. What has emerged from this research is that no overt
race to the bottom has been observed up to now (see Pontusson 2005) and
that, conversely, some product standards can even improve and become

The politicization of economization? 299

internationalized thanks to globalization. This phenomenon is very aptly
referred to as trading up by David Vogel (1997). Nevertheless in all countries the pressure has increased to redesign the welfare systems and eliminate excessively restrictive regulations (see, for example, Seeleib-Kaiser
2001).
Moreover, economic denationalization weakens the basis for codetermination. In the course of location competition, state co-determination
regulations are also increasingly perceived as a competitive disadvantage;
and, in cases where they still exist, economic denationalization has
undermined employee representation. In recent years the emphasis has
clearly been shifted in the direction of a shareholder model of corporate
governance. The fate of Germanys Commission on Co-determination
(Mitbestimmungskommission) illustrates this development. The employers
declared that without the abolition of equal co-determination, any further
reform debate would be superuous. As a result, the Expert Commission for
the Further Development of the Co-determination of Employees in
Companies came to grief after just one years work; however, its academic
members did produce an important report.3
Governance in the age of denationalization
In view of these challenges to the eectiveness of the democratic interventionist state, three types of reaction are conceivable in principle. First, the
democratic interventionist state can develop new instruments and
approaches to overcome the problems of eectiveness. Second, the global
economic rms may develop self-regulations that can serve as substitutes
for state regulation. Third, the policy can follow the markets and societal
transactions, and extend the area of applicability of political regulations
through the creation of governance institutions beyond the nation-state. In
the following, each of these three possibilities are discussed in terms of
their eectiveness.
New instruments I: market-compatible mechanisms
If the old instruments are no longer eective due to the emergence of new
challenges, an attempt will be made either to use more of the old instruments or to try out new instruments. Whereas the Anglo-Saxon variant of
the relationship between regulation and market in capitalism was quick to
seek new instruments, the continental European variant in particular initially favored the rst option using more of the same to respond to the
corresponding challenges. This approach eventually proved to be misconceived, so new instruments also began to be applied.
The new instruments involved here are, for the most part, marketcompatible mechanisms. Whoever causes extra-contractual damage that

300

Handbook of research on global corporate citizenship

is, harm to third parties should be made to pay through organized

market mechanisms. An example of such a mechanism would be emissions
trading (see Endres and Ohl 2005) or cap and trade, which is intended to
act as a costly deterrent to companies who pollute the air, in order to
prevent them from causing injury to third parties. Another mechanism is
that of consumer education:4 the more aware consumers are about the
harmfulness of specic goods, the more condent they will become about
punishing the providers of such goods economically by refusing to purchase them. Such instruments have increased signicantly in number in
recent years. Never before have so many emissions rights been traded, and
the proliferation of ranking and ratings (on this point, see Kerwer 2006) is
now generating its own information problems.
These new instruments are often associated with far-reaching hopes
which must eventually be deated. Such regulations function only under
certain conditions. First, the initiation of market-compatible regulatory
mechanisms often requires state legislative activity. Thus, for example, the
denition of maximum limit values is a logical prerequisite for emissions
trading. To be fully eective, ranking and rating requires, moreover,
investors and consumers who seek information and quality. For instance,
the labeling of foodstus is often based on both state regulations and the
existence of a quality-aware group of buyers.
As intimated above, market-compatible regulatory instruments may not
be as successful as the initial wave of euphoria over them would lead one to
hope. A plethora of preconditions, for instance, can cause these instruments
to fail. In addition to such preconditions, the failure of market-compatible
instruments can also be attributed to the frequent instances in which it is
impossible to ascribe damage to a specic party; such damage can remain
undiscovered due to information asymmetry, or it may not be taken seriously
as such (as in the case of food and beverages harmful to health, which in
the case of addiction gratify the demand of addicted or weak-willed consumers specically because of these negative properties) (see Oe 2006). To
this is added the problem that market-compatible regulatory instruments can
only serve the purpose of market stabilization, but scarcely that of market
correction. In sum, these instruments are associated with many preconditions; thus, generalization results in the failure of this solution.
New instruments II: ethicization of corporate behavior
The relevant keywords and concepts here include corporate social responsibility, corporate citizenship, the proclamation of corporate codes by large
companies or trade associations, one-sided and voluntary corporate selfcommitment, the services provided by private foundations, and the scientic and political discourses on the subject of business ethics. Of central

The politicization of economization? 301

importance are the debates surrounding the concept of CSR, which refers
to the activities of companies that extend beyond their direct production
and sales interests. As opposed to general philanthropic activities, which
are often pursued by corporate foundations, the focus here is on the prevention or processing of the side-eects of competitive behavior through
so-called codes of conduct. This can include, for example, both the
support of individual companies for sustainability projects through plantation operators (for example, Chiquita or Dole) and the joint denition of
health and safety regulations by several companies in the textiles or sports
shoe sectors. The establishment of such codes of conduct has increased
rapidly since the mid-1980s, mainly in the form of public undertakings by
individual companies (just over 50 per cent of all cases) but also in the form
of agreements between the companies within a sector as so-called stakeholder partnerships or, in individual cases, those adopted from nongovernmental organizations (see Kolk and van Tulder 2005). Although the
absolute numbers remain within bounds an OECD study from 1999
identied 182 such codes (see Hassel 2006) the growth curves are very
impressive (Kolk and van Tulder 2005, p. 6).
Various causes may be assumed for this development (see Clapham 2006,
ch. 1, and Werther and Chandler 2006, ch. 1). For example, changes emanating from consumers may be cited as an explanation for why rational
companies are prompted to develop and observe codes of conduct.5
Because of temporal simultaneity, it is immediately obvious that the debordering of information and communication processes should be identied
as a cause. As consumers in the developed industrial countries are informed
about global production methods and processes, they establish the benchmark of a quasi-extraterritorial interpretation of the law: what is not legal
on the market where products are sold, likewise cannot be legal in the plant
where they are produced. Based on this interpretation, child labor, forced
labor, workplace human rights violations or wanton destruction of the
environment, for example, are understood as violations of regulations,
which must be sanctioned through a considerable loss of reputation by the
perpetrator.
In addition to the increase in the availability of information through the
transparency of global communication processes, the signicance of such
information has also grown and this represents a further conceivable
cause for the increase in the number of codes of conduct. The auent consumers in the Western world have the material latitude to take information
into account in their purchasing decisions, which relates to the production
process rather than to the product itself. Based on this explanation, thrifty
is not nifty; it is the politically motivated consumer who is cool. To this
is added the enormous signicance which labels or brand names have

302

Handbook of research on global corporate citizenship

attained for many products. In our brand-name society, as the retail price
of products becomes dissociated from the material and labor values
involved in their production, aspects of brands, which have nothing to do
with the actual product, are gaining in signicance child labor and largescale environmental destruction, for instance, are a turn-o for most
potential purchasers.
On the other hand, the explanation for this apparent surge in codes of
conduct may relate to the emergence of an altered self-image on the part of
multinational companies which, owing to their size, can withdraw at least
partly from direct competitive pressures. This altered self-image hypothesis
is supported above all by the fact that some companies are no longer
content with the formula of corporate social responsibility and now
(re)dene themselves as corporate citizens. ExxonMobil writes on its
website: ExxonMobil applies a rigorous approach to corporate citizenship
in all aspects of our business, everywhere we operate (ExxonMobil 2006).
Almost identical statements have also been issued, for example, by Ford,
Toyota, Nike and Nokia (Matten and Crane 2005, p. 167). This has
prompted a debate on the use of the term corporate citizen (Moon et al.
2005) and the political legitimation of private actors in such processes
(Palazzo and Scherer 2006).
An altered self-image alone would indicate pure ethicization of companies. CSR activities can certainly to some extent be explained as a reaction
to altered information situations and demand structures and, therefore, can
be interpreted as an expression of well-understood self-interest. Irrespective,
however, of the appropriate explanation for the rise of CSR, it points to a
mechanism which, it is hoped, will compensate for the decits of traditional,
state-based political regulation. This would involve the adoption of state
functions (see Matten and Crane 2005, p. 174) and the lling of regulatory
gaps left by the international institutions (Kolk and van Tulder 2005, p. 2).
Doubts remain, however, as to whether the declared governance objectives can actually be achieved through ethicization of corporate behavior.
In terms of strategies for corporate self-commitment, the collective action
problematique always arises, whereby no actor can be sure that all competitors take on and, above all, comply with the same obligations. It is precisely this problem that points to a changed self-image of companies as
corporate citizens with deliberative obligations which attempt to supersede
the inherent voluntarism of the codes of conduct (Scherer et al. 2006). The
problem persists nevertheless. For good reasons, the eective control of a
bourgeois society always falls back on compulsory mechanisms which
should ensure that the understanding of the roles of the citoyen and the
bourgeois cannot be arbitrarily exchanged. Dissolution of the problem of
voluntarism could be sought in corporate associations acting as private

The politicization of economization? 303

governments (Streeck and Schmitter 1985) which make compliance with
their commitments mandatory for their members. However, this would
only lead to conclusive success if membership in the associations were
mandatory (as in the case of the chambers) and if external competitors
could be kept at arms length through restriction of access to the international market. Given that the fulllment of both of these conditions seems
unrealistic today, it may be assumed that business ethical commitment will
remain voluntary in nature.
The market and consumers can only partly serve as a mechanism for
the sanctioning of commercial enterprises disregard of codes of conduct.
The market is subject to precisely the same limitations as those referred to in
the discussion of market-compatible instruments. As a result of information
problems, it is mainly consumer-oriented products with a strong brand image
that come into view. Thus, there is a real danger that the ethicization of commercial enterprises will be limited to strategies for the maintenance of individual commercial reputations and preventive public relations. This
ultimately tallies with Milton Friedmans (1962) early warnings to the eect
that the social responsibility of companies consists precisely and uniquely in
prot making. If prot orientation demands that individual companies also
work with the concept of CSR, they simply must do this.
In summary, it may be noted that CSR and the codes of conduct usually
associated with it have clearly gained in signicance, but remain bound to
certain preconditions. It can hardly be expected that they can be implemented across the board with the necessary binding force. This nding
coincides with the nding above for market-compatible instruments.
Supranationalization and transnationalization
Against the background of problems surrounding the eectiveness of the
new governance instruments, it can come as no surprise that the alternative
and complementary option of re-establishing the traditional regulatory
instruments on a level beyond the nation-state is being adopted.
The corresponding dynamic is familiar (see Zrn et al. 2006). The number
of international agreements in existence increased linearly from fewer than
15 000 in 1960 to over 55 000 in 1997. A good third of the laws that are
passed in the national parliaments of European countries actually originate
at the European or international level. In addition to the growing number
of international agreements, it is also possible to observe a new quality of
international regulations as a second measure of this institutional dynamic.
It is possible to demonstrate an increase in regulations that tackle behindthe-border issues (Kahler 1995), which have societal actors as their ultimate
target group and, as a result, create new institutional requirements. For
example, in hindsight, the traditional international commitment that import

304

Handbook of research on global corporate citizenship

duties on goods shall not be increased appears very simple in many ways. In
contrast, the obligation to achieve substantial reductions in the emissions of
certain pollutants is proving far more challenging. Because the ultimate
target group of this regulation is not the state but societal actors (that is,
industrial operations and car drivers), the reduction, for instance, of CO2
emissions does not merely represent an executive matter of will. Unlike the
situation that exists with regard to most other international regulations,
failure is also possible in this case if the governments that sign the agreement
fully intend to reduce CO2 emissions. Signicant nancial, administrative
and technological resources are required to fulll such an obligation.
Similarly serious is the fact that, in the case of behind-the-border issues like
global warming, regulatory compliance is signicantly more dicult to
monitor than it is in the case of border or interface problems. Moreover, the
problem itself is so complicated that the discussions regarding a suitable
form of regulation are repeatedly overshadowed by questions concerning
the real causes and actual extent of global warming.
Thus, supranationalization (Moravcsik 1999) and transnationalization
(Risse 2002) can be understood as a form of institutional reaction to the
new regulatory problems. Supranationalization refers to a process whereby
institutional components and procedures that facilitate the decisions of
autonomous international institutions increase even against the will of an
aected government. It is characterized by the fact that the Westphalian
principle of consensus in intergovernmental politics has been superseded in
many areas by majority decision-making or quasi-legal processes, for
example, those of dispute settlement bodies. Supranationalization is in no
way limited to the European Union even if it is particularly prominent in
this case but also nds application in other institutions. In addition to the
International Monetary Fund (IMF) and the World Bank, other examples
of decision-making procedures of this kind can be found in the special UN
organizations, the International Criminal Court, the World Trade
Organizations (WTO) Dispute Settlement Body and Mercosurs Tribunal
Permanente de Revisin.
Along with the establishment of supranational institutions, the emergence of transnational governance, whereby at least one regulatory body is
a non-state actor, may increasingly be observed as a reaction to the declining ecacy of state action. With these new forms of governance, political
denationalization combines with the use of new market-compatible and soft
instruments. This can also take the form of purely private regulation at the
transnational level. Most codes of conduct which are valid throughout a
sector are actually transnational in nature. In this case, transnational corporations cooperate in private sector regimes, or private sector actors join
forces with civil society actors in networks. Examples of such private forms

The politicization of economization? 305

of transnational governance include the International Chamber of
Commerce, the International Accounting Standards Board (IASB) and the
numerous codes of conduct and certication systems (for example, the
Forest Stewardship Council, Rugmark, and so on). The literature on international relations refers here to private authority and little mention is made
of corporate social responsibility (see, for example, Cutler et al. 1999; Hall
and Biersteker 2002; Wolf 2006). The term private authority is assigned to
point to the exclusive character of those regulations which often do not
involve important stakeholders. Although private authority frequently
refers to regulations similar to those embraced as part of CSR, the former
deliberately distinguishes itself from the latter, more euphemistic term customarily used in management studies. A second way in which the declining
eectiveness of national policy is compensated consists in the joint performance of governance services by states and economic and/or societal actors
within so-called public-private partnerships (Villancourt Rosenau 2000).
Examples for such public-private models include the internet Corporation
for Assigned Names and Numbers (ICANN), the Global Compact, the
Consultative Group on International Agricultural Research and the
Kimberley Process. In all of these cases, societal actors provide regulatory
services or produce public goods at a transnational level, which are not provided by states or by states alone.
The emergence of eective governance at supranational and transnational levels is likewise extremely complex and demanding. The boundaries
of transnational governance correspond to those already mentioned in the
discussion of new instruments (above). Thus, it is hardly to be expected that
it will be possible to create measures which can be applied across all issue
areas. Just 5 per cent of multinational companies are involved in the Global
Compact (Benner and Witte 2006). Wolf (2006, p. 222) notes, therefore,
that [p]rivate contributions to governance beyond the nation-state can add
to, but will not replace, public governance. It will not be possible to dispense entirely with the role of the state. The eectiveness of transnational
regulations depends here, again, on intergovernmental agreements which
themselves can only succeed under certain conditions and which are, moreover, very cumbersome (for an overview, see Hasenclever et al. 1997). And
even in the case of successful supranationalization and transnationalization, two systematic problems remain: the lack of democratic legitimacy of
such regulations6 and the lack of market-correcting institutions beyond the
nation-state (Zrn 1998, pp. 40914).
Politicization without the state
The above-described double shift in the choice of instruments and political
level can certainly be read as a reaction to the reduced eectiveness of the

306

Handbook of research on global corporate citizenship

democratic interventionist state. Despite their limited eectiveness, the new

instruments and political denationalization can partly compensate for the
shortcomings of traditional state regulation.
We should not, however, allow ourselves to be misled: the outcome is
neither a political world without states nor depoliticization. On the one
hand, the state is an integral and necessary component of almost all of the
new arrangements. It no longer acts alone, but is central in its signicance.
Within the OECD world, the monopoly on the power to levy taxes and the
monopoly on the use of force remain rmly in the hands of the state. As a
result, the state secures a central source of inuence for itself and retains
the monopoly on governance in the area of market-correcting policy. While
it is possible to transfer regulations that stimulate and safeguard the market
to private and international actors, in most cases the nation-state retains
the ultimate right of intervention. Without the shadow of hierarchy, the
new control mechanisms have proven mostly to have little eect. The traditional state remains, therefore, central in its signicance, even for a new
constellation of statehood.
Nevertheless, even in cases in which a signicant replacement of nationstate policies arises, this does not necessarily result in depoliticization. In
fact, both international institutions and the action of large corporations
are becoming politicized.
First, the above-described process of supranationalization and transnationalization is closely associated with another process: the increasing sensitivity of societies to questions concerning the power and legitimacy of
global governance institutions. This politicization of global governance
should be understood as a process which results in the increasing targeting
of normative demands at governance beyond the nation-state by societal
actors be they organized at the national or the transnational level.7 As a
result, this leads to a pluralization of actors and positions in international
and transnational institutions. This process would appear to be comparable with the politicization of national governance in many European countries in the course of the 19th century.
The institutions with their new possibilities for exerting inuence are
subjectively assigned a greater relevance by a growing number of societal
actors. This leads to demands for the transparency of these institutions and
the integration of societal expertise, as a result. However, this only strengthens the claims for democratic legitimation of international institutions. The
opposition to these international institutions, whose manifestations can
range from a lack of compliance and the critical public thematicization of
issues to violent protests, then increases. Ultimately, and in line with
ongoing expectations, the path of renewed institutional adaptation to the
articulated claims, in particular the further opening of processes to societal

The politicization of economization? 307

actors (democratization), or a return to an intergovernmentalism which is
compatible with the consensus principle of international politics, may be
the only options that remain. Thus, the logic of international institutions is
shifting from a rationale of eective problem resolution to a logic of legitimate governance. International politics is then no longer evaluated solely
on the basis of political astuteness and eectiveness: it is instead subject to
the criteria of good political order, that is, fairness and legitimacy. Hence,
territorial boundaries relinquish their normative dignity, and universalistic
conceptions of politics develop. This is followed by the emergence of a
conict between the world of states and world of societies in the sense of
transnational social spheres of action. This politicization by civil-society
actors and arenas simultaneously incorporates a potential for opposition
to political and, ultimately, societal denationalization as well.
Second, companies are also becoming politicized. The process of
increasing shareholder orientation and the undermining of plant-level codetermination are being counteracted by activities in the context of socalled corporate social responsibility. Companies are creating foundations,
establishing corporate universities and participating in social and cultural
sponsorship (Mosdorf 2005, p. 73). Robert Boschs (a German industrialist) motto better to lose money than trust, which once expressed the strategy of an individual company, can now be generalized. This is perhaps best
demonstrated by the fact that the question as to whether the exercise of
political inuence could not be better implemented through the market
than through democratic processes has already been debated. Noreena
Hertz (2001, p. 190), for example, poses the question, [is it] better to shop
than to vote? and goes on to answer her own question in the armative:
It is because of the fact that instead of showing up at the voting booth to register their demands and wants, people are turning to corporations. The most
eective way to be political today is not cast your vote at the ballot box but to
do so at the supermarket or at a shareholders meeting. Why? Because corporations respond. (Ibid.)

This action logic leads, however, to legitimation problems of a specic

nature (see Palazzo and Scherer 2006). Friedman (1962, 1970) warned of
the danger of the politicization of companies in his plea for the restriction
of companies to the purpose of prot maximization. While he welcomes
the philanthropic activities of the owners of companies, he criticizes managers who allow the stock companies to be poached in the public arena,
because this occurs without the mandate of shareholders and at their
expense. Friedman concludes that if companies become political actors,
then the aected population should also be able to select the managers.
Robert Reich (1998, p. 17), who is otherwise no friend of Friedmans

308

Handbook of research on global corporate citizenship

theories, conrms this insight some 20 years later, indicating that the excessive adoption of state functions by companies would lead to a problematic
politicization of the corporation. An analysis from the eld of management studies goes a step further: Legitimacy has become one of the most
critical business issues, especially for those companies who operate globally (Kostova and Zaheer 1999, p. 74). Thus, the corporate citizen is now
subject to an inherent legitimation pressure; together with investors they
must take the interests of customers and the political public into account.
Whether the primacy of politics over the market can be regained through
such politicization remains clearly questionable. Nevertheless, the demonstrated changes are not in any way indicative of a process of depoliticization. On the contrary, both international institutions and the actions of
corporations are becoming increasingly politicized. Governance with and
without government is subject, therefore, to the same normative claims as
governance by government. Or, to put it more directly: as the market gains
ground on politics, the market becomes politicized.
This diagnosis does indeed raise some questions that will need to be
answered by further research. Through which mechanisms can transnational actors be connected to public procedures of decision making? Are
transnational and international institutions capable of developing redistributive mechanisms or will they remain in the regulative realm? What role
does education and information play in global politics? How is it possible
to distinguish good from bad companies? How do political actors respond
to the politicization of international and transnational institutions? Does
this lead to a revival of the nation-state or to a golden age of constitutionalization? Which role will the most powerful nation-state, the United States,
play with respect to these questions in the future?
Notes
1. For more on the emergence and functioning of the democratic constitutional interventionist state and its perspectives for development in the light of current challenges, see
Leibfried and Zrn (2005).
2. See Zrn (1998, pp. 4154) as an overview. For important contributions, see Polanyi
(1957), Marshall (1975) and North (1981).
3. See http://www.bundesregierung.de/Content/DE/Artikel/2006/12/Anlagen/2006-12-20
mitbestimmungskommission,property=publicationFile.pdf, accessed 21 November 2007.
4. See, for example, Miller and Staord (2005) and Lowe et al. (2006).
5. The change of consumer behavior serves here as an explanation for the change in practice of companies. This is a related, but dierent notion than consumer education as an
instrument of state policies.
6. There are two sides to the concept of legitimacy. From a normative perspective it refers to
the validity of political decisions and political order, and their claim to legitimacy. From
a descriptive perspective, in contrast, the focus is on the societal acceptance of political
decisions and political orders as well as the belief of the subjects of rule in legitimacy. The
next section focuses on this descriptive aspect of legitimacy. The normative legitimacy of
transnational and international institutions is double-edged. On the one hand, institu-

The politicization of economization? 309

tions beyond the nation-state only provide the basis for bringing in all those aected by a
political decision with cross-bordering or global externalities. On the other hand, the decision-making process as such does not fulll the institutional criteria of a democratic
process (see Zrn 2000).
7. This coincides with Iris Youngs (2004, p. 377) general denition of politicization,
whereby activities in which people organize collectively to regulate or transform some
aspects of their shared social condition, along with the communicative activities in which
they try to persuade one another to join such collective actions or decide what directions
they wish to take should be classied as political.

References
Albrow, Martin (1996), The Global Age: State and Society Beyond Modernity, Cambridge:
Polity.
Beisheim, Marianne, Sabine Dreher, Georg Walter, Bernhard Zangl and Michael Zrn (1999),
Im Zeitalter der Globalisierung? Thesen und Daten zur gesellschaftlichen und politischen
Denationalisierung (The age of globalization? Theses and data on societal and political
denationalization), Baden-Baden: Nomos.
Bell, Daniel (1973), The Coming of Post-Industrial Societies, New York: Basic Books.
Benner, T. and J.M. Witte (2006), Keine Macht den Multis? Die Rolle transnationaler
Konzerne in Entwicklungslndern (No power to the multinationals? The role of transnational concerns in developing countries), Internationale Politik, 61 (9), 3945.
Brock, Lothar and Matthias Albert (1995), Entgrenzung der Staatenwelt (Ridding the world
of borders), Zeitschrift fr Internationale Beziehungen, 2 (1), 25985.
Cerny, Philip G. (1995), Globalization and the changing logic of collective action,
International Organisation, 49 (4), 595625.
Clapham, Andrew (2006), Human Rights Obligations of Non-State-Actors, Oxford: Oxford
University Press.
Cutler, A. Claire, Virgina Hauer and Tony Porter (eds) (1999), Private Authority and
International Aairs, Albany, NY: SUNY Press.
Deutsch, Karl W. (1969), Nationalism and its Alternatives, New York: Free Press.
Endres, Alfred and Cornelia Ohl (2005), Kyoto, Europe? An economic evaluation of the
European Emission Trading Directive, European Journal of Law and Economics, 19, 1739.
Eurostat (2004), Total expenditure on social protection, http://epp.eurostat.ec.europa.eu/
portal/page?_pageid=1996,39140985&_dad=portal&_schema=PORTAL&screen=detailref&language=en&product=Yearlies_new_population&root=Yearlies_new_population/C/
C5/C54/dae10000, accessed 19 October 2007.
ExxonMobil (2006), 2006 corporate citizenship report. CEO statement, http://www.
exxonmobil.com/Corporate/ccr 06/community_ceo_statement.aspx, accessed 6 November
2007.
Friedman, Milton (1962), Capitalism and Freedom, Chicago, IL: University of Chicago Press.
Friedman, Milton (1970), The Counter-Revolution in Monetary Theory: First Wincott
Memorial Lecture, Delivered at Senate House, University of London, 16 September,
London: Institute of Economic Aairs.
Hall, Rodney B. and Thomas J. Biersteker (eds) (2002), The Emergence of Private Authority
in Global Governance, Cambridge: Cambridge University Press.
Hasenclever, Andreas, Peter Mayer and Volker Rittberger (1997), Theories of International
Regimes, Cambridge: Cambridge University Press.
Hassel, Anke (2006), The transformation of global public policy the case of labour standards, unpublished manuscript, Berlin: Hertie School of Governance.
Hertz, Noreena (2001), Better to shop than to vote?, Business Ethics: A European Review,
10 (3), 19093.
Kahler, Miles (1995), International Institutions and the Political Economy of Integration,
Washington, DC: Brookings Institution.
Kearney, A.T. (2003), Foreign Policy Magazine Globalization Index 2003: measuring globalization: whos up, whos down?, Foreign Policy, 134, 6072.

310

Handbook of research on global corporate citizenship

Kerwer, Dieter (2006), Governing nancial markets by international standards, in Mathias

Koenig-Archibugi and Michael Zrn (eds), New Modes of Governance in the Global System.
Exploring Publicness, Delegation and Inclusiveness, Basingstoke: Palgrave, pp. 77100.
Kolk, Ans and Rob van Tulder (2005), Setting new global rules? TNCs and codes of conduct,
Transnational Corporations, 14 (3), 127.
Kostova, Tatiana and Srilata Zaheer (1999), Organizational legitimacy under conditions of
complexity: the case of the multinational enterprise, Academy of Management Review,
24 (1), 6481.
Krugman, Paul (1996), Pop Internationalism, Cambridge, MA: MIT Press.
Leibfried, Stephan and Michael Zrn (eds) (2005), Transformations of the State?, Cambridge:
Cambridge University Press.
Lindblom, Charles E. (1977), Politics and Markets. The Worlds PoliticalEconomic Systems,
New York: Basic Books.
Lowe, Ross E., Charles A. Malouf and Annette L. Jacobsen (2006), Consumer Education and
Economics, New York: Glencoe/McGraw-Hill, 6th edition.
Marshall, Thomas H. (1975), Social Policy in the Twentieth Century, London: Hutchinson.
Matten, Dirk and Andrew Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
Miller, Roger LeRoy and Alan D. Staord (2005), Economic Education for Consumers,
Boston, MA: South-Western Educational Publications, 3rd edition.
Moon, Jeremy, Andrew Crane and Dirk Matten (2005), Can corporations be citizens?
Corporate citizenship as a metaphor for business participation in society, Business Ethics
Quarterly, 15 (3), 42953.
Moravcsik, Andrew (1999), The new statecraft? Supranational entrepreneurs and international cooperation, International Organization, 53 (2), 267306.
Mosdorf, Siegmar (2005), Regiert uns die fnfte Gewalt? ber die Einuss-Architektur
von Staat und Wirtschaft in der Gesellschaft des 21. Jahrhunderts (Are we being ruled by
a fth power? On the structure of business and state inuence), Internationale Politik,
60 (10), 6973.
North, Douglass C. (1981), Structure and Change in Economic History, New York and
London: W.W. Norton.
Oe, Claus (2006), Unternehmen, Staat und Globalisierung aus sozialwissenschaftlicher
Perspektive (Enterprises, the state and globalization from a social science perspective),
unpublished manuscript, Berlin: Hertie School of Governance.
Palazzo, Guido and Andreas G. Scherer (2006), Corporate legitimacy as deliberation: a communicative framework, Journal of Business Ethics, 66, 7188.
Polanyi, Karl (1957), The Great Transformation: The Political and Economic Origins of Our
Time, Boston, MA: Beacon Press.
Pontusson, Jonas (2005), Inequality and Prosperity: Social Europe Vs. Liberal America, New
York: Cornell University Press.
Reich, Robert B. (1998), The new meaning of corporate social responsibility, California
Management Review, 40 (1), 817.
Risse, Thomas (2002), Transnational actors and world politics, in Risse, Walter Carlsnaes
and Beth Simmons (eds), Handbook of International Relations, London: Sage, pp. 25574.
Scherer, Andreas G., Guido Palazzo and Dorothe Baumann (2006), Global rules and private
actors: toward a new role of the transnational corporation in global governance, Business
Ethics Quarterly, 16 (4), 50532.
Scholte, Jan A. (2000), Globalization? The denitional issue again, Working Paper Series,
03/1, Toronto: Institute on Globalization and the Human Condition.
Seeleib-Kaiser, Martin (2001), Globalisierung und Sozialpolitik: Ein Vergleich der Diskurse und
Wohlfahrtssysteme in Deutschland, Japan und den USA (Globalization and social policy: a
comparison of the discourses and welfare-state systems in Germany, Japan and the USA),
Frankfurt am Main: Campus.
Streeck, Wolfgang and Norbert Kluge (eds) (1999), Mitbestimmung in Deutschland. Tradition
und Ezienz (Co-determination in Germany: tradition and eciency), Frankfurt and New
York: Campus Verlag.

The politicization of economization? 311

Streeck, Wolfgang and Phillipe C. Schmitter (1985), Private Interest Government. Beyond
Market and State, Beverly Hills, CA: Sage.
Villancourt Rosenau, Pauline (2000), Public-Private Policy Partnerships, Cambridge, MA:
MIT Press.
Vogel, David (1997), Trading up and governing across: transnational governance and environmental protection, Journal of European Public Policy, 4 (4), 55671.
Werther, William B. and David Chandler (2006), Strategic Corporate Social Responsibility.
Stakeholders in a Global Environment, Thousand Oaks, CA, USA and London, UK: Sage.
Windho-Heritier, Adrienne (1987), Policy-Analyse: Eine Einfhrung (Policy analysis: an
introduction), Frankfurt am Main and New York: Campus.
Wolf, Klaus D. (2006), Private actors and the legitimacy of governance beyond the state.
Conceptional outlines and empirical explorations, in Arthur Benz and Yannis
Papadopoulos (eds), Governance and Democracy: Comparing National, European and
International Experiences, Abingdon: Routledge, pp. 200227.
Young, Iris M. (2004), Responsibility and global labor justice, Journal of Political Philosophy,
12 (4), 36588.
Zrn, Michael (1992), Jenseits der Staatlichkeit (Beyond statehood), Leviathan, 20 (4),
490513.
Zrn, Michael (1998 [2005]), Regieren jenseits des Nationalstaates. Denationalisierung und
Globalisierung als Chance (Governance beyond the nation-state: denationalization and
globalization as an opportunity), Frankfurt am Main: Suhrkamp, 2nd edition.
Zrn, Michael (2000), Democratic governance beyond the nation-state: the EU and other
international institutions, European Journal of International Relations, 6 (2), 183221.
Zrn, Michael, Martin Binder, Matthias Ecker-Ehrhardt and Katrin Radtke (2006),
Politische Ordnungsbildung wider Willen Ein Forschungsprogramm zu transnationalen
Konikten und Institutionen (The building of a political order contrary to will a research
programme on transnational conicts and institutions), WZB Discussion Paper No. SP IV
2006-301, Wissenschaftszentrum Berlin fr Sozialforschung, http://skylla.wzb.eu/pdf/2006/
iv06-301.pdf, accessed 19 October 2007.

PART IV
DISCIPLINARY
PERSPECTIVES ON
CORPORATE
CITIZENSHIP

15 The economic view of corporate

citizenship
Jessica C. Ludescher, Abagail McWilliams
and Donald S. Siegel

Introduction
Corporate citizenship (CC) is broader than existing concepts in the business and society literature, such as corporate social responsibility (CSR)
and corporate social performance (CSP). CC considers the role of corporations as social institutions and their ability to respond to non-market
pressures, especially in a global context. Consistent with its roots in political and critical theory, CC extends the concept of corporate accountability
beyond the economic dimension to include the environmental and social
realms.
The term citizenship itself invites a dierent type of ethical justication
compared to that evoked by the term social responsibility. Citizens are
members of society who have rights, benets and responsibilities. They are
expected to abide by societys laws and norms, and may incur penalties for
violating those laws and norms. At an individual level, good citizenship
denotes the assumption of non-mandated responsibilities to advance the
welfare of society. These distinctions can be mapped onto the concept of
corporate citizenship. Firms are legal entities, which can be regarded as
citizens, to the extent that society grants them rights and privileges. In
exchange for the benets of citizenship, corporations must abide by
societys laws and norms. However, good CC requires that rms also exercise additional responsibilities to society. CSR, on the other hand, typically does not denote such a broad or inclusive commitment. Corporations
can be socially responsible merely by satisfying certain stakeholder
demands.
Locating CC in corporate involvement with civil society, rather than
merely with individual (rm) stakeholder groups, constitutes its chief
source of dierentiation from CSR, and ultimately, makes CC a broader
concept. In this chapter, we present a neoclassical economic perspective on
CC, which extends the research of McWilliams and Siegel (2001;
McWilliams et al. 2006) on the economic and strategic implications of CSR
to incorporate these additional dimensions. Our aim is to present the economic case for CC, and to show that various ethical objections raised by
315

316

Handbook of research on global corporate citizenship

economists to corporate social obligations do not hold for either CSR or

CC, and especially not for CC.
Following McWilliams and Siegels denition of CSR, we dene CC,
CSR and CSP collectively as activities where the rm goes beyond legal
compliance and engages in actions that appear to further some social
good, beyond the interests of the rm and that which is required by law
(McWilliams and Siegel 2001, p. 117). CSR activities have been posited to
include incorporating social characteristics or features into products and
manufacturing processes (for example, aerosol products with no
uorocarbons or environmentally friendly technologies), adopting progressive human resource management practices (for example, promoting
employee empowerment or quality of the work environment), achieving
higher levels of environmental performance through recycling (for
example, recycling paper rather than cutting down additional trees),
advancing the goals of community organizations (for example, working
closely with groups such as United Way), providing humanitarian aid in the
event of catastrophes (for example, relief aid to victims of natural disasters) and philanthropic assistance to needy communities (for example,
technology donations to inner-city public schools). CC activities incorporate all these CSR activities but also include such things as investing in a
healthier environment, supporting human rights and requiring safe
working conditions from all suppliers. Because economic globalization
extends business operations beyond that of a given society, CC demands
that business enhances the welfare of all the societies in which it operates,
not just that of the home base. It is our view that, ultimately, CC requires
global citizenship.
There is growing interest in the economic consequences of CSR and CC,
especially for executives at multinational, multidivisional companies. These
corporate leaders are mindful of the fact that business norms and standards, regulatory frameworks and stakeholder demand for social contributions can vary substantially across nations, regions and lines of business.
Such top-level executives are also aware that their divisional managers are
under constant pressure from employees, suppliers, community groups,
non-government organizations (NGOs) and government to increase their
involvement in CSR and CC. Globalization raises concerns for managers
of multinational corporations because diering, and sometimes competing, ethical expectations result in unpredictable and non-uniform payos
for social contributions. There is also growing awareness that some issues,
such as water and air pollution, cannot eectively be addressed within
national borders, and therefore, expectations for responsible activities are
broader. In sum, there are numerous antecedents and consequences of CSR
and CC, which require managers to conceptualize and estimate the

The economic view of corporate citizenship 317

economic returns to engagement with stakeholders and civil society.
However, the complex nature of these drivers often leaves managers
without a clear direction.
Researchers have been moving beyond just identifying CSR and CC
activities and examining the economic impact of these activities (for the
rm and for society) toward evaluating the ethical basis of their utilization
from an economic perspective. The question of corporate legitimacy has
become pressing for business managers, stakeholders and civil society.
Palazzo and Scherer (2006) argue that tensions between these groups over
the role of the corporation in society have given rise to a new politicization
of the corporation. Following Suchmans (1995) discussion of legitimacy,
they argue that under the conditions of globalization the corporations
organizational legitimacy needs to be established along moral, as opposed
to pragmatic or cognitive lines. In other words, a corporation is morally
legitimate if its conduct and institutional structure are ethically justied in
conscious moral judgments and discourses with various stakeholder
groups.
Legitimacy is subjectively perceived and constructed in processes of
social interaction. Suchman distinguishes between three types of legitimacy: pragmatic, cognitive and moral. Corporations frequently attempt to
secure pragmatic legitimacy through strategic activities that create real or
apparent benets to groups other than shareholders, but which ultimately
are designed to advance the interests of the shareholders alone. Cognitive
legitimacy emerges when corporations and their output are taken for
granted. Corporations possess cognitive legitimacy in so far as the benets
to society of their wealth-creating function are tacitly supported and
remain unchallenged by stakeholders and civil society. Pragmatic legitimacy is based on the conscious perceptions of benecial outcomes of corporate activities by self-interested actors, whereas cognitive legitimacy
derives its source from the unreective and unconscious acceptance of the
status quo. Moral legitimacy, by contrast, is the result of conscious moral
judgments and is socially constructed in discursive processes.
We locate our discussion of CSR and CC in an economic interpretation
of Palazzo and Scherers revitalization of the legitimacy question. We
extend their interpretation of McWilliams and Siegels (2001) view of
strategic CSR as a corporate attempt to achieve legitimacy by pragmatic
means (underpinned by the supposed cognitive legitimacy of the prot
function in neoclassical economics) to a broader discussion of the ethical
legitimacy of CSR and CC in economic theory. We begin by asserting that,
in so far as CSR and CC are unreectively assumed to be ethically justied,
the demand for such activity by stakeholders and civil society merely stems
from an attempt to secure cognitive legitimacy for the corporation by

318

Handbook of research on global corporate citizenship

means of a less articulated theory of the rm than that of neoclassical

economics.
From the narrower perspective of managers, the critical question about
CSR and CC is: what level of engagement in socially responsible activities
will maximize (short- or long-term) protability for the benet of the rm
and its shareholders? From a social or political perspective on CSR and
CC, the critical question is: how can managers be encouraged to engage in
socially responsible activities so as to benet society? From an economic
perspective on CSR and CC, the critical questions are: are socially responsible activities consistent with the property rights of shareholders and do
socially responsible activities enhance or diminish the public welfare? We
apply the research of McWilliams and Siegel (2001) with respect to the
managerial question to an evaluation of the economic question and thus
demonstrate that both CSR and CC are ethically legitimate from a neoclassical economic view. We argue that CSR and CC can be distinguished
by the fact that managers tend to seek pragmatic legitimacy for their corporation when engaging in CSR, whereas they tend to seek ethical legitimacy for all corporations when engaging in CC.
The remainder of this chapter is organized as follows. In the following
section, we discuss a variety of economic theories that shed light on CSR.
Then, we apply our discussion of CSR to CC, while focusing on key
dierences between the two concepts. We advance a view of CC that
reframes the ethical problems with CSR raised by many economists. We
also briey outline an agenda for theoretical and empirical research on the
economic implications of CC.
Theoretical perspectives on CSR
Numerous theories have been brought to bear on the subject of CSR. The
question of whether CSR is ethically legitimate has been hotly debated as
well as analyzed from a variety of disciplinary perspectives (Buchholz and
Rosenthal 1999; The Economist 2005). Here we only consider the economic
arguments concerning the legitimacy and use of CSR. Our model of strategic CSR aligns the interests of rms and society and obviates the need for
ethical as opposed to economic considerations. With this in mind, we
analyze the eectiveness of CSR for rms in light of several economic concepts and raise a number of problems that have yet to be resolved.
The ethical legitimacy of CSR
Theodore Levitt can be credited with establishing an agenda for the debate
about the social responsibility of business in his seminal Harvard Business
Review article entitled The dangers of social responsibility, in which he
cautions that governments job is not business, and businesss job is not

The economic view of corporate citizenship 319

government (Levitt 1958, p. 47). Milton Friedman (1970) expressed a
similar objection to CSR and added that it signals an agency problem
within the rm, in that the agents/managers fail to serve the interests of the
principals/stockholders when they engage in socially responsible behavior.
This agency theory perspective implies that CSR is a misuse of corporate
resources that would better be spent on valued-added internal projects or
returned to shareholders. Friedmans argument also implies that CSR is an
executive perk, in the sense that managers use CSR to advance their careers
or other personal agendas. Friedman has even gone so far as to decry CSR
as immoral (Bakan 2004). Friedmans main reason for rejecting CSR
appears to be that it usually entails the violation of property rights, as he
holds that the corporation is an instrument of the stockholders who own
it (Friedman 1962, p. 135).
Jensen and Meckling (1976) extended agency theory to an analysis of the
rm, modeling the corporation as a market that is not owned by anyone,
not even the stockholders. Calling the rm a nexus-of-contracts, they
argue that social responsibility is a nonsensical concept because rms are
not the sorts of entities to which the term responsibility can meaningfully
be applied. In other words, individuals as moral actors can be responsible,
but rms cannot. The nexus-of-contracts theory implies that managers
should concentrate on abiding by the rms contractual commitments to
constituencies and the duciary duty owed to shareholders. CSR is bound
to violate some groups contractual rights. In the case of shareholders, it
violates the rights to residual revenue (prot). In this way, Jensen and
Mecklings view is aligned with Friedmans.
In a similar vein to Friedman, Elaine Sternberg (2002) has argued that
CSR is a form of theft and that managers exploit CSR so as to avoid
accountability for their management of the rm. In a January 2005 survey
of CSR, The Economist (2005) argued that most CSR is immoral, not only
because it is a form of theft, but also because it inhibits the process by which
the free market secures optimal resource allocation. The Economists
second concern revives Levitts and Friedmans initial skepticism about
CSR. Like Friedman, The Economist points to the role of the market in
advancing the public welfare of society, indicating that CSR attempts to do
what the market mechanism already does, only not as eciently as the
market. All of these perspectives reveal problems with the ethical legitimacy of CSR at both the micro and macro levels. At the micro level, the
ethical problem with CSR is that it violates property (and other contractual) rights. At the macro level, the ethical problem with CSR is that it is a
poor substitute for the market mechanism.
R. Edward Freeman (1984), building on Chester Barnards (1938)
inducementcontribution framework, presented a more positive view of

320

Handbook of research on global corporate citizenship

managers support of CSR. Freemans stakeholder theory asserts that managers must satisfy a variety of constituents (for example, workers, customers, suppliers, local communities) who can inuence rm outcomes.
According to this view, it is not sucient for managers to focus exclusively
on the needs of stockholders or the owners of the corporation, even if their
goal is to maximize wealth for owners. Stakeholder theory implies that it
can be benecial for the rms wealth objectives to engage in certain CSR
activities that non-nancial stakeholders perceive to be important, because,
without CSR, these groups might withdraw their support for the rm.
Stakeholder theory was expanded by Donaldson and Preston (1995), who
stressed the ethical justications for CSR, as well as the business case for
engaging in such activity.
Goodpaster (1991) has argued that there is an essential tension in the
stakeholder literature between those who advocate the advancement of
stakeholder interests as a means to shareholders ends of wealth maximization and those who argue for the extension of ethical obligations to all
stakeholders in the form of a duciary duty. He refers to the former as a
strategic and the latter as the multiduciary approach to stakeholder management and argues that both approaches to stakeholder engagement
present ethical problems. Put in Suchmans (1995) terms, managers can
approach stakeholder engagement for the purposes of securing either pragmatic or ethical legitimacy. In Goodpasters view, the strategic approach
fails to recognize the entitlement of stakeholders to ethical consideration,
while the multiduciary approach fails to recognize the primacy of shareholder entitlements in a rm and the signicance of shareholder entitlements to the capitalist system. In other words, the former places economic
considerations above ethical ones and the latter does the reverse. There is
an apparent trade-o between economics and ethics in Goodpasters socalled stakeholder paradox.
Another economic perspective applied to CSR is the theory of the rm.
Unlike the earlier agency theory models provided by Friedman and Jensen
and Meckling, a theory of the rm approach can be applied to illuminate
the alignment between CSR activities and prot. Although Goodpaster
might regard this sort of CSR as strategic stakeholder management, we
advance a view that transcends his ethical characterization. When understood in its economic complexity, CSR can be seen to advance the interests
of shareholders, other stakeholders, and society at large. Ergo, there is no
necessary tension between economic and ethical considerations.
Jones (1995) introduced a theory of the rm to study the benets of CSR
and concluded that companies involved in repeated transactions with
stakeholders on the basis of trust and cooperation are motivated to be
honest, trustworthy and ethical because the returns on such behavior are

The economic view of corporate citizenship 321

high. A more formal model of prot-maximizing CSR was developed in
McWilliams and Siegel (2001). These authors outlined a simple model in
which two companies produce identical products, except that one rm adds
an additional social attribute or feature to the product, which is valued by
some consumers or, potentially, by other stakeholders such as investors. In
this model, managers conduct a costbenet analysis to determine the level
of resources to devote to CSR activities/attributes. That is, they assess the
demand for CSR and also evaluate the cost of satisfying this demand. This
analysis allows managers to select an optimal amount of CSR. From here,
McWilliams and Siegel conclude that rms should consider CSR as a
strategic investment. Another way of putting this point is that managers
should seek pragmatic legitimacy through their CSR.
To the extent that rms engage in CSR strategically, this behavior can be
examined through the lens of the resource-based view of the rm (RBV).
RBV, as introduced by Wernerfelt (1984) and rened by Barney (1991),
borrows heavily from Penroses theory of the rm (1959). RBV postulates
that rms are bundles of heterogeneous resources and capabilities that
are imperfectly mobile across rms. Barney (1991) maintains that if
these resources and capabilities are valuable, rare, inimitable and nonsubstitutable, they can constitute a source of sustained competitive advantage. The rst theoretical paper to apply the RBV framework to CSR was
Hart (1995), who focused exclusively on environmental social responsibility.
Hart asserted that, for certain types of rms, environmental social responsibility can constitute a resource or capability that leads to a sustained competitive advantage. Russo and Fouts (1997) tested this theory empirically
using rm-level data on environmental and accounting protability, and
found that rms with higher levels of environmental performance had superior nancial performance, which they interpreted to be consistent with the
RBV theory.
These theory-of-the-rm perspectives on CSR yield several meaningful
managerial implications. The rst is that CSR can be an integral element of
a rms business and corporate-level strategies and should be considered as
a form of strategic investment that yields value for shareholders. A second
implication is that it is possible to generate a set of predictions regarding
patterns of investment in CSR across rms and industries. A third implication is that further examination of economic concepts such as product
dierentiation, asymmetric information, market structure and competition, externalities and public goods will shed more light on the consequences of CSR. The ultimate implication of the theory-of-the-rm
perspective is that enhancement of public welfare can ensue from corporate
self-interest. Collectively, these implications shed considerable light on the
critical economic questions about CSR, outlined in our introduction. We

322

Handbook of research on global corporate citizenship

now turn our discussion to several specic economic concepts, which we

apply to CSR.
Analysis of CSR in terms of economic concepts
In the following analysis of CSR, we explain how CSR can rationally be utilized by corporate managers as a business strategy to maximize prots for
shareholders, thus respecting property rights and maintaining consistency
with the viewpoints of Levitt, Friedman, Jensen and Sternberg. Our analysis also makes use of the insights of stakeholder theory that reveal the importance of satisfying the ethical preferences of stakeholders, particularly of
customers, as a way of creating value for shareholders. This theory-of-therm approach, while ethically legitimate from an economic standpoint, is
essentially driven by managers motives to do what it takes to continue generating wealth. Another motive, or sometimes unanticipated consequence, is
heightened legitimacy for the rm, pragmatically construed.
CSR as product dierentiation A primary implication of the McWilliams
and Siegel (2001) study of CSR is that CSR attributes and activities constitute a range of dierentiation opportunities for rms. We note that in the
context of using CSR to dierentiate products, it is important to distinguish
between two types of product dierentiation. The rst is vertical
dierentiation, which occurs when most consumers prefer one product to
another. For example, other things being equal, most consumers prefer a
more fuel-ecient vehicle. In the context of CSR, such a situation could
occur when it is clear in the mind of consumers that the product with a CSR
characteristic is better than the product without such a characteristic. For
example, a hybrid version of a Honda Accord generates less pollution than
a standard Honda Accord. Thus, it is clear to most consumers that the
hybrid car is better than the standard model. Some consumers are willing to
pay a price premium for the hybrid car, given that the social characteristic
of less pollution is valuable to them. Frank (2004) has argued that this type
of CSR enables the rm to stay competitive despite incurring the higher
costs associated with producing socially responsible products, because the
rm is able to pass the higher costs of social responsibility on to the consumer. This strategy works if consumers have preferences for socially
responsible products. When rms engage in this type of dierentiation they
can also gain, because oering such products may strengthen or maintain
the rms reputation (Fombrun and Shanley 1990). Vertical product
dierentiation also adds value by allowing the rm to meet a particular
market demand.
In contrast, horizontal dierentiation occurs when only some consumers
prefer a particular product, but the preference is based on taste, rather than

The economic view of corporate citizenship 323

quality. For example, some consumers choose a particular vehicle because
of the color. This type of dierentiation does not contribute to the reputation of the rm and does not allow the rm to charge a premium price.
Horizontal dierentiation also operates for dierent brands. For example,
some consumers prefer Coke to Pepsi, while others have the opposite preference. However, horizontal dierentiation can be applied to controversial
moral issues such as open immigration and gay marriage. Consumers may
decide to purchase from retailers that they believe adhere to moral standards similar to their own.
The importance of advertising Most consumers become aware of product
dierentiation through advertising. That is, the rm makes the consumer
aware of the dierentiation. The relationship between CSR and advertising
is an interesting one, which bears further reection. Based on the model from
McWilliams and Siegel (2001), we would expect levels of investment in CSR
to be higher for established rms in more mature industries, since the extent
of product dierentiation will be greater in such sectors and consumers will,
in general, have more sophisticated tastes and knowledge regarding products
and rms. It is clear that such companies are likely to derive greater benets
from the use of CSR for reputation enhancement/protection.
When considering advertising of CSR, it is important to distinguish
between persuasive and informational advertising. Persuasive CSR advertising attempts to positively inuence consumer tastes for products with
CSR attributes (for example, organic produce or Fair Trade). It follows that
this type of advertising needs not be rm specic since the cultivation of
CSR tastes would result in decisions to purchase products of a variety of
rms and possibly even from competitors. For instance, a consumer might
be introduced to the concept of Fair Trade coee at a health food store, and
then later seek out other Fair Trade products and coees at Trader Joes.
Informational CSR advertising merely provides information about the CSR
characteristics or CSR managerial practices of the rm and may take the
form of CSR reporting (for example, in annual reports). This type of advertising is rm specic and meant to increase sales for the rm that does informational advertising. Following Milgrom and Roberts (1986), one could
view a high level of CSR advertising (either persuasive or informational
CSR advertising) as a signal of product or rm quality. This is because
established rms are more likely to invest in advertising. The implication of
our analysis is that high levels of CSR advertising should enhance reputation building and maintenance. Ideally, a combination of persuasive and
informational advertising of CSR activities would increase the value to the
rm of engaging in those activities, since persuasive advertising is needed to
convince the customer of the importance of CSR and informational

324

Handbook of research on global corporate citizenship

advertising is needed to connect the activities explicitly to the rm rather

than its competitors. Persuasive advertising alone will not maximize the
benets to the rm of CSR conduct because competitors can free ride on
the advertising.
The problem of information asymmetry In contrast to the ease of valuing
CSR product attributes, consumers often nd it dicult to determine
whether a rms internal operations meet their standards for social responsibility. The level of asymmetric information regarding internal operations
can be mediated by the rm itself or by activists. For instance, companies
such as McDonalds, Motorola and Nike publish annual reports on social
responsibility. One can view this activity as a form of informational advertising, especially for more general types of CSR. While such reports may be
useful, some consumers perceive this information as biased, since it is
ltered through senior management. Feddersen and Gilligan (2001) assert
that activists can play an important role in addressing this concern, by supplying consumers with information they can rely on to choose socially
responsible rms. However, since many activists have an anti-corporate
agenda, their reporting can be biased as well. For example, they might
choose to downplay positive attributes in favor of negative ones. Although
reporting by rms and activists conveys information about social responsibility, there is still considerable information asymmetry between those
groups and external stakeholders.
The irrelevance of market structure Another critical issue concerns the
nature of the market structure of the rms industry. A key conclusion of
the McWilliams and Siegel (2001) paper was that, in equilibrium, rms that
engage in CSR will earn the same rate of prot as rms that do not engage
in CSR. We refer to this nding as the neutrality result. This nding was
misinterpreted by Piga (2002) as implying that strategic CSR can only occur
in monopolistically competitive industries, since some oligopoly models of
vertically dierentiated markets predict that (in equilibrium) rms selling
the higher-quality product (in our case, the rm that sells a good with a CSR
characteristic) reap abnormal prots. A monopolistically competitive
industry consists of numerous rms, some product dierentiation, and relative free entry. Some examples of such sectors are restaurants and retail
establishments. On the other hand, oligopolies are characterized by a consolidated industry structure, considerable entry barriers and substantial
product dierentiation (for example, autos, computers).
We believe that the neutrality result holds under both oligopoly and
monopolistic competition (McWilliams and Siegel 2002). This result is
implied for monopolistic competition because sectors with such a structure

The economic view of corporate citizenship 325

are characterized by both horizontal and vertical dierentiation, a fragmented industry structure and very low entry barriers. Under this scenario,
it is impossible for rms to use CSR to outperform rivals because rival rms
can rely on horizontal dierentiation or dierent (non-ethical) types of vertical dierentiation to make a prot. Examples of rms in monopolistically
competitive industries that engage in CSR include restaurants, hotels, companies selling organic produce and dierent types of retail establishments.
For example, McDonalds advertises its socially responsible behavior to
increase consumer demand. Another fast-food chain might use a dierent
horizontal dierentiation strategy, such as oering ethnic foods (tacos and
burritos). These dierent dierentiation strategies would lead to similar
protability, because they attract consumers for dierent reasons (or they
attract dierent customers).
The neutrality result likely holds for oligopolistic markets as well. That
is because, while some oligopoly models predict that rms producing a
higher quality product earn abnormal returns, these ndings hinge on the
assumption that costs are constant and independent of quality. These
assumptions were not invoked in the McWilliams and Siegel (2001) model.
Furthermore, recent economic models of CSR (Baron 2001; Feddersen and
Gilligan 2001; Siegel and Vitaliano 2007) identify an important countervailing force on the ability of companies to engage in strategic CSR in oligopolistic industries: activists who target leading rms (for example, the
attacks on Gaps and Nikes Asian production). This countervailing force
makes it dicult for oligopolistic rms to achieve a competitive advantage
through the strategic use of CSR because their rivals are continually forced
by activists to employ a comparable level of CSR. What may not have been
understood about the neutrality eect is that rms within the same industry will have the same rate of prot. But prots vary across industries, so
that in oligopolies all rms may make higher prots than all rms in some
more competitive industries.
The potential for competitive advantage Another approach to the neutrality result is to ask whether CSR can create a sustainable competitive advantage. A paper by Reinhardt (1998) nds that a rm engaging in a
CSR-based strategy can only generate an abnormal return if it can prevent
competitors from imitating its strategy. In competitive markets this is
unlikely, since CSR is highly transparent, with little causal ambiguity. In
fact, the strategic necessity of communicating information about CSR to
consumers via reporting and advertising enhances transparency, thus
eroding competitive advantage.
Other theoretical studies (Dutta et al. 1995; Hoppe and Lehmann-Grube
2001) show that any early-mover advantages that might be gained by

326

Handbook of research on global corporate citizenship

oering higher-quality products (recall that CSR is modeled as a quality

improvement in McWilliams and Siegel 2001) are eroded when competitive strategies are observable. However, various strategies can be deployed
to counteract this loss of rst-mover advantage brought on by transparency. Porter and Kramer (2002) suggest that corporate philanthropy
can result in loyalty to the company and that careful selection of location
target can enable companies to reap benets that are uniquely valuable to
the company. Kanter (1999) has also argued that corporate contributions
to the social sector can be designed as test projects for product or system
innovations that can be exported to other units operated for prot. She
regards such strategies as corporate social innovation (CSI), and concludes
that they reap long-term gains for both the rm and society.
Prot and the public welfare CSR may also be used in the context of political strategies that create regulatory barriers to imitation. One such strategy would be for rms to use government regulation to impose CSR on
rivals who do not employ an appropriate technology, thus raising the costs
for those rivals relative to the initiating rm. Marvel (1977) provided an
example of this political strategy in the British textile industry in the early
1800s. The rst child labor law was passed in Great Britain after the mill
owners who employed modern technology banded together and lobbied for
restrictions on child labor, which had been used more by the older, smaller
mills. This new law placed the smaller mills at a competitive disadvantage
because it forced them to purchase the newer machinery that the other mills
already possessed. McWilliams et al. (2002) applied the RBV framework to
demonstrate how US rms can use political strategies based on CSR to
raise regulatory barriers that prevent foreign competitors from using substitute (for example, low labor cost) technology.
In its 2005 survey of CSR, The Economist denounced such political
strategies as a form of hobbling the competition, and labeled such behavior pernicious CSR. This ignores the potential benets of political strategies that would restrict the use child labor and sweatshops in less developed
countries or impose more stringent environmental standards globally
(McWilliams et al. 2002).
There is some debate in neoclassical economics about whether rms
political strategies enhance or diminish the public welfare. In general, advocates of the free market oppose CSR for the same reasons they oppose
government regulation (Friedman 1962, 1970), whereas advocates of a
regulated market favor CSR, although many would prefer the government
to regulate the market to the end of public welfare rather than rely on corporate volunteerism. In the view of those who are optimistic about the
potential of the free market, such political strategies harm society over the

The economic view of corporate citizenship 327

long run by de-liberalizing the market and thus inhibiting competition and
ecient production. However, rms often make use of political strategies
in order to reduce rather than increase government regulation. Instead of
lobbying to demand higher standards for workers, they might lobby to
reduce labor laws, for instance. A free market proponent is inclined to
regard such decreased regulation as benecial to society over the long run
because the lowered costs will increase eciency, and competition between
producers will eventually drive up wages. There is much debate about
whether this invisible hand theory works as well in practice as it does in
theory. More problematic than the issue of work conditions is the issue of
environmental integrity. Corporate lobbying to reduce environmental regulations might result in a permanent degradation of the commons, such as
irreversible global warming.
It is because corporations utilize political strategies more often to reduce
rather than enhance regulations that pessimists about the free market tend
to be suspicious of CSR. The fact that corporations only pursue political
strategies that will add value to their bottom line, whether through heightened or reduced regulation, leads advocates of regulation to regard such
political strategies skeptically. The important issue to recognize is that corporations primarily act according to a mandate of self-interest and are not
inclined to advance the public welfare, or consider the interests of society
for its own sake. However, a more complex picture of self-interest, as it is
currently being developed in behavioral economics, can lead to a more
favorable reading of corporate political strategies that aim to increase regulation. In this chapter we take an optimistic view of both the free market
and CSR since we assume that people have preferences for socially responsible conduct that leads them to reward corporations for engaging in CSR,
thus aligning prot and the public welfare. Our approach may be located in
a middle ground between free and regulated markets.
Private and public responsibility The literature also contains numerous
studies of the relation between doing good and doing well the business
case for CSR. Orlitzky et al. (2003) conducted a meta analysis of the analyses of corporate social and nancial performance. They found only a
modest positive eect on performance from doing good. Prima facie, such
ndings might lead one to be pessimistic about the potential of CSR to
enhance the public welfare since the nancial incentives for engaging in
CSR would not be tremendous. Greater attention to the motivations for
engaging in CSR is necessary in order to evaluate the likelihood of a lineup between the private and the public interest.
Asymmetric information makes it dicult to study the antecedents
and consequences of CSR. Managers may perceive that many external

328

Handbook of research on global corporate citizenship

stakeholders view CSR activity more favorably if it is divorced from any

discussion of the bottom line. With this in mind, managers may not reveal
the more practical motivations (such as product promotion, labor cost
control and reputation building) behind their CSR activities, especially in
corporate publications such as annual reports. This lack of candid information has made it dicult to distinguish and discuss the dierent motivations for CSR, which may be private or social or both.
The use of CSR to capture value is referred to as strategic CSR by Baron
(2001, p. 17) who points out that it is the motivation for the action that
identies socially, as opposed to privately, responsible action. That is, if the
motivation is to serve society, at the cost of prots, the action is socially
responsible, but if the motivation is to serve the bottom line, then the action
is privately responsible. Recall that in the agency theory of the rm, a
managers primary obligation is to serve the interests of shareholders, in
other words, to be responsible to a private party rather than a public, or
social, one. For privately responsible actions, there may well be social
benets that exceed the cost of the action to the rm. However, this does
not change the motivation, unless these social benets are of value to managers. For example, providing daycare may reduce the number of juvenile
crimes in a community, but the rm might provide the daycare only because
it increases the availability of workers and lowers the cost of absenteeism.
In situations where benets accrue to multiple private and public parties, as
well as to managers, it is dicult to discern the true motivation of managers actions.
Externalities and public goods These situations are reminiscent of the
consideration of positive externalities associated with innovative activity.
An externality is dened as the impact of an economic agents actions on
the well-being of a bystander, where positive externalities generate benets
and negative externalities generate costs. Pollution is a classic example of a
negative externality, while innovation (whose benets cannot be entirely
appropriated by its creator) is a classic example of a positive externality.
Much of the business ethics literature has focused on rms tendencies to
externalize costs (negative externalities) and has neglected to emphasize the
degree to which corporations externalize benets (positive externalities).
Many environmentalists call for more cost internalization of business
activity, so that CSR would amount to an elimination of negative externalities, or business harm to society. Corporate critics have expressed skepticism that rms have any motivation at all to internalize costs and have
every reason to externalize them. Joel Bakan (2004), for instance, refers to
corporations as externalizing machines because the pressures of intense
competition in the market necessitate continuous cost cutting to survive

The economic view of corporate citizenship 329

and thrive. CSR as a type of positive externality has been somewhat
neglected by the literature, possibly because the motivations for generating
such benets appear to be selsh rather than altruistic. However, while the
private returns to innovation (or those that accrue to the company) may be
high, the social returns to innovation (through the creation of new or
improved products and processes) may be even higher. As such, privately
motivated activities can be extraordinarily benecial for society. If strategic CSR is privately motivated, the benets to society can be more than
marginal. Researchers need to use more direct methods, such as interviews
and surveys, to tease out less self-serving information about the motivations for CSR activity and improve the precision of measurement of the
private and social returns to CSR.
In addition to understanding the motivation for the provision of social
benets, we need to understand how the provision of these goods, through
strategic CSR, aects society. Following Baron (2001), we examine how
strategic CSR can be regarded as the private provision of a public good.
A public good is dened as a good the enjoyment of which is non-rival and
non-exclusive, as opposed to a private good the enjoyment of which is competitive and exclusive. A clean, disease-free environment would be a public
good, while a car or carton of ice cream would be a private good. The
problem with public goods is that private costbenet analyses do not necessarily lead to their provision because the benets to individuals of enjoying a public good are typically lower than the costs they would need to
assume in order to help secure it. It is in each individuals self-interest to
free ride on the costs assumed by others in an attempt to secure the public
good.
However, Baron articulates a view of CSR that eliminates this problem.
Baron asserts that companies compete for socially responsible customers
by explicitly linking their social contributions to product sales. A good
example of such strategic CSR was Ben and Jerrys commitment to donate
7.5 per cent of its pre-tax prot to social causes. Eco-labeling is another
good example of strategic CSR where rms advertise the contribution that
the sale of their private goods makes to the provision of a public good. In
this model, both the rms and the customers contribute to the provision of
a public good because if the customers are willing to pay more for their contribution to, say a clean environment, then their individual costbenet
analyses would seem to imply that they would be willing to pay. The explanation for this apparently non-economical reasoning would be that the customers have an ethical preference that they think they can satisfy through
their product purchases.
Bagnoli and Watts (2003) model this behavior and nd that the propensity of rms to engage in strategic CSR depends on two factors: the

330

Handbook of research on global corporate citizenship

intensity of competition in the market and the extent to which consumers

are willing to pay a premium for social responsibility. The authors conclude
that there is an inverse relation between intensity of competition and provision of CSR. That is, in more competitive markets, less of the public good
will be provided through strategic CSR. Conversely, the less competitive the
market, the more of the public good will be provided. Prima facie, this view
seems correct since more competition results in lower margins and, therefore, less ability to provide additional (social) attributes or activity.
Conversely, less competition leads to the potential for higher margins and
more ability to provide additional attributes or activity.
However, Bagnoli and Wattss analysis fails to take into account the fact
that highly competitive markets contain more rms, a greater number of
which could potentially contribute to providing public goods through their
separate, individual CSR activities. Although CSR is typically employed
strategically when individual rms attempt to set themselves apart from
irresponsible competitors, situations where the ethical demand for a
certain kind of CSR in society is exceptionally high can impose a competitive necessity on all companies in a given industry to increase their individual CSR.
We conjecture that this process is presently occurring in the energy industry, where oil companies competitively advertise their investments in
research on solutions to the climate change crisis and the need for renewable energy. BP arguably sparked this industry trend by heavily advertising
their beyond petroleum initiatives. These initiatives have placed other
rms at a competitive disadvantage relative to BP, because there is a high
global ethical demand for renewable energy technology given the collective
concern about the status of the global environment. Following BP, other
companies such as Chevron and ExxonMobil have begun to advertise their
environmental investments. In this way, competitive pressure works to
secure public goods through the collective, ethically driven demand for
them. If rms in a given industry will be disadvantaged by a failure to
engage in CSR activities, then the intensity of competition will have the
reverse eect to that predicted by Bagnoli and Watts. The large number of
rms in a highly competitive industry may add to the variety as well as the
amount of public goods provided.
An analysis of the provision of public goods by private rms is a
welcome addition to the management literature on CSR, which has been
primarily concerned with answering the following question: do rms do
well by doing good?. Showing that a rm does well by doing good is often
referred to as making the business case for CSR. While understanding the
relation between rm performance and CSR is of primary importance in
the management literature, a more thorough understanding of the CSR

The economic view of corporate citizenship 331

phenomenon requires that we take account of eects that go beyond the
rm and its stakeholders. As we shall demonstrate, the concept of CC
enables us to apply the analysis of public goods and positive externalities
to socially responsible conduct by rms.
Application of economic theories to CC
Strategic CSR, as we have dened it, amounts to a form of product
dierentiation, where management will select such dierentiation to the
extent that doing so is prot maximizing. In our model, advertising of CSR
investments is essential for rms to locate customers who are willing to pay
a premium for socially responsible products, or products made under
socially responsible conditions. An analysis of CSR in terms of public
goods reveals this product dierentiation to be privately rewarding to rms
because customers have an ethical preference for social responsibility and
are willing to contribute to the provision of public goods through the
assumption of costs that exceed the individual benets. Another benet of
such strategic CSR is greater legitimacy for the rm in the mind of certain
stakeholders. While managerial motivation for such rm legitimacy might
be pragmatic in nature, the underlying economic justication for CSR is
creating value for shareholders, which is in itself an ethically legitimate
pursuit. We have suggested that our view of ethical legitimacy can be
extended beyond the pragmatic managerial approach and now turn to a
discussion of CC in light of this issue. We have also suggested that our
model of CSR be applied to other stakeholders besides consumers and we
believe that CC constitutes just such a broader form of CSR. In Table 15.1
we compare CSR and CC to highlight the dierences.
Historical development of CC
CC is a relatively new term in the business and society literature. Early
usage dened it in terms of corporate philanthropy (Carroll 1991) or direct
support of local communities (Altman 1998). Over time, it came to be used
primarily as a synonym for CSR. Currently, there is no consensus regarding the distinction between CC and CSR. Numerous companies ascribe to
either or both of these social commitments, sometimes describing their
activities as responsible corporate citizenship or corporate citizenship
and sustainability. Organizations such as the Conference Board and the
Boston College Center for Corporate Citizenship indicate that the
dierence between CC and CSR is purely semantic. We hypothesize that a
theoretical dierence between CC and CSR can be identied.
CIVICUS, the World Alliance for Citizen Participation, denes CC as
voluntary corporate engagement with civil society (CIVICUS 1999). They
begin to articulate CC as a broader form of CSR in that social performance

332

Handbook of research on global corporate citizenship

Table 15.1

Comparison of CSR and CC

CSR

CC

Motivation

Profits for shareholders (doing

well by doing good)
Pragmatic legitimacy

Profit and the good of society

(good corporate citizenship)
Ethical legitimacy

Outcomes
for firms

Can charge a premium price to

cover the costs of added
attributes and activities
Possible short-run
competitive advantage due to
increased reputation

Continue to reap the benefits of

citizenship long-term
survival, possible long-run
competitive advantage due to
expanded legitimacy

Aected
groups

Firm stakeholders
(shareholders, investors,
consumers, employees,
suppliers, communities,
managers)

Civil society, particularly the

citizens of those countries
where production or
consumption occurs

Outcomes
for aected
groups

Wealth maximization, product

dierentiation, enhanced work
environment, healthier
communities, greater
managerial discretion

Cleaner environment, safer

work conditions, expanded
human rights, unification of
standards across societies

Theories
applied
(selected
authors)

Political economy (Levitt 1958),

agency (Friedman, 1970),
stakeholder Freeman 1984;
(Donaldson and Preston 1995;
Jones 1995), theory of the firm
(McWilliams and Siegel 2001),
resource-based view (Hart
1995; McWilliams et al. 2002)

Philanthropy (Carroll 1991),

strategic philanthropy (Altman
1998; Windsor 2001), theory of
the firm (Fombrun and Shanley
1990), social investing
(Waddock 2001), civil
regulation (Zadek 2001), liberal
citizenship (Matten and Crane
2005)

Theoretical
justifications

Eciency, economic rights,

ethical preferences, short-term
viability and competitive
advantage

Social welfare, human rights,

social expectations, long-term
viability and competitive
advantage

is deemed relevant to civil society organizations (CSOs) and not just to customers and other rm stakeholders, as we have dened CSR. The focus of
CIVICUSs agenda is furthering a mutually supporting relationship
between corporations and society generally. In their view, government, corporations and civil society constitute the primary institutional actors on the
global stage. Given the dwindling role of the nation-state in the global era

The economic view of corporate citizenship 333

(Tavis 1997), it makes sense to begin to analyze the dynamic played out
between corporations and non-governmental institutional players.
Simon Zadek provides an account of CC that emphasizes the corporate
response to what he calls civil regulation (Zadek 2001). In other words,
civil society acts as a non-market, non-governmental force for regulating
the activities of business. The notion that various segments of society can
regulate business is an idea that appears in the CSR literature as well. For
example, Boatright (1999) has used this concept to explain how nancial
markets reward small rms that engage in socially responsible activities.
Although Zadek indicates that managers respond to pressures of civil
society such as boycotts and other reputation assaults, he presents empirical evidence that is consistent with the neutrality result of McWilliams
and Siegel (2000, 2001). That is, the author nds that rms do not reap
abnormal positive returns (on average) for being socially responsible.
Zadek asserts that managers of companies that engage in CC do so
because they are taking heed of the long-term nancial eects of social
engagement, rather than considering the short-term eects typically
heeded by nancial markets. His ndings may also be due to the diculty
of isolating the eect of one strategic activity on the stock price of rms
that engage in many signicant activities at the same time (McWilliams
and Siegel 1997).
Ethical analysis of the citizenship concept
The term citizenship itself requires a dierent sort of ethical justication
from that invoked by the term social responsibility. As noted earlier, citizens have rights, benets and responsibilities and are expected to abide by
societys laws and norms. More importantly, good corporate citizenship
implies additional responsibilities to society.
Matten and Crane (2005) present a more political conceptualization of
corporate citizenship that takes into account the global nature of 21stcentury business and citizenship in this global context. In their conceptualization, rms assume some of the responsibilities of government in
administering social, civil and political rights, when governments fail to do
so (or cannot do so because an issue spans national borders). This view
denes the corporation as an institution that has the power to administer
citizenship rights and regards the term CC as only approximately descriptive of the new corporate role in a global society. Since Matten and Crane
compare corporations to state actors on the global stage, we propose that
a more apt title for this new conceptualization would be corporate state,
since they explicitly compare corporate roles to those of the nation-state.
Because they indicate that the scope of CC potentially includes all citizens
worldwide, their conceptualization dierentiates CC and CSR along

334

Handbook of research on global corporate citizenship

similar lines to the way we have. CC is a broader concept than CSR and has
a more global reach.
Possible issues to be addressed under Matten and Cranes rubric include
sweatshops and child labor, corruption, legal compliance, pollution and
climate change. As to the motivation for such CC, Matten and Crane (2005,
p. 173) suggest that a range of motivations might be evident, from altruism to enlightened self-interest or plain self-interest. For instance, corporations may choose to pay much higher wages at a plant in Indonesia
because they take it as their mission to provide all workers with a living
wage, because they want to generate goodwill at home and abroad for the
sake of gaining repeat business over the long run or because they want to
attract the best workers away from a local competitor. Societies in the developing world may potentially derive considerable gains from CC as Matten
and Crane construe it.
However, the benets to society of such an expanded corporate role are
dubious. As we indicated in our discussion of the ethical legitimacy of CC,
both Levitt and Friedman rejected CSR for the reason that corporations
should not be regarded as governments. Corporations are designed to
advance the wealth objectives of investors via ecient production of goods
and services, not advance the interests of society, although the private
responsibility of pursuing prot might resemble a public responsibility in
the sense that it enhances welfare through ecient production, product
dierentiation, and the creation of positive externalities and public goods.
Nevertheless, the generation of such socially benecial outcomes depends,
in part, on the ethical preferences of shareholders, stakeholders and civil
society, along with the ability of those groups to punish and reward the corporation for its ethically relevant actions. If preferences are more selfinterested than ethical and/or if capacity to punish and reward companies
nancially for unethical or ethical conduct is limited, then corporations will
not necessarily enhance public welfare.
Another problem with the proposed governmental role of global corporations lies in the inadequacy of current corporate governance structures to
serve a democratic role in society. Matten and Crane refer to this problem
as that of inadequate corporate accountability and lack of participatory
mechanisms. Ideally, governments are established to represent the views of
their citizens via democratic processes that respect a set of basic rights that
are codied in a constitution. Corporate motivation to act as governments
would have to be interpreted in light of rm nancial objectives, unless the
prevailing theory of the rm were supplanted by an alternative that tied
rm objectives more explicitly to groups other than investors and that
secured democratic representation for such groups. Although CC begins to
resemble such a theory of the rm, it has yet to demand democratic

The economic view of corporate citizenship 335

processes and constitutional protection of rights that characterize modern
national governments. Without the inclusion of democracy and protection
of rights in corporate governance, any voluntary assumption of governmental functions by corporations ought to be viewed skeptically. We do not
at this point recommend an alternative theory of the rm, but instead recommend caution about advancing a governmental role for corporations.
We advocate global citizenship, not global statehood, for corporations.
The new centrality of civil society
Locating CC in corporate involvement with civil society rather than merely
with individual stakeholder groups constitutes its chief dierentiation from
CSR and makes CC a broader concept. The comparison to government
posed by Matten and Crane could not meaningfully be made in the CSR
literature. However, as we have indicated in our discussion of Matten and
Crane (2005), the broader scope of CC in no way implies that CC is irrelevant to consumers. In fact, from the theory-of-the-rm perspective, CC
must be made relevant to consumers in order to achieve the protmaximizing objectives of the owners. From the perspective of economics,
the importance of shareholder rights cannot be denied, nor can the benets
to society of eciently run rms. Just as our view of CSR insists that added
social dimensions to products must satisfy consumer demand in order to
maximize rm value, so do we posit that CC must manifest engagement
with civil society to the extent that consumers will reward corporations for
such engagement. Corporations would only assume governmental roles if
there were sucient consumers who exercised a preference for CC in the
governmental guise proposed by Matten and Crane.
Shareholders can also gain directly from corporate engagement with civil
society. CC, more than CSR, demonstrates recognition on the part of management that rm performance is deeply connected to social performance.
This is because society grants corporations certain rights and privileges in
exchange for the economic benets that rms add to society. If society does
not regard the economic benets provided by the provision of employment,
sale of products and tax proceeds to be sucient benets, then it may
demand additional contributions. Such contributions could include
nancial advisory services to local CSOs, public schools or governments.
They could also include more traditional philanthropic contributions of
company products and cash to those organizations. The rewards to the rm
of these social contributions take the form of continued support from all
sectors of society. Tangible benets include access to the best quality labor,
repeat business with customers and suppliers, and the absence of bureaucratic obstacles from government. Intangible benets include enhanced
reputation, loyalty and trust. The ultimate benet is ethical legitimacy as a

336

Handbook of research on global corporate citizenship

social institution, which is required for long-term survival of the rm.

Corporations have to be regarded as legitimate institutions if their right to
citizenship will be endorsed rather than challenged by individuals and nonprot civil institutions.
Advertising for corporate legitimacy
In order for the benets of CC to be realized in full, corporations are
required to advertise their contributions to civil society. For the same
reasons that rms must advertise their CSR activities, civil society and customers must be made aware of the contributions made by rms to civil
society. Persuasive advertising will have the eect of promoting CC generally, which may benet other rms that do not advertise their CC activities
heavily. Informational advertising, including social reporting, will net
greater benets to the rm since it provides rm-specic information about
CC, rather than cultivating a preference for CC by rms in general.
Although it might be concluded from our previous discussion of advertising that rms should only engage in informational advertising, we
hypothesize instead that the aim of securing legitimacy that distinguishes
CC from CSR creates an added incentive to engage in persuasive advertising. In other words, rms need to persuade civil society that corporations
behaving with good citizenship merit greater title to social legitimacy than
do bad corporate citizens. The benets of persuasive advertising to the
company are particularly high in cases where the role of corporations in
society is widely contested. Given the debates about globalization and
climate change, the nature of corporate foreign direct investment and environmental practices have come under intense scrutiny. Corporations need
to convince civil society of the value of their economic contributions, as
well as their social and environmental contributions, if they are to be
regarded as legitimate institutions. Persuasive advertising would then be an
important prerequisite to informational advertising.
The need for advertising blurs the distinction between motives for
dierent kinds of legitimacy. In so far as rms seek to persuade civil society
of the importance of their economic function to the greater good, their
actions might be regarded as pragmatically motivated. As Palazzo and
Scherer (2006) have argued, openness to input from civil society, to being
persuaded rather than just persuading, is an important prerequisite to the
attainment of ethical legitimacy. They would regard persuasive advertising
as a form of output-oriented activity that falls under the category of pragmatic legitimacy. The reason is that ethical legitimacy is constituted by
deliberative engagement between diverse institutions and members of civil
society, whereas pragmatic legitimacy is constituted by the self-interested
attempt to dominate discourse and bring dissenting parties under the sway

The economic view of corporate citizenship 337

of the powerful institutions preferred framework. However, they also indicate that some NGOs and other corporate critics approach discourse with
corporations in the same one-sided manner as do corporations. We, too,
acknowledge the limits of current discourses, but still believe that persuasive advertising might be a justiable component of an attempt to create
ethical legitimacy for the corporation.
The value of corporations to society
From the perspective of neoclassical economics, what is ultimately at stake
for corporations is their right to operate for the purpose of maximizing
prots for shareholders. If the climate of public opinion turns too strongly
against the corporate form of doing business then corporations will lose
business to independently owned enterprises or less prot-oriented organizations. Under the inuence of civil society condemnation, stakeholders
will withdraw from involvement with rms and corporations will lose
ground to competitors, eventually going out of business or being forced to
reform completely. The present task of corporations is to convince society
and rm stakeholders that the corporation is providing them with valuable
benets as it pursues protability for shareholders.
Fundamentally, there are two methods of raising condence available to
corporations: demonstrate direct contributions to civil society in the form
of philanthropy, promotion of rights, or environmental protection, or persuade civil society that social and environmental benets will ensue from
corporate economic pursuits, so that the rm is making indirect contributions to society by pursuing prot. The rst method reects the overall
trend of the CSR literature, especially that arising from stakeholder theory,
in that it emphasizes the need for ethical conduct in society. The second
method reects the viewpoint of The Economist (2005), which insists that
society needs to understand the social benets of market mechanisms in
order to recognize the detrimental nature of CSR. We have proposed an
approach that bridges these two seemingly disparate methods in that we
show that direct corporate contributions to society enable corporations to
pursue long-term protability, which would then feed back into more indirect contributions to society. This bridge constitutes the main logic of
strategic CC. Ironically, a further implication of our view is that corporations can gain legitimacy by highlighting the value of their economic function to society, as The Economist proposes.
The value of corporations to society constitutes the central issue of corporate citizenship. Although the CSR literature deals with the same question of whether CSR is good or bad for shareholders and society, the term
CSR conjures up a less precise image of the corporate function. CC tells us
that corporations are social actors just by calling them citizens. The term

338

Handbook of research on global corporate citizenship

itself demands that we ask the question of what sort of citizen corporations
should be. The answer, in part, has to include the economic contributions
made by corporations to society and the environment through the production of goods and services, creation of jobs, ecient use of resources
and innovations. Whether truly good corporate citizenship involves the
assumption of non-legally mandated obligations in the form of philanthropy, expanded protection of rights and environmentally conscious activity, is a further question. In other words, whether or not corporations are
being good corporate citizens just by serving their economic function well
is an open question. Our analysis targets the skeptic of corporate capitalism by favoring a method that advertises corporate engagement with civil
society for the strategic purpose of advancing long-term corporate prot
objectives. In so doing, this analysis bypasses the concerns raised by CSR
skeptics such as Levitt, Friedman, Sternberg, Jensen and The Economist.
However, the real value to society of corporate pursuit of prot deserves a
more just hearing. CC provides corporations with the opportunity to establish the ethical legitimacy of the wealth-creating function in securing the
public welfare, thus legitimating the corporate form.
The issue of how corporations benet society is reminiscent of the topic
of public goods and externalities, broached in our CSR discussion. Where
CSR can constitute the provision of public goods through the sale of private
goods and the elimination of negative externalities such as pollution, CC
goes further in clarifying the rms role as a public good and its generation
of positive externalities. Amartya Sen (1993) suggests that rms themselves
be regarded as public goods in so far as they depend on cooperative eort
that yields benets not easily attainable by the private costbenet analyses
of rm participants. We suggest that this model of the corporation as a
public good be extended to include the benets to society of its prot function. In other words, society not only benets from the ecient production
of goods and services that may or may not satisfy the ethical preferences of
consumers, but also from the creation of jobs, wealth for investors and innovation that the corporate pursuit of prots yields. If the corporate form constitutes a superior model of business, then it follows that its continued
existence and ourishing in society is of value to society. This view implies
that corporations deserve legitimacy as citizens just by virtue of their economic function. Put another way, our analysis posits that corporations are
a public good because of the positive externalities that the private pursuit of
prot generates. This account in no way contradicts our earlier ndings
about the importance of satisfying ethical demand for the provision of
public goods such as a clean environment. Rather it illustrates the seamless
connection between economically self-interested activity and the good of
society, which is the ultimate ethical stance of neoclassical economics.

The economic view of corporate citizenship 339

Conclusion
We have articulated a form of strategic CC that is compatible with the
agency theory of the rm, and reveals the ethical legitimacy of CC, CSR
and the prot function. We posit that managers can perform a costbenet
analysis to determine the optimal amount of CC in which to engage. The
wealth objectives of shareholders can be brought into alignment with the
demands of society for both private and public goods, so long as a longrange perspective is adopted. We have shown that an important implication
of our view is that CC incorporates a much longer time horizon than does
CSR and therefore supports the long-term viability of the rm in a superior way. Nevertheless, advertising of rm CC is necessary in order for the
rm to realize the full benets of CC. Further analysis should examine the
dierent benets and costs to rms and society of CC versus CSR. Does
CC have the potential to provide public goods in a more satisfactory way
than CSR because of its broader scope? In other words, does the engagement with civil society, over and above the satisfaction of consumer preferences, guarantee a more reliable supply of public goods?
The main problem for CC in a global society is the non-uniform nature
of the social expectations worldwide. Multinational, multidivisional rms
have operations in many dierent societies around the globe, which have
diverse and sometimes competing ideas regarding the role of business in
society and the value of corporate contributions to stakeholders and
society at large. National governments have dierent laws protecting labor
and consumer rights, as well as dierent laws protecting intellectual property and promoting open and fair competition. Environmental laws worldwide are far from uniform.
Ethically, the question for corporations is: to what standards should they
adhere those of the host country, the home country or some ideals that
are higher than that mandated by law in any country? CC in a global
context could refer to the practice of adhering to the laws of the home
country when doing business abroad, especially if those laws are stricter (as
they typically are) in developed countries. It could also refer to the practice
of adhering to standards higher than the laws of even the home country
when doing business abroad.
These questions are further complicated by some of the economic arguments we have advanced in this chapter, which suggest that pursuit of prot
alone is benecial to society. The Economist (2005), for instance, argues that
advocates of multinational corporate divestment from the developing
world and of globally mandatory higher labor and environmental
standards (as could be written into future WTO treaties) are actually
harmful to residents of both the developed and developing worlds. We
do not take a stand on these controversial issues, but rather note the

340

Handbook of research on global corporate citizenship

complexity for decision making that such issues pose for managers of companies operating in a global economy. In conclusion, we briey tease out
some of the unresolved issues for managerial decision making that are
raised by our economic analysis of CC.
There are numerous unresolved theoretical and empirical issues relating
to the economic implications of CC. These include identifying institutional
dierences in CC across countries, determining the motivations for CC,
describing CC strategies, modeling the eects of CC on the rm and stakeholder groups, empirically assessing the eect of CC on the rm and stakeholder groups, measuring the demand for CC, measuring the costs of CC
and assessing the current knowledge base. Because CC is a broader concept
than CSR and applies more denitely to the global society, a more integrated understanding of these theoretical and empirical issues will be
necessary.
Other unanswered questions include the following: are all corporations
global citizens? What standards dene good global citizenship? Should the
same standards apply equally to all corporations? What sorts of analytic
devices and empirical studies will ensure corporate accountability? How
should corporations reconcile diering value systems? Should corporations be regarded as state actors rather than citizens? What theory of the
rm would justify statehood for corporations? How should dialogue
between civil society and corporations proceed so as to determine the
proper role of corporations in society and ensure their ethical legitimacy?
As the literature on CC evolves, we expect that many of these questions
will be addressed by scholars in a wide variety of business and social
science disciplines.
References
Altman, B. (1998), Corporate community relations in the 1990s: a study in transformation,
Business and Society, 37, 2217.
Bagnoli, M. and S. Watts (2003), Selling to socially responsible consumers: competition and
the private provision of public goods, Journal of Economics and Management Strategy, 12,
41945.
Bakan, J. (2004), The Corporation: The Pathological Pursuit of Prot and Power, New York:
Free Press.
Barnard, C. (1938), The Functions of the Executive, Cambridge, MA: Harvard University
Press.
Barney, J. (1991), Firm resources and sustained competitive advantage, Journal of
Management, 17, 99120.
Baron, D. (2001), Private politics, corporate social responsibility and integrated strategy,
Journal of Economics and Management Strategy, 10, 745.
Boatright, J. (1999), Ethics in Finance, Malden, MA: Blackwell.
Buchholz, R. and S. Rosenthal (1999), Social responsibility and business ethics, in
R. Frederick (ed.), A Companion to Business Ethics, Oxford: Blackwell, pp. 30321.
Carroll, A. (1991), The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders, Business Horizons, 34 (4), 3948.

The economic view of corporate citizenship 341

CIVICUS Organization (1999), Promoting Corporate Citizenship: Opportunities for Business
and Civil Society Engagement, L. Regelbrugge (ed.), Washington, DC: CIVICUS, World
Alliance for Citizenship Participation.
Donaldson, T. and L. Preston (1995), The stakeholder theory of the corporation: concepts,
evidence, and implications, Academy of Management Review, 20, 6591.
Dutta, P.K., S. Lach and A. Rustichini (1995), Better late than early: vertical dierentiation in
the adoption of a new technology, Journal of Economics and Management Strategy, 4, 56389.
Economist, The (2005), The good company: a survey of corporate social responsibility, 374
(8410), 322.
Feddersen, T. and T. Gilligan (2001), Saints and markets: activists and the supply of credence
goods, Journal of Economics and Management Strategy, 10, 14971.
Fombrun, C. and M. Shanley (1990), Whats in a name? Reputation building and corporate
strategy, Academy of Management Journal, 33, 23358.
Frank, R. (2004), What Price the Moral High Ground: Ethical Dilemmas in Competitive
Environments, Princeton, NJ: Princeton University Press.
Freeman, R.E. (1984), Strategic Management: A Stakeholder Perspective, Englewood Clis,
NJ: Prentice-Hall.
Friedman, M. (1962), Capitalism and Freedom, Chicago, IL: University of Chicago Press.
Friedman, M. (1970), The social responsibility of business is to increase its prots, New York
Times Magazine, 13 September, pp. 1226.
Goodpaster, K. (1991), Business ethics and stakeholder analysis, Business Ethics Quarterly,
1 (1), 5374.
Hart, S. (1995), A natural resource-based view of the rm, Academy of Management Review,
20, 9861014.
Hoppe, H. and U. Lehmann-Grube (2001), Second-mover advantages in dynamic quality
competition, Journal of Economics and Management Strategy, 10, 41933.
Jensen, M. and W. Meckling (1976), Theory of the rm: managerial behavior, agency costs,
and ownership structure, Journal of Financial Economics, 3, 30560, reprinted in M. Jensen
(2000), A Theory of the Firm: Governance, Residual Claims, and Organizational Forms,
Cambridge, MA: Harvard University Press, pp. 83135.
Jones, T. (1995), Instrumental stakeholder theory: a synthesis of ethics and economics,
Academy of Management Review, 20, 40437.
Kanter, R. (1999), From spare change to real change: The social sector as beta site for business innovation, Harvard Business Review, 77 (3), MayJune, 12233, reprinted in (2003)
Harvard Business Review on Corporate Responsibility, Boston, MA: Harvard Business
School Press, pp. 189213.
Levitt, T. (1958), The dangers of social responsibility, Harvard Business Review,
SeptemberOctober, 4150.
Marvel, H. (1977), Factory regulation: a reinterpretation of early English experience, Journal
of Law and Economics, 20, 379402.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
McWilliams, A. and D. Siegel (1997), Event studies in management research: theoretical and
empirical issues, Academy of Management Journal, 40, 62657.
McWilliams, A. and D. Siegel (2000), Corporate social responsibility and nancial performance: correlation or misspecication?, Strategic Management Journal, 21, 6039.
McWilliams, A. and D. Siegel (2001), Corporate social responsibility: a theory of the rm
perspective, Academy of Management Review, 26, 11727.
McWilliams, A. and D. Siegel (2002), Additional reections on the strategic implications of
corporate social responsibility, Academy of Management Review, 27, 1516.
McWilliams, A., D. Siegel and P. Wright (2006), Corporate social responsibility: strategic
implications, Journal of Management Studies, 43, 118.
McWilliams, A., D.D. Van Fleet and K. Cory (2002), Raising rivals costs through political strategy: an extension of the resource-based theory, Journal of Management Studies, 39, 70723.
Milgrom, P. and J. Roberts (1986), Advertising as signal of product quality, Journal of
Political Economy, 94, 796821.

342

Handbook of research on global corporate citizenship

Orlitzky, M., F. Schmidt and S. Rynes (2003), Corporate social and nancial performance: a
meta-analysis, Organization Studies, 24, 40341.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66, 7188.
Penrose, E. (1959), The Theory of the Growth of the Firm, New York: Wiley.
Piga, C. (2002), Corporate social responsibility: a theory of the rm perspective, a few comments and some suggestions, Academy of Management Review, 27, 1315.
Porter, M. and M. Kramer (2002), The competitive advantage of corporate philanthropy,
Harvard Business Review, December, reprinted in (2003) Harvard Business Review on
Corporate Responsibility, Boston, MA: Harvard Business School Press, pp. 2764.
Reinhardt, F. (1998), Environmental product dierentiation, California Management
Review, 40, 4373.
Russo, M. and P. Fouts (1997), A resource-based perspective on corporate environmental performance and protability, Academy of Management Journal, 40, 53459.
Sen, A. (1993), Does business ethics make economic sense?, Business Ethics Quarterly, 3 (1),
4554.
Siegel, D.S. and D. Vitaliano (2007), An empirical analysis of the strategic use of corporate
social responsibility, Journal of Economics and Management Strategy, 17 (3), 77392.
Sternberg, E. (2002), Just Business: Business Ethics in Action, Oxford: Oxford University
Press.
Suchman, M. (1995), Managing legitimacy: strategic and institutional approaches, Academy
of Management Review, 20, 571610.
Tavis, L. (1997), Power and Responsibility: Multinational Managers and Developing Country
Concerns, Notre Dame, IN: University of Notre Dame Press.
Waddock, S. (2001), The multiple bottom lines of corporate citizenship: social investing, reputation, and responsibility audits, Business and Society Review, 105, 32345.
Wernerfelt, B. (1984), A resource based view of the rm, Strategic Management Journal, 5,
17180.
Windsor, D. (2001), Corporate citizenship: evolution and interpretation, in J. Andriof and
M. McIntosh (eds), Perspectives on Corporate Citizenship, Sheeld: Greenleaf, pp. 83103.
Zadek, S. (2001), The Civil Corporation: The New Economy of Corporate Citizenship, London:
Earthscan.

16 Human rights, corporations and the

global economy: an international law
perspective1
David Kinley and Justine Nolan

Introduction
The many and various features of the global economy and the centrality of
corporations within it, have a direct and enduring impact on the quest to
better protect and promote human rights. That impact, of course, cuts both
ways. Consider, for instance, such recent events as the United Nations
appointment of a Special Representative to the Secretary-General on
human rights and corporations;2 the World Banks proclamation that
human rights are the very essence of the Banks work;3 and the entreaties
made of the worlds principal trading nations at the last World Trade
Organization (WTO) ministerial meeting in Hong Kong of the sclerotic
Doha Round (which, at the time of writing, limps on still),4 to leverage
global trade for the benet of securing basic human rights of the poor,5 all
of which bear testimony to the two dimensions of this debate an appreciation of the global economys great potential not only to help but also to
hamper the objects of human rights.
What is striking about this potential is the extent to which it relies upon
indeed, to a signicant degree, is driven by private non-state actors,
namely corporations. Transnational corporations (TNCs) in particular, are
the engines of the global economy; they have become the Behemoths as
Noreena Hertz calls them, whose power has been propelled by government
policies of privatisation, deregulation and trade liberalisation, and the
advances of communications technologies of the past twenty years (Hertz
2001, p. 8). Aid agencies, furthermore, no longer shun private enterprise as
either merely incidental, or possibly even antithetical, to the goals of
poverty reduction, but rather embrace it as a sister in arms in the struggle
to help the poor. Thus, the United Nations Development Programme
(UNDP) established the Commission on Private Sector Development in
whose report in 2004 it declared its mission to be about acknowledging
that the private sector is already central to the lives of the poor, and has the
power to make those lives better [and] about using the managerial organization and technological innovation that resides in the private sector to
improve the lives of the poor (UNDP Commission on Private Sector
343

344

Handbook of research on global corporate citizenship

Development 2004, p. 5). Corporations have the potential to provide the

basis for many human rights but also the ability to hamper the attainment
of rights.
This chapter traces the interrelationship of human rights with business
and considers the central role played by corporations in the global
economy. In particular it examines three points of intersection between
human rights and business: transnational commerce, trade and investment
and development aid. As the inuence of corporations on the economic
and political scene in many countries has increased in recent decades, international law has barely responded to this growing imbalance of power,
exposing an accountability gap within the broad global economy for corporate related human rights abuses.
The purpose of this chapter is therefore twofold: (i) to provide an
overview of the relationship between human rights and the global economy
by highlighting their points of intersection, opposition and support, both
in terms of the position today and how it might develop in the future; and
(ii) in particular, focus on the increasing centrality of the role played by corporations in driving global commerce, trade and development. For with
such centrality comes increasing levels of corporate power political and
social, as well as economic that causes a reappraisal of the capacity, let
alone suitability, of international law to regulate the use of that power.
Two globalizations . . . and the rise of corporate authority
Although international economic relations have a long history stretching
back to the earliest times when people began to trade and travel between
communities or states, the full force of economic globalization has only
really been brought to bear over the last half-century or so. Over the same
period, human rights have also been undergoing a process of globalization
or universalization. In many respects their paths have been running parallel to each other, but there have been, and there are today, important
cross-overs. In this section we shall explore these cross-overs, explain their
parameters, examine the signicance of these two dierent aspects of globalization and discuss whether economic globalization assists or impedes the
globalization or spread of human rights.
The growth of both global economic intercourse and universal human
rights standards has been aided by certain important phenomena of the
late 20th century and early 21st century. These are: rst, de-colonization,
especially during the immediate post-war years up until the mid-1970s. The
subsequent attainment of independent statehood by many former colonies
provided their people with the opportunity not only to realize the key
human right of self-determination, but also to engage in international relations in their own right be that in terms of trade, politics and diplomacy

Human rights, corporations and the global economy

345

or by taking part in the negotiation of international treaties including, of

course, those covering human rights.
The second important phenomenon has been the rapid growth of international organizations and international regimes covering a vast array of
subject areas from agriculture and food standards to refugees and labour
standards, from aid and trade to travel and shipping, and from nancial
intercourse and telecommunications to human rights, military alliances,
nuclear disarmament and war crimes. These legal regimes and the international institutions they gave birth to have certainly hastened the spread
of global interrelations in all these elds. Conspicuous and variously powerful intergovernmental organizations (IGOs), such as the United Nations,
the International Labour Organization (ILO), the Organization for
Economic Cooperation and Development (OECD), the International
Monetary Fund (IMF), the World Bank and regional development banks,
as well as the WTO and regional trading blocs have a pervasive impact
both ways on the protection and promotion of human rights within the
global economy.
Third, the enormous advances in speed and capacity in technology, especially as regards travel, telecommunications and technology transfer over
the last twenty years or so, have facilitated ever-expanding means by which
we interconnect with each other across countries, continents and cultures.
Certainly, we know (or at least have the opportunity to know) more about
each other and thereby, arguably, also have a greater capacity to understand
one another (Lamy 2006).
Finally, and most especially, alongside these developments, and sometimes
constitutive of them, has been the escalation of the presence and power of
TNCs.6 Today, the economic capacities of some TNCs is greater than that of
the countries in which they operate, and their corollarative political muscle
can be greater than the ability of some states to regulate them eectively
(UNRISD 2004). The expansion of the global economy has been accompanied by and at times led by, these super corporations.7 The corporate world
has demonstrable global reach and capacity and can often make and act on
decisions far faster than governments. With this increased power to impact
rights comes responsibility. But the nature, scope and source of such responsibility remains a matter of debate (Nolan 2005). The burgeoning corporate
responsibility movement aims to put this eciency to greater use by employing the corporate machinery in the protection of human rights.
In terms of human rights, the great expansion of the global economy has
brought advantages and disadvantages. On the one hand it is true that
greater economic wealth has the potential to provide the basis for many
human rights such as the economic and social rights to work and wages,
shelter, food and water, healthcare, education and raised standards of living

346

Handbook of research on global corporate citizenship

generally. Such greater wealth may also assist in the attainment of other
rights such as the civil and political rights to freedom of expression, political and religious beliefs, movement and association, participation in government and privacy. But the key question is whether that potential is borne
out in practice. For even if the worlds wealth, or a countrys wealth, is
markedly increased that does not necessarily mean that all will benet
equally, or that disadvantaged groups will even benet at all. Indeed, it is
notoriously dicult to say with certainty what is the impact of increased
prosperity on human rights enjoyment, beyond mere platitudes (such as for
some people they are clearly better respected). Thus, for example, in respect
of the circumstantial links between increased foreign direct investment
(FDI) and human rights protections, one can only make fairly tentative,
general conclusions in this regard such as, that there is some apparent
benet (Letnes 2004, pp. 26970).
The principal conduits of this new wealth are corporations, in particular TNCs, largely through FDI. Questions regarding the ambit of corporate responsibility and whether there are mechanisms in law (or policy) for
enforcing such responsibility has a direct impact on how increased wealth,
and the benets that go with it, are distributed, whether by public (state) or
private (corporate) actors. And it is this question of distribution and the
gap between theory and practice that really matters for the realization of
human rights; whether that be in respect of the distribution between rich
and poor countries, or between rich and poor communities within countries
(both in developed and developing states). The issue of elite capture that
is, the notion that the elite few, internationally and domestically, take a
hugely disproportionate slice of the economic pie, leaving the many with
little (Darrow and Tomas 2005, pp. 4747) is a concern in all states,
though certainly it is a greater concern in some than in others. From the
human rights perspective this is particularly signicant because often the
reasons for the inequality are based on illegitimately discriminating factors
such as gender, social class, race, religion, physical and mental disabilities,
existing wealth, political beliefs or even geographical location all of
which are human rights infringements (UNDP 2005, p. 5). Furthermore,
inequitable distribution of wealth often exacerbates existing inequality,
places additional power in private hands and deprives the community of
their ability to make positive human rights advances.
Human rights perspectives of the global economy
There are three dimensions of the global economy generally, and the role
of corporations in particular, that have attracted the attention of those concerned with human rights namely, commercial enterprise, trade and
investment, and aid-based development.

Human rights, corporations and the global economy

347

Commercial enterprise
The phenomenon of transnational corporations is not new, but the continually increasing levels of power and inuence of TNCs within the global
economy of today is unprecedented. It has been calculated, for example,
that of the top 100 economies in the world today, 51 are corporations and
only 49 states (Anderson and Cavanagh 2000). With such massive economic power at their disposal, TNCs therefore have capability to do great
harm as well as good for human rights, at both the global and domestic
levels. It has been on this basis that calls for corporations to be made
responsible for the human rights consequences of their actions have
increasingly been made, especially over the past 10 to 15 years.
The role that corporations play in domestic and international economies
is fundamental. Their impact on human rights is equally important.
Through commercial activity driven by corporations, jobs and wages are
made available, goods and services are provided and taxes are paid enabling
governments to provide further goods and services. Thereby, directly or
indirectly, a vast array of human rights may be supported from rights to
work, welfare, food and shelter, health and education, and freedoms to
speech, association and movement. In short, not only are corporations
central to the provision of many of the things that make human life more
tolerable, enjoyable and fullling, the work and wages that corporate enterprise brings to all communities are key elements to the establishment and
maintenance of individual human dignity to which end human rights strive
to meet. The value of employment cannot be underestimated: it was the
number one response to the question what do you need to improve your
life?, as posed to more than 60 000 poor people from countries all over the
world (Narayan et al. 2000).
However, the inuence of corporations on human rights is not all benign.
Corporations, both local and multinational, have been and continue to be
minor and major abusers of human rights. Some corporations are guilty of
treating workers badly in terms of pay, conditions and working environments; some do pollute the environment in ways that have dramatic and
serious eects far beyond their immediate surroundings; some do discriminate against indigenous peoples, or certain ethnic or religious groups, or
against women, or people with disabilities, or on grounds of sexuality; and
some do work alongside (or inside) governments that perpetrate gross
human rights abuses, such as in Nazi Germany, apartheid South Africa,
and in the many authoritarian and repressive states in the world today
(Stephens 2002).
At the domestic level, both sides of this relationship are relatively well recognized, even if the consequences are not necessarily adequately dealt with.
In all Western states and increasingly so in developing nations there are laws

348

Handbook of research on global corporate citizenship

that impose obligations on corporations, explicitly or implicitly protecting

human rights standards. These include laws covering occupational health
and safety at work, employment conditions and wage levels, environmental
protection, non-discrimination, employees rights to privacy, movement and
association, and rights to free speech and fair trial (Kinley 2002).
However, at the international level it is another story, for there are
presently very few legal obligations that bind corporations operating
transnationally in terms of human rights. What is more, those few that do
exist are very limited in scope and are in fact merely domestic laws that
happen to have extraterritorial (that is, international) application (Ratner
2001; Kinley and Tadaki 2004, pp. 9345). One such example is the US
Alien Torts Claims Act (ATCA) (1789) which has now been used against a
number of US-based corporations for alleged breaches of certain international human rights standards and is discussed further below (OHCHR
2005b, paras 2355). Given the importance of international trade and commerce, the lack of international regulation is perhaps somewhat surprising.
At the international level, the corporate form is barely recognized, still less
directly bound, whether in respect of human rights or any other eld.
TNCs have been able to operate largely in a legal vacuum because international law including international human rights law imposes no direct legal
obligations on corporations. The traditional application of international
human rights law is to bind states because states have long been regarded
as the most prominent potential violators of human rights. The drafters of
the Universal Declaration of Human Rights (UDHR) could not have foreseen in 1948 that select states powers might one day be dwarfed by corporate power.8 As such the emphasis in the UDHR, and in international
human rights law generally, is on states as the primary bearers of human
rights responsibility. However, while international law does not (or at least
rarely)9 directly address corporations, the states duty to protect against
non-state human rights abuses within their jurisdiction (which includes
abuses by corporations) is rmly enshrined in international law (Ruggie
2007, pp. 57). While the earlier UN human rights treaties, such as
the International Covenant on Civil and Political Rights (ICCPR) and
the International Covenant on Economic, Social and Cultural Rights
(ICESCR), do not explicitly address a states obligation regarding business,
later treaties and occasionally now treaty bodies have begun to refer more
specically to the role of corporations in human rights protection. For
example, the recently adopted Convention on the Rights of Persons with
Disabilities states clearly that states parties have an obligation to take all
appropriate measures to eliminate discrimination on the basis of disability
by any person, organization or private enterprise (emphasis added).10 In
2004, the UN Human Rights Committee when commenting on the nature

Human rights, corporations and the global economy

349

of a states legal obligation with respect to the ICCPR armed that the
obligation will only be fully discharged if individuals are protected by the
state, not just against violations of Covenant rights by its agents, but also
against acts committed by private persons or entities (UN Human Rights
Committee 2004, para. 8), thus acknowledging a growing need to include
corporations within the rubric of the human rights protection framework.
However, the vision of human rights protection is not always commensurate with the practice and it is evident that some states while welcoming
the investment oered by TNCs have been unwilling or unable to react to
corporate human rights abuses. Compounding the problem is the crucially
unresolved legal issue of whether a states obligations that may ow from
international human rights law generally to protect against corporate
related human rights abuses extend beyond its jurisdiction (that is, extraterritorially or internationally). In a report by the Special Representative of the
Secretary-General (SRSG) submitted to the UN Human Rights Council in
2007, he suggests that international human rights law is more ambiguous in
this regard. The Report suggests that while human rights treaties do not
require states to exercise extraterritorial jurisdiction over corporate human
rights abuses, neither do they prohibit a state from doing so (Ruggie 2007,
para. 15; Ruggie and OHCHR 2007a, 2007b). That is, a state may choose to
require corporations (domiciled in their jurisdiction) to abide by certain
standards regardless of the country in which they are operating. For
example, the antibribery provisions of the US Foreign Corrupt Practices
Act of 1977 make it unlawful for a US person, and certain foreign issuers of
securities, to make a payment to a foreign ocial for the purpose of obtaining or retaining business for or with, or directing business to, any person
whether such action occurs within or outside of the United States. However,
the basis for exercising such jurisdiction over human rights standards generally and the nature of the subject matter which might justify such action
(for example, is protection justied for all corporate human rights abuses?)
is still a matter of debate. It is this ambiguity which is central to the creation
of the permissive international human rights free environment in which
some corporations seem to now operate (de Schutter 2006).
The inability of the international legal framework to keep pace with the
rise of the corporation as a signicant non-state actor has resulted in the
emergence of a multiplicity of approaches which aim, in signicantly
varying degrees, to impose some such level of responsibility on corporations
(OHCHR 2005b). There now exist a great number of voluntary codes of
conduct devised or adopted by individual corporations, industry groups or
international organizations, such as the UNs Global Compact, and the
OECDs Guidelines for Multinational Enterprises (Leipziger 2003). Many
of these initiatives have a very broad coverage with only brief references to

350

Handbook of research on global corporate citizenship

human rights. Generally, while such codes encourage companies to

promote and protect internationally recognized human rights; there are no
eective, independent enforcement mechanisms to ensure that they do so.
Decisions cannot be enforced directly against a company and their power to
compel behavioural changes remains subject to the political will and ability
of national governments (Nolan 2005, p. 587). On a more intimate level,
some corporations are now explicit in their claims as regards human rights.
For example, a 2006 survey of Global Fortune 500 rms conducted by the
UNs Special Representative on business and human rights, found that a
high percentage of respondents report having an explicit set of human rights
principles or management practices in place, although the particular human
rights highlighted varied between respondents (Ruggie 2006b).
Another, much smaller and distinct, category of initiatives is those that
purport to place legal (that is non-voluntary) obligations on corporate
behaviour overseas. TNCs are subject not only to the laws existing in the
states in which they operate (host states), but also in their home states
(that is, where their headquarters are). An example of the latter, so-called
extra-territorial laws, is the US ATCA, which was passed by the US
Congress in 1789 and provides US District Courts with jurisdiction over
violations of the law of nations. In the modern era, courts have allowed
foreign victims to use ATCA to address egregious human rights violations.
More recently, ATCA has been used against corporations that have
allegedly been knowingly complicit in human rights violations a distinction being drawn against direct involvement in corporate human rights violations as opposed to assistance or indirect involvement. The most explicit
judicial denition of complicity has emerged from the action against the
Californian energy company, Unocal, by group of Burmese plaintis. The
plaintis alleged that Unocal was working with the Burmese military to
conscript forced labour, kill, abuse and rape citizens while working on the
Yadana gas pipeline project (Doe v Unocal Corp.). The US Court of the
Appeals for the 9th Circuit in the Unocal case, stipulated three criteria for
determining complicity: giving practical assistance to the actual perpetrator of a crime; the requirement that this assistance had a substantial eect
on the commission of the criminal act; and the fact that the company knew
or should have known that its acts would result in a possible crime even if
it did not intend for that crime to take place. The case against Unocal
settled in 2005 for an undisclosed sum paid to the Burmese plaintis. While
ATCA has now been used against a number of US-based corporations for
alleged breaches of certain international human rights standards, it is
worth noting that of the 36 ATCA cases to date involving companies, 20
have been dismissed, three settled, and none decided in favour of the
plaintis; the rest are ongoing (Ruggie 2006a, para. 62).

Human rights, corporations and the global economy

351

In terms of legally binding obligations on TNCs, what is apparent from

the preceding discussion is the glaring lack of provisions in international law
that is, despite the fact that by denition such corporations are operating
internationally. The UNs Human Rights Norms for Corporations (Norms
2003) were in part intended to ll this gap, and the arrival of the Norms on
the international scene in 2003 provided some ground for believing that this
status quo might be challenged. However, the Norms which comprise a set
of human rights obligations directed at companies, but which would be
imposed upon them by way of the usual means of international law, namely,
the domestic laws of individual states met considerable resistance from the
corporate community (Kinley et al. 2007). As SRSG, Professor Ruggie has
tried to move past the divisive debate over the Norms and to reconcile the
pro- and anti-Norms lobbyists by illuminating what unites rather than what
divides the two camps. In his Interim Report of 2006, the SRSG argued that
the manner in which the Norms are framed must be abandoned, but that
their substance may be resurrected in a new and less controversial format
(Ruggie 2006a). The future of the Norms remains clouded but they have
been a benecial and fruitful initiative, reinvigorating debate on the issue of
business and human rights, raising new and important concepts regarding
regulation of TNCs and enforcement of human rights obligations, and
articulating a core set of standards for going forward (Kinley et al. 2007,
p. 31). Voluntary eorts by companies to improve their adherence to
human rights are welcomed but alone insucient to prevent human rights
abuses.
The goals of corporate enterprise and those of human rights are not the
same that much cannot be denied. Human rights protection is not a key
factor in the calculations that TNCs typically make. Such protection for
human rights that corporations do provide is incidental to their principal
goals of growth and prot maximization, and such violations of human
rights made by corporations often ow directly from too slavish a devotion to these twin objectives. Economist Milton Friedmans classic statement that there is one and only social responsibility of business to use
its resources and engage in activities designed to increase its prots so long
as it stays within the rules of the game is generally taken as supportive of
this view (Friedman 1970, p. 32). However, the more than 30 years which
have followed Friedmans statement have seen a growing acknowledgement that the rules of the game are changing and now adherence to
human rights standards for corporations is becoming more mainstream
and less optional (Ruggie 2006a, pp. 56). The task before us continues to
be to attempt to devise ways to maximize the benecial eects of commercial activity on human rights protection and to minimize the detrimental eects.

352

Handbook of research on global corporate citizenship

To that end, it would be unrealistic, and indeed undesirable, to insist that

corporations should drop their prot motive and substitute it with the
object of protecting and promoting human rights, for that would of course
be to make corporations something which they are not and never could be.
But we are surely in a situation today where the prevalence and power of
corporations is such that it must attract suitable levels of regulation and
accountability in terms of the impact that they have on human rights, not
only at the domestic level, but also in international relations.
International trade and investment
International trade is fundamentally a concern of corporate commercial
enterprise. States may indeed make the rules by way of multilateral or
bilateral treaties or the establishment of trading blocs (for example, the
European Union: EU, or NAFTA: North American Free Trade Agreement)
or trading governing bodies (for example, the WTO) but it is corporations,
and mainly private corporations, that actually do the trading and thus have
a powerful eect on the protection, or not, of human rights (Oxfam 2002,
p. 175). In fact, Braithwaite and Drahos contend that the reality behind
even the rst leg of the above sentence is questionable, as in their monumental study of global business regulation, they found that business leaders
are more likely to dictate the terms argued by their states trade representatives, rather than the other way around (Braithwaite and Drahos 2000,
pp. 200201; Shaer 2006, p. 187).
It is argued that increased economic development and wealth will ow
from the expansion of global trade, and global trade will expand by way
of the dismantling or domestic trade barriers. Certainly, greater global
wealth is demonstrably apparent (IMF 2007) and indeed so it is with most
countries on an individual level with a number of sub-Saharan African
states constituting the startling exceptions that prove this rule (World
Bank 2007). Certainly too, many are convinced that this growth is the
direct result of massively increased international trade over the past 1520
years borne on the back of aggressive (if not altogether consistent) policies of trade liberalization. Not unsurprisingly, perhaps, trade experts
and advocates or leaders of trade organizations tend to be among
those true believers. Thus, the Director-General of the WTO steadfastly
pronounced:
The role that trade can play as an engine for growth and development has long
been recognized. A large body of empirical studies suggest that trade helps
global allocation of resources, enhances output and productivity and increases
overall welfare gains. Trade allows countries to concentrate on what they can do
best and translate the individual advantage that countries enjoy into maximising productivity, which in turn can lead to development. (Lamy 2005, p. 1)

Human rights, corporations and the global economy

353

However, the key questions for many human rights advocates are rst
whether the reliance on the operation of the notion of comparative advantage in the open market to yield such advances in economic development
always (or even often) delivers on its promise; and second, even when it
does, does that necessarily translate into the equitable and widespread
improvement of social circumstances generally, and human rights in particular? At the national level, the standard answers to these twin questions
are that the market, given time, will deliver on the rst, and that the market
as appropriately tempered (usually meaning lightly so)11 by state regulation
and intervention, will yield the second, or at least as best as is possible.12
The variety of ways in which states formulate and pursue their market
interventions is as great as are their relative successes. What we are concerned with here is both the international and corporate dimensions of the
balance that is, to what extent do the institutions and mechanisms of
international trade promote or retard human rights, and whatever the
extent and direction, what role is played by corporations?
The broad historical context in which the brave new world of global
trade exists today is as important to answering these questions as are the
specics of certain initiatives, approaches and proposals that might bring
human rights and trade rules together. For what can be said with certainty
about the mixing of trade and human rights is that the single most important bone of contention between the old free trading countries of the West
and the new free trading countries in the developing world, is that the
former were able to build their economies on the back of very strong protectionist policies, which policies are now being largely denied to developing countries, just at the time when they are seeking to expand their
economies (Pogge 2002, pp. 1720). And what is more, some of those old
barriers still exist in the West, especially in the areas of agriculture. The
combination of these two factors is seen as providing a grossly unfair
advantage to often monumentally powerful agribusinesses in developed
nations as they compete on a supposedly level playing eld with the smallscale farmers (collectives, cooperatives or corporations) in much of the
developing world.13 And further, as a direct consequence, it is claimed,
nations of the developing world especially those whose economies are
agrarian based are less able to deliver the promised economic and welfare
benets to their peoples and are therefore hampered in their eorts to guarantee their human rights (UNCTAD 2004, pp. 179217). However politically intractable this problem is for the Western governments and one can
deny neither its depth nor the extent of the power wielded by the agribusiness lobbies in the US and Europe in particular14 the resultant inequity
of circumstance is felt keenly by developing state governments. Boil-overs
such as the manner in which a number of the larger developing states

354

Handbook of research on global corporate citizenship

foreclosed the Cancn ministerial conference in 2003 bear testimony to the

depth of this feeling (EPHA 2003).
Specically, there are, within the WTO regime, few clear avenues by
which corporations, let alone the human rights concerns, gain entry, let
alone take centre stage. To a very substantial degree this is due, in respect
of corporations, to the fact that it is a state-membership organization, and
in respect of human rights, to the mandate of the WTO and the main trade
instruments over which it presides. For although reference to concerns for
the broader socioeconomic and environmental consequences of trade liberalization, especially in relation to developing economies, are expressly
alluded to in the Marrakesh Agreement that established the WTO, they are
none the less viewed in practice to be desirable outcomes rather than
binding legal obligations15 of the main business of state parties contributing to these objectives by entering into reciprocal and mutually
advantageous arrangements directed to the substantial reduction of taris
and other barriers to trade and to the elimination of discriminatory treatment in international trade relations (Marrakesh Agreement 1995, preamble, third paragraph). The emphasis on developing states has none the less
created the foundation upon which certain specic initiatives have been
built that have directly or indirectly promoted human rights ends.
All that said, to the extent that there are features of the WTO regime that
address human rights concerns (or might be read to do so) they operate at
the state to state level, with or without the intermediary of the WTO. Thus,
the WTOs so-called enabling clause16 that permits contracting parties to
accord dierential and more favourable treatment to developing countries, has been the cornerstone of a Generalized System of Preferences
(GSP) that the USA and the EU in particular have couched in terms that
expressly tie adherence to (or at least recognition of, in the form of treaty
ratications) international human rights standards (Bartels 2005; HafnerBurton 2005). And there are various other key trade laws that also allow
exceptions to the obligation to remove or not to erect trade barriers when
there are demonstrable human health and environmental concerns,17 where
goods are the product of prison labour18 and where national security,19
public order20 or public morals21 would otherwise be compromised all of
which can be presented as the raising of barriers on grounds related to, if
not directly expressive of, international human rights standards (OHCHR
2005a, p. 6). Additionally, it has also been argued that such attempts at the
textual incorporation of human rights might be more eectively pursued if
the jurisprudential tools more familiar to trade law, and especially to trade
lawyers, were employed by human rights advocates. For example, the longestablished notion of legitimate expectations (that anticipated trade
benets accrue in practice) and well-recognized defence of necessity (that

Human rights, corporations and the global economy

355

is, for example, protection of public health) within Dispute Settlement

Mechanism Panel decisions might both be amenable to the inclusion of
human rights reasons why a state might wish to restrict trade of a particular product or with a particular country (Bastin 2007).
In all of these respects the medium is, formally, the state of course, not
corporations. However, in practice their interests are often closely aligned
within the broad regulatory framework devised by Braithwaite and Drahos
above. For example, corporations are as self-interestedly concerned with
promoting the stablizing features of the rule of law and good governance
in countries that they invest in or trade with, and these features are contingent on securing many of the civil and political rights and labour standards
espoused by the EU and US GSP schemes. The allowable general exceptions clauses such as Article XX of the General Agreement on Taris and
Trade (GATT) might be indeed are invoked or rejected by states at the
clear behest of domestic corporate interests. Thus, for example, the US
shing industrys interest in having the US pursue the Tuna/Dolphin and
Shrimp/Turtle cases,22 the competing pressures placed on the EU and the
US administrations by their respective agribusinesses to ght out the beef
hormones and genetically modied organism (GMO) cases,23 the pressures
placed on the US government by the tobacco lobby to mount the Thai cigarettes case24 and the barely disguised Kodak/Fuji dispute that was formally pursued through the surrogacy of the US and Japanese governments,
respectively.25 This is not to say that this is necessarily illegitimate, it just
exposes the reality of the economic and political leverage that the corporate lobby exercises in all nearly all states whether developed or developing in respect of a whole array of government policies; international trade
is no exception.
The situation is somewhat similar even in respect of the more ambitious
proposals to more closely align trade and human rights concerns, including and especially regarding calls for the incorporation of a so-called social
clause into the WTO framework agreements. The establishment of a more
comprehensive set of permissible human rights barriers to free trade incorporated into such a device would institute a much wider range of social
issues (including human rights concerns, especially relating to minimum
labour standards) that might be used as reasons for one country to erect
trading barriers in respect of the importation of certain goods from
another country (Leary 1997). The explicit mixing of human rights and
trade goals in this way is strongly resisted in many quarters, and supported
in some others. Notably, opponents to a social clause (which also include
groups and governments from developing nations26) are concerned over
the insertion of human rights in trade agreements, seeing them as little
more than protectionist trade barriers in disguise which are designed to

356

Handbook of research on global corporate citizenship

protect the commercial and/or labour interests in the developed northern

hemisphere states from competition from developing, southern states
(Srinivasan 1996, pp. 316).
In turn, this line of reasoning is rejected by others who consider such an
approach as merely a convenient excuse to allow the governments of developing nations and their own corporate interests and inuences to avoid
international human rights responsibilities.27 However, while the debate
will no doubt continue, such a perceived fundamental alteration of the
nature and function of the WTO regime is not likely to be acted on quickly,
if at all.
In fact, the area in which the most direct results have been achieved in
respect of trade mechanisms that protect human rights has been where the
strategies have been targeted directly at corporations (selective public procurement SPP) or as a direct consequence of inter-governmental agreement (Doha Declaration on the Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS) and Public Health in 2001).28 As with
the various text-based exceptions discussed above, both types of measures
here represent permissible limitations to otherwise core obligations placed
on states to free up trade relations between each other. The essential
dierence to the mix is the added ingredient of corporations. Under SPP
measures, states make threshold demands with regard to human rights
protections of corporations that wish to bid for public sector contracts.
They are intended directly, to create incentives for companies and their
host states to improve human rights conditions (Zeisel 2006, p. 361).
Government procurement is not an insignicant portion of the economies
of almost all states, varying, it is estimated, between 10 and 30 per cent of
the GNP of states (ibid., p. 362). They are malleable instruments in that
they can be designed to address the abusive activities of either foreign or
domestic corporations, or both, and they can be just as eective whether
the government is national or subnational, as demonstrated by (the now
disbanded) Massachusetts SPP directed towards excluding corporations
that did business in Burma from bidding for state government contracts.29
Both the US and the EU have established permissive stances towards
member states use of the device, despite the concerns held by some that
such state intervention on non-trade grounds will interfere with the commercial objects of trade and further, that it might be abused such as to disguise essentially protectionist measures. And while in respect to the later
concern, the WTO is very much alive, it has since 1994 specically
exempted SPP from the scope of the GATT. Evidence upon which to make
meaningful judgements about the ecacy of SPP measures in respect of
promoting human rights observance is simply not available at present, but
the increasing interest in corporate accountability mechanisms in the other

Human rights, corporations and the global economy

357

parts of the global economy covered in this chapter points to a likely

increase in their use by governments.
The Doha Declaration on TRIPS and Public Health in 2001 is an intergovernmental agreement that institutes a regime under which developing
countries such as India, Brazil, Malaysia and Thailand are able to manufacture cheap, generic copies of otherwise patent-protected drugs which are
the property of pharmaceutical corporations. What is unusual about this
international arrangement is that, in practice, it is not an international
process at all, but rather negotiations between states and corporations. The
Declaration provides the framework in which individually or collectively,
states and corporations can hammer out what are in eect concessionary
commercial agreements namely voluntary licensing,30 or, where such
agreement is not forthcoming (which so far has been the norm), it reendorses the right of developing countries to issue compulsory licences for
the manufacture of certain health-related products in situations of national
emergency or other circumstances of extreme urgency (Declaration on the
TRIPS Agreement and Public Health, adopted on 14 November 2001,
WT/MIN(01)/DEC/2 (Doha Declaration), Article 5(c)).31
On the face of it therefore, the right to health is given priority over the
right to the exploitation of a corporations right to intellectual property
(IP), although it should always be borne in mind that the whole TRIPS
regime is itself an enormous exception to the free market ideology of the
WTO that expressly serves the interests of corporate holders of IP rights.
This fact often seems lost on pharmaceutical companies who thus far
have shown an extreme reluctance to negotiate with poorer countries
over patent rights, preferring to litigate or threaten litigation instead
(Saini 2007).
Fundamentally, corporations and trade are symbiotically linked and, as
we have seen in this section, human rights concerns can, albeit minimally,
be inserted into trade relations by way of obligations or inducements
directed towards the corporate vehicles of trade. And if such a corporate
route is not the only way in which to civilize trade, it is none the less a viable
and proper one. The corporate lobby at level of national government is, or
can be, extremely inuential, and as the WTO as trade lawyers are so keen
to remind us is little more than a construct of its member states, corporations thereby have great inuence over the objects, means and methods
of global trade. This sequence of power and inuence is inexorable, even to
such reactionary commentators as Kent Jones who in the process of apparently seeking to debunk the arguments of corporate critics, endorses their
very concerns as to the wielding of corporate power: trying to attack
MNCs [multinational corporations] by attacking the WTO misses the
target. For one thing, MNCs [sic] inuence on the WTO has often been

358

Handbook of research on global corporate citizenship

exaggerated. The largest of MNCs certainly wield a great deal of political

inuence, but mainly through domestic channels (Jones 2004, p. 174).
Whatever, the precise role of corporations in the slow and stilted convergence of human rights and trade goals, it is one that will grow rather than
diminish. They will be crucial players in the process of advancing trade specialists understanding of and the concerns of human rights advocates and
vice versa, and especially as regards the obligations imposed on states by
international human rights law and international trade law, respectively (van
Hees 2004, pp. 2432). The question of how to balance economic eciency
through trade and social justice through human rights protection remains
the key task at hand, and in that the choices made by corporations as to
where and in what they invest are vital (Gonzalez 2006, pp. 96792). FDI is,
as Janet Dine puts it: a mechanism with great potential benets, including
the provision of stable capital, the importation of skills and technology and
access to the largest markets of them all: [e]xchanges within TNCs which
now account for around two-thirds of world trade ows, reecting the
growth of intra-product trade (Dine 2005, p. 22, original emphasis).
The fact, however, that so little of it goes to the very poorest countries
sub-Saharan Africa receives about 1 per cent of FDI, whereas the vast bulk
goes into those booming developing economies such as China, India, Brazil,
Mexico, Malaysia, Indonesia, Thailand and Vietnam (ibid., p. 22) demonstrates how merciless the market can be for the poorest of the poor. It may
be said that it is at this point that international aid steps in, but that, as we
shall see in the following subsection, is itself an ever more-challenging task,
as aid budgets pale not only against the demands that are made of them, but
also against the enormous increase in the amounts of FDI.32
Aid-based development33
Of the three pillars that constitute the global economy, the relationship
between international aid and human rights has, on the face of it, the least
room for corporate enterprise. After all, the post-Second World War
origins of development aid were steeped in the philosophy of the command
economy with a focus on public sector economic management rather than
encouragement of private sector enterprise (Cox 2006, pp. 2857).
However, much has changed over the past 15 years, such that now aid agencies actively court private sector involvement in development projects, not
least in an deliberate eort to co-opt the enormous (and growing) economic
potential, noted above, that lies in the private sectors command of FDI
(UNDP Commission on Private Sector Development 2004, pp. 2937). An
example of the changing face of development is the Global Fund which
was established in 2002. It is a publicprivate partnership (PPP) tasked with
administering and allocating funds provided by both governments and

Human rights, corporations and the global economy

359

private sector donors to countries to combat HIV/AIDS, malaria and

tuberculosis. The Global Fund brings private sector disciplines to the disbursement and evaluation of programmes, and operates with much lower
overheads than traditional agencies. With the increasing involvement of
corporations in aid-based development comes a correspondingly urgent
need to regulate TNCs adherence to international human rights norms so
as to reduce the scope for negative human rights impact.
The provision of development aid, whether by multilateral organizations
such as the World Bank,34 the Regional Development Bank or the EU, or
bilaterally through individual state aid agencies,35 is essentially concerned
with the alleviation of poverty and improvement of peoples living standards through the process of economic development. Thus the 2000
Millennium Development Goals to which 189 states have formally lent
their support have as their rst goal to eradicate extreme poverty and
hunger, by halving both the number of people living on less than US$1 a
day and those suering from hunger by 2015. Aid-based development is, by
design or eect, essentially concerned with the fullment of many key
human rights. We must, therefore, as Thomas Pogge urges us to, focus on
the human rights of the global poor because the great human rights decits
persisting today are heavily concentrated among them (Pogge 2005, p. 718).
In fact, the UN, in its Vienna Declaration and Program of Action 1993,
states that: the existence of widespread extreme poverty inhibits the full
and eective enjoyment of human rights; its immediate alleviation and
eventual elimination must remain a high priority for the international
community (Vienna Declaration and Program of Action, adopted 25 June
1993, A/CONF.157/23, para. 14).
And more recently, the former UN Secretary-General made clear his
understanding of the central role that the relationship between the development and human rights plays within the triptych (the third being security) of the most pressing interrelated concerns that face the world today
(Annan 2005a, para. 17). This in the same era, when Ko Annan acknowledged that to meet these concerns, a multiplicity of actors must be
employed and that such an approach is indicative of a fundamental shift
that has occurred. He stated:
The United Nations once dealt only with governments. By now we know that
peace and prosperity cannot be achieved without active partnerships involving
governments, international organisations, the business community and civil
society. In todays world we depend on each other. The business of the United
Nations involves the businesses of the world. (Zammit 2003)

This explicit recognition by the former Secretary-General of the powerful role played by corporations within the broad mission of the United

360

Handbook of research on global corporate citizenship

Nations is indicative of the pervasive inuence of business, including more

recently, an increasing presence in the development sector. As noted by
Utting and Zammit, in the eld of international development, dierent
decades seem to usher in new champions of change: the developmental
state in the 1960s and 1970s and free market forces and non-governmental
organizations (NGOs) in the 1980s and 1990s (Utting and Zammit 2006,
p. 1). Now in the new millennium, the centrality of corporations in the
delivery (both direct and indirect) of development aid is being emphasized.
Corporations are now billed by some as the solution to some of deciencies
in current development dilemmas (Bossone 2007) but their place within the
development paradigm is complex and largely unregulated.
Obviously the main concern of corporations is not development, but the
deliverance of development aid can take many forms. There are many
aspects of business operations that can have a direct link, intentionally or
not, to some development goals the most obvious being poverty reduction. At its most simplistic, business may be involved in development philanthropy, simply giving money to a charitable cause to promote some
particular aspect of development that is most commonly targeted at communities in which the company operates.36 At a more complex level, a corporation may attempt to integrate prot maximization with a deliberate
strategy to market goods in a developing economy. Prahalad, for example,
urges businesses to stop thinking of the poor as victims and instead start
seeing them as consumers. He proposes that there are tremendous benets
to TNCs that choose to serve these markets in ways responsive to their
needs and provides examples of rural electrication in Nicaragua and salt
iodization in India to demonstrate how companies can make money from
selling to people with low income, while simultaneously, aiming to improve
the quality of life of their consumers (Prahalad 2004). Somewhere in the
middle of these two paths is the increasing focus on developing a growing
sustainable business strategy by organizations such as the UNDP.
Involvement of business at this level aims to full Ko Annans prophecy
that it is the absence of broad-based business activity, not its presence, that
condemns much of humanity to suering (Annan 2005b).
Regulation specically focused on the role of business in the development sphere is relatively new, and while the preceding examples of business
incursions into the development sphere are regulated largely on the
domestic front such as via domestic environmental or corporate law the
human rights accountability gap arises when such states are unable or
unwilling to regulate corporate activity in a manner that is consistent with
providing human rights protections. Largely in response to civil society agitation, international guidance that forces the merger of human rights and
business has begun to emerge in selected sectors on the international front,

Human rights, corporations and the global economy

361

particularly with respect to the nance industry. The outcry for change is
partly a result of the policies of the 1980s when international nance institutions such as the World Bank and the IMF actively encouraged developing countries to pursue export-led growth, liberalize their trade and
investment regimes and privatize state enterprises. During, and following
on from this period, the role and impact of TNCs in developing countries
expanded, some argue for the better (providing investment, employment,
taxation and so on) and some for the worse (because the TNCs were implicated in promoting a particular style of development that prioritized economic development over the people and the environment). 37
In accordance with the pursuit of such policies, international nancial
institutions are often perceived to be acting outside any global governance
regime for the protection of rights or those aected by their policies.
However now, in some cases, there is evidence of reformed attitudes that
acknowledge, at least in theory, the growing inuence (positive and negative)
of corporations in the development sphere and the need for guidance (if not
regulation) in the protection of human rights. In 2002, with the backing of
the World Bank Groups International Finance Corporation (IFC), a
number of banks working in the project nance sector met to develop a
common set of environmental and social policies and guidelines that could
be applied globally and across all industry sectors. This led to the drafting
of the rst set of Equator Principles launched in 2003.38 This notion of
extending both culpability and responsibility in order to promote, respect
and protect human rights to the traditional silent investment partners,
illustrates the ever-increasing relevance and acceptance of human rights
responsibilities to business. The adoption of the Equator Principles reects
the increasing scrutiny that project sponsors and lenders face in dealing with
environmental and social issues which surround projects in emerging
markets, and can be seen as a direct response, by the adopting banks (and
the international nancial institutions which encouraged such adoption), to
criticism from NGOs and others relating to their past lending practices.
Corporations and their nancial backers are urged to consider the full
impact of their practices on development and adopt a preventive approach
to investment. The IFC has also instituted performance standards that companies are required to meet in return for IFC investment funds which
include several human rights elements such as labour rights, the rights of
indigenous people and the surrounding community and the protection of
cultural heritage (IFC 2006). Despite being criticized by some as not going
far enough, the standards are yet another step in the right direction of solidifying the connection between human rights and corporations and the
intrinsic role each plays in the development sphere (Ruggie 2007, para. 51).
The World Banks Corporate Social Responsibility Practice, set up to advise

362

Handbook of research on global corporate citizenship

developing country governments on public policy roles and instruments

they can use to encourage corporate social responsibility, is another
reminder that when dealing with human rights and development, business
should not be left out of the equation. The work of the practice group
acknowledges that some of the most signicant and systematic contact that
most people in low-income countries have with the rule of law is in the workplace and the bank, along with states and corporations all have signicant
roles to play in ensuring that an eective compliance regime is in place to
protect individual rights (Smith and Feldman 2003, p. 2).
Similarly, concern about the impact of corporations on human rights has
led to an increased focus on the transparency (or lack thereof) of a countrys
export credit agencies (ECAs). ECAs use public funds or a combination of
public and private funds to provide loans, guarantees and insurance in
support of overseas investment and exports by domestic corporations, and
may sometimes fund controversial projects. For example, ESCR Net, a nongovernment advocacy organization, argues that Export Development
Canada provides considerable support to Canadas mining companies with
signicant negative impact on human rights and the environment, and the
UK Export Credit Guarantee Department is heavily invested in arms
exports detrimentally aecting rights (ESCR Net 2007). The capital that
industrial countries ECAs provide to exporters and investors eclipses the
contribution of overseas development agencies, other bilateral agencies and
multilateral organizations (Gianturco 2001, p. 69). Signicantly, the 2006
Interim Report of the SRSG singled out home countries providing investment guarantees and export credits for frequently not taking adequate
regard for the human rights practices of the companies receiving the
benets (Ruggie 2006a, para. 79). NGO activism on this issue has helped
focus attention on the need to institute safeguards into ECA programmes
to promote greater transparency and curb corporate-led abuse of human
rights and the environment. The obligation on national governments to
protect human rights includes within it a duty to regulate private actor
conduct. As discussed above, this creates a duty for home states to regulate
private nancial institutions, including those providing export credits and
investment guarantees as well as TNC conduct generally. However the
same limitations and ambiguities with respect to extraterritorial protection
continue to apply. As has become evident throughout this chapter, the startling reality is that the theory of state protection of human rights is not
always applied in practice and corporations, wittingly or unwittingly, are
often able to operate in a largely human rights free zone.
In practice, the delivery of development aid whether by corporation or
other agencies has many dimensions. Some of those can be viewed as
directly contributing to human rights goals, like the provision of food,

Human rights, corporations and the global economy

363

clean water, shelter, healthcare, education and the protection and welfare of
children; others more indirectly so, through the provision of power and
telecommunication services, and the building of transport infrastructure.
Furthermore, in this latter respect, aid is increasingly concerned with the
promotion of institutional capacity and individual skills in such areas as
the judiciary, government ocials, police forces and civil society organizations. Here, aid seeks to support such rights as the right to a fair trial,
freedom of expression and association, non-discrimination (on grounds of
gender, race, disability, sexuality and so on), and political participation.
In analysing the extent to which corporations can and will play a role in
modern development thinking and practice and the ensuing intrinsic connection business has with human rights, it is important to recognize that
there are certain controversial features of the relationship between human
rights and aid. In fact, when discussion is focused specically on what role
human rights do and ought to play within aid, much discontent is apparent. The concern comes largely from two sources. The rst is represented
by many of the multilateral and Western aid agencies themselves, who resist
calls for them to adopt a so-called human rights approach to aid and
development (Darrow and Tomas 2005), as, they argue, this would deect
them from their primary economic concerns and thrust them into political
issues. This is despite the fact as demonstrated above that the development programmes of such agencies are already deeply involved with human
rights matters. The Human Rights Council of Australia, for example,
claims that development should in fact be properly seen as a subset of
human rights (HRCA 1995, p. 26).
The second source of discontent gives rise to the neo-colonial concerns
held by the developing countries who are the recipients of Western and multilateral aid.39 The argument here is that the nature of many of the past and
present aid programmes is such that they are exporting particular political
agendas. Specically, by making aid conditional (whether explicitly or
implicitly) on the recipient states adherence to certain human rights standards, the donor states are forcing their (typically) liberal, capitalist democratic philosophies onto developing countries. An especially unambiguous
example of this approach is the Bush administrations establishment in 2004
of the Millennium Challenge Account administered by the Millennium
Challenge Corporation. Initially, up to $5 billion per year was earmarked
for distribution to developing countries over the initial three years of the
programme (though far less has been appropriated by Congress each year
and still less actually divested)40 to developing countries under the programme based on the principle that aid is most eective when it reinforces
good governance, economic freedom and investments in people.41
Applicant states are measured according to 16 specic criteria that cover

364

Handbook of research on global corporate citizenship

governance, rule of law and civil liberties, as well as such commercially

related concerns as the levels of impediment to setting up business in the
applicant states (costs in time and money); openness of trading relations;
land ownership and access rights; and scal and monetary policies.
Fundamentally, debates over questions of conditionality in terms of
human rights whether heavy- or light-handed centre on the notion of
the universality of human rights. For if rights are accepted as universal, and
therefore not representative of any one particular political, philosophical
or cultural ideology, they then should apply to all states equally. Thus,
neither the excuses made by Western states not to promote human rights
compliance in others, nor those made by developing states not to abide by
human rights standards, are legitimate.
Whatever the political and philosophical disputes, at the practical level,
the two notions of human development and human rights have to be seen
as interrelated and interdependent, even if it is accepted that they are not
coterminous. They are, as the UNDP puts it, close enough in motivation
and concern to be compatible and congruous, and they are dierent enough
in strategy and design to supplement each other fruitfully (UNDP 2000,
p. 19). An approach that acknowledges, accepts and when necessary is
willing to regulate the role played by corporations in the development arena
can thus bring signicant rewards, and facilitate in practical ways the
shared attempts to advance the dignity, well-being and freedom of individuals in general (ibid., p. 19).
Conclusion
Evidently, the impact of the global economy on human rights is extremely
signicant, even if, as yet, the same cannot be said in respect of the human
rights impact on the global economy. The rise and rise of the TNC as a
powerful non-state actor has largely left behind human rights and international law in its wake without proposing any real sustainable mechanisms
for holding business accountable for human rights abuses. And yet we agree
that it can be said of TNCs that they play a signicant role in generating
the gains from trade for both their home and their host countries, since they
reallocate resources internationally to maximise eciency and prots
(Jones 2004, p. 171). But with the important proviso that, for example, the
author of these words crucially omits namely, that this is a role that corporations can play. It is their destiny neither always to do so, nor indeed
always to do so without also inicting injustice and harm, including, sometimes, great human rights harm. An important message of our present
piece is that the costs (in all respects) of such a footprint cannot and must
not be ignored or externalized by the corporate generals and foot soldiers
of the global economy. To be sure, they can do good and do so, and that

Human rights, corporations and the global economy

365

much we must be very careful to harness, but the bad must be acknowledged and attended to as well. And that challenge is one that falls to human
rights advocates as well as the corporate sector to meet.
The part then that human rights plays in the corporate world must be
strengthened if we are to ensure the wider distribution, and the deeper penetration of increasing wealth and protection of the disadvantaged from the
worst excesses of economic globalization; a quest to humanise globalization, as Pascal Lamy rather grandly puts it (Lamy 2006). The voluntary
adoption of sector-specic human rights standards by corporations
whether relevant to commercial enterprise, trade and investment or development is but a temporary brace that supports but will not alone sustain
long-term human rights protections. With power comes responsibility and
not only corporations, but also many states and intergovernmental institutions now recognize the need to more formally protect human rights within
the juggernaut of the global economy.
The task is not only one that cries out for strengthening the ties of international cooperation, but is also a task that has important implications for
the ways in which countries treat their own citizens. This is as true for the
developed economies of the Western countries as it is for countries whose
economies and structure of governance are still developing. The former
cannot aord to be complacent by relying on the fact that capitalism and
democracy have brought relative economic comfort to many of its peoples.
For there still exist too many who are disadvantaged and deprived, and
whose powerlessness and minority status are too often allowed to blind the
majority to their fate (Beetham 1999, pp. 1067). But equally, where the
latter (developing countries) relegate respect for human rights to second
place behind the pursuit of the economic growth through autocratic governance and as pushed by both domestic and foreign corporate interests,
they do so at the peril of their peoples welfare and their governments legitimacy. Rights and liberties are, as Amartya Sen argues, instrumental and
integral to the attainment of development, not merely add-ons to be
pursued at some later date (Sen 1999, pp. 3640).
Notes
1.

The origins of this chapter lie in research undertaken while the rst-named author was a
Senior Fulbright Scholar in late 2004 at Washington College of Law, American
University. The research was also enabled by two Australian Research Council grants (on
corporations and human rights, and human rights and international trade, respectively).
The themes herein have been aired in graduate classes in the global economy and human
rights taught over the last four years in both Australia and the United States, and in a
series of papers at workshops conducted by the author at the Institute of Human Rights
of the Ho Chi Minh National Political Academy in Hanoi, Vietnam, in November 2005.
Finally, we would like to thank Gillian Moon for her insightful comments on an earlier
draft and both Jessie Connell and Odette Murray for their editorial assistance.

366
2.

Handbook of research on global corporate citizenship

Which followed consideration in 2005 (for the second time) by the then Commission on
Human Rights of the Norms on the Responsibilities of Transnational Corporations
and Other Business Enterprises with Regard to Human Rights, UN Doc. E/CN.4/
Sub.2/2003/12/Rev.2 (2003), available at http://www1.umn.edu/humanrts/links/normsAug 2003.html, accessed 26 August 2007 (hereinafter Norms 2003) (Kinley and
Chambers 2006).
3. Roberto Daino, (the then) Senior Vice President and General Counsel, the World Bank
Group, in a speech delivered at the World Bank Legal Forum: Law, Equity and
Development, 1 December 2005 (Daino 2005a); and see further Daino (2005b).
Dainos successor, Ana Palacio, has also endorsed this interpretation (Palacio 2006). It
must be said, however, that such high-level rhetoric is neither repeated, nor borne out at
the level of the Banks practice (Darrow 2006).
4. Pascal Lamy, in his report on the Doha Round to the WTO General Council on 27 July
2007, noted that some good progress has been made across the board over the last few
months, but there are some signicant dierences which remain to be resolved (Lamy
2007, p. 1).
5. Thus, for example, the Preamble to the Marrakesh Agreement establishing the World
Trade Organisation 1994 declares the parties concern with no less than the following:
raising standards of living, ensuring full employment, advancing real income levels,
expanding production and trade in goods and services, respecting the precepts of sustainable development and the protection and preservation of the environment, all in a
manner consistent with the respect for the dierent levels of economic development
between states (Marrakesh Agreement, preamble, rst paragraph). Further, see
UNCTADs statement that: international trade can play a major role in reducing
poverty in the LDCs [least developed countries] (UNCTAD 2004, p. 123); and see the
Statement of the Human Rights Caucus on the Occasion of the Sixth Ministerial
Conference of the WTO on 10 December 2005, at p. 1, which proclaims that international trade can undoubtedly serve as one means for the realization of human rights
. . . but it does not automatically or necessarily do so.
6. The term transnational corporation refers to an economic entity operating in more
than one country or a cluster of economic entities operating in two or more countries
whatever their legal form, whether in their home country or country of activity, and
whether taken individually or collectively (Norms 2003, Article I).
7. As noted by Andrew Clapham, much of the focus is on large TNCs but there is no reason
to exclude national companies from the realm of human rights obligations (Clapham
2006, p. 201).
8. For example, the American retailer, Wal-Mart, is one of the worlds largest companies
with revenues over US$287 billion in 2005 (see www.money.cnn.com/magazines/fortune/
global500/2005/index.html, accessed 26 August 2007). By contrast, the IMF estimates
Cambodias GDP in 2005 to be approximately US$4.5 billion (IMF 2005).
9. While the notion of direct responsibility being placed on corporations appears radical,
it is not the rst time duties have been placed on them in international law. It
has been noted that TNCs also have direct duties under some multilateral conventions. For example, both the International Convention on Civil Liability for Oil
Pollution Damage 1969 and the Convention on Civil Liability for Damage resulting
from Activities Dangerous to the Environment 1993 directly impose liability on legal
persons including corporations (Ratner 2001, p. 480 .; Kinley and Tadaki 2004,
pp. 9467).
10. Convention on the Rights of Persons with Disabilities opened for signature 30 March
2007, UN Doc. A/RES/61/106 (not yet in force), Art 4(e).
11. Because, it is argued, the main civilising inuence on the otherwise crude capitalist
quest for prot is the market itself, which turns capitalism into an engine of social
progress (Cox 2006, p. 6).
12. See Floris van Heess excellent canvassing of both sides of the debate in Protection v protectionism: the use of human rights arguments in the debate for and against the liberalisation of trade (van Hees 2004).

Human rights, corporations and the global economy

13.

367

The price-xing practices and generally anti-competitive business structures of large

agricultural corporations magnify their market power in respect of international trade
in food, given the highly concentrated and vertically/horizontally integrated nature of
the market. This gives farmers in developing countries little chance to compete with them
or negotiate fair prices when the TNCs buy their produce. On the market practices of
transnational agribusiness, see IFAP (2002).
14. Thus, for example, the Common Agricultural Policy (CAP) has maintained a phenomenal grip on the EU budget since its inception in 1958, from highs of almost 70
per cent of the EU budget in the 1970s, to 34 per cent of the budget during the 200713
period (EU 2007). In 2001, the subsidies provided by rich countries to their farmers
represented six times the amount of their development aid that is, US$311 billion in
farm subsidies, compared to US$55 billion in development aid (Stiglitz and Charlton
2005, p. 62).
15. See Jagdish Bhagwatis dismissive comment in this regard: Many of us nonlegal intellectuals and experts think that the preamble is like the overture at the opera: the audience is free to rustle through the libretto and even whisper to friends until the real opera
begins! (Bhagwati 2002, p. 133).
16. A product of the Tokyo Round of Trade Negotiations, which though not constituting a
part of the GATT, none the less has legal force by virtue of it having been agreed to by
all GATT signatories; see GATT, Basic Instruments and Selected Documents, 26th
Supplement (1980), pp. 2035; also reproduced at: http://www.wto.org/english/docs_e/
legal_e/enabling 1979_e.htm, accessed 26 August 2007.
17. See GATT Art. XX(b); on the relevant jurisprudence of which article, see Marceau
(2002); and OHCHR (2005a).
18. See GATT Art. XX(e).
19. See GATT Art. XXI.
20. See GATS Art. XIV(a).
21. See GATT Art. XX(a).
22. United States Restrictions on Imports of Tuna, Report of the Panel (GATT DS21/R),
3 September 1991 (Tuna/Dolphin I) and United States Restrictions on Imports of
Tuna, Report of the Panel (GATT DS29/R), 16 June 1994 (Tuna/Dolphin II). United
States Import Prohibition of Certain Shrimp and Shrimp Products, Report of the
Appellate Body (WT/DS58/AB/R), 12 October 1998. On the role of private industry in
lobbying the US Trade Representative (USTR) to initiate GATT/WTO cases, see generally: Shaer (2003, pp. 237, 4650).
23. EC Measures Concerning Meat and Meat Products (Hormones), Report of the
Appellate Body (WT/DS26/AB/R; WT/DS48/AB/R), 16 January 1998; and EC
Measures Aecting the Approval and Marketing of Biotech Products (WT/DS291/R;
WT/DS292/R; WT/DS293/R), 29 September 2006. The US beef industrys trade organizations put pressure on the USTR to take their case to the WTO in the ECMeat
Hormones case (Shaer 2003, p. 39). On the role of lobby groups in the
ECBiotech/GMO case, see: Friends of the Earth International and Corporate Europe
Observatory (2003, pp. 89).
24. Thailand Restrictions on Importation of and Internal Taxes on Cigarettes, Report of the
Panel (GATT BISD 37S/200), 7 November 1990. On the ability of the tobacco industry
to enlist the support of the US government in overcoming trade barriers in developing
states, including in the case of Thailand, see Taylor (1996, pp. 2624).
25. Japan Measures Aecting Consumer Photographic Film and Paper, Report of the Panel,
(WT/DS44/R), 31 March 1998. Though not an Art. XX case, we include it here on
account of the unambiguously corporate-led actions. The case was openly referred to as
having been brought by the US against Japan, at the behest of Kodak (SouthNorth
Development Monitor 1996).
26. Robert Joss and Anita Chan outline the diverse views of developing country trade
unions on the desirability of the social clause, see Joss and Chan (2002, p. 9).
27. For a review of both sides of this debate, see Chapter 8: The WTO and the interests of
developing countries in Jones (2004); and also Hilary (2004).

368
28.

29.

30.
31.
32.
33.
34.

35.

36.

37.
38.
39.
40.
41.

Handbook of research on global corporate citizenship

WTO Ministerial Conference, Declaration on the TRIPS Agreement and Public Health,
adopted on 14 November 2001, WT/MIN(01)/DEC/2 (the Doha Declaration) at:
http://www.wto.org/English/thewto_e/minist_e/min01_e/mindecl_trips_e.htm, accessed
26 August 2007.
For a discussion of the political and legal context of the Massachusetts Burma law, see
Fitzgerald (2001, especially at pp. 410, 3644). In June and July 1997, respectively, the
EC and Japan each issued a complaint against the US in the WTO, alleging that the
Burma law violated the Agreement on Government Procurement. On 21 October 1998,
the WTOs Dispute Settlement Body established a Panel, but the Panel agreed to suspend
the proceedings, at the request of the parties, on 10 February 1999, due to ongoing constitutional challenges to the Burma law in the US courts. The US Supreme Court ultimately held that the Massachusetts Burma law was unconstitutional (see Crosby v
National Foreign Trade Council, 530 US 363 (2000)). The WTO proceedings lapsed on
11 February 2000.
See Davina Ovetts account of such voluntary licensing negotiations between Brazil and
a group of US pharmaceutical manufactures of antiretroviral medicines, in Ovett (2007,
p. 177).
For example, the recent compulsory licensing actions of both Thailand and Brazil in
respect of the anti-HIV/AIDS drug Efavirenz over which the US pharmaceutical
company Merck, Sharp & Dohme holds the patent (Cortes 2007).
In 2004, FDI inows into the group of 50 least developed countries (LDCs) reached $11
billion, the highest level ever. In the 19952000 period, average annual FDI ows
exceeded bilateral overseas development aid for 12 LDCs (UNCTAD 2005, pp. 12).
For an excellent overview of the issues that lie at the heart of the debate over the links
between human rights and development, see UNDP (2000, chs 1 and 6).
See, for example, the Articles of Agreement of the International Bank for Reconstruction
and Development (IBRD) (part of the World Bank Group), which state that among its
purposes are the development of productive facilities and resources in less developed
countries, and raising . . . standard[s] of living and conditions of labour (arts 1(i) and
(iii), respectively), http://go.worldbank.org/7H3J47PV51, accessed 26 August 2007.
See, for example, AusAIDs proclamation that the overseas aid program aims to assist
developing countries reduce poverty and achieve sustainable development, in line with
Australias national interest, http://www.ausaid.gov.au/makedi/default.cfm (accessed
26 August 2007); and the United Kingdom Department for International Developments
somewhat less cryptic declaration in its Mission Statement, that it is leading the British
governments ght against world poverty, available at http://www.dd.gov.uk/
aboutdd/missionstatement.asp, accessed 26 August 2007.
For example, as part of its broader social responsibility initiative, Gap Inc., the US clothing company, through the Gap Foundation makes grants to various organizations and
community programmes around the world, focusing on communities where its factories
operate (Gap Inc. 2007).
Corporate Ethics International (2007).
A revised set of principles were released in July 2006, available at http://www.equatorprinciples.com/principles.shtml, accessed 26 August 2007.
See Gregory Shaer and Yvonne Apea (2005, pp. 4915).
The appropriation gures are: $1 billion for 2004; $1.5 billion for 2005 and $1.75 billion
for 2006 (Johnston and Zajonc 2006, p. 7).
See Millennium Challenge Corporation, About MCC, at http://www.mcc.gov/about/
index.php, accessed 21 November 2007.

References
Alien Torts Claims Act (ATCA) (1789), 28 USC 1350.
Anderson, Sarah and John Cavanagh (2000), Top 200: the rise of global corporate power,
Institute of Policy Studies Paper, http://www.ips-dc.org/reports/top 200text.htm, accessed
26 August 2007.

Human rights, corporations and the global economy

369

Annan, Ko (2005a), In larger freedom: towards development, security and human rights for
all, UN Doc. A/59/2005, http://www.un.org/largerfreedom/contents.htm, accessed 26
August 2007.
Annan, Ko (2005b), as quoted in Financial Times, 14 September, reproduced at
http://www.undp.org/partners/business/gsb/, accessed 26 August 2007.
Bartels, Lorand (2005), The Appellate Body Report in European Communities Conditions
for the Granting of Tari Preferences to Developing Countries and its implications for conditionality in GSP programmes, in Thomas Cottier, Joost Pauwelyn and Elisabeth Brgi
Bonanomi (eds), Human Rights and International Trade, Oxford: Oxford University Press,
pp. 46387.
Bastin, Lucas (2007), A new argument for the textual incorporation of human rights into
WTO law: legitimate expectations and the defence of necessity, University of Sydney
student thesis, on le with authors.
Beetham, David (1999), Democracy and Human Rights, Cambridge, UK and Malden, MA:
Polity.
Bhagwati, Jagdish (2002), Afterword: the question of linkage, Symposium: The Boundaries
of the WTO, American Journal of International Law, 96, 12634.
Bossone, Andrew (2007), Encouraging development, www.businesstodayegypt.com/
article.aspx?ArticleID=7148, accessed 26 August 2007.
Braithwaite, John and Peter Drahos (2000), Global Business Regulation, Cambridge:
Cambridge University Press.
Clapham, Andrew (2006), Human Rights Obligations of Non-State Actors, Oxford and New
York: Oxford University Press.
Corporate Ethics International (multiple authors) (2007), Strategic Corporate Initiative:
Towards a Global Citizens Movement to Bring Corporations Back Under Control, September,
pp. 1011, 6273; available at http://www.corporateethics.org/downloads/SCI_Report_
September_2007.pdf, accessed 21 November 2007.
Cortes, Katia (2007), Brazil breaks patent on Mercks Efavirenz AIDS drug,
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAHMaYgcQA4o&refer=ho
me, accessed 26 August 2007.
Cox, Simon (ed.) (2006), Economics: Making Sense of the Modern Economy, London: The
Economist, Prole Books.
Daino, Roberto (2005a), speech delivered at the World Bank Legal Forum: Law, Equity
and Development, 1 December, http://siteresources.worldbank.org/INTLAWJUSTICE/
214576-1139604306966/20817193/LegalForum2005.pdf, accessed 26 August 2007.
Daino, Roberto (2005b), Legal aspects of the World Banks work on human rights: some
preliminary thoughts, in Philip Alston and Mary Robinson (eds), Human Rights and
Development: Towards Mutual Reinforcement, Oxford: Oxford University Press, pp. 50924.
Darrow, Mac (2006), A human rights-based approach to development: theoretical and operational issues for the World Bank, in Caroline Sage and Michael Woolcock (eds), The
World Bank Legal Review: Law, Equity and Development, Vol. 2, Washington, DC: World
Bank/Martinus Nijho, pp. 385417.
Darrow, Mac and Amparo Tomas (2005), Power, capture, and conict: A call for human
rights accountability in development cooperation, Human Rights Quarterly, 27 (2),
471538.
de Schutter, Olivier (2006), Extraterritorial jurisdiction as a tool for improving the human
rights accountability of transnational corporations, http://www.reports-and-materials.org/
Olivier-de-Schutter-report-for-SRSG-re-extraterritorial-jurisdiction-Dec-2006.pdf, accessed
26 August 2007.
Dine, Janet (2005), Companies, International Trade and Human Rights, Cambridge: Cambridge
University Press.
Doe v Unocal Corp., 395 F. 3d 932 (9th Cir. 2002).
ESCR Net (2007), Information on export credit agencies and human rights, http://www.escrnet.org/resources/resources_show.htm?doc_id=427881, accessed 26 August 2007.
European Public Health Alliance (EPHA) (2003), The Cancn ministerial conference of the
WTO: what went wrong?, http://www.epha.org/a/747, accessed 26 August 2007.

370

Handbook of research on global corporate citizenship

European Union (EU) (2007), Overviews of the European Union activities: agriculture,
http://europa.eu/pol/agr/overview_en.htm, accessed 26 August 2007.
Fitzgerald, Peter (2001), Massachusetts, Burma and the World Trade Organization: a commentary on blacklisting, federalism, and internet advocacy in the global trading era,
Cornell International Law Journal, 34, 153.
Foreign Corrupt Practices Act (1977), 15 U.S.C. 78dd1.
Friedman, Milton (1970), The social responsibility of business is to increase its prots,
Magazine, New York Times, 13 September, p. 32.
Friends of the Earth International and Corporate Europe Observatory (2003), Business Rules:
Who Pays the Price? How Corporate Inuence in the WTO Impacts People and the
Environment, www.foei.org/en/publications/pdfs/businessrules.pdf, accessed 26 August 2007.
Gap Inc. (2007), Giving Money, http://www.gapinc.com/public/SocialResponsibility/sr_
com_giving.shtml, accessed 26 August 2007.
Gianturco, D.E. (2001), Export Credit Agencies: The Unsung Giants of International Trade and
Finance, Westport, CT: Quorum Books.
Gonzalez, Miguel (2006), Trade and morality: preserving public morals without sacricing
the global economy, Vanderbilt Journal of Transnational Law, 39, 93972.
Hafner-Burton, Emilie (2005), Trading human rights: how preferential trade agreements
inuence government oppression, International Organization, 59, 593629.
Hertz, Noreena (2001), The Silent Takeover: Global Capitalism and the Death of Democracy,
London: Heinemann.
Hilary, J. (2004), Trade liberalization, poverty and the WTO: assessing the realities, in Homi
Katrak and Roger Strange (eds), The WTO and Developing Countries, Basingstoke, UK and
New York, USA: Palgrave Macmillan, pp. 3862.
Human Rights Council of Australia (HRCA) (1995), The Rights Way to Development: A
Human Rights Approach to Development Assistance, Marrickville: Human Rights Council
of Australia.
International Federation of Agricultural Producers (IFAP) (2002), Sixth draft report on
Industrial Concentration in the Agrifood Sector, http://www.ifap.org/en/publications/documents/Concentration6thdraftrevE.pdf, accessed 26 August 2007.
International Finance Corporation (IFC) (2006), Performance Standards on Social and
Environmental Sustainability, http://www.ifc.org/ifcext/enviro.nsf/AttachmentsByTitle/
pol_PerformanceStandards 2006_full/$FILE/IFC+Performance+Standards.pdf, accessed
26 August 2007.
International Monetary Fund (IMF) (2005), Cambodia: gross domestic product, current
prices (US dollars, billions), World Economic Outlook Database: April 2005,
http://www.imf.org/external/pubs/ft/weo/2005/01/data/index.htm, accessed 26 August
2007.
International Monetary Fund (IMF) (2007), World Economic Outlook: Spillovers and Cycles
in the Global Economy: April 2007, Washington, DC: IMF, http://www.imf.org/Pubs/FT/
weo/2007/01/index.htm, accessed 26 August 2007.
Johnston, Doug and Tristan Zajonc (2006), Can foreign aid create an incentive for good governance? Evidence from the Millennium Challenge Corporation, http://ssrn.com/
abstract=896293, accessed 26 August 2007.
Jones, Kent (2004), Whos Afraid of the WTO, Oxford and New York: Oxford University Press.
Joss, Robert and Anita Chan (2002), From NorthSouth to SouthSouth: the true face of
global competition, Foreign Aairs, 81 (5), 813.
Kinley, David (2002), International human rights as legally binding or merely relevant, in
Stephen Bottomley and David Kinley (eds), Commercial Law and Human Rights,
Aldershot: Ashgate Dartmouth, pp. 2545.
Kinley, David and Rachel Chambers (2006), The UN Human Rights Norms for
Corporations: the private implications of public international law, Human Rights Law
Review, 6 (3), 44797.
Kinley, David, Justine Nolan and Natalie Zerial (2007), The politics of corporate social
responsibility: reections on the United Nations Human Rights Norms for Corporations,
Company and Securities Law Journal, 25, 3042.

Human rights, corporations and the global economy

371

Kinley, David and Junko Tadaki (2004), From talk to walk: the emergence of human rights
responsibilities for corporations at international law, Virgina Journal of International Law,
44 (4), 9311023.
Lamy, Pascal (2005), Trade is a Fundamental tool in the ght against poverty, speech
delivered to the United Nations Conference on Trade and Development (UNCTAD) in
Geneva, 6 October, http://www.wto.org/English/news_e/sppl_e/sppl05_e.htm, accessed 26
August 2007.
Lamy, Pascal (2006), Humanising globalization, http://www.wto.org/english/news_e/sppl_e/
sppl16_e.htm, accessed 26 August 2007.
Lamy, Pascal (2007), Report by the Chairman of the Trade Negotiations Committee,
http://www.wto.org/english/news_e/news 07_e/tnc_chair_report_july07_e.htm, accessed 26
August 2007.
Leary, Virginia (1997), The WTO and the Social Clause: post-Singapore, European Journal
of International Law, 8 (1), 11822.
Leipziger, Deborah (2003), The Corporate Responsibility Code Book, Sheeld: Greenleaf.
Letnes, Bjrn (2004), Transnational corporations and human rights: silencing the ontological controversy, Public Organization Review, 4 (3), 25977.
Marceau, Gabrielle (2002),WTO dispute settlement and human rights, European Journal of
International Law, 13 (4), 753814.
Marrakesh Agreement establishing the World Trade Organisation (1994), opened for signature
15 April 1994, 1867 UNTS 3 (entered into force 1 January 1995), reproduced at
http://www.wto.org/English/docs_e/legal_e/04-wto_e.htm, accessed 26 August 2007.
Millennium Challenge Corporation, About MCC, at http://www.mcc.gov/about/index.php,
accessed 21 November 2007.
Narayan, Deepa, Robert Chambers, Meera Kaul Shah and Patti Petesch (2000), Voices of the
Poor: Crying Out for Change, New York: Published for the World Bank, Oxford University
Press.
Nolan, Justine (2005), With power comes responsibility: human rights and corporate
accountability, University of New South Wales Law Journal, 28 (3), 581613.
Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises
with Regard to Human Rights (2003), U.N. Doc. E/CN.4/Sub.2/2003/12/Rev.2,
http://www1.umn.edu/humanrts/links/norms-Aug 2003.html, accessed 26 August 2007.
Oce of the United Nations High Commissioner for Human Rights (OHCHR) (2005a),
Human Rights and World Trade Agreements: Using General Exceptions Clause to Protect
Human Rights, http://www.ohchr.org/english/about/publications/docs/WTO.pdf, accessed
26 August 2007.
Oce of the United Nations High Commissioner for Human Rights (OHCHR) (2005b),
Report on the responsibilities of transnational corporations and related business enterprises with regard to human rights, UN Doc. E/CN.4/2005/91, 15 February 2005,
http://daccessdds.un.org/doc/UNDOC/GEN/G05/110/27/PDF/G0511027.pdf ?OpenElem
ent, accessed 26 August 2007.
Ovett, Davinia (2007), Making trade policies more accountable and human rights-consistent:
an NGO perspective of using human rights instruments in the case of access to medicines,
in Wolfgang Benedek, Koen de Feyter and Fabrizio Marrella (eds), Economic Globalisation
and Human Rights, Cambridge: Cambridge University Press, pp. 170209.
Oxfam (2002), Rigged Rules and Double Standards: Trade, Globalisation, and the Fight Against
Poverty, Oxford: Oxfam.
Palacio, Ana (2006), The way forward: human rights and the World Bank, http://go.
worldbank.org/RR8FOU4RG0, accessed 26 August 2007.
Pogge, Thomas (2002), World Poverty and Human Rights, Cambridge: Polity.
Pogge, Thomas (2005), Recognized and violated by international law: the human rights of the
global poor, Leiden Journal of International Law, 18, 71745.
Prahalad, C.K. (2004) The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through
Prots, Upper Saddle River, NJ: Wharton School Publishing.
Ratner, Stephen (2001), Corporations and human rights: a theory of legal responsibility,
Yale Law Journal, 111, 443545.

372

Handbook of research on global corporate citizenship

Ruggie, John (2006a), Interim Report of the Secretary-Generals Special Representative on

the Issue of Human Rights and Transnational Corporations and Other Business
Enterprises, UN Doc. E/CN.4/2006/97, 22 February 2006, http://documents-ddsny.un.org/doc/UNDOC/GEN/G06/110/27/pdf/G0611027.pdf ?OpenElement, accessed 26
August 2007.
Ruggie, John (2006b), Human rights policies and management practices of Fortune Global
500 rms: results of a survey, Corporate Social Responsibility Initiative, Working Paper
no. 28, Cambridge, MA: John F. Kennedy School of Government, Harvard University.
Ruggie, John (2007), Report of the Special Representative of the Secretary-General on the
Issue of Human Rights and Transnational Corporations and Other Business Enterprises:
Business and Human Rights: Mapping International Standards of Responsibility and
Accountability for Corporate Acts , UN Doc. A/HRC/4/035, 9 February 2007,
http://www.business-humanrights.org/Documents/SRSG-report-Human-Rights-Council19-Feb-2007.pdf, accessed 26 August 2007.
Ruggie, John and OHCHR (2007a), State responsibilities to regulate and adjudicate corporate activities under the United Nations core human rights treaties, Individual report on
the International Covenant on Economic, Social and Cultural Rights, Report No. 2,
http://www.reports-and-materials.org/Ruggie-report-ICESCR-May-2007.pdf, accessed 26
August 2007.
Ruggie, John and OHCHR (2007b), State responsibilities to regulate and adjudicate corporate activities under the United Nations core human rights treaties, Individual report on
the International Covenant on Civil and Political Rights, Report No. 3, www.reports-andmaterials.org/Ruggie-ICCPR-Jun-2007.pdf, accessed 26 August 2007.
Saini, Angela (2007), Making poor nations pay for drugs, http://www.newscientist.com/
channel/health/mg 19325972.800-making-poor-nations-pay-for-drugs.html, accessed 26
August 2007.
Sen, Amartya (1999), Development as Freedom, Oxford and New York: Oxford University Press.
Shaer, Gregory (2003), Defending Interests: PublicPrivate Partnerships in WTO Litigation,
Washington, DC: Brookings Institution Press and Bristol: University Presses Marketing.
Shaer, Gregory (2006), The challenges of WTO law: strategies for developing country adaption, World Trade Review, 5 (2), 17798.
Shaer, Gregory and Yvonne Apea (2005), GSP programmes and their historical
politicalinstitutional context, in Thomas Cottier, Joost Pauwelyn and Elisabeth Brgi
(eds), Human Rights and International Trade, Oxford: Oxford University Press, pp. 488503.
Smith, Gare and Dan Feldman (2003), Company Codes of Conduct and International
Standards: An Analytical Comparison, Corporate Social Responsibility Practice Group,
World Bank, Washington, DC: World Bank/IFC.
SouthNorth Development Monitor (1996), KodakFuji War before WTO, http://www.sun
sonline.org/trade/process/followup/1996/10040096.htm, accessed 26 August 2007.
Srinivasan, T.N. (1996), Trade and human rights, Centre for Economic Growth, Yale
University, http://www.econ.yale.edu/growth_pdf/cdp 765.pdf, accessed 26 August 2007.
Statement of the Human Rights Caucus on the Occasion of the Sixth Ministerial Conference
of the WTO, 10 December 2005, http://www.dh.org/IMG/pdf/wto122005a.pdf, accessed
26 August 2007.
Stephens, Beth (2002), The amorality of prot: transnational corporations and human
rights, Berkeley Journal of International Law, 20, 4590.
Stiglitz, Joseph and Andrew Charlton (2005), Fair Trade for All: How Trade Can Promote
Development?, Oxford and New York: Oxford University Press.
Taylor, Allyn (1996), An international regulatory strategy for global tobacco control, Yale
Journal of International Law, 21, 257304.
UN Human Rights Committee (2004), General Comment 31: Nature of the General Legal
Obligation on States Parties to the Covenant, UN Doc. CCPR/C/21/Rev.1.Add.13,
http://www.unhchr.ch/tbs/doc.nsf/(Symbol)/CCPR.C.21.Rev.1.Add.13.En?Opendocument,
accessed 26 August 2007.
UN Millennium Development Goals (2000), www.un.org/millenniumgoals/, accessed 26
August 2007.

Human rights, corporations and the global economy

373

UN Research Institute for Social Development (UNRISD) (2004), Corporate Social

Responsibility and Business Regulation, Research and Policy Brief 1, Geneva: UNRISD.
UNCTAD (2004), Least Developed Countries Report 2004: Linking International Trade with
Poverty Reduction, Geneva: UNCTAD.
UNCTAD (2005), FDI in Least Developed Countries at a Glance: 2005/2006, UN Doc.
UNCTAD/ITE/IIA/2005/7, http://www.unctad.org/en/docs/iteiia20057_en.pdf, accessed
26 August 2007.
UNDP (2000), Human Development Report 2000: Human Rights and Human Development,
Oxford and New York: Oxford University Press.
UNDP (2005), Human Development Report 2005: International Cooperation at a Crossroads:
Aid, Trade and Security in an Unequal World, New York: UNDP.
UNDP Commission on Private Sector Development (2004), Unleashing Entrepreneurship:
Making Business Work for the Poor, New York: UNDP.
Utting, Peter and Ann Zammit (2006), Beyond Pragmatism: Appraising UNBusiness
Partnerships, UNRISD Programme Paper, Geneva: UNRISD.
van Hees, Floris (2004), Protection v protectionism: the use of human rights arguments in the
debate for and against the liberalisation of trade, http://www.abo./instut/imr/norfa/
oris.pdf, accessed 26 August 2007.
Vienna Declaration and Programme of Action, adopted 25 June 1993, UN Doc.
A/CONF.157/23, http://www.ohchr.org/english/law/vienna.htm, accessed 26 August 2007.
World Bank (2007), Global Monitoring Report 2007: Confronting the Challenges of Gender
Equality and Fragile States, Washington, DC: World Bank.
WTO Ministerial Conference (2001), Declaration on the TRIPS Agreement and Public
Health, adopted on 14 November 2001, WT/MIN(01)/DEC/2 (the Doha Declaration),
http://www.wto.org/English/thewto_e/minist_e/min01_e/mindecl_trips_e.htm, accessed 26
August 2007.
Zammit, Ann (2003), Development at Risk: Rethinking UNBusiness Partnerships, Geneva:
UNRISD/South Centre.
Zeisel, Katherine (2006), The promotion of human rights by selective public procurement
under international trade law, in Olivier de Schutter (ed.), Transnational Corporations and
Human Rights, Oxford, UK and Portland, OR, USA: Hart, pp. 36191.

17 Global business as an agent of world

benet: new international business
perspectives leading positive change
Nancy J. Adler

Let us choose to unite the power of markets with the strength of universal ideals.
(United Nations Secretary-General Ko Annan, 199720071)

Introduction
The relationship between global business and society including businesss
search for mutually benecial advances that address the worlds most pressing needs has become one of the dening issues of the 21st century.
Throughout the world, immense entrepreneurial energy is nding expression, energy whose converging force is in direct proportion to the turbulence, crises and the call of our times. One-by-one positive disruptions are
erasing the false dichotomy embedded in the great trade-o illusion the
belief that rms must sacrice outstanding nancial performance if they
choose to strategically address societal challenges. Could it be that with a
global perspective and the right mix of innovative leadership and scholarship the creation of a sustainable society and planet could become the
international business opportunity of the 21st century?2
The 21st-century challenge
The success of global society is increasingly inuenced, if not dened, by
the behavior of multinational corporations (MNCs). More than half of the
worlds hundred largest economic entities today are corporations; only 47
are countries (UNCTAD 2005). ExxonMobil, for example, with 2005 revenues of over $341 billion and prots of $36 billion, is larger than twothirds (125) of the 184 countries whose economies are ranked by the World
Bank (ibid.). Similarly, Wal-Mart is the nineteenth largest economy in the
world, with sales exceeding $250 billion (Mau et al. 2004, p. 128); its singleday revenue is larger than the annual GDP of 36 independent countries.3 If
it were a country, Wal-Mart would be Chinas eighth largest trading partner
(Friedman 2005, 2006). With over 1.8 million employees worldwide, WalMart has more people in uniform than the entire United States Army
(www.walmartfacts.com; Mau et al. 2004, p. 128). What global companies
such as ExxonMobil and Wal-Mart do, individually and collectively,
374

Global business as an agent of world benet

375

matters, not only to their own customers, employees and suppliers, but also
to the larger global economy and society.
The crucial question for the 21st century is not a traditional academic
question How can we best describe what most global companies do and
why they do it?. Similarly, it is not an equally traditional, yet more narrowly focused, economic question How do global companies achieve the
best nancial performance through the most ecient and eective use of
resources (Molz 2006, p.1)? Rather, both from societys and companies
perspectives, the crucial questions are: How can companies and society
simultaneously benet from the ways in which multinational rms
operate? and How might companies operate in the future so as to increasingly contribute to societys well-being while simultaneously enhancing
their own nancial performance?.
Questioning the potential for private sector-created positive outcomes is
particularly important, given that the behavior of companies such as
ExxonMobil and Wal-Mart toward their own employees, other stakeholder
groups and the broader social and physical environment has frequently (and
often accurately) been severely criticized in the courts, the popular press and
academic publications (see, for example, Cascio 2006; Fishman 2006;
Freeman 2006; Ghemawat 2006). Scherer and Palazzo (2008) point out that
prior discussions of the relationship of rms to the social and physical
environment presupposed that responsible rms operated within a system
of primarily government-dened rules and regulations. With globalization,
however, this assumption is no longer valid: The global framework of rules
is fragile and incomplete. Therefore business rms [today] have an additional political responsibility to contribute to the development and proper
working of global governance (ibid., p. 3) to the proper working of the
world (also see Palazzo and Scherer 2006; Scherer et al. 2006).
Whereas we have learned a substantial amount about the social, economic and political inuences of MNCs, what we know is disproportionately negative and narrowly focused on economic outcomes. From the
perspective of anticipatory scholarship (Botkin et al. 1979), perhaps the
most important question facing business scholars today is: What can we
learn about the positive, and potentially positive, impacts of multinational
business? What can we learn about global corporations ability to simultaneously do good and do well?.4
Business repositioning itself clearly and convincingly as a part of society
Speaking in Davos, Switzerland at the opening of the 21st century, Klaus
Schwab (2003, p. 10), President of the World Economic Forum, challenged
the worlds most senior business leaders to examine and take responsibility
for their companies impacts:

376

Handbook of research on global corporate citizenship

In todays trust-starved climate, our market-driven system is under attack . . .

large parts of the population feel that business has become detached from
society, that business interests are no longer aligned with societal interests . . .
The only way to respond to this new wave of anti-business sentiment is for business to take the lead and to reposition itself clearly and convincingly as part of
society.

During the 21st century, many business leaders believed that their companies should be detached from society. Reecting their sentiment, leading
economist Milton Friedman (1970, p. 122) expressed his strongly held
opinion that the only social responsibility of business is to increase its
prots. Today, going beyond 20th-century logic, prominent CEOs from all
continents are expressing their belief that the relationship between business
and society including businesss search for mutually benecial advances
that address the worlds most pressing global needs has become a dening
issue for the 21st century.
What does it mean for global business to take the lead in repositioning
itself as a part of society? What might such a repositioning imply for scholars of international business? Ko Annan, while he Secretary-General of
the United Nations, addressed the World Economic Forum in Davos,
Switzerland, inviting the business community to rise to the challenge:
Let us choose to unite the power of markets with the strength of universal ideals.
Let us choose to reconcile the creative forces of private entrepreneurship with
the needs of the disadvantaged and the requirements of future generations.5

In response to the Secretary-Generals seminal invitation, the worlds

largest global corporate citizenship network, the United Nations Global
Compact, was formed in 2000, and now includes more than 3000 member
corporations headquartered in 87 countries. With CEO-level commitment
from such major multinationals as Alcan, BP, Daimler Chrysler, Escom
SA, Novartis, Pzer, Punjab National Bank, Telecom Italia and Unilever,
the members of the UN Global Compact have committed themselves to
two objectives: (i) mainstreaming principles for global citizenship into the
activities of businesses around the world, and (ii) acting as a catalyst for
business actions in support of the UN Millennium Development Goals.
The Millennium Development Goals include: eradicating extreme poverty
and hunger; achieving universal primary education; promoting gender
equality and empowering women; reducing child mortality; improving
maternal health; combating HIV/AIDS, malaria and other diseases; ensuring environmental sustainability; and developing a global partnership for
development all by the year 2015 (United Nations 2006). American economist Jerey Sachs, arguably the most inuential, and perhaps the most
controversial, voice in international development today, unequivocally

Global business as an agent of world benet

377

asserts that to the extent that there are any international goals, they are the
Millennium Development Goals (Eviatar 2004; also see Sachs 2005).
At the Global Compacts Leaders Summit held at the United Nations
in 2004 just four years after the Compacts founding, one overarching
theme emerged from the corporate leaders deliberations (Cooperrider
2004). It was a call for more and better knowledge, learning and management tools for advancing innovation at the intersection of business and
society.
As members of the global business community rise to Klaus Schwabs
and Ko Annans challenge, how will scholars of international business
address the same challenge? What are the implications for international
business scholarship in a century in which:
1.
2.
3.

4.
5.

6.

global integration has become denitional rather than a choice;

change is as often discontinuous as it previously was reliably predictable;
transparency is more likely to be dened by a single photo shown rst
on You Tube or another blogsphere (Gena 6, Burma, and other similar
sites), and then on the evening news exposing previously hidden corporate malfeasance than by any countrys legal structure or by the
World Trade Organizations (WTOs) entire set of regulations. Most
probably, the unexpected and unwelcome photo will have been taken
on a cell phone by the sole member of a tiny non-governmental organization that the companys senior executives had never previously heard
of, let alone planned for;
resource scarcity exacerbates previously tranquil economic relationships;
global environmental crises, human rights abuses, societal violence and
income inequality are more likely to be blamed on the private sector
than on government; and
public opinion is more likely to condemn corporate corruption than
praise companies societal contributions (Adler 2006a).

Within this context, how must international business scholarship change

for it to respond to businesss call for more and better knowledge, guidance
and management approaches for advancing positive innovations at the
intersection of business and society? What would it mean for international
business scholarship to expand:
1.
2.

from scholarship that is descriptive of the mean to scholarship that is

skilled at identifying the exception (and therefore, the exceptional),
from scholarship that is focused on decit-based problem solving to
scholarship seeking to explain strength-based corporate contributions,

378
3.
4.

Handbook of research on global corporate citizenship

from scholarship based on assumptions of contextual determinacy to
scholarship that explicitly assumes free will, and
from prediction based on historical trends to anticipatory scholarship?

This chapter explores some of the most important transformations

taking place in other disciplines and their implications for allowing international business to more directly address the key economic and societal
challenges of our time. The chapter raises questions and suggests possibilities aimed at expanding the domain and relevance of international business scholarship, both for academics and for business managers and
leaders. Box 17.1 oers a brief overview of international business scholarship to date and its relationship to the most compelling issues of our time.

BOX 17.1

INTERNATIONAL BUSINESS
SCHOLARSHIP

Addressing compelling questions

As a scholarly discipline, international business has focused
mainly on the emergence, conditions for success, and growth of
multinational enterprise (MNEs).6 At the opening of the 21st
century, Buckley (2002, p. 371) challenged international business (IB) scholars by stating that the field was running out of
steam because it had failed to identify a question for the 21st
century that was as big and compelling as the central questions
the field had addressed in the 20th century; questions such as:
Can we explain the sequence of entry of nations as major players
in the world economy . . .?, Why are different forms of company
organization characteristic of [specific] individual and cultural
backgrounds? Or is this an artifact?, and [Using] what empirical
measures can we identify trends toward (and away from) globalization?. By 2004, Buckley and Ghauri recommended that the
guiding question for the field in the 21st century should be understanding globalization.
Other scholars have similarly challenged IB scholars to identify
a big question worthy of the field (Butler 2006). Peng (2004), for
example, suggested that the question that would best leverage IBs
strengths in the 21st century would be: What determines the international success and failure of firms? a question that many
argue has always been the central question in IB. Furthering the
dialogue, Buckley and Lessard (2005) recommended that internalization continue to be central, while Shenkar (2004) suggested

Global business as an agent of world benet

379

focusing on finding integrative and synergetic ways to combine

local and global knowledge.
Whereas each of these questions is important, none, I would
suggest, is big enough. I would therefore recommend that one of
the guiding questions for IB research in this century should be:
What allows firms to succeed internationally, including performing
at an exceptional level (with success defined as the ability to strategically and sustainably enhance societal well-being and the firms
own bottom line)?.
International business theory: using the tools of the field
Like any sophisticated scholarly discipline, IB has developed a set
of theoretical approaches that compete with each other in attempting to best explain the behavior of organizations that transcend
national borders. In IB, the dominant theoretical approaches have
included agency theory, institutional theory, internalization theory,
resource-based theories and transaction cost analysis, among
others. Whereas each theoretical approach has contributed to the
overall understanding of the behavior of business worldwide, to
date, none has focused primarily on the question of why and how
MNEs succeed in simultaneously doing good and doing well.
Similarly, few IB scholars have attempted to use the fields dominant theories to explain exceptional behavior, especially when
exceptional is defined more broadly than simply maximizing the
firms financial bottom line. This chapter therefore offers an invitation to scholars to use the interdisciplinary perspectives and powerful theoretical tools that have defined IB scholarship to address
the broadest and most encompassing questions about the ability
of multinational and transnational enterprises to strategically and
sustainably do good and do well. Examples of some of the most
prominent theoretical perspectives follow.
Internalization and transaction cost analysis
Buckley and Cassons (1976) landmark study provided a rigorous
economic explanation for the existence and functioning of MNEs,
and thus provided a basis for transaction cost-based theories of
MNEs.7 As summarized by Rugman and Verbeke (2003, p.126),
Buckley and Casson (1976) emphasized:
very general forms of imperfect competition stemming from the
costs of organizing markets ([Buckley and Casson 1976] p. 33),
with a special focus on imperfections in intermediate product

380

Handbook of research on global corporate citizenship

markets, including various types of knowledge and expertise,
embodied in patents, human capital, etc. Internalization of such
imperfect external markets, when this occurs across national
boundaries, leads to the creation of MNEs. In explaining the
rapid, post World War II growth of MNE activity, Buckley and
Casson (1976) focused especially on the existence of market
imperfections, which generates benefits of internalization.8 . . .
As internalization theories and transaction cost analysis developed, four sets of parameters relevant to the internalization
decision were recognized, namely: (1) industry specific factors
(related to the nature of the product and the structure of the
external market), (2) region-specific factors, (3) nation-specific
factors, including government policies and (4) firm-specific
factors, with a focus on the ability of the management to organize an internal market (Buckley & Casson, 1976: 34).

Given the theoretical structure of transaction cost perspectives,

there is huge potential for scholars to explore potentially positive
relationships between firms and the environment (see King 2007).
Country-specific advantages
Unlike most mainstream strategy theories, IB theory viewed the
world neither as one perfectly integrated market nor as completely
independent and isolated domestic markets. Ghemawat (2003)
labeled the lack of perfectly integrated markets as semiglobalization and, using a transaction-cost analysis framework,
explained that country-specific advantages are still highly relevant.
Building on Ghemawats work, the field of IB could leverage its theoretical strengths and address bigger questions by helping scholars
across disciplines to understand the ways in which both society and
the economy are semi-globalized, and thus how conditions in one
part of the world influence those in all parts of the world while remaining unique to their particular location. Such understanding could
underpin investigations of global companies that are attempting to
strategically and sustainably excel at doing good while doing well.
Resource-based perspectives
In addition to transaction cost analysis and country-specific advantages, Peng (2001) summarized the importance and influence of
resource-based views, another key theoretical perspective to
strategy and IB. As Peng (2001, pp. 80910) described:

Global business as an agent of world benet

381

A key insight of IB research is that MNCs face a substantial liability of foreignness, which leads to nontrivial costs. To overcome such a liability [transaction cost] (Buckley & Casson,
1976; Caves, 1996) and eclectic (Dunning, 1993) perspectives
stress that MNCs need to equip their overseas subsidiaries with
certain firm-specific advantages. The . . . [resource-based view]
extends these perspectives by specifying the nature of these
resources and capabilities, such as administrative heritage
(Bartlett & Ghoshal 1989; Collis, 1991), organizational practices
(Tallman, 1991, 1992; Zaheer, 1995; Zaheer & Mosakowski,
1997), and bargaining power (Moon & Lado, 2000).
Resource-based theories have been used, for example, to investigate the resources underlying different types of diversification. To
address big questions, resource-based theorists might study the
types of resources and capabilities, including, but not limited to
administrative heritage, organizational practices and bargaining
power, that most consistently lead to exceptional performance by
multinational firms in simultaneously doing good and doing well.
John Dunning, a leading IB scholar, has most recently contributed
to this discussion with his edited volume, Making Globalization
Good (Dunning 2003).
Institutional theory
According to IB scholar and sociologist Eleanor Westney (2005a,
p. 47):
Institutional Theory begins with the premise that organizations
are social as well as technical phenomena, and that their structures and processes are not shaped purely by technical rationality. But whereas earlier critics of technically deterministic
approaches to organization tried to explain departures from technical rationality by looking inside the organization (to factors such
as informal social structures or power relationships within the
organization), institutional theory looks first to the social context
and focuses on isomorphism within the institutional environment
(Zucker 1987: 443), whereby organizations adopt patterns that
are externally defined as appropriate to their environments, and
that are reinforced in their interactions with organizations. . . .
One basic premise of institutional theory is that the environment
is itself socially organized: that is, it is populated by organizations
that have relationships, not simply transactions, and it is the

382

Handbook of research on global corporate citizenship

source of pressures and constraints on their considerations of
alternative ways of organizing, thereby influencing organizations
toward isomorphism: the adoption of structures and processes
prevailing in other organizations within the relevant environment
(Zucker 1987). . . . DiMaggio and Powell (1983:15054) have
proposed three categories of institutional isomorphism: coercive
isomorphism, where organizational patterns are imposed on
organizations by a more powerful authority . . . normative isomorphism, where appropriate organizational patterns are championed by professional groups and organizations; and mimetic
isomorphism, where organizations respond to uncertainty by
adopting the patterns of other organizations defined as successful in that kind of environment.

From even this brief description, it is clear that institutional theory

has huge potential to help both business and scholars to understand better the relationship between firms and their environment
(see Westney 2005a, 2005b; Campbell 2007; Marquis et al. 2007).
More importantly, institutional theorists could explore ways to
extend their theories to help explain not just the various forms of
fitting in (isomorphism), but also the range of ways of standing out
(exceptionalism); in particular, the relationship between firms that
stand out in terms of their economic performance and societal contribution and their relationship to the broader environment. It is not
that institutional theory cannot be helpful; it is rather that the right
questions have not been systematically asked and therefore
neither scholarship nor practice have been able to benefit from the
full robustness of the theory.
Agency theory
Another prevalent theoretical approach to IB research is agency
theory. Agency theories assume that different players in a system
have different goals, act in a self-interested manner, and are willing
to assume various degrees of risk (Johnson and Droege 2004). As
described by Nilakant and Rao (1994, p. 650), agency theory:
suggests that problems of organization arise because principals
entrust tasks to agents since they neither have the time nor the
ability to do the tasks themselves. As a result, agents have
opportunities to misrepresent information and divert resources
to their personal use. Therefore, principals have a need to
monitor agents or, alternatively, induce them to cooperate by

Global business as an agent of world benet

383

designing incentive schemes. Agents also may be motivated to

bond themselves to the principals if they want to avert monitoring. The task of organization design is to efficiently structure the
agency relationship so that monitoring, bonding and related
costs are minimized (Jensen & Meckling 1976).
There are two main branches of agency theory. One, called positivist agency theory, focuses on the broad problem of separation of ownership from control and emphasizes how managers
are disciplined by incentive schemes, external labour markets
and capital markets (Fama 1980; Fama & Jensen 1983; Jensen
1983). The second branch, called principalagent research,
takes the ownership and allocation of firms as a given and concentrates on the design of ex-ante employment contracts and
information systems (Baiman 1982, 1990).
Although currently outside the scope of most agency-theorybased studies, the theory could also be used to explore both naturally occurring and organizationally designed incentive schemes
that encourage MNEs to act in ways that mutually benefit the firm
itself while simultaneously contributing to the broader physical and
social environment.

Academic transformation: shifting to positive scholarship

How do elds of scholarship change? What precedents from other disciplines can IB draw on to maintain its relevance both within academia as
well as for business and the broader society? Perhaps one of the most
important transformations taking place in scholarship in recent years is the
shift to positive scholarship initiated by the eld of psychology and now
increasingly embraced by organizational studies.
Over the past 15 years, Martin Seligman and his positive psychology
colleagues (see, among others, Seligman 1994, 1998, 2002, 2003; Seligman
et al. 1996; Gillham 2000; Seligman and Csikszentmihalyi 2000; Snyder and
Lopez 2002; Fredrickson 2003; Keyes and Haidt 2003; Peterson and
Seligman 2004) have radically altered the eld of psychology. How? Initially
by recognizing that 98 per cent of all research published in reputable psychology journals has focused on decits (Myers 2003). Psychologists, led by
Seligman, recognized that their eld had learned how to recognize and
describe dysfunction (what is not working), but, from both a conceptual and
a methodological perspective, the eld appeared incapable of understanding that which was working. Historically, psychological research has oered

384

Handbook of research on global corporate citizenship

relatively few insights into normal behavior, let alone outstanding behavior.
In the Forward to the Handbook of Positive Psychology (Snyder and Lopez
2002, p. vii), Sir John Templeton questioned the value in that history and
highlighted the omissions, by asking: Why is it we know so little about the
human spirit?. Why is it that until the recent work of the positive psychologists, we have known next to nothing about what supports joy, happiness,
wisdom, courage, hope, generosity or love?
In the last ve years, positive organizational scholarship has begun to initiate a similar transformation in management research; a shift away from
problem-focused decit paradigms and toward strength-based approaches
(among others, see Luthans 2002, 2007; Bernstein 2003; Cameron et al.
2003; Peterson and Seligman 2003; Wright 2003; Cameron and Caza 2004;
Luthans and Youssef 2004; Dutton and Ragins 2007; and Luthans et al.
2007). Positive organizational scholars have begun to understand organizational phenomena that dramatically and surprisingly outperform the
norm. Using strength-based perspectives, scholars are beginning to investigate why certain systems succeed in contributing to the public good while
others do not.9 In particular, business and corporate social responsibility
scholars are beginning to investigate why certain companies outperform
their cohort in simultaneously beneting the world and increasing their
own nancial performance.10
Similar to other disciplines, the IB eld is also being challenged to reposition itself vis--vis this centurys unique challenges (see Box 17.1). The
central question that previously dened IB which theories best explain the
behavior of MNCs? is no longer sucient to address the challenges articulated by societal leaders such as Klaus Schwab and Ko Annan. The challenges of the 21st century demand that international business, like its sister
disciplines of psychology and organizational studies, create and increasingly embrace strength-based, positive scholarship. The challenges that
business and society face demand that international business scholars
investigate how best to understand the most eective and admirable behavior literally, the outstanding behavior of specic, frequently unique
companies. Drawing on the work of colleagues in positive psychology and
positive organizational studies, perhaps more international business scholars can investigate the possibilities inherent in global businesses acting as
agents of world benet.
Positive deviance: exceptional, benecial and rare
Traditional scholarship has venerated the mean. Methodologists have developed endless analytical techniques for discovering what is central and/or
most frequent in a given population. We have therefore become experts at
identifying that which is common that which is average and/or that which

Global business as an agent of world benet

385

is central. At times, however, we confuse our labels and present the mean
(the average) as normal, instead of just as central or common. In the book,
What Does It Mean To Be Human?, Chittister (1998, p. 193) cautions against
misunderstanding, and therefore mislabeling, that which is common:
The problem with trying to dene what it means to be human is that we now take
so much of the inhuman for granted. We confuse the meaning of the words
natural and human, and make synonyms of them. We act as if one is the other.
We allow one to be the other. We rip to shreds the ideas each of them masks, forgetting one and surrendering to the other. We call the natural human and in
one ash of the pen presume we have made it so. We wander in a philosophical
maze and never even realize that we are lost.
War is natural, they tell us. Violence is natural, they argue. Selfaggrandizement is natural, they maintain. What they do not say is that just
because something is natural does not make it human.

As our methodological ability to identify central tendencies and replicating

patterns (the natural) has increased, our ability to recognize outliers and
especially positive outliers appears to have either remained nascent or
atrophied. As a eld we are at risk of becoming blind to that which is
unique, that which is deviant, that which is unusual, and therefore, that
which is exceptional.
Positive deviance: the theory
The positive organizational scholars, however, have studied deviance, and
become especially interested in positive deviance. Traditionally, scholars
have dened deviance as intentional behavior that not only signicantly
violates organizational norms but in doing so threatens the well-being of
an organization and/or its members; thus implying that deviance is bad
(Robinson and Bennett 1995, p. 556). Historically, most academic discussions of deviance have focused on negative or decit behavior (Warren
2003). Positive deviance has always existed, yet only recently have scholars
begun to recognize it. Today, positive deviance, as dened by the positive
organizational studies scholars, is understood to be intentional behaviors
that depart from the norms of a referent group in honorable ways
(Spreitzer and Sonenshein 2003, p. 209). Given the newness of the eld,
however, it must be recognized that the terms positive and honorable are
not yet rigidly dened and are frequently used interchangeably. Positive, or
honorable, behavior of organizations most commonly refers to organizational behavior that benets a broader constituency than simply the rms
bottom line (traditional stockholders), encompassing a wider range of
stakeholders by focusing on the sustainability and well-being of the physical and social environments of employees, customers and community
members, as well as the planet.

386

Handbook of research on global corporate citizenship

In contrast to more commonly employed research methodologies,

positive-deviance approaches explicitly search for examples of systems,
often operating on the margins, which far exceed both the expectations and
the behavior of most other systems (Spreitzer and Sonenshein 2003). Using
traditional research methodologies and scholarly perspectives, such
systems often remain invisible, or, when visible, are attributed to random
error. Institutional perspectives, for example, have diculty explaining
exceptional behavior because, by denition, such positive exceptions are
neither contextually determined nor do they t in with current or prior patterns they literally exist only as outliers. By using positive deviance both
as a perspective and as a methodological approach, the superior performance of exceptional systems not only becomes visible, it becomes a candidate both for research and for amplication into broader systemsenhancing strategies.
Positive deviance: the example of Vietnam
A classic example of positive deviance in international development
attracted the attention of researchers interested in global change. It comes
from Jerry and Monique Sternin who were working with Save the Children
on malnutrition programs in Vietnam (Dorsey 2000). Instead of bemoaning the fact that most international poverty programs in developing countries ultimately have no eect, or worse, leave recipients poorer than they
were prior to the program (and therefore either give up in grounded hopelessness or continue to replicate previously used unsuccessful strategies),
the Sternins chose to identify naturally occurring success and attempt to
amplify it. They identied the healthiest children in four of Vietnams
poorest communities: poor children who had somehow grown taller and
weighed more than similarly poor neighbor children. They then interviewed the mothers of the healthiest children to nd out what they were
doing that was dierent from their neighbors who were raising less healthy
children. The Sternins then amplied the positive deviance by inviting the
mothers of the healthiest children to teach the other mothers in the village
their approach to feeding. Unlike most other nutrition programs, the
Sternins approach worked, both immediately and over the longer term.
Their radically dierent and successful approach to child nutrition, after
rst being implemented with starving children in Vietnam, later served as
a model for rehabilitating tens of thousands of undernourished children in
over twenty countries worldwide (ibid.). As is clear in the Sternins
approach, positive deviance starts with the assumption that that which is
desired is possible; it starts with agency. It rejects the notion that that
which is either common or contextual is denitive or deterministic. The
question we must raise as scholars is: why have most such cases of positive

Global business as an agent of world benet

387

deviance remained invisible when we have conducted our most rigorous

research?
Positive deviance: South Africa
On the other side of the world from Vietnam, South Africas CIDA
University also uses a strategy that is similarly based on identifying and
amplifying positive deviance. Lauded by South Africas President Mbeki as
one of the countrys pioneers of change, actuary and consultant Taddy
Blecher launched CIDA University as a business school in Johannesburg in
2002.11 Blechers vision was to develop motivated students from the
countrys poorest and most marginalized communities into a new generation of business leaders and high-powered entrepreneurs who will spread
knowledge and prosperity across the continent. While operating at a fraction of the cost of other universities, CIDA, which is now accredited,
received over 19 000 applications for its 1600 places.12 Living its motto, it
takes a child to raise a village, students partner with their home communities to pass on their learning. In just one month, for example, CIDAs
business students taught 300 000 young people about AIDS and money
management in communities throughout South Africa ( Ubuntu
University Lifts o 2002).13
CIDA University developed its innovative education model, and continues to recruit students today, based on identifying and amplifying positive
deviance. CIDA looks for learners who, despite severe disadvantages, have
[excelled] academically and who [also] found time to . . . contribute to their
communities (Davie 2001). In other words, they look for positive deviants,
students who have succeeded in environments in which most other young
people could not. Before opening the university, Blecher and his colleagues
studied these surprisingly successful students to understand what allowed
them to deviate in such positive ways from the more common patterns of
failure experienced by most of their contemporaries. They then built
CIDAs selection criteria and curriculum based on the distinguishing characteristics that supported these outstanding young people in achieving so
much more than their similarly disadvantaged peers.
In the space of just a few years, CIDAs graduates have begun winning
top performance awards and attracting Africas most forward-looking
employers.14 The corporate partnerships, however, are not motivated
simply by altruism. As one Africaans mining executive explained, CIDA
University is the next Silicon Valley. Any African company that doesnt recognize that will not succeed in the 21st century.15 An executive with the
First National Bank of South Africa agrees, explaining: We see it as sort
of an incubator for the talented leaders of the future (Lindow 2004). CIDA
identies and brilliantly educates the best of the best. No company can

388

Handbook of research on global corporate citizenship

succeed in the 21st century by hiring the second or third tier. No society can
succeed without broadly educating its population, including the best of the
best. Blecher, the founder and CEO of CIDA University, ts in neither with
expectations nor with current institutional elds; his aspirational set and
skills defy current reality. Would our traditional research methodologies
recognize CIDAs organizational strategy, or would its unique position far
outside the norm relegate it to invisibility? In an era of severe global challenges, does regression toward the mean reduce scholarship to irrelevance?
Transcending 20th-century research assumptions
As we consider the challenges facing the world today including war and
peace, environmental sustainability, equitable income distribution, human
rights and similarly complex issues it is easy to strip ourselves of scholarly and practical relevance by relying unquestioningly on the conventional, often implicit, assumptions underlying our research; that is, by
assuming that:
1.
2.

3.

4.

that which is common is true (welcome to our statistical veneration of

the mean);
the environment determines the set of possible behaviors of actors
(welcome to one of the implicit assumptions underlying institutional
theory);
progress comes from xing problems rather than from amplifying
strengths (welcome to our analytical, problem-solving orientation);
and
that which has been, will be (welcome to our history-based predictive
and deterministic relationship to the future).

None of these pervasive assumptions supports international business in

recognizing, let alone understanding, outstanding admirable and eective
behavior. Unquestioned, the assumptions certainly do not help the eld to
understand why certain MNCs simultaneously succeed nancially and successfully act as agents of world benet, whereas the majority remain oblivious to world betterment or continue, in the name of externalities, to inict
deleterious eects on the world. To address MNCs relationship to the array
of global societal issues, we need to go beyond the research methodologies
that have guided our scholarship in the past. We need to consider more
appreciative and anticipatory approaches.
Positive scholarship
First, we need to borrow from what already exists: we need positive
deviance and other strength-based approaches. We need very good skills at

Global business as an agent of world benet

389

(i) detecting the most positive systems and situations, (ii) ascertaining what
allowed those particular systems to outperform other systems and situations, and (iii) investigating how such outstanding success could be replicated on a broader scale. One methodology for such investigations is David
Cooperriders appreciative inquiry (Cooperrider et al. 2003). From the perspective of implementation, appreciative inquiry forces an important shift:
from taking an analytical problem-solving approach focused on documenting what is (primarily by identifying problems in average and belowaverage systems and then attempting to solve the problems), to taking a
design approach (Boland and Collopy 2004) that focuses on identifying the
strengths in the best-performing systems (the outliers) in order to magnify
them. At present, all such approaches (appreciative inquiry included) are
confounded by the fact that there is, as yet, no widely agreed-upon method
or criteria for determining performance to be outstanding, and therefore
no way to state denitively that a particular system or organization has outperformed its cohort.16
Anticipatory scholarship
Given the gap today between our aspirations for the world and its current
state, we need approaches that do more than simply amplify positive
deviance. We need to legitimize and to develop skills at creating and supporting systems that are better than anything that currently exists. How do
we study that which could be? How do we create that which we wish to be?
How do we create peace? How do we replace poverty with prosperity? How
do we restore our environment to vibrant, sustainable health? How do we
research that which cannot be predicted but is desired?
Anticipatory scholarship, by denition, violates one of the mainstays of
traditional research; it violates the assumption of objectivity it is biased
toward nding exceptionally positive outcomes. Rather than objectivity,
anticipatory scholarship relies primarily on the wisdom, courage and hope
that scholars bring to their investigations. Wisdom is knowledge of what
is true and right coupled with just judgment as to action (Stein 1969,
p. 1639). Courage transforms wisdom knowledge of what is true and
right into meaningful action. Hope inspires people to aspire toward
dreams (even when others judge those very dreams to be unattainable)
dreams that others are no longer capable of dreaming. Founder and CEO
emeritus of VISA International, Dee Hock, regularly reminds businesspeople and scholars alike that, it is no failure to fall short of realizing all
that we might dream the failure is to fall short of dreaming all that we
might realize (Hock 1997).
While still evidence based, anticipatory scholars question what traditional science considers as evidence and what it rejects as not evidence.

390

Handbook of research on global corporate citizenship

Rather than relying primarily on analytical skills, anticipatory scholarship

depends on researchers ability to envisage (exceptionally positive) future
outcomes that have heretofore never occurred. Such public envisioning
takes wisdom, courage and hope; human qualities about which surprisingly
little is known, but which the positive psychologists are currently studying.
BHP Billiton: an exceptional case
Let me oer an example of the type of situation that needs to be recognized
and studied if international business is to live up to Ko Annans challenge.
It is an example of an MNC whose corporate decision making led to
nancial and societal success. So far, to the best of my knowledge, the story
has been reported in the popular press but has yet to be studied from a
scholarly perspective.
The story takes place in Africa. Malaria in Africa is estimated to reduce
the continents economic growth by 1.3 per cent annually, at a cost of
almost $12 billion a year. Every 30 seconds an African child dies of
malaria. Whereas malaria has been almost eradicated in most of the world,
in Africa it is still out of control, claiming more lives every year.
In the 1990s, BHP Billiton, an Australia-based international mining
company and one of the worlds largest aluminum producers, came to
Mozambique, thus becoming one of the rst multinational companies to
make a substantial investment, US$1.3 billion, in the country following
Mozambiques 20-year civil war (LaFraniere 2006).17 Known as Mozal,
which is short for Mozambique Aluminum, BHP Billitons entire
Mozambique operation was at risk if it failed to eradicate malaria. In just
the rst two years of operation, one-third of Mozals 6600 employees fell
ill from malaria and 13 died. At any given time, 20 per cent of Mozals
employees were absent due to malaria. From a strictly nancial perspective,
BHP Billiton could not aord the cost of malaria.
For years, international and national public health campaigns to eradicate malaria have been conducted, and have been failing, in Africa. BHP
Billiton quickly realized that it could not protect its Mozambique investment by relying on others or by focusing only on its own employees. So in
1999, the same year that Ko Annan challenged those in the private sector
to become co-creators of societys success, BHP Billiton chose to partner
with the governments of Mozambique, Swaziland and South Africa to
create a regional anti-malaria campaign covering 4 million residents.
For the rst time, a company led a large-scale malaria eradication eort
in Africa, and for the rst time, a large-scale eort was successful. In just
six years, the partnership between Mozal and the three national governments succeeded at a previously unimaginable level. In the entire region,
new cases of malaria plummeted from 66 to fewer than ve cases per 1000

Global business as an agent of world benet

391

inhabitants. The percentage of infected children fell from more than 90 per
cent to less than 20 per cent in the region of BHP Billitons smelter.
Absenteeism at Mozal went down from more than 20 per cent to less than
1 per cent. At the same time, BHP Billitons Mozambique operations
became a nancial success. In just three years, BHP Billiton expanded and
more than doubled its production in Mozambique. BHP Billiton not only
rose to Ko Annans challenge; they far exceeded anything the company or
the community had ever previously thought possible. Foreign investment is
up, prots are up, employment is up, the number of children able to attend
school is up, and the number of people in hospitals and dying is down.
Rising to the challenge
The question for scholars of international business is: Do we believe that
rising to Ko Annans challenge is possible? Not just for BHP Billiton in
Mozambique vis--vis malaria eradication, but for business in general?
Moreover, do we believe, as scholars and as educators, that we have a critical role to play in shaping societys future? In shaping the 21st centurys
success or demise? As we face the array of world crises, do we believe that
what we do matters?
I do; I believe we matter. Think, for a moment, about our role as management educators. Management is chosen as a college major by more students than any other area of study (Were number 1!). The more than one
million management students we teach each year will be making the billions of decisions that will, in fact, shape the future.
Yet do we believe we make a dierence? Stanford management professor
Jerey Pfeer revealed that students entering management and economics
faculties are the only students who do not become more compassionate
toward others, including people from the rest of the world, during their
time at university.18 In fact, on average they become narrower and more
self-centered. Yes, we make a dierence, but up until now we have either
denied our impact or made the wrong kind of dierence. As we accept our
impact and the huge responsibility that comes with it, we must ask ourselves several questions.
First, do we believe that what we do matters?
Second, do we believe that the quality of the worlds leadership depends
on the quality of the learning environments we create? In Croatia, an executive I spoke with echoed what everyone else seemed to know, but no one was
saying out loud: We wont survive another generation of leaders like those
we have had in the past. What would each of us research and teach if we
knew that the future of our country and the world depended on it?
Third, do we have the courage to see reality as it is? Can we see the world
with our own eyes, or will we allow ourselves to continue to repeat what the

392

Handbook of research on global corporate citizenship

mainstream, including the mainstream of our eld, is telling us to see? For

example, as we watched the Enron story unfold, did we ask ourselves why
everyone went along with what was occurring within the company (see,
among others, McLean and Elkind 2003)? We know from research on the
Second World War that the majority of people in Europe simply did not
see their neighbors disappearing; they did not see the trains leaving lled
with people, the smokestacks, and the trains returning empty.
Do we have the courage to see changes in the environment? And international businesss relationship to those changes? Do we have the courage
to see the increasing gap between rich and poor, and international businesss relationship to it? Do we have the courage to see the senseless death
in the world, and international businesss relationship to it? Do we have the
courage to see reality as it is? Do we have the skills to help our million management students not collude with popular and pervasive illusions?
Fourth, do we have the courage to see possibility? Do we have at least the
rudimentary skills to conduct anticipatory research? Years ago, Thomas
Kuhn (1962) demonstrated that most people, including scholars, are incapable of seeing new possibilities until the evidence is overwhelmingly in its
favor and there is a new paradigm that makes the evidence understandable.
Do we believe that the story of BHP Billitons experience in Mozambique
is true? Do we believe it is an anomaly? Do we believe it is an example of
positive deviance for the company, the country and the world? Do we have
a paradigm that allows us to see BHP Billitons impact on Africa, and other
situations like it, as part of a pattern of what is and must be?
Our inability to see positive outliers was brought home to me this past
year in my own teaching. I showed the managers attending my Global
Leadership seminar, who came from around the world, including the
Middle East, a short documentary on Tefen, the rst of Stef Wertheimers
ten planned Middle Eastern industrial communities. Israeli Industrialist
Wertheimer is the founder, former CEO, and Chairman of the Board of
Iscar Ltd, a $1 billion-a-year metal-tool-cutting business. Wertheimers
name was familiar to the managers attending the seminar because Warren
Buet had recently bought Iscar, the rst non-American company that
Buet had ever purchased, and had described it as an amazing company
run by amazing people (Sandler 2006).
Wertheimer, along with many others, believes that diplomatic eorts to
foster peace in the Middle East have failed. As shown in the documentary,
Wertheimer oers an alternative, what he calls the Tefen Model, a unique
business-based, cross-culturally integrated industrial-park approach that:
[s]tresses creativity through an unusual combination of aims: providing high
quality products to a global market, advancing entrepreneurial education and

Global business as an agent of world benet

393

industrial training, fostering new indigenous industries, and showcasing art and
culture. To these ends, the [industrial] parks in Israel, Jordan, and Turkey all have
incubator spaces, educational and training facilities, museums, and sculpture
gardens. (Wertheimer 2002)19

Using the Tefen Model within Israel, Wertheimer has already built a
series of industrial parks that bring together Arab, Druze and Jewish
Israelis and are nancially successful (Fast 50 2003 Winners: Meet the
Winners 2003). By 2002 the four Israeli industrial parks had already
launched 150 new rms and had created 5000 new jobs (Wertheimer 2002).
By 2004 the same four industrial parks accounted for more than $2 billion
in annual revenue, representing 10 per cent of Israels total industrial
exports (Fast 50 2003 Winners: Meet the Winners 2003).
Will Wertheimers network of industrial parks ultimately become a
major factor in bringing peace to the Middle East? It is too early to tell, but
there are already ten industrial parks either built or planned throughout the
eastern Mediterranean, including sites in Israel, Jordan, Lebanon, Turkey
and Gaza. Many people are optimistic about their current and future
success. Wertheimer believes that industry is the engine of economic stability; and that without economic stability, there can be no peace
(Wertheimer 2002).
In the documentary, Wertheimer compellingly explains to the United
States Congress, The Middle East has a way of besmirching the entire
world with its conicts. It is of global interest to quiet this area (ibid.). An
industrial development plan for this region, based on the Tefen Model,
would produce a variety of benets, perhaps the most important of which
would be:
a reduction of terrorism worldwide. The majority of the worlds terrorists hail
from [the Middle East]. . . . Terrorism thrives in areas of poverty. Narrowing the
gap between the nancial status of neighboring countries and enhancing a
populations standard of living automatically changes attitudes. Job opportunities and a higher standard of living for people in this area will reduce the power
that terrorist groups oer to the deprived masses. (Ibid.)

After viewing the Tefen documentary, the rst reaction from a seminar
participant was: But it could never happen! It would never work!. Luckily,
I was so surprised by his response, I remained silent. After a minute or so,
a second participant spoke up, But Tefen already exists and it is already
working. The rst ve times I showed the Tefen documentary, the participants rst reaction was the same: Its nice, but not possible. Even with the
data in front of them, the managers could not see a positive reality, especially between Arabs and Israelis in the Middle East, even when given the
facts of the situation.

394

Handbook of research on global corporate citizenship

Our academic tradition has tried to make seeing possibility illegitimate.

We are excellent at identifying the mean and therefore at recognizing what
most companies are doing. We are equally good at predicting the future
based on the past and/or the present. When we identify spectacular outliers,
however, or focus on creating (rather than predicting) the future, we are
labeled as unprofessional and rendered unpublishable. BHP Billiton and
Tefen are pejoratively labeled as stories, not as data, if they are recognized
at all.
Fifth, do we have the courage to create the future, rather than continuing to merely analyze the past? There is a not-so-subtle shift going on at
leading management schools; they are shifting from an analytical decisionmaking approach to a design approach: from giving the managers attending management programs increasingly better techniques for analyzing and
choosing between yesterdays options, to designing options worthy of
choosing (Boland and Collopy 2004; Adler 2006b). The shift delineates the
dierence between this decade heralding our professions increasing irrelevance and our profession becoming crucial to the very survival of the
planet. IB scholars are particularly important actors in this shift, having for
years brought foreign outliers (in the form of ideas and data) to the attention of the more narrowly dened, domestic eld of management.
Redening success: a landscape of ideas
There is no question that scholars of international business can become a
primary source for understanding businesss role in contributing not only
to global companies nancial well-being, but also to the success of the
broader society. All that is required is that the eld demonstrates the same
professionalism that characterized it during the 20th century, including
continuing to requestion the fundamental perspectives and assumptions
inherent in our conceptualizations and methodologies. Rather than accepting the future as predetermined by historic patterns, the community of
international business scholars can, and I predict they will, oer grounded
evidence for informed hope.
We do not inherit the earth from our ancestors; we borrow it from our children.
(Kenyan proverb)

Notes
1.
2.

Speech given by UN Secretary-General Ko Annan on 1 February 1999 at the World

Economic Forum in Davos, Switzerland.
An earlier version of this chapter was presented at the Academy of International
Business (AIB) Meetings in June 2007. A summary is published as International business scholarship: contributing to a broader denition of success (Adler 2008) in the AIB
Fellows book produced to celebrate AIBs 50th anniversary (Boddewyn 2008). The construct of business as an agent of world benet is based on the exemplary work of

Global business as an agent of world benet

3.
4.

5.
6.
7.
8.

9.

10.

11.

395

Professor David Cooperrider, and is the name of his center at Case Western Reserve
University. The ideas for the chapter were developed originally as a part of the Global
Forum on Business as An Agent of World Benet: Management Knowledge Leading
Positive Change, co-sponsored by the Academy of Management and the United Nations
Global Compact, and co-chaired by Nancy J. Adler, David Cooperrider and Manuel
Escabar.
Wal-Marts 2002 revenue on the day after US Thanksgiving was almost $1.5 billion
(Mau et al. 2004, p. 128).
Scherer and Palazzo (2007) cogently review alternative dominant discourses on corporate social responsibility including a positivist perspective (which is reliant on
scientically observable cause-and-eect relationships, but they contend is overly instrumental and normatively vacuous), post-positivist perspective (which is based on philosophy but, they contend, is overly relative, normative and utopian), and Habermasian
(which focuses on the political role of companies in globalizing society, and the authors
recommend). For an understanding of the rich scholarly conversation taking place
about businesss impact and potential impact on the broader society, see, among others,
Hawken et al. (1999); Lovins et al. (2000); Laszlo (2003); Paine (2003); Young (2003);
Fort and Schipani (2004); Hart (2005); Prahalad (2005); Savitz and Weber (2006);
Aguilera et al. (2007); Barnett (2007); Bies et al. (2007); Brickson (2007); Den Hond and
De Bakker (2007); King (2007); Mackey and Barney (2007); Marquis et al. (2007);
Perrini (2007); and Terlaak (2007). Perhaps one of the most important, but, to date, least
discussed aspects of MNC relationships to the broader society is their potentially positive impact on peace-making. For an discussion of the topic, see, among others, Adler
(2006a) and the special issue of the Journal of Corporate Citizenship (Issue 26, 2007)
edited by Malcolm MacIntosh, Sandra Waddock and Georg Kell, including the article
by Fort (2007).
Speech given by UN Secretary-General Ko Annan on 1 February 1999 at the World
Economic Forum in Davos, Switzerland.
For other, broad denitions, see Buckley (2005), Ghoshal and Westney (2005) and
Westney (2005b), among others.
For additional classic studies, see Teece (1977), Rugman (1981, 1996), Williamson (1975,
1981) and Hennart (1982, 2001).
Buckley and Casson (1976), as cited by Rugman and Verbeke (2003) recognized the contribution of several scholarly studies, both conceptual and empirical, to the development
of their particular view on the MNE, including, Coase (1937), Penrose (1959), Vernon
(1966, 1971), Hirsch (1967), Johnson (1970), Wells (1971), Dunning (1973) and Dunning
and Pearce (1975), among others.
According to the University of Michigans Center for Positive Organization Scholarship
(http://www.bus.umich.edu/Positive/PDF/POS%20Essence.pdf, accessed 14 November
2007), positive organizational scholarship focuses on the dynamics in organizations that
lead to developing human strengths, producing resilience and restoration, fostering vitality, and cultivating extraordinary individuals. Positive Organization Scholarship is based
on the premise that understanding how to enable human excellence in organizations will
unlock potential, reveal possibilities, and facilitate a more positive course of human and
organizational welfare. POS . . . draws from a full spectrum of organizational theories
to understand, explain, and predict the occurrence, cases, and consequences of positivism. . . . At its core, POS investigates positive deviance, or the ways in which individuals and organizations ourish and prosper in extra ordinary ways.
See the work of David Cooperrider at his center at Case Western Reserve University on
Business as an Agent of World Benet, along with the work of scholars attempting to
measure the impacts of doing good and doing well on various stakeholders (for example,
Barnett 2007, Mackey and Barney 2007 and Terlaak 2007). Also see the work of corporate social responsibility researchers, including Matten and Crane (2005) and Scherer
and Palazzo, (2007), among others.
CIDA stands for Community and Individual Development Association. For further
information, see CIDA University City Campus website at: http://www.cida.co.za/,

396

12.
13.
14.
15.
16.

17.
18.

19.

Handbook of research on global corporate citizenship

accessed 14 November 2007. For background on Blecher, see Aarup and Rauet (2003),
among others.
See CIDA University City Campus website: http://www.cida.co.za/, accessed 14
November 2007.
The month referred to is October 2001.
Private conversation with Taddy Blecher in Gaborone, Botswana on October 7, 2004.
Private conversation with South African executive in New York City, October 21, 2004.
For a discussion of various issues relative to the assessment of corporations socially
responsible behavior as well as the relationship of that behavior to nancial performance, see Friedman (1970), Margolis and Walsh (2003), Paine (2003), Walsh (2005),
Barnett (2007), Mackey and Barney (2007), and Terlaak (2007).
Facts about BHP Billitons Mozambique operations are based on LaFraniere (2006).
Based on a presentation by Stanford Professor Jerey Pfeer on 5 August 2003 at the
Annual Meeting of the Academy of Management in Seattle (also see Ferraro et al. 2005).
Pfeers presentation was based on the research of Marwell and Ames (1981), among
others.
Wertheimer presented on 13 July 2004 at the Academy of International Business
Meetings in Stockholm, Sweden. For a further discussion of Wertheimers Tefen Model
and its implications for peace, see Trialogue of Cultures in the Age of Globalization at
the Sinclair House Debates, Herbert-Quandt Stiftung Foundation at http://www.hquandt-stiftung.de/root/index.php?lang=en&page_id=333 (accessed 14 November
2007), and Ari Goldbergs Israeli tycoon urges help for Palestinians, BBC News on-line
at http://news.bbc.co.uk/1/hi/business/1944846.stm, accessed 14 November 2007.

References
Aarup, K. and E. Rauet (2003), Social entrepreneurship and leadership: Taddy Blecher and
CIDA City Centre University, South Africa, Montreal: HEC Centre for Case Studies,
unpublished.
Adler, N.J. (2006a), Corporate global citizenship: successfully partnering with the world, in
Gabriele Suder (ed.), Corporate Strategies Under International Terrorism and Adversity,
Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp. 17795.
Adler, N.J. (2006b), The art of leadership: now that we can do anything, what will we do?,
Academy of Management Learning and Education Journal, 5 (4), 46699.
Adler, N.J. (2008), International business scholarship: contributing to a broader denition of
success, in J. Boddewyn (ed.), The Evolution of International Business Scholarship: AIB
Fellows on the First 50 Years: Volume 14 of Research in Global Strategic Marketing,
Greenwich, CT: JAI Press/Elsevier.
Aguilera, R.V., D.E. Rupp, C.A. Williams and J. Ganapathi (2007), Putting the S back in corporate social responsibility: a multilevel theory of social change in organizations, Academy
of Management Review, 32 (3), 83663.
Baiman, S. (1982), Agency research in managerial accounting: a survey, Journal of
Accounting Literature, 1 (Spring), 154213.
Baiman, S. (1990), Agency research in managerial accounting: a second look, Accounting,
Organizations, and Society, 15 (4), 34171.
Barnett, M.L. (2007), Stakeholder inuence capacity and the variability of nancial returns
to corporate social responsibility, Academy of Management Review, 32 (3), 794816.
Bartlett, C. and S. Ghoshal (1989), Managing Across Borders, Boston, MA: Harvard Business
School Press.
Bernstein, S.D. (2003), Positive organizational scholarship: meet the movement an interview
with Kim Cameron, Jane Dutton, and Robert Quinn, Journal of Management Inquiry,
12 (3), 26671.
Bies, R.J., J.M. Bartunek, T.L. Fort and M.N. Zald (2007), Corporations as social change
agents: individual, interpersonal, institutional, and environmental dynamics, Academy of
Management Review, 32 (3), 78893.
Boddewyn, J. (ed.) (2008), The Evolution of International Business Scholarship: AIB Fellows on

Global business as an agent of world benet

397

the First 50 Years: Volume 14 of Research in Global Strategic Management, Greenwich, CT:
JAI Press/Elsevier.
Boland, R. and F. Collopy (eds) (2004), Managing as Designing, Palo Alto, CA: Stanford
University Press.
Botkin, J.W., M. Elmandjra and M. Malitza (1979), No Limits to Learning: Bridging the
Human Gap: A Report to the Club of Rome, Oxford: Pergamon.
Brickson, S.L. (2007), Organizational identity orientation: the genesis of the role of
the rm and distinct forms of social value, Academy of Management Review, 32 (3), 86488.
Buckley, P. (2002), Is the international business agenda running out of steam?, Journal of
International Business Studies, 33, 36573.
Buckley, P.J. (ed.) (2005), What is International Business?, New York: Palgrave Macmillan.
Buckley, P.J. and M.C. Casson (1976), The Future of the Multinational Enterprise, London:
Macmillan.
Buckley, P. and P. Ghauri (2004), Globalization, economic geography, and the strategy of
multinational enterprises, Journal of International Business Studies, 35, 819.
Buckley, P.J. and D.R. Lessard (2005), Regaining the edge for interntional business research,
Journal of International Business Studies, 36 (6), 5959.
Butler, K.C. (2006), Finance and the search for the, big question in international business ,
Academy of International Business Insights, 6 (3), 39.
Cameron, K.S. and A. Caza (2004), Special issue on contributions to positive organizational
scholarship, American Behavioral Scientist, 47 (2).
Cameron, K.S., J.E. Dutton and R.E. Quinn (eds) (2003), Positive Organizational Scholarship,
San Francisco, CA: Berrett-Koehler.
Campbell, J.L. (2007), Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility, Academy of Management Review, 32 (3),
94667.
Cascio, W.F. (2006), Decency means more than always low prices: a comparison of Costco
to Wal-Marts Sams Club, Academy of Management Perspective, 20 (3), 2637.
Caves, R. (1996), Multinational Enterprise and Economic Analysis, Cambridge and New York:
Cambridge University Press, 2nd edition.
Chittister, J. (1998), as cited in F. Franck, J. Roze and R. Connolly (eds), What Does It Mean
to Be Human?, Nyack, NY: Circumstantial Productions, p. 193.
Coase, R.H. (1937), The nature of the rm, Economica, 4, November, 386405.
Collis, D. (1991), A resource-based analysis of global competition: the case of the bearings
industry, Strategic Management Journal, 12, 4968.
Cooperrider, D. (2004), The Global Compact Leaders Summit: Final Report, New York:
United Nations Global Compact Oce, October, pp. 142, www.unglobalcompact.org,
accessed 14 November 2007.
Cooperrider, D.L., D. Whitney and J.M. Stavros (2003), Appreciative Inquiry Handbook,
Bedford Heights, OH: Lakeshore.
Davie, L. (2001), South Africas rst Ubuntu university, 5 December, as found on the City
of Johannesburg ocial website: http://www.joburg.org.za/december/university.stm,
accessed 14 November 2007.
Den Hond, F. and F.G.A. De Bakker (2007), Ideologically motivated activism: how activist
groups inuence corporate social change activities, Academy of Management Review,
32 (3), 90124.
DiMaggio, P. and W. Powell (1983), The iron cage revisited: institutional isomorphism
and collective rationality in organizational elds, American Sociological Review, 48,
14760.
Dorsey, D. (2000), Positive deviant, Fast Company, Issue 41, December, p. 284.
Dunning, J.H. (1973), The determinants of international production, Oxford Economic
Papers, 25 (3), 289336.
Dunning, J.H. (1993), Multinational Enterprises and the Global Economy, Wokingham, UK:
Addison-Wesley.
Dunning, J.H. (ed.) (2003), Making Globalization Good: The Moral Challenges of Global
Capitalism, Oxford: Oxford University Press.

398

Handbook of research on global corporate citizenship

Dunning, J.H. and R.D. Pearce (1975), Protability and Performance of the Worlds Largest
Companies, London: Financial Times Ltd.
Dutton, J.E. and B.R. Ragins (2007), Exploring Positive Relationships at Work: Building a
Theoretical and Research Foundation, Mahwah, NJ: Lawrence Erlbaum.
Eviatar, D. (2004), Spend $150 billion per year to cure world poverty, New York Times,
7 November, www.nytimes.com.
Fama, E. (1980), Agency theory: an assessment and review, Academy Management Review,
14 (1), 5774.
Fama, E. and M. Jensen (1983), Separation of ownership and control, Journal of Law and
Economics, 26, 30126.
Fast 50 2003 Winners: Meet the Winners (2003), Complement to the March 2003 Fast
Company print edition, http://www.fastcompany.com/fast50_04/2003winners.html,
accessed 14 November 2007.
Ferraro, F., J. Pfeer and R.I. Sutton (2005), Economics language and assumptions: how theories can become self-fullling, Academy of Management Review, 30 (1), 824.
Fishman, C. (2006), The Wal-Mart eect and a decent society: who knew shopping was so
important?, Academy of Management Perspective, 20 (3), 625.
Fort, T.L. (2007), The corporate contribution to living in world peace, Journal of Corporate
Citizenship, 26 (June), 2024.
Fort, T.L. and C.A. Schipani (2004), The Role of Business in Fostering Peaceful Societies,
Cambridge: Cambridge University Press.
Fredrickson, B. (2003), The value of positive emotions, American Scientist, 91 (4),
33035.
Freeman, R.E. (2006), The Wal-Mart eect and business, ethics, and society, Academy of
Management Perspective, 20 (3), 3840.
Friedman, M. (1970), The social responsibility of business is to increase its prots, New York
Times Magazine, 13 September, p. 122.
Friedman, T.L. (2005), Its a at world, after all, New York Times, Op-Ed, 3 April,
www.nytimes.com.
Friedman, T.L. (2006), The World is Flat: A Brief History of the Twenty-First Century,
New York: Farrar, Straus & Giroux.
Ghemawat, P. (2003), Semiglobalization and international business strategy, Journal of
International Business Studies, 34, 13852.
Ghemawat, P. (2006), Business, society, and the Wal-Mart eect , Academy of Management
Perspective, 20 (3), 413.
Ghoshal, S. and E.D. Westney (eds) (2005), Organizational Theory and the Multinational
Corporation, London and New York: Palgrave Macmillan, 2nd edition.
Gillham, J.E. (ed.) (2000), The Science of Optimism and Hope: Research Essays in Honor of
Martin E.P. Seligman, Radnor, PA: Templeton Foundation Press.
Hart, Stuart L. (2005), Capitalism at the Crossroads: The Unlimited Business Opportunities in
Solving the Worlds Most Dicult Problems, Upper Saddle River, NJ: Wharton School
Publishing.
Hawken, P., A. Lovins and L.H. Lovins (1999), Natural Capitalism: Creating the Next
Industrial Revolution, Boston, MA: Little, Brown.
Hennart, Jean F. (1982), A Theory of Multinational Enterprise, Ann Arbor, MI: University of
Michigan Press.
Hennart, Jean F. (2001), Theories of multinational enterprise, in Alan M. Rugman and
Thomas L. Brewer (eds), The Oxford Handbook of International Business, Oxford: Oxford
University Press, pp. 12749.
Hirsch, Seev (1967), The Location of Industry and International Competitiveness, Oxford:
Oxford University Press.
Hock, Dee (1997), The birth of the chaordic century: out of control and into order, Part 2
as posted on 12 November 1998 on the Paradigm Shift International website: http://www.
parshift.com/Speakers/Speak010.htm, accessed 14 November 2007.
Jensen, M. (1983), Organization theory and methodology, Accounting Review, 58,
31939.

Global business as an agent of world benet

399

Jensen, M. and W. Meckling (1976), Theory of the rm: managerial behavior, agency costs,
and ownership structure, Journal of Financial Economics, 3, 30560.
Johnson, Harry G. (1970), The eciency and welfare implications of the multinational corporation, in Charles P. Kindleberger (ed.), The International Corporation: A Symposium,
Cambridge, MA: MIT Press, pp. 3356.
Johnson, Nancy Brown and Scott Droege (2004), Reections on the generalization of agency
theory: cross-cultural considerations, Human Resource Management Review, 14 (3),
32535.
Keyes, C.L.M. and J. Haidt (eds) (2003), Flourishing: Positive Psychology and the Life WellLived, Washington, DC: American Psychological Association.
King, Andrew (2007), Cooperation between corporations and environmental groups: a transaction cost perspective, Academy of Management Review, 32 (3), 889900.
Kuhn, Thomas (1962), The Structure of Scientic Revolutions, Chicago, IL: University of
Chicago Press.
LaFraniere, Sharon (2006), Business joins African eort to cut malaria, New York Times,
29 June, www.nytimes.com.
Laszlo, Chris (2003), The Sustainable Company: How to Create Lasting Value Through Social
and Environmental Performance, Washington, DC: Island Press.
Lindow, Megan (2004), Stepping into Africas future, Christian Science Monitor, 6 January,
as reported on the Christian Science Monitor website: http://www.csmonitor.com/
2004/0106/p 14s 01-legn.htm, accessed 14 November 2007.
Lovins, A.B., H. Lovins, P.R.F. Hawken, R. Shapiro and J. Magretta (2000), Harvard Business
Review on Business and the Environment, Boston, MA: Harvard Business School Publishing.
Luthans, F. (2002), The need for and meaning of positive organizational behavior, Journal
of Organizational Behavior, 26, 695706.
Luthans, F. (2007), Hope, optimism, and other business assets: why psychological capital
is so valuable to your company, The Gallup Management Journal, 11 January, 16.
Luthans, F., B.J. Avolio, J.B. Avey and S.M. Norman (2007), Positive psychological capital:
measurement and relationship with performance and satisfaction, Personnel Psychology,
60, 54172.
Luthans, F. and C. Youssef (2004), Human, social, and now positive psychological capital
management: investing in people for competitive advantage, Organizational Dynamics,
33 (2), 14360.
MacIntosh, M., S. Waddock and G. Kell (2007), Editorial, Journal of Corporate Citizenship,
26 (June), 35.
Mackey, A. and J.B. Barney (2007), Corporate social responsibility and rm performance:
investor preferences and corporate strategies, Academy of Management Review, 32 (3),
81735.
Manville, B. and J. Ober (2003), Beyond empowerment: building a company of citizens,
Harvard Business Review, 81 (1), 4853.
Margolis, J.D. and J.P. Walsh (2003), Misery loves companies: rethinking social initiatives by
business, Administrative Science Quarterly, 48, 265305.
Marquis, C., M.A. Glynn, G. Davis and F. Davis (2007), Community isomorphism and corporate social action, Academy of Management Review, 32 (3), 92545.
Marwell, G. and R.E. Ames (1981), Economists free ride, does anyone else?, Journal of Public
Economics, 15, 295310.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
Mau, B. and the Institute without Boundaries (2004), Massive Change, London: Phaidon
Press.
McLean, B. and P. Elkind (2003), The Smartest Guys in the Room: The Amazing Rise and
Scandalous Fall of Enron, New York: Portfolio (Penguin Group).
Molz, Rick (2006), Academy of Management professional development workshop, paper
presented at the Academy of Management Meetings, Atlanta, 13 August.
Moon, C. and A. Lado (2000), MNChost government bargaining power relationship: a critique and extension within the resource-based view, Journal of Management, 26 (1), 85117.

400

Handbook of research on global corporate citizenship

Myers, D. (2003), The positive psychology of youth and adolescence, Journal of Youth and
Adolescence, 32 (1), 13.
Nilakant, V. and H. Rao (1994), Agency theory and uncertainty in organizations: an evaluation, Organization Studies, 15 (5), 64972.
Paine, L. Sharpe (2003), Value Shift: Why Companies Must Merge Social and Financial
Imperatives to Achieve Superior Performance, New York: McGraw-Hill.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66, 7188.
Peng, M.W. (2001), The resource-based view and international business, Journal of
Management, 27, 80329.
Peng, M.W. (2004), Identifying the big question in international business research, Journal
of International Business Studies, 35, 99108.
Penrose, E. (1959), The Theory of the Growth of the Firm, Oxford: Basil Blackwell.
Perrini, F. (2007), The market for virtue: the potential limits of corporate social responsibility, Academy of Management Perspective, 21 (3), 1079.
Peterson, C. and M.E.P. Seligman (2003), Positive organizational studies: thirteen lessons
from positive psychology, in Cameron et al. (eds), pp.1428.
Peterson, C. and M.E.P. Seligman (2004), Character Strengths and Virtues: A Handbook and
Classication, New York and Oxford: APA Press and Oxford University Press.
Prahalad, C.K. (2005), The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through
Prots, Upper Saddle River, NJ: Wharton School Publishing.
Robinson, S.L. and R.J. Bennett (1995), A typology of workplace behaviors: a multidimensional scaling study, Academy of Management Journal, 38, 55572.
Rugman, A.M. (1981), Inside the Multinationals: The Economics of Internal Markets, New
York: Columbia University Press.
Rugman, A.M. (1996), The Theory of Multinational Enterprises, Aldershot, UK and
Brookeld, US: Edward Elgar.
Rugman, A.M. and A. Verbeke (2003), Extending the theory of the multinational enterprise:
internalization and strategic management perspective, Journal of International Business
Studies, 34 (2), 12538.
Sachs, J.D. (2005), The End of Poverty: Economic Possibilities of Our Time, New York:
Penguin.
Sandler, N. (2006), Companies: Buet takes a cut of Iscar, Business Week, 8 May,
http://www.businessweek.com/globalbiz/content/may2006/gb20060508_953503.htm.
Savitz, A.W. and K. Weber (2006), The Triple Bottom Line, San Francisco, CA: Jossey-Bass.
Scherer, A.G. and G. Palazzo (2007), Toward a political conception of corporate responsibility: business and society seen from a Habermasian perspective, Academy of Management
Review, 32 (4), 1096120.
Scherer, A.G. and G. Palazzo (2008), Globalization and corporate social responsibility, in
A. Crane, A. McWilliams, D. Matten, J. Moon and D.S. Siegel (eds), The Oxford Handbook
of Corporate Social Responsibility, Oxford: Oxford University Press, forthcoming.
Scherer, A.G., G. Palazzo and D. Baumann (2006), Global rules and private actors: toward a
new role of the transnational corporation in global governance, Business Ethics Quarterly,
16 (4), 50532.
Schwab, Klaus (2003), Remarks as reported in Newsweek, 24 February, p. 10.
Seligman, M.E.P. (1994), What You Can Change and What You Cant, New York: Knopf.
Seligman, M.E.P. (1998), Learned Optimism, New York: Pocket Books (Simon & Schuster),
2nd edition.
Seligman, M.E.P. (2002), Authentic Happiness: Using the New Positive Psychology to Realize
Your Potential for Lasting Fulllment, New York: Free Press/Simon & Schuster.
Seligman, M.E.P. (2003), Positive psychology: fundamental assumptions, Psychologist,
16 (3), pp. 1267.
Seligman, M.E.P. and M. Csikszentmihalyi (2000), Positive psychology: an introduction,
American Psychologist, 55, 514.
Seligman, M.E.P., K. Reivich, L. Jaycox and J. Gillham (1996), The Optimistic Child, New
York: Harper Collins.

Global business as an agent of world benet

401

Shenkar, O. (2004), One more time: international business in a global economy, Journal of
International Business Studies, 35 (2), 16171.
Snyder, C.R. and S.J. Lopez (eds) (2002), Handbook of Positive Psychology, Oxford and
New York: Oxford University Press.
Spreitzer, G. and S. Sonenshein (2003), Positive deviance and extraordinary organizing, in
Cameron et al. (eds), pp. 20724.
Stein, J. (ed.) (1969), The Random House Dictionary of the English Language: The Unabridged
Edition, New York: Random House.
Tallman, S. (1991), Strategic management models and resource-based strategies among
MNEs in a host market, Strategic Management Journal, 12 (Special Summer Issue), 6982.
Tallman, S. (1992), A strategic management perspective on host country structure of multinational enterprises, Journal of Management, 18 (3), 45571.
Teece, D.J. (1977), Technology transfer by multinational rms: the resource cost of transferring technological know how, Economic Journal, 87 (June), 24261.
Terlaak, A. (2007), Order without law? The role of certied management standards in
shaping socially desired rm behaviors, Academy of Management Review, 32 (3), 96885.
Ubuntu University Lifts O (2000), as reported on the website of the SouthAfrica.info
Reporter, 18 November 2002, http://www.southafrica.info/ess_info/sa_glance/education/
ubuntu.htm, accessed 21 November 2007.
UNCTAD (United Nations Conference on Trade and Development) (2005),
www.unctad.org/sections/dite_dir/docs/wir 2005top 100_en.pdf, accessed 14 November
2007.
United Nations (2006), United Nations Millennium Development Goals, www.un.org/
millenniumgoals/, accessed 14 November 2007.
Vernon, R. (1966), International investment and international trade in the product cycle,
Quarterly Journal of Economics, 80, 190207.
Vernon, R. (1971), Sovereignty at Bay: The Multinational Spread of US Enterprises, New
York: Basic Books.
Walsh, James P. (2005), Book Review Essay: Promises and Perils at the Bottom of the
Pyramid, Administrative Science Quarterly, 50 (3), 47382.
Warren, D. (2003), Constructive and destructive deviance in organizations, Academy of
Management Review, 28, 62232.
Wells, L.T., Jr (1971), The multinational enterprise: what kind of international organisation?,
International Organization, 25 (3), 44764.
Wertheimer, S. (2002), Statement by Stef Wertheimer, Washington, DC, 24 June 2002
Hearing of the United States House Committee on International Relations, as cited at
http://www.israelnewsagency.com/stefwertheimer.html, accessed 14 November 2007.
Westney, E.D. (2005a), Institutional theory and the multinational corporation, in
G. Sumantra and E.D. Westney (eds), Organization Theory and the Multinational
Corporation, London and New York: Palgrave Macmillan, 2nd edition, pp. 4767.
Westney, E.D. (2005b), What is international business? A sociologists view, in Buckley (ed.),
pp. 15367.
Williamson, O.E. (1975), Markets and Hierarchies: Analysis and Antitrust Implications, New
York: Free Press.
Williamson O.E. (1981), The modern corporation: origins, evolution, attributes, Journal of
Economic Literature, 19 (4), 153769.
Wright, T.A. (2003), Positive organizational behavior: an idea whose time has truly come,
Journal of Organizational Behavior, 24, 43742.
Young, S. (2003), Moral Capitalism: Reconciling Private Interest with the Public Good, San
Francisco, CA: Berrett-Koehler.
Zaheer, S. (1995), Overcoming the liability of foreignness, Academy of Management Journal,
38 (2), 34163.
Zaheer, S. and E. Mosakowski (1997), The dynamics of the liabilities of foreignness: a global
study of survival in nancial services, Strategic Management Journal, 18 (6), 43963.
Zucker, L.G. (1987), Institutional theories of organizations, Annual Review of Sociology, 13,
44364.

PART V
IMPLICATIONS FOR
MANAGEMENT THEORY
BUILDING

18 Structures, identities and politics:

bringing corporate citizenship into the
corporation
Peter Edward and Hugh Willmott

Being a good corporate citizen starts with hiring lots of good citizens.
Whats a good corporate citizen? Its not just about awards or mission statements or press releases. Its about people. People who care about what they do
and how they do it. And at Toyota, we know these people pretty well, because
we hire them every chance we get.
You see it in every vehicle we build here [in the USA]. Our over 32 000 team
members take pride in everything they do. Quality, teamwork and dependability, thats what theyre all about.
Our team members care about doing whats right; at work as well as in their
local communities. They really are good citizens. Which in turn makes Toyota a
better corporate citizen. Isnt it nice when things work out?
(Toyota advertisement, The Week magazine, 15 September 2006, rear cover.)

Introduction
What does it mean to be a good corporate citizen? It is a question that permeates contemporary discussions of business in society and it is a central
theme of this Handbook. Is it, as the Toyota advert above suggests, about
recruiting particular, deserving employees who care about what they do
and how they do it? If corporations like Toyota develop the structures
the procedures for recruiting, selecting and training employees with the
characteristics of good citizens have they begun to earn the badge of
corporate citizenship? And is the employee who faithfully complies with
corporate demands for quality, teamwork and dependability a model of
the good corporate citizen?
Consider another example. Ms Sayaka Kobayashi, a Toyota employee,
recently blew the whistle on the companys North American CEO, claiming that she had been repeatedly sexually propositioned by him and that
when she raised the issue with the senior vice-president in charge of human
resources nothing was done to investigate her complaint (Business Week
2006). Ms Kobayashi was advised by the vice-president to resolve the
matter privately with Mr Otaka. When she refused because, reportedly,
she regarded it as a corporate issue, not a personal one Ms Kobayashi was
told that she could either leave the rm or cease being an assistant to
Mr Otaka (The Guardian 2006).
405

406

Handbook of research on global corporate citizenship

If whistleblowing exposes malpractice, rather than simply presenting

predatory or disgruntled employees with an opportunity to exploit or hit
back at their employer, are whistleblowers disloyal or are they making a
valuable contribution to good corporate citizenship? Should whistleblowing be actively encouraged or even expected as an indicator or integral part
of good corporate citizenship; or can it only ever signify a failure of corporate citizenship? In so far as corporations institutionalize contingent
inequalities (for example, pay, privilege, and so on) to what extent can any
institutionalized concept of corporate citizenship incorporate whistleblowing that draws attention to the manifestations of these inequalities, in the
form of harassment, bullying, discrimination and so on? Can corporate citizenship resolve who the corporation, the individual, society perhaps
has the right to decide what constitutes legitimate whistleblowing or
indeed what counts as good citizenship without itself becoming an exercise in the wielding of power?
Whistleblowing generally occurs when someone asserts their own identity contra their identication with the corporation they work for (Vinten
1994), so such questions not only prompt reection upon the meaning of
corporate citizenship but also draw attention to how corporate citizenship
is inextricably linked to identity formation.1 By this we do not simply mean
the formation of the corporations identity as a citizen for example, with
regard to its corporate image as socially responsible but also, and primarily, the identities of people as employees, managers, community
members and so on, whose quality of life at work (and beyond) depends
upon processes within the corporate polity that attend to concerns that are
not reducible to corporate priorities or custom and practice. Signicantly,
Ms Kobayashi did not just blow the whistle on a particular, allegedly errant
individual but upon how norms of respect had not become embedded in
Toyota as the company lacked procedures and/or the commitment from its
senior managers to address such complaints.
Our focus in this chapter is on these issues of identication with notions
of corporate citizenship as they relate to two issues: (i) the meanings attributed to corporate citizenship; and (ii) the importance of processes of
identication for the realization of corporate citizenship. The rationale for
this approach is that any concern, or claim, for bringing corporate citizenship into the corporation (the subtitle of this chapter) requires some explication of the meaning(s) of the term which, as we shall see, ranges from
forms of philanthropy and paternalism to radically democratic forms of
struggle for collective self-determination. Attention is paid to whether
these meanings resonate with identities of individuals within organizations
and hence whether they gain or lose grip.2 For in order for corporate citizenship in any of its multiple guises to become established in corporations,

Structures, identities and politics

407

these meanings must gain broad acceptance or buy-in by employees. Key

to establishing any kind of citizenship in, and of, corporations, is their
identication with whatever meaning(s) are attributed to the combination
of these terms. Understood in this way, it can be suggested that some
version of corporate citizenship, however incoherent or sketchy, is structured in to the everyday practices of corporate life. Our view is that corporate citizenship is not equivalent to the adoption of specic policies,
formal procedures and/or reportable metrics but, rather, is present within
or absent from routine, skilful processes of reproducing and transforming
organizing practices (Whittington 2002).
Our attentiveness to identication is consistent with a conception of
structure as an articulation of practice, as contrasted with a notion of
structure as a template or a design that exists externally to human agency.
This focus is relevant for addressing our interest in (corporate) citizenship,
as distinguished from other ways of characterizing a similar terrain of
concern such as corporate (social) responsibility. For us, the distinctive
value of corporate citizenship resides in the association of citizenship with
(democratic) participation in a polity, a resonance that is diluted or expelled
by other terms, such as corporate (social) responsibility, which thereby are
more readily permissive of continuing control of corporate agendas by
established elites. In this regard, the use of the language of citizenship to
construct a procedural framework for facilitating democratization of corporations based upon deliberation can, in principle, be of considerable
value. If, however, it is accepted that a necessary condition for the establishment of postliberal democracy is identication with an ethos that gives
voice to the underdog and recurrently encourages an interrogation of
claims to ostensible completeness or inclusivity that are made in democracys name, then deliberative democracy may not be sucient to meet this
challenge and, indeed, may unintentionally obstruct it. This concern is
addressed here by engaging ideas of hegemony and radical democracy
drawn from the work of Ernesto Laclau and Chantal Moue.
On this terrain between deliberative democracy and radical democracy,
we observe that Habermasian deliberative democracy, as an idea, is developed through an argument that imagines an ideal-type situation of actors
that exist within a system but who can construct their identities and interrelationships autonomously from the system. Principles from this ideal,
essentially a thought experiment, are then transposed back into the real
world but are assumed to retain much of the value that they had in the
ideal situation despite the fact that this transposition invalidates some of
the foundational presumptions that ground the thought experiment. From
the standpoint of radical democracy, deliberative democracy is seen to
exhibit an unwarrantable faith in a prospective, almost transcendent,

408

Handbook of research on global corporate citizenship

consensus. Such a view is absent from radical democracy where any consensus is understood to be partial and always constructed in systems of
power. Deliberative democracys urge to facilitate stable consensus is symptomatic of an inclination to value more highly the prospect of homogenization than dislocatory heterogeneity a prospect that we associate with
a risk of excluding the comparatively powerless and the underdog. Radical
democracy does not rely upon this troublesome movement as it is derived
from a focus on conict (antagonism) that strives to achieve an always unattainable consensus. From the standpoint of radical democracy, deliberative
democracy is seen to think backwards from the unrealistic fantasy of a realized consensus. If deliberative democracy is allowed to stand without the
radical corrective that highlights its limitations, it is vulnerable to becoming trapped in a closed loop in which reliance upon deliberative consensus
building about the nature of a system, among actors whose identities are
constructed within that system, risks closing out more radical options. In
short, we detect a (small c) conservative drift in Habermass deliberative
democracy for which Laclaus social theory of hegemony, including its conception of radical democracy, can provide a corrective.
The next section expands upon the idea of structure as an articulation of
processes of identication and outlines our interest in aligning the meaning
of corporate citizenship to a more radical understanding of participation
in the polity. We then go on to consider attempts to extend the meaning of
corporate citizenship by incorporating notions from citizenship theory,
notably Habermass deliberative democracy, and to consider whether such
notions are likely to achieve grip, and hence be part of a resurgent notion
of corporate citizenship. Our focus on identication and structure leads us
to propose that for this movement to occur, the notion of democracy reinscribed into corporate citizenship needs to have a more radical element
than is currently envisaged by proponents of deliberative democracy.
Accordingly, we then review an example where lack of attention to this
dimension can occlude the potentially undemocratic nature of deliberative
democracy. Finally, we conclude by considering what it would mean
to introduce a more radical understanding of democracy into corporate
citizenship.
Structures, identities and politics
In this section, we begin by elaborating our practice-centred conception of
structure and the importance that we attach to processes of identication.
We then expand upon the idea of corporate citizenship as involving the
development of a polity in which full participation is actively encouraged,
as contrasted with the mere establishment of procedures that provide for
the deliberative production of consensus.

Structures, identities and politics

409

Structure and identication

Our focus on identication has implications for how we conceive of structures. One widespread meaning of structure associates it with control or
regulation through elements of organizational design considered to deliver
predictability and stability such as organization charts, rules, reporting arrangements, procedures and so on (Silverman 1975, especially
pp. 2723). Employees are conceived as (potentially recalcitrant) factors of
production who are located within, and regulated by, structural mechanisms. For this structure to have any eectiveness, however, such elements
must be rendered meaningful, albeit instrumentally, as indicators of the
states of aairs they are taken to depict (Zimmerman and Pollner 1971;
cited in Silverman 1975, p. 276) by employees who identify, more or less
passionately and/or instrumentally with their ostensibly factual properties.
Only in this way can a structure achieve what we refer to as grip: in modern
organizations, reference to their structure implicitly invokes what Bittner
(1973) terms a gambit of compliance which employees more or less dutifully accept. That is to say, the dominant, hegemonic conception of structures, as a set of oces and rules, and so on, communicates an expectation
of compliance. As Bittner puts it, even though one nds only is [for
example there is a rule or a procedure] in the substantive determination
there attaches a sense of ought to the entire scheme [so that] organization [structure] is dened as having determining power over action that
takes place under the scope of its jurisdiction (Bittner 1973, p. 272). This
idea of structure anticipates, and implicitly urges, identication, even if it
is at a dependent, cynical distance, with a seemingly impersonal set of
oces, systems (for example of rewards) and processes; and, to the extent
that identication with the structures occurs, a desired degree of conformity and predictability is produced.
The previous paragraph illustrates how the dominant concept of structure may be recast and applied for analysis in which the focus is upon
identication rather than design. In the structure-as-design notion, no
attention is paid to the intersubjective and inherently political process of
practically (re)producing the activity that is represented as impersonal
structure. Compliance is taken for granted rather than appreciated as a
(precarious) process of institutionalization. The invitation to conceive of
the structure of organizations in this particular way is, arguably, symptomatic of a broader, hegemonic discourse in which corporations are presented as neutral actors within an economic and ostensibly rational system
(see Deetz 1992) (Livesey 2002, p. 335).3 As Livesey (ibid.) continues, it is
a stance [which] helps protect against unwanted public scrutiny [and
accountability], which would threaten proprietary control over information, resource allocation and other decision making . . . (Cheney and

410

Handbook of research on global corporate citizenship

Vibbert 1987). Since we are concerned to problematize this hegemonic discourse, we readily acknowledge the dominance of, but do not want to
restrict our discussion to, an impersonal, design-centric concept of structure. Instead, we are drawn to a (poststructuralist) conception of structure
that incorporates an understanding of how establishing, reproducing and
transforming elements conventionally attributed to structure such as policies and procedures is accomplished through processes of identication.
Accordingly, with regard to corporate citizenship, the term structure
in the title of this chapter does not refer to a set of rules, codes or obligations such as those that might be introduced into a company to manage its
economic, social and environmental relationships, as well as those with
dierent stakeholders (World Economic Forum 2003; cited in Gardberg
and Fombrun 2006, p. 329; for an example see Accenture 2005). Instead we
mean by structure the discursive formation(s) in and through which
(varied) notions of corporate citizenship are intersubjectively articulated
and invoked through processes of identication. For example, testimonies
at the Hearing on the Employment Non-Discrimination Act (1996)
repeatedly invoked the argument that responsible corporate citizens are
willing to go beyond what the law itself demands because of the fundamental belief that all people have the right to be treated with dignity and
respect (Creed et al. 2002, p. 484, emphasis added). Civil rights discourse
was invoked by gay, lesbian, bisexual and transgender (GLBT) employees
and other advocates of nondiscriminatory workplace legislation as they
successfully asserted their identity as citizens entitled to, but currently
denied, equal protection under the law. This example demonstrates how the
meaning of citizenship is not a pre-given concept. Rather, in the moment
of discursive articulation illustrated in very dierent ways by the Toyota
advert and Ms Kobayashis whistleblowing a particular notion of citizenship can act to bring itself into being as part of the intersubjective structuring of the moment.
Participation in a polity
In common with other concepts, including structure, corporate citizenship admits of diverse meanings (Bovens 1998). In comparison with corporate social responsibility (CSR) or sustainability for example, its
meaning is distinctively complexied by a dominant meaning of citizenship as suggestive of participation in a polity as well as loyalty to, and protection by, the polity. When citizenship is associated with corporation,
interdiscursivity occurs where inter alia discourses of democracy and social
justice, in addition to those of environmentalism and neoclassical economics, intersect (Parsons 2005). This interdiscursivity may be contained
within a (currently hegemonic) discourse that downplays the citizenship

Structures, identities and politics

411

in corporations and thereby depoliticizes corporate citizenship as equivalent to corporate investments of time and money in pro bono work, philanthropy, support for community education and health, and protection of
the environment (Gardberg and Fombrun 2006, p. 329). Such containment
is problematized, however, by conceptualizations that draw more directly,
deeply and insistently on notions of citizenship.
When informed by a liberal concept of citizenship,4 the extended
meaning of corporate citizenship is attentive to how corporations are
increasingly involved in the administration of aspects of citizenship formerly placed principally upon governments (Matten and Crane 2005, especially pp. 171 .), such as the provision of education and healthcare. When
extended to a more radical concept of democracy, the focus shifts to an
emphasis upon collective self-determination. Radical democrats are critical of liberal contentment with limited forms of communication, participation and dissent that eectively bestow legitimacy on a social order where
plural forms of domination (for example, of class, gender, ethnicity and so
on) are institutionalized such that reform occurs predominantly within a
framework of equality of opportunity to work within and reproduce the
established system. A sticking point for radical democrats, then, is the
acceptance of, or vulnerability to, established practices by other deliberative as well as liberal forms of democracy.
Noting that proponents of radical democracy are critical of the
instrumental character of liberalism, Norval (2004, p. 151) summarizes
the core ideas of radical democracy. First, central importance is given to
the political which means that consensus, for example, is regarded as a
political (hegemonic) accomplishment, rather than the outcome of a
rational process in which agreement, rather than an uneasy accommodation, is reached. Second, and relatedly, there is an emphasis on the construction and articulation, rather than mere aggregation, of interests and
identities (ibid.) through processes of discursive struggle. Social interaction and communication, including democratic modes of social formation, do not simply reveal pre-given interests and identities. Rather, such
interaction creates and transforms interests and identities. Third, and
relatedly, there is the attention given to the process of subject formation
in general, and the constitution of democratic identities in particular
(ibid.), as contrasted with a focus upon procedures that are deemed or
intended to demonstrate or guarantee the democratic development of
society. While it may be arguable that none of these elements is per se
incongruent with Habermasian deliberative democracy, radical democracy avoids deliberative democracys reliance upon idealized counterfactuals and pays much greater attention to the constitution of democratic
identities.

412

Handbook of research on global corporate citizenship

When approached from a radical democratic perspective, the intersection

of structure as identication and citizenship as active participation in the
democratization of the polity is understood to be integral to the realization
of meaningful citizenship. As Warren (1995, p. 167; cited in Callero 2002,
p. 11) puts it, the understanding shared by radical democrats is not only that
more participation will produce more individuals with more democratic
dispositions individuals who are more tolerant of dierence, more sensitive to reciprocity, better able to engage in moral discourse and judgement,
and more prone to examine their own preferences but crucially that these
notions of tolerance, sensitivity and moral discourse can be expected to
pose a direct challenge to institutionalized inequalities and associated forms
of domination that are undisturbed by liberal notions of citizenship. The
radical democratic notion of citizenship, then, is exemplied in social practices which challenge and change institutions that impede the production of
democratic dispositions. Radical democracy recognizes that such challenges cannot always be arrived at through processes of deliberation. Vested
interests and power dierentials mean that deliberations rarely take place in
situations of true reciprocity, and hence the extension of democracy cannot
be achieved without moments of antagonistic struggle that expose the
inequities of vested interests.5 Examples of this in the civil sphere are the
challenges posed by the suragette movement, the civil rights movement
and the anti-apartheid movement. In corporations, an equivalent to
members of civil disobedience movements are those who confront and
make visible taken-for-granted systems of domination (Callero 2002,
p. 24), such as campaigners against discrimination experienced by GLBT
employees in corporations. As Creed and Scully (2000, p. 410) observe,
For GLBT workplace advocates, politicizing the personal challenges the
penumbra of social expectations . . . Listeners are won over to challenging and
changing the status quo through the increased capacity to imaginatively identify with the states of others (Fligstein 1997). Indeed, such enhanced empathy
may be the basis for a new, collective identity. The collective aspect of diversity
advocacy tends to emphasize connections between historically oppressed groups
such as women, people of color, and GLBT employees as they come to understand one anothers struggles as similar and shared.

An understanding of citizenship that incorporates participation to radically change the polity is conspicuously absent from the catalogue of features attributed to corporate citizenship in liberal as well as managerialist
literatures. Without this radical dimension, however, proclamations of corporate citizenship may amount to little more than a slogan that restores
some legitimacy to the status quo of corporate practice or provides a smokescreen for dubious corporate practices.

Structures, identities and politics

413

Towards radical participation

As Laclau (2004, p. 297) has argued, there are two aspects to the constitution of democratic space. The rst, upon which liberals and democratic
deliberationists (for example, Habermas) place most emphasis, concerns
the mechanisms that provide for formal equality of representation and/or
participation by members of a polity within a practice that presupposes a
readiness to cooperate (Habermas 1998, p. 245). As Laclau points out, this
understanding of participation minimizes the signicance and courts the
exclusion, or at least the reduction, of dierence. In principle it is inclusive
but, in eect, it can be homogenizing as it excludes those who are poorly
placed to challenge compromises reached; and it tends to be at a loss when
understanding those who are disinclined to deliberate. Consequently,
attentiveness to the disadvantaged or marginalized underdog is the second
aspect of the constitution of democratic space stressed by advocates of
radical democracy. It is concerned with bringing the full heterogeneity of
dissenting and excluded demands into participation.6 We suggest therefore
that a key indicator for corporate citizenship must be a supportive normative environment that values engagement with, and attentiveness to, forms
of dissent as opposed to merely, or more highly, valuing compromise and
consensus (Calland and Dehn 2004).
For example, in combination with other corporate scandals (for example,
Tyco), the blowing of whistles by Sherron Watkins on Enron and by
Cynthia Cooper on WorldCom7 contributed to the introduction of the
SarbanesOxley Act (Watnick 2006) which legislates for whistleblower-like
obligations on a number of highly placed corporate actors who work for
public companies (Tippett 2006).8 However, legislative change is comparatively blunt and weak compared to the extra-legal, normative means of
regulation that might be envisaged when corporate citizenship is understood to mean radical democratization, in which the degree of encouragement (not just protection) for dissent and for whistleblowers becomes a
relevant indicator of how far corporations have incorporated core values of
citizenship into their activity. Such encouragement recognizes whistleblowing as a legitimate political act which not infrequently initiates or
mobilizes activist movements (Mansbach 2007).
A more extended view of corporate citizenship?
Extension as injection of a new particularity
Our advocacy of a radically democratic conception of corporate citizenship as participation in the polity is broadly consistent with a developmental conception of democracy (Stokes 2002) in which citizenship is
conceived as a conduit of personal and social improvement (as contrasted,

414

Handbook of research on global corporate citizenship

for example, to economic growth). 9 As such, our advocacy contributes to

a number of initiatives that aim to extend the meaning of the corporate citizenship concept. On this theme, Matten and Crane distinguish three broad
understandings of corporate citizenship. The rst two termed limited
and equivalent are characterized as conventional. They conceive of
corporate citizenship, respectively, as (limited) philanthropy or as very
similar (hence equivalent) to established notions of CSR. A third,
extended view is presented as moving beyond such received ideas about
corporate citizenship by emphasizing the importance of citizenship
(Matten et al. 2003).10
Extended views of corporate citizenship are distinguished by their eorts
to mobilize citizenship theory as a means of moving beyond a view that
assumes the legitimacy of the established boundaries of corporate responsibilities. The specic nature of this move, or demand, varies with the academic theorization. In Logsdon and Woods (2005; Wood et al. 2006)
global business citizenship, for example, the demand is for corporations
to implement a small set of universal human values, tailored to local conditions. In Matten and Cranes (2005) extended view, the demand is for corporations to recognize the responsibilities associated with their creeping
movement into roles that formerly were the exclusive responsibility of government; and, more normatively, for corporations to be held accountable
for their actions, or inactions, with respect to these quasi-governmental
roles. For Moon et al., deliberative participation is the favoured mechanism in which the main criteria for those taking part in participative discourses are impartiality, non-persuasiveness, non-coercion, and expertise
(2005, p. 443), but it is Scherer and Palazzo (2007) who draw more extensively on Habermass theory of deliberative democracy to promote a
demand for greater corporate engagement with, and transparency to, civil
society organizations.
It is not our purpose here to discuss the relative merits of these various
eorts to reframe the notion of corporate citizenship; and we readily
acknowledge that our sketch of these writers positions does insucient
justice to the sophistication and complexities of their proposals. Our intent,
however, is not to provide nuanced accounts of their contributions but,
rather, to appreciate how, albeit through appeals to dierent notions of citizenship, they attempt to infuse some new particularity into corporate citizenship which, understood within the social theory of hegemony, is a
comparatively empty or capacious signier that, at best, is ambiguous and
therefore open to and accommodating of multiple interpretations (as evidenced by the coexistence of the limited and equivalent views, for example).
Extended views of corporate citizenship aspire to exploit and redress this
emptiness by lling, or reinscribing, the concept with a meaning that, for

Structures, identities and politics

415

example, carries expectations of how corporations ought to behave if they

are to earn the accolade of good corporate citizenship.
In Laclaus theory of hegemony, it is an important condition of possibility for achieving widespread grip that a concept becomes relatively
empty of specic content, having just enough residual content to resonate
with popular concerns without being so specic that it ignites dierences
and rifts (Laclau 1996). It is through this process of emptying meaning that
a particular concept comes to acquire a more universal, and hence
inuential, presence. But in the emptying process, the concept also loses
much of its particularity. For example, concepts such as freedom and
democracy have a strong grip so long as their meaning remains relatively
unexplored. Once these universalizing concepts become infused with more
specic particular contents or qualiers such as liberal, deliberative or
radical democracy their ability to achieve grip may be enhanced with
particular constituencies but their ability to secure identication with, and
hence to unify, broader constituencies is weakened. From this perspective,
we can see appeals for an extended view of corporate citizenship as
attempts to inscribe a more democratic notion of citizenship into the
concept. We are not opposed to such attempts but our Laclauian perspective cautions us that if the favoured meaning of citizenship has a content
that is highly particular, then it risks failing to oer and appeal to (that is
to achieve grip with) precisely those more radical identities (including the
whistleblower, the underdog and the marginalized) that will need to be
brought in if corporate citizenship is to live up to the legitimating democratic discourse that seems to drive moves towards extended meanings for
corporate citizenship.
In the next subsection we develop this theme by considering the appeal
of deliberative democracy in reinscribing the meaning of corporate citizenship in a way that anticipates its relevance for addressing a future crisis
of legitimacy and identity for corporations. We then argue that if a new
understanding of corporate citizenship is to achieve grip with the dissenting elements that are likely to come to the fore in such a crisis, it is necessary to articulate radical democracy into our understanding of corporate
citizenship.
Deliberative democracy and reinscription
Habermass notion of deliberative democracy is predicated on two key
dualities. The rst of these is lifeworldsystem: lifeworld as symbolic reproduction in socially integrated action; system as material reproduction in
system integrated action (Habermas 1987, pp. 31920). The second duality
is moralsethics: morals are considered universally valid norms while (discourse) ethics are productive of contingent values (Habermas 1990).11

416

Handbook of research on global corporate citizenship

However, Habermas conceives of these dualities not as comprising

absolute, separable entities but as dierences in degree (Fraser 1989;
Habermas 1990, p. 211). In his more recent work on deliberative democracy, the melding of the theorized dualities is taken even further particularly in the elision of the public sphere of the lifeworld into civil society.
A fundamental issue, then, is whether this de-dierentiation of the grounding dualities in Habermass work can legitimately be made while maintaining the essential insights that derive from theorizing these social
phenomena as dualities. In other words, can we assume that principles
derived from an idealized decoupling of lifeworld and system can still be
invoked when that decoupling is denied in the name of pragmatism? At
issue here is a possible weakening of Habermass resolve to preserve the
centrality of lifeworld priorities in the face of its colonization by system
logics and demands.
With regard to corporations, Palazzo and Scherer (2006) point to the
weakening ability of national law to control transnational corporate activities, combined with increasingly heterogeneous and changing societal
expectations, which are seen to undermine the cognitive and pragmatic
foundations that, in the past, have provided corporate legitimacy. These
developments are understood to foster a politicization of the corporation
as an unavoidable result of the changing interplay of economy, government and civil society in a globalising world (ibid., p. 76). In this respect,
Scherer and Palazzo echo and considerably broaden and deepen the
extended view of corporate citizenship advanced by Matten and Crane as
they commend Habermass notion of deliberative democracy as a relevant
response to the politicization of the corporation (Palazzo and Scherer
2006; Scherer and Palazzo 2007).
Contrasting Habermass earlier, more philosophical work on communicative competence from which ideas of deliberate democracy draw their
inspiration and legitimation, Scherer and Palazzo present his theorization
of deliberative democracy as a less idealistic and more pragmatic approach
that narrows the gap between the actual practice of political decision
making and the theoretical purity of ethical discourses and argue that it
delivers a solid theoretical basis for conceptualizing a new approach to
CSR, especially against the background of globalization (Scherer and
Palazzo 2007, p. 1107, original emphasis). From the standpoint of Laclau
and Moues theory of hegemony (Laclau and Moue 1985), this move
exemplies the attempt to inject a particular content that is, open communication into the meaning of corporate citizenship. We regard this as
signicant and valuable in so far as it serves to revive and reactivate, to use
Laclau and Moues terminology, the term corporate citizenship in relation to emergent and fast-moving debates on worklife balance or on

Structures, identities and politics

417

climate change, for example. We anticipate that such debates make it more
likely that questions about the position of business in society will be raised
with increasing frequency and intensity in ways that can lend grip to a reinscription of the corporate citizenship signier. The combination of ideas of
process, morality, inclusion, participation and openness within deliberative
democracy provides numerous hooks into which specic concerns and
demands can be linked. Deliberative democracy may therefore become an
appealing and fruitful way to open up corporate actions to greater scrutiny
and public debate as it provides a universalizable content, one around
which a large number of particular issues and claims may be articulated.
Our reading of Laclau and Moue is that they would be in broad agreement with Scherer and Palazzos assessment of a looming crisis of legitimacy and identity for corporations; and they would particularly emphasize
how contemporary events and developments are leading to a reactivation
of what had become rather widely sedimented in advanced capitalist societies that is, the taken-for-granted legitimacy enjoyed by corporations
over the past several decades. The dierence resides in how Habermas and
Laclau, respectively, interpret politicization and, relatedly, how their
respective forms of theorization suggest that it be addressed. Following
Habermass lead, Palazzo and Scherer (2006, pp. 789) contend that moral
legitimacy has become the core source of societal acceptance; and that in
a context where normative conicts can no longer be solved by referring to
a shared background of values and traditions, communication becomes the
sole source of peaceful interaction and mutual recognition (ibid., pp. 789,
our emphasis). Laclau and Moue do not take issue with the importance
of communication but question whether becoming the sole source of
peaceful interaction and mutual recognition is consistent with advancing
and preserving the ethos of (radical) democracy.
Achieving grip
If deliberative democracy is to play a universalizing role that is, if
Habermasian deliberative democracy is to be identied (articulated) as the
hegemonic content of a resurgent notion of corporate citizenship then it
will have to achieve grip so as to become a de facto practice of the polity.
That, after all, is a condition of becoming hegemonic. A key issue then is
whether deliberative democracy can achieve the required grip when at the
core of this approach is a reliance upon the purication or tighter
specication of processes of deliberation through an attentiveness to procedures notably, through the use of law. Where deliberative democracy
falls back on communication procedures and institutionalization of consensus building, radical democracy repeatedly worries away at the suturing
of any emergent consensus in order to keep alive the subversive ame, or

418

Handbook of research on global corporate citizenship

energy, of openness. However, while deliberative democracy undertheorizes how open communication can accommodate antagonistic dierences
in identication, radical democracy struggles to theorize how antagonistic
relations between mutually negating enemies can be transformed into agonistic relations between respectful adversaries.
As Norval (2006, p. 230) notes, there is a failure of both deliberative and
poststructuralist (radical) models of democracy to address the question of
how democratic norms and values come to grip subject-citizens. This
failure is most acute in deliberative democracy where a focus upon proceduralism marginalizes consideration of the question of the identityforming ethos of democracy (ibid., p. 239, added emphasis). In the case of
poststructuralist radical democracy, attention is paid to the formation
of the subject (for example, through a Lacanian understanding of
identication) but, as Norval acknowledges, the construction of democratic subject positions is often relegated to the domain of mere contextual
political articulation (ibid., p. 230). Arguably, the democratizing process of
transforming antagonisms into agonistic relations requires relevant channels, yet very little guidance for the formation and institutionalization of
agonistic democracy can be found in Laclau and/or Moues writings. In
principle, then, there may be considerable merit in exploring how the
respective strengths of deliberative and radical formulations of democracy
may complement each other without demanding that they can be fused.
In so far as deliberative democracy is able to secure and develop an institutional framework capable of defending and deepening liberal democracy
by encouraging a greater democratization of private and public administration, it may serve to compensate for a decit in radical democracy.
Specically, it may make a valuable contribution to the process of regulating democratic politics by developing institutions and practices through
which the potential antagonism can be played out in an agonistic way
(Moue 2005, p. 21). Without such an input, there is a dicult-to-justify
risk that the lack of procedures will weaken the prospects for democratic
politics, though Habermass framework oers no guarantees. As Habermas
(1996, p. 7 note 8; cited in Kapoor 2002, p. 474) makes the argument, deliberative democracy depends not on a collectively acting citizenry but on the
institutionalization of the corresponding procedures and conditions of
communication. This strength of Habermass position is, however, also a
weakness to the extent that its focus is not upon the demands articulated
by a plurality of (passionate) citizens but, rather, upon procedures that are
intended to produce a deliberated consensus. It is here that the agonistic critique of deliberative democracy comes into play, defending the openness of
political life and thereby recognizing what is excluded and occluded in the
representation of legitimate politics as dialogue (Schaap 2007, p. 72).

Structures, identities and politics

419

Of course, this is a virtue only if the understanding is maintained that

radical democracy emphasizes the importance of remaining open to contestation rather than privileging the demands of an institutional framework
that is claimed to support this process.
Deliberative democracy in practice
From the perspective of the social theory of hegemony, communicative
power works in the theory of deliberative democracy as a signier that
operates inadvertently to occlude and silence its own constitutive dislocation. Noonan (2005) identies the same dislocation, though in dierent language, when he says that because Habermas argues that the economy must
be left to function according to endogenous market dynamics, he accepts
as a condition of democracy . . . a social structure that is in fact antidemocratic (p. 101). Our view is that if deliberative democracy is to
become a preferred articulation (to achieve grip) for corporate citizenship
then it must be complemented by a radical democratic element. This move
can be seen as an attempt to ensure that the dislocation remains visible,
unable to become fully sedimented into accepted commonsense. To
support this view, we now illustrate what can happen when this occlusion
of ambiguity occurs in corporate citizenship.
The Forest Stewardship Council
Following Habermass thinking on deliberative democracy, Scherer and
Palazzo (2007, p. 1105; Habermas 1996) state that, it [now] seems nave to
assume that all coordination problems in the context of economic activities
can be solved in processes of argumentation that are oriented toward
mutual understanding and agreement. According to them, this less idealistic and more pragmatic approach (Scherer and Palazzo 2007, p. 1107)
singles out collective actors such as non-governmental organizations
(NGOs), citizen movements and networks as actors in the process of willformation who can map, lter, amplify, bundle, and transmit private problems, needs, and values (ibid., p. 1107). In other words, civil society here
predominantly signies instrumental processes that exist, for Habermas, at
the system level; and the collective actors form part of the procedural
design of political institutions (Scherer and Palazzo 2007, p. 1107, referencing Habermas 1996). In this process, it seems to us that the original
signicance and value of the lifeworld, as the locus where processes and
objects of identication take shape, and as the site of the emancipatory
force in all human beings, risks dilution and marginalization. In the name
of non-naive pragmatism, we are invited to occlude, or to circumvent, the
inescapable presence of dislocation in the social realm. To the extent to
which this occurs, the critical edge of Habermass thinking becomes

420

Handbook of research on global corporate citizenship

softened by a realistic readiness to accommodate the demands of the

system. As we shall now argue, this translates, in Scherer and Palazzos
thinking, to a combination of issuing appeals to corporations to be public
spirited combined with lending encouragement to NGOs (which lack any
democratic mandate) and other collective actors to pressure and collaborate with corporations in order to get them to participate in the public
process of exchanging arguments (ibid., p. 1109) and facilitating forms of
self-regulation that mitigate social and ecological destructiveness.
The example used by Scherer and Palazzo (2007) to support and illustrate their argument is the case of the Forest Stewardship Council (FSC)
which was established in 1993 as a collaborative venture between NGOs
and major corporations such as IKEA, Home Depot and B&Q (see also
Scherer et al. 2006). We shall argue that this example highlights the dangers
of focusing upon procedures rather than eective political action and/or
the vulnerability of Habermass ideas to a reading that identies the operation of the FSC with even their partial actualization.
Ten years after the establishment of the FSC, the Rainforest Foundation
(RF) (2002) conducted a detailed (160 page) report on the FSCs activities.
Scherer and Palazzo (2007, p. 1110) refer to the RF report, but despite its
pertinence for their thesis, mention only the reports criticism of the
Councils fast growth strategy that is linked to the certication of noncomplying companies. The full RF report makes uncomfortable reading for
advocates of deliberative democracy as it illustrates the vulnerability of its
principles to capture and subversion. The report is highly critical of the
transparency of the FSC and the lack of democratic accountability. A
avour of the problems is given in the executive summary where it is noted:
Key stakeholders are eectively excluded from many FSC processes . . . Whilst
legitimate forest stakeholders, such as local communities and indigenous people,
remain marginalized in FSCs decision-making processes, the inuence of other
stakeholders such as certication bodies and their commercial clients has
grown . . . The FSCs complaints procedures concerning certiers and their
certications are essentially non-functioning. They are cumbersome and
onerous, discriminatory against weaker stakeholders, and biased in favour of the
certiers and their commercial clients. There is therefore no eective means of
redress for many stakeholders in the event of dispute . . . There has been a
serious lack of transparency or democracy of knowledge. Key FSC processes
have been undertaken without proper information being available to the membership and the wider public. This has undermined accountability of the organization . . . (Rainforest Foundation 2002, p. 7)

In short, according to the RF, the operation of the FSC privileged

certication bodies and commercial clients as it marginalized the voice of
local communities and indigenous people who were unable to obtain

Structures, identities and politics

421

redress from the FSC as a consequence of a cumbersome complaints procedure (notably similar to Ms Kobayashis experience at Toyota described
earlier).
Silence on the RF ndings allows Scherer and Palazzo to oer the
unqualied view that the FSC can be considered one of the most advanced
concepts in the sense of our proposed political CSR (Scherer and Palazzo
2007, p. 1110). Of course, no organization is going to be without signicant
imperfections. But to identify the FSC as a model of political CSR and to
claim that the FSC demonstrates the corporate embeddedness in processes
of democratic will-formation and problem solving in a transnational
context of political governance (ibid.) does fuel some concern about the
value and/or application of Habermass deliberative democracy. What the
RF report communicates to us is a triumph of system over lifeworld legitimized by a discourse of deliberative democracy where it is claimed, for
example, The FSC is designed around deliberative criteria such as broad
participation, the attempt to exclude corporate power as a decision criterion . . . (ibid.).12
If the ndings of the RF report are accepted as a reliable indicator of the
operation of corporate citizenship at the FSC, then it illustrates our earlier
points about the importance of buy-in to the principles of citizenship and,
more specically, the likely consequences if mere lip-service is paid to commitments to develop skilful processes that transform and democratize corporate practices. More specically, there is a risk that formal principles and
structures are established that approximate to ideals of deliberative democracy but that the everyday practices of organizing fail to embody and
nurture such lofty ideals. While a supercial tick-box audit might show that
the relevant procedures are in place, it is only when attention is given to
the outcomes of specic practices that signicant doubt is cast, for
example, upon the claim that the FSC demonstrates the corporate embeddedness in processes of democratic will-formation and problem solving in
a transnational context of political governance (ibid.).
Conclusion
Radical corporate citizenship?
Scherer and Palazzos use of the FSC case gives us pause for thought about
how ideas of deliberative democracy are vulnerable to appropriation, especially in a situation where the lifeworld has become penetrated and heavily
contaminated by the system. When dissociated from concepts of
identication and emancipation, civil society risks becoming incorporated
into the system as a third subsystem alongside the economic and administrative systems. It is then a short step just mere commonsense we might

422

Handbook of research on global corporate citizenship

say to taking a sectoral perspective where corporate citizenship is theorized exclusively in relation to the subsystems of business (money), government (power) and civil society (see, for example, Waddell 2000).13 In this
commonsense or pragmatic recasting of lifeworld, processes of emancipation which, arguably, are central to the project of critical theory can
become diluted, marginalized and/or reconstructed to the point of invisibility. The signier civil society comes to embody the mere trace of these
emancipatory processes. That is to say, it comes to serve as the means of
controlling them by defusing their antagonism within the systemic discourse of sectors. How else can we explain that when, in the context of corporate citizenship, citizenship is taken to mean democracy, the move can be
made without immediately raising an impassioned cry that it is not enough
to think only of corporations in a democracy without also thinking about
democracy in corporations?
Consideration of the FSC case reinforced our scepticism about the
capacity of a Habermasian approach to corporate citizenship to open up
substantively new modes of participation for the polity. Specically, we are
uneasy about the prospect of the problematic underpinnings of
Habermass theory becoming normalized and silenced behind a commonsense that assumes that open deliberation will generate a role for business
in society that is better grounded in morality and ethics. Is this morality
likely to be a new start, a way to ground new social identities for a changing world order? Or is it more likely to produce a re-legitimation of the
existing system old wine in new bottles? To put it into Laclauian wording,
does the introduction of deliberative democracy suciently disrupt established equivalent, limited and even extended views of corporate citizenship so as to yield the best chance of transforming them into a radically
new logic?
A specic concern and practical implication of our analysis is that a critical dimension of citizenship that is, participation in a polity is vulnerable to being formalized and blunted in Habermass pragmatic conception of
deliberative democracy, even to the point that it seems self-evident and
uncontentious to assert that it is dicult, if not impossible to implement
concepts of radical democracy (i.e., all citizens participate in all public decisions) in modern societies (Scherer and Palazzo 2007, p. 1107; see also
Habermas 1998). By viewing radical democracy through an instrumental
lens, it becomes reduced to a particular demand for the participation of all
in all decisions that is plainly impractical when understood within an
instrumental discourse. The rejection of a more radical conception of
democracy in the name of pragmatism (that being the commonsense
of instrumentalist discourse) occurs precisely at the point where the limits of
instrumentalist discourse the impossibility of its closure are encountered.

Structures, identities and politics

423

Radical democracy cannot be subsumed within instrumental discourse

that is, the discourse of the system, of the economy and hence of the corporation today. This is not because it is utopian but because, by recognizing the
hegemonic discursive processes at work, it exposes the occluded, powerladen nature of the neutral discourse of eciency that not only underpins
the economy but also contaminates Habermass conception of deliberative
democracy.
If Habermass theory of deliberative democracy, and application of it,
retained more of the sense of the lifeworld, we would nd greater continuity with the position advanced here. There will, however, always be a divergence with Laclaus understanding of radical democracy. This dierence,
of course, relates directly to the central theme of this chapter namely the
structuring of the identities we are invited to assume. In contrast to deliberative democracy that anticipates the fully communicative subject of the
ideal speech situation, radical democracy conceives of the subject as constitutively split and, relatedly, understands the structuring of identities to
be irremediably dislocated. The point has been made by Fraser when she
contends that the signicance of what she terms the split subject (Fraser
1989, p. 134) is unappreciated in Habermass work. If it were, she argues,
he would better recognize that:
the question is not whether lifeworld norms will be decisive but, rather, which
lifeworld norms will [be] . . . These struggles are not waged [only] over the meanings and norms embedded and enacted in government and corporate policy [but
also] in a phenomenon not thematized by Habermas, in the struggles between
opposing social movements with conicting interpretations of social needs.
Both kinds of struggles involve confrontations between normatively secured and
communicatively achieved action. Both involve contestation for hegemony over
what I call the sociocultural means of interpretation and communication.
(Ibid., p. 135, original emphasis)

Back in the late 1980s, just as corporate citizenship was (re)emerging as

a concept in search of hegemony, Fraser was arguing for an understanding
of the sociocultural means of interpretation and communication that
places the split subject and hegemony at its centre. Today, as we attempt
to reinscribe corporate citizenship with notions of deliberative democracy,
her call continues to resonate.
Towards democratic corporate citizenship
If we want corporate activities to be democratized, or at least to become
less hostile to processes of democratization and, as we have stressed, the
notion of corporate citizenship would seem to be a relevant vehicle for
advancing the democratic development of corporate activity then the
challenge is to rearticulate corporate citizenship in ways that get grip in

424

Handbook of research on global corporate citizenship

society, as well as in corporations. For corporate citizenship to be embraced

and radicalized in this way requires that those engaged in diverse struggles
of self-determination in organizations connect their campaigns through a
common concern to counter and subvert institutionalized forms of oppression, and to learn from one another about processes of politicization and
democratization. Examples of such struggles noted earlier in this chapter
include the actions of whistleblowers, especially those who go on to form
campaigning organizations, the activities of those campaigning for GLBT
employees, and the actions of organizations such as the Rainforest
Foundation that draw attention to the serious lack of transparency or
democracy of knowledge (Rainforest Foundation 2002, p. 7) in the
operation of NGOs, such as the FSC, as well as corporations such as
Toyota.
Like the whistleblower, the advocate for GLBT employees gives voice to
underdogs whose voice is routinely marginalized if not silenced in
processes of decision making about the development of the corporate
polity, and thus from opportunities to engage in democratic deliberation
about the formation of that polity with respect to their rights and treatment. Radical democracy, as Laclau (2004, p. 295) puts it, means the
incorporation into democratic deliberation of actors who had been, so far,
excluded from the process of decision-making. Democracy is only radical
if it involves an eort to give a political voice to the underdog. This stance
resonates with that developed by advocates of direct democracy (for
example, Pateman 1970) who inter alia place importance upon extending
processes of democratization to include non-state structures such as
the workplace, and in the need to foster substantial democracy in order
to reduce social and economic inequalities (Vitale 2006, p. 753).
Whistleblowing and campaigning for the rights of employees are illustrative of such direct forms of participative intervention in the corporate
polity. Common to such struggles is a demand for greater participation in
the formation of the sociocultural means of interpretation and communication (Fraser 1989, p. 135) through which the polity of corporations is
democratized. This demand may to a degree be incorporated within the
framework of deliberative democracy but it also contains more radical elements that draw attention to the limits and vulnerabilities of such deliberation. We have therefore suggested that a successful reinscription of
corporate citizenship is more likely to resonate with, and hence gain grip
in, society when it incorporates a vision of (radical) democracy such as that
oered by Laclaus social theory of hegemony.
In exploring the connections between structures, identities and politics,
our purpose has been to interrogate and to discern the limits, but not to
reject the important contribution, of deliberative democracy or its

Structures, identities and politics

425

relevance for corporate citizenship. Its dismissal would, in our view, run
counter to the spirit of openness that radical democracy prizes most highly.
An approach which neglects the role of law and/or the importance of communitarian deliberation in supporting processes of radical democracy risks
jeopardizing the gains of liberal democracy (Laclau 2004, especially
p. 298). That said, there is also a risk that translations of Habermass ideas
about deliberative democracy into the domain of corporate citizenship
become excessively preoccupied with the institutionalization of representation as a means of ordering the world. Deliberative democracy is too
readily appropriated in the service of corporatist liberal democracy in
which the forced nature of agreements is glossed over, as illustrated in the
example of the RF report on the operation of the FSC. Radical democracy
invites us to think more in terms of ways of being in the world; and to foster
and preserve an awareness of the unavoidable tensions that arise from the
necessity, yet impossibility, of suturing openness, as manifested in opposition and dissent. We anticipate that some readers may associate the stance
of radical democracy with being overly romantic or insuciently pragmatic. Our response has been to show how the advocacy and pursuit of
deliberative democracy per se can be excessively pragmatic and conservative. From a radical democratic standpoint, traversing the tensions learning to live with them and to appreciate them as constitutive necessities of
the social world is considered to be endemic to the puzzles and possibilities of citizenship. So, while we support the intent of deliberative democracy, our support is qualied by a concern to highlight and correct what we
assess to be the vulnerability of deliberative democracy to co-option and
formalization.
Notes
1.

2.
3.
4.
5.

To clarify the terminology that runs through this chapter, identity is identication with
a subject position or multiple positions in a discursive structure. Discourse includes all
activities in the social realm, including therefore not only linguistic practices but also all
other symbolic and material practices. Since identity is discursively constructed it is
changeable, contingent, fragmented and never fully complete or xed. For an introduction to these terms, see Jrgensen and Phillips (2002).
The term is used by Glynos (2001) to mean the way that a concept attracts an emotional
investment in, and hence an identication with, the concept.
As Butler (1997, p. 13; cited in Swanson 2005, pp. 1045) puts it, for some social formation to appear as structured is for it to have covered over in some way the contingency
of its own installation (original emphasis).
By a liberal concept of citizenship we mean citizenship in a system of representative
democracy where rights and freedoms of individuals are protected by law while state
power is exercised by elected representatives who are themselves subject to the law.
Here we signal a key dierence between radical democracy and (Habermasian) deliberative democracy. Both approaches envisage that more participation will produce more
democratic dispositions. However, while deliberative democracy seeks to promote procedures and practices of participation and consensus forming, radical democracy is

426

6.

7.
8.

9.

10.

11.

Handbook of research on global corporate citizenship

critical of the ways that such procedures and practices inevitably tend to reinforce and
privilege established positions thereby reducing and constraining the conceivable space
for legitimate dissent. In this respect, deliberative democracy resonates more closely with
a liberal concept of citizenship.
We have in mind here that one dening feature of democracy is that it should be based
on freedom of participation. Liberal democracy interprets this as freedom to participate
in the selection of ones government, and Habermasian deliberative democracy conceives of it as freedom to engage in practices and processes of deliberation that strive for
consensus formation. Radical democracy emphasizes a more Nietzschean view that
freedom includes freedom to resist constraints on freedom, such as inequalities of power
or social practices and procedures that serve to delegitimize antagonistic resistance.
For further details, see: http://www.pcaw.co.uk/about/whistleblowers.html, accessed 24
October 2007.
SarbanesOxley places a legal obligation upon employees to act in ways that, as
Rothschild and Miethe (1994, p. 270) argue, are already widely established within organizations with a long history of open communication between sta and management,
worker solidarity and a commitment to treating employees with dignity and self-respect.
Such organizations, they observe, seem more likely to encourage internal disclosure of
wrongdoing. Similarly, more participatory or democratic organizations tend to be more
open and self-correcting, thereby responding more constructively to internal criticism
(ibid.).
One distinction between developmental democracy and deliberative democracy
identied by Stokes is that developmental democrats advocate participation, deliberation and critical self-reection as a route to personal and social transformation whereas
(radical) deliberative democrats see personal transformation as a necessary step before
proper deliberative participation can be achieved (Stokes 2002, p. 45). Stokess use of the
term radical here should not be confused with the radical democracy of Laclau and
Moue. This latter is primarily concerned with appreciating and challenging the ways
that discourses (conceived as both concepts and practices) operate to create hegemonic
orders that silence and destabilize alternative political positions in society today. Laclau
and Moues radical democracy does not argue that personal transformation must
precede deliberative participation, but only that deliberative participation should not
occur in processes that are ignorant of, or in denial of, the workings of hegemonic logics
in society.
Banerjee (2007) nds that attempts to distinguish between corporate citizenship and
CSR do not make a particularly convincing case and appear to be more of an academic
exercise in staking out territories (Banerjee 2007, p. 44). Extended views are therefore
interpreted as attempts to articulate distinctive positions within the established normative positions of CSR discourses. This leads Banerjee to draw attention to the ways that
these discourses are framed by power dierentials that are not adequately addressed in
concepts of CSR and corporate citizenship (ibid., p. 48) and to ask how marginalized
and impoverished communities . . . can ensure their rights are protected in a democracy,
deliberate or otherwise (p. 155).
Habermass uses of the terms moral and ethics can be confusing but the following
quotes clarify his usage. What moral theory can do and should be trusted to do is to
clarify the universal core of our moral intuitions and thereby to refute value skepticism.
What it cannot do is make any kind of substantive contribution (Habermas 1990, p. 211,
original emphasis). The substantive contribution arises then from the procedures of discourse ethics (ibid., p. 199) and hence morals and ethics cannot be entirely separated.
Habermas identies the limitations to the applicability of his approach when he points
out that discourse ethics is a procedure of practical discourse for the discursive redemption of normative claims to validity . . . Practical discourse is not a procedure for generating justied norms but a procedure for testing the validity of norms that are being
proposed and hypothetically considered for adoption . . . It would be utterly pointless
to engage in a practical discourse without a horizon provided by the lifeworld of a
specic social group and without real conicts in a concrete situation (p. 103). In other

Structures, identities and politics

12.

13.

427

words, for Habermas the transcendental procedure of discourse ethics is used to validate
universal moral hypotheses by testing them in lifeworld situations from which are derived
practical ethics as contingent values.
Our concerns are not allayed when visiting the FSC website where we came across an
endorsement quote from the Business Manager of B&Q, a market-leading hardware
store. In this quote which, it should be recalled, is selected and showcased by the FSC,
comment is passed only on the benet of FSC membership as being able to secure a competitive advantage by demonstrating to B&Q customers that its wood products are traceable from the store right back to the forest. There is no mention of this being an integral
part of any broader commitment to educating either its employees or its customers about
sustainable forestry, and thereby to reducing detrimental impacts on the environment
(see http://www.fsc.org/en/whats_new/news/news/30, accessed 24 October 2007).
Habermass lifeworldsystem division was originally predicated on the system as the
locus of the economic and administrative (sub)systems which are considered to be separate systems that together comprise the System. The lifeworld comprises the public
and private spheres and is not conceived as a system. Interactions between the lifeworld
and the system are through the media of power and money (Habermas 1987, p. 320).
This separation is a necessary construct for the idealized thought experiment underpinning the theory of communicative action. In more recent, and allegedly more pragmatic,
work on models of democracy, Habermas sees civil society as merely distinct from
(rather than of a dierent type to) the economic and administrative systems (Habermas
1998, p. 249). What we are asserting is that putting civil society on this level of commensurability with the economic and administrative systems risks reducing the lifeworld
to another subsystem of the system. By introducing the medium of solidarity he reinforces the idea that there is a tripartite system of economy (with its medium money),
administration (power) and civil society (solidarity). The fact that solidarity tends to
take us in the direction of ordering and consensus, rather than emancipation and
identication, only seems to reinforce this move towards civil society as part of the
system. We recognize that this may not be the intent of Habermas here, but we believe it
is the eect.

References
Accenture (2005), Corporate citizenship in action, http://www.accenture.com/NR/
rdonlyres/B338ADF4-EC1C-4376-9BED-C4456CEAD75B/0/2005CCProle_PRINTED
VERSION_102804_t1_v29.pdf, accessed 2 March 2007.
Banerjee, S.B. (2007), Corporate Social Responsibility: The Good, the Bad and the Ugly,
Cheltenham, UK Northampton, MA, USA: Edward Elgar.
Bittner, E. (1973), The concept of organization, in G. Salaman and K. Thompson (eds),
People and Organizations, London: Longman, pp. 26476.
Bovens, M. (1998), The corporate republic: complex organizations and citizenship, in E.A.
Christodoulidis (ed.), Communitarianism and Citizenship, Aldershot: Ashgate, pp. 15876.
Business Week (2006), Trouble at Toyota: behind the sexual harassment suit roiling the carmakers U.S. executive suite, 3985, 22 May, http://www.businessweek.com/magazine/
content/06_21/b3985078.htm, accessed 24 October 2007.
Butler, J. (1997), Further reections on the conversation of our time, Diacritics, 27 (1), 1315.
Calland, R. and G. Dehn (eds) (2004), Whistleblowing around the World: Law, Culture and
Practice, Cape Town: Institute for Democracy in South Africa.
Callero, P.L. (2002), The political self: identity resources for radical democracy, mimeo,
Department of Sociology, Western Oregon University.
Cheney, G. and S.L. Vibbert (1987), Corporate discourse: public relations and issue management, in F.M. Jablin, L.L. Putnam, K.H. Roberts and L.W. Porter (eds), Handbook of
Organizational Communication: An Interdisciplinary Perspective, Newbury Park, CA: Sage,
pp. 16594.
Creed, W.E.D. and M. Scully (2000), Songs of ourselves: employees, deployment of social
identity in workplace encounters, Journal of Management Inquiry, 9 (4), 391412.

428

Handbook of research on global corporate citizenship

Creed, W.E.D., M. Scully and J.R. Austin (2002), Clothes make the person? The tailoring of
legitimating accounts and the social construction of identity, Organization Science, 13 (5),
47596.
Deetz, S. (1992), Democracy in an Age of Corporate Colonization, Albany, NY: State
University of New York Press.
Fligstein, N. (1997), Social skill and institutional theory, American Behavioral Scientist, 40
(4), 397405.
Fraser, N. (1989), Unruly Practices: Power, Discourse and Gender in Contemporary Social
Theory, Minneapolis, MN: University of Minnesota Press.
Gardberg, N.A. and C.J. Fombrun (2006), Corporate citizenship: intangible assets across
institutional environments, Academy of Management Review, 31 (2), 32946.
Glynos, J. (2001), The grip of ideology: a Lacanian approach to the theory of ideology,
Journal of Political Ideologies, 6 (2), 191214.
Guardian, The (2006), Toyotas North America boss quits early over $190m sexual harassment
lawsuit, 10 May, http://www.guardian.co.uk/japan/story/0,,1771501,00.html, accessed 24
October 2007.
Habermas, J. (1987), The Theory of Communicative Action. Volume 2: Lifeworld and System:
The Critique of Functionalist Reason, Cambridge: Polity.
Habermas, J. (1990), Moral Consciousness and Communicative Action, trans. C. Lenhardt and
S.W. Nicholsen, Cambridge Polity.
Habermas, J. (1996), Between Facts and Norms: Contributions to a Discourse Theory of Law
and Democracy, trans. W. Rehg, Cambridge: Polity.
Habermas, J. (1998), Three normative models of democracy, in Habermas (ed.), The
Inclusion of the Other, Cambridge, MA: MIT Press, pp. 23952.
Jrgensen, M. and L. Phillips (2002), Discourse Analysis as Theory and Method, London:
Sage.
Kapoor, I. (2002), Deliberative democracy or agonistic pluralism? The relevance of the
HabermasMoue debate for Third World politics, Alternatives, 27, 45987.
Laclau, E. (1996), Emancipation(s), London: Verso.
Laclau, E. (2004), Glimpsing the future, in S. Critchley and O. Marchart (eds), Laclau: A
Critical Reader, London: Routledge, pp. 279328.
Laclau, E. and C. Moue (1985), Hegemony and Socialist Strategy: Toward a Radical
Democratic Politics, London: Verso.
Livesey, S. (2002), The discourse of the middle ground: citizen Shell commits to sustainable
development, Management Communication Quarterly, 15 (3), 31349.
Logsdon, J.M. and D.J. Wood (2005), Global business citizenship and voluntary codes of
ethical conduct, Journal of Business Ethics, 59, 5567.
Mansbach, A. (2007), Political surplus of whistleblowing: a case study, Business Ethics: A
European Review, 16 (2), 12431.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
Matten, D., A. Crane and W. Chapple (2003), Behind the mask: revealing the true face of corporate citizenship, Journal of Business Ethics, 45 (12), 10920.
Moon, J., A. Crane and D. Matten (2005), Can corporations be citizens? Corporate citizenship as a metaphor for business participation in society, Business Ethics Quarterly, 15 (3),
42953.
Moue, C. (2005), On the Political, London: Routledge.
Noonan, J. (2005), Modernization, rights, and democratic society: the limits of Habermass
democratic theory, Res Publica, 11, 10123.
Norval, A.J. (2004), Democratic decisions and the question of universality: rethinking recent
approaches, in S. Critchley and O. Marchart (eds), Laclau: A Critical Reader, London:
Routledge, pp. 14066.
Norval, A.J. (2006), Democratic identication: a Wittgenstinian approach, Political Theory,
34, 22955.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66, 7188.

Structures, identities and politics

429

Parsons, R. (2005), The social responsibility of business is to challenge its assumptions, Paper
presented at the 4th Critical Management Studies Conference, Cambridge, 46 July,
www.mngt.waikato.ac.nz/ejrot/cmsconference/2005/proceedings/movementsmoments/
Parsons.pdf, accessed 24 October 2007.
Pateman, C. (1970), Participation and Democratic Theory, Cambridge: Cambridge University
Press.
Rainforest Foundation (2002), Trading in credibility: the myth and reality of the Forest
Stewardship Council, http://www.rainforestfoundationuk.org/les/Trading%20in%20Cre
dibility%20full%20report.pdf, accessed 24 October 2007.
Rothschild, J. and T.D. Miethe (1994), Whistleblowing as resistance in modern work organizations: the politics of revealing organizational deception and abuse, in J.M. Jermier,
D. Knights and W.R. Nord (eds), Resistance and Power in Organizations, London:
Routledge, pp. 25273.
Schaap, A. (2007), Political theory and the agony of politics, Political Studies Review, 5, 5674.
Scherer, A.G. and G. Palazzo (2007), Towards a political conception of corporate responsibility business and society seen from a Habermasian perspective, Academy of
Management Review, 32 (4), 1096120.
Scherer, A.G., G. Palazzo and D. Baumann (2006), Global rules and private actors: toward a
new role of the transnational corporation in global governance, Business Ethics Quarterly,
16 (4), 50532.
Silverman, D. (1975), Accounts of organizations: organizational structures and the accounting process, in J.B. Mckinlay (ed.), Processing People: Cases in Organizational Behaviour,
London: Holt, Rinehart & Winston, pp. 269302.
Stokes, G. (2002), Democracy and citizenship, in G. Stokes and A. Carter (eds), Democratic
Theory Today, Cambridge: Polity, pp. 2351.
Swanson, J. (2005), Recognition and redistribution: rethinking culture and the economic,
Theory, Culture and Society, 22 (4), 87118.
Tippett, E.C. (2006), The promise of compelled whistleblowing: what the corporate governance provisions of SarbanesOxley mean for employment law, Working Paper, Harvard
Law School, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=930226, accessed 24
October 2007.
Vinten, G. (1994), Whistleblowing: Subversion or Corporate Citizenship, London: Palgrave
Macmillan.
Vitale, D. (2006), Between deliberative and participatory democracy: a contribution on
Habermas, Philosophy and Social Criticism, 32 (6), 73966.
Waddell, S. (2000), New institutions for the practice of corporate citizenship: historical, intersectoral, and developmental perspectives, Business and Society Review, 105 (1), 10726.
Warren, M.E. (1995), The self in discursive democracy, in S.K. White (ed.), The Cambridge
Companion to Habermas, Cambridge and New York: Cambridge University Press,
pp. 167200.
Watnick, V.J. (2006), Whistleblower Protections under the SarbanesOxley Act: A Primer and
a Critique, No. 1822: Berkeley Electronic Press, available at http://law.bepress.com/cgi/
viewcontent.cgi?article=8640&context=expresso, accessed 24 October 2007.
Whittington, R. (2002), Corporate structure: from policy to practice, in A. Pettigrew,
H. Thomas and R. Whittington (eds), Handbook of Strategy and Management, London:
Sage, pp. 11338.
Wood, D.J., J.M. Logsdon, P.G. Lewellyn and K. Davenport (2006), Global Business
Citizenship: A Transformative Framework for Ethics and Sustainable Capitalism, Armonk,
NY: M.E. Sharpe.
World Economic Forum (2003), Global Competitiveness Report: 20032004, available at
http://www.webforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/Past
Reports/index.htm.
Zimmerman, D.H. and M. Pollner (1971), The everyday world as a phenomenon, in J.D.
Douglas (ed.), Understanding Everyday Life, London: Routledge & Kegan Paul, pp. 80104.

19 Responsible leadership in a globalized

world: a cosmopolitan perspective
Thomas Maak and Nicola M. Pless

If our world is to be a decent world in the future, we must acknowledge right

now that we are citizens of one interdependent world held together by mutual
fellowship as well as the pursuit of mutual advantage, by compassion as well as
self-interest, by a love of human dignity in all people, even when there is nothing
we have to gain from cooperating with them.
(Martha Nussbaum 2005, pp. 21718)

The quest for responsible leaders

One of the key lessons to be learnt from Enron and other corporate scandals in recent years is arguably that it takes responsible leadership and
responsible leaders to build and sustain a business that is of benet to multiple stakeholders and not just to a few risk-seeking managers. The scandals
have triggered an ongoing and broad discussion on the role of business in
society: on its legitimacy, obligations and responsibilities. As a result, businesses and their leaders are increasingly held accountable for what they do
and fail to do by multiple stakeholders and society at large. Moreover,
given the increase of power and inuence of large multinational corporations (MNCs), stakeholders expect that business leaders take a more active
role and acknowledge their co-responsibility in solving the worlds most
pressing problems such as protecting and promoting human rights, global
warming, contributing to poverty alleviation and the ght against diseases
such as malaria and HIV/AIDS. There is widespread agreement that MNCs
and their leaders have both power and potential for contributing to the betterment of the world.
Consequently, recent developments and initiatives such as the multistakeholder forum UN Global Compact, the Global Business Coalition on
HIV/AIDS, the Business Leaders Initiative on Human Rights (BLIHR),
the World Business Council for Sustainable Development (WBCSD)
Tomorrows Leaders Group, or the European Foundation of Management
Developments (EFMD) Call for Responsible Global Leadership are clear
indicators that more and more organizations are actively seeking ways to
promote responsible leadership in business and that MNCs and their leaders
are beginning to answer the call for more accountability and are willing to
accept their responsibilities as businesses in societies around the globe.
430

Responsible leadership in a globalized world

431

However, we argue in what follows that being responsible responding to

the call of stakeholders (and the market) is a necessary but not a sucient
condition for responsible leadership. This endeavour ultimately requires
responsible global leaders who think and act as cosmopolitan citizens that
is, leaders with responsible mindsets who are aware of the pressing problems in the world, care for the needs of others and in particular for the
distant needy, aspire to make this world a better place and act in words and
deeds as global and responsible citizens. We contend that responsible leadership in a globalized world requires business leaders who have a cosmopolitan mindset, live and enact cosmopolitan ethics and full their
cosmopolitan responsibilities in a densely connected and increasingly
complex global stakeholder society.
Yet, with few exceptions (Ciulla 1998; Doh and Stumpf 2005; Maak and
Pless 2006a, 2006b; Maak 2007; Pless 2007) we still have little knowledge
about responsible leadership in general, let alone do we know what makes
a responsible global leader a cosmopolitan citizen. The aim of this chapter
is thus to develop an understanding of the role of responsible leaders as
cosmopolitan citizens in a globalized business environment. Our contribution is organized into ve sections. Following these introductory remarks
we highlight some of the leadership challenges in a connected world, then
give a denition of responsible leadership and introduce the roles model of
responsible leadership. In the next two sections we sketch out core elements
of what might best be described as a rst attempt to dene principles of
cosmopolitan business ethics; starting with a tour dhorizon in cosmopolitanism and then dening the normative foundation of a citizenship
approach to responsible global leadership. We seek to identify some competence areas that are required for leading responsibly in a connected world
and conclude with some examples of a cosmopolitan approach to responsible leadership.
Responsible leadership challenges, denition and roles model
Leadership challenges in a connected world
The past decade has seen a seminal shift in the business environment:
global interdependence and interconnectedness are a reality. Leading a
business in such an environment means navigating in a world of complexity, diversity and uncertainty, requiring from leaders an appropriate crosscultural perspective (Bartlett and Ghoshal 1998; Black et al. 1999) and the
ability to deal with a high level of complexity (Hooijberg et al. 1997;
Dalton 1998). Moreover, since values are everywhere (Diermeier 2006), it
also requires a values radar, that is, the ability to scan moral, social, ecological and cultural developments, and to assess and weigh the impact of

432

Handbook of research on global corporate citizenship

organizational behaviour on all relevant stakeholders (Pless and Maak

2005).
There is widespread agreement that the stakeholder framework has
proved useful in the analysis of the strategic and normative challenges
organizations face, and that good stakeholder relationships are key to organizational viability and business success (Freeman 1984, 1994; Donaldson
and Preston 1995; Wheeler and Sillanp 1997; Post et al. 2002). Still, there
are both theoretical and practical challenges with respect to stakeholder
salience (Mitchell et al. 1997; Jones et al. 2007), and to evaluating and balancing the often conicting claims of multiple stakeholders (such as, for
example, employees, clients, shareholders, suppliers and non-governmental
organizations: NGOs). It is a key task of responsible leaders to enable inclusive stakeholder engagement and dialogue to help balance these diverse
claims, ensuring ethically sound decision making. To achieve this purpose,
organizations and their leaders face the challenge of weaving a web of sustainable stakeholder relationships (Maak and Pless 2006b) to create trust
and ultimately stakeholder social capital (Maak 2007).
Yet, in an interconnected and multicultural global stakeholder society,
moral dilemmas are almost inevitable. How can one adhere to fundamental moral principles while still respecting cultural dierences and taking
into consideration dierent developmental standards (DeGeorge 1993;
Donaldson 1996)? What needs to be done to secure uncompromising
integrity (Moorthy et al. 1998) on a global level, while leaving leeway for
discretion in matters of particular corporate values and culture-specic
decision making? What is required to secure ethical sourcing? Leadership
failure in any of these exemplary areas may create signicant reputational
damage, leading to consumer boycotts or, worse, to the loss of the licence
to operate. Communication technologies and an activist global civil society
have led to a historically unique level of transparency in matters of (global)
business ethics. Todays corporations, although complex and diversied,
are made of glass they are transparent, see-through organizations. Thus,
when meeting multiple moral challenges, leaders have to make sure that
both individual and organizational actions are ethically sound.
In general, diversity and dierence are hallmarks of business done across
borders. This places new demands on leadership both inside and outside
the organization: leading diverse people across distance, businesses, countries and cultures; selecting, developing and retaining competent people;
leveraging the potential inherent in a diverse workforce; creating a multicultural (Cox 2001) and inclusive (Gilbert and Ivancevich 2000; Pless and
Maak 2004) environment, in which people nd meaning, feel valued and
respected and can contribute to their highest potential. Among the outside
challenges are the above-mentioned multiplexity of stakeholder claims,

Responsible leadership in a globalized world

433

cultural dierences and the need to reconcile cross-cultural dilemmas,

knowing when dierent is dierent and when dierent is simply wrong
(Donaldson 1996).
Moreover, balancing dierent stakeholder claims, including those of the
natural environment, future generations and less privileged groups at the
bottom of the pyramid (Prahalad 2005) creates social, ecological and
humanitarian challenges. Against this backdrop, leaders are confronted
with the challenge of business sustainability in a global risk society (Beck
2006) in which according to UN estimates more than half of the population lives on less than two dollars a day. While many corporations have
adopted a triple-bottom-line approach (Elkington 1998) and have started
to integrate social and environmental considerations into their values creation, few have yet taken on humanitarian challenges poverty, hunger, diseases and injustice which still prevent large parts of the human
community from participating in the global economy, let alone beneting
from it. The actual challenge at hand is twofold on the one hand to ensure
active global corporate citizenship and live up to the responsibility that
comes with the increased power that especially MNCs nowdays have; on
the other hand to actively engage in novel ways of doing business in less
privileged regions of the world by building and supporting human capabilities (Nussbaum and Sen 1993) and by assisting in eradicating world
poverty.
Yet, can we, or should we, really hold business leaders responsible for
solving the worlds most pressing problems? It should be noted that we are
not arguing here that business leaders are responsible for solving any miseries in the world; we do not contend that they should turn idealist and
focus their attention solely on how to make this world a better place. After
all, they still have a business to run and in addition to the above-mentioned
challenges leaders are confronted with the task of ensuring the economic
viability of their organization. Yet, while this is certainly true, addressing
some of the above-mentioned problems has become a business reality as
multiple stakeholders expect from businesses in general, and MNCs in particular, that they contribute to solving these problems. Thus, given rising
stakeholder expectations and shifting demands as to what constitutes business legitimacy, we argue more modestly that business leaders are coresponsible, as key actors and as cosmopolitan citizens, in addressing the
above-mentioned challenges.
Still, there remains a fundamental tension between, say, the more traditional economic rationality of running and sustaining a capitalist business
and the increasingly complex non-economic challenges as sketched out
above. Yet, this tension is inherent to todays world of markets, not external to it. Companies and their leaders operate in an environment of

434

Handbook of research on global corporate citizenship

contested values (Diermeier 2006) in which how they address the social,
moral and environmental aspects of their business decides on both their
success and legitimacy. In the end, then, balancing economic demands on
the one hand and social, moral and environmental demands on the other,
may turn out to be the ultimate leadership challenge, that is, reconciling the
world of prot and the world of purpose.
Responsible leadership
In the light of these leadership challenges we dene responsible leadership
as a values-based and principle-driven relationship between leaders and
stakeholders who are connected through a shared sense of meaning and
purpose through which they raise one another to higher levels of motivation and commitment for achieving sustainable values creation and responsible change (Maak and Pless 2006b; Pless 2007).
What do we mean by this denition? What are its key elements? First, as
we have argued elsewhere (Maak and Pless 2006a), following Burns (1978)
and Ciulla (1998), it is important to understand that leadership is a social
and normative phenomenon that is based on values and driven by ethical
principles. Yet, to acknowledge that leadership is a normative phenomenon
in which the values of both leaders and followers count is a necessary condition, but not a sucient one. To qualify as responsible, leadership needs
to be based on the right values; values that enable both leader and followers to nd a common meaning and purpose, such as contributing to a
sustainable future; values that leaders live and incorporate in authentic
ways (George 2003). In fact, as John Gardner notes (1990, p. 77): We must
hope that our leaders will help us keep alive values that are not so easy to
embed in laws our feeling about individual responsibility, about caring for
others, about honor and integrity, about tolerance and mutual respect, and
about fullment within a framework of values.
Second, leadership occurs in interaction between leaders and followers.
Yet, as obvious as this may sound, in a stakeholder society followers are not
necessarily subordinates but also other internal or external constituencies
(Freeman et al. 2006; Maak and Pless 2006b, p. 106), who have a stake in
the leadership project. Broadening the view from a leadersubordinate relationship to a leaderstakeholder relationship challenges some of the basic
assumptions in traditional leadership theory which to date understands the
leaderfollower relationship as an unequal relationship with the leader in
charge (Bennis and Nanus 1985) and followers being dedicated to doing
the leaders wishes (Rost 1991, p. 70). This understanding is based on the
assumption that leadership authority comes with status and position power
inherent to dyadic, hierarchical relationships. Yet, it is unable to explain
leadership success in vertical network structures where leaders mobilize

Responsible leadership in a globalized world

435

stakeholders who are ultimately of equal status and do not directly

depend on them to follow them in the pursuit of a common purpose, creating an organization of multistakeholder benet that contributes to a sustainable future. Thus, in the context of stakeholder networks a business
leader needs to be integrated in, not detached from, those he/she engages
with. The leader ought to be seen as a weaver and cultivator of relationships with all stakeholders, as a facilitator of relational processes whose
results depend on the constructions and coordinated actions of both
leaders and stakeholders (Maak and Pless 2006b, p. 104). Leading a business in a stakeholder society means leading in a at world in which the
leader, too, may be a follower at times following the lead and advice of
external stakeholders in achieving the common purpose of contributing to
an ethically sound and sustainable business.
Third, since the relationship is not driven by short-term, quantiable
goals but by a commonly shared and ethically sound purpose (Rost 1991)
it satises a fundamental human need that mobilizes people towards higher
commitment (Kets de Vries and Florent-Treacy 1999). People are neither
forced nor contracted (by punishment or rewards) to contribute to the leadership project, but raise one another on a level playing eld (irrespective
of formal positions) in dynamic ways to higher levels of motivation and
morality (Burns 1978, p. 20).
Fourth, as Pless (2007) has argued, the outcomes of the leadership
process should not only be eective and ethical in general terms (Ciulla
2006), but given the challenges also contribute to sustainable value creation. The notion of sustainable values creation comprises the production
of economic value (products, services, prots, reputation and so on) and
equally important the creation of social, political and ecological values. In
other words, given the problems and challenges that we as humans face,
business organizations and their leaders have to make sure that they contribute to a sustainable future and do not hinder it from emerging. Thus,
the idea of stewardship as protecting, preserving and nourishing what
one is entrusted with (Block 1993; Davis et al. 1997), is key to responsible
leadership.
Lastly, inherent in this denition and connected to the idea of a sustainable future is also a normative aspiration for achieving responsible change
for the betterment of this world in general and the needy in particular.
Given the much discussed power shift from nation-states to the economic
sector, especially to MNCs (see, for example, Scherer et al. 2006), companies and their leaders arguably have not only a co-responsibility for solving
some of the worlds most pressing problems (for example, global warming,
poverty alleviation), but also the potential to contribute to problem solutions and to foster sustainable development on a global scale.

436

Handbook of research on global corporate citizenship

Roles model of responsible leadership: the leader as citizen

In order to be credible and authentic a leader needs to live certain desirable
values, needs to walk the talk and thus be a role model in pursuing a commonly shared vision. Yet, to mobilize dierent stakeholders (with dierent
backgrounds, values and sometimes conicting interests) to collaborate
and to work together for such a vision, leaders need to exercise certain roles.
In other words, given the diversity and complexity of leading responsibly
in a global stakeholder society we also need a roles model of responsible
leadership which we have introduced in more detail elsewhere (Maak and
Pless 2006a, 2006b, emphasis added).
The roles model of responsible leadership is composed of nine roles
which form a gestalt and describe dierent characteristics of a responsible
leader. The roles are part of an integrated whole. And while at times certain
roles might be more important than others, all of them are key in exercising responsible leadership in a (global) stakeholder society: No role can
be pulled out of framework and the job be left intact (Mintzberg
1975, p. 59). There are values-based roles that are key for the self-image
and -understanding of a responsible leader: being a steward, citizen,
servant and visionary. To foster collaboration and to mobilize and align
multiple stakeholders, leaders need to be:
1.

2.

3.

4.

a steward and as such a custodian of values and resources, preserving

and enriching what they are entrusted with and caring about future
generations both within and beyond the organization;
a good citizen and thus an active and caring member of communities
(including the global community as we shall discuss in more detail
below). Being a businessperson and a private citizen the leader knows
that thriving communities need ourishing businesses and that businesses can only ourish in healthy communities;
a servant to others (Greenleaf 1977 [2002]), knowing that leadership is
not about the grandiosity of a leader but about those the leader serves
by caring for them, strengthening their abilities and supporting their
growth; as well as
a visionary by providing inspiration and perspective with respect to a
desirable future. In a stakeholder society a responsible vision would
need to be ethically sound, envisaging a truly sustainable business balancing economic success and the well-being of nature and societies.

Connected to these roles are the more operational ones of being the
architect of inclusive systems, processes and a moral infrastructure; change
agent and transforming leader; coach by supporting followers; and storyteller, that is the creator and communicator of moral experience and

Responsible leadership in a globalized world

437

enabler of shared systems of meaning. In addition, leaders ought to consider themselves weavers of relationships; building and sustaining trustful
relationships to all stakeholders.
As indicated in the beginning, it is the purpose of this chapter to discuss
in more detail the particularly important role of a leader as citizen in a
globalized world. We ask what it means to be a leader and citizen in a global
business environment and what it takes to act as one. Corporate citizenship
arguably depends on how corporate leaders think, act and behave in terms
of citizenship. Put dierently, corporate citizenship depends signicantly
on the self-image and -understanding of leaders as citizens. If leaders see
and think of themselves as concerned citizens it is more than likely that they
will make sure that their organization acts as a corporate one. If, however,
the leaders in charge do not care about communities at home and abroad,
if they do not think about social, environmental and political challenges
and the state of the world, it will impact on the existence, sense and scope
of corporate citizenship.
Let us therefore assume that leaders are concerned about civic health
(Schudson 1998) as they are about business matters. This means that they
are committed to a greater common good and will engage in activities to
further the well-being of the communities in which they operate both at
home and abroad. Citizens know that they need to balance various
responsibilities, especially with respect to integrating business and civil
duties. Citizens value political, economical and intellectual freedom as
well as their moral free space (Donaldson and Dunfee 1999). These freedoms, however, are conditional, secured by, and cultivated in, a healthy
community in which civic virtues like mutual respect and recognition, tolerance, fairness and inclusion are valued (Dagger 1997). Such republican
civility (Ulrich 1997; Barber 1999; Maak 1999) commonality, deliberation, inclusiveness, listening, learning and development (Barber 1999,
pp. 423) is not only morally desirable; it is also key for a leader if he/she
is to be and stay connected to multiple stakeholders. The responsible
leader knows that business legitimacy depends on an inclusive stakeholder approach and that overcoming the discursive deciency (Scherer
and Palazzo 2007) in matters of corporate responsibility is important.
Ultimately, the leader, too, is a member of civil society and thus looks at
stakeholders not as aliens but as equally integrated members of the
(political) community in the pursuit of both individual freedom and
ourishing and the common good. Thus, in contrast to dominating liberal
notions of citizenship, our conceptualization draws on civic republicanism as a more balanced and thicker notion of citizenship (Walzer 1994);
guiding responsible leaders both at home and at home in the world as
cosmopolitan citizens.

438

Handbook of research on global corporate citizenship

Pless (2007) has recently shown how the late Dame Anita Roddick,
founder and former leader of the Body Shop, as a concerned and committed citizen, created a culture of citizenship, communicated that citizenship
is an integral part of doing principled business at the Body Shop (and elsewhere) and used her inuence as a leader to mobilize dierent stakeholders
to take coordinated action for the common good (for example, gaining
support from NGOs to become alliance partners, mobilizing sta to run
the campaigns and inspire customers to support them). Roddick, as a
citizen and leader, helped to set standards in the business world (fair trade
business practice) and contributed to awareness raising on social, environmental and human rights issues in business, academia and society. In fact,
her notion of being an active and activist citizen can be understood as
transforming leadership (Burns 1978), with the leader acting as a responsible change agent. Roddick implicitly embodies many of the hallmarks of
a cosmopolitan citizen. Yet, to better understand what these are, let us
turn more explicitly to cosmopolitanism as a source of responsible global
leadership.
Cosmopolitanism
What does it mean to think and act as a cosmopolitan citizen? What do we
mean by cosmopolitanism? Are we not all cosmopolitans, citizens of the
world? Why should we engage in cosmopolitanism? As Martha Nussbaum
argues in the quote that started o this chapter:
If our world is to be a decent world in the future, we must acknowledge right
now that we are citizens of one interdependent world, held together by mutual
fellowship as well as the pursuit of mutual advantage, by compassion as well as
self-interest, by a love of human dignity in all people, even when there is nothing
we have to gain from cooperating with them. (2005, pp. 21718)

Cosmopolitanism is about creating a decent world; a fair, just and thus

principle-driven global community that enables human ourishing and
seeks to build human capabilities. In this endeavour we as human beings
depend on each other, whether rich or poor. Yet, it is the distant needy in
least developed countries who deserve our special attention. It is one world,
after all, and its sustainability requires care and inclusiveness for both
people and planet. The right now in Nussbaums quote signals a certain
sense of urgency for the cosmopolitan project. Indeed, if we look at the
widening gap between rich and poor and the social and environmental costs
of the rapid speed of development in emerging economies such as India
and China, a truly sustainable future seems more distant than ever.
Lately, the eects of global warming and global terrorism have added a
heightened sense of risk and insecurity. Not surprisingly, the German

Responsible leadership in a globalized world

439

sociologist Ulrich Beck (2006) uses the term risk-cosmopolitanism in presenting his argument for a global risk society. Ironically, then, and to a
certain extent, 21st-century cosmopolitanism is triggered by a collective
risk experience. In other words, the fragility of the human condition on this
planet has led to a revitalized sense for the importance of a more active cosmopolitanization socially, environmentally and politically.
At the same time it can be argued that the world is getting more cosmopolitan every day. Economic globalization, the internet, a rapid increase
in air travel, an emerging class of cosmopolitan managers, and the active
experience of other cultures and consumption of cultural dierences (in
music, food, style and so on) have led to a lifeworld which appears to be
increasingly cosmopolitan. Yet, as Beck (ibid., p. 19) argues, these are sideeects of global trade, travel and consumption, most of which happens
rather unconsciously; it is passive or banal cosmopolitanism. Given this
argument, real cosmopolitanism apparently needs to reect much more
than aesthetic and cross-cultural experience: namely ambition, commitment, action and vision to be at home in the world and make this world a
better place. Put dierently, globally savvy and mobile people are not necessarily cosmopolitans (Hannerz 1990).
What makes cosmopolitanism a key word of our time (Benhabib 2006,
p. 17) is obviously something dierent. Aside from a somewhat collective,
growing sense of risk and urgency, nurtured by an active global civil
society (including supranational bodies and NGOs), we nd a revitalized
sense of cosmopolitanism that in fact has a long history of thought and
action. There is widespread agreement that it goes back to the Stoics in
ancient Greece; Diogenes is supposed to have said, when asked which city
he belonged to: I am a citizen of the world. It was a bold statement at
that time and reected a rejection of the communitarian connes of the
Greek city republics. The brilliant Immanuel Kant, who in his lifetime
apparently never travelled farther than 30 miles from his home town of
Knigsberg, made cosmopolitanism part of the Enlightenment and is
arguably the father of modern-day, rights-based cosmopolitanism. In
his Perpetual peace Kant (1795) imagined a cosmopolitan right
(Weltbrgerrecht) that ought to govern the global relations of citizens
worldwide; a right that belongs to all human beings as potential participants in a world republic. Kants pioneering work may be seen as a key
reference for mid-20th-century cosmopolitanism, as reected by the UN
Declaration of Human Rights, but also in the work of Hannah Arendt,
in particular her discussion of the atrocities of Nazi Germany in the
context of the Eichmann trial (1963). Following Kant, Arendt likewise
argues that crimes against humanity are not violations of moral norms
alone, but violations of the rights of humanity in our person (Benhabib

440

Handbook of research on global corporate citizenship

2006, p. 22), and thus need a special frame and treatment on a global,
human scale.
Last but not least, since the mid-1990s, that is with globalization becoming a ubiquitous phenomenon, we witness an intensied discussion on
promises and perspectives of cosmopolitanism in a globalized world, for
example, with respect to national attachment and patriotism (Nussbaum
1996), multicultural citizenship (Kymlicka 1995), global governance (Held
1995), and philosophical world-views (Bohman and Lutz-Bachmann
1997), a discussion that lately has intensied (Vertovec and Cohen 2002;
Brock and Brighouse 2005; Appiah 2006; Beck 2006; Benhabib 2006), not
least in the light of world poverty and the Rawlsian (Rawls 1999) inspired
duty of assistance (Pogge 2002; Chatterjee 2004).
Against this historical backdrop, cosmopolitanism may be divided into
four connected streams: political cosmopolitanism, ethical cosmopolitanism, a cosmopolitan world-view and cosmopolitan practice. Political
cosmopolitanism is concerned with questions of global governance, political agency and citizenship in a globalized, at world (Friedman 2005).
Ethical cosmopolitanism captures the discussion on legal and moral principles in contemporary cosmopolitanism: cosmopolitan justice and thus
human rights issues; cosmopolitan duties and principles (respect, recognition of dierence, assistance and so on).
When Diogenes said I am a citizen of the world, his statement symbolized a specic cosmopolitan attitude and view of the world. This specic
mindset is equally important since cosmopolitanism depends on how we
think about cosmopolitanism: if we consider ourselves as cosmopolitans,
if we aspire to be and act as cosmopolitans and if we reect about the state
of the world and our role in contributing to its betterment then we shall
likely act accordingly, reconciling our duties and obligations both private
and public.
However, it is important not only to think as a cosmopolitan citizen, but
also to act as one. What distinguishes 21st-century cosmopolitanism from
earlier forms in history, it might be argued, is the emerging cosmopolitan
practice in an active global civil society, supported by web technologies and
rapid economic convergence, and its potential to improve the state of our
globalized world.
Concluding our tour dhorizon we contend that all four variations of cosmopolitanism are needed. In fact, all of them are part of what may be
termed the 21st-century cosmopolitan project. In this sense, cosmopolitanism is a project of mediations and integration, not of reductions or of
totalizations (Benhabib 2006, p. 20). It is not about the ultimate global
ethic, or the ultimate set of universalizable norms and values; nor is it
equivalent to nding a mere modus vivendi among cultures. Rather, in the

Responsible leadership in a globalized world

441

Kantian tradition, it describes the emergence of norms, values and ideas

that ought to govern relations among individuals and non-individual
actors in a global civil society which each and every human being as
(potential) participant in a world republic, to use Kants term.
This context has changed signicantly as we have seen above. Therefore,
21st-century cosmopolitanism seeks to establish new forms of governance,
transparency and accountability in both business and politics; it pursues
more actively than ever the moral foundations of global citizenry a regime
of mutual respect and recognition, human rights and entitlements; and it
envisages a fair, just and inclusive global economic order, benecial to the
life of the many.
What distinguishes cosmopolitanism from having a mere global mindset
is ultimately the level of activity in contributing to this cosmopolitan
project, the moral aspiration in thinking and feeling like a citizen of the
world, the acknowledgement of the political co-responsibility as an individual actor, organizational representative, citizen and member of a global
civil society, and ultimately the level of commitment to act as a cosmopolitan citizen in all relevant walks of life.
Because leaders have the power, the means and the potential to become
leading cosmopolitan citizens, we argue, they have the responsibility to do
so. Yet, what they need is an appropriate cosmopolitan mindset and a rm
grounding in cosmopolitan ethics. In other words, cosmopolitan practice is
determined by how we think about the cosmopolitan project and by our
moral point of view (Baier 1958) and thus the set of cosmopolitan principles which guide our actions.
Towards responsible global leadership the leader as cosmopolitan citizen
Cosmopolitan mindset
We have briey touched on the aesthetic, culinary and cultural experiences
which happen as side-eects of global trade, travel and consumption on
banal cosmopolitanism, to use Becks term (2006). If it is to be a meaningful concept from an ethical perspective, cosmopolitanism cannot be
restricted to looking for food for thought while many others are just
looking for food, to paraphrase Appiah (2006, p. xviii). It requires more,
namely a specic cosmopolitan attitude and mindset, that is, in our case, a
specic way in which leaders think about their place and role in the cosmopolitan moral universe. It is the legal and moral challenges in establishing an inclusive global community, one that truly reects our common
humanity, which makes the cosmopolitan dierence, not fusion food,
airport lounges or design retreats on remote islands. The quality and
scope of cosmopolitan business ethics therefore ultimately depends on how

442

Handbook of research on global corporate citizenship

self-aware and reective leaders are in determining their place in the (business) world and thus to a considerable extent on the leaders cognition.
Accordingly, a cosmopolitan mindset would certainly need to include the
following (these are exemplary key features and are not intended to provide
an exhaustive list):
1.
2.

3.

4.

5.

6.

inquisitiveness as to what we share collectively, as human beings, and

what we owe each other, as citizens of the world;
knowledge about the state of the world, its most pressing problems,
actors and partnerships in global civil society, and thus cosmopolitan
savvy;
as indicated, reection skills to determine ones place in the (business)
world and ones role as well as that of ones organization in living
global (corporate) citizenship;
a sense of belonging to the community of communities; that is the community of ideals, aspirations and human ourishing. This attachment
is an important trigger for the moral motivation to care for others, to
assist others (especially those in need) and to further the development
of human capabilities at home and abroad. Cosmopolitans are no
vagabonding individuals. In addition to being members of a particular
community, for example, their home country, they are active members
of the community of communities. This republican dualism prevents
them from losing home and ground and is reected by:
the acknowledgement that each citizen, as a free and equal member of
the global moral commonwealth, has a political co-responsibility
regarding the state of the world and the well-being of communities in
which one lives and operates;
the willingness to participate in deliberation processes, not only regarding the worlds most pressing problems, but also with respect to what
is common to all persons as citizens of reasons and the world (D. Held
2005, p. 10) and certainly regarding ones own action, or non-action,
as leader and organization. In other words, the discursive scope
(Benhabib 2004) of cosmopolitanism, which implies viewing moral
discourse as potentially including all of humanity, requires each citizen
(leader or not, individual or corporate) to justify his/her actions with
reasons to any other citizen, human being and moral agent (Benhabib
2006, p. 18). Cosmopolitanism is about integration and wholeness; the
cosmopolitan thinks in ones: one world, one humanity, one moral universe. Yet, these ones are inclusive in the sense that the underlying
guiding principles still allow for moral and cultural pluralism, if only
on the grounds of certain indispensable ethical norms of human coexistence; and nally

Responsible leadership in a globalized world

7.

443

imagination, moral and otherwise, as to how the cosmopolitan ideal of

a just, peaceful and ourishing world community could be achieved.
The idea of community, like other human ideals, exists to a certain
extent in our imagination; we inhabit imagined communities
(Anderson 1991). In other words, the state of the world depends in part
on how we imagine it to be. If we imagine a ourishing global community as desirable, our attitude towards this communitys most pressing problems will be receptive, responsive and responsible. However, if
we think in terms of separation my world and their world attitude
and commitment to these problems is likely to be dierent. Thus, our
perception of the world as a global community and what it implies in
cosmopolitan terms decides on if, and how, this community will
ourish particularly in a at world where it becomes increasingly
implausible to distinguish between me and them, here and there, as
there is no longer an out there (Friedman 2005).

It is obvious that these features of a cosmopolitan mindset are rooted in

specic norms and values about how we ought to live together on this
planet, what we owe each other as human beings and what people in privileged positions should contribute to making our moral universe as inclusive as possible; given that in this moral universe every person, whether in
Munich or Mumbai, Tokyo or Timbuktu, ought to be considered as equally
worthy of respect and consideration. In other words, this mindset is rooted
in and motivated by a set of cosmopolitan norms and principles, that is, by
cosmopolitan ethics.
Cosmopolitan ethics
It is not our goal, nor is this the place, to posit cosmopolitan ethics as a new
global ethic, let alone as the ultimate set of principles in the age of connectedness and globalization. Rather, it is our aim to present a plausible
case for basic principles of a specic cosmopolitan business ethic guiding
responsible global leaders in their attempt to contribute to the betterment
of the world and to act as agents of world benet rather than out of mere
self- or shareholder interest. As such it is a cosmopolitan moral point of
view, a point of reection and introspection, of deliberation and moral
ambition, from which we must depart in order to act and lead responsibly
in a connected world. Our goal, then, is modest: we would like to emphasize that such a set of ethical principles is needed and to point out what
might be important in that respect.
Ontologically it should be noted that this moral point of view is just that,
a specic moral point of view, nurtured by the moral heritage of the
Enlightenment and modern moral theory alike. Thus, we do not consider

444

Handbook of research on global corporate citizenship

the cosmopolitan perspective to be a replacement of moral traditions such

as ethics of justice or ethics of care. Rather, the cosmopolitan moral point
of view is rooted in these traditions but generates new, mediated and integrated moral perspectives for a globalized world. Against this backdrop we
consider three core principles and complementary points of reference as
crucial: recognition, care and assistance.
Ethics of recognition To focus on mutual recognition as a cosmopolitan
moral point of view implies putting human relationships and needs at the
centre of our moral attention, for example, the relationship between leader
and follower or stakeholders in a globalized world. Mutual recognition
means realizing that we as human beings are equally vulnerable and mutually dependent on love, respect and self-esteem, that is on emotional, political and social recognition (Honneth 1996; Maak 1999). The need for
recognition along these three core dimensions is a universal part of the
human condition.
Moreover, to recognize each other implies the process of recognition:
knowing that as human beings we all share the basic needs for recognition,
the I recognizes the mutual interdependence in giving and receiving love
and emotional appreciation; in respecting the others human, civil and
political rights; and in including the other in social groups or communities,
showing respect and appreciation. If the I, or the other, does not receive any
of these basic forms of recognition, or worse, if her/his needs are violated,
for example, through harassment, rights violations or exclusion, then both
have good reason to feel morally disrespected and hurt. Thus, the need(s)
for recognition are also a reection of historically processed moral violations, of moral, social and political progress, and embedded in active
mutual commitment to improve the human condition. Obviously then,
responsible leadership is not about the ego or grandiosity of a leader, but
about building and sustaining relationships between leader and stakeholders as followers, based on mutual recognition, to achieve desirable goals.
Ethics of care As indicated above, cosmopolitan ethics implies active
agency and caring for the basic needs of others, for example, followers and
stakeholders, and for those in need in, but certainly not limited to, the countries in which a company operates. The care perspective nds its most elaborate discussion and expression in feminist (moral) theory and culture
(Gilligan 1982; V. Held 2005; Noddings 2003). However, it is limited neither
to feminine attributes, nor to aspects of mothering (though the moral relationship between mother and child has been an important aspect of
research). Instead, it draws our attention to the fundamental question
about what and whom we really care. Is our caring attitude restricted to

Responsible leadership in a globalized world

445

those close to us, or do we care about others, for example, the distant needy,
in equal ways?
Empathy towards others, especially those in need, based on mutually
shared feelings of human ourishing and vulnerability, is a fundamental
moral hallmark of the human condition, laid out eloquently for example,
in Adam Smiths Theory of Moral Sentiments (1759). It implies in the cosmopolitan context that we recognize others, contemplate the lives of others
(Sen 1999, p. 283) and take seriously the value not just of human life [in
general] but of particular human lives, which means taking an interest in
the practices and beliefs that lend them signicance (Appiah 2006, p. xv)
and in the conditions of their freedoms and livelihood. The cosmopolitan
citizen cares not only about his/her own kin, but also about strangers.
Leaders in particular have both potential and means (especially in large
corporations) to contribute to social betterment, to assist others in need, to
further human capabilities and foster human ourishing. Accordingly, such
commitment can reasonably be expected. The responsible leader as a cosmopolitan citizen cares about the needs of others, followers and nonfollowers alike. In fact, as a citizen of the world the leader has a moral
obligation to care for others, especially the less powerful and privileged.
This is not the place to discuss the limits of such a caring attitude. Each
and every leader has limited resources at his/her disposal, personally and
organizationally. How these resources should be allocated is an important
question that ought to be addressed in reective processes both individually (as part of a leaders discretion) and interactively (as part of stakeholder will formation). We contend at this point merely that a caring
attitude is key to cosmopolitan ethics, but do not consider how this attitude
may be transferred into practice.
Ethics of assistance In The Law of Peoples (1999) John Rawls develops
principles of global justice. His suggestions have received considerable
attention among philosophers and legal thinkers (see, for example, Pogge
2002; Chatterjee 2004), most notably his eighth principle of justice:
Peoples have a duty to assist other peoples living under unfavourable conditions that prevent their just or decent political and social regime (1999,
p. 37).
Rawls considers his suggestions to assist burdened societies a part of a
liberal ideal theory, which explains that his formulation is thin or weak
in the sense that it aims targets as Rawls puts it to create conditions
under which a people or society is able to help itself. In Rawlss view this
requires rst and foremost a minimal amount of justice and a decent political regime. However, the aim is to realize and preserve just (or decent)
institutions, and not simply to increase, much less to maximize indenitely,

446

Handbook of research on global corporate citizenship

the average level of wealth, or the wealth of any society (ibid., p. 107).
Thus, while Rawls recognizes a duty to assist those in need, he insists on
setting clear targets to create basic decent conditions that may (or may not)
enable them increase their level of wealth.
Pogge (2002), Nussbaum (2005) and others have criticized Rawls for the
thinness of the principle, arguing for a thicker conception (Walzer 1994)
of the duty to assist. In fact, Pogge contends that we, the more advantaged
citizens of the auent countries, are actively responsible for most of the
life-threatening poverty in the world (Pogge 2005, p. 92) and thus have the
moral duty to help and assist people in less favourable conditions. He suggests a global resources dividend, which would amount to roughly $4 per
person and year, to redistribute resources in a more decent way. Nussbaum
(2005, pp. 214 .) is less concrete but equally convinced that we have the
responsibility to help poorer nations. In fact, she argues that prosperous
nations have a responsibility to give a substantial portion of their GDP to
poorer nations, that the main structures of the global economic system
must be designed to be fair to the poor and developing countries and that
multinational corporations have responsibilities for promoting human
capabilities in the regions in which they operate.
While we can discuss neither Rawlss principle, nor Pogges or Nussbaums
suggestions in more detail here, we agree with these authors that privileged
cosmopolitan citizens have a moral duty to assist others, especially those in
need. Yet, while Rawlss suggestion is arguably too thin to help leaders in
fullling this duty, it is equally questionable if large-scale, substantial redistribution eorts can help to eliminate poverty and indecent disparities. We
agree with Nussbaum, however, that we need fair structures and a more
active responsibility from corporate citizens (MNCs and others) to assist
poorer regions and nations in building human capabilities. What Nussbaum
stresses is the cosmopolitan principle of active agency in assisting fellow
humans and citizens in securing the basic needs and in acquiring human
capabilities (Nussbaum and Sen 1993) to lead a decent and ultimately
ourishing life.
In this sense we posit that business leaders as (powerful and privileged)
cosmopolitan citizens have the moral duty to assist others in much less
favourable conditions, and the responsibility to ensure that their organizations act in the spirit of this principle as good corporate citizens around the
world.
Before we conclude our discussion of cosmopolitan ethics we need to
address two areas of concern, namely the question whether business leaders
should, or are allowed to act in matters of global justice; and whether our
moral point of view is indeed cosmopolitan enough, that is whether it is
cross- and interculturally sound.

Responsible leadership in a globalized world

447

Business leaders as agents of social justice? While there is widespread

agreement among stakeholders that corporations and their leaders ought
to act more responsibly and engage in more active ways in tackling pressing problems, there is much less consensus on corporations acting as active
proponents of human rights and agents of social justice. This scepticism is
caused by the common perception that states are the primary agents of
justice (ONeill 2004) and thus are ontologically privileged (D. Held 2005,
p. 10) in the delivery of equal liberty, social and humanitarian justice. Yet,
Held argues that while states are hugely important vehicles to aid the
delivery of cosmopolitan justice, contemporary cosmopolitanism must go
further, and build an ethically sound and politically robust conception of
the proper basis of political community (ibid.).
ONeill (2004, pp. 2467) gives at least three reasons why states should
not be considered the primary or sole agents of justice: one, many states in
developing regions are simply unjust; two, there are weak states and failing
states that fail to secure the rights of their inhabitants; and three, globalization has led to more porous borders and weaker power of nation-states,
allowing powerful agents and agencies of other sorts to become more
active within their borders. ONeill posits therefore that in some instances
MNCs like weak or unjust states cannot simply see themselves as secondary
agents of justice; on the contrary: they need to shoulder active cosmopolitan duties in carrying some of the obligations of international justice, for
example, by actively promoting human rights in and beyond their own business; by instituting social and economic policies that bear on human rights,
on environmental standards or on labour practices, and even on wider areas
of life (ibid., p. 253); by ensuring transparency and accountability, ghting
nepotism and corruption; by implementing globally respectable social and
environmental standards. Although corporations and their leaders at the
end of the day can contribute little to basic political justice, there are the
above-mentioned areas, to which they often can and ought to contribute a
lot (p. 256).
Thus, since corporations and their leaders are part of this global political community, and since they are able to exercise active agency and have
the capabilities to act as agents and thus proponents of justice in the countries in which they operate, we argue that they bear as cosmopolitan citizens a co-responsibility in promoting human and social rights. The choice
of responsible leaders must therefore be to support and promote the
areas of justice in which they are able to contribute, and not to wash their
hands, or to take advantage of the situation by acting unjustly. Shell for
example, learnt this lesson the hard way when they argued some ten years
ago that they were in Nigeria just for the purpose of doing business,
that their actions (in a rogue state) were legal and that it would have been

448

Handbook of research on global corporate citizenship

unethical to interfere with the political aairs of a country. The Shell leadership admitted later that they were wrong on all counts and initiated a fundamental organizational learning process towards becoming a responsible
and sustainable corporation (see Wade 2006). Others, such as the sports
apparel maker Reebok with its Human Rights Campaign (see the
companys website at www.reebok.com), have taken the high road more
proactively and thus recognize that being part of the global community
means being part of a common moral universe and that allegiance is owed,
rst and foremost, to this universe of reasoning citizens of equal worth and
dignity, not to shareholders.
Layered cosmopolitanism The perspective sketched out as cosmopolitan
ethics reects at heart very basic, universal human needs the need(s) for
emotional, political and social recognition. Whatever religious, spiritual, or
belief system the other has, I cannot reasonably question his/her basic needs
to be loved, appreciated, to be a full citizen, or to be recognized at work and
in his/her community. That is why the ethics of recognition is both thin
enough to be universally valid and enable the inclusion and recognition of
pluralist perspectives (as long as they do not violate the basic principles),
and thick, that is tangible enough, to guide the moral reality of crosscultural relationships (Walzer 1994). Thus, we nd some true unity in diversity. Yet, it will not be achieved unchallenged: one of the key challenges in
cross-cultural contexts is to determine when dierent is just dierent and
when dierent is wrong (Donaldson 1996, p. 48). In other words, even if
the guiding moral principles are clear, leaders, or followers, may encounter
situations when they need moral imagination (Johnson 1993) to reconcile
moral conicts or dilemmas.
The principles of care and assistance complement the cosmopolitan
moral point of view and emphasize the need for active agency, responsibility and accountability in global matters. What we nd, then, are dierent
layers of principles, both fundamental and practical, that require interpretative activity depending on the context and the moral challenges at hand.
We agree with David Held (2005, p. 18) that it needs such layered cosmopolitanism, a mix of regulative principles (that all citizens could reasonably assent to while respecting plurality and dierence) and
interpretative activity, to bring the cosmopolitan vision to life.
Conclusion: cosmopolitan business leaders as agents of world benet
In this chapter we have argued that given todays global leadership challenges business leaders should see themselves as cosmopolitan citizens.
Most business leaders, in particular those in MNCs, have the means, the
power and the potential to contribute to the betterment of the world to

Responsible leadership in a globalized world

449

act as agents of world benet. Business leaders are key actors and agents
in realizing globalization with a human face and a more decent globalized
world.
In fact, at the time of writing we are witnessing a growing number of
business leaders acting as cosmopolitan citizens. Franck Riboud, CEO of
the worlds largest dairy and food company, Danone, for example, has initiated, in collaboration with the Nobel laureate Muhammad Yunus of
Grameen Bank, the GrameenDanone Food Co., a non-loss, non-prot
venture in Bangladesh, to produce safe and aordable dairy products to be
sold at no prot in one of the most impoverished countries in Asia
(Brinkbumer and Fichtner 2007, p. 51; Danone 2006). Patrick Cescau,
Group Chief Executive of Unilever, is working hard to lead the British
Dutch food giant into new waters to establish responsible and sustainable
business practices in developing countries. Among the ventures is Shakti,
an initiative by Hindustan Lever Ltd that enables Indian women in rural
areas to become micro entrepreneurs, selling specically designed hygiene
and household products in rural villages. Shakti enables not only people in
remote areas to satisfy certain basic needs, but also to build human capabilities in women to become independent micro entrepreneurs (Shakti
2007). There is Celso Grecco, a former Brazilian advertising executive, who
founded a Social Stock Exchange to connect social enterprises and initiatives in more ecient ways to generate larger dividends in order to nance
social and environmental projects (Brinkbumer and Fichtner 2007,
pp. 489); and there are leaders like Bill Gates or Richard Branson, bornagain large-scale philanthropists and cosmopolitan citizens, whose eorts
to ght diseases, poverty and global warming have arguably more impact
than many traditional eorts to aid people in the developing world.
The challenge is, however, to make these laudable eorts sustainable. The
cosmopolitan challenges and problems at hand are too important to be a
fashion fad. This requires as demonstrated an appropriate mindset, a rm
understanding of cosmopolitan ethics, as well as the moral motivation to
bring it to life, to help establish a cosmopolitan business practice in the connected world of ours,
where a host of complex relationships link people across national borders, and
the accident of birth in any given nation now looks in some ways as morally arbitrary as the accidents of race, class, and sex . . . We need to devote ourselves to
working out new theories that will prove more fully adequate to this world.
(Nussbaum 2004, p. 171)

We understand our eort to present key features of a cosmopolitan business ethic as an attempt to contribute to a better understanding of the
responsibilities of business leaders in a connected world and hope that it

450

Handbook of research on global corporate citizenship

proves to be helpful for others researchers who agree with us that the global
business world needs cosmopolitan, rather then mere global business principles, and that business leaders ought to act as agents of world benet
rather than world misery.
As Benhabib (2006, p. 72) notes, such norms and principles are morally
constructive; they create a universe of meaning, values and social relations
that had not existed before, at least not in this way, and may change the normative constituents and evaluative principles of the (business) world. Thus,
they are to a signicant extent unprecedented. Yet, the emerging cosmopolitan business practice is reason enough to believe that the unprecedented, once it has appeared, may become a precedent for the future
(Arendt 1963, p. 273). In the end it is not so much a matter of having exact
rules about how precisely we ought to behave, as of recognizing the relevance of our shared humanity in making the choices we face (Sen 1999,
p. 283) as leaders and cosmopolitan citizens.
References
Anderson, Benedict (1991), Imagined Communities, London: Verso.
Appiah, Kwame A. (2006), Cosmopolitanism: Ethics in a World of Strangers, New York and
London: W.W. Norton.
Arendt, Hannah (1963), Eichmann in Jerusalem: A Report on the Banality of Evil, rev. edn
(1994), New York: Penguin.
Baier, Kurt (1958), The Moral Point of View, Ithaca, NY: Cornell University Press.
Barber, Benjamin R. (1999), The discourse of civility, in Stephen L. Elkin and Karol E.
Soltan (eds), Citizen Competence and Democratic Institutions, University Park, PA: Penn
State University Press, pp. 3947.
Bartlett, Christopher A. and Sumantra Ghoshal (1998), Managing Across Borders, Boston,
MA: Harvard Business School Press.
Beck, Ulrich (2006), The Cosmopolitan Vision, Cambridge, UK and Malden, MA: Polity.
Benhabib, Seyla (2004), The Rights of Others: Aliens, Residents and Citizens, Cambridge:
Cambridge University Press.
Benhabib, Seyla (2006), Another Cosmopolitanism, Oxford and New York: Oxford University
Press.
Bennis, Warren and Bert Nanus (1985), Leaders: The Strategies for Taking Charge, New York:
Harper & Row.
Black, J. Stewart, Alan J. Morrison and Hal B. Gregersen (1999), Global Explorers: The Next
Generation of Leaders, New York and London: Routledge.
Block, Peter (1993), Stewardship, San Francisco, CA: Berrett-Koehler.
Bohman, James and Matthias Lutz-Bachmann (eds) (1997), Perpetual Peace: Essays on Kants
Cosmopolitan Ideal, Boston, MA: MIT Press.
Brinkbumer, K. and U. Fichtner (2007), Die Weltsanierer (The worlds saviour), in Der
Spiegel, 30/2007, 23 July, 4256.
Brock, Gillian and Harry Brighouse (eds) (2005), The Political Philosophy of
Cosmopolitanism, Cambridge: Cambridge University Press.
Burns, James M. (1978), Leadership, New York: Perennial.
Chatterjee, Deen K. (ed.) (2004), The Ethics of Assistance: Morality and the Distant Needy,
Cambridge: Cambridge University Press.
Ciulla, Joanne (ed.) (1998), Ethics, The Heart of Leadership, Westport, CT and London: Praeger.
Ciulla, Joanne (2006), Ethics: the heart of leadership, in Thomas Maak and Nicola M. Pless
(eds), Responsible Leadership, London and New York: Routledge, pp. 1732.

Responsible leadership in a globalized world

451

Cox Jr, Taylor (2001), Creating the Multicultural Organization, San Francisco, CA: JosseyBass.
Dagger, Richard (1997), Civic Virtues: Rights, Citizenship, and Republican Liberalism, Oxford
and New York: Oxford University Press.
Dalton, Maxine A. (1998), Developing leaders for global roles, in Cynthia D. McCauley,
Russ S. Moxley and Ellen Van Velsor (eds), The Center for Creative Leadership Handbook
of Leadership Development, San Francisco, CA: Jossey-Bass, pp. 379402.
Danone (2006), Launching of Grameen Danone Foods social business enterprise, Press
release, 16 March,http://www.danone.com/cmscache/MYSESSION~C18BEC37655BCF
6EC12571330043EC9E/CP_1600306_GB.pdf, accessed 30 July 2007.
Davis, James H., F. David Schoorman and Lex Donaldson (1997), Toward a stewardship
theory of management, Academy of Management Review, 22 (1), 2047.
DeGeorge, Richard T. (1993), Competing with Integrity in International Business, Oxford and
New York: Oxford University Press.
Diermeier, Daniel (2006). Leading in a world of competing values: a strategic perspective on
corporate social responsibility, in Thomas Maak and Nicola M. Pless (eds), Responsible
Leadership, London and New York: Routledge, pp. 15569.
Doh, Jonathan P. and Stephen A. Stumpf (eds) (2005), Handbook on Responsible Leadership
and Governance in Global Business, Cheltenham, UK and Northampton, MA, USA:
Edward Elgar.
Donaldson, Thomas (1996), Values in tension: ethics away from home, Harvard Business
Review, 74 (5), 4856.
Donaldson, Thomas and Thomas Dunfee (1999), Ties that Bind, Boston, MA: Harvard
Business School Press.
Donaldson, Thomas and Lee E. Preston (1995), The stakeholder theory of the corporation:
concepts, evidence, and implications, Academy of Management Review, 20 (1), 6591.
Elkington, John (1998), Cannibals with Forks: The Triple Bottom Line of 21st Century
Business, Gabriola Island, BC and Stony Creek, CT: New Society.
Freeman, R. Edward (1984), Strategic Management: A Stakeholder Approach, Boston, MA:
Pitman.
Freeman, R. Edward (1994), The politics of stakeholder theory: some future directions,
Business Ethics Quarterly, 4 (4), 40922.
Freeman, R. Edward, Kirsten Martin, Bidhan Parmar, Margaret Cording and Patricia
H. Werhane (2006), Leading through values and ethical principles, in Ronald J. Burke
and Cary L. Cooper (eds), Inspiring Leaders, London and New York: Routledge,
pp. 14974.
Friedman, Thomas L. (2005), The World Is Flat, New York: Farrar, Strauss & Giroux.
Gardner, John (1990), On Leadership, New York: Free Press.
George, Bill (2003), Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value,
San Francisco, CA: Jossey-Bass.
Gilbert, Jacqueline A. and John M. Ivancevich (2000), Valuing diversity: a tale of two organizations, Academy of Management Executive, 14 (1), 93105.
Gilligan, Carol (1982), In a Dierent Voice, Cambridge, MA: Harvard University Press.
Greenleaf, Robert K. (1977 [2002]), Servant Leadership: A Journey into the Nature of Legitimate
Power and Greatness, 25th Anniversary edition, New York and Mahwah, NJ: Paulist.
Hannerz, Ulf (1990), Cosmopolitans and locals in world culture, in Mike Featherstone (ed.),
Global Culture: Nationalism, Globalization and Modernity, London: Sage, pp. 23751.
Held, David (1995), Democracy and the Global Order: From the Modern State to Cosmopolitan
Governance, Cambridge: Polity.
Held, David (2005), Principles of cosmopolitan order, in Brock and Brighouse (eds),
pp. 1027.
Held, Virginia (2005), Ethics of Care, Oxford and New York: Oxford University Press.
Honneth, Axel (1996), The Struggle for Recognition: The Moral Grammar of Social Conicts,
Cambridge, MA: MIT Press.
Hooijberg, R., J.G. Hunt and G.E. Dodge (1997), Leadership complexity and development
of the leaderplex model, Journal of Management, 23, 375408.

452

Handbook of research on global corporate citizenship

Johnson, Mark (1993), Moral Imagination: Implications of Cognitive Science for Ethics,
Chicago and London: University of Chicago Press.
Jones, Thomas M., Will Felps and Gregory Bigley (2007), Ethical theory and stakeholderrelated decisions: the role of stakeholder culture, Academy of Management Review, 32 (1),
13755.
Kant, Immanuel (1795), Perpetual peace: a philosophical sketch, in Hans Reiss (ed.) (1994),
Kant: Political Writings, Cambridge: Cambridge University Press, pp. 93131.
Kets de Vries, Manfred F.R. and Elizabeth Florent-Treacy (1999), The New Global Leaders,
San Francisco, CA: Jossey-Bass.
Kymlicka, Will (ed.) (1995), The Rights of Minority Cultures, Oxford: Oxford University Press.
Maak, Thomas (1999), Die Wirtschaft der Brgergesellschaft (Business and civil society),
Bern, Stuttgart and Vienna: Haupt.
Maak, Thomas (2007), Responsible leadership, stakeholder engagement and the emergence
of social capital, Journal of Business Ethics, 74 (4), 32943.
Maak, Thomas and Nicola M. Pless (2006a), Responsible leadership: a relational approach,
in Thomas Maak and Nicola M. Pless (eds), Responsible Leadership, London and New
York: Routledge, pp. 3353.
Maak, Thomas and Nicola M. Pless (2006b), Responsible leadership in a stakeholder
society, Journal of Business Ethics, 66, 99115.
Mintzberg, Henry (1975), The managers job: folklore and fact, Harvard Business Review,
JulyAugust, 4961.
Mitchell, Ronald K., Bradley R. Agle and Donna J. Wood (1997), Toward a theory of stakeholder identication and salience: dening the principle of who and what really counts,
Academy of Management Review, 22 (4), 85386.
Moorthy, R.S., Richard T. DeGeorge, Thomas Donaldson, William J. Ellos, Robert
C. Solomon and Robert B. Textor (1998), Uncompromising Integrity: Motorolas Global
Challenge, Schaumburg, IL: Motorola University Press.
Noddings, Nel (2003), Caring: A Feminine Approach to Ethics and Moral Education, Berkeley,
CA: University of California Press, 2nd rev. edn.
Nussbaum, Martha C. (1996), Patriotism and cosmopolitanism, in Joshua Cohen (ed.), For
Love of Country: Debating the Limits of Cosmopolitanism, Boston, MA: Beacon, pp. 317.
Nussbaum, Martha C. (2004), Women and theories of global justice: our need for new paradigms, in Deen K. Chatterjee (ed.), The Ethics of Assistance: Morality and the Distant
Needy, Cambridge: Cambridge University Press, pp. 14776.
Nussbaum, Martha C. (2005), Beyond the social contract: capabilities and global justice, in
Brock and Brighouse (eds), pp. 196228.
Nussbaum, Martha C. and Amartya Sen (eds) (1993), The Quality of Life, Oxford: Clarendon.
ONeill, Onora (2004), Global justice: whose obligations?, in Deen K. Chatterjee (ed.), The
Ethics of Assistance: Morality and the Distant Needy, Cambridge: Cambridge University
Press, pp. 24259.
Pless, Nicola M. (2007), Understanding responsible leadership: roles identity and motivational drivers: the case of Dame Anita Roddick, Journal of Business Ethics, 74 (4), 43756.
Pless, Nicola M. and Thomas Maak (2004), Building an inclusive diversity culture: principles,
processes and practice, Journal of Business Ethics, 54, 12947.
Pless, Nicola M. and Thomas Maak (2005), Relational intelligence for leading responsibly in
a connected world, in K.M. Weaver (ed.), Proceedings of the 65th Annual Meeting of the
Academy of Management, Honolulu, HI: Academy of Management.
Pogge, Thomas (2002), World Poverty and Human Rights, Cambridge, UK and Malden, MA:
Polity.
Pogge, Thomas (2005), A cosmopolitan perspective on the global economic order, in Brock
and Brighouse (eds), pp. 92109.
Post, James E., Lee E. Preston and Sybille Sachs (2002), Redening the Corporation:
Stakeholder Management and Organizational Wealth, Stanford, CA: Stanford University
Press.
Prahalad, C.K. (2005), The Fortune at the Bottom of the Pyramid: Eradicating Poverty through
Prots, Upper Saddle River, NJ: Wharton School Publishing.

Responsible leadership in a globalized world

453

Rawls, John (1999), The Law of Peoples, Cambridge, MA and London: Harvard University
Press.
Rost, Joseph C. (1991), Leadership for the 21st Century, Westport, CT and London: Quorum.
Scherer, Andreas G. and Guido Palazzo (2007), Toward a political conception of corporate
responsibility: business and society seen from a Habermasian perspective, Academy of
Management Review, 32 (4), 1096120.
Scherer, Andreas G., Guido Palazzo and Dorothe Baumann (2006), Global rules and private
actors: toward a new role of the transnational corporation in global governance, Business
Ethics Quarterly, 16 (4), 50532.
Schudson, Michael (1998), The Good Citizen, New York: Free Press.
Shakti (2007), http://www.hllshakti.com/sbcms/temp 15.asp, accessed 30 July 2007.
Sen, Amartya (1999), Development as Freedom, Oxford and New York: Oxford University
Press.
Smith, Adam (1759), The Theory of Moral Sentiments, Glasgow edition 1976, Oxford:
Clarendon.
Ulrich, Peter (1997), Integrative Wirtschaftsethik (Integative economic ethics), Bern, Stuttgart
and Vienna: Haupt (forthcoming from Cambridge University Press, 2008).
Vertovec, Steven and Robin Cohen (eds) (2002), Conceiving Cosmopolitanism: Theory,
Context, and Practice, Oxford and New York: Oxford University Press.
Wade, Mark (2006), Developing leaders for sustainable business, in Thomas Maak and
Nicola M. Pless (eds), Responsible Leadership, London and New York: Routledge,
pp. 22744.
Walzer, Michael (1994), Thick and Thin: Moral Argument at Home and Abroad, Notre Dame,
IN: University of Notre Dame Press.
Wheeler, David and Maria Sillanp (1997), The Stakeholder Corporation, London: Pitman.

20 The political economy of corporate

social responsibility
Subhabrata Bobby Banerjee

Introduction
This chapter contributes to the literature by developing a critical theoretical lens on business and politics to view the political economy of corporate
social responsibility. Drawing on theoretical perspectives from economic
sociology and political economics I discuss how relationships between governments and multinational enterprises (MNEs) discursively produce particular forms of social arrangements of various actors, institutions and
networks, and examine the inclusions and exclusions that result. This political approach problematizes some of the key assumptions underlying politics and corporate social responsibility by shifting the level of analysis
from the individual corporation to the political economy to reveal the discursive and material eects produced by interactions between dierent
actors. The chapter also discusses a critical research agenda for future
research corporate social responsibility in an attempt to broaden our
understanding of what corporations can or cannot do to solve the worlds
social problems.
The chapter is organized as follows: rst, I discuss received knowledge
about businesssociety relationships by discussing the literature on corporate political activity. Second, I outline a politicalcultural approach to our
understanding of institutions and markets as developed by Fligstein (2001).
Drawing on institutional theory I start from the presumption that corporations are one of several groups of actors in institutional elds, domains or
organized social spaces (Bourdieu 1977; DiMaggio 1985; Scott 1995) that
attempt to produce a system of domination. Third, I apply this theoretical
framework to understand how particular forms of social arrangements of
various actors, institutions and networks produce a particular corporate
form and rationality. I discuss the limits of corporate social responsibility
generated by this rationality and the inclusions and exclusions that result. I
conclude by discussing some directions for future research.
Business and politics
Business political behavior refers to the acquisition, development, securing, and use of power in relation to other entities (Boddewyn and Brewer
454

The political economy of corporate social responsibility

455

1994, p. 120). This literature regards political actors such as governments,

community organizations, public or private interest groups as belonging to
nonmarket elds. The literature is informed by a range of theoretical perspectives including institutional theory and its various branches, political
economy, interest group theory, transaction cost theory, resource dependency and agency theory (Getz 1997). Recent research has examined the
role of institutional structures of states in developing governmental capability to create industries (Spencer et al. 2005); the role of governmental
institutions and political centralization in fostering innovation (Mahmood
and Run 2005); the role of emergent institutions and interest groups in
MNEhost country interactions (Henisz and Zelner 2005) and the relationship between deregulation and corporate governance (Kim and
Prescott 2005).
Research on corporate political activity has explored several questions:
what constitutes political activity, why rms engage in political activity,
what kind of rms engage in political activity and how and where political
activity is done (Getz 1997). While it seems obvious that corporations
engage in political activity to use governmental power to further their own
interests (Keim and Baysinger 1988; Hillman and Hitt 1999), there is some
variance in the types of strategies that corporations use. Researchers have
distinguished between transactional political strategy, which focuses on a
specic salient policy issue, and relational political strategy, which attempts
to build ongoing relationships with political constituents (Hillman and Hitt
1999). Applying a market-based perspective on the public policy process,
Bonardi et al. (2005, p. 399) dene political markets as comprising demanders and suppliers of public policy and describe dierent conditions that
inuence the attractiveness of political markets for rms. Institutional
dierences, resource dependencies and size of rms also inuence the type
of political strategy where rms with the largest market shares were consistently the most politically active (Schuler 1996; Fligstein 2001).
Corporate political strategies include providing information to political
constituents through lobbying tactics, providing nancial incentives
through contributions to political parties or building constituent support
through advertising and public relations (Hillman and Hitt 1999).
Resource-based views of the rm imply that the capacity to inuence public
policy is a source of competitive advantage. However, empirical support for
this proposition is weak: some studies indicate that, while nancial gains
may accrue through specic lobbying eorts, the nancial and competitive
eects of relational corporate political strategies are dicult to assess
(Schaer 1995). Corporate political strategic objectives include eciency
(delivered through government subsidies or protection from competition)
(Yoe and Bergenstein 1985; Schaer 1995), market power (ability to raise

456

Handbook of research on global corporate citizenship

prices, eliminate competition, raise barriers to entry) (Vogel 1996; Rugman

and Verbeke 1998) and social legitimacy (in order to obtain access to economic resources and stakeholder support) (Boddewyn and Brewer 1994).
Not much attention is paid in the literature to consequences of corporate political activity, particularly the equity outcomes for the broader
society. The focus has been on the costs and benets of corporate political
activity for the rm, with very little research on the social outcomes of corporate political activity for organizational stakeholders or society in
general. As Boddewyn (1988), Fligstein (1996) and others have pointed out,
economic activity does not occur in a vacuum but is grounded in polity and
society. Market arrangements exist because they are the outcome of power
plays among political actors, not just because they are ecient. In the literature power has generally been theorized in a structural manner where
power is viewed as the capacity of social actors to overcome the resistance
of other actors (Astley and Sachdeva 1984; Brewer 1992), or as dierences
in bargaining power between MNEs and host countries (Fagre and Wells
1982). There are a few empirical studies on corporate political strategies
that primarily use institutional theory to analyze elds of power relations,
for example institutional evolution in the US chemical industry arising
from environmental concerns (Homan 1999) and institutional conicts
arising from climate change negotiations (Levy and Egan 2003). Newell
and Paterson (1998) provide an alternative theoretical approach by examining the role of the state and the structural power of capital in global environmental politics. Nevertheless, the politics of power in dierent
institutional elds is often viewed in simplistic terms where all forms of
power can be explained within the framework of interest group politics
(Vogel 1987).
Institutional and political economic approaches have produced a particular picture of businessgovernment relations using primarily economic
concepts such as eciency and structural formulations of power.
Corporate political activity is mainly viewed through a market-oriented
lens. A dierent picture might emerge if we use a political lens to look at
markets and corporations along with a more complex formulation of
power. In the next section I shall discuss a politicalcultural approach to
markets, governments and rms (Fligstein 1996, 2001) and then extend this
framework to explain how shareholder value maximization became the
dominant paradigm for corporations and discuss the limits of corporate
social responsibility produced by this paradigm.
Toward a politicalcultural perspective of markets
Economic theories about markets have focused on the eciency of existing
arrangements between actors. Economic theories of the rm also focus on

The political economy of corporate social responsibility

457

eciency criteria that maximize rent-seeking opportunities. An alternative

view, the sociological view of the rm, focuses on legitimacy under the
assumption that corporations exist because society gives them the right to
do so. The problem with the eciencylegitimacy dichotomy is that in
public policy it is often the case that legitimacy becomes subordinate to
eciency because notions and terms of legitimacy are discursively produced and dened by economic eciency criteria. Economic theories also
assume that social relations and arrangements between actors are ecient
simply because they continue to exist. Economic sociologists oppose the
neoclassical economic view of anonymous actors operating in stable
markets and argue that all economic interactions are embedded in social
relations (Granovetter 1985). Thus, the distinction between market and
nonmarket transactions breaks down when one considers that all transactions are situated in political and social relations. The eciency of these
relations is another matter while some authors assume that existing social
relations in markets are indeed ecient (Uzzi 1996, 1999; Gulati and
Gargiulo 1999), others question universal understandings of eciency,
arguing that the notion of eciency itself is socially constructed (Meyer
and Rowan 1977; Fligstein 1996).
Theoretical perspectives from a sociological approach to markets shift the
focus from economic eciencies of markets to understanding the range of
social relations that exist for markets to function. Social relationships
include formal and informal relations between networks of producers, consumers, governments and suppliers. At a more macro level, social relations
include formal and informal rules that dierent societies have for organizing economic activities, for example, property rights, governance structures,
contracts, rules of exchange, and competition laws and legislative frameworks (Fligstein 2001). These rules of exchange are the basis of institutional
theory, which posits that social structures exist in order to produce market
stability. Stable markets and the social relations that underpin them are
thought to be eective when they ensure the continued survival of rms
(Hannan and Freeman 1984; Scott 1995). This approach marks a departure
from conventional economic theories that are concerned about optimal
allocation of resources. However, from a societal standpoint neither the
sociological approach nor the economic approach provides a satisfactory
normative understanding of how social relations should be organized to
produce positive outcomes, especially for marginalized sections of societies.
As Fligstein (2001) has pointed out, even a sociological approach to the
study of markets is ambiguous about the notion of eciency, especially
when it comes to making normative assertions about whether current
social arrangements should be allowed to continue. He advocates a politicalcultural approach to the study of market institutions in society. This is

458

Handbook of research on global corporate citizenship

a fundamentally dierent way of looking at markets because it assumes

that current social and economic relationships are a function of power and
political relations between various actors. A political economy lens views
politics as markets (Bonardi et al. 2005) whereas a politicalcultural lens
views markets as politics. Problem identication, research questions and
solutions will depend on which lens is used. Drawing from institutional
theory, Fligstein (2001) argues that social action involving a range of
market and nonmarket actors takes place in elds or organized social
spaces (Bourdeieu 1977; DiMaggio 1985; Fligstein 1996). Fields are constituted by actors attempting to dominate a particular space and this
system of domination requires the production of a local culture that
denes local social relations between actors (Fligstein 2001, p. 15).
Because social interactions in a eld are ultimately determined by
the dynamics of power and forces of dominance, the process is inherently
political.
Governments are key actors in institutional elds because they have the
power to create and enforce rules for all other actors. Firms attempt to
inuence government policy by anticipating and shaping future legislation
or even circumventing legislation through voluntary codes of conduct. This
process, called regulatory capture by economists, serves to control regulatory agencies through extensive lobbying and selective information
sharing (Bakan 2004, p. 152). Other groups such as non-governmental
organizations (NGOs) are part of social movements that attempt to alter
the balance of power by transforming domains and changing actors ability
to create rules.
Market stability is a key aim for all institutional elds. Because stability
requires rules, governments play an important role as creators and
enforcers of rules of exchange. Governments also regularly intervene in
markets by creating policies to promote stability (Fligstein 2001). However,
since all markets are socially embedded, one would assume that the normative assumptions and outcomes of promoting stability are framed by
societal goals and norms and this is where the problem becomes more
complex. Stable social structures in markets allow some degree of competition among rms based on a system of rules of exchange, resources from
society, contracts and property rights that allow rms to survive. The normative basis of economic theories of markets is that ecient allocation of
a societys resources can only occur through market forces. The use of
public, social resources to confer advantage to private actors is considered
to be ecient in terms of producing stability because the assumption is that
society is prepared to pay the price for this stability since it needs goods and
services that private rms produce. In this context, society means consumers of these goods and services but the cost of creating stability is borne

The political economy of corporate social responsibility

459

by society in general because it bears the costs of infrastructure, public

safety and economic institutions that allow rms to pursue stabilized
markets (ibid., p. 22).
While a politicalcultural approach recognizes that powerful actors in
elds create rules that serve their interests, it does not provide a sophisticated analysis of power. Market arrangements in a given society do not
emerge from some natural organic process but are products of power
applied by actors in dierent elds. If markets are seen as systems of power
and domination exercised by large rms and institutions, then a political
analysis of institutions in society can provide a picture of how these institutions are used, by whom and what inclusions and exclusions they
produce. This kind of critical analysis is rarely found in the management
literature. Even studies that take an institutional approach do not provide
a thorough analytic of power and often use market metaphors to describe
businessgovernment relations (Vogel 1987). Corporate power has been
undertheorized in much of the management literature and there is not
much research that discusses the ability of corporations to control the political agenda or how the needs of business often determine the parameters
of public policy. Some writers have addressed the power of MNCs in
inuencing government policy, arguing that corporate power represents a
new form of imperialism, especially in developing countries (Warren 1980;
Vernon 1998; Mandel 1999; Grandin 2006).
Departing from conventional economic accounts of eciency in
markets, Fligstein (1996, 2001) identies four institutional factors that contribute to the stability of markets. The rst of these are property rights
that dene which groups of actors have residual claims on rm prots. As
Fligstein (1996) points out, it is important to realize that property rights are
not an outcome of market eciency but emerge from a contestable political process involving business rms, governments and other institutions.
Governments are key actors in shaping property rights and as we shall see
in a later section, the interaction between governments and powerful corporate interests produced a particular legal identity of a corporation that
allowed it to enjoy property rights. Any regime of property rights is a function of the distribution of power in societies. The second institutional
arrangement refers to governance structures that dene competitive relations, rm governance structures and laws governing competitive activity.
Conceptions of control refer to market structures and internal organization of rms that dene competitive (or cooperative) strategies. Rules of
exchange refer to rules governing market transactions and the enforcement
of contracts. Governments play a crucial role in the development of these
institutional factors and while there is some variance in institutional
arrangements in dierent societies, policies of institutions such as the

460

Handbook of research on global corporate citizenship

World Trade Organization (WTO), the World Bank, as well as bilateral and
multilateral trade agreements attempt to promote consistency in property
rights, governance structures and rules of exchange.
Thus, a politicalcultural approach to the study of market and rm
behavior is concerned with relations between states and rms as opposed
to the neoclassical view of perfectly competitive markets. Governments all
over the world have been involved in providing infrastructure for markets
and rms to operate. The literature on governmentrm relations views
government intervention either as an exogenous variable, as typied by
population ecologists (Ranger-Moore et al. 1991) or as a coercive force
(Scott and Meyer 1994). In the elds of organizational economics, transaction costs and agency theory governments are classied as nonmarket
phenomena (Boddewyn and Brewer 1994), which stand in direct contrast
to the politicalcultural approach. As Fligstein (2001) points out, market
stability is dependent on rmgovernment relationships because rms rely
on governments and citizens for making markets. A politicalcultural
approach will examine the outcomes of these relationships, both positive
and negative, for all segments of society. This approach provides a normative basis for policy making that either allows or disallows certain relationships to exist. In the next section I shall discuss the power politics of market
and nonmarket actors in institutional elds of the global political economy.
The question of power
Power of actors in institutional elds inuences the outcomes of interactions as well as sets rules and norms. For example, there is some empirical
research on changing societal and institutional norms and shifts in institutional power resulting from heightened environmental concerns all over the
world (Newell and Paterson 1998; Homan 1999; Banerjee et al. 2003; Levy
and Egan 2003). In her analysis of the global environmental movement,
McAfee (1999) describes three types of power that shaped meanings,
practices and knowledge of concepts such as nature, the environment
and biological diversity. She describes how the institutional power of the
World Bank and multilateral environmental institutions, the economic
power of the advanced capitalist states and transnational corporations and the discursive power (Foucault 1980) of the environmental
economic paradigm constructed particular notions of biological diversity
that permitted the international trade of biological diversity as a commodity as well as the control, accumulation and exchange of biological
diversity (McAfee 1999, p. 135).
Discursive power also creates a particular kind of rationality that
inuences macro social developmental issues, policies of institutions such
as the World Bank, the International Monetary Fund and the WTO, as well

The political economy of corporate social responsibility

461

as micro level activity of corporations, NGOs and other agencies. The consolidation of a market system in the global economy produces a particular
kind of discursive corporate rationality. The same rationality is also a hallmark of what is commonly referred to as the neoliberal agenda (Boggs
1986; Gills 2000; Fine 2001; Taylor 2002). One could argue that the dominant economic view of the world, which is a hallmark of neoliberal economic policies, reects a particular ideology that results in a preoccupation
with the economic organization of society. Neoliberal ideology assumes
that markets are a better mechanism to organize society than governments
(Fligstein 2001). The main tenets of the neoliberal school of thought are
(i) protection of private capital interests and expansion of the process of
capital accumulation; (ii) primary reliance on market forces to achieve economic and social goals through the homogenization of state policies; and
(iii) development of a system of transnational institutional authority above
and beyond the authority of the state (Boggs 1986; Gills 2000). Noted proponents of neoliberalism such as Friedrich von Hayek (1944), Milton
Friedman (1962), and Robert Nozick (1974) argue that economic policies
of deregulation, privatization and tax cuts have positive consequences for
society and represents a spontaneous order of social life based on an individuals freedom to choose.
The rationality of neoliberal thinking is an outcome of power relations
that have discursively produced a particular way of looking at the world,
which in turn has material eects on government policy, international trade
agreements, institutional norms and rules, and corporate strategies. For
example, the last 20 years have seen a signicant transformation in governmentMNE relations, especially among developing countries. Between
1986 and 1995, more than 80 countries liberalized their policies toward
MNEs in terms of welcoming inward foreign direct investment (FDI) and
relaxing rules on outward FDI (Dunning 1998). Supranational institutions
such as the UN also encouraged these policies in 1996 and 1997 the
United Nations Conference on Trade and Development (UNCTAD)
released two reports on encouraging Best Practice in Investment
Promotion which called for developing countries to provide a favorable
climate for investment through scal and other incentives. This marked a
fundamental shift from UNCTAD policies of the 1970s, when the now
defunct United Nations Center on Transnational Corporations attempted
unsuccessfully to develop a universal code of conduct for MNEs designed
at maximizing benets of inward FDI for developing countries and to contribute to development policies of domestic governments (ibid.).
So far I have attempted to develop a critical theoretical framework by
discussing a politicalcultural approach to markets, governments, institutions and corporations as well as the discursive eects of power in dierent

462

Handbook of research on global corporate citizenship

institutional elds. Let us now attempt to employ this framework to understand how particular social arrangements of actors, institutions and networks produce particular forms of organization and the kinds of inclusions
and exclusions that result.
The modern corporation as a politicalcultural formation
The emergence and dominance of the shareholder-value-maximizing rm
can be explained using a politicalcultural lens (Fligstein 2001; Perrow
2002). In his excellent historical analysis of the emergence of the modern
American corporation, Perrow described how a legal revolution transformed the nature of corporations. Early 19th-century business rms were
chartered by states to serve specic public purposes and states could, and
routinely did, revoke corporate charters if rms failed to serve the public
interest. Several banks lost their charters due to fraudulent trading, as did
turnpike companies for failing to keep public roads in good repair (Derber
1998). The states role in 19th-century America was to place restrictions
around the incorporation of companies to ensure that the publics interest
was served. However, by the end of the 19th century, restrictions around
incorporation had all but disappeared. As Perrow (2002, p. 41) argues, this
was not a mistake, an inadvertence, a happenstance in history, but a welldesigned plan devised by particular interests who needed a ruling that
would allow for a particular form of organization.
The particular form of organization that emerged was the modern corporation which was given a legal personality, declared by the courts as
being an articial, invisible, intangible being that could enjoy property
rights (ibid.). Establishing the legitimacy of a ctitious legal person or an
articial legal entity distinct from its owners and ocers (Hessen 1979,
p. xiv) had two eects: rst, it eectively put an end to the argument that
the corporation was a creature of the state thus limiting public representation and second, by conferring private rights on corporations, rights normally held by individuals, the court automatically guaranteed a system that
would protect those rights. Thus, an articial legal entity such as a corporation became entitled to protection under the 14th Amendment of the US
Constitution because it was a ctitious person. The legal personality of
the modern corporation was created by certain interests to deliver specic
outcomes that needed a particular form of organization, and a strong state
presence was inimical to these interests. What was originally intended as a
public body now became a private person with its property rights guaranteed by law but its social responsibilities, which were initially mandated by
law, now made discretionary.
As the legal personality of the modern corporation evolved in the 1800s,
contestations in the public, political and legal spheres revolved around the

The political economy of corporate social responsibility

463

conict between public and private interests. Now that the corporation was
dened as an entity that could enjoy property rights, the focus shifted to
developing systems of enforcement and mechanisms that protected these
rights. Gaining legally enforceable property rights gave more power to corporations in a post-charter era and set in motion the process of devising
new forms of corporate control, beginning with consolidation and mergers
of competitive rms in the late 19th and early 20th centuries, oligopolistic
manufacturing concepts of control in the 1920s, followed by the nance
concepts of control in the 1960s and the nancial reorganization of
American corporations in the 1980s and 1990s through mega mergers
(Fligstein 2001). Throughout this period corporate interests, which
inuenced several key legal rulings about the function of a corporation,
reinforced the idea of a rm as a maximizer of shareholder value. Problems
were dened and solutions were applied with this primary concept of the
rm in mind. Any reference to social good was at best symbolic and derivative in that the economic function provided the social good. The separation of the economic from the social in dening corporate identity, in itself
an outcome of power relations between political and economic actors and
institutions, was also discursively produced by disciplinary power reected
by the tenets of economic theories of the time the notion of externalities, for instance, where governments and other agencies, not economic
actors, were responsible for managing the negative social and environmental eects of economic growth.
New laws were created in the United States that allowed states to allocate
property to private corporations. Perrow (2002) describes how powerful
private interests in the railroad industry in the 1800s were able to obtain
rights of way on public land at virtually no cost. Public legal actions in most
cases were decided in favor of corporations in a socioeconomic climate
where public purpose was dened so broadly that eminent domain and corporate privileges could always be justied in the name of prosperity and
growth; and in general for the freedom to externalize costs (ibid., p. 45). For
instance, a court decision on a petition by Louisville residents protesting the
companys decision to lay rail lines across their neighborhood declared:
A railroad will be allowed to run its locomotives into the heart of Louisville
despite the noise and pollution from its smokestacks (the externality), because
so necessary are the agents of transportation in a populous and prospering
country that private injury and personal damage must be expected. (1839
Kentucky court decision, cited in ibid., p. 141)

The politics of corruption

It would be naive of us to assume that the legal revolution was launched
uniformly with the public interest in mind. In his analysis of the railroad

464

Handbook of research on global corporate citizenship

industry in 19th-century America, Perrow (2002) describes an impressive

list of activities that could hardly be considered socially responsible. Judges
and legislators were routinely bought, shady nancial dealings such as
watering stock, misuse of stock in paying dividends, obtaining public funds
through deception, misuse of public funds and violation of legal statutes
were common. In fact, the level of corruption was such that Perrow (p. 143)
argues that ease of corruption should be added to the usual factors of production such as land, labor, capital, technology and organizational form.
He rightly points out that corruption involved considerable social costs in
terms of wasting a societys resources, risking the lives and health of communities and workers due to evasion of environmental health and safety
laws and increasing negative externalities. Corrupting the legislature and
judiciary meant that corporations could shape their own powers and freedoms. As he argues:
Corruption meant that the prots were not returned to either the government
that subsidized so much of the railroads, or even to many of the private
investors, but to a small group of executives and nanciers. This concentrated
wealth and the power that comes with it. Corruption counts, but few historians
and social scientists have done any counting. Instead, they tend to blame the
victims, not the perpetrators the large organizations. There are no accounts of
railroads as corporations engaged in lobbying, joining with merchants and shippers in getting public funds, ghting regulation and accountability, and generally using the organizational tool to shape the commercial world to their liking.
(Ibid., p. 144)

There is some truth to Perrows claim about the paucity of research on

corporate corruption, especially in the management and organization literature. The limited accounts that are available focus on high-prole fraud
cases such as Enron, World Com and the like. In the management literature
corruption is generally treated as an element of the rms external environment which has direct and indirect costs to the rm (strangely there are
very few accounts that discuss the benets of corruption to rms). At the
level of the individual rm, researchers have developed typologies of
corrupt transactions (Khan 1996), and examined corporate actions in
responding to corruption (Lindgreen 2004); MNEs strategies for dealing
with corruption in developing countries (Doh et al. 2003); causes of illegal
corporate behavior (Baucus 1994); and nancial consequences of illegal
corporate behavior (Baucus and Baucus 1997). Government corruption is
dened as the abuse or misuse of public power for private or personal gain
(Doh et al. 2003, p. 115), and various corporate strategies have been proposed to deal with government corruption including avoidance, adjusting
entry mode, corporate codes of conduct, training, social contributions, or
withdrawal from markets (Doh et al. 2004; Lindgreen 2004).

The political economy of corporate social responsibility

465

The economics and sociology literatures contain more extensive studies

of corruption using markets, societies or countries as units of analysis.
Studies have examined the impact of corruption on economic development
(Bardhan 1997), impact on wealth distribution (Rose-Ackerman 1999) and
the conditions that promote and sustain corruption (Shleifer and Vishny
1993; Husted 1999; Maitland 2002; Park 2003). Typically, economics takes
an eciency argument to explain corruption where markets exist for corruption and ecient corruption occurs when government policy produces second-best outcomes in resource allocation, particularly through
over-regulation of economic activity (Maitland 2002, p. 65). However,
these models do not take into account distortionary costs of corruption,
especially the costs of eorts to avoid detection or punishment costs.
Game-theoretical approaches that examine bribe taking and receiving, may
result in ecient outcomes but do not take into account the political and
social environment that these transactions are embedded in or the negative
social costs for other actors. Sociological and cultural approaches to the
study of corruption have also used countries or societies as their units of
analysis. While cultural dierences do exist in meanings of what constitutes
corrupt practices, there is nevertheless some common understanding
among dierent countries of corruption as a social problem (Maingot
1994). Eorts by groups such as Transparency International to rank countries based on a corruption index aim at identifying universal meanings of
corruption. Another example is the United Nations Global Compact,
which is a voluntary initiative for MNEs to follow universal principles of
human rights, labor, environment and corruption.
The UN Global Compacts corruption principle states business should
work against corruption in all its forms, including extortion and bribery.
One assumes that this means corruption in both private and public sectors.
The management literature on corruption has almost exclusively focused
on corporations that are forced to respond to government corruption. Not
much is known about corruption in the private sector. If corruption is the
abuse of public power for private gain, perhaps we need to adopt a broader
view of the process, going beyond extortion and bribery. One could argue
that the use of corporate power in lobbying eorts at governments, multilateral trade agreements and supranational organizations (all perfectly
legal activities) results in private or personal gain, especially since the legal
identity of a corporation is a ctitious person. Economic neoliberalism
may promote eciency in certain quarters but also reects a decline in the
political power of governments, workers and other social groups (Boggs
1986; Fligstein 2001; Taylor 2002). There is little research that examines this
area and there is a need to document the social outcomes that result when
the role of the state is reduced to creating ecient markets for corporations.

466

Handbook of research on global corporate citizenship

And as the breakdowns in almost every WTO ministerial meeting have

shown, there are plenty of contentious issues around trade that reect deep
NorthSouth political, social and economic divides.
Networks of power: globalization and the role of states and institutions
Debates about the benets and dangers of globalization have been ongoing
in academic and policy circles for more than two decades. According to the
neoliberal argument, increasing economic integration as a result of globalization is benecial for both richer and poorer societies, because of
increases in FDI to capital-poor regions, competitive prices as a result of
reduced taris and increasing levels of productivity due to faster diusion
of knowledge and technology (Reich 1991; Burtless et al. 2005). However,
globalization is also a contested process as evidenced by the numerous
protests at various trade meetings in recent years. The so-called antiglobalization movement draws attention to the downsides of globalization
pointing to increasing inequalities both within and between countries, the
impoverishment of farmers in the Third World, environmental destruction
and social dislocation (Shiva 1991; Korten 1995; Monbiot 2004).
Globalization has also changed congurations of power between state
and market actors. The state is a key player in any institutional eld and
while some theorists believe that the power of the state has greatly diminished in an era of global neoliberalism (Boggs 1986; Regan 1998; Rifkin
1999), others argue that state power in recent years has been redistributed
to be more tightly connected to the needs and interests of corporations and
less so to the public interest (Bakan 2004, p. 154). For instance, the distinction between global, national and corporate interests becomes particularly important in the way these disputes are resolved in the WTO. National
environmental legislation, safety regulations, social welfare nets, ethical
buying policies are all examples of unfair trade practices according to
recent WTO rulings.
For instance, in 1996, the state of Massachusetts ruled that companies
operating in Burma would not receive any government contracts because
of the countrys brutal human rights record. As a result of corporate lobbying, the European Union threatened to take the case to the WTO,
arguing that the ban was an unfair trade practice. The courts ruled in favor
of the corporations. Lawyers representing Massachusetts argued that
Nelson Mandela would still be in prison had current trade rules been in
force in the 1980s (Hertz 2001, p. 78). While it is true that the US Congress
imposed similar restriction on trade with Burma that have not been challenged, the fact remains that powerful corporate interests could challenge
them if they choose to do so. While proponents of the neoliberal agenda
argue about the dangers of governments regulating markets the reality is

The political economy of corporate social responsibility

467

that in the power politics of todays global political economy, powerful

market actors are regulating governments.
Corporations and industry groups are also powerful players in global
trade and environmental negotiations. For example, in three of the main
trade advisory committees of the US trade representatives oce, representing a total of 111 members, 92 represented individual companies and
16 were trade industry associations (10 from the chemical industry). Two
represented labor unions. More than a third of the member companies represented at these meetings had been ned by the Environmental Protection
Agency for failure to comply with environmental regulations. Another
third of member companies had actively lobbied state and federal governments opposing higher environmental standards (Korten 1995). Most of
these agreements are arrived at in so-called green room meetings at the
WTO which are essentially closed-door meetings with no access to the
public. Many Third-World governments have raised concerns about this
process and social and environmental activists have complained about the
exclusionary nature of global trade policy development.
Bilateral, multilateral and global trade agreements can also be analyzed
using a politicalcultural approach to examine how discursive power in
dierent contexts determines the inclusions and exclusions of dierent
actors. Global environmental policy regimes are an example, which, despite
the rhetoric of inclusiveness, do little to address concerns of rural communities and indigenous peoples. Corporations play a key role in the politics
of global warming and climate change agreements and powerful lobbies
representing fossil fuel industries have resisted national, regional and global
policies that call for a reduction in the use of fossil fuels while establishing
their interests in the Framework Convention on Climate Change (Newell
and Paterson 1998). For instance, one of the outcomes of the Kyoto
Protocol was the development of a global policy on forestry. The rationale
for this policy was that polluting countries could obtain pollution credits
by growing and harvesting forests (because of their carbon absorption
capacity) even if they did not reduce their emissions. In an eort to be inclusive, the organizers of the Convention on Climate Change invited a wide
range of stakeholders including MNEs from the fossil fuel industries, scientists, policy makers, NGOs, community organizations, industry groups,
media representatives and government leaders. One group they omitted to
include were the people who actually lived in the forests and were dependent on forest resources for their livelihood. The convention was opposed
by several indigenous groups as part of an Indigenous Forum. Of primary
concern was the exclusion of indigenous peoples as participants in the
development and the implementation of the Kyoto Protocol. The
Indigenous Forums declaration stated:

468

Handbook of research on global corporate citizenship

The measures to mitigate climate change currently being negotiated are based
on a worldview of territory that reduces forests, lands, seas and sacred sites to
only their carbon absorption capacity. This worldview and its practices adversely
aect the lives of Indigenous Peoples and violate our fundamental rights and
liberties, particularly, our right to recuperate, maintain, control and administer
our territories which are consecrated and established in instruments of the
United Nations. (IIFC 2000)

This is another example of discursive power where forests become valued

only for their carbon sequestration capacity and how the institutional
regimes can create global policy based on the interests of a few powerful
actors. What gets excluded in scientic forestry policy are the concerns of
communities that have an alternative view (Banerjee 2003). Forests are not
just carbon sinks or timber mines for indigenous communities who live in
them: they are their source of food, agriculture, medicine, in short, their
entire livelihood.
The limits of corporate social responsibility
The conicts described above also highlight the limits of corporate social
responsibility and stakeholder theory, which are championed in the literature as alternatives to the shareholder value view of the rm. More than 50
years of research in the area has resulted in a plethora of frameworks,
models and taxonomies as well as scores of empirical studies reporting statistically signicant, albeit theoretically tenuous, relationships between
social and nancial performance. Much of the research on social and environmental initiatives implemented by corporations has focused on winwin
situations where environmental and social initiatives are implemented
when there are clear benets to the corporation (Bansal and Roth 2000;
Banerjee et al. 2003). What happens when there is a clash of objectives and
interests and how companies deal with trade-os and dilemmas is not very
well documented in the literature (Margolis and Walsh 2003).
Even the so-called stakeholder view of the rm assumes a winwin
outcome, which serves as limits to any corporate social initiative. For
instance, the authors of a meta analysis of more than 25 years of empirical studies on the link between corporate economic and social performance
indicated that the literature was overinclusive in dening organizational
stakeholders and called for a more restrictive concept of stakeholders in
order to establish a stronger link (Orlitzky et al. 2003). This implies a focus
on stakeholders who can inuence the nancial or competitive position of
the rm, leaving little or no resources directed to serve the interests of marginalized stakeholder groups. Corporate social responsibility in this framework is limited to winwin situations, starting with the assumption that it
makes good business sense and enhances shareholder value. The entirety of

The political economy of corporate social responsibility

469

empirical research on the economic performancesocial performance link,

and indeed all of the conceptual research on stakeholder theory, actually
serves to authenticate the economic shareholder value model of the rm
because it accepts its assumptions and does not pose an alternative view
(Margolis and Walsh 2003).
The strategic view of corporate social responsibility also suers from
the same limitations. If corporate social responsibility is indeed a competitive strategy, it is limited in the amount of competitive advantage it can
generate because the very visible nature of these practices makes it easier
for competitors to develop similar strategies (McWilliams and Siegel 2001).
Research on environmental strategies has shown that once all economic
actors have realized the immediate benets of environmental improvements, the low-hanging fruit of cost savings and eciency increases; every
incremental environmental improvement required a substantially larger
level of investment with a much longer time horizon which few companies
were willing to consider (Newton and Harte 1997; Sharma and Vredenburg
1998). Corporate social responsibility in this framework is limited to
winwin situations, starting with the assumption that it makes good business sense and enhances shareholder value.
An instrumental pragmatic approach has dominated the normative
claims of stakeholder theory and, despite attempts to socialize economic
theories of the rm and markets, these arguments adapt transaction cost
economic theory, based on the premise that ethics in business transactions
is economically ecient (Learmount 2002). While the literature has produced several classicatory schemes and attributes of stakeholder salience
(Mitchell et al. 1997) that allows managers to identify legitimate, powerful
and urgent stakeholders, it does not tell us how and why some stakeholders came to possess these attributes and others did not (Friedman and Miles
2002). The instrumental approach to stakeholder theory cannot address
social ills in any meaningful way because it simply argues that stakeholder
thinking in contractual situations is a more eective way to reduce transaction costs (Learmount 2002). These refer to transaction costs for the rm
obviously, not for external stakeholders. The problem with much of theorizing about corporate social responsibility is that the limits of corporate
rationality determine the limits of corporate social responsibility because
if a corporation can do good only to help itself do well, there is a profound
limit on just how much good it can do (Bakan 2004, p. 50).
Conclusion and directions for future research
In this chapter I have tried to provide a critical lens to view MNE activity
and highlight the dierent power dynamics in institutional elds.
Developing a critical lens using a politicalcultural approach will allow us

470

Handbook of research on global corporate citizenship

to see how particular forms of organization emerge that serve particular

interests and the inclusions and exclusions that result. Such an approach
can pose a challenge to arguments about eciency as well as provide a normative basis for theories of the rm. Despite the rhetoric of stakeholders,
the dominant view of the rm remains rmly focused on shareholder value
and ignores the fact that it is not just employees, customers and suppliers
that are aected by the actions of rms but also the larger society which
provides the social, legal and political conditions that allow rms to exist
and prosper (Fligstein 2001). While this narrow focus serves particular
interests, its impact on the broader society is debatable.
I shall conclude by outlining three directions for future research. First, I
believe that there is a need to promote a critically oriented research agenda
for businesssociety relationships. This will enrich existing theoretical
frameworks such as institutional theory by providing a normative basis for
theory development. The predominant focus of MNE research is on its
economic activity. Research on the social and environmental impact of this
activity is limited and future research can focus on explaining how issues
such as social justice, community development and environmental sustainability can inform governance of MNE activity. A critical perspective will
allow us to see how knowledge and theory development in the eld constitutes social relations between dierent stakeholders, and perhaps even
set the ground for a dierent set of conditions, which in turn needs to be
critiqued.
A second direction for future research is to examine the rise of social
movements all over the world. Studying social movements might allow us
to construct alternative accounts of businesssociety relations and provide
the basis for changing the normative framework of political decision
making. While any alternative vision of the world must contain an economic dimension, integrating political, social and cultural dimensions presents a challenge, and more research from a variety of disciplinary
perspectives is needed to understand how this might be done. A critical perspective in analyzing social movements would examine the policies, practices, modes of governance and power dynamics underlying their
interactions with other stakeholders and the conicting discursive rationalities they produce. This might yield valuable insights on how social
problems are articulated and resolved in dierent institutional elds.
A third direction for future research is to examine businessNGO partnerships and the outcomes they produce. A good starting-point is to critically examine the workings of the UN Global Compact, which is a
voluntary initiative for MNEs to develop and implement global codes of
conduct. A key element of the Global Compact is a multistakeholder dialogue process that involves the development of local networks comprising

The political economy of corporate social responsibility

471

corporations, NGOs, government agencies and other groups. This network

of actors discusses ways of applying the principles of the Global Compact
at a regional level and then implements them through specic projects and
case studies. While critics argue that the Global Compact is yet another voluntary, non-bonding mechanism that becomes another public relations
exercise for MNEs, the active presence of NGOs, community and governmental organizations can provide some measure of accountability and
highlight the problems, prospects and challenges of developing and implementing corporate social initiatives (Wilson 2004).
Several critics call for greater accountability of MNEs in order to
monitor negative social and environmental impacts. For instance, Friends
of the Earth, an international environmental NGO, proposed a
Framework Convention on Corporate Accountability at the Johannesburg
Earth Summit (Bruno and Karliner 2002). Key elements of the proposal
include:
1.

2.

3.

4.
5.
6.

Mandatory corporate reporting requirements on environmental and

social impacts. Process for prior consultation with aected communities including environmental and social impact assessment and complete access to information.
Extended liability to directors for corporate breaches of environmental and social laws and corporate liability for breaches of international
laws and agreements.
Rights of redress for citizens, including access for aected people anywhere in the world to pursue litigation, provisions for stakeholders to
legally challenge corporate decisions and legal aid mechanisms to
provide public funds to support such challenges.
Community rights to resources, including indigenous peoples rights
over common property such as forests, sheries and minerals.
Veto rights over developmental projects and against displacement and
rights to compensation for resources expropriated by corporations.
Sanctions against corporations for breaching these duties including
suspending stock exchange listing, nes and (in extreme cases) revoking the corporations charter or withdrawal of limited liability status.

How these requirements can be institutionalized is a challenge, however,

given the power of MNEs and in many cases their complicity with governments. Establishing democratic control over economic policies developed by
supranational institutions and business decisions of corporations in a
transnational context implies some form of global governance. Governance
involves understanding the rules, norms and institutions that dene relationships between key actors, processes of representation, decision making

472

Handbook of research on global corporate citizenship

and accountability. Governance arrangements include legal (national legislation, international laws, treaties and agreements) and extra-legal (voluntary codes of conduct, standards, processes and guidelines) mechanisms.
Increasing NGO and public pressure in a variety of arenas may not yet have
been translated into legal mechanisms, but corporations do change their
strategies based on these external pressures. There are also useful insights to
be gained by investigating alternative forms of organizations, perhaps
hybrid forms of organization similar to the quasi-NGOs (or quangos as
they are called in the UK) or social enterprises that are funded out of corporate prots whose purpose is to implement projects promoting social
welfare (Bertelli 2006).
Markets and corporations are created out of a set of arrangements
between governments, citizens, rms, employees, shareholders and other
stakeholders. Stable markets allow for specic forms of wealth creation,
and market stability is a result of societal and governmental investments
(Fligstein 2001). The MNC is a product that was created by a specic historical process and was granted property rights by governments and citizens. Thus, it is reasonable to expect that these parties can also make claims
on corporations, not just shareholders of corporations. The problem is to
develop a legally enforceable system by which stakeholder claims can be
negotiated. Ultimately the notion of eciency needs to be critiqued from a
social, cultural and political perspective if any alternative social arrangements are to be imagined.
References
Astley, W.G. and P.S. Sachdeva (1984), Structural sources of intraorganizational power: a theoretical synthesis, Academy of Management Review, 9, 10413.
Bakan, J. (2004), The Corporation: The Pathological Pursuit of Prot and Power, Toronto:
Viking Canada.
Banerjee, S.B. (2003), Who sustains whose development? Sustainable development and the
reinvention of nature, Organization Studies, 24, 14380.
Banerjee, S.B., E. Iyer and R. Kashyap (2003), Corporate environmentalism and its
antecedents: inuence of industry type, Journal of Marketing, 67 (2): 10622.
Bansal P. and K. Roth (2000), Why companies go green: a model of ecological responsiveness, Academy of Management Journal, 43, 71736.
Bardhan, P. (1997), Corruption and development: a review of issues, Journal of Economic
Literature, 35 (3), 132046.
Baucus, M.S. (1994), Pressure, opportunity and predisposition: a multivariate model of corporate illegality, Journal of Management, 20, 699721.
Baucus, M.S. and D.A. Baucus (1997), Paying the piper: an empirical examination of the
longer-term nancial consequences of illegal corporate behavior, Academy of Management
Journal, 40 (1), 12951.
Bertelli, A.M. (2006), Governing the quango: an auditing and cheating model of quasigovernmental authorities, Journal of Public Administration Research and Theory, 16 (2),
23961.
Boddewyn, J. (1988), Political aspects of MNE theory, Journal of International Business
Studies, 19, 34163.

The political economy of corporate social responsibility

473

Boddewyn, J. and T. Brewer (1994), International business political behavior: new theoretical
directions, Academy of Management Review, 19 (1), 11943.
Boggs, C. (1986), Social Movements and Political Power, Philadelphia, PA: Temple University
Press.
Bonardi, J., A.J. Hillman and G.D. Keim (2005), The attractiveness of political markets:
implications for rm strategy, Academy of Management Review, 30 (2), 397413.
Bourdieu, P. (1977), Outline of a Theory of Practice, Cambridge: Cambridge University Press.
Brewer, T.L. (1992), An issue area approach to the analysis of MNCgovernment relations,
Journal of International Business Studies, 23, 295309.
Bruno, K. and J. Karliner (2002), Marching to Johannesburg, Corpwatch, www.
corpwatch.org/campaigns/PCD.jspa?articleid=3588, accessed 25 September 2007.
Burtless, G., R.G. Lawrence and R.E. Litan (2005), Globaphobia: Confronting Fears about
Open Trade, Vancouver: University of British Columbia Press.
Derber, C. (1998), Corporation Nation, New York: St Martins, Grin.
DiMaggio, P. (1985), Structural analysis of organizational elds: a block model approach,
Research in Organization Behavior, 8, 33570.
Doh, J.P., P. Rodriguez, K. Uhlenbruck, J. Collins and L. Eden (2003), Coping with corruption in foreign markets, Academy of Management Executive, 17 (3), 11427.
Dunning, J.H. (1998), International business enterprises: an overview of relations with
national governments, New Political Economy, 3 (2), 28085.
Fagre, N. and L.T. Wells (1982), Bargaining power of MNCs and host governments, Journal
of International Business Studies, 13 (2), 923.
Fine, B. (2001), Social Capital Versus Social Theory: Political Economy and Social Science at
the Turn of the Millennium, London: Routledge.
Fligstein, N. (1996), Markets as politics: a political cultural approach to market institutions,
American Sociological Review, 61 (4), 65673.
Fligstein, N. (2001), The Architecture of Markets, Princeton, NJ: Princeton University Press.
Foucault, M. (1980), Power/Knowledge: Selected Interviews and Other Writings, 19721977,
New York: Pantheon Books.
Friedman, A.L. and S. Miles (2002), Developing stakeholder theory, Journal of Management
Studies, 39, 121.
Friedman, M. (1962), Capitalism and Freedom, Chicago, IL: University of Chicago Press.
Getz, K.A. (1997), Research in corporate political action, Business and Society, 36 (1), 3272.
Gills, B.K. (2000), Globalization and the Politics of Resistance, New York: Palgrave.
Grandin, G. (2006), Empires Workshop: Latin America, the United States and the Rise of the
New Imperialism, New York: Metropolitan Books.
Granovetter, M. (1985), Economic action and social structure: the problem of embeddedness, American Journal of Sociology, 91 (3), 481510.
Gulati, R. and M. Gargiulo (1999), Where do interorganizational networks come from?,
American Journal of Sociology, 102 (5), 1258304.
Hannan, M. and J. Freeman (1984), Structural inertia and organizational change, American
Sociological Review, 49 (2), 14964.
Hayek, F.A. (1944), The Road to Serfdom, London: Routledge.
Henisz, W.J. and B.A. Zelner (2005), Legitimacy, interest group pressures, and change in
emergent institutions: the case of foreign investors and host country governments,
Academy of Management Review, 30 (2), 36182.
Hertz, N. (2001), The Silent Takeover: Global Capitalism and the Death of Democracy,
London: Arrow.
Hessen, R. (1979), In Defense of the Corporation, Stanford, CA: Hoover Institution Press.
Hillman, A.J. and M.A. Hitt (1999), Corporate political strategy formulation: a model of
approach, participation and strategy decisions, Academy of Management Review, 24 (4),
82542.
Homan, A. (1999), Institutional evolution and change: environmentalism and the U.S.
chemical industry, Academy of Management Journal, 42 (4), 35171.
Husted, B.W. (1999), Wealth, culture, and corruption, Journal of International Business
Studies, 30 (2), 33960.

474

Handbook of research on global corporate citizenship

IIFC (International Indigenous Forum on Climate Change) (2000), Declaration of indigenous peoples on climate change, Second International Indigenous Forum on Climate
Change, The Hague, 1112 November.
Keim, G. and B. Baysinger (1988), The ecacy of business political activity, Journal of
Management, 14, 16380.
Khan, M.H. (1996), A typology of corrupt transactions in developing countries, IDS
Bulletin: Liberalization and the New Corruption, 27 (2), 1221.
Kim, B. and J.E. Prescott (2005), Deregulatory forms, variations in the speed of governance
adaptation, and rm performance, Academy of Management Review, 30 (2), 41425.
Korten, D. (1995), When Corporations Rule the World, West Hartford, CT: Kumarian Press.
Learmount, S. (2002), Corporate Governance: What Can Be Learned from Japan?, Oxford:
Oxford University Press.
Levy, D.L. and D. Egan (2003), A neo-Gramscian approach to corporate political strategy:
conict and accommodation in the climate change negotiations, Journal of Management
Studies, 40 (4), 22238.
Lindgreen, A. (2004), Corruption and unethical behavior: report on a Danish code, Journal
of Business Ethics, 16 (2), 1121.
Mahmood, I.P. and C. Run (2005), Governments dilemma: the role of governments in imitation and innovation, Academy of Management Review, 30 (2), 33860.
Maingot, A.P. (1994), Confronting corruption in the hemisphere: a sociological perspective,
Journal of Intra-American Studies and World Aairs, 36 (3), 313.
Maitland, E. (2002), Corruption and the outsider: multinational enterprises in the transitional economy of Vietnam, Singapore Economic Review, 46 (1), 6382.
Mandel, E. (1999), Late Capitalism, London: Verso, 2nd edition.
Margolis, J.D. and J.P. Walsh (2003), Misery loves companies: rethinking social initiatives by
business, Administrative Science Quarterly, 48, 268305.
McAfee, K. (1999), Selling nature to save it? Biodiversity and green developmentalism,
Environment and Planning D: Society and Space, 17, 13354.
McWilliams, A. and D. Siegel (2001), Corporate social responsibility: a theory of the rm
perspective, Academy of Management Review, 26, 11727.
Meyer, J. and B. Rowan (1977), Institutionalized organizations: formal structures as myth and
ceremony, American Journal of Sociology, 83 (2), 34063.
Mitchell, R., B. Agle and D. Wood (1997), Toward a theory of stakeholder identication and
salience: dening the principle of who and what really counts, Academy of Management
Review, 22, 85386.
Monbiot, G. (2004), The Age of Consent: A Manifesto for a New Global Order, London and
New Delhi: Harper Collins.
Newell, P. and M. Paterson (1998), A climate for business: global warming, the state and
capital, Review of International Political Economy, 5 (4), 679703.
Newton, T. and G. Harte (1997), Green business: technicist kitsch?, Journal of Management
Studies, 34, 7598.
Nozick, R. (1974), Anarchy, State and Utopia, Oxford: Blackwell.
Orlitzky, M., F.L. Schmidt and S.L. Rynes (2003), Corporate social and nancial performance: a meta-analysis, Organization Studies, 24, 40341.
Park, H. (2003), Determinants of corruption: a cross-national analysis, Multinational
Business Review, 11 (2), 2948.
Perrow, C. (2002), Organizing America: Wealth, Power and the Origins of Corporate
Capitalism, Princeton, NJ: Princeton University Press.
Ranger-Moore, J., J. Banaszak-Hall and M. Hannan (1991), Density dependence in regulated
industries: founding rates of banks and life insurance companies, Administrative Science
Quarterly, 36, 2655.
Regan, M.C. (1998), Corporate speech and civic virtue, in A.L. Allen and M.C. Regan (eds),
Debating Democracys Discontent: Essays on American Politics,Law and Public Philosophy,
Oxford: Oxford University Press, pp. 1937.
Reich, R. (1991), The Work of Nations: Preparing Ourselves for Twenty-rst Century
Capitalism, New York: A.A. Knopf.

The political economy of corporate social responsibility

475

Rifkin, J. (1999), The Biotech Century: How Genetic Commerce Will Change the World,
London: Phoenix.
Rose-Ackerman, S. (1999), Corruption and Government: Causes, Consequences and Reform,
Cambridge: Cambridge University Press.
Rugman, A.M. and A. Verbeke (1998), Multinational enterprises and public policy, Journal
of International Business Studies, 29 (1), 11536.
Schaer, B. (1995), Firm level responses to government regulation: theoretical and research
approaches, Journal of Management, 21 (3), 495514.
Schuler, D.A. (1996), Corporate political strategy and foreign competition: the case of the
steel industry, Academy of Management Review, 39 (3), 72037.
Scott, W.R. (1995), Institutions and Organizations, Beverly Hills, CA: Sage.
Scott, W.R. and J. Meyer (1994), Institutional Environments and Organizations: Structural
Complexity and Individualism, Thousand Oaks, CA: Sage.
Sharma, S. and H. Vredenburg (1998), Proactive corporate environmental strategy and the
development of competitively valuable organizational capabilities, Strategic Management
Journal, 19, 72953.
Shiva, V. (1991), The Violence of the Green Revolution: Third World Agriculture, Ecology and
Politics, London: Zed Books.
Shleifer, A. and R.W. Vishny (1993), Corruption, Quarterly Journal of Economics, 108,
599617.
Spencer, J.W., T.P. Murtha and S.A. Lenway (2005), How governments matter to industry creation, Academy of Management Review, 30 (2), 32137.
Taylor, C. (2002), Modern social imaginaries, Public Culture, 14 (1), 91124.
Uzzi, B. (1996), The sources and consequences of embeddedness for the economic performance of organizations: the network eect, American Sociological Review, 61 (4), 67498.
Uzzi, B. (1999), Embeddedness in the making of nancial capital: how social relations and
networks benet rms seeking nancing, American Sociological Review, 64 (4), 481505.
Vernon, R. (1998), In the Hurricanes Eye: The Troubled Prospects of Multinational
Enterprises, Cambridge, MA: Harvard University Press.
Vogel, D.J. (1987), Political science and the study of corporate power: a dissent from the new
conventional wisdom, British Journal of Political Science, 17 (4), 385408.
Vogel, D.J. (1996), The study of business and politics, California Management Review, 38 (3),
14665.
Warren, B. (1980), Imperialism: Pioneer of Capitalism, London: Verso.
Wilson, O.F. (2004), The UN Global Compact: the challenge and the promise, Business
Ethics Quarterly, 14 (4), 75574.
Yoe, D.B and S. Bergenstein (1985), Corporate political advantage: the rise of the corporate
political entrepreneur, California Management Review, 28 (1), 12439.

21 The interrelationship between global and

corporate governance: towards a
democratization of the business rm?
Grahame F. Thompson

Introduction
According to the United Nations Conference on Trade and Development
(UNCTAD) in 2006 there were upwards of 77 000 multinational corporations (MNCs) (UNCTAD 2006, p. 10). Of these, some 57 000 were from
the developed countries. In all, these MNCs involved about 770 000
foreign aliates. The rise of the MNC is often associated with the development of globalization indeed it is taken to be one of its prime indicators. However, quite whether these MNCs are truly global is another
matter. In fact, most of them are conned to a home base with only one
or two overseas operations or aliates abroad. And even the largest
MNCs tend to be supranationally regional in their operations rather than
global (Rugman 2005). They still mainly operate on their home territories, with key foreign activities conned to close regional markets and
sources.
Nevertheless, the development of internationalized companies poses
new problems for both their internal corporate governance and their external regulation. This chapter seeks to explore the relationship between
several features of such regulation and governance. First the relationship
between internal governance and stakeholding is explored. This inevitably
involves some discussion of corporate social responsibility (CSR) since it
is the pressures put upon companies through the CSR movement that has
served to raise issues about the expansion of stakeholder interests within
company governance structures. In part this also relates to the particular
legal form of the limited liability company. The common conception in
respect to companies is that they are there to serve the shareholder interest
only. But stakeholding breaks the exclusive focus on shareholders. So on
what basis can such a wider conception of corporate governance be
founded? The argument is that companies are legal subjects in their own
right, ones that, in fact, own themselves. Once this is recognized other than
a simple shareholder interest in respect to their governance becomes apparent. However, there are many problems associated with stakeholding, particularly as companies have internationalized.
476

The interrelationship between global and corporate governance 477

The chapter then moves on to discuss the external governance context in
which companies are placed as they have become multinational, even if few
are truly global. MNCs are subject to multiple sites and forms of scrutiny,
monitoring and regulation at the international level, all designed in one way
or another to encourage a sense of social responsibility by business rms.
And many rms themselves have responded to these developments by
claiming to be global corporate citizens (GCCs). The characteristics of
this global governance regime for companies its mechanisms and institutions are explored and their impact assessed. We then move on to the
dicult issue of the democratization of the rm particularly of the internationalized rm to assess how to extend the scope of corporate governance to encourage the objective of greater democratic transparency and
accountability. Finally, some of the problems associated with the growth of
new and innovative nancial engineering developments, such as private
equity and corporate raiders, are explored in the context of their consequences for corporate governance as traditionally understood.
The company as legal subject and stakeholding
In respect to the question of company governance, it is important not to
confuse ownership as a legal title with ownership as an economic category and neither of these two with control which is more of a political
relationship.
Limited liability companies are incorporated in law as legal subjects in
their own right, independently of those who either own them or work in
them. This means, for instance, that rms can sue, or be sued, in their own
name. Strictly speaking, then, the shareholder does not own the assets of a
company (Hadden 1995). These are invested in the company itself. What the
shareholder owns, by contrast, is a right or title in the distribution of any
surpluses generated by the company. In addition, share ownership confers
certain voting rights in respect to the appointment of directors and the conditions for share dealing. Under normal circumstances the surplus distributed to shareholders is itself decided by the management. In this respect
within Anglo-American legal practice at least the shareholder is in a similar
economic position to any other creditor vis vis the company as legal subject;
they are both its creditors and have no direct proprietary entitlements in the
companies assets as such. Their interests jointly represent liabilities from the
point of view of the company. The company owns itself, so to speak.
Similarly, although the managers may be (formally at least) elected or
appointed by the shareholder, they are legally constrained to work in the
best interests of the company in the rst instance, not the shareholder.
Their role is to supervise the continuing organizational, nancial and legal
reproduction of the company to maintain it as a going concern, to keep

478

Handbook of research on global corporate citizenship

the capital intact, and so on. Obviously a dierent set of legal conditions
hold if the company is in liquidation, creditors having a prior interest over
shareholders in this instance. But even under these circumstances, creditors
or shareholders cannot seize the companys assets at will, so nor do they
own it in this sense. Here both shareholders and creditors are similarly
constituted as claimants with only a contingent title in respect to the
companys assets (Kraakman et al. 2004; see also Hohfeld 1919).
In addition, claimants must act in accordance with due legal process.
What this means is that legal rights in respect to any company are always
highly specic and contingent, and what they impart to dierent agents are
dierential capacities and capabilities to undertake actions or engage in
litigation. Legal rights do not exclusively or unconditionally guarantee
access to ownership or anything else but only arrange possibilities for
undertaking litigation or initiating actionable endeavour in the courts.
This point is important in several respects, particularly in the debates
about property rights. These do not impart an exclusive, unconstrained or
unconditional possession to a denite subject or agent. It is not the case,
then, that any attenuation of those rights involving a circumscription or
restraint on their exercise, usually thought to be imposed by the political
process or the state necessarily represents an unwarranted challenge to
those rights of possession. Property rights attribute no more (or no less)
than a capacity or capability to initiate something (like a claim on the assets
of a rm). But that guarantees nothing in terms of outcomes. It only contingently and conditionally arranges a series of possibilities for legal disputation and action.
So with this conception there is no general public or private privileged possession of, or exclusion from, ownership. In principle the law could thus
establish a set of rights that impart capacities and capabilities to any number
of constituent stakeholders without this necessarily undermining a deeper or
more fundamental ownership relation because, as agued above, rights in law
are never rendered with respect to an exclusive possession, but only in respect
to a claim. Here we see the way a discussion of the nature of company law
can establish the principles for the wider notion of stakeholder democracy.
Philosophical arguments for stakeholding
But we could buttress these legal arguments for stakeholder democracy with
some philosophical ones. Any discussion of economic democracy must confront the classic triptych: democracy, liberty, equality (Dahl 1985). Why is
there such a political sensitivity surrounding issues of economic democracy?
The classic arguments here involve whether economic democracy threatens
individual liberty, or whether it is absolutely essential for its eective exercise (Berlin 1958).

The interrelationship between global and corporate governance 479

Those who feel that liberty would be threatened by economic democracy,
see this threat arising as a consequence of greater equality. One of the key
conditions for securing liberty, it is argued, is the private ownership of
property. If this results in political and economic inequality, so be it. It is a
price worth paying for the benets of liberty and freedom from authority.
Liberty and freedom are fundamentally inscribed negatively in this view.
They represent freedom from constraint in its strongest sense, an absence
of coercion (Hayek 1994). The private ownership of capital and wealth is
the foundation stone of the capitalist system, and the capitalist system in
turn guarantees those freedoms and liberties it so eagerly invokes in its own
name. An excessive concern with equality challenges the proper outcomes
that emerge from the operation of the market system. Any compromise in
respect to individual liberty, occasioned by an overzealous concern for
equality, would act to undermine that system. In as much as democracy
fosters an excessive consideration for equality, by placing it above the consideration of liberty, it becomes suspect and should be circumscribed. It is
this conception of the centrality of private ownership expressed in the
conventional (though somewhat misplaced) terms as just discussed above
that underpins the idea of an exclusive shareholder democracy as the only
basis for corporate governance.
On the other hand, we have an approach that sees economic democracy
and equality as absolutely central to securing liberty, rather than as a potential deadly threat to it. Indeed, in this case economic inequality and a lack
of economic democracy pose serious threats to the eectiveness of capitalism. This is because the political legitimacy of capitalism is at risk when
inequalities are large and democratic decision making absent. Here liberty
and freedom are more positively inscribed: they relate to the capacity for
action rather than to a lack or otherwise of constraint (Wootton 1945).
Liberty becomes the eective ability to initiate action and implement
change in a range of areas. Thus there is no necessary sacrice of liberty
under conditions of economic equality or democratic decision making.
Indeed, from this position, it is the plurality of arenas and forms of economic organization that is celebrated. A plurality of freedoms and liberties,
of spheres of justice and of fairness, of ethical considerations and deployments, is what counts (for example, Walzer 1983). In this case the existence
of a range of stakeholders expressing or representing a range of social
and ethical concerns would be welcomed rather than considered a potentially sinister intrusion or threat.
To some extent this discussion of positive liberty as a way of buttressing
a commitment to stakeholder democracy underlies the way legitimacy is
treated in relationship to corporate behaviour. Legitimacy is one of those
complex categories that has several competing meanings and implications

480

Handbook of research on global corporate citizenship

(Suchman 1995; Wolf 2005; Palazzo and Scherer 2006) . In general terms,
the concept expresses the way in which norms, rules and (particularly) laws
are accepted as valid willingly obeyed and respected because they have
the backing of authority or are authorized in accordance with generally
accepted values and expectations. This encourages consent to the power
relation that is embodied in authority.
In the business world, legitimacy is often thought necessary and, indeed,
a precondition for corporate survival. It secures the continual ow of
resources and the support from external constituencies. In making the
actions of corporations seem to be proper and appropriate within generally
accepted, recognized and authorized social norms and expectations, management secures the continued legitimacy of their organizations. An
obvious way in which such legitimacy is advanced is via both an address to
the concerns of external stakeholders and the possible welcoming of
greater internal corporate democracy to embed that legitimacy.
While these philosophical considerations could certainly serve to inform
the debates about shareholder and stakeholder governance (Clark 2004),
as we have seen, the modern corporation is a very specic instrument of
economic and legal organization in advanced capitalism. The next two
sections explore some implications of the practical nature of the modern
corporation.
Economic arguments for stakeholding
The classic statement for an exclusive shareholder focus for corporate governance was given by Milton Friedman (1970). As might be expected from
the author of a book called Capitalism and Freedom (Friedman 1962), this
essentially reiterates the negative freedom argument as outlined above. The
role of business is to maximize the return to the shareholder who is the
unambiguous owner of the business. Any deviation from this undermines
freedom since it substitutes the wishes of the unaccountable agent (the
manager) for those of the principal (the proprietary owner). In eect, this
undermines the market system and replaces it with an ultimately coercive,
political and social(ist) decision-making procedure.
Ever since this proclamation by Friedman there have been attempts to
provide a clear and rigorous economic argument for the extension of governance to include other stakeholders, one that does not undermine the
incentives for the maximization of value by weakening the overall production of welfare. One of the most successful of these is the hold-up argument. Given that contracts cannot ever be completely comprehensive this
gives rise to the possibility of opportunism. If agents cannot be committed
to keep to an agreement, relationship-specic investment will be curbed and
a hold-up produced (Blair 1995). Ordinary market-based transactions

The interrelationship between global and corporate governance 481

create no stakeholding they involve well-specied contracts (you do the
job, you get the payment). Rather, relationship-specic investments are
specic to the rm involved and are at risk in respect to that enterprise only;
they thereby create a stakeholding. The degree of asset specicity is dened
as the fraction of the value of the asset which is lost if the asset is excluded
from its major use (Milgrom and Roberts 1992, p. 305). If two parties both
make relationship-specic investments, their assets are co-specialized; that
is, the two assets are most productive when used together and are of little
value separately. In this way stakeholder relationships produce a mutual
dependency between the participants in the enterprise. The return on the
relationship-specic investment of a particular stakeholder depends upon
actions of other participants in the rm.
From this perspective the main type of stakeholders are the managers
who have a decision-making capacity that may be specic to the rm; the
employees who invest a part of their human capital in the specic operations of the rm; shareholders who have a specic interests in the rm;
creditors as the suppliers of debt nance who know the particular circumstances of the rm; upstream suppliers of components and intermediate
goods; any joint-venturing partner rms; and consumers who have a longterm purchasing commitment to the rms products and its brands.
Although such stakeholders have a common commitment to the continuity of a rms operations it does not mean that they all have exactly the
same interests; shareholders and debt nanciers would have dierent views,
for instance, if the share value plummeted. Contracts are always incomplete
under these circumstances because of bounded rationality, which generates
transaction costs; contracts that would specify all parties obligation in
respect to all future contingencies are not possible because of the inordinate costs involved (Milgrom and Roberts 1992, ch. 5; Hart 1995). Thus the
only way to reconcile such conict is for there to be a governance forum
of some kind, where the dierent stakeholder interests can be confronted
and worked through to provide some resolution and agreed-upon decision.
Hence the case for a stakeholding democracy of sorts.
A second major economic argument for stakeholding concerns the existence of externalities (Crouch 2006). Externalities arise when the operations
of a rm produce not only value for the organization but have an impact on
the external environment as well. This impact may be negative or positive.
Negative externalities occur, for instance, when the operations of the rm
produce environmental pollution. Positive externalities occur when, for
instance, its operations generate public benets to the local economy, when
an invention by one rm leads other rms to gain cost advantages in their
own production operations or when the labour market benets through a
general increase in the skill content of employment as a single rm expands

482

Handbook of research on global corporate citizenship

(these are all sometimes termed dynamic external economies of scale).

These examples generate potential stakeholdings; for example, for the environment, the local community, the unemployed and so on.
Thus again, from this perspective in theory at least there are a range of
stakeholder interests created by these externalities which, if addressed by creative mechanisms for their consideration by corporate governance, would
potentially redress social disadvantage or enhance welfare, without this necessarily destroying the underlying market system. Addressing externalities
a form of market failure can enhance overall welfare. And given that there
is no reason why all these stakeholders should have exactly the same interests, some means for the reconciliation of dierences between them within
the corporate governance framework is posed by this form of analysis. A
response to this is taken up and developed in the rest of this chapter.
Corporate stakeholders and citizenship
Once we conceive of the corporation as legitimately open to a range of
stakeholder interests, several new issues arise. Figure 21.1 shows an array
of possible corporate constituencies of varying characteristics and statuses.
Only one of these the investor/shareholder is traditionally considered
a stakeholder from the point of view of corporate governance. A number
of the others have a direct contractual relationship with the company (for
example, workers, customers and suppliers), so it is often argued that there
is no need to consider these as explicit stakeholders. However, the rapid
expansion in importance of the category of intangibles in company balance

Creditors

Political
groups

Government
The
environment
Suppliers
FIRM

Customers

Trade
associations
Communities
Employees

Figure 21.1

The
unemployed

Corporate constituencies

The interrelationship between global and corporate governance 483

sheets, which includes the customer base and goodwill as assets (along with
rm-specic human capital), implies a radical change in the nature of
company activity that bolsters the idea that customers (and workers)
should be considered as genuine stakeholders. If these categories of assets
are included in the balance sheet, they implicate new explicit stakeholding
interests analogous to those of shareholders. More controversially, a
number of other less obvious stakeholders are included in the gure.
Notable among these are the unemployed and the environment. These may
be extreme cases because there is no obvious way in which they can easily
be constituted into an interest that might be represented in any wider corporate governance arrangement. Later the chapter returns to this issue, but
at this stage it is worth drawing attention to the added diculty of operationalizing a stakeholder governance system that might include many of
these interests when considering internationalized companies.
One of the consequences of including an increasing range of possible
stakeholder interests in corporate governance is that the number of issues
being pressed upon companies itself expands. Box 21.1 lists a series of these

BOX 21.1

ACTIVITIES ASSOCIATED WITH CSR

AND STAKEHOLDING

Ethical issues/values/human rights.

Working conditions/labour standards/health and safety at
work/gender inequalities/child labour.
Environmental preservation/emission of pollutants/sustainable development.
Tackling poverty.
General health care/fighting HIVAIDS/epidemic prevention
and fever control.
GM crops and foods/preserve bio-diversity.
Fair trading.
Tax avoidance/corruption.
Transparency/accountability/corporate governance.
Conflict prevention.
Fostering the local community.
Shareholder returns/marketing/traditional business bottomline issues.

Source: The information was compiled from various corporate

social responsibility reports.

484

Handbook of research on global corporate citizenship

that have arisen from a scrutiny of corporate responsibility reports. These

reports give an indication of what stakeholder concerns might involve since
the CSR movement is the great champion of stakeholder democracy.
Not all of these issues appear in every CSR report of course, but they
indicate the range of concerns that are being increasingly pressed upon
companies generally. The problem directly posed by this list is whether
companies can be, or indeed should be, encouraged to respond to all these
issues even if they wanted to. There is a real danger that the CSR movement
and stakeholder democracy could destroy itself by overwhelming companies with too many obligations and objectives (Ward and Smith 2006).
Companies cannot be expected to solve all the worlds problems. There has
to be a reasonable balance struck between the traditional nancial bottom
line (indicated by the nal issues included in Box 21.1) and some legitimate
social and environmental objectives.
One of the reasons why companies are being manoeuvred, partly by the
CSR movement, into a position in which they feel obliged to address more and
more of the issues collected in Box 21.1 is their self-designation as corporate
citizens. Once companies claim some kind of citizenly status they lay themselves open to the charge that they should act like ordinary citizens, whose
rights and obligations involve and concern the issues signalled in the box.
All this begins to raise some rather dicult issues associated with the category of citizenship, particularly where corporations are concerned
(Thompson 2006). Two classic forms of citizenship can be elaborated: acts
citizenship and status citizenship. The typical characteristics of these two
forms are shown in Box 21.2.
Acts citizenship invokes a behavioural approach that stresses what
agents do to claim a citizenship. Ultimately it is voluntary in nature, associated with the exercise of civic virtue, stressing an active involvement in
public aairs and operations in respect to the civic sphere. By contrast,
status citizenship pertains to a denite legal entitlement, where rights and
obligations are thrust upon agents as a consequence of them being
members of a polity or community, and from which they cannot voluntarily withdraw. Furthermore, it is this second form of citizenship that is most
closely associated with formal democratic activity and the exercise of political rights and obligations. What is at stake in discussions of these two
forms of citizenship is the relationships between them (see Kelsen 1945, for
a classic example of such a discussion). And invoking the general category
of corporate citizenship also inevitably raises questions about the relationships of companies to democracy, to political obligation and to a polity
or community to which they belong. So inasmuch as companies designate
themselves as global corporate citizens, they are responsible for bringing
this discussion upon themselves.

The interrelationship between global and corporate governance 485

BOX 21.2
1.

Acts citizenship
a)
b)
c)
d)
e)

2.

CHARACTERISTICS OF TWO TYPES

OF CITIZENSHIP

Act in a way that invokes a civic virtue.

Stresses active engagement or involvement in public
affairs and in the public sphere.
Voluntaristic.
Behavioural.
Represents a claim only.

Status citizenship
a)
b)
c)
d)

Rights and obligations determined within the context of a

definite polity.
These embodied in a clear legal form.
Involves the democratic exercise of membership duties
and obligations.
Obligations thrust upon citizens in a take it all manner.

Several further diculties arise if such a discussion is to be conducted

with respect to companies as distinct from individuals. We have seen how
companies are a denite legal subject they have a presence in law in distinction to the individuals who run them or otherwise work in them. In fact,
there are several features of the rights that rms can claim that parallel
those of ordinary citizens. The clarication of these is probably easiest to
identify in the case of US legal practice since here there is appeal to the
Constitution for clarication (Aligada 2006). The distribution of these is
shown in Box 21.3.
Several implications follow from these points. First it shows how claims
are a contingent consequence of the status of companies as created by
statute law. Companies are always incorporated in a denite jurisdiction.
But could this give them the status of being citizens of the polity in which
they are incorporated? Clearly, in some respects it does, as indicated in the
box. But what it crucially does not confer are rights associated with political citizenship, roughly indicated by those aspects of legal citizenship
included in the bottom half of Box 21.3. A corporation is a legal person
(or subject), but it is a ctitious person or virtual person. Strictly speaking citizenship is a legal status only aorded to natural persons.1 And

486

Handbook of research on global corporate citizenship

BOX 21.3

CORPORATIONS CLAIMS ON FORMAL

LEGAL CITIZENSHIP (USA)

What companies can claim:

1.
2.
3.
4.
5.
6.

Equality of protection and treatment.

Trial by jury.
Protection from unreasonable searches and seizures (for
example, of property).
Takings without compensation.
The exercise of due process.
Non-discrimination.

What companies cannot claim:

1.
2.

3.
4.

Protection against self-incrimination (that is, the prevention of

a witness from testifying against him- or herself).
That corporations and their officers are the same person
(thus corporations are separate from their officers whereas
there is no analogously similar claim that can be made by
natural person).
Claim certain protections while abroad.
They cannot command a vote or exercise any of the political
consequences that follow from this capacity.
Source:

Adapted from Aligada (2006).

natural persons must possess certain attributes to qualify: they have to be

cognate beings, able to rationalize and make decisions. Strictly speaking,
therefore, it is probably analytically incorrect to apply the legal term citizenship to anything other than a natural person (it would be like asking
whether a dog or a sh, or even a mushroom, can be a citizen). In the normative sense, however, there seems no reason why a corporation cannot be
considered a normative citizen. That is, the same acts tests can apply to
human persons and corporations: a corporation can perform good works,
support community initiatives, reduce its deleterious impact on the environment, and so on. However, all this just shows how poorly dened the
normative dimension of citizenship is. To talk of corporate citizenship in
this sense should be recognized for what it really is, no more than a rhetorical strategy an attempt to disguise a policy option, or set of options

The interrelationship between global and corporate governance 487

pursued, within an inappropriate discursive category. Recalling what Marx
and Engels (1850) had to say about utopian socialism that the bourgeoisie
want the proletariat to love them there are no problems with corporations
trying to be lovable, but they should be loved for the right reasons. To call
this citizenship is a potential confusion of categories. We need a dierent
category here, or perhaps an older one namely CSR. That is probably an
adequate one to describe the normative aspects of lovesick companies
(Thompson 2006).
Most companies that claim to be good corporate citizens do so on the
basis of their acts. They take responsibility and act to promote good
working conditions within the boundary of their company, and in their
supply chains beyond; they are concerned to minimize the environmental
damage of their operations; they seek to act ethically and to encourage sustainability in respect to their activities, and so on. However, their status as
citizens is more questionable, as just indicated, and this becomes even more
problematic in the case of MNCs when operating internationally. What is
the polity from which their citizenly status can be derived, or to which it can
be attributed? This just does not exist at the international level. MNCs have
no legal status in international law. At best they are creatures of an aggregation of national jurisdictions and local resources.
Thus the approach adopted here parts company with what could be
termed the organizationalethical approach to corporate citizenship
(Logsdon and Wood 2002; Matten and Crane 2005; Moon et al. 2005). This
approach stresses a normative and ethical notion of citizenship to the
neglect of its legal and positive denition. It celebrates an extended vision
of the CSR agenda, very much driven by a commitment to ethical acts and
participation by companies in fullling or taking over civic duties in the
name of their values. This is considered in a basically domestic context,
where deliberative democracy occupies a key role in pushing the normative
agenda (for example, Palazzo and Scherer 2006). Apart from the comments
already made earlier about the shortcoming of this approach in respect to
category mistakes and the dangers of a lack of attention to status aspects of
citizenship, it also invests too much in the idea of deliberative to the detriment of substantive notions of democracy (deliberative norms refer to
democratic aspects of activity such as transparency, due process, the representativeness of participants and so on; substantive norms refer to rule of
law, genuine contestation and compromise over policies and outcomes, separation of powers, including, crucially, an independent judiciary, freedom
of the press and so on). For deliberative democracy, procedure is everything in terms of democracy, just as this now animates the commitment to
a certain conception of citizenship by the corporate organizationalethical
approach (see also, Norman and Nron 2007).Thus any serious attempt at

488

Handbook of research on global corporate citizenship

generating corporate democracy would need to involve two aspects: some

forum for deliberation within the company, but also substantive rules
for stakeholders to be included in that deliberation which is backed by law
or the authority of a sanction. How this might be conceived is discussed
below.
Classifying companies in respect to CSR
Of course, not all companies claim the title of good (global) citizens.
Those who do constitute a minority. Broadly speaking it is those companies
that readily promote the idea of CSR that also fall into the category of
claiming this as citizenly activity. A way of classifying companies in respect
to their attitudes towards CSR is shown in Figure 21.2.
Companies can be divided into those that think social and ethical values
(S&EV) are central for their business activity and those who think these are
irrelevant. This is shown along the horizontal axis. On the other hand, there
is the business and nancial rewards dimension to company activity. Do
they think that a commitment to S&EV enhances their bottom line or is
irrelevant to it, or, perhaps put slightly dierently, would the market reward
these businesses for their commitment, or otherwise, to S&EV? This dimension is shown on the vertical axis.
Commitment to ethical values
Irrelevant
Cynics

Financial and
business rewards

Strong

Energy
Corporations
Extractive industries
Wal-Mart
McDonalds

Bottom
feeders

Weak

Figure 21.2

Ryanair
Hedge & Private Equity Funds
New Corp
Monsanto
Halliburton

Essential
True
believers
Novo Nordisk
Lefrage
BP
GlaxoSmithKline

Ethical
producers
Fair trade corporations
Organic producers
Small cooperative banks

Company attitudes towards CSR/GCC

The interrelationship between global and corporate governance 489

We could begin to place dierent companies in the four cells marked out
by the gure, and what is shown here is a preliminary classication. It contains some headings, some sector aliations and some possible named
companies. None of this distribution is meant to be rigorous. It is for illustrative purposes only. The bottom feeders would be those that felt a commitment to S&EV to be irrelevant, and that it would have no impact on
their nancial and business rewards or performance. At the other extreme
are those companies that felt S&EV to be vital to their business and that it
would have, and indeed does have, a very signicant impact on their
nancial and business performance. These are designated the true believers. Many of these can be found on the FTSE4Good stock market index
where the leading socially responsible companies are gathered.2 Between
these two cells lie the cynics on the one hand and the ethical traders on
the other.
The former represent those companies who might think that S&EV are
basically irrelevant, but recognize that a pragmatic commitment to these is
a sensible (if sometimes unfortunate) necessity because it does provide
nancial and business rewards and benets. Often these are the companies
that have experienced a public campaign against their activities (or who
wish to ensure against one) and who want to present a more appropriate
public image as a result. From the point of view of those committed to
S&EV in business, or who advocate for this, moving companies from this
cell to the top right-hand side one is the main objective. This is what the
CSR movement is committed to.
Finally, there are the ethical producers who are fully committed to
S&EV but who reap a thin reward from it. In part this would be because
the importance of S&EV to business outcomes is not yet fully recognized
by the market in these cases. Alternatively, it could be because these companies are small and often ineciently run.3
Figure 21.2 provides an initial mechanism for classifying company activity in respect to social and ethical values in business. It presents the
company layer of the full CSR/GCC governance picture. In the next
section a further layer to this picture is sketched out, dealing with the key
external governance frameworks for international companies, namely the
structure of advocacy and scrutiny organizations.
A global corporate governance framework
In an overt international context, of course, it is convenient to underplay
the status aspects of citizenship because these just cannot operate there in
the same way that they might in a domestic context; there is no obvious substantive polity with the administrative or governing capacity to establish
and enforce citizenship rights and obligations. Instead we have a range of

490

Handbook of research on global corporate citizenship

Types of international regime

Political objective

Communitarian
(closed borders)

OECD/WB

WEF
ICGN
WBCSD

UNGLOBAL COMPACT

(I)NGOs

Democratic
sovereignty

Social
justice

Cosmopolitan
(open borders)

Note: WB  World Bank; WEF  World Economic Forum; ICGN  International

Corporate Governance Network; WBCSD  World Business Council for Social
Development; (I)NGOs  international non-governmental organizations.

Figure 21.3

Sorting out GCC advocacy organizations

organizational bodies that have arisen to claim, advocate and monitor

CSR/GCC aspects of MNCs business practices as they see them. These are
not inconsequential in practice, and they may have a genuine impact on the
nature of some international businesses in a CSR context (Thompson
2005). Faced with this combination of actual organizations, Figure 21.3
explores a preliminary way to categorize them. It illustrates the distribution
of those bodies designed to advocate for and monitor the GCC activities
of companies. Two types of political objective are shown (democratic sovereignty and social justice) and two types of regime (communitarian and
cosmopolitan). Representative organizations that t into each of the cells
are also illustrated.4 Thus Figure 21.3 provides a further layer to the multilevel governance structure of CSR/GCC.
But Figure 21.3 also enables us to open up a discussion of another important aspect of the overall emerging global corporate governance regime.
Given the debate above about companies increasingly claiming to be citizens, a key issue is whether the activity centred around the organizations
shown in Figure 21.3 amounts to a surrogate constitutionalization of the

The interrelationship between global and corporate governance 491

international arena (Thompson 2006). Citizenship is a term at the very
centre of constitutional debates. Are we seeing, therefore, the informal,
unrecognized, almost surreptitious emergence of a global quasiconstitutionalization of corporate governance matters, which may be creeping up unnoticed as these organizations go about their business of
advocating and promoting GCC?
Take the UN Global Compact as an example. This was launched in 2000
as the then UN Secretary-General Ko Annan invited the corporate world
to join the UN in a partnership to advance the agenda of corporate citizenship. This involves a set of ten principles (not rules) associated with the
usual issues of social responsibility: human rights, working conditions,
environmental preservation, anti-corruption and so on. As of October
2006 there were 3689 signatories, 2900 of which were companies. These are
voluntary codes of conduct and there is no enforcement mechanism. It is
often described as an enabling and learning network (see McIntosh et al.
2004). This initiative has encouraged a set of other similar initiatives by the
UN to engage private actors in various forms of sponsorship for responsible behaviour (for example, Principles for Responsible Investment). But
there are issues associated with the nature of such a partnership with
private businesses, which the UN Department of Legal Aairs has been at
pains to address (United Nations, 2000). The UN is an intergovernmental
body that has a clear status in international law. MNCs are aggregations of
resources and a jumble of national holding companies with no clear status
in international law. So what exactly is the UN doing, forging partnerships
with these agents who thereby agree to adhere to its principles? A good
deal of this is couched in quasi-legal language. And while there is a precedent for the UN to engage with civil society actors such as NGOs, these
are closely scrutinized (even regulated) in terms of their representativeness, geographical location, organizational structure and so on. No
such scrutiny is involved with partner companies. Anyone can join from
anywhere.
Somewhat similar issues arise in the case of the Organization for
Economic Cooperation and Developments (OECD) Principles on
Multinational Companies; although the OECD is not a recognized agent
in international law, its principles have a semi-ocial status. Each member
state has a National Contact Point (NCP) charged with enforcing the principles. This delegated agency is usually located in a government oce (in
the UK in the Department of Trade and Industry). It can hear complaints
against companies initiated by a number of actors, including accredited
trade union bodies, employee associations and NGOs. However, companies cannot be sanctioned because, rather like the principles of the
Global Compact, the OECD principles are also voluntary. They involve

492

Handbook of research on global corporate citizenship

only moral suasion. The NCPs can, however, call for arbitration, and such
meetings are conducted in a quasi-legal manner, though lawyers are not
directly involved in the actual process. Information suggests, however, that
lawyers are involved in the run-up to any arbitration, providing advice and
suggestions for strategy and tactics.
The point about these and other mechanisms that could be discussed
here is that they smack of constitutionalization by the back door. They
would seem to involve, at least in part, an evolving semi-formal system of
customary commercial law, addressing issues traditionally associated with
GCC. They might thus be viewed as acts that are thereby conferring statuses that were neither initially intended, nor for which there is a proper
legitimate authority to sanction.
Problems with stakeholder democracy in an internationalized corporate
environment
The discussion above has concentrated on the external governance environment or regime designed to encourage companies to take their social and
ethical responsibilities seriously and to monitor whether what companies
say they are doing they are actually fullling. This section returns to the
more internal constitution of corporate governance by returning to the
ideas of stakeholding.
In respect to company governance there have been many voluntary initiatives that are designed to enhance the role of the shareholder; to stimulate shareholder activism, trim the power of CEOs and raise the prole of
non-executive directors. In this they may have been at least partially successful. On the other hand, large sections of the INGO community and
those arguing for wider CSR/GCC stakeholder reforms leave the implementation of their concerns rather vague somehow it will be within the
context of national law or regulation that reform will have to take place. An
explicit address to the role for other stakeholders directly in corporate decision making remains the missing link here. This used to be termed corporate democracy but this term has somewhat fallen out of favour. Even the
most progressive of companies that have embraced the full CSR agenda
enthusiastically do not talk much about corporate democracy. In large part,
then, CSR is a substitute process and a less threatening one for corporate
reform than corporate democracy, hence, to some extent at least, its enthusiastic embrace by the corporate world. And this is another dimension that
could allow us to dierentiate between CSR and GCC. Hard denitions of
citizenship require a status recognition to be a legitimate actor in a political community and at a minimum this also requires democratic credentials to sustain that legitimacy (see the discussion of legitimacy, earlier).
Thus on this basis, it would only be if there were genuine moves towards

The interrelationship between global and corporate governance 493

serious corporate democracy that a right of citizenship could be claimed
and more importantly, perhaps, conferred.
Company reform to increase internal democratic decision making is a
complex issue, made even more so by the progressive internationalization
of business activity as suggested above. But suppose there was a dramatic
change in the sentiment associated with GCC among companies and governments alike so that they were eager to embrace radical reform. How
could this be organized and implemented in practice?
Elsewhere this issue has been addressed in more detail, though still in a
preliminary way (Thompson 1996; Driver and Thompson 2002; Thompson
and Driver 2004). The main problem is exemplied by the case of treating
something like the environment or the unemployed as a stakeholder. How
could these be constituted into viable and convincing entities able to be
involved in any direct decision-making activity? And these examples, while
extreme ones perhaps, are illustrative of the wider diculty of constituting
the stakeholders shown in Figure 21.1 as decision-making entities for
MNCs as the international basis of their activities spreads.
The conventional language employed in situations where formal democratic means are being discussed would be to think of this as a problem of
the representation of an interest. But the diculty is clear in the case of the
environment (and many of the other stakeholders included in Figure 21.1).
How could this be constituted as an interest? The way round this is to
abandon the language and indeed, the conception and practice of both
representation and interests. Instead, it is a former language of political
analysis that is invoked here: that of championing and stewardship. Any
reformed decision-making arena within the rm needs to be thought of as
an arena of stewardship or championing rather than of representation. In
whatever way champions were elected or appointed, they would simply act
as decision makers not as representatives of an interest. They would be
there to champion a cause, nurture it and act as a steward of that cause
through any corporate decision-making and implementation processes.
Clearly, this approach raises all sorts of diculties of its own, not least as
to the mechanism of how such champions would be appointed or how they
would be made accountable. One way forward would be to strengthen the
non-executive directorship role via this route. As it stands, most existing nonexecutive directors are appointed very much through the old-boy network.
They are already known to the rm, or are in its immediate network of contacts. But they lack a clear alternative brief as a result, which is why there has
been such an interest in re-vamping their role in the rather restrictive corporate citizenship reform so far enacted. The suggestion here would be much
more radical and would strengthen the role of the non-executive directorship
by making it the job of such directors to champion the cause of the

494

Handbook of research on global corporate citizenship

unemployed, the environment, the community, the employees, the customers

and so on, even the creditors. And this would put these various considerations at the very heart of the organizational decision-making processes.
But where would such champions be found and how would they be
appointed? Here we might think of the formation of a pool of such personnel from which could be drawn suitable individuals to serve on dierent
company boards or senates, or who were elected to do so (this would be a
way of increasing the gene pool of directors). But who should be responsible for generating this pool of expertise? Here it could be suggested that
already existing global governance organizations, national bodies and governments, INGOs, trade and professional associations, interested and competent pressure groups, and even other companies in completely dierent
sectors, and the like, that already address these separate issues should constitute themselves into quasi-constituencies around their existing concerns
and provide lists of such acceptable personnel as potential candidates. They
could then either elect or appoint to companies as suits their purpose, but
operating in an open and transparent manner. The champions so produced
by such a process would then have to report back to such bodies on their
stewardship: their accountability would be addressed to these new civil
associations as they might be termed.5 In a sense, then, what is being promoted is a form of indirect democracy to address the issue of accountability. But what about legitimacy, the other pillar of democracy?
Here the suggestion would be that to gain such legitimacy the new civic
associations outlined above might have to be accredited by existing international representative organizations (such as the UN, the World Bank, the
OECD and the Bank for International Settlements: BIS) and perhaps lists
of the candidates proposed by them as appointed champions would be allocated in proportion to rules established by those representative bodies. In
that way, legitimacy would be established for activist involvement even at
the international level. Thus the legitimacy of the process relies upon the
legitimacy of the organizations that support it and feed personnel into it in
a two-stage manner as outlined here. And this also undermines the surrogate quasi-constitutionalization of the international arena warned against
above, since these organizations are legitimate intergovernmental ones.
In some ways the overall architecture of this process could be less cumbersome and onerous than either elaborate frameworks for corporate
democracy (as that suggested by Turnbull (1994) for instance) or the
earnest maximization of CSR processes in rms as described by the list in
Box 21.1. To fully press these concerns can be heavily bureaucratic and time
consuming. Both are in danger of promoting excessive democracy. There
is always a trade-o between democracy and eciency. Thus one should
not always worry about the charge of not being democratic enough. Just

The interrelationship between global and corporate governance 495

like everything else, there must be limits to the extent of democracy. The
precise nature of these limits, of course, cannot be established in advance
of the discussions and negotiations conducted in the various arenas in
which such activities take place.
New international nancing and corporate governance
Financial companies often appear near the top of any league tables involving CSR activities (Ethical Corporation 2006). But this mainly applies to
traditional banking businesses. Recent developments in the nancial sector,
however, have witnessed the emergence of a new breed of nancial institutions that are rapidly challenging the traditional banking sector. Among
the most vigorous of these are hedge funds, private equity funds and
various forms of corporate raiders. These are having a profound eect on
the entire business environment since the objective of this new form of
nancial activity is to restructure companies through takeovers that
unlock dormant value, often unbundling the businesses via asset stripping, and sometimes taking them into forms of private ownership, at least
for a while before reoating them on public exchanges. All this is done
under a rhetoric of eciency: making companies leaner and tter, undermining complacency and so on. Hundreds of billions of dollars are
involved in this business, and its activities are no longer conned just to
Anglo-American type economies. Even very large public companies can
come within the grasp of these new private funds, who ruthlessly stalk their
prey across international frontiers.
The actual eects of this (as opposed to the rhetoric) have been to allow
value skimming by the principals involved in the activity, who accumulate
vast fortunes as a result (for example, Froud and Williams 2007). In many
ways this is a throwback to an earlier era of rapacious nancial engineering and reckless commercial practices, where any ideas of a wider social
responsibility are simply ignored. That is why these nancial organizations
would appear under the bottom feeder heading in Figure 21.2.
From a CSR perspective this is an unwelcome development. It is dicult
enough to conceive of genuine democratic advance with respect to the more
traditional nancial sector institutions, but in many instances the new
breed of nancial organizations lack even a rudimentary corporate governance structure in the conventional sense. These organizations substitute
debt for equity, they take their newly acquired businesses out of public quotation and into the private sphere, and they are the subjects of a very light
touch regulatory regime. Even conventional shareholder democracy is
undermined as a result, and in fact, they remain without proper corporate
governance (other than in the form of a rudimentary market discipline).
But this is a rapidly growing element in the nancial sector which threatens

496

Handbook of research on global corporate citizenship

to overwhelm the traditional publicly quoted company on which much of

the above analysis was based. Its development represents a real challenge
to the CSR/GCC movement.6
Conclusions
The development of the CSR movement has created considerable momentum for the creation of wider stakeholder governance structures and even
the re-emergence of a concern with economic democracy. But this movement needs to be careful not to overplay its hand. To start with, burdening
the corporate sector with too many undeliverable social and environmental obligations will undermine condence in the movement. Second there
needs to be a more precise use of language and conceptualization in respect
to what it is that companies are doing as they address their traditional CSR
objectives. In this respect, it has been argued that the idea of corporate citizenship looks to be an inappropriate category to deploy, particularly in an
international context. And this is not just a matter of nomenclature; it has
signicance that corporations cannot be considered as global citizens. It
means that the attention must be directed back into the politics of the
domestic arena for regulation and onto multilateral intergovernmental
organizations once again when considering the global context for regulating internationalized companies. The surreptitious constitutionalization
of the international corporate arena, through the development of a quasicommon law legal code associated with the voluntary regulation of MNCs
and other agencies, is a potentially problematic development.
But with some imaginative thinking about how democratic decision
making might be implemented for MNCs, and a more careful attention
paid to new forms of nancial innovation that aects the traditional corporate sector, there is no inherent reason why an agenda for a stakeholder
democracy cannot continue to advance. Close attention to the legal status
of companies, along with more philosophically based arguments about
economic democracy, can provide good and telling arguments which could
serve to considerably extend the ambit of corporate governance and
widened democratic decision making.
Notes
1. There may be some partial exceptions to this norm. For instance, the City of London has
an unusual governmental structure made up of the Lord Mayor and the Court of
Common Council which comprises Aldermen who are in part elected by city corporate
businesses and commercial partnerships not just by resident individuals (see: http://www.
cityoondon.gov.uk/Corporation/about_us/governing.htm, accessed 20 October 2007).
In addition, Hong Kong has special representatives of certain commercial interests who
can vote in the legislature, who are not exactly elected by individual voters, but, in eect,
appointed from functional constituencies (see: http://en.wikipedia.org/wiki/Legislative_
Council_of_Hong_Kong, accessed 20 October 2007). In both cases, citizen voters are not

The interrelationship between global and corporate governance 497

2.

3.

4.

5.
6.

necessarily natural persons. However, these tend to be marginal cases, ones either of a historical anomaly with little real power, or arrangements designed to deal with limited and
unusual situations.
The FTSE4Good (see: http://www.ftse.com/Indices/FTSE4Good_Index_Series/index.jsp,
accessed 20 October 2007) along with the Dow Jones Sustainability Index, are the main
stock exchange based scrutiny mechanisms for CSR companies. As of April 2004 there
were 869 companies listed on the set of FTSE4Good indices (the full constituent list).
This list can be supplemented by the companies reporting to the Global Reporting
Initiative (GRI), which is probably the most widely supported CSR reporting framework.
For all these bodies, rms are required to meet extensive business nancial, environmental
and social reporting requirements. These are comprehensive and transparent, and they are
policed in several ways. As of October 2006 there were 821 companies registered with the
GRI, not all of which were MNCs. What this demonstrates, however, is that those companies that take CSR seriously are in a minority (as stated above, there are approximately
77 000 MNCs alone).
It should be noted that this gure pertains to the possible eects on performance and
bottom-line nancial considerations of attitudes towards S&EV only. It does not illustrate
the overall nancial performance of companies. For instance, Ryanair is a highly
protable company despite it appearing as a bottom feeder here.
A task for future reection would be to add further examples to this gure so as to build
a robust picture of the importance of each cell and the types of bodies that t into them.
This would also involve drawing a clearer distinction between those organizations of
advocacy and those of monitoring, which are rather run together here.
This is an attempt to operationalize what Paul Hirst has termed Associationalism see
Hirst (1994).
To address this issue would require the building of a broad-based alliance between the progressive managers of CSR companies with the ethical investment movement and ethical
consumerism. Only such a broad-based essentially political alliance could hope to delay or
divert the current one which marries voracious managers/CEOs with the elite nancial
institutions, supported by lawyers, consultants and other nancial intermediaries. This is
a formidable alliance and one that underpins the current corporate governance regime.

References
Aligada, R.A. (2006), Corporate citizenship and corporate criminal rights, Emergency
Envelopes, 1 (2), 112.
Berlin, I. (1958), Two Concepts of Liberty, Oxford: Clarendon.
Blair, M.M. (1995), Ownership and Control: Rethinking Corporate Governance for the Twenty
First Century, Washington, DC: Brookings Institution.
Clark, T. (ed.) (2004), Theories of Corporate Governance: The Philosophical Foundations of
Corporate Governance, London: Routledge.
Crouch, C. (2006), Modelling the rm in its market and organizational environment: methodologies for studying corporate social responsibility, Organization Studies, 27 (10), 153351.
Dahl, R. (1985), A Preface to Economic Democracy, Cambridge: Polity.
Driver, C. and G. Thompson (2002), Corporate governance and democracy: the stakeholder
debate revisited, Journal of Management and Governance, 6 (4), 11130.
Ethical Corporation (2006), Financial Sector Responsibility, Special Report, Ethical
Corporation, November, http://www.ethicalcorp.com/download.asp?DownloadID=1791,
accessed 20 October 2007.
Friedman, M. (1962), Capitalism and Freedom, Chicago, IL: University of Chicago Press.
Friedman, M. (1970), The social responsibility of business is to increase prot, New York
Times Magazine, 13 September, pp. 12260.
Froud, J. and K. Williams (2007), Private equity and the culture of value extraction, CRESC
Working Paper Series No. 31, Manchester: University of Manchester, February.
Hadden, T. (1995), Company Law and Capitalism, London: Butterworths Law.
Hart, O. (1995), Firms, Contracts and Financial Structure, Oxford: Clarendon.

498

Handbook of research on global corporate citizenship

Hayek, F.A. (1994), The Road to Serfdom, London: Routledge & Keegan Paul.
Hirst, P.Q. (1994), Associative Democratic: New Forms of Economic and Social Governance,
Cambridge: Polity.
Hohfeld, W.N. (1919), Fundamental Legal Conceptions as Applied in Judicial Reasoning,
New Haven, CT: Yale University Press.
Kelsen, H. (1945), General Theory of Law and State, New York: Russell & Russell.
Kraakman, R.R., P. Davies, H. Hansmann, G. Hertig, K.J. Hopt, H. Kanda and E.B. Rock
(2004), The Anatomy of Corporate Law: A Comparative and Functional Approach, Oxford:
Oxford University Press.
Logsdon, J.M. and D.J. Wood (2002), Business citizenship: from domestic to global level of
analysis, Business Ethics Quarterly, 12 (2), 15587.
Marx, K. and F. Engels (1850 [1970]), Manifesto of the Communist Party, in Marx and
Engels: Selected Works, London: Lawrence & Wishart.
Matten, D. and A. Crane (2005), Corporate citizenship: towards an extended theoretical conceptualization, Academy of Management Review, 30 (1), 16679.
McIntosh, M., S. Waddock and G. Kell (2004), Learning to Talk: Corporate Citizenship and
the Development of the UN Global Compact, Sheeld: Greenleaf.
Moon, J., A. Crane and D. Matten (2005), Can corporations be citizens?, Business Ethics
Quarterly, 15 (3), 42953.
Milgrom, P and J. Roberts (1992), Economics, Organization and Management, Englewood
Clis, NJ: Prentice-Hall.
Norman, W. and P.-Y. Nron (2007), Citizenship Inc.: do we really want businesses to be good
corporate citizens?, Montreal: University of Montreal, mimeo.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66, 7188.
Rugman, A.M. (2005), The Regional Multinationals, Cambridge: Cambridge University Press.
Suchman, M.C. (1995), Managing legitimacy: strategies and institutional approaches,
Academy of Management Review, 20 (3), 571610.
Thompson, G.F. (1996), Multinational corporations and democratic governance, in
A. McGrew (ed.), The Transformation of Democracy?, Cambridge: Polity, pp. 14970.
Thompson, G.F. (2005), Global corporate citizenship: what does it mean?, Competition
and Change, 9 (2), 20324.
Thompson, G.F. (2006), Tracking global corporate citizenship: some reections on lovesick
companies, IIIS Discussion Paper 192, Dublin: Institute for International Integration
Studies, Trinity College Dublin, http://www.tcd.ie/iiis/pages/publications/discussionpapers/
IIISDP192.php, accessed 20 October 2007.
Thompson, G.F. and C. Driver (2004), Stakeholder champions: how to internationalize the
CSR agenda, Business Ethics: A European Review, 14 (1), 5666.
Turnbull, S. (1994), Stakeholder democracy: redesigning the governance of rms and bureaucracies, Journal of Socio-Economics, 23, 32160.
UNCTAD (2006), World Investment Report 2006, Geneva: UNCTAD.
United Nations (2000), Guidelines on Cooperation Between the UN and the Business
Community, July, http://www.un.org/unp/Docs/Guidelines_on%20UN_Business%20
Cooperation.pdf, accessed 9 November 2007.
Walzer, M. (1983), Spheres of Justice: A Defence of Pluralism and Equality, Oxford: Oxford
University Press.
Ward, H. and C. Smith (2006), Corporate Social Responsibility at the Crossroads: Futures for
CSR in the UK to 2015, London: International Institute for Environment and Development.
Wolf, K.D. (2005), Private actors and the legitimacy of governance beyond the state: conceptual outlines and empirical explorations, in A. Benz and I. Papadopoulos (eds),
Governance and Democratic Legitimacy: Transnational, European and Multi-Level Issues,
London: Routledge.
Wootton, B. (1945), Freedom Under Planning, London: Allen & Unwin.

PART VI
CRITICAL PERSPECTIVES

22 Transparency, integrity and openness:

the Nike example
Frits Schipper and David M. Boj

Introduction
Nowadays, corporate citizenship and corporate social responsibility are
key expressions in matters of corporate governance. Sometimes they are
supposed to denote something dierent. For example, corporate citizenship as referring to a companys local context, to a civil society to which
companies are also supposed to contribute, going beyond their own direct
business activities (sponsoring, societal aid and so on). If so, then corporate social responsibility refers more to business-related issues (for
example, human capital, environment, stakeholders, sustainability), even
on a global scale. However, sometimes this distinction is not made, and
both expressions are used almost synonymously. This is understandable,
especially when companies have worldwide operations and act in the
global society (Zadek 2007, p. 41).
Dierent languages are used in discussing and evaluating matters of governance. Some of them refer to the company as an actor, others to it being
an instrument. Among the rst are, for example, moral subject, personhood, citizen and homo economicus; among the second are shareholder
value, brand and money making. Of course, we should not make a
dichotomy of this, because a brand can be an important aspect of a
companys identity, co-constituting its actorship and giving content to corporate governance.
Governance always has a general as well as a particular side.
Constraints, standards and duties, sometimes set by law, make up a general
structure with which companies will have to comply.1 This leaves room for
individual dierences, related to actorship, which is emphasized by some
of the expressions mentioned in the preceding paragraph. Nowadays, the
call for transparency is widespread, especially concerning standards,
auditing and control. A concept widely used in connection with actorship
is integrity. Companies themselves often have both concepts in their
vocabulary when speaking about their own views of good governance. The
pharmaceutical company Novartis, for example, claims the following: we
strive for high performance with integrity, corporate citizenship is a top
priority [and we] aspire to responsible and conscientious citizenship based
501

502

Handbook of research on global corporate citizenship

on trust, transparency and accountability (Novartis 2007). ABN AMRO

bank considers integrity and transparency to be a basis for success in
nancial service.2 Another concept advocated is openness (for references,
see section on integrity).
In this contribution, attention will be given to transparency, integrity and
openness, rather than discussing corporate citizenship and corporate social
responsibility per se. Hence, we seek a relevant meta understanding. Take
transparency and integrity: they do not seem to imply each other. The
former can function as an instrument of power, seriously damaging the
latter. Demanding, for example, transparency of incomes of CEOs can
have an increasing eect, thereby putting the integrity of these people and
of the companies they work for in jeopardy. We shall start by exploring the
general understanding, referred to above. Next for reasons to be mentioned later some DeleuzianGuattarian concepts, related to entrepreneurship and using images in the case of branding and company identity,
will be presented. Subsequently, the case of Nike, a major US company that
has described its own governance in terms of transparency (see its
Transparency 101 programme), will be analysed.
Understanding transparency, integrity and openness
Understanding transparency, integrity and openness goes beyond just
giving denitions. An important part of it involves their relationship
and how to relate them to practice. Especially in connection with the
latter, we shall attempt to formulate a general maxim. First, we shall
examine the historicalphilosophical backgrounds of the concept of
transparency.
The meaning of transparency: historical and philosophical background
The concept of transparency is used in connection with various domains,
such as material objects, art, science and society (Schipper 2007). A very
early reference to transparency can be found in Nicole Oresmes Le Livre
du Ciel et du Monde, dating back to the 137077 period (Oresme 1968,
pp. 4569). In this text, which is a translation of and commentary on
Aristotles De Caelo et Mundo, Oresme is discussing the properties of the
moon and he speaks of transparent bodies, that is, bodies through which
light passes through.3 About two centuries later the concept was also being
used in connection with human aairs. An example can be found in
Shakespeares Romeo and Juliet, rst printed edition 1597, where in act 1,
scene 2, Romeo says that if he saw a woman more beautiful than Rosaline,
his tears would turn to re and burn his eyes as transparent heretics for
not seeing the truth (Shakespeare 1883, p. 625). As we see it, these examples show two opposed connotations in the meaning of the concept of

Transparency, integrity and openness

503

transparency, and its current use is much the same. We shall now explore
these connotations further.
As in Oresme, material things are nowadays said to be transparent when
light passes through them with no or only minor absorption. This gives
these objects a visual un-presence, a quality often made use of sense-fully.
Sometimes, this un-presence is (partly) cancelled out for safety reasons
(stickers on glass doors preventing collisions). The second connotation, on
the other hand, denotes presence. Music, for example, is considered as
more or less transparent, depending on whether all voices are clearly
audible, and melodies, rhythm and compositorial structure are evident a
meaning of the concept we can also see in the example of Shakespeare
the limit being their complete presence. Hence, romantic music is not a
paradigm of transparency. Sometimes, as in the plastic and visual arts, both
meanings of transparency are played with, creating tensions of presence
and un-presence. People sometimes speak of organizations transparent
decision and wage systems, that is, systems which are clear and manifest in
all their operations; this is transparency in the sense of presence, as it is
when the EU Round Table talks about ensuring the transparency of corporate social responsibility instruments (for example, tax rules). In all this,
transparency indicates a non-normative quality of something, attributed
while considering subject matters from an outside position.
However, what is said thus far is not the whole story. Throughout history,
transparency has also been linked to a particular epistemic and societal4
ideal. The rst is involved when people seek theories as completely coherent systems of clearly dened concepts and statements, without any hidden
knowledge claims. If so, then realities, referred to by the theories, would
become manifest and understandable for the human mind (almost) automatically. Further, there is also talk of transparent mental maps, systems
of concepts making possible a clear understanding of things as they are.
One could of course question the naive realist epistemology involved here.
What at least remains, however, is the transparency of concepts and knowledge claims, that is, complete presence of meaning and absence of hidden
presuppositions, as a valuable epistemic aim.
With regard to society, the Enlightenment period is widely known for
associating transparency with a so-called modernist ideal of rationality
and knowledge: with no dark areas, rationally unjustied traditions,
(power) mechanisms, privileges, hidden agendas or other unclear structures
and institutions a society liberated by real knowledge. Jean Starobinsky
(1971) draws our attention to Jean-Jacques Rousseau as inspiring this view
(see also Foucault 1980, p. 152). Starobinsky notes especially the following
thoughts of Rousseau: once upon a time, the world, including ones own
consciousness, was transparent, present, everywhere and it would be crucial

504

Handbook of research on global corporate citizenship

for the future to rediscover this happy reality. Hence, there is a paradise
lost (Starobinsky 1971, p. 19; our translation) and a task that lies ahead:
to realize the ideal of transparency (ibid., p. 39; our translation). In this
ideal world one celebrates transparencys accession to the throne
(Starobinsky 1964, p. 101; our translation).5 In Rousseau, the possibility of
this ideal society is eventually founded on the original reciprocal transparency of human souls and the self-transparency of the human heart:
transparent like a crystal (Rousseau, quoted in Burgelin 1952, p. 294; our
translation).6 Note that this original transparency is spontaneous, simply
existing of its own and not forced at all.
In the introduction we mentioned transparency as an instrument of
power. Foucault in particular has made this link in connection with Jeremy
Benthams panoptical design of prisons. He rightly remarks that
Rousseauean transparency is much dierent from the visibility of everything prisoners are doing, created by this panopticum with its overseeing
gaze: a visibility aimed at establishing power through transparency
(Foucault 1980, p.154).7 We see here the (conceptual) opposition of (i) a
society in which transparency breaks down power and control, and (ii) a
society in which transparency establishes power and control. Note that the
meaning of transparency in both societies is the same: presence. The other
connotation, un-presence, is not absent, however. In Rousseau, all culture
should be transparent, diaphanous, in the sense of not disturbing original
reality, and the gaze mentioned by Foucault is eective only when it is not
seen as such.
For a long time the concept of transparency had two dierent meanings,
which can be qualied in terms of presence and un-presence. The double
meaning denotes two possible kinds of value-neutral properties of various
entities. Now, thanks to this neutrality, the concept of transparency can be
connected to dierent ideals, for instance epistemic, societal, moral and
aesthetical ones. At the same time it is obvious that things can be transparent without being of a high value, considered from the ideal involved: a
crystal vase can have minor aesthetical value; the reward system of a particular organization, including rules of giving shares to personnel, may be
clear to outside observers without being morally justiable. Also Sir Adrian
Gadbury, in his discussion of business dilemmas, has noted that transparent decisions do not necessarily have a moral quality (Gadbury 2002, p. 20).
However, a company, knowing that decisions have to be transparent, can
decide dierently, changing their content, if not the motives, relating them
to a moral point of view. Take, for example, ExxonMobil: our involvement
with transparency initiatives is an extension of our commitment to ethical
behaviour. These transparency initiatives are designed to increase disclosure of nancial information and are fundamental for good governance.8

Transparency, integrity and openness

505

Here, transparency has its two meanings: (i) the means of disclosure and
structuring the indicated information having an un-present presence, correctly representing the nancial state of the company; and (ii) giving this
state of the company a presence to the outside world.
The commandment of transparency
Transparency contrasts ambiguity and complexity; lack of overview negatively inuences it, making proper judgements and evaluations rather puzzling. These situations can be coped with in dierent ways.9 Concerning
organizations and the wider society, strategies of demarcation and hierarchization are used. An example of the latter is organizational culture considered as an overarching determiner of human behaviour. So-called
Chinese walls in banking companies, preventing share price-sensitive
information leaking from one part of the organization to another, are
examples of demarcation. Moreover, the widespread practice of auditing is
also directed to the attainment of transparency.
These strategies all have a double aim: (i) making transparent unclear
organizational networks, and (ii) making available unscattered and distinct
streams of reliable information. Of course, it cannot be excluded that
implementing them will meet resistance, leading to eorts to keep things in
the dark or creating ambiguity. Yet, the use of these strategies always aims
at creating or restoring transparency. In the light of the quite recent crisis
of condence, due to nancial manipulations in some rms, it is striking
that people often speak of the commandment of transparency (CT).
Obeying CT involves particular rules and strategies, such as Chinese walls.
Ultimately, however, the result will be an imposed transparency, very
dierent from the direct natural transparency (transparence naturelle,
Starobinsky 1971, p. 37) referred to by Rousseau. Indeed it is more in line
with the Foucaultian idea. However, it is immaterial whether CT is introduced by self-regulation, forced by stakeholder activism or a matter of law.
What is more, imposing transparency strategies on organizational matters
always introduces new elements. Indeed, this may increase the complexity,
thereby inducing new possibilities of confusion and ambiguity. That something is added is also clear from the extra costs of implementing the new
strategies.
In particular, external auditing matches CT. Internal auditing is only
conditional, never sucient, for obeying CT. Auditing adds new elements,
too, and CT can now also involve this practice itself. Recent discussions on
the necessity to split audit rms auditing and consulting actually becoming more and more intertwined are examples of this shift.10 Further,
David Flint, in his still important book Philosophy and the Principles of
Auditing, makes it clear that auditing always has an intuitive component:

506

Handbook of research on global corporate citizenship

In every profession . . . there is an element of art and inspiration. These qualities have an indispensable and invaluable part to play in identifying the uniquely
relevant evidence which an auditor should look for in the nal analytical and
judgemental review in the process of formulating an audit opinion or report.
(Flint 1988, p. 115)

If Flint is right, and we think he is, then this unavoidably limits the possibility of attaining complete transparency through auditing. Besides, measures taken on behalf of the organization, the transparency of which is not
always self-evident, are involved too. A more cynical reading of this situation can also be found. An example is Auret van Heerden (CEO of the Fair
Labor Association, a coalition of 20 apparel and sporting goods makers
and retailers,including Nike and the Adidas Group) saying that for many
retailers, audits are a way of covering themselves (Roberts and Engardio
2006).
In connection with monitoring and the audit society, John Roberts
remarks that the powerful accountability mechanisms, created by contemporary society in order to conrm CT, are nothing but systems of visibility. In his view, they consist of concepts functioning as lenses for
making companies and other organizations visible. At the same time, a selfdisciplining logic, leading to preoccupation with imposed transparency,
also shaping organizational reality, becomes active. We see here reminiscences of Foucaultian ideas. According to Roberts, the following side-eect
is likely: becoming indierent to everything not required by CT (Roberts
2003). Although obeying CT and self-discipline, which might result from
this, do not themselves need to be irresponsible and insensitive, this sideeect will limit responsibility and sensitivity to what is required by actual
applications of CT.11 If so, then a wider organizational responsibility and
moral sensibility are put under pressure. Consequently, a narrow, sometimes even mindless, imposed transparency, by which elements lying
beyond are not being considered at all, could come into being. Also openness (see below) will be in jeopardy, in particular in circumstances where it
is most relevant.12
Openness and integrity
Now that we have gained some understanding of transparency we shall
turn our attention to openness and integrity (see also Schipper 2007). Later
on, both concepts are related to transparency.
Openness Companies often use the term openness when expressing their
views. NASDAQ corporation Cisco, for instance, comments: Ciscos
approach to corporate citizenship is based on our values of openness,
integrity, and generosity.13 In the same vein, the Dutch agricultural

Transparency, integrity and openness

507

company Frieslandfood advocates: openness and trust are the keys to successful collaboration.14
People are called open when they are, unforced and positively, sensitive
to what is going on in the world and in themselves (feelings, concerns), not
swayed by preoccupations and prejudices:15 being open to. Such persons
have world-openness and self-openness. Both expressions indicate a
benecial relationship, dierent from mere opportunism. But is being open
always positive? This is a dicult question, and one can imagine situations
in which imperturbability is appropriate. A second quality of open people
is that they tend to speak of themselves on their own initiative as being
open about. This has some limitations too, because putting everything on
the table is sometimes unwise, risky, or considered as not done or even as
pathological. Sometimes people suggest that they are open, while actually
they are not. Although not easy to verify, in such a case they have pseudoopenness.
Analogously, it is also possible to speak of open organizations. They are
sensitive to important, even unexpected, situations, externally as well as
internally. Importance requires one or more criteria for judging situations:
you cannot simply be open to everything, and opportunism is also better
avoided.16 However, the ability to move beyond prejudice is always crucial.
Simon Zadek (2007, p. 298) gives several examples (Nike, Shell) of corporations being, at a particular time, uncritical about their own preconceptions. Maybe Cisco and Frieslandfood are open in the indicated sense at
least their own statements suggest this; however, Shell, at the time of the
Brent Spar incident, and Nike, in connection with labour standards in
their supply chain, very likely were not. Openness limits internal bureaucracy, which always involves a kind of closure, and also there is less urgency
for whistleblowers to make their tune heard in the outside world. Moreover,
openness is important because it can soften the risks to CT mentioned
earlier. Besides, open organizations, for example, communicate their
intentions, making them public, without heightening or downplaying
current issues. Shell, when publishing its view of the triple bottom line as
crucial assuming that they are honest can be said to be open in this sense.
Also this kind of openness has potential limitations. Because of competition, companies cannot be open about everything. Neither aspect of openness implies the other, however. It is, for instance, always possible that
companies are open about themselves, without the sensitivity that is
involved by the rst quality. All in all, openness is, therefore, a normative,
relational category and the initiative to be receptive and communicative lies
with the open actor (person, organization) involved.
The rst aspect of openness, that is, being sensitive to the outside world
as well as to matters inside, is very dierent from transparency. For

508

Handbook of research on global corporate citizenship

example, we can say that, in the years before the Second World War, Philips
N.V. was indeed open to some societal needs without transparency, the
management being rather paternalistic. The second quality implied seems
to be nearer the mark, in the sense that under particular conditions
something, that is the intentions of the organization, will be present.
However, because openness depends on the initiative of the entity involved,
this presence does not coincide with the one connected with transparency.
Especially when CT is active, there can be transparency without openness.
Of course, an organization may deliberately claim to be open, when this is
not really the case. In such a situation we can, analogously to persons,
speak of pseudo-openness.
Integrity The concept of integrity is widespread, whether it concerns
personnel, companies as actors, or special subject matters, such as how to
build a culture of integrity, the integrity of audits or a brands integrity.
Integrity can be invoked for dierent reasons, some recent ones relating to
the management of compliance risks. Others, more removed from the daily
pressure of doing business, refer to the growing attention to virtue ethics,
which has taken place in philosophy during the last decade.
Integrity comes from the Latin integer which means whole, complete, unbroken or in one piece. It is used in many dierent contexts such
as medicine, technology, ethics and so on. Integrity always involves a
highly valued property, condition or situation, considered in terms of
wholeness. Acting with integrity means acting in one piece: actions are
taken because of what has been said, not from blind obedience or following rules; or having a hidden agenda; or saying or acting at a certain
moment A, and the next time, without any specic reason, not-A. Taken
in this sense, integrity and pseudo-openness, mentioned above, are not
equivalent. Moreover, having integrity exludes others having to face
unpleasant surprises or being focused on private interests. As such, it
involves openness and trustworthiness.
In professional and organizational contexts all this counts too. Auditors,
for example, need professional integrity because not everything they do can
be reduced to following strict rules.17 In sociology, it is not uncommon to
speak of role integrity, pointing to the variety of possible roles and loyalties an actor can have, including conicts between them. Solomon, defending an Aristotelian, virtue ethical, perspective on business ethics, speaks of
integrity as a kind of super-virtue, saying that it is the essential virtue to
a decent life . . . getting it all together (Solomon 1993, p. 174). Dierent
roles involve partial integrities, with the possibility of attending to only
one of them. In that case, it is not unlikely that there will be negative eects.
Companies and other organizations may be seen as:

Transparency, integrity and openness

1.
2.
3.

509

instruments for attaining particular aims;

social environments, work communities, in which concrete persons
full roles; and
moral agents, citizens acting in the wider society.

All three inuence the image of integrity. In connection with the rst
point, integrity means unbrokenness and proper functioning of the
instrument, with a focus on structure, internal coordination, internal stability and so on. However, the second point deals with integrity of personnel and organizational aspects, culture for example, that inuence this. The
third point considers organizations themselves in terms of actor integrity,
without reducing it to those of people it involves; notions such as corporate citizenship or personhood or even legal person cater to this. It goes
without saying that in the second point issues, such as organizational obstacles, negative incentives, as well as potential positive measures, cultivating
integrity, become important. Therefore, being aware of integrity risks, especially in connection with complexities and ambiguities of work is highly
relevant. Today, advocating a kind of integrity management is quite
common. In so far as this implies making an inventory of integrity hazards,
creating real opportunities for personnel to deal with them responsibly and
the management not merely paying lip-service, this is positive. Also, bringing an organizations self-image in line with that of a moral actor is noteworthy. However, if this kind of management ultimately means nothing
but controlling people by other means, then integrity itself comes under
pressure.
There is also a relevant epistemological theme. Another actors integrity
cannot be proven objectively, by means of a valid and clear method. If
people or organizations attribute integrity to themselves in public, then
how do we value this? Nevertheless, judgements of integrity concerning
people or organizations, a key aspect of reputation, are being made and
communicated. Unavoidably, such judgements can only mean something if
based on close contact. In situations where integrity is openly doubted, it
is very dicult to defend oneself against such doubts on the basis of knowledge. As said above, there is no clear methodology; (knowing about)
integrity is vulnerable. Indeed, in connection with integrity, epistemic transparency eventually fails. In a more metaphysical language: every person or
organization has its own mystery, inaccessible from the outside. Saying this
does not exclude the possibility of actors, whether humans or organizations, making themselves known over time in concrete actions involving
particular situations. Generally speaking, saying that they have integrity
is pointing to a fallible, particular kind of knowledge of the other, which
can be grasped only receptively, involving a kind of empathy based on real

510

Handbook of research on global corporate citizenship

contact. Seen from an epistemological perspective, therefore, integrity and

transparency point in opposite directions, the latter having a focus on
knowledge on demand.
Transparency, integrity and openness
Sometimes, transparency is considered as an integrity-supporting virtue. In
the light of what has been said thus far, this cannot be simply endorsed. The
reason is that transparency is a value-neutral quality rather than a moral
one. Yet, in some situations agreeing to obey CT is defensible from an
integrity point of view. This is, for instance, the case when society asks
questions about a companys supply chain or when pension funds are put
under pressure to impart knowledge about the dierent stock in which they
invest. Not doing so will be suspect. However, concerning other matters it
is understandable that transparency should be limited, that being too transparent might put integrity in jeopardy. Requiring, for instance, that a pharmaceutical enterprise provides all the details of their research right from
the very outset is overdemanding. Some CEOs maintain that demands for
transparency can conict with the freedom needed for entrepreneurial
activities. Indeed, privacy is necessary here, because of reasons of creativity and competition, without which enterprises cannot function in a market
economy at all. Putting it metaphorically, companies need a free private
space of action possibilities. In connection with this one could also think
of Schumpeters entrepreneurship as creative destruction (Schumpeter
1934).
Another important issue, mentioned earlier, is the risk of becoming
indierent to everything not required by CT. It is not unlikely that, as we
have argued, by putting transparency on the throne of corporate governance, there will be pressure on social entities sensibility and responsibility. This especially relates to the being open to quality, mentioned above.
Transparency strategies, such as hierarchization and demarcation, are not
harmless in this connection, because they can induce an its not my job
attitude. Indeed, overemphasizing transparency might risk the wholeness,
that is the integrity, of persons and organizations.
As far as audits are concerned, three groups are always involved: (i) the
organizations at issue, (ii) the people,18 auditing them in one way or
another, and (iii) those having an interest in these audits. We have argued
that auditing itself is never completely transparent. Moreover, measures of
creating transparency always have their organizational counterpart, the
transparency of which is not self-evident. This means that auditing also
involves a questio transparensis. Hence, those parties who are in need of
audit judgements have to cope with a double-sided diculty. In this situation, the risk of being confronted with a sort of pseudo-transparency is

Transparency, integrity and openness

511

never absent. Nike, for example, seems to be aware of these problems (Nike
2005, pp. 3944). Besides transparency risks, there are, generally speaking,
also hazards of integrity. In situations of strong temptation or high pressure it is seductive to give in, following only partial interests without others
knowing it, thereby triing with integrity and forgetting about the wholeness of persons and the organization involved.
Transparency, integrity and openness do not have a simple relationship.
Following CT can bring risks for integrity and openness, putting corporate
citizenship and corporate social responsibility under pressure. Moreover,
achieving transparency requires integrity, and the same applies if pseudoopenness is to be avoided. On the other hand, as we indicated above, there
could also be situations in which, apart from the negative inuence of
overemphasizing transparency, integrity is in jeopardy. Especially in the
latter kind of situations, seeking transparency can be helpful, as we showed
at the beginning of this section. We think of cases in which, from a wider
societal perspective and in a particular period of time, it is important that
issues are open to independent, external judgement and evaluation.
Nowadays one can, for example, think of global issues with local interests:
environment, safety, origin of products and labour circumstances (see comments on supply chains, above); giving of loans and moving of capital; relations between public and private organizations, in order to avoid (the
appearance of) favouritism; and the idea of market transparency. The last
has to be strived for when the receptive knowledge, related to integrity, does
not suce in order to deal responsibly with market parties and the goods
they oer. Therefore, one should realize that it could make sense to
demand a higher degree of transparency, reducing hazards of integrity.
Transparency in the context of corporate governance is more of a
Foucaultian than a Rousseauean kind. Allowing ourselves some conceptual
liberties, we could perhaps say that openness and integrity show some similarity to what Rousseau had in mind when he talked about transparency.
All in all, what has been said thus far implies that, despite tensions and
risks, integrity, transparency and openness are important. How to handle
this when governing companies and other organizations can never be a
matter of applying recipes. Above, we pointed to a free space of action
needed by every enterprise. Good governance requires this space to be
coloured by integrity, which is beyond transparency. How to deal with
this? At the risk of simplication, it can be said that all parties involved
should keep in mind the following maxim: openness if suitable, transparency when necessary, and integrity always.
The implication of this maxim is that we should be on the alert at any
time. The actual content of corporate governance very much depends on
how integrity, openness and transparency are given their due and how they

512

Handbook of research on global corporate citizenship

are related. When society is overfocusing on transparency this might lead

to a limited or even pseudo-transparency, damaging integrity. However,
underestimating transparency can favour integrity risks. Moreover, when
integrity is in jeopardy it cannot be excluded that openness will turn into
pseudo-openness. If so, then things will not be what they seem to be: actual
presence no longer coincides with reality. Furthermore, the pseudo will
be part of reality, making it ambiguous, processes following hidden paths,
usual knowledge claims being supercial. At the same time, language and
other symbols in use are not as they appear: the actual meaning of words
might be just the opposite of what we, naively, think they are; descriptions
are veiling instead of revealing, and so on. All this would indicate that,
instead of approaching the epistemic ideal mentioned earlier, things seem
to be more like a Deleuzean rhizome. In the following we shall apply some
of these ideas with reference to Nike. We do this heuristically in order to
make a contrast, without identifying ourselves with their full, descriptive as
well as normative, implications.
Intermezzo: a rhizomatic reading of entrepreneurship and branding
Some organisms are seen only partially. So what we see is not necessarily
what is. A striking example is a rhizome. Deleuze and Guattari (1987) use
the concept of a rhizome to characterize reality, thought, symbolization
and images. A rhizome is literally the subterranean root and stemming
network found in crab-weeds in the lawn. Having no hierarchy, no clear
structure, no main point of entry and being many layered, it is lacking
transparency and integrity which might be at risk or disappear altogether.
Moreover, a rhizomes usurying, rampant, growth illustrates its closure, not
really being open in the sense presented earlier. Now, rhizomatic theory is
about thought as well as reality. In both, movement and subterranean
processes operating through roots and stems, creating unexpected possibilities, are essential. Deleuze and Guattari also present their own books as
rhizomatic, having many layers. As such this creates nomadic thinking,
that is, spontaneous movement of thought beyond any preceding logic of
possible design. In what comes next, we shall look at entrepreneurship and
branding an image from a rhizomatic perspective.
Entrepreneurial nomadism
A rhizomatic interpretation makes a sharp contrast with everything that
can be described in terms of the three concepts discussed in this contribution. A social entity to which this interpretation ts is global terrorist
organizations consisting of cells connected by hidden, for example ideological and nancial, threads. Also the role played by impatient money
(Zadek 2007, p. 250) and multilayered investments by pension funds (where

Transparency, integrity and openness

513

it is often very dicult to grasp in which businesses they invest their money
in the last resort), have rhizomatic traits. The economy can also be looked
at from the perspective of rhizomatism. Enterprises keep changing, moving
and rearranging the landscape by acts of innovation in unpatterned ways,
not following xed trails, avoiding becoming sedentary. All this is done by
creatively destroying old ways of production, and nding new terrain
where entrepreneurial ways maximize protable results. This is why the
Schumpeterian creative destruction and Deleuzian nomadism can be considered as having something in common. Nomadic multinational enterprises proceed by capturing production factors into supply chains, based on
ever-changing contracts.19
Branding an image From a rhizomatic perspective visible reality, symbols
and images are not what they seem to be. In connection with the last,
Deleuze and Guattari express this by saying that the black hole is on the
white wall (Deleuze and Guattari 1987, p. 182). Although images may be
painted on the white wall of innocence, being completely present, they are
never without black holes, pointing to hidden realities which the image does
not make visible. Hence, an image is accompanied by black holes, in which
it lodges its . . . redundancies (ibid., p. 167). Nomadism notwithstanding,
global entrepreneurial activity often involves branding, that is, creating an
enduring image of what the enterprise is about, using stories, (heroic) narratives about its origin (founding narratives), logos, or whatever. In ocial
branding nothing happens accidentally; it involves story control, creating
an image that is intended to be experienced as completely present, that is
transparent. In politics, for example, spin doctors may create the image of
a candidate as an unselsh person, seeking only the interests of the people,
saying that this is all there is, that there is nothing hidden. However, from
a Deleuzean, rhizomatic, perspective this cannot be. A branded image is
accompanied by black holes, in which redundancies are lodged. Therefore,
when controversy or scandal erupt in the case of corporations one can
think of sweatshop-related events out of a black hole, this is not accidental but as a result of what is behind the image.
Economy as a rhizome is lacking transparency, integrity and openness,
and one of its outgrowths is nomadic multinational corporations striving
for continuity of their brands. Branded images are accompanied by black
holes, and pretended transparency is nonexistent. Moreover, speaking
about the integrity of corporations would give only a very supercial
understanding of what is going on. Branding, intended to protect images
and related stories, is all about keeping up appearances. This means that
openness is also very dicult to achieve, if not impossible. If this is so, then
the whole idea of corporations as responsible actors, being hand in glove

514

Handbook of research on global corporate citizenship

with integrity and openness, would be an illusion, and maintaining the pretense is keeping up appearances once again.
The example of Nike
Nike, the well-known sports footwear and apparel company, manufactures
its products in more than 800 factories, employing over 600 000 workers in
51 countries. It has about 24 000 direct employees, most of them working
in the US. Although primarily known as a footwear company (its original
line of business), only 70 out of the more than 800 suppliers are currently
producing shoes (Locke et al. 2006). We shall rst provide some historical highlights (see also Zadek 2004), then examine Nikes Corporate
Responsibility Report and assess to what extent the situation ts in with the
rhizomatic perspective.
Historical overview
In 1962, Phil Knight wrote a paper in his Stanford University small business course asserting that low-priced shoe exports from Japan could replace
Germanys domination over the US running-shoe industry. In 1963 he
began importing Tiger brand shoes from Japan, selling them at local track
meets from the back of his truck. Knight teamed up with University of
Oregon track coach Bill Bowerman to form Blue Ribbon Sports, selling
shoes sourced in Japan. In 1971, he paid Caroline Davidson (a student at
Portland State University) $35 for the Swoosh logo, representing the wing
of the Greek goddess Nike. Since then, its value has been estimated to be
in excess of $2 billion (Ballinger and Olsson 1997, p. 15). In the early 1970s,
Nike moved, changing its sourcing from Japan to South Korea and Taiwan.
Branding took a turn in 1985, when the company signed Michael Jordan to
endorse its products. When wages in Korea hit a dollar a day, Nike incentivized Korean and Taiwan-based contractors to relocate to Indonesia.
Controversies Controversies over working conditions and payment of
poverty wages began with the move to Indonesia, when Indonesian newspapers began to highlight the situation. Nikes response was one of distancing, claiming were just the buyers and therefore not responsible .20
By 1989, workers were conducting protests at the Tae Hwa and Pratama
Abadi factories. Charges were corroborated by a USAID-funded study on
minimum wage non-compliance by Nike and other shoe contractors in
Indonesia. By 1990 more workers protested at the Tae Hwa factory and at
Sung Hwa (in response to workers killed when an overcrowded contractor
bus crashed). News expos articles proliferated through 1992.
The US State Department issued its Human Rights 1992 report
to Congress, claiming shoe factories in Indonesia to be out-of-control

Transparency, integrity and openness

515

pernicious inuences. Nikes response was to craft its rst Code of Ethical
Conduct and promise responsible corporate oversight of contractor practices. Sadisah, a worker in a Nike factory was featured in Harpers
Magazine, where it was estimated that it would take her 44 700 years to
make what Michael Jordan was paid in Nike endorsements for 1991. An
Oregon newspaper published reports on Indonesia factory unrest; the articles were denounced by Phil Knight, who glossed over injustices and
inequities and blamed the contractors. In 1993, Ed Bradley in a CBS
episode of Street Stories warned viewers prepare yourself for a shock . . .
workers cant make a living while making Nike shoes (Ballinger and
Olsson 1997, p. 15). More CBS News reports appeared, plus critical reports
in the New York Times, the International Herald Tribune, The Economist
and the Jakarta Post.
In 1994, the situation in Indonesia demanded a reply from Nike. Nikes
response was to produce a lm, distributed to news media outlets, putting
a positive spin on the Indonesian protests, but also admitting the lowest
waged being paid were below the poverty line in Indonesia (ibid., p. 20).
By 1995, Nike began to move into China and Vietnam. The cycle of abuse
reported in Korea and Taiwan, replicated in Indonesia, was now being
reported in Vietnam and China. For example, the Nike subcontractor
manager at Pratama Abadi lined up and slapped 15 women from the
quality control section in Vietnam. The year 1996 brought further escalation and international attention, when the National Labour Committee
(NLC) accused Kathie Lee Giord of operating sweatshops. Life Magazine
published an article on Pakistan soccer ball stitching by child labour,
employed by Nike, Reebok and Adidas contractors. By this time, Nikes
South Korean and Taiwanese contractors had moved a signicant portion
of factory production from Indonesia to Vietnam and China. Thuyen
Nguyen organized Vietnam Labor Watch, based in New York, and Nike
formed its own Labor Practices Department to monitor the situation in its
war room. On 17 October 1996, the controversy ared up when CBS News
48 Hours reporter Roberta Baskins made an on-site visit to Nike in
Vietnam. This was the rst interview with Nguyen Thi Lap, a team leader
in Nikes Sam Yang (Korean-owned) sneaker factory in Ku Chi, Vietnam.21
She was subsequently demoted and forced to leave her employment.
During the 1990s, sacked Nike workers from Indonesia toured the US,
giving testimonials at universities and other sites.
In 1997, Nguyen (Vietnam Labor Watch) had a prearranged tour of
Nikes contractor factory in Vietnam. But Nguyen also travelled to factories o the ocial tour. He collected pay stubs and interview reports alleging wage cheating. On 8 March 1997, International Womens Day in
Vietnam, 56 women were forced to run around the Nike factory in the

516

Handbook of research on global corporate citizenship

Dong Nai province because they did not wear regulation shoes. A dozen
women collapsed of heat exhaustion and spent the day in the emergency
room. A joint report on Nike contractors in China by the Hong Kong
Christian Industrial Committee and the Asia Monitor Resource Center
brought serious charges of abuse. For example, Wellco, a subcontractor in
China, paid workers half their regular wage. Workers who went on strike
were red.22
In August 1996, President Bill Clinton brought a diverse group of corporations (among them Nike), labour and human rights leaders to the
White House to discuss industry conditions. This resulted in the 14 April
1997 presentation at the White House of the Apparel Industry Partnership
(AIP) agreement, dealing with the acutely embarrassing issue of US companies involved in labour rights violations. However, it is said that a worker
red by Nikes contractor in Indonesia was denied the chance to speak at
the AIPs founding conference in Washington.
In 1997, Nike contacted Ernst & Young to audit Indonesian footwear
contractors for compliance to the Code of Conduct and former US
Ambassador to the UN Andrew Young to investigate Vietnamese, Chinese
and Indonesian contractors. In his 22 September 1997 address to the shareholders, Nike founder and CEO Phil Knight mentioned both as examples
of independent monitoring. He especially praises Andrew Young as a man
of great intellect . . . and unquestioned integrity. He adds that the Young
report found that basically Nike is acting as a good citizen in those communities and that the incidences that you hear about and that have gotten
so many headlines are just that.23 It is noteworthy that Knight seems to
consider the incidences referred to as mere incidents. However, negative
news and academic study reports proliferated, putting doubt on the quality
of the monitoring (for example, ORourke 1997). Nike also increased its
advertising budget by 22 per cent in order to protect its brand image.
Doonesbury did a series of cartoons damaging to Nikes brand image as
well as to Youngs reputation.24 In October 1997, Nike paid rst-year MBA
students at Dartmouths Amos Tuck Business School to tour Nike factories in Vietnam and Indonesia, and conduct local interviews with nonworkers. The Tuck study reported similar ndings as Young, that is, the
situation was not that bad.
In 1998 the state of aairs continued. On 2 April, ESPNs Outside the
Lines ran an hour-long show on Nike and Reebok sweatshop abuse in
Vietnam. Former assistant coach of the soccer team, Jim Keady, claims
that the head coach insisted he wore a jacket with the Nike Swoosh if he
wanted to continue coaching. Vietnam was still a hotbed. Joseph Ha, a
top adviser to Phil Knight exacerbated the situation. He sent a letter
(11 January 1999) to the highest-ranking labour ocial in Vietnam

Transparency, integrity and openness

517

portraying anti-sweat activists as enemies of the state with a political

agenda (Zadek 2007, p. 167). The response of the NGO members of AIP
was to write to Knight, saying that the only way that Nike can recover its
integrity in this matter is to reverse publicly, in Vietnam, its position and
make clear that Nike values the work of human rights monitors.25
Student protests escalated. Students began to form United Students
Against Sweatshops (USAS) campus groups, asking their university to sign
up. This was a countermove to Nike and other apparel manufacturers
attempts to sign up universities to the Fair Labor Association (FLA is an
outgrowth of AIP). When the University of Oregon signed up to the USAS
(one of 45 universities joining the Worker Rights Consortium (WRC), a
student-backed anti-sweatshop group of the USAS movement), alumnus
Phil Knight withdrew a $30 million contribution.
FLA, funded by participating apparel corporations such as Nike and
Reebok, hired monitors to conduct inspections of subcontractors. Two
main reports have been issued. Both indicate that while some conditions in
some factories have improved, wage cheating, child labour and forms of
sexual and physical abuse are still being widely reported. Nike claims that
it redresses each occurrence, acting as a sort of police arm with the FLA
carrying out the surveillance activity, calling this its Transparency 101 programme. It was widely touted on Nikes website until the 1998 class action
lawsuit was led about false claims of improved working conditions in subcontracting factories.
Lawsuit The class action lawsuit was led by labour activist Marc Kasky
against Nike at the San Francisco Superior Court, alleging that Nike had
illegally been misleading and deceiving California consumers about working
conditions and wages in its overseas factories. Nike claimed protection
under the 1st Amendment (right to free speech) extended to a corporations
right to say anything about matters being aired in public debate. In May
2003, the California Supreme Court decided that Nikes publications and
responses were to be considered as commercial speech and, therefore, not
protected by the right to free speech. In January 2003, the US Supreme
Court, after an appeal by Nike, began its deliberations. On 12 September
2003, Kasky and Nike announced, however, that they had agreed to settle
the case. Part of this settlement was that Nike should make an additional
workplace-related programme investment ($1.5 million), to be given to the
FLA for programme operations and worker development programmes
focused on education and economic opportunity. One project that the
money will be used for, is the advancement of a common global standard
to measure and report on corporate responsibility performance among
companies [advocating] corporate transparency.26 Maria Eitel, from

518

Handbook of research on global corporate citizenship

19982004 Nikes Corporate Responsibility Vice President and currently a

member of the board of directors, remarked in the press release just referred
to, that Nikes integration of corporate responsibility into the framework
of its business is integral to who we are as a company. During the period in
which the lawsuit was still ongoing, Nike remained relatively silent, a situation which changed after the settlement: on 13 April 2005 the company published its almost 100-page Corporate Responsibility Report, with chapters
on, for instance, workers, the environment and the community.
Nikes Corporate Responsibility Report
In his letter accompanying the report, Knight says that Nike remained
fairly quiet on matters of corporate responsibility because of the Kasky
lawsuit. He also mentions that probably the most signicant piece of disclosure linked to this report is the publication of the list of all companies
making Nike products, and that Nike wants to become a corporate responsibility leader in 21st-century business. The report itself notes that writing
it has been a process of introspection and internal transformation (Nike
2005, p. 33); corporate responsibility challenges us to take a good, hard
look at our business model (ibid., introduction pp. 4, 7). In line with the
above-mentioned disclosure, the report presents many details on the practice of auditing and monitoring supply chain businesses concerning issues
such as hours of labour, wages, freedom of association (among the toughest challenges; p. 38), diversity and the environment (ecological footprint); the concept of transparency is used throughout the text.
Transparency concerning compliance and non-compliance in the supply
chain is especially welcomed because it can change the footwear and
apparel industry as a whole. In this, multistakeholder collaboration is also
considered to be crucial (pp. 15, 47, 48, 55). One of the founding ideas is
that corporate responsibility has to be integrated into the core business
strategies (p. 14). Market forces will have to be used to support the whole
eort: its only when market forces enable corporate responsibility that
widespread change will occur (p. 11, introduction p. 6).27 Having learned
a lot from non-governmental organizations (NGOs) and others, Nike
agrees that engagement with the civil society is highly important (p. 89).
This experience also led to the idea that stakeholder contacts should have
a structural, enduring, base: the global stakeholder forum starting in
February 2004.28 They also mention community investments, knowing that
if these investments are driven only by business objectives, this can damage
the outcome (p. 77).
China is considered as a major challenge especially in connection with
freedom of association, because its law prohibits independent labour
organization. Another obstacle is the lack of a tradition of transparency;

Transparency, integrity and openness

519

indeed, there is even the practice of the managements coaching of workers

in deceiving compliance auditors. Nike, therefore, sees it has a task: we
believe a policy of direct engagement and openness is the best path to
reform China (p. 86). In particular, this engagement is supposed to benet from building partnerships (p. 87). These ideas about China are
in alignment with the remarks made on the international Multi-Fiber
Arrangement (introduced in 1974, expired 1 January 2005). Nike is positive
about the phase-out of this arrangement because it has contributed to the
prevalence of short-term relationships between buyers and producers, and
short-term relationships are not always compatible with best practices on
corporate responsibility (p. 88). The situation described in the report
matches the statement made by Locke et al. (2006) that, because of industry dierences between footwear and apparel (for example, the Multi-Fiber
Arrangement), Nike has been able to develop long-term relations with
several Korean and Taiwanese footwear producers. These notwithstanding,
there are still problems. In 2006, more controversy was being reported from
China. For example, Roberts and Engardio (2006):
Nike says that one factory it caught falsifying records several years ago, is the
Zhi Qiao Garments Co. The dingy concrete-walled facility set near mango
groves and rice paddies in the steamy southern city of Panyu employs 600
workers, most in their early 20s. They wear blue smocks and lean over stitching
machines and large steam-blasting irons. Today the factory complies with
labourlaw requirements, Nike says, but Zhi Qiaos general manager, Peter
Wang, says its not easy. Before, we all played the cat-and-mouse game, but that
has ended, he claims. Any improvement you make costs more money. Providing
for overtime wages is his biggest challenge, he says. By law, he is supposed to
provide time-and-a-half pay after eight hours on weekdays and between double
and triple pay for Saturdays, Sundays, and holidays. The price [Nike pays] never
increases one penny, Wang complains, but compliance with labour codes
denitely raises costs.

The issue Wang raises is that, while Nike and the FLA hold the contractors feet to the re to obey labour codes, Nike does not provide them with
any more money to ensure compliance. These problems are similar to those
Wal-Mart, Dell, Hewlett-Packard and other multinational rms are
involved in. Labour activists documenting labour conditions are continuing to expose poor conditions surfacing in China. Nike, though, believes
that the problems are far less severe than 15 years ago. In connection with
this, the report shows reective consciousness: with regard to monitoring
and auditing, employers have very subtle methods of misleading and concealing; cultural barriers also exist, for example, diculties in talking
openly of sexual harassment; in some cases workers are taught how to
mislead auditors (Nike 2005, pp. 3944, 87). Similar issues are raised by

520

Handbook of research on global corporate citizenship

Roberts and Engardio (2006), quoting the FLA: factory personnel have
become sophisticated in concealing non-compliance related to wages. They
often hide original documents and show monitors falsied books. Nike
recognizes that overtime is a widespread and persistent problem in China
(Nike 2005, p. 43). However, it is less so in the footwear industry, because
the company is often the sole buyer and can inuence matters (Nike 2005).
In connection with wages, Nike underlines the role of market forces, if possible, in connection with industry changes: lowering the price on entry into
corporate responsibility is crucial, because more can and must join and
commit (p. 11). If wages are to be set by non-market mechanisms, Nike
believes that this should be done by those having the power to do so on a
broad scale, that is governments, industrial relations bodies . . . and
employers federations (p. 44).
We shall close this section by considering (dis-)contracting suppliers.
The report mentions placing orders in 122 new factories, and discontinuing them in 34 companies during Fiscal Year 2004. The rst reason given
for these were shifts in consumer demand and trends. Other reasons were:
performance of companies with respect to quality, price and corporate
responsibility (p. 16). Nike has developed the so-called factory compliance life cycle, which, at a general level, formalizes exit procedures and the
way new companies are to be contracted into a decision-tree model (p. 17).
The exit procedure is meant to be applied when a reduction of orders from
Nike aects a signicant number of workers. In the case of subcontracting, however, this may not always be clearly visible (p. 19). In both procedures the items that play a role in the decision cycle are quality, delivery,
price and compliance with corporate responsibility demands. Information
concerning the last is gained through multifaced auditing, the results of
which are presented in a four-category rating system. The idea is that when
a company has a low score, a remediation trajectory will be started. All this
is said to be quite new and part of a learning process (p. 26). In order to
integrate compliance into the business, the report presents a balance
scorecard by which cost, delivery, quality and compliance have to be balanced (see also introduction p. 7). However, there is always the diculty
of nding a common metrics and Nike recognizes that the metrics of compliance is more subjective, whereas for the rst three the numbers are
easy to track in real time (p. 27). Another diculty remains the mutual
weighting of the four factors. However, the report does not mention how
this might be solved. The only comment made is that Nike does not report
on factories dropped for compliance reasons because it is often dicult to
isolate poor performance on compliance as the sole reason for terminating a business relationship (p. 26). In our view, integrating performance
on compliance also remains a serious problem: there is a lack of rigorous

Transparency, integrity and openness

521

systems that align compliance performance with business performance

(p. 47).
Nike rhizomatic?
The preceding historical expos provides the opportunity of deciding to
what extent Nike ts in with the rhizomatic perspective. At the beginning,
it did business in a way that can be categorized as nomadic entrepreneurship, moving its production to ever-cheaper facilities. It was not interested
in the way suppliers were meeting the conditions of contracts, nor did it
concern itself with realities behind the walls of contracted plants and the
eects of moving from one place to the other (grasshopper nomadism).
All this was not accidental but dependent on its business model, in which
maxizing prot by pushing its brand was the key. When Phil Knight, in
reaction to the growing criticism of the 1990s, was denoting the issues mentioned by the critics as incidences, this was not accidental either. Nikes
branded image, involving the Just Do It advertising campaign, just
counted the winners, the company being a winner itself. In line with its business model, it did not matter at what cost and whose suering victory was
being achieved. Rhizomatic theory of branding images, however, leads one
to expect a hidden reality behind the victorious swoosh, a reality indeed
becoming manifest in Knights incidences.
However, when, in reaction to the criticisms, Nike started (external)
auditing in the second half of the 1990s, this, as such, already brought in
something that went beyond nomadism. The same applies to Knights
statement about auditor Andrew Youngs unquestioned integrity and his
judgement that basically Nike is acting as a good citizen. This vocabulary is beyond entrepreneurial nomadism, although everything was used,
apparently, for cleansing the branded image of Nike of the mud of criticism. The period from the end of the 1990s until the 2005 publication of
the Corporate Responsibility Report seems to mark a real change from
nomadism to citizenship. What remains is Nikes intention to be a winner,
this time as the leading member of a victorious team (the industry and
many other stakeholders) concerning corporate responsibility, instead of
a sole actor seeking its own gain. As we have seen from our reading of the
report, however, the triumphant just do it has led to an awareness of
many diculties connected with auditing, for instance manifesting
themselves. So, if the report contains Nikes intentions, with the company
really being open in the sense discussed earlier, then a rhizomatic
reading of its activities is no longer adequate. However, we also pointed
to some undecided, dicult, issues, for example, in connection with the
compliance balanced scorecard, which bear with them risks of nomadic
regression.

522

Handbook of research on global corporate citizenship

Concluding remarks: Nike, transparency, integrity and openness

Our investigation brought us to transparency, integrity and openness, concepts important for corporate responsibility and citizenship. After exploring their meaning, we examined their involvement, relation, proper role and
risks in matters of governance. In all this, we explored normative and epistemological issues, inter alia the vulnerability of knowing about integrity.
At the end of the rst part of our argument we proposed a general maxim:
openness if suitable, transparency when necessary and integrity always.
However, risks of pseudo-transparency and -openness were also highlighted, leading to an examination of rhizomatic entrepreneurship and
branding. Then we gave the example of Nike, presenting some of its historical vicissitudes, culminating in an overview of the most relevant ideas
and views of the 2005 Corporate Responsibility Report.
Looking at Nike in terms of the above maxim, the conclusion is that, at
the beginning, there was not much openness (in both senses discussed
earlier), that transparency was very limited, mainly conned to nancial
performance, and that integrity was not very much in evidence, perhaps
only in connection with the company considered as an instrument for
money-making and upholding the brand. Now, a reader could ask: does
all this not t in with the maxim?; at that time, was small openness not
very apt?; did Nike, as far as transparency is concerned, not do what they
had to do?; in terms of its business model, was it not acting with
integrity?. From a corporate responsibility point of view, these questions
require a critical reaction: Nike was not suciently open (see the remarks
concerning corporate prejudice); transparency was less than necessary, that
is, as demanded by the wider society; and integrity was jeopardized by the
companys actions. This at least is how we interpret Knights comment of
Nike making a bumpy original response (Nike 2005, introduction p. 2),
and the earlier quote from the letter by NGO members of AIP to Knight.
Both are striking.
The 2005 Corporate Responsibility Report can also be read in terms of
the maxim mentioned above. It gives attention to transparency and openness. Integrity is also involved, although not explicitly.29 For integrity,
meaning wholeness and acting in one piece, the following quotation from
the report is relevant: in the past, a degree of separation has existed
between CR and the rest of the company (p. 10). Introspectively Nike,
indeed, learned that it was lacking integrity. Other central subject matters
in the report, pointing to integrity, are those problems dealing with
misleading in connection with audits, and the compliance balanced scorecard. Regarding the former, lack of integrity is translated immediately into
a hazard of pseudo-transparency, that is, the reality as described is
not present. The latter relates to diculties of integrating compliance

Transparency, integrity and openness

523

performance with business performance, creating integrity risks. In connection with the intention of changing the whole industry, this is a problem
not only for Nike. The term transparency is widely used in the report. Its
meaning is not dened explicitly, though. The impression one gets from
what is being said, is that transparency concerns information, facts, not
perceptions, on the basis of standardized reporting regarding a companys
performance (p. 89). The report considers transparency as a risk as well as
an opportunity. The latter is its function as a strategic tool, which is supposed to have potential for changing a whole business; it is also expected
practice for industry leaders (introduction p. 9). The risk is expressed by
Nike as: what we say can be taken out of context; and the rst hard lesson
of transparency is that bad news trumps good news. This is dierent from
what we have discussed as risks of the commandment of transparency.
According to Nike, the best response is focus . . . on more and better transparency, and by the latter, as noticed above, the company understands
monitoring and reporting on the basis of uniform standards (p. 89). Now,
uniform standards have a force, but they also run the risk of becoming
insensitive to matters outside their scope. Openness and things related are
mentioned explicitly by Nike only twice: (i) in the already quoted belief
that, concerning the problem of freedom of association, a policy of direct
engagement and openness is the best path to reform China (p. 86); and (ii)
in the view that engagement with NGOs and other stakeholders has
opened our eyes to new issues and viewpoints and . . . enabled us to draw
on their experience and expertise (p. 89). Both connotations, that is being
open to and open about, not because of reasons of compliance but by a corporations own initiative, are present here. Other issues, involving openness
implicitly, are, for example, the cooperation with other companies, the
intended going beyond the law concerning toxic substances (p. 62), the
emphasis on the stakeholder forum and the will to learn from our keenest
critics (p. 89). All this is completely in line with the remark that corporate
responsibility can be a radar for the future (p. 86). However, when Mark
Parker and Charlie Denson, co-presidents of Nike, in their accompanying
letter write we understand that a well managed company must reect [our
emphasis] the society in which it operates (introduction p. 7), this seems,
because of its passive subtone, to somewhat contrast with the proactivity
involved in these issues.
Hence, the relevance of openness, integrity and transparency is clear. We
also think that the future of Nikes corporate citizenship might benet from
a conscious, reective linking of the proposed maxim with its engagements.
The risk of transparency, of obedience to CT, for example, might be softened by paying conscious attention to openness. The same applies to situations that readily put integrity in jeopardy. In particular, cooperation and

524

Handbook of research on global corporate citizenship

interaction in the stakeholder forum enables people to get to know one

another, which is important because of the epistemic vulnerability of
integrity. Moreover, (attention to) integrity should always be borne in
mind, and this is especially important concerning audits and limits of openness (how far does a company have to go in being open?). In the case of
Nike, an example of the latter is the non-reporting of factories no longer
used for compliance reasons. This should be done with integrity. If not,
then nomadic regression, damaging citizenship, lies in wait.
Seeking the suitability of openness, nding out when transparency is
needed and being mindful of the enduring value of integrity has a general
relevance and we think the example of Nike also illustrates its importance
in a particular case. In addition, when looking at Zadeks (2004) ve subsequent stages of organizational learning concerning corporate responsibility, that is from the defensive to the civil one, cultivating the latter can
also benet from this attention to openness, transparency and integrity;
the reverse is valid at the same time. Zadek also mentions the part played
by shareholders. In his judgement, they largely show a disinterest in
matters of corporate responsibility. Many investors indeed seem to consider companies as money-making machines (see our introduction), and
earlier rhizomatic traits of globalized capital have been mentioned. An
important Dutch pension fund, a very large investor, was recently in the
news because of unwise investments a lack of self-knowledge, transparency, openness and integrity in businesses producing forbidden
weaponry. The funds rst reaction was that their prime responsibility is
raising money in order to secure pensions; later on things were presented
with more nuance. Hence, there is a world to win by looking at openness,
integrity and transparency. This will not be easy, however, but every step
is a step forward one. That companies such as Nike value contacts with the
socially responsible investment community (Nike 2005, p. 96) is a hopeful
sign in this respect.
Notes
1.
2.
3.
4.
5.
6.
7.
8.

Important questions such as how far should we go by setting uniform standards? and
what is the exact role of governments? will not be addressed in this contribution.
See their Business Principles: www.abnamro.com/beyondmakingmoney, accessed 5
November 2007.
The original French reads as follows: autre corps sont dyaphane ou transparenz ou
clers . . . la lumire et perce et pass tout oultre (Oresme 1968, p. 456).
One could also speak of moral or aesthetic ideals.
The original French is as follows: lon clbre lavnement dune transparence: les curs
nont plut de secrets, la communication ne rencontre plus dobstacle.
In the original: son cur, transparente comme le cristal, ne peut rien cacher de ce qui
sy passe. Here, both meanings, presence and unpresence, are meeting in one.
Big Brother is watching you! is expressing the same.
See www.exxonmobil.com/corporate/citizenship, accessed September 2007.

Transparency, integrity and openness

525

9.

For instance, in quantum mechanics a lack of clarity in the wave/particle dualism leads
to the introduction of the principle of complementarity.
10. It is not impossible that this split is experienced as dichotomizing professional life.
How this should be estimated depends on the meaning given to the professional
practice involved. This, however, is not a matter of personal taste but a philosophical
issue.
11. Sensitivity mentioned here is related to the notion of openness discussed in the next
section.
12. See also Steinmanns idea of the sensitive organisation (Steinmann 2002, p. 17).
13. See
http://www.cisco.com/web/about/ac227/ac111/cisco_and_citizenship/corporate_
culture.html, accessed September 2007.
14. See http://www.frieslandfoods.com/en/frieslandfoods/environmentsociety/socialrespon
sibility/Pages/default.aspx, accessed September 2007.
15. Philosopher Gadamer distinguishes between two kinds of prejudices, that is, those necessary for hermeneutic understanding and those hindering it.
16. We shall not discuss the important issue of dening and selecting the criteria, nor will
we pay attention to their validity base. For the moment it is sucient to say that companies have no complete autonomy in this.
17. In the philosophy of auditing, expressions such as the integrity of nancial information, the integrity of the audit function, the integrity of internal control and capacity for integrity of the auditors are fairly ommon (see Flint 1988).
18. Some people, that is stakeholder activists, make themselves responsible.
19. We know, of course, that long-term relationships also exist. They do not t comfortably
into nomadism.
20. Everything 2 website summary, http://www.everything 2.com/index.pl?node=nike,
accessed 30 October 2007. For similar support on this, see Nguyens site http://
thangthecolumnist.blogspot.com/2007/08/just-do-it-instead-of-playing-blame.html.
21. Boj, D.M. (2000), Timeline for Lap Nguyen, http://business.nmsu.edu/~dboje/nike/
vietnam.html, accessed 30 October 2007.
22. Ibid., accessed 30 October 2007.
23. See http://business.nmsu/~dboje/NIKknightmeetingse2297.html, accessed September
2007.
24. Global Exchanges Nike Chronology, http://www.globalexchange.org/campaigns/sweat
shops/nike/chronology.html, accessed 30 October 2007.
25. See Nike (2007).
26. See http://www.nike.com/nikebiz/news/pressrelease.jhtml, accessed September 2007.
27. Later on in the report it says that consumers may not yet understand sustainability as a
purchasing incentive (Nike 2005, p. 60).
28. In this text, we shall pay no attention to Nikes stakeholder denition because substantial discussion would require at least another paper.
29. Perhaps its importance is thought to be so obvious that such attention is supposed not
to be necessary.

References
Ballinger, J. and C. Olsson (eds) (1997), Behind the Swoosh: the Struggle of Indonesians Making
Nike Shoes, Uppsala, Sweden: Global Publications Foundation and International
Coalition for Development Action.
Boj, D.M. (2001), Narrative Methods for Organizational and Communication Research,
London: Sage.
Burgelin, P. (1952), La Philosophie de lexistence de J.J. Rousseau (J.J. Rousseaus philosophy
of existence), Paris: Presse Universitaires de France.
Deleuze, G. and F. Guattari (1987), A Thousand Plateaus: Capitalism and Schizophrenia, trans.
and foreword by Brian Massumi, London and Minneapolis, MN: University of Minneapolis
Press.

526

Handbook of research on global corporate citizenship

Flint, D. (1988), Philosophy and Principles of Auditing: An Introduction, London: Macmillan.

Foucault, M. (1980), Power/Knowledge: Selected Interviews and Other Writings, New York:
Pantheon Books.
Gadbury, Sir A. (2002), Business dilemmas: ethical decision-making in business, in
C. Megone and S.J. Robinson (eds), Case Histories in Business Ethics, London: Routledge,
pp. 923.
Locke, R., F. Qin and A. Brause (2006), Does monitoring improve labour standards? Lessons
from Nike, MIT Sloan Working Paper No. 461206, www.ssrn.com/abstract=916771,
accessed 7 November 2007.
Nike (2005), FY04, Corporate Responsibility Report, www.nikeresponsibility.com, accessed 7
November 2007.
Nike (2007), http//www.saigon.com/~nike/aipletter.html, accessed September 2007.
Novartis (2007), www.novartis.com[0], accessed 20 September 2007.
ORourke, D. (1997), Smoke from a hired gun: a critique of Nikes labour and environmental auditing in Vietnam as performed by Ernst & Young, www.corpwatch.org, accessed 7
November 2007.
Oresme, N. (1968), Le Livre du Ciel et du Monde (The book on the heavens and the earth),
Madison, WI: University of Wisconsin Press.
Roberts, D. and P. Engardio (2006), Secrets, lies, and sweatshops, Business Week, 27
November, 5058, see also:http://www.socialfunds.com/news/release_print.cgi?sfArticleId=
7041, accessed 7 November 2007.
Roberts, J. (2003), The manufacture of corporate social responsibility, Organization Studies,
10 (2), 24967.
Schipper, F. (2007), Transparency and integrity: contrary concepts?, in K. Homan,
P. Koslowski and C. Luetge (eds), Globalisation and Business Ethics, Aldershot and
London: Ashgate, pp. 10119.
Schumpeter, J.A. (1934), The Theory of Economic Development, Cambridge, MA: Harvard
University Press.
Shakespeare, W. (1883), Romeo and Juliet, in C. Knight (ed.), The Works of William
Shakespeare, London: Routledge.
Solomon, R.C. (1993), Ethics and Excellence: Cooperation and Integrity in Business, Oxford:
Oxford University Press.
Starobinsky, J. (1964), LInvention de la Libert (The invention of liberty), Geneva: dition
dArt Albert Skira.
Starobinsky, J. (1971), Jean-Jacques Rousseau: la transparence et lobstacle (Jean-Jacques
Rousseau: transparency and obstruction), Paris: Gallimard.
Steinmann, H. (2002), Corporate ethics: a German view, BRC Working Papers, Kowloon:
Hong Kong Baptist University Press.
Zadek, S. (2004), The path to corporate responsibility, Harvard Business Review, December,
210.
Zadek, S. (2007), The Civil Corporation, London: Earthscan.

23 The corporation and its fragments:

corporate citizenship and the legacies of
imperialism
Raza Mir, Richard Marens and Ali Mir

The conquest of the earth, which mostly means the taking it away from those
who have a dierent complexion or slightly atter noses than ourselves, is not a
pretty thing when you look into it too much. What redeems it is the idea only.
An idea at the back of it; not a sentimental pretence but an idea; and an unselsh
belief in the idea something you can set up, and bow down before, and oer a
sacrice to . . .
(Joseph Conrad 1899 [2001], p. 65)

Introduction
The role of corporations in the process of colonialism and imperialism has
been well documented, from the sugar plantations in 16th-century Haiti
(Ahluwalia et al. 1999) to the East India Company in 18th-century India
(Guha 1989), and from allegations about the dubious role played by oil
companies in 19th-century Middle East (Prashad 2007) to concerns about
carpetbagger corporations in 21st-century Iraq (Tappan 2004). Accounts
of corporate behavior in poorer nations have suggested a pattern of malfeasance, often in coordination with colonial and imperial states.
In this chapter, however, we are less concerned with unearthing and cataloguing these oenses than we are with exploring the ways in which organizational theory has been deployed to naturalize these actions, to render
them unremarkable or in some cases, liberatory. In light of the epigraph to
this chapter, we are attempting to highlight (and historicize) the idea that
has been deployed to legitimize global corporate accumulation. Our
specic focus here is the nebulous, ill-articulated concept of corporate citizenship, which has intrigued corporations as well as researchers over the
past two decades, as a possible tool to legitimize corporate presence in an
increasingly deterritorialized economic space. Our contention is that any
hegemonic denition of corporate citizenship is predicated upon an
antecedent homogenization of the concept of the corporation itself. Such
an interlocked set of denitions of rm and rm behavior leaves out a
variety of actors in the shadows of theoretical debates on corporate behavior. We term these actors the fragments of the corporation (following
Chatterjee 1992, who had done a similar analysis of the concept of the
527

528

Handbook of research on global corporate citizenship

nation-state). In an interesting theoretical inversion, the nation-state begins

by promising universal inclusion, and then is forced to encounter the fragments its ideology left behind, while the corporation begins with a circumscribed self-concept, and then has to deal with the fact that its citizenship
initiative produces the fragments that it cannot aord to ignore, if it seeks
global legitimacy. This chapter seeks to provide a voice to those fragments
of the corporate discourse whose concerns are left unaddressed in the theoretical discussions of corporate citizenship.
The rest of this chapter comprises four sections. First, we identify three
ways in which corporate citizenship can be conceptualized within the parameters of organizational theory. Next, we utilize theories of Third-World
nationalism to dene the term fragment as it relates to the concept of citizenship and then link it to the notion of corporate citizenship. Here, we
briey analyze corporate behavior in the past and present to evaluate if corporate actions (by multinational corporations (MNCs) in particular) can
be seen as having met these standards of citizenship. In the third section,
we historicize theoretical debates around corporate social responsibility in
the United States, attempting to identify the ideological context around
which the concept of corporate citizenship emerged. Finally, we return to
the concept of the fragments of the corporation, to highlight ways in
which the marginalized actors in this debate around corporate citizenship
can make their presence felt in the political as well as the theoretical realm.
Three facets of corporate citizenship
Recent formulations in organizational theory (Matten and Crane 2005;
Palazzo and Scherer 2006) have played an important role in deepening our
understanding of corporate citizenship, and rescuing it from being equated
incorrectly with corporate philanthropy and participation in local community. The incorporation of arguments from political science (Moon et al.
2005), in particular the republican political model of Jrgen Habermas
(Scherer et al. 2006), have infused the term with greater depth, and allowed
for multiple conceptualizations of corporate citizenship.
In the arena of political science, the issue of citizenship has been debated
vigorously (see Spiner 1994, for a review). Citizenship has always been
framed in terms of aliation to a state, which can be conceived of as a sovereign geographical and administrative space. However, the state as a unit
of aliation suers from several disadvantages, principally related to its
inability to generate an emotive connection with its subjects. Some political
philosophers have tended to gloss over this inconsistency, as evidenced by
Richard Rortys suggestion that matters of culture and identity politics
should simply be ignored for the purpose of designing political institutions
(Rorty 1991, p. 209). Their suggestion is that the design of a multiethnic

The corporation and its fragments

529

state will eventually produce its own emotive connections. The demands of
liberal citizenship therefore involve a separation of the institution from the
individual, with the corollary demand that the individual subsume some or
most of their group aliation to this particular mode of identication
(Walzer 1984, p. 325).
The spatial boundaries of citizenship have constantly been challenged,
particularly as diasporic communities from various states traveled, migrated
from or sometimes sought refuge from their homelands. Citizenships were
renounced, changed, or sometimes dually held. Around the same time,
debates around the construct of nationalism, which carried a much
more complex and emotionally anchored identication than citizenship
(Hobsbawm 1990) began to intensify. The notion of a nation-state was proposed to encompass the emotive pulls of nationalism and the bureaucratic
governmentality of the state, but nationalism continued to spill beyond the
cognitive boundaries of citizenship. The nation lived in empty homogenous
time (Anderson 1991), and produced an imagined community that transcended geographic boundaries. Be it British citizens of Pakistani origin,
German-Turks, French-Canadians or displaced Palestinians in Lebanon,
people all over the world began to reimagine their citizenship aliations in
creative ways.
In the midst of such a chaotic attitude to citizenship, corporations also
staked a claim to the term, albeit in dierent ways. For instance, they sometimes sought to represent the corporation as an entity in global space and
cast its corporate social responsibility initiatives as evidence of its citizenship behavior. For example, Microsoft articulates its global citizenship initiative thus: Our Global Citizenship Initiative combines innovative
technology, partnerships, and programs to create economic, educational,
and social opportunities in local communities worldwide, and to help foster
a more secure computing experience for people everywhere.1 At other
times, corporations aligned themselves with initiatives aimed at helping
people from disadvantaged backgrounds have a greater say in their lives,
thereby claiming to facilitate citizenship behavior. For example, Wal-Mart
successfully publicized its 2005 eorts to help the victims of Hurricane
Katrina in the United States as a facilitation of the civil rights of poor
Americans.2 Finally, corporations can become crucibles of citizenship
themselves, by attempting to align all their spatially displaced workers into
a single corporate identity through a variety of identity-reinforcing actions.
Christina Garsten, in an ethnography of Apple Corporation, illuminated
the dierent strategies used by this spatially dispersed organization to foster
a collective culture among its employees (Garsten 1994). All these three initiatives of corporations can be theorized as attempts to wrest legitimacy by
leveraging the corporation into the interstices of the concept of citizenship,

530

Handbook of research on global corporate citizenship

which had itself been fractured by the relative incompatibilities between the
nation and the state.
In light of the above, the concept of corporate citizenship (both in terms
of active corporate initiatives and public perceptions of rm behavior) can
be parsed along three dimensions, which we have termed the responsive,
the facilitative and the internal-democratic elements. The responsive
element of corporate citizenship is the most traditional conceptualization,
where the rm is presented as a citizen in global society, and its behavior is
evaluated along several dimensions such as philanthropy, engagement with
local communities, environmentalism and compliance with local and global
laws (Wood and Logsdon 2001). The facilitative element of corporate citizenship relates to its increasing duciary responsibility to world citizens at
a time when institutions of governance have become deterritorialized. In
other words, corporations, like governments, have a role to play in ensuring
that the people they encounter enjoy citizenship rights (Matten and Crane
2005). Finally, the relatively undertheorized internal-democratic element
considers the corporation as a vessel of citizenship rights. In other words, in
a world of fracturing identities, one may think of people as being, to varying
degrees, citizens of corporations. While many theorists have alluded to
this aspect of corporate behavior (Derber 1998; Saari 1999), it has not
been examined seriously in the context of corporate citizenship. We argue
that the manner in which an organization denes its citizens, includes and
excludes various constituencies from citizenship privileges and treats
dierent classes of citizens will provide an insight into its own citizenship
behavior.
As Table 23.1 shows, a corporation can be judged to have shown responsive citizenship behavior if it engages in actions that may temporarily go
against its prot motive, to help constituencies to which it is not transactionally linked. For example, the intensication of the HIV epidemic in
Africa in the 1990s presented a unique challenge (and opportunity) to pharmaceutical corporations who held patents on anti-retroviral drugs, to
sacrice some of their rent-generating capability in favor of ameliorating a
crisis that arguably represented the greatest human rights and human
capital challenge to an entire continent (Bond 1999). It is a dierent matter
that these corporations did not rise to this challenge in any substantive
manner (Lewis 2001).
Similarly, consider a country where a regime has been known to oppress
its people and deny them their democratic rights and civil liberties. If the
economy of such a state had substantial corporate exposure, corporations
acting individually or in coordination could use the threat to exit to force
the state to stop oppressing its citizens. The incipient moves toward a corporate boycott of the apartheid regime in South Africa (Franck et al. 1982)

The corporation and its fragments

Table 23.1

531

Three elements of corporate citizenship

Types of
citizenship
behavior

Responsive
citizenship

Facilitative
citizenship

Internal-democratic
citizenship

Role of
corporation

As a citizen in
global society
(engaging in
socially responsive
behavior)

As a facilitator of
citizenship rights of
disadvantaged
people

As a crucible of
citizenship (people
are citizens of the
corporation)

Hypothetical
example of
citizenship
behavior

A pharmaceutical
company gives up
intellectual property
privileges to
facilitate access to
medicines by the
aicted poor

A corporation
threatens exit from
a lucrative market
unless local
government
recognizes human
rights

A corporation
grants contract
workers access to
its internal
procedures
regarding
harassment and
wage-fairness

Hypothetical
example of
violations of
citizenship
compacts

A chemical
company deploys
a defective plant in
the Third World,
which malfunctions.
Thousands die

A soft drinks giant

colludes with
apartheid South
Africa and profits
from human rights
violations

A sneakermanufacturing
firm outsources
production to
vendors who abuse
workers. Disclaims
responsibility for
contract employees

Possible
recourse
against
corporations
by
fragments
(political
society)

Protest corporate
behavior at local
headquarters of the
corporation, as well
as international
venues, such as the
WTO ministerial
meetings

Through global
solidarity
movements,
attempt
embarrassing
boycotts of
violating
corporation in key
markets

Democratic
pressure on local
governments to
enact minimum
wage and labor
oversight laws, to
cover domestic as
well as foreign
organizations

provided such an example of a potential facilitative citizenship behavior by

corporations.
Finally, corporations who utilize the globalization of production to outsource their manufacturing operations could take steps to ensure that the
laborers who produce their products in the hinterlands of the world are
treated with dignity and earn a fair wage (Feenstra and Hanson 1996). In

532

Handbook of research on global corporate citizenship

domestic contexts, they need to ensure that their employees who toil in the
lower levels of the corporate hierarchy earn a living wage and have access
to basic benets such as healthcare. It is a matter of some surprise and disappointment that companies such as Nike and Wal-Mart choose to risk
delegitimizing challenges to their corporate image rather than oer this
courtesy to their employees and contract laborers. They are truly squandering an opportunity to exhibit internal-democratic citizenship behavior,
which could also have a valuable signaling eect in the corporate space,
given the status of these rms as market leaders in their product markets.
In the next section, we attempt to theorize a dierent approach to corporate citizenship behavior using a framework from political theory.
Theorizing the fragment: from the nation to the corporation
What denes a citizen? As we discussed in the earlier section, the
citizenship-conferring state derived its legitimacy from a claim to nationhood, which presumed a high level of cultural legitimacy. Even multiethnic state formations like the Soviet Union chose to articulate a concept of
national culture (Brubaker 1994), while nationalists in states that had cultural continuities with their neighbors (such as East and West Germany, or
India and Pakistan) sought to distance their state culturally from their
neighbors (Blank and Schmidt 2003). As can be imagined, this form of
homogenized nationalism is based on an ocialized narrative of history
and culture. This version of the nation has always had its share of detractors, such as those minorities whose cultural aspirations were erased or
marginalized in the ocial discourse of nationhood.
In an inuential book titled Nationalist Thought and the Colonial World,
the political theorist Partha Chatterjee claimed that nationalism of the type
that a colonial power bequeathed to a colony at the moment of independence was a derivative discourse. According to Chatterjee, a Western
concept of secular nationalism, which was suggested as a mode of governance and popular solidarity by departing colonial regimes in Asia and
Africa, had been politically derived from a particular ideology of
Enlightenment (Chatterjee 1986). Despite their universalistic claims,
Enlightenment-related approaches use an intrinsically European experience as a referent (as was pointed out by European theorists such as
Theodore Adorno and Max Horkheimer, and subsequently by Michel
Foucault). African and Asian populations are unable to develop any
organic connection with this ocial narrative of their nationhood (for an
anti-imperialist critique of Enlightenment ideology, see Muthu 2003).
Thus, the nation-state in the Third World forever exists in peril of fracture
by other nationalisms, based on religion, caste, or other aspects of culture.
Building further on this concept, Chatterjee (1992) subsequently argued in

The corporation and its fragments

533

a book titled The Nation and its Fragments that in order for nationalism to
be an eective force, nationalist discourse would have to incorporate the
concerns of the fragments, of the nation, dened as those subjectivities
whose interests and aspirations had been sacriced at the altar of homogenized nationalism (Pandey 1991). Thus, Chatterjee cautioned against
compressing the history or culture of the nation into any model, speaking
instead of ways in which nationalism can honor the fragmentary, the local,
and the subjugated in order to unmask the will to power that lies at the very
heart of modern rationality and to decenter its epistemological and
moral subject (Chatterjee 1992, p. xi). In his analysis of Indian nationhood, Chatterjee invokes fragments such as outcastes, women, peasants
and others, and suggests that instead of traditional binaries such as
laborcapital, we need to deal with more complex oppositions such as
communitycapital.
A nuanced analysis of Chatterjees ideas is beyond the scope of this
chapter (see Sarkar 2002 for a critique of some of his positions). Here, we
attempt to visualize the fragments of the corporation in the context of a
broad acceptance of his premise. This includes the acceptance that just like
nations, corporations have attempted to oer a homogenized version of
their role in societies, as citizens, as facilitators of citizenship and as crucibles of citizenship, which is ideological in character. Such a concept of citizenship is predicated upon an epistemological focus that is not universally
shared, and that people from dierent parts of the world nd these assumptions and their consequences bewildering and exclusionary. For example,
corporations enact their citizenship rights as demanded by the legal framework of the nation, but also demand citizenship privileges such as property
rights, recourse to a legal system that protects intellectual property, the
ability to purchase land and to use market forces in their hiring and compensation policies. However, power dierentials between nations and corporations lead to situations where such privileges, while conceptually
unremarkable, end up as a serious threat to the civil rights of other subjectivities. The interesting theoretical dierence between these two entities is
that while nations begin with an implied universality of inclusion, corporations begin with a more limited vision. And while fragments of the
nation are entities that nd themselves left out of its epistemic self-concept,
the fragments of the corporation are those entities that nd that their citizenship rights are systemically compromised by the growing reach of
corporations.
For example, regimes of intellectual property rights are incompatible in
agrarian societies where seeds are constantly replanted. Monsatos development of a terminator seed to prevent replanting of agrarian product
not only puts nancial burdens on farming communities, but interrupts a

534

Handbook of research on global corporate citizenship

way of life that has existed for millennia (Pendleton 2004). Similarly, the
privatization of water by companies such as Coca-Cola (Barlow and Clarke
2002) goes against the instincts of people who have never believed that
water was a commodity, and suddenly nd that streams and lakes that had
been available to them for generations were being fenced o and protected
by gun-toting security guards. The fact that such actions carry the imprimatur of the law is of scarce consolation to these people. Likewise, the
mistreatment of workers by contractors in the sneaker industry is directly
related to the stresses of job deadlines that originate thousands of miles
away and are not well understood by them (Klein 2000). The mechanized
rhythms of capitalist life are of course alien to these workers, who may have
been farmers less than a decade ago, but were forced into the industrial
workforce by a variety of corporate actions, including the elimination of
farm subsidies by local governments who diverted their spending to factories (Breman 1996).
In eect, the scenario plays itself out in the following manner.
Corporations enter poorer nations with a promise that they will bring in
investments and foreign technology, so necessary for the nations progress
in the globalized economy. National governments, in order to encourage
investments, oer them a variety of inducements, such as subsidies and
immunity from local laws (Baker et al. 1998). Corporations are allowed by
such laws to acquire a variety of assets, including some that had hitherto
been assumed (in light of past practices) to be community assets. They are
occasionally allowed to dictate the way of life in the spaces where they
operate, such as interfering in local customs, practices and celebrations
(Ong 2005). The nation-state accepts the corporation as a citizen, and in
eect relegates some of the residents of the nation from the status of citizen
to that of fragment. In general, the homogenized representation of the corporation and corporate behavior is designed to ignore the suering of these
fragments, or to theorize their plight as the consequence of some
Schumpeterian creative destruction.
Also, just as the discourse of liberal nationalism in ex-colonies was not
universally opposed, since it suited the agenda of a variety of national
elites, so too does the discourse of a homogenized corporation and its citizenship behavior nd circumscribed acceptance in some elite segments of
Third-World society. What we are attempting to do in this chapter is to
disrupt the homogenized discourse of corporate citizenship and visualize a
more inclusive approach that values the fragments of the corporation.
These fragments include labor (both employees and contractors working in
the globalized production space) (Munck 2002), communities aected by
corporations (Breman 1996), and those people whose lifestyles are displaced by the violence unleashed by capitalism in their living and working

The corporation and its fragments

535

spaces, usually through corporate actions (Harvey 2005). Just as corporate

citizenship jostles in the marketplace of ideas in order to legitimate itself
through hegemony-inducing maneuvers, the fragments should also have
the right (and the theoretical wherewithal) to articulate their own ideas of
mini-citizenship, not only as a means to legitimize their own position, but
also to challenge the dominant ideology.
How does one interrupt the discourse of homogenized corporate action?
One way would be to read the newspapers carefully and understand the
ways in which corporations have inltrated the quotidian life of the nation.
One quickly realizes that corporations have insinuated themselves into
public life in a seamless way, and now exist at the forefront of economy,
culture and policy. One important theoretical task would be to render this
reality more apparent. For example, Brook (2007 pp. 623) analyzes the
architecture of Washington, DC, and notes the emergence of over 100
buildings since 2001, which house private contractors to the US government. He observes that now corporations are powerful enough even to have
the famous Washington Mall closed o for private events. The corporation
and the government have truly begin to morph into each other; the
Securities and Exchange Commission (SEC) building in Washington is
rented from a corporation, and one in six SEC employees is in eect a
private contractor.
If this information seems unremarkable, juxtapose it against the news in
October 2007 that the US Congress, under pressure from the Iraqi government, had admitted that contract soldiers of the rm Blackwater USA had
perpetrated nearly 200 incidents of shootings in Iraq since 2005. In most of
those incidents, these soldiers had red at civilians from moving vehicles,
and never stopped to count the dead or assist those that they had grievously
wounded.3
On rst reading, this information seems like a routine incident of corporate malfeasance. Blackwater was contracted by the US government to do
a job in Iraq and they did it badly, presumably illegally, and will be punished for their behavior to the extent of the law. However, once we start contextualizing this behavior, it points to some troubling systemic trends. First,
the incident points toward the further shrinking of the state and the privatization of even the most fundamental of public services; that of public
defense (Scahill 2007). Second, the impunity of corporate behavior is most
apparent in the case of the Iraq war, a war that was prosecuted by the state
despite being unpopular. We now learned, for instance that Blackwater
USA derives 90 per cent of its revenue from US contracts, an incredible 65
per cent of which are awarded on a no-bid basis.4 Each Blackwater
employee in Iraq costs the US government an estimated $445 000 per year.5
Such corporate eecing of the US during wartime is hardly uncommon: we

536

Handbook of research on global corporate citizenship

have recently read of the Halliburton Corporation (of which Vice President
Richard Cheney is an ex-CEO) charging the US exchequer $28 for a plastic
plate.6
Finally, and perhaps most troubling is the reality that in the current legal
framework of corporate governance, there exists no framework under
which Blackwater can be adequately tried and prosecuted. The corporation
and its actors cannot be sued for murder or any other human rights violations. They do not fall under Iraqi law (because of a specic contract
between the US and the Iraqi government). They do not fall under US law
(because the events under question occurred outside the US, in Iraq) and
they do not fall under international law because the latter is made for
nation-states and not non-state actors.7 In eect, the corporation can
occupy the twilight zone of international governance, where no citizenship
laws apply.
What makes it so easy for a corporation like Blackwater to ride
roughshod over the will of the US people (not to mention the lives of the
Iraqi people)? Perhaps the answer to this question lies in observations made
in the aftermath of the Great Depression in the United States, when Berle
and Means (1932, p. 357) predicted: the future may see the economic
organization now typied by the corporation, not only on an equal plane
with the state, but possibly even superseding it as the dominant form of
social organization. The defense contractor is yet another example of how
corporations are now legally backed by imperial governments (USA) more
powerfully than sovereign nations (Iraq).
In a bleak if prescient analysis of corporate behavior, Banerjee (2006)
has argued that contemporary forms of organizational accumulation
increasingly involve dispossession and the subjugation of life to the power
of death. Drawing on the works of Mbembe (2003) and Agamben (2005),
Banerjee suggests that some contemporary capitalist practices contribute
to the subjugation of life in a variety of contexts. He too analyzes the role
of private military contractors in Iraq, often connected to large public corporations or private rms. Privatized military rms (PMFs) now oer a
variety of military-related services including combat operations, strategic
planning, asset protection, support and training. It is a global industry
operating in every continent except Antarctica. While the Third World
often marks the theater of operations for PMFs, their corporate head
oces are, not surprisingly, based in metropolitan centers of London,
Paris, Berlin and New York (Singer 2004, quoted in Banerjee 2006).
The idea of linking corporations to death, war and torture is an important
device to decenter the discourse of the corporation as a citizen and represents
them instead as mercenaries as well as merchants. While the mercenary
image is not necessarily a default image to represent the corporation, it helps

The corporation and its fragments

537

us to question the sanitized backdrop against which corporations have been

viewed in the mainstreams of organizational theory. And it is not as if the
corporations role as a purveyor of destruction in poorer countries is a new
phenomenon. Consider the following data points, which, if not constituting
a trend, are at least numerous enough to deect the charge of being outliers
in the Third-World experience of corporate malfeasance. In 1953, the CIA,
attempting to protect corporate interests in Iran, overthrew the government
of Dr Mossadegh, the democratically elected prime minister. The coup was
nanced in part by British Petroleum (Kinzer 2003). In 1973, ITT nanced
a similar overthrow of the democratically elected government of President
Salvador Allende of Chile (Alegria 1993). The actions of Union Carbide
caused the death of thousands of Indians in the Bhopal gas leak of 1984.
The Nobel Prize winner Ken Saro-Wiwa was executed in 1995 by the military regime of Nigeria on trumped-up charges. Saro-Wiwa had been agitating against Shell corporation on behalf of the Ogoni tribe, and the
culpability of Shell in the death of the activist was clearly articulated (Manby
2000).
How much responsibility do companies like Nike bear in perpetrating
the sweatshop culture that pervades the global supply chain (Klein 2000)?
Is Exxon responsible for the ravaged coastline of Alaska (Ott 2005)? Such
questions are direct body blows to the homogenized image of the corporation and corporate citizenship behavior.
As Table 23.1 shows, the hypothetical examples of the violations of citizenship by corporate actors are hardly far-fetched. As the brief summary
of examples in this section makes clear, such actions cannot be brushed o
as anecdotal examples of corporate crime. Rather, there are hints of a
pattern here, of systematic and systemic violation of citizenship behavior
by corporations, on which organizational theorists are puzzlingly silent.
Our contention in this chapter has been that in the current environment of
international governance, corporations exhibit behavior that violates all
three facets of corporate citizenship. The primary reason is that national
and global institutions have been relatively slow to keep pace with the
growing reach and power of corporations. To that end, these large entities
have found it even easier to be exploitative of local populations in the
current age than in earlier stages of global capitalism. Neoliberal macroeconomic policies have become hegemonic across most of the world, and
the economic success of most nation-states is predicated upon their ability
to attract global capital. As agents of global capital (through the promise
of foreign direct investments), corporations are in a position of advantage,
and are often not vulnerable to the punitive power of the nation-state
(Baker et al. 1998). At the same time, there are no international institutions
of any power to oer serious regulatory oversight to the actions of MNCs.

538

Handbook of research on global corporate citizenship

As a result, we see corporations riding roughshod over national laws in

their expansionary trajectories, often clothing their actions in the cloak of
foreign direct investment and avoiding culpability by threatening to move
their operations to the next eager supplicant nation.
The contested terrain of corporate social responsibility: from the USA to
the world
In the earlier section, we observed how corporations have tended to fall
short of the demands of good citizenship behavior on a number of fronts.
However, as suggested in the introduction, our assertion runs deeper than
mere allegations of malfeasance. What we seek to demonstrate is that the
notion of corporate citizenship, especially those elements of it that are
derived from the antecedent construct of corporate social responsibility
(CSR), has been altered in many ways to legitimize the ability of corporations to avoid governmental and institutional oversight in their rentseeking endeavors. In eect, we argue that many of the CSR/citizenship
theories have been consciously transformed over the past several years to
protect the abilities of organizations to appropriate surplus value, control
workers and preempt criticism. While our focus in this chapter has been the
imperial corporation, our story here shifts to the USA, which is the site of
imperialist knowledge production regarding corporate citizenship. It is a
story of how the term CSR was hijacked by corporations with the direct
participation of management theorists to legitimize behavior that had hitherto been deemed immoral.8
It is very interesting to observe here that while the most egregious violations of corporate citizenship behavior occur in countries that exist in the
penumbra of global capital, the theoretical debates occur in the metropolis (USA and Europe). This is consistent with earlier theoretical analyses of
the construct of Orientalism (Said 1978; see Prasad 2003, pp. 913 for an
introduction), where Edward Said documented how the Orient was discursively produced in the literary and academic arenas of 18th- and 19thcentury Europe. The cultural and theoretical representation of Asian and
African society as a mysterious, inscrutable, heathen and savage space
where coercion could be the only mode of restoring order tended to legitimize the force and violence that colonial armies and administrations
unleashed on the local populations (Said 1993). Likewise, we contend that
the seemingly benign domestic debates around CSR that went on in the
USA in the 1970s and 1980s were used to legitimize all manner of corporate excess in the rest of the world.
Moreover, the transformation of the meaning of CSR according to an
agenda dened by US executives was a process that was deeper and more
complex than the eorts of a handful of ambitious academics seeking the

The corporation and its fragments

539

ear or even the patronage of American corporate management. Both the

timing and internal logic of this change needs to be understood as part of
a deeper structural change in the US economy and its role in the world.
There have been a number of eorts to explain the political economy of the
rise and fall of what is often referred to as the Golden Age of American
capitalism, a period that lasted for approximately a generation after the
Second World War (Aglietta 1979; Lash and Urry 1987; Brenner 2002).
Arrighis (1994) variant of world-system theory most eectively places this
structural shift in a both a global and long-term chronological context.
According to Arrighi, global capitalism is a half millennium-old system
that experiences roughly century-long waves of development, with each
wave dominated by a geographically central hegemonic region. He
identies these increasingly larger and more technologically advanced
hegemonic regions, in succession, as the North Italian City-States (especially Genoa), the Netherlands, England and the United States, with each,
at its peak, serving as the center of the production and sale of the most
important commodities in world trade. After several decades of industrial
or agricultural hegemony, however, the cost of production in the core area
becomes increasingly less competitive. Wages and other costs rise in the
core, and other regions successfully use cost and other advantages to rst
imitate, then improve upon the hegemons competitive advantage, leading
most directly to downward pressure on labor within the relatively privileged
core region. A more subtle change, however, is the rise of the importance
of nance. By the time the hegemonic society is seriously challenged within
the sphere of production, it has already accumulated an enormous amount
of wealth. As a result, it becomes increasingly more attractive within the
hegemon for those in a position to do so to nd ways to extract this wealth
through nancial strategies and redistributionist politics than to continue
to invest in production in the core region. At the same time, some of this
accumulated capital is also invested in the most promising of the developing regions, thus nancing the next hegemon. In this manner, Venice
nanced Holland which nanced a great deal of the English agricultural
revolution, which in turn invested in American railroads and various infrastructural projects, a process that Marx, himself, noted but did not systematically analyze (Marx 1887 [1967]). This nancial hegemony, however,
actually proves technically easier to imitate than the production of commodities, and within a few decades, it too passes on as the rising hegemon
increasingly accumulates its own wealth. For a generation or so, however,
between the early decades of expanding productive capacity and the nal
decades of nancial hegemony, the middle-aged hegemonic core region
briey dominates both the nancial and real economic spheres, a period
of atypical liberality.

540

Handbook of research on global corporate citizenship

It was during the USA of this generation of double hegemony that the
idea of CSR was rst explicitly developed in line with a prosperity-regulated post-war consensus that valued a pluralist polity. In the early years of
this period, Howard Bowen published a book-length study, The Social
Responsibilities of the Businessman (1953), written on behalf of the organizational precursor of the National Council of Churches, a good bellwether of mainstream establishment moral views. This book is generally
regarded as the pioneering work on corporate social responsibility (Carroll
1999), but Bowens eort was soon joined by contemporaries such as
Harvard Business School Professor Benjamin Selekman, Whartons Ernest
Dale and Columbias Neil Chamberlain (Heald 1970; Windsor 2001).
Inuenced by parallel exposure to Keynesian economics and industrial
relations theory, and sharing similar experiences with depression, graduate
school, world war, cold war and government service (Bowen, for one, had
worked for both houses of Congress), these scholars advocated:
labormanagement cooperation, an equitable distribution of income, a
balance of countervailing power among important institutions, and a state
suciently independent of all of these narrower interests to serve as referee
(Marens 2004).
A generation later, these hopes for the evolution of benevolent, guided
capitalism within the American hegemonic core were wearing thin even
among its advocates. During the late 1970s, a time of stagation and building political reaction, Bowen himself announced: I have come to the view,
however, that corporate power is so potent and so pervasive that voluntary
social responsibility can not be relied on as a signicant form of control of
business (Bowen 1978, p. 129). By and large, however, Bowens disenchantment was either not noticed or not seen as important enough for a
new generation of CSR theorists to acknowledge, during these rst years
of declining economic hegemony. As American executives began to
respond to a weakening economy and the resulting political challenges, the
institutions and policies that the original cohort of business ethicists had
advocated with regard to government, unions and the egalitarian distribution of wealth were precisely the kinds of arrangements that American
executives were increasingly organizing to prevent, or even roll back
(Clawson et al. 1998).
These eorts did not stop with pressuring the political system. Executives
also turned their attention to the American intellectual community
(Callahan 1999). During a generation of American hegemony in both production and nance, it was argued that a degree of power sharing and economic egalitarianism within the core could win some degree of tolerance or
even approval among the more liberal members of the corporate elite, especially by those who saw it as a weapon in the competition with communism

The corporation and its fragments

541

and social democracy. By contrast, however, the 1970s rise of foreign competition and the increase of general economic uncertainty allowed little
space for these challenges to the legitimacy of corporate decision making,
more specically the right of businesses to act with the same autonomy in
the core as they had been doing all along in more peripheral regions, especially with regard to the treatment of employees (Marens 2004).
The Committee for Economic Development, for example, a mildly
Keynesian think-tank that generally proposed policies consistent with the
principles espoused by Bowen, Selekman and the others, was literally
purged during the mid-1970s. The Committee was founded and supported
by contributions from various businesses and executives, many of whom
had worked in government during the Second World War or after
(Schriftgiesser 1967). This small group of businessmen, however, which
Bowen (1953, p. 64) identied as understanding the need for public policies which will make the economic system work better from the point of
view of all classes not merely from the point of view of business, had
largely disappeared a generation later, and so did support for the
Committees traditional policies. As one of the Committees administrators
explained it, In the early [post-Second World War] days the trustees were
men who saw a need for some more government intervention. Now some
of the trustees believe the intervention has gone far enough (Clark 1976,
p. 38). As a result, an organization which had historically advocated regulations and mild subsidies, ended up employing an almost entirely new
Research and Drafting Committee for its 1979 study, Redening
Governments Role in the Market System, which called for tax cuts and a
reduced regulatory burden on business (Frederick 1981).
Not surprisingly, business executives patrons of American business
schools and employers of their graduates were also taking a closer look
at what universities were teaching, especially in business schools. In an
article candidly titled Corporate support of education: some strings
attached, a CEO of a major defense contractor argued without any conscious irony, that corporate support should be channeled to those [academics] who speak out for limited government and those who stress the
importance of individual liberties (Malott 1978, p. 134). He also called for
restoring a balance away from what he implied was an anti-business academic bias, which he exemplied by arguing that professors needed to teach
Milton Friedman along with John Kenneth Galbraith. What he regarded
as bias, however, reveals the change regarding what executives found intellectually tolerable since Bowens day. Friedman was already taught in all
standard economics texts, and Galbraith, while a skeptic and a pluralist,
was hardly an ideological opponent of capitalism: his then most recent best
seller had even been labeled by one left-wing economist a new streamlined

542

Handbook of research on global corporate citizenship

apologetic for monopoly capitalism (Sweezy 1973, p. 3). For the CEO who
authored the piece, the pluralism and mild government interventions once
advocated by Bowen and his cohorts were now synonymous with an inherently anti-business perspective.
There was no shortage of candidates waiting to provide a view of the corporation more palatable to business executives. In 1956, Selekman and
Selekman, working in Americas leading business school, could publish a
book titled Power and Morality in a Business Society without generating
serious controversy. Sixteen years later, at the dawn of a new era of organized corporate power, two highly respected economists would argue that
power was not even an issue with regard to understanding corporations.
They claimed, with no apparent irony, that the business rm has no power
of at, no authority, no disciplinary action any dierent in the slightest
degree from ordinary market contracting between any two people (Alchian
and Demsetz 1972, p. 780). That the authors oered no empirical support
for the articles studied, almost Orwellian, naivety has not prevented it from
becoming among the most cited pieces in modern economic scholarship,
says much about the intellectual climate that emerged in American economics departments and business schools (Lazonick 1991).
A second, related intellectual trend made the traditional approach to
business and society even less tenable. Not long after a large portion of
business executives were mobilizing to resist or prevent perceived attacks
from what they regarded as the left or liberal critics, they faced a new challenge from another direction that only reinforced this hostility. A new line
of criticism began emanating from economics and nance departments
that argued that corporate managers were paying too much attention to the
interest of non-shareholder groups, or, worse, pretending to do so as an
excuse for self-dealing, and thus avoiding or at least distracting themselves
from their duty to promote protability and shareholder value (Friedman
1970; Jensen 1988).
Furthermore, corporate executives working in previously oligopolistic
industries, who were now facing heightened competition and renewed
shareholder pressure, were less likely to have felt insuciently secure to
keep the big picture of societys interests in mind. Under siege by the
nancial community and their academic allies for allegedly being too deferential to other groups, executives were not likely to be sympathetic to the
view promoted by Bowen and others that assumed that they themselves
were potentially irresponsible tyrants requiring the constraints imposed by
countervailing power and additional governmental regulation.
As a result, business academics interested in social responsibility not
only faced potential career risks by advocating unionization, countervailing power and additional regulation, they also faced the question as to

The corporation and its fragments

543

whether there was any practical benet of advocating these in an era characterized by weak unions, mobilized shareholders and cautious politicians
(Clawson et al. 1998). Ultimately, CSR scholars responded to the new business and academic environments by implicitly conceding the right of corporate executives to retain a high level of autonomy so as to explicitly try
to inuence this autonomy by oering credible arguments to counter those
of agency theorists in favor of the hegemony of shareholder interests.
Much of this new focus was devoted to direct responses to Milton
Friedmans (1970) widely read New York Times article which argued that
protability (within the rules of the game) was the sole measure of a businesss social responsibility (Donaldson and Dunfee 1995).
Furthermore, while, in keeping with declining economic hegemony, the
United States began an unprecedented era of long-term wage stagnation
and an increasing concentration of wealth (Picketty and Saez 2003;
Economic Report of the President 2005). Not a trend that anyone wishing
to gain the attention of business executives would wish to point out, this
new generation of business ethicists rarely took the risk of measuring
ethical principles against economic consequences and they ignored the
warnings of the earlier cohort regarding over-reliance on the voluntary
constraint of executives. Instead, virtually the entire eld turned to two new
paradigms of voluntary ethics: stakeholder theory and social contracting
(Gerde and Wokutch 1998).
In eect, stakeholder management and social contracting became functional substitutes for countervailing power and government regulation,
substitutes more suitable to an era in which discussing the restraint or
coercion of corporate behavior was disfavored. According to the stakeholder perspective, managers need to consider the interests and goals of
other groups connected to the corporation, not because these groups are
themselves powerful institutions formed to compel such consideration
through countervailing power, but because managers should accept the
Kantian notion that other people are not merely means, but ends in themselves (Evan and Freeman 1993). While undoubtedly a worthwhile sentiment, leaving such evaluations up to executives mirrors Kants own
approval of the enlightened despotism of Frederick the Great, whom Kant
preferred to republican government (Kant 1784). While concepts derived
from stakeholder scholarship have diused throughout management education in the United States, there is little evidence that corporate executives
actually practice a measurable degree of Kantian stakeholder management (Marens 2004). This result would hardly have surprised Bowen and
the rst generation of CSR scholars, given their skepticism regarding the
eectiveness of relying on managers to consider and mediate the interest
of other groups.

544

Handbook of research on global corporate citizenship

In the context of the poorer nations, this conclusion to the CSR

debate implies that corporate behavior in their economic space cannot be
critiqued using the available tools of mainstream management theory.
Anti-corporate moves in the poorer nations are easily represented as resistance to change, inability to see longer-term benets, or simply, irrational
behavior (Ong 1987). This in turn has led to a caricatured representation of
the poorer nations, both in management pedagogy and in business practice.
For example, Fougre and Moulettes (2006) after a detailed analysis of ve
prominent international management textbooks, concluded that the representations of non-Westerners in those books were:
constructed upon the legacy of a colonial thinking, in the sense that the knowledge is meant to be propagated through a one-way communication from the
Western, mostly Anglo-Saxon world to a rest of the world that is considered economically and culturally peripheral. We conclude that the books contribute to
producing both a guilt-free Western subjectivity and a collective cultural responsibility on the part of the people from so-called developing countries. (Fougre
and Moulettes 2006, p. 3)

Consider a passage from one of those standard textbooks:

Foreign companies have had mixed success in Saudi Arabia, due in large part to
how well they understood and adapted imaginatively to Saudi customs . . .
Religious patrols may hit women if they show any hair in public. The government carries out beheadings and hand-severances in public and expects passersby to observe the punishments, some of which are for crimes that would not be
oenses in other countries. . . . In spite of contrasts and paradoxes, foreign companies nd ways to be highly successful in Saudi Arabia. (Daniels et al. 2004,
p. 161)

Travel past further descriptions of Western businessmen having trouble

dealing with corrupt government ocials in Bolivia. Rest your eyes
perhaps, on a story of how the superstitious Thais dealt with the solar
eclipse of 1995. Never mind of course, that US customs with regard to
crime and punishment are as capricious and venal as any in Saudi Arabia,
that corruption is as well-documented in Miami as it is in La Paz and that
there are as many superstitious US citizens as Thais. The textbooks (and
many academic papers) evaluate a represented Saudi, Bolivian or Thai
against an idealized Westerner (and a corporate subject to boot), and never
question the rhetorical representation of corporate behavior by Western
corporations in these countries as a form of citizenship.
It becomes quickly apparent that the actions of corporations in these
nations represent nothing short of a civilizing mission on behalf of the
West toward the natives. Nations with a history of national involvement
in the economic activity of their large corporations are denounced as

The corporation and its fragments

545

participating in cartels, corporate taxation is combated and reduced

through international regimes such as the World Trade Organization
(WTO), natural resources are privatized, and all these actions are unfortunately legitimated with reference to the very theories that have emerged in
the eld of corporate citizenship in the wake of the defeated Keynesian
dream in the United States of America.
Conclusion: in defense of the fragment
Thus far, we have attempted to accomplish three things. We have identied
dierent facets of corporate citizenship, examined corporate behavior in
the world and evaluated it against those standards and contextualized the
violations of citizenship behavior by corporations against historical events
in the United States. Our conclusions may be summarized as follows: the
growing strength and spatial spread of corporations coincided with two
historical trajectories that further weakened the ability of nation-level institutions to police corporate behavior. On the one hand, poorer states were
weakened in the global neoliberal environment by their undercapitalized
economies, and were forced to seek corporate assistance to raise foreign
exchange levels (Harvey 2005). On the other, corporations were successful
in their attempts to weaken Keynesian policies in the US (and to a greater
or lesser degree, similar state-centric policies in Europe) (Marens 2004).
This weakening was mirrored in academia as well, notably in the revisionist theorizing of the term corporate social responsibility in organizational
theory. The term CSR now serves for the most part as a legitimizer of corporate rent appropriation, rather than a call for more corporate endeavor
in the sphere of the national economy.
These successes in rent-seeking endeavors have instilled in corporations
a culture of impunity, especially in the manner in which they conduct their
operations in the poorer nations of the world. Their actions, both in terms
of their violent behavior and their legitimizing this coercion through convenient theoretical frameworks, hark back to older regimes of colonialism
and imperialism. In other words, instead of behaving as good citizens, corporations simply changed the denition of citizenship to reect their
actions. In this eort, they have unfortunately been well served by organizational theorists as well.
Such an analysis, however, begs the question: how do citizens of the
world respond to this lock-step behavior by theorists and practitioners,
which attempts to shut them out of a majority of economic activity and has
seriously impeded their eorts to lead lives of dignity and freedom? The
answers perhaps lie in the conceptualization of political society, a new formulation that has emerged in the poorer nations as a polar opposite of civil
society (Chatterjee 2005). Chatterjee nds civil society as being nothing

546

Handbook of research on global corporate citizenship

more than the closed association of modern elite groups, sequestered from
the wider popular life of the communities, walled up within enclaves of
civic freedom and rational law (ibid., p. 4). In contrast, political society
includes large sections of the fragments of the nation, who do not relate to
the nation in the same way that the middle classes do. They lack the citizenship rights that are the hallmark of civil society, but make their claims
on nations through unstable arrangements arrived at through direct political negotiations. Political society is the realm of populations, of instrumental alliances between marginalized groups, and an attempt to wrest
some concessions from a society where the status of its constituents is
beyond the pale of legality (the attempts by illegal immigrants in the US
to secure human rights for themselves in a context where they have no
formal access to the constitution represent the best possible exemplar from
the Western world).
As organizational theorists, perhaps this is our best entry into the
chaotic world of engagement between local groups and corporations.
Consider, for example, a criminal event such as the burning down of the
oces of Cargill Seeds oce in Bangalore, India by a group of irate
farmers. On the face of it, this is a disruptive act, which may be described
(depending on ones sympathies) as either vandalistic in character or a sign
of an insurgency against the dominant order. However, theorizations of
political society help us understand these things in a more nuanced
manner. What we are seeing here is the emergence of mobilizations among
political society, who believe that institutions of civil society have been
hegemonically usurped by corporate capital. The moral and political hegemony of capitalism over civil society, however, leaves political society with
no option but to disrupt the functioning of the state and use the ensuing
discussion to negotiate some space for its own existence and livelihood.
Theoretically, members of civil society are dened through regimes of
liberal citizenship, while members of political society are determined more
by regimes of empirically described characteristics, related to regimes of
governmentality, which may be dened as the quotidian administrative
reality that oers a counterpoint to the images of sovereignty (Foucault
1991; Chatterjee 2007). Corporations are already very well acquainted
with these subtle distinctions. They constantly make concessions to political society (even when they have the power of local law on their side). Be
it Coca-Cola paying compensation to people who have been deprived of
water, Monsanto withdrawing its terminator seed program in the short
run, or Shell re-negotiating with Ogoni leaders in Nigeria, corporations
produce ad hoc arrangements to negotiate with fragments to the extent
they nd such negotiations necessary for maintaining their conditions for
surplus appropriation. Such negotiations not only end up legitimizing

The corporation and its fragments

547

corporations, they end up, in some fashion, as the legitimizing agents for
the fragments, in an arena far removed from civil societys idealized realm.
Organizational theory is only beginning to catch up in its analysis of the
extra-legal negotiations between corporate citizens and politicalsociety
fragments. Alas, initial eorts to understand political society such as
Prahalads studies of the bottom of the pyramid (Prahalad 2005) seem
designed only to let corporations extract surplus from the fragment.
Organizational theory needs to theorize resistive acts from the political
society as well (Mir and Mir 2002), and we hope this chapter marks a
modest beginning in that direction.
On the level of praxis, this leads to important conclusions and imperatives for organizational theorists. We need to theorize and publicize those
acts by which an assertive political society takes on global capital. In India,
organized farmers groups have begun to resist primitive accumulation
practices by corporations in the name of special economic zones. The
state encourages corporations to acquire peasant land, and most peasant
struggles against such acquisition are deemed illegal. However, theorists
and journalists need to band together to provide analysis of these events in
a manner that confers legitimacy on the struggles (Pandey 2006).
Aihwa Ong, writing in 1987, had theorized the periodic seizures and
spirit possessions suered by Malay women working on the shopoors of
modern factories as a form of resistance to capitalist discipline (Ong 1987).
We need similar theories to understand why South Korean farmers picket
the WTO in Hong Kong, Nigerians disrupt Shell corporation, French
farmers attack McDonalds, or US citizens demand accountability of
Countrywide Financial in the aftermath of the recent crisis in sub-prime
mortgages. Political society represents the last gasp of the fragments to
assert themselves against the hegemonic dominance of the state and civil
society by corporations, and we as organizational theorists will ignore it at
our own peril.
Notes
1. See http://www.microsoft.com/about/corporatecitizenship/citizenship/default.mspx, accessed 1 November 2007.
2. See http://www.thenation.com/doc/20050926/featherstone, accessed 1 November 2007.
3. See http://www.nytimes.com/2007/10/02/washington/02blackwater.html, accessed 1 November 2007.
4. See http://content.hamptonroads.com/story.cfm?story=108057&ran=56149, accessed 1
November 2007.
5. See http://www.nytimes.com/2007/10/01/, accessed 1 November 2007.
6. See http://www.thenation.com/doc/20060626/mccarthy, accessed 1 November 2007.
7. We are grateful to Guido Palazzo for helping us clarify this important point.
8. In this section, we have relied on material that has been accepted for publication from a
journal article by one of the co-authors: see Marens (2008).

548

Handbook of research on global corporate citizenship

References
Adorno, T. and M. Horkheimer (2002), Dialectic of Enlightenment, Stanford: Stanford
University Press.
Agamben, G. (2005), State of Exception, Chicago, IL: University of Chicago Press.
Aglietta, M. (1979), A Theory of Capitalist Regulation: The US Experience, London: Verso.
Ahluwalia, D., B. Ashcroft and R. Knight (1999), White and Deadly: Sugar and Colonialism,
Commack, NY: Nova Science.
Alchian, A.A. and H. Demsetz (1972), Production, information, costs, and economic organization, American Economic Review, 62, 77792.
Alegria, F. (1993), Allende, Mountainside, CA: Stanford University Press.
Anderson, B. (1991), Imagined Communities: Reections on the Origins and Spread of
Nationalism, London: Verso.
Arrighi, G. (1994), The Long Twentieth Century: Money, Power, and the Origins of Our Times,
New York: Verso.
Baker, D., G. Epstein and R. Pollin (1998), Globalization and Progressive Economic Policy,
Cambridge: Cambridge University Press.
Banerjee, S.B. (2006), Live and let die: colonial sovereignties and the deathworlds of necrocapitalism, Borderlands, 5 (1), 115.
Barlow, M. and T. Clarke (2002), Blue Gold: The Fight to Stop the Corporate Theft of the
Worlds Water, New York: Diane.
Berle, A. and G. Means (1932), The Modern Corporation and Private Property, London and
New York: Macmillan.
Blank, T. and P. Schmidt (2003), National identity in a United Germany: nationalism or patriotism? an empirical test with representative data, Political Psychology, 24 (2), 289312.
Bond, P. (1999), Globalization, pharmaceutical pricing, and South African health policy:
managing confrontation with U.S. rms and politicians, International Journal of Health
Services, 29 (4), 76592.
Bowen, H.R. (1953), Social Responsibilities of the Businessman, New York: Harper & Row.
Bowen, H.R. (1978), Social responsibilities of the businessman: twenty years later, in
E. Epstein and E.D. Votaw (eds), Rationality, Legitimacy, Responsibility: Search for New
Directions in Business and Society, Santa Monica, CA: Goodyear, pp. 11630.
Breman, J. (1996), Footloose Labour: Working in Indias Informal Economy, Cambridge:
Cambridge University Press.
Brenner, R. (2002), The Boom and the Bubble: The US in the World Economy, New York: W.W.
Norton.
Brook, D. (2007), Mall of America: the architecture of our privatized government, Harpers
Magazine, 315 (July), 623.
Brubaker, R. (1994), Nationhood and the national question in the Soviet Union and postSoviet Eurasia: an institutionalist account, Theory and Society, 23 (1), 4778.
Callahan, D. (1999), One Billion Dollars for Ideas: Conservative Think Tanks in the 1990s,
Washington, DC: National Committee for Responsive Philanthropy.
Carroll, A.B. (1999), Corporate social responsibility, Business and Society, 38, 26895.
Chatterjee, P. (1986), Nationalist Thought and the Colonial World: A Derivative Discourse?,
London: Zed Books.
Chatterjee, P. (1992), The Nation and Its Fragments: Colonial and Postcolonial Histories,
Princeton, NJ: Princeton University Press.
Chatterjee, P. (2005), The Politics of the Governed: Reections on Popular Politics in Most of
the World, New Delhi: Permanent Black.
Chatterjee, P. (2007), Democracy and economic transformation in India, Unpublished manuscript, Columbia University.
Clark, L.H. (1976), Rehabilitation project: once-mighty CED panel of executives seeks a
revival, oers advice to Carter, Wall Street Journal, 17 December, p. 38.
Clawson, D., A. Neustadtl and M. Weller (1998), Dollars and Votes: How Business Campaign
Contributions Subvert Democracy, Philadelphia, PA: Temple University Press.
Conrad, J. ([1899] 2001), Heart of Darkness, New York, NY: Signet Classics.

The corporation and its fragments

549

Daniels, J., L. Radebaugh and D. Sullivan (2004), International Management: Managing Across
Boundaries and Cultures, 5th edition, Upper Saddle River, NJ: Pearson Prentice-Hall.
Derber, C. (1998), Corporation Nation: How Corporations Are Taking over Our Lives and What
We Can Do about It, New York: St. Martins Press.
Donaldson, T. and T. Dunfee (1995), Integrative social contracts theory: a communitarian
conception of economic ethics, Economics and Philosophy, 11, 85112.
Economic Report of the President: Transmitted to Congress (2005), Washington, DC: US
Government Printing Oce.
Evan, W. and R. Freeman (1993), A stakeholder theory of the modern corporation: Kantian
capitalism, in T. Beauchamp and N. Bowie (eds), Ethical Theory and Business, Englewood
Clis, NJ: Prentice-Hall, pp. 171211.
Feenstra, R. and G. Hanson (1996), Globalization, outsourcing, and wage inequality,
American Economic Review, 86 (2), 24045.
Foucault, M. (1991), Governmentality, in G. Burchell, C. Gordon and P. Miller (eds), The
Foucault Eect: Studies in Governmentality, Chicago, IL: University of Chicago Press,
pp. 87104.
Fougre, M. and A. Moulettes (2006), Cultural (in) sensitivity in management texts: a postcolonial reading, Proceedings of the Critical Management Studies Workshop, Atlanta,
August 2006, http://group.aomonline.org/cms/Meetings/Workshop 06/Streams/Imperialism/
martin_agneta.org, accessed 15 October 2007.
Franck, T., A. Padgett, J. Mitchell, L. Kanaan, D. Bonbright and R. Moelis (1982), An investment boycott by the developing countries against South Africa: a rationale and preliminary
assessment of feasibility, Human Rights Quarterly, 4 (3), 30932.
Frederick, W.C. (1981), Free markets vs. social responsibility: decision time at the CED,
California Management Review, 23, 2028.
Friedman, M. (1970), The social responsibility of business is to increase its prots, New York
Times, 13 September, 1720.
Garsten, C. (1994), Apple World: Core and Periphery in a Transnational Organizational
Culture, Stockholm: Almqvist & Wiksell International.
Gerde, V.W. and R.E. Wokutch (1998), 25 years and going strong, Business and Society, 37,
41446.
Guha, R. (1989), Dominance without hegemony and its historiography, in R. Guha (ed.),
Subaltern Studies VI, Oxford and New Delhi: Oxford University Press, pp. 210309.
Harvey, D. (2005), A Brief History of Neoliberalism, Oxford: Oxford University Press.
Heald, M. (1970), The Social Responsibilities of Business: Company and Community,
19001960, Cleveland, OH: Case Western Reserve University Press.
Hobsbawm, E. (1990), Nations and Nationalisms since 1780: Programme, Myth and Reality,
Cambridge: Cambridge University Press.
Jensen, M.C. (1988), The takeover controversy: analysis and evidence, in J. Coee, L.
Lowenstein and S. Rose-Ackerman (eds), Knights, Raiders, and Targets: The Impact of the
Hostile Takeover, Oxford and New York: Oxford University Press, pp. 31454.
Kant, I. (1784), The nature of enlightenment, in R. Wines (1967), Enlightened Despotism,
Reform or Reaction?, Boston, MA: Heath, pp. 1417.
Kinzer, S. (2003), All the Shahs Men: An American Coup and the Roots of Middle East Terror,
New York: John Wiley.
Klein, N. (2000), No Logo: Taking Aim at the Brand Bullies, New York: Picador.
Lash, S. and J. Urry (1987), The End of Organized Capitalism, Madison, WI: University of
Wisconsin Press.
Lazonick. W. (1991), Business Organization and the Myth of the Market Economy, Cambridge:
Cambridge University Press.
Lewis, S. (2001), Silence = Death: AIDS, Africa and pharmaceuticals, Corpwatch,
http://www.corpwatch.org/article.php?id=491, accessed 1 November 2007.
Malott, R.H. (1978), Corporate support of education: some strings attached, Harvard
Business Review, 89, JulyAugust, 1338.
Manby, B. (2000), Shell in Nigeria, Corporate Social Responsibility and the Ogoni Crisis,
Pittsburgh, PA: Carnegie Council on Ethics and International Aairs.

550

Handbook of research on global corporate citizenship

Marens, R. (2004), Wobbling on a one-legged stool: the decline of American pluralism and
the academic treatment of corporate social responsibility, Journal of Academic Ethics, 2,
6387.
Marens, R. (2008), Recovering the past: reliving the legacy of early scholars of corporate
social responsibility, Management Decision, 14 (1), forthcoming.
Marx, K. (1887 [1967]), Capital: A Critique of Political Economy, New York: International.
Matten, D. and A. Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30, 16679.
Mbembe, A. (2003), Necropolitics, Public Culture, 15 (1), 1140.
Mir, R. and A. Mir (2002), The organizational imagination: from paradigm wars to praxis,
Organizational Research Methods, 5 (1), 10424.
Moon, J., A. Crane and D. Matten (2005), Can corporations be citizens? Corporate citizenship as a metaphor for business participation in society, Business Ethics Quarterly, 15,
42954.
Munck, R. (2002), Globalisation and Labour: The New Great Transformation, London: Zed
Books.
Muthu, S. (2003), Enlightenment Against Empire, Princeton, NJ: Princeton University Press.
Ong, A. (1987), Spirits of Resistance and Capitalist Discipline: Factory Women in Malaysia,
Berkeley, CA: University of California Press.
Ong, A. (2005), Graduated sovereignty in South East Asia, in J.X. Inda (ed.), Anthropologies
of Modernity: Foucault, Governmentality and Life Politics, Oxford: Blackwell, pp. 83102.
Ott, R. (2005), Sound Truth and Corporate Myth$: The Legacy of the Exxon Valdez Oil Spill,
Norwich, CT: Lorenzo Press.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66, 7188.
Pandey, G. (1991), In defence of the fragment: writing about HinduMuslim riots in India
today, Economic and Political Weekly, 26 (1112), 55972.
Pandey, P. (2006), Singur: Arundhati Roy warns of the perils of anti-people policies, The
Hindu, 8 December, http://www.hindu.com/2006/12/08/stories/2006120804351200.htm,
accessed 1 November 2007.
Pendleton, C. (2004), The peculiar case of terminator technology: agricultural biotechnology and intellectual property protection at the crossroads of the third Green revolution,
Biotechnology Law Report, 23 (1), 129.
Picketty, T. and E. Saez (2003), Income equality in the United States (updated 19132001),
Working Paper 8467, Cambridge, MA: National Bureau of Economic Research.
Prahalad, C.K. (2005), The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through
Prots, New Delhi: Pearson.
Prasad, A. (2003), Postcolonial Theory and Organizational Analysis: A Critical Engagement,
London and New York: Palgrave Macmillan.
Prashad, V. (2007), The Darker Nations: The Making and Unmaking of the Third World,
New York: New Press.
Rorty, R. (1991), Objectivity, Relativism and Truth: Philosophical Papers I, Cambridge:
Cambridge University Press.
Saari, D. (1999), Global Corporations and Sovereign Nations: Collision or Cooperation?,
Westport, CT: Greenwood.
Said, E. (1978), Orientalism, New York: Vintage Books.
Said, E. (1993), Culture and Imperialism, New York: Alfred A. Knopf.
Sarkar, S. (2002), Beyond Nationalist Frames: Postmodernism, Hindu Fundamentalism,
History, Bloomington, IN: University of Indiana Press.
Scahill, J. (2007), Blackwater: The Rise of the Worlds Most Powerful Mercenary Army,
New York: Nation Books.
Scherer, A.G., G. Palazzo and D. Baumann (2006), Global rules and private actors towards
a new role of the TNC in global governance, Business Ethics Quarterly, 16 (4), 50532.
Schriftgiesser, K. (1967), Business Comes of Age, Englewood Clis, NJ: Prentice-Hall.
Selekman, S.K. and B.M. Selekman (1956), Power and Mortality in a Business Society,
New York: McGraw-Hill.

The corporation and its fragments

551

Singer, P.W. (2004), Corporate Warriors and the Rise of the Privatized Military Industry,
Ithaca, NY: Cornell University Press.
Spiner, J. (1994), The Boundaries of Citizenship: Race Ethnicity, Nationality and the Liberal
State, Baltimore, MD: Johns Hopkins University Press.
Sweezy, P. (1973), Galbraiths Utopia, New York Review of Books, 15 November, pp. 36.
Tappan, S. (2004), Shock and Awe in Fort Worth: How the US Army Rigged the Free and Open
Competition to Replace Halliburtons Sole-Source Oil Field Contract in Iraq, New York:
Pourquoi Press.
Walzer, M. (1984), Liberalism and the art of separation, Political Theory, 12, 31529.
Windsor, D. (2001), The future of corporate social responsibility, Journal of Organizational
Analysis, 9, 22556.
Wood, D. and J. Logsdon (2001), Theorising business citizenship, in J. Andriof and
M. McIntosh (eds), Perspectives on Corporate Citizenship: Sheeld: Greenleaf, pp. 83103.

24 The corporation as a political actor?

A systems theory perspective
Helmut Willke and Gerhard Willke

Introduction
The concept of corporate citizenship (CC) has been proposed by some
strands of the consulting and management literature and has been picked
up eagerly by corporations as a preemptive strategy to cope with allegedly
societal demands for expanding the social role of business. The third
group of actors in this msallance are social scientists who in retrospect discover a presumably new corporate social responsibility (CSR) and its
derivatives, including a political role of the corporation.
To some degree this reinventing the past is baing. Since the days of
Jean-Jacques Rousseau, Locke, John Stuart Mill and Karl Marx, political
economy has been a central part of economic and political theorizing.
Reecting on the political roles and implications of business is as old as
business itself, and it certainly is a valid and legitimate endeavor aimed at
clarifying the relationship between economy and politics. So there is little
new in discussing the political role, implications and consequences of business, and it is equally obvious that there can be no denite answer to the
problem of the relationship between economy and politics in general and
to the problem of social or political responsibilities of corporations in particular. Each historical epoch will have to nd its own answers according to
the specics of its constellation, its opportunities and its risks.
Looking at various conceptualizations of the problmatique of political
economy we nd two ideal-type solutions. On the one hand this is Marxs
theoretical and socialisms practical solution the antagonism of economy
and politics is resolved by conating both spheres of society under the prerogative of politics. In the socialist concept the political system not only sets
the rules of the game but also tells the players what to do. On the other hand
this is the solution of liberal democracy economy and polity are functionally separated, and their relations are governed by the principles of
autonomy, restraint, non-interference and subsidiarity. Needless to say that
in theory these ideal types represent normative models which become
muddled and fuzzy in reality and in the praxis of specic societies.
Our own discussion of the relations between corporations/economy
and politics/state is designed as a critique of the CSR/CC approach that
552

The corporation as a political actor?

553

features a new type of imbrication between the two spheres by trying to

transfer ethical and political obligations (responsibilities) into the mentalities of economic actors. CSR/CC, like the stakeholder concept and
similar notions, is focusing on responsible managerial decision making; all
those concepts endeavor to establish ethical guidelines meant to constitute
a daily challenge for managers (Kakabadse et al. 2005, p. 289). In our critique, we shall advance in three steps. First, we contend that the CSR/CC
theory upholds fundamentally mistaken views about the architecture of
modern democratic societies, particularly about the roles of citizens and
government. Second, the chapter argues that the CSR/CC approach is fundamentally mistaken about the function of enterprise in market societies;
this argument is based on the distinction between the goals of individual
actors and the systemic outcomes of their actions. Finally, we oer some
thoughts on a more complex coupling of economy and polity in a systems
theory perspective, leading to a model of governance that is related to the
knowledge society.
Some of the more radical propositions of the CSR/CC approach (for a
salient discussion of the dierences, see Branco and Rodrigues 2007) are
aligned with a tradition of ethics that criticizes the prot motive and moralizes about money-making. Salient examples of this tradition are the biblical expulsion of the merchants from the temple, the Churchs ban on
lending money at interest and the Marxist damnation of capitalists exploiting the proletariat, the Third World, the environment and so on. In this critique, the perceived evils of society are attributed to self-interested behavior
in general and to the principle of prot maximization in particular in
short: to the selsh entrepreneurs (Palazzo and Scherer 2006, p. 76). Today,
CSR/CC proponents use globalization as a device to reiterate their fundamental distrust in the economy as a (relatively) autonomous sphere and in
economic behavior guided by self-interest. Strangely enough, corporations
are demonized as the rogues of globalization and simultaneously idealized
as the white knights disposed to save the world (if enlightened or pressed
suciently to become corporate citizens). But just how are the Knaves
Turnd Honest (Mandeville 1705)? That remains an open question.
Political economy and the politicized corporation
Modern political economy, cum grano salis, is a reduced form of handling
the relationship between economy and politics, reecting the supremacy of
economics over the social sciences. It has been reduced mostly to an economic analysis of political rules, structures and processes, that is, aspects
of political regimes. Originally, however, particularly with Locke and Mills,
political economys subject has included the topic of describing the proper
tasks, duties and options of politics regarding economic activities of the

554

Handbook of research on global corporate citizenship

members of a society. Book ve of Mills (1848 [1909]) treatise Principles of

Political Economy, addresses the inuence of government, including
chapter ten on Interferences of Government grounded on Erroneous
Theories. Book ve begins with a sentence which by its broad perspective
discloses the poverty of modern political economy: One of the most disputed questions both in political science and in practical statesmanship at
this particular period, relates to the proper limits of the functions and
agency of governments (ibid., V.1.1).
Marxs critique of (his times legacy of) political economy brought to the
fore the most radical interpretation of the relation between economy and
society. In the Communist Manifesto, Marx and Engelss (1872 [2005])
disdain for the liberal achievements of the bourgeois society is expressed
quite clearly: discussing various strands of 19th-century socialist literature,
the Manifesto states:
[A] long-wished for opportunity was oered to True Socialism of confronting
the political movement with the Socialist demands, of hurling the traditional
anathemas against liberalism, against representative government, against bourgeois competition, bourgeois freedom of the press, bourgeois legislation, bourgeois liberty and equality, and of preaching to the masses that they had nothing
to gain, and everything to lose, by this bourgeois movement. (Marx 1857,
Communist Manifesto, ch. III, 1 c)

Without going into details here, it can be said that by removing all political self-restraint regarding the governance of the economy and subjugating politics under the collective will of the proletariat, Marx hoped to
extend democracy and self-determination into the area of industrial labor
and the economy at large, thus subjecting entrepreneurial decisions to
political directions and in eect creating a politicized economy.
The preceding brief reminder of some of the historical background of
political economy should not be misunderstood as representative of a
complex and multifaceted discourse; it is not intended to insinuate any
vicinity of CC or CSR with socialist thinking. Instead, the deviation to
Marx is intended to undergird a critical understanding of the notion of the
politicized corporation. A politicized rm is not an entity which reacts to
political circumstances this notion would be a mere truism since no
organization within the context of modern democratic societies can avoid
doing this, for example, by obliging to the laws and regulations of a democratic legislative. If the notion of a politicized corporation is to have any
signicance at all, it is an organization which having political responsibilities is subject to political directives, implements political goals, is
politically accountable in some way and in return participates directly and
explicitly in political decision making.

The corporation as a political actor?

555

In this sense of the word, Palazzo and Scherer, for example, apply the
term. In a rst step they postulate: in our view, the politicization of the corporation is an unavoidable result of the changing interplay of economy,
government and civil society in a globalizing world (Palazzo and Scherer
2006, p. 76), referring to a later text, in which, however, there is again no
sucient argument: For a corporation to deal with changing societal
demands in a reasonable way, it must replace implicit compliance with
assumed societal norms and expectations with an explicit participation in
public processes of political will formation. We consider this shift the politicization of the corporation (Scherer and Palazzo 2007, p. 1108, emphasis
omitted). Although Scherer and Palazzo in other parts of their text (2007)
have delineated careful arguments for a politicization of corporations, the
crucial problem remains that they underestimate the harmful consequences
of undermining liberal societys separation of the spheres of economy and
polity. To underline the core dierence: explicit participation of corporations, in particular transnational corporations (TNCs) and other actors,
has always been an accepted part of lobbying, interest articulation, public
opinion and so on. These kinds of inuence need to be mediated and transformed into a political logic by convincing actors within the political
system, that is, party members, members of parliament or members of
administrations and governments. The politicization of rms, however, circumvents this mediation and instead puts economic/corporate actors
directly in charge of political tasks such as running schools, implementing
health programs or providing infrastructures. This evokes the illusion of a
shortcut solution of social problems. However, the only legitimate
guardians of the public interests are governments, which are accountable
to all their citizens.
If one were to take this kind of politicization of the corporation seriously, it would entail a fundamental reconguration of democracy.
Modern democracy rests on the basic rule of one person, one vote and on
interest aggregation through political parties which compete with each
other for a majority in the legislative body. If corporations as citizens had
a vote of any sort and what else could be the end result of politicization?
this would raise the voting power of some people, that is, the masters of the
corporations, above that of ordinary people. It would in fact reintroduce a
weighted two-class voting system, elevating the managing class to the position of a new nobility. A result not exactly to look forward to.
This aspect of the politicization of the corporation is aptly expressed by
the notion of corporate citizenship. CC indeed insinuates an understanding of the role of corporations as citizens, implying membership in a territorially dened community, constituting a political legal entity with rights
and duties. Since the right to vote is the core privilege of a citizen, it would

556

Handbook of research on global corporate citizenship

be hard to deny this right to corporate citizens. Active participation in

society includes the right to vote or the right to hold oce and, generally
speaking, entitles the individual to take part in the process of collective will
formation in the public sphere (Matten and Crane 2005, p. 170). Matten
and Crane clearly see, however, that this form of citizenship is not suitable
for corporations: At rst glance, it is somewhat hard to make sense of
something like corporate citizenship from this perspective, particularly
since social and political rights cannot be regarded as an entitlement for a
corporation (ibid., p. 170). (We shall come back to the second glance in a
moment.)
Of course, most articles and arguments about CC remain oblivious of
this disturbing fact and instead focus on the duties of corporations. Archie
Carroll (in the subtitle of his article) is even heading towards the moral
management of organizational stakeholders (Carroll 1991). It seems to be
rewarding to postulate some civil, social and political duties of corporations, treating the corresponding rights quite lightly. Consequently, there
is an abundance of ideas around CRS/CC, postulating ethical, ecological,
philanthropic, cultural, educational, recreational, and so on responsibilities of the corporation, all of it based on the need for a vague moral legitimacy of rms. We consider this line of arguments unsatisfactory since it
violates the basic balance of rights and duties. Any kind of social contract,
beginning with Thomas Hobbes and Rousseau, leading to regulated or
even democratic forms of governance, presupposes a balancing of rights
and duties: No taxation without representation!. Any notion of CRS/CC
which argues for duties of corporations without answering the question of
corresponding rights must therefore be considered decient. Carrolls
famous pyramid of CSR, for example, postulates ethical and philanthropic responsibilities in addition to the non-controversial economic and
legal responsibilities without any reference to corresponding rights
(Carroll 1991, p. 42). The back side of this pyramid is left in the dark.
This takes us to the second glance. Here, Matten and Crane oer an
interesting perspective on CC, following the lead of authors such as Wood,
Logsdon and Noreena Hertz (see, for example, Wood and Logsdon 2001).
Within the contractual relation between citizen and government, corporations, acquiring the role of corporate citizens, in this perspective do not side
with citizens, but instead nd their (new) place on the side of government.
They become powerful public actors that have a responsibility to respect
individual citizens rights, taking over many of the roles and actions previously associated with government (Matten and Crane 2005, p. 170). This
perspective turns around the equation of rights and duties. It brings into
focus the governance duties of the corporation, its providing of communal
services for the public good, implying the corporations competence and

The corporation as a political actor?

557

capacity to decide on the specics and terms of social services. Quite obviously, we are not talking about citizenship any more; we are talking about
governance. Strangely enough though, Matten and Crane disregard this
consequence and mutter something about corporate involvement in citizenship which, they surmise, clearly justies a shift toward the terminology of CC (ibid., p. 171).
This is perplexing. Why would involvement in citizenship at the other
side of the relation citizen/government justify the terminology of CC in
describing the role of corporations? It clearly calls for a terminology of
governance, and indeed the role of corporations in global governance is discussed in this sense (Willke 2006, 2007). It remains a mystery why Matten
and Crane stick with the terminology of CC when they shift their focus
away from the citizenship storyline in favor of a governance storyline, being
predominantly concerned with corporations lling in the gaps of defunct
or nonexistent governments.
Even if we accept for arguments sake this idea to stick to a CC frame of
reference we have to voice disagreement with Matten and Cranes reasoning for a governance role of corporations. We shall do this in detail later in
this chapter. Suce here to state that Matten and Crane run the risk of
legitimizing or even inviting the classical institutions of government, in particular the nation-states, to disregard their obligations and simply refer the
citizens to some corporations for the provision of public goods, for
example, safety, healthcare, schooling or an ecologically sound environment. CC then describes the role of the corporation in administering citizenship rights for individuals (Matten and Crane, p. 173) without
answering the crucial question of how to construct a position of rights or
legitimate demands of citizens toward the corporation. By force of logic
the citizen would have to be a citizen of the corporation, that is, being
somehow miraculously included in the respective corporate kingdoms.
Before we get back to this point, we would like to address an even more
intricate problem. CC reinforces and invigorates the concept of a politicized corporation, inheriting all the awkward insuciencies of a politicized economy. One usually quite underestimated aspect of these
insuciencies concerns the problem of distributed knowledge. Friedrich
von Hayek bases the possibility of a modern rational economic order on
the fact that the knowledge of the circumstances of which we must make
use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which
all the separate individuals possess (Hayek 1945, p. 519). Above all it is
neither the corporations in general nor one particular rm that possess
some sort of superior knowledge about the needs or wants of that abstract
entity citizen let alone society in general. It is the market and its price

558

Handbook of research on global corporate citizenship

system which in the case of the economy combine the distributed knowledge of innumerable actors in order to generate systemic eects, variously
labeled as the working of the invisible hand or as the tendency toward
general equilibrium. To repeat the crucial point: there is super-institution,
no absolute knowledge or any superior decision maker but instead an intelligent combination of distributed areas of expertise or knowledge: The
whole acts as one market, not because any of its members survey the whole
eld, but because their limited individual elds of vision suciently overlap
so that through many intermediaries the relevant information is communicated to all (ibid., p. 526).
The reverse process with a similar architecture but a dierent logic applies
to the political will formation process. Here the communications of all concerned or interested citizens are organized through many federal and functional intermediaries into propositions which reduce the complexities of
individual political preferences into the simple dichotomies (for or against)
of democratic decision making, suitable for winning a majority. Again, the
decentered and distributed knowledge of myriads of citizens is transformed
by mutual incremental adaptation into propositions which can be decided
by majority vote, thus establishing the famous intelligence of democracy
(Lindblom 1965). Democratic procedures establish a market for public
goods, and political entrepreneurs (political parties) compete for votes and
ultimately for a majority in political decision making. In this process of
political will formation corporations have no privileged role to play.
A nal argument against a politicized economy and politicized corporations, following from this line of reasoning, is surprisingly simple: from
the point of view of democracy the entire endeavor of politicizing corporations is simply superuous. Politics is the one subsystem of modern
society whose specic societal function is to provide collectively binding
decisions. It enjoys the privilege of the competence to dene competencies
(competencecompetence). By political decision the sovereign may dene
the limits and constraints of economic activity by imposing rules and regulations on corporations at (majority) will. In this sense all economic activity is subjected to political discretion and supervision. It is obvious in areas
of safety, high risks or ordre public but it has been extended in many areas
of public interest, including provisions for ecology, health, old age, protection of children and so on. The crucial point is that as soon as any proposition from within society gains enough political support and is being
processed in the logic of politics, and nally is able to achieve a legislative
majority, it may become the law of the land. It is, therefore, politics which
denes the limits and obligations of all other arenas of society. Malkin and
Wildavsky have concluded from this argument that any good can be considered a public good and that all public goods are public because and only

The corporation as a political actor?

559

because society chooses to put the goods in the public sector instead of the
private sector (Malkin and Wildavsky 1991, p. 355, emphasis omitted).
Historical evidence and experience suggest that the performance of
democratic governance depends on smart self-restraint, restricting politics
to genuinely political questions, that is, problems which denitely demand
collectively binding decisions. Whenever political systems have ventured to
govern non-political arenas of society they have invoked havoc and at times
even totalitarian regimes. For these reasons it is almost common sense
today that a political domination or direction of the economy is counterproductive and detrimental to the innovativeness and competitiveness of
an economy. However, as we shall point out in the next section, there are
intermediate options between a politicized economy and laisser faire.
Liberal economy and the de-politicized corporation
A major achievement of liberal market reforms against mercantilist (that
is, political) control of business has been to disentangle the two arenas of
economy and polity. The purpose of this early exercise in de-politicization
was to strengthen the functional autonomy of business in order to boost
productivity, innovation and welfare. It worked, generally speaking.
Politics remained in charge of the constitutional arrangements such as
securing the legal and monetary order and keeping markets competitive
(independent courts, independent central banks, antitrust agencies and so
on). In the liberal paradigm, legislatures and governments set the rules and
maintain the framework for the economy, whereas private enterprises are
free to take advantage of market opportunities.
Whenever this liberal division of labor was violated, either by the state
interfering with entrepreneurial decision making or by corporations
assuming political functions, the result has been a collapse of economic
performance if not worse (see the fate of socialist countries or, even worse,
the economic conditions of North Korea). The recent propagation of a
politicized corporation is oblivious of this historical experience.
According to the CSR/CC narrative, globalization and global corporations
are aggravating worldwide social and environmental problems. With the
nation-states unable to reach out into the global sphere and global governance institutions still edgling, global corporations are called upon to
solve the problems which governments and international organizations are
unable or unwilling to tackle. But should private enterprise really act as
substitute government? Is politicization of corporations the solution to
the rules gap in the world economy?
The CSR/CC approach refers to a number of empirical observations
from which far-reaching conclusions concerning moralization and politicization of corporations are drawn:

560
1.

2.

3.

4.

Handbook of research on global corporate citizenship

In a globalizing world economy, with international trade and foreign
investment largely deregulated, corporations tend to outsource and
oshore operations to countries that have become attractive as production sites and consumer markets.
Several of these countries, mostly developing and newly industrialized
ones, attract investors with low labor costs and low levels of regulations
concerning working conditions, consumer rights, human rights, environmental protection and so on.
TNCs are taking advantage of these dierentials in labor and regulation costs; through foreign direct investment they build up global production and service capacities while at the same time closing down
plants in their home countries.
As global markets oer attractive opportunities for corporations
and as capital is getting more mobile, the power balance shifts
from national governments to TNCs. Investors benet from the exit
option by oshoring capacities and jobs; governments feel under
pressure to implement competitive standards for domestic and
foreign investors.

These observations are subsequently linked to an array of world problems allegedly associated with the activities of TNCs (for example,
exploitation, poverty, child labor, environmental degradation, poor healthcare, HIV, global crime, gender and racial discrimination, and so on).
Corporations proting from low standards regarding labor costs, work
safety, sanitary conditions, environment and so on, are indicted for causing
(or at least contributing to) these problems on the grounds that they desist
from applying the same high standards wherever they operate that is, on
the grounds of failing to act morally.
Accepting (for the sake of argument) this diagnosis and evaluation
what can be done about redressing the (perceived) ills of a globalizing world
economy? To remedy undesired outcomes of socioeconomic systems, three
main options come to mind:
1.
2.
3.

change the system;

change the mentality of (corporate) actors; and
change the framework (constitution) for corporate transactions.

The rst option has lost appeal with the bankruptcy of socialism. As a
consequence, the capitalist system is usually accepted in the CSR/CC
debate, although some of its participants aspire to some sort of new ethical
capitalism. The second option assumes that mental changes can be
imposed on actors from outside (by moral pressure, if need be). This seems

The corporation as a political actor?

561

as mistaken a view as the expectation that by channeling motivations

systemic outcomes can be controlled. The third option is the tedious third
way, often derided as incrementalist. However, considering historical evidence, this is the only promising option. The constitution of an economic
system sets the rules of the game and determines the modes in which corporate actions are transformed into systemic outcomes; the same holds true
for the world economy. What needs to be achieved, therefore, is an adequate
architecture of global governance (see Willke 2007, pp. 67 .); improvements in the framework of governance can possibly channel motivations
into arguably more desirable directions and thereby incrementally
improve outcomes.
The major fallacy of the CSR/CC approach is to opt for shortcut solutions to complex problems. The logic of the ethical shortcut is to ascribe
global problems to a wrong mentality of managers and a wrong governmentality (Foucault) of corporations, and then administer correct morals
for corporate actors. This is considered necessary and sucient to change
the behavior of corporations. The selsh entrepreneurs (Palazzo and
Scherer 2006, p. 76) are to be substituted by a corporate behavior that is
somehow genuinely ethico-political (Palazzo and Scherer 2006). Ethical
rm behavior will then be conducive to solving the problems previously
ascribed to amoral corporate conduct. However, a change from selfinterested to ethical behavior will not come about easily and certainly
not by means of ethical debate, let alone moral pressuring. CSR/CC proponents should pause to reect why humankind has generally been ignoring the Ten Commandments or the Sermon on the Mount. Morally
acceptable behavior of corporate actors will materialize if rms (and managers) nd it rewarding. Companies will commit to CSR/CC if they expect
to gain a competitive advantage or if they need to avoid competitive disadvantages. That bars any shortcuts into the mentality of corporate actors
and imposes the tedious third way. Ethico-political wants of consumers
and citizens (societys expectations leaving aside that these are usually
conicting and contradictory) cannot be imposed directly but need to be
translated into the language of the market, that is, into monetary signals
which will show up in rms bottom lines.
In a liberal perspective, any attempts at changing the motivations, mind
sets and morals of corporate actors are unavailing, given the functioning of
the economic system and the role of companies in competitive markets. The
entrepreneurial objective function of prot maximization under uncertainty, risk and all kinds of constraints (including legal, cultural and moral
ones) normally transforms into the practical goal of surviving and prospering in contested markets. To stay in business protably, a corporation
needs to meet two main responsibilities:

562
1.
2.

Handbook of research on global corporate citizenship

to create value for its partners in transactions (other rms and consumers); and
to fulll its obligations to its main stakeholders (nanciers  shareholders, employees, suppliers and the local community).

In fact, corporations acknowledge this: Our vision is to be an innovative

and inspirational global citizen in a world where our company participates.
Every day we drive responsible business practices that contribute to
protable and sustainable growth (www.nike.com, original emphasis).
Stripped of its phoney rhetoric and of its misconceived corporate personhood (inspirational global citizen) the obvious is stated by the US sportswear company: it strives to stay in business protably. Incidentally, Nike
ranks third on the Business Ethics 100 Best Corporate Citizens List 2007.
By creating value and earning gains from trade a company makes
prots and at the same time fullls its economic function of generating
jobs, incomes, private and public goods. It is by creating private wealth that
corporations deliver societal value. If a rms overriding goal is to prosper
in a competitive market environment it cannot possibly ignore the interests
of its main stakeholder without jeopardizing medium-term protability
(Clarkson 1995). So a proactive stakeholder policy normally is in a rms
very own interest, securing competitive advantages and monetary returns
(or at least avoiding the costs of damaging its reputation). Obviously, then,
rms do not need to be enlightened or pressured about the benets of
CSR/CC; either they will nd out for themselves or they will not remain
in business. If, however, social responsibility proves not to be in a rms
interest, then it is futile to preach that kind of conduct, let alone resort to
moral pressuring for ethical business behavior. Those rms will not listen.
Dierences in assessing CSR/CC are obviously rooted in dierent worldviews: does the public benet depend on private virtue or on institutional
design? Liberals basically believe that market transactions guided and propelled by the prot motive will also contribute to the common weal, provided that markets are open and competitive; they believe in the invisible
hand. CSR/CC proponents believe in (betting) mentalities and morals to
usher in the common good; they require corporate actors not just to
comply with societys legal and moral rules but voluntarily to assume
additional obligations (Palazzo and Scherer 2006, p. 79). In other words,
they require private virtue, whereas the market design does not require
virtue; markets cope with normal people, saints and knaves. Given these
dierences, the question arises what can and should be done about bringing private and public interests in line: do we need improvements in mentalities (possibly prescribed by some preceptorial authority) with morals
re-politicized and rms required to engage in public debate to disclose their

The corporation as a political actor?

563

ethical stance and political positions? Or should we rather rely on improvements in governance, that is, in the constitutional framework of the world
economy, with mentalities, ethics and morals remaining a private aair of
individual actors?
If business strategy is the specication of characteristics to which the
activities of business are required to conform (Moss 1981, p. 1), then corporate strategy can specify the characteristics either of making prots or of
doing the morally good and politically correct thing. Only if these two
strategic orientations do not conict that is, when doing good adds to
prots does the CSR/CC approach conform to the market setting of a
liberal economic system. CSR/CC will become a competitive strategy if
and only if the related business activities sustain adequate returns on
investment. If they do, however, pressuring corporations into ethical mentalities and behavior can be called o. It would seem far more imperative
to educate the mentalities of consumers and citizens so that they understand the working of the market system, and understand, above all, that it
is their actions which translate into market eects to which corporations
are bound to react if they show up in their bottom line. To reiterate this
point: it seems to us a fundamental misunderstanding of the market mechanism and of liberal democracy and also an expression of misplaced
paternalism to try to turn business leaders into good shepherds of the
common weal and thereby implicitly assigning the subjects of economic
and political processes, consumers and citizens, to the role of sheep. On
the contrary, it would seem appropriate to encourage the sheep to become
enlightened, rational and, if they like, moral subjects aware of their potential to inuence the course of events in the economic and political subsystems of society. It is the self-determined individuals who are the true and
only citizens in the realms of economy and polity nobody else.
In the economy, prots and losses function as instruments like carrots
and sticks for pulling the cart. From a systems perspective, investors in productive capacities are useful idiots pursuing their selsh prot goals and
thereby generating private and public wealth, with the invisible hand
taking care of the system as a whole to achieve results which nobody has
intended or planned: that is the way in which each actor participates in producing an end which was no part of his intention (Adam Smith 1776,
p. IV.ii.9). Competition induces and commands agents and rms to put
in the extra eorts needed to stay in business and remain competitive; exerting these extra eorts to gain a competitive advantage in the market creates
wealth by enhancing productivity, innovation and structural change. The
outcomes of a market system are the results of human action but not of
human design (Ferguson 1767, Part 3.2; Hayek 1967). Markets eectively
coordinate investment, production, consumption and saving, generating

564

Handbook of research on global corporate citizenship

wealth, dynamic change and innovation as side-eects of prot seeking

under competition. Experiments with politically planned economies have
not been very encouraging so far and experiments with benevolent corporations will not fare better.
The politico-ethical approach strives to establish critical guidelines for
corporate activities (Palazzo and Scherer 2006, p. 75). The liberal economic approach relies on competitive markets (and possibly critical consumers/citizens) to provide the guidelines for business activities. However,
the complicated ideas of economic freedom and of indirect eects in systemic contexts (emergence eects) stand no chance in popular debates vis-vis the simple idea of imposing moral guidelines on rogue corporations.
If big business is pressed to give up its egotistical, self-interested goals of
prot maximization which allegedly damage people, communities and the
biosphere, and instead act socially committed and embrace the broader
public concerns of equity, justice, environmental and global survival and so
on, nobody can aord to desist from applauding even if eye-rolling.
However, if the benevolence proposition of the CSR/CC approach is
taken seriously, that is, taken to its nal consequence, moralized rms
(above all in poor countries) cannot possibly avoid giving away their
produce for love (as the Sermon on the Mount also suggests): if you are
supposed to act morally, how can you avoid sharing with the poor? The
point is that not only the rms and their employees but also the community
as a whole are better served if rms exchange their produce at market
prices. Exchange is more productive than charity; the pursuit of private
wealth generates social wealth albeit indirectly.
In the liberal perspective a corporations major responsibility to society
is to prosper and to stay out of politics as much as possible. This would
demonstrate respect for the (functional) autonomy of the political arena
(Walsh and North 2005, p. 436). The wrong kind of division of labor
obviously is the one in which corporations press policy makers to create
tax breaks and reduce contributions and having obtained all sorts of
privileges turn around to sponsor health projects and school libraries.
Rather, corporations should comply with political decisions, pay taxes
and leave health, schooling and the provision of other public goods to
politics.
In stating that the best strategy to advance the general welfare is to allow
rms to prosper, Jensen (2002) is paraphrasing Milton Friedmans (1970)
famous dictum that the social responsibility of business is to increase its
prots (and, incidentally, to pay taxes). Friedman declared social initiatives
fundamentally subversive for undermining the prot-seeking purpose of
corporations and wasting shareholders money. Even if today this looks
like a rather fundamentalist position, it seems wise to keep Adam Smiths

The corporation as a political actor?

565

warning (of 1776, p. 421) in mind: I have never known much good done by
those who aected to trade for the public good.
Functional dierentiation and global contexts
Until now our reasoning largely has remained within the traditional
connes of the nation-state and its functional subsystems, for example, politics and economy perceived as nationally dened arenas. We realize that
the most pertinent arguments for CC are related to globalization and to the
changing role of the nation-states and their national polities. When
dening CC as a concept describing the role of the corporation in administering citizenship rights for individuals, adding that of course, this does
not mean that corporations are citizens, or that they have citizenship,
but they are certainly active in citizenship and exhibit citizenship behaviors
(Matten and Crane 2005, pp. 173, 175, original emphasis), Matten and
Crane rely on one main argument the deterioration of the role of the
nation-state by a pervasive deterritorialization of social, political, and economical interaction and by the failure of the nation-states to be the sole
guarantor of these rights any longer (ibid., p. 171). This argument is to be
taken seriously.
Clearly, a many-faceted globalization is widening the gap between the
competences (in both senses of formal competences and capabilities) and
the reach of the nation-states which are in essence limited to their respective territories on the one hand, and the transnational extension of many
of the most pressing social problems on the other from poverty, ecology,
health (that is, pandemics), migration and organized crime to education
deciencies, technological risks, insucient economic growth and other
global systemic risks (Willke 2007, ch. 6). A world that has been dominated by nation-states for some centuries does not all of a sudden switch
into a global community. Even when it is undeniable that profound
processes of globalization are taking place, it is equally undeniable that
nation-states still have an important role to play.
New powers are entering the world stage, among them TNCs, international non-governmental organizations (INGOs), transnational institutions and policy networks. These global players and decision-making
centers cannot and do not abrogate the sovereignty of the nation-states
since they have no formal legitimacy whatsoever to do so. As actors in
policy-making constellations they nevertheless diuse the idea of sovereignty in a factual way. And they are being helped by the fact that the
Westphalian model of state sovereignty has come under scrutiny from
inside, too. In a lucid article, John Agnew has deconstructed two crucial elements of the idea of state sovereignty: that of territoriality and that of
stateness (Agnew 2005). It all amounts to realizing that the notion of

566

Handbook of research on global corporate citizenship

sovereignty is losing its absolute status and is beginning to acquire more

realistic traits of a conceptual variable. It is composed of dierent meanings, ingredients, qualities and conjectures depending on historical circumstances and societal conditions. It was a convenient ideal type as long as
most relevant social relations and transactions were almost exclusively contained within the boundaries of nation-states. Even at present, it can be
argued, there is a strong bias toward a national, not to say regional and
local, containment of social relations and transactions, including the fact
that by far the largest part of goods produced in the United States and in
the European Union are traded and consumed within their respective territories. Still more to the point, domestic sovereignty, referring to authority structures within states and the ability of these structures to eectively
regulate behavior (Krasner 2001, p. 21), is still in place in modern democracies to a high degree.
Resolving these apparent contradictions of empirical ndings takes little
more than parting with the ideal-type notion of sovereignty and rejecting
the implied eitheror quality of the term: a nation-state either does or does
not have sovereignty. The idea of sovereignty rather follows the trajectory
of similar ideas of seemingly monolithic quality authority, legitimacy or
accountability. They all have to yield to the forces of complexication that
transform a simplied and almost trivial realist construction of the relations among states into a multilevel, concatenated network of diverse
forces, resources, actors and interests. A globalizing world contains many
forms of authority, many shades of legitimacy, diverse aspects of accountability and complex arrangements of partial or divisible sovereignty
(Agnew 2005, p. 439).
A crucial part of this shift concerns the remaining role of the nationstate. A diusion of sovereignty certainly does not mean that the nationstate is becoming irrelevant or even that it is ceasing to exist. The ery
debate between statists and globalists is mostly academic show business.
It obfuscates the fact that a diusion of sovereignty through transnational
ows and networks can even enhance the inuence and the resources of
nation-states because it opens the transnational and global stage for
national actors. There is no reason to assume a zero-sum relationship
between sovereign states on the one hand and the emergence of global contexts on the other. Therefore, it seems highly questionable to derive an
immediate responsibility of corporations for administering citizenship
rights from a changing role of the nation-states. Undeniably, the nationstate is losing some of its prerogatives, particularly regulatory authority in
nancial and commercial transactions. At the same time, however, modern
democracies are extending their legitimacy base in far-reaching chains of
legitimacy to transnational institutions. In essence, the underlying

The corporation as a political actor?

567

processes of globalization are adding another federal layer to a multilevel

governance system that has existed within federal nation-states for a long
time without bringing these states to their knees.
Lateral world systems such as the global nancial system or the world
health system emerge as the counterparts of the nation-state, highlighting
its accomplishments as well as its shortcomings. To understand the
present role of the nation-state, it is mandatory to understand the role of
lateral world systems. Lateral world systems originate in a core feature of
modern societies. They are extensions of the internal functional
dierentiation of modern societies beyond the nation-state into the global
space. For example, the national economies of the nation-states extend
beyond their boundaries and merge into an interconnected global
economy in the strict sense: that for economic actors and rms global perspectives and exigencies become more important than regional and
national ones. Or take national health systems that are regulated by
national rules and programs: they are confronted with the global dynamics of pandemics and global health risks that are propelled by tourism and
other factors. There is little chance of solving these problems on a
national basis without an overarching global level of health-system structures. Other examples of lateral world systems are global nance, global
sports, global mass media or the global science system and even global
terror.
Max Weber has described the basic process of rationalization of
Western societies as a fundamental transformation of the architecture of
the whole of society from a segmented structure in archaic societies and
hierarchically dierentiated structures in pre-modern societies to a functionally dierentiated structure in modern societies. Functional dierentiation means that the specialized subsystems of society, that is, politics,
the economy, law, science, health system, the family, religion, education and
so on, separate from each other and bring forth a logic or rationality of
their own. Whereas an archaic tribe or the Greek oikos assemble all functions (political, economic, health, educational, religious and so on activities) under one roof and within the family as intertwined activities,
modern societies extend the dierences in the activities and occupations to
specialized organizations, role sets and logics of functional subsystems
(Luhmann 1982).
Theories of governance must address the problem of coordination of a
society that is divided into separate parts, each of them following their own
logic. At this level we are dealing with an operational problem of practical
governance: how can political interventions and policy programs inuence
societal arenas that follow dierent rules and internal logics, and are thus in
principle indierent to external perturbations? At this point, globalization

568

Handbook of research on global corporate citizenship

and the advent of the knowledge society enlarge the governance problem to
proportions that may actually help to clarify it.
The basic problem-solving ideas and models can be copied from the level
of modern nation-states. Subsidiarity and federalism are successful
models of coping with societal complexity and functional autonomies.
Both models rely on the subsystems capacity of self-regulation and selfgovernance in matters pertaining to the space of the subsystem and excluding major externalities. At the global level the task now is to describe
patterns of self-governance that evolve within lateral world systems, to point
out achievements and limits of existing governance regimes, and to juxtapose these factual developments with theoretically grounded considerations
about governing complex social systems. In this perspective it becomes
visible that a multitude of lateral world systems have succeeded in establishing a surprising degree of self-organization and self-governance. They
build global institutions, often originally created by international treaties
between nation-states, which become procient in setting global rules, standards, regulations and other norms sanctioned mainly by the (mounting)
costs of breaking contracts and leaving treaty organizations for example,
the World Trade Organization for the world trade system, the Bank for
International Settlements, the World Bank and the International Monetary
Fund for the world nancial system, the International Olympic Committee
for world sports, the International Red Cross for the world system of disaster relief, the International Atomic Energy Agency for atomic energy safety,
the International Labour Organization for the world labor system, and so
on. Concerning these global institutions it is obvious that they are lacking,
to various degrees, in legitimacy, representativeness and accountability
(Keohane 2003; Held 2004). All claims for a political role of corporations,
then, should be exposed at least to the same critique and scrutiny.
The prime reason for the self-governance of lateral world systems is dire
necessity: there is no world government. This is why global arenas of coordinated activities such as the global nancial system or the global health
system have to do the job themselves. In order to understand the intricate
interdependencies of lateral world systems and nation-states, an extended
view of the traditional forms of subsidiarity and federalism as core elements
of governance is called for. The standard form of vertical subsidiarity is a
tried and proven way of organizing hierarchical complexity. Nothing should
be managed at a higher level if it can be taken care of at a lower one. For
transferring a task to a higher level of governance convincing reasons must
be given and value added must clearly be discernible. If these reasons or the
value added are lacking, the task is to remain at the lower level.
For social systems with a predominantly hierarchical structure, vertical
subsidiarity is sucient to counteract excessive centralization. However,

The corporation as a political actor?

569

the structures of modern societies and organizations are mainly characterized by functional dierentiation. There still is hierarchy of a sort but it
operates mainly within the functional subsystems. The dominant relation
between the functional subsystems is not hierarchy but interdependence.
For the overall system, say a society, the governance problem is not hierarchy but organizing the interdependence of autonomous and operationally
closed subsystems. Vertical subsidiarity is not sucient for this task. It
needs to be complemented with horizontal subsidiarity, that is, by the
principle of subsidiarity extended to the relations between functionally specialized subsystems.
The specialized subsystems of modern societies are not organized hierarchically but interact in relations of interdependent coordination. If one
subsystem, say the political system or the economy, assumes the role of a
primary system trying to organize society at large, it falls prey to the fallacy
of overextension. Ungovernability in modern complex societies means
that they cannot be governed in their entirety by one subsystem alone.
Governance has to become distributed and decentralized. Any governing
institution has to heed the principles of vertical and horizontal subsidiarity to escape the trap of overload and destructive centralization.
In a similar vein, and strictly complementary to subsidiarity, the idea of
federalism has to be extended to meet the challenge of highly complex
global contexts. Federalism is not a panacea for the woes of globalization
but it is an indispensable basic principle of global governance. In a global
perspective, federalism denotes a space of precarious balance between
anarchy and Leviathan (the subtitle of Buchanan 1975) under conditions
of impossible unity and equally impossible particularism. Global unity in
the sense of a unitary global government will remain impossible for a long
time to come because there are no mechanisms and institutions for a viable
global democracy whatsoever. Global particularism is certainly possible
but not advisable since problems, risks and tasks of global reach abound.
Therefore, an approach to global governance based on subsidiarity and
federalism might be a way to avoid anarchy as well as a new Leviathan:
Federalism is an old idea, but its time may have come again because it
matches paradox with paradox (Handy 1995, p. 110).
In a systems theory view, extended models of subsidiarity and federalism make it superuous to refer to corporations to amend or substitute
democracy. Corporations are by their very design and rationality very
unlikely proponents of democracy and citizen participation. They are, to
be sure, indispensable for the self-organization and self-governance of the
economy, but they fail to qualify as legitimate and accountable political
actors. Instead, they become part of a growing number of politically
active intermediaries, including other collective actors such as associations,

570

Handbook of research on global corporate citizenship

non-governmental organizations (NGOs), social movements, interest

groups, embedded knowledge networks (Sinclair 2000), policy networks
(Benner et al. 2002) or private global institutions such as the G-30 (Tsingou
2006), the Financial Stability Forum or the World Ecological Forum.
Corporations are not political actors in the arena of government but they
are political actors in the arenas of (global) governance.
The term political actor needs to be specied because globalization and
the emergence of lateral world systems have expanded the notion of politics from classical government to more encompassing governance
modes and governance regimes (Rosenau 1995; Keohane 2001; Willke
2006). Governance regimes combine classical (multilevel) government, selforganization of societal spheres and self-guidance by global institutions as
core actors of lateral world systems. Global governance regimes establish a
complex interplay of public and private actors (Cutler et al. 1999), of traditional and innovative institutional designs, of normative and cognitive
rules systems (Strulik and Willke 2006). In the debate on governance the
new role of corporations in a partially globalized world appears to be more
suitable as a frame of reference than the misleading concept of citizenship.
Outlook
In order to wrap up and generalize our argument, we briey discuss two
aspects of governance which are of particular relevance in a systems theory
perspective: the aspects of complexity and contingency of the constellations of global governance. Complexity refers to the degree of interdependence, recursiveness and eigen-behavior of a dierentiated system,
whereas contingency is not used in the sense of dependence but in the
original sense of possibility, denoting the space of options and alternatives
in a given eld of decision making (Willke 2006).
It is almost a truism to state that the social problems of a globalized
world are highly complex, taxing the problem-solving capacity of the
nation-states and of existing democratic procedures. At the same time we
observe a propensity even in academic discourse to match complex
problems with overly simplied solutions. Modern societies are highly
complex systems and democracy is an impressively advanced array of procedures to cope with the intricacies of complex governance. Any attempt to
adapt democratic procedures and institutions to the heightened complexities of global constellations must take into account that intervening in a
multilayered, interdependent system may have unintended consequences:
Doing the right thing can generate more damage than good if its not tied
into a holistic longterm perspective (Kell 2005, p. 3). The attempts of
CRS/CC to establish a new kind of citizenship may come at great costs to
the citizen.

The corporation as a political actor?

571

If one of the strengths of formal democracy is to include all relevant

members of a society in its basic processes of decision making, a good
point to start the necessary revisions is to further strengthen this strength.
The inclusion of further actors in processes of interest aggregation and
option building means expanding the input side of legitimacy and collective action. It is an established practice in modern democracies to make use
of a full array of organized interests as an informal support structure for
supplying expertise from lobbying groups and interest associations to
think-tanks, white papers, NGOs and technical communities of practice.
Taking this innovation as an instance of a growing mutual imbrication of
all levels of governance (Sassen 1999, p. 1) leads to a position that takes
organized interests as elements of democratic processes more seriously.
Instead of treating them merely as informal fora for preparing formal decisions, the resources of a full range of private organizations help to improve
the quality of democratic input processes and input legitimacy if their
input is channeled along the lines of democratic procedures.
The obvious counterargument is that the inux of organizations and
organized interests diminishes the inuence of the individual voter and of
the voter as individual. This argument is valid. It indicates a fundamental
power shift within modern societies from individuals to organizations,
reecting the changing mode of societies as societies of organizations. It
seems inappropriate to ignore this aspect of societal reality. Instead, democratic theory and practice have to respond to this power shift if they want
to remain relevant factors for determining the governance regimes of
present societies. Actually, this power shift is just one feature of a broader
process. The more democratic processes depend on cognitive considerations and decision bases, the more a shift in the topology of knowledge
(from individual knowledge to organizational knowledge) will change the
distribution of resources for decision making.
The repercussions of this transformation of democracy are profound.
New knowledge and pertinent expertise expand the contingency (that is,
the option-space) of democratic decision making. They increase the range
of alternatives and thus the burden of selecting among them. Extending
the range of evidence-based options and delineating contingent implications and externalities is but a rst step. Judging from present experience,
it will be even more important though also more dicult to induce political decision makers to seriously engage in a discourse about these options.
To make future contingencies relevant for present incumbents presupposes
a revision of incentive structures and standards of accountability for political decisions. To put it bluntly, it seems illusory to expect that the necessary revisions will be supported by the present political class and by the
proponents of formal democratic procedures. The winds of change will

572

Handbook of research on global corporate citizenship

have to come from new actors, new perspectives and new modes of
accountability.
In this view it makes perfect sense to include corporations, and in particular TNCs, in new modes of governance regimes as it makes sense to
include other transnational actors such as NGOs, policy networks, communities of expertise, private associations and social movements, and so
on. The crucial point here is not to mistake political actors in governance
regimes as parts of or substitutes for government and as formal components of democracy, conveying on them rights and duties which are none
of their business. The multifaceted processes of globalization create new
contingencies and uncertainties for governance because they add an additional level of concatenated and sophisticated problems while the necessary structures, processes and rule systems for an adequate problem-solving
architecture are still in their infancy. In this respect it is almost political
business as usual. There always seems to be a lag between emerging problems and problem-solving mechanisms, but eventually the coping mechanisms catch up at least to some more or less satisfactory degree. If this
were an adequate description of the global constellation of uncertainty
there would be no reason for extended concern.
But it is not. The problem of contingency is more fundamental because
it is tied to the new role of knowledge in an emerging global knowledge
society. Governance ceases to be a matter of common sense. It inexorably
demands professional expertise in handling sophisticated expertise. It
demands prociency in monitoring, facilitating, coordinating and moderating diverse competence elds and professional interests, all of which
surpass in their specic elds the competence level of governance. The
point of governance, then, is not to stage a heroic struggle in order to nally
reach the necessary level of expertise. This endeavor would be in vain and
misdirected. The point of global governance rather seems to be to cultivate
moderation in political intervention, tempered by principles of subsidiarity, federalism, political restraint and decentralized, distributed intelligence.
The concept of CRS/CC confounds the roles of corporations and of politics, confusing their logics and rationalities to an amalgam which does
justice neither to economics nor to politics. A systems theory view, in contrast, builds on functional dierentiation and a clear separation of the
operational modes of the specialized subsystems of society, thereby sustaining a classical liberal architecture of modern societies that grants
autonomy and self-governance to the subsystems under the auspices of vertical and horizontal subsidiarity. Systemic thinking takes account of the
increasing interdependence and imbrications of societal spheres not by
fusing (and confusing) them but by elaborating forms of structural

The corporation as a political actor?

573

coupling which respect the autonomy of the subsystems and at the same
time allow for highly selective contextual relations between them.
In practical terms this means that the interplay between corporations
(and other global societal actors) and politics will become more intense,
combining forms of public and private authority in establishing new modes
of governance. Whereas CC invites a substitution of politics and government by business and corporations, a systems view treats the dignity of
democracy as a given which cannot be substituted by economic actors but
only ameliorated, eventually transforming the rules of formal government
into modes of smart governance.
References
Agnew, John (2005), Sovereignty regimes: territoriality and state authority in contemporary
world politics, Annals of the Association of American Geographers, 92, 43761.
Benner, Thorsten, Wolfgang Reinicke and Jan Witte (2002), Shaping globalization: the role of
global public policy networks, in Carl-Bertelsmann Award: Cooperation Responsibility
Transparency, edited by Bertelsmann Foundation, Gtersloh: Bertelsmann.
Branco, Manuel and Lcia Rodrigues (2007), Positioning stakeholder theory within the
dabate on corporate social responsibility, EJBO Electronic Journal of Business Ethics and
Organization Studies, 12, 515, http://ejbo.jyu./, accessed 17 November 2007.
Buchanan, James (1975), The Limits of Liberty: Between Anarchy and Leviathan, Chicago, IL
and London: Chicago University Press.
Carroll, Archie (1991), The pyramid of corporate social responsibility: toward the moral
management of organizational stakeholders, Business Horizons, 34, 3948.
Clarkson, Max B.E. (1995), A stakeholder framework for analyzing and evaluating corporate
social performance, Academy of Management Review, 20, 92117.
Cutler, Claire, Virginia Hauer and Tony Porter (eds) (1999), Private Authority and
International Aairs, New York: State University of New York Press.
Ferguson, Adam (1767), An Essay on the History of Civil Society, Edinburgh and London:
D. Cadell, available at http://oll.libertyfund.org/les/1428/1229_Bk.pdf, accessed 17
November 2007.
Friedman, Milton (1970), The social responsibility of business is to increase its prots, New
York Times Magazine, 13 September, 1720, reprinted in T. Donaldson and P.H. Werhane
(eds) (1988), Ethical Issues in Business: A Philosophical Approach, Englewood Clis, NJ:
Prentice-Hall, pp. 21723.
Handy, Charles (1995), The Age of Paradox, Boston, MA: Harvard Business School Press.
Hayek, Friedrich A. (1945), The use of knowledge in society, American Economic Review,
35 (4), 51930.
Hayek, Friedrich A. (1967), The results of human action but not of human design, in Hayek,
Studies in Philosophy, Politics and Economics, London: Routledge & Kegan Paul,
pp. 96105.
Held, David (2004), Democratic accountability and political eectiveness from a cosmopolitan perspective, Government and Opposition, 39, 36491.
Jensen, Michael C. (2002), Value maximization, stakeholder theory, and the corporate objective function, Business Ethics Quarterly, 12 (2), 23556.
Kakabadse, Nada K., Ccile Rozuel and Linda Lee-Davies (2005), Corporate social responsibility and the stakeholder approach: a conceptual review, International Journal of
Business Governance and Ethics, 1 (4), 277302.
Kell, Georg (2005), The UN Global Compact: moving the business mainstream, interview
by PricewaerthouseCoopers, in: PwC: The Corporate Responsibility Report, Vol. II, Winter
2005, www.unglobalcompact.org, accessed 17 November 2007.

574

Handbook of research on global corporate citizenship

Keohane, Robert (2001), Governance in a partially globalized world, Presidential address,

American Political Science Association, 2000, American Political Science Review, 95, 113.
Keohane, Robert (2003), Global governance and democratic accountability, in David Held
and Mathias Koenig-Archibugi (eds), Taming Globalization: Frontiers of Governance,
Oxford: Polity, pp. 13059.
Krasner, Stephen (2001), Globalization, power, and authority, www.pro.harvard.edu/papers/000/000008KrasnerSte.pfd, accessed September 2004.
Lindblom, Charles (1965), The Intelligence of Democracy: Decision Making through Mutual
Adjustment, New York: Free Press.
Luhmann, Niklas (1982), The Dierentiation of Society, trans Stephen Holmes and Charles
Larmore, New York: Columbia University Press.
Malkin, Jesse and Aaron Wildavsky (1991), Why the traditional distinction between public
and private goods should be abandoned, Journal of Theoretical Politics, 3, 35578.
Mandeville, Bernard de (1705 [1714]), Fable of the Bees: Or, Private Vices, Publick Benets,
London.
Marx, Karl (1857), Critique of political economy Appendix I: Introduction to a contribution
to the critique of political economy, Chapter 1 of Grundrisse (Notebook M, pp. 81111),
written between the end of August and the middle of September 1857, Karl Marx Internet
Archive, http://www.marxists.org/archive/marx/-txtindex.htm, accessed 17 November 2007.
Marx, Karl and Friedrich Engels (1872 [2005]), Das kommunistische Manifest und Karl Marx,
Das Kapital: Kritik der politischen konomie, Cologne: Parkland Verlag.
Matten, Dirk and Andrew Crane (2005), Corporate citizenship: toward an extended theoretical conceptualization, Academy of Management Review, 30, 16679.
Mill, John Stuart (1848 [1909]), Principles of Political Economy, Oxford: Clarendon.
Moss, Scott J. (1981), An economic theory of business strategy: an essay in dynamics without
equilibrium, http://cfpm.org/~scott/bus-strat/ch1.html, accessed 17 November 2007.
Palazzo, Guido and Andreas Georg Scherer (2006), Corporate legitimacy as deliberation: a
communicative framework, Journal of Business Ethics, 16, 7188.
Rosenau, James (1995), Governance in the twenty-rst century, Global Governance, 1, 1344.
Sassen, Saskia (1999), Spatialities and temporalities of the global: elements for a theorization,
unpublished manuscript, www2.ucsc.edu/cgirs/publications/cpapers/sassen.pdf, accessed 17
November 2007.
Scherer, Andreas Georg and Guido Palazzo (2007), Toward a political conception of corporate responsibility: business and society seen from a Habermasian perspective, Academy of
Management Review, 32 (4), 1096120.
Sinclair, Timothy (2000), Reinventing authority: embedded knowledge networks and the new
global nance, Environment and Planning C: Government and Policy, 18, 487502.
Smith, Adam (1776), An Inquiry into the Nature and Causes of the Wealth of Nations, London:
Methuen, available at http://oll.libertyfund.org//les/237/0206-01_Bk.pdf, accessed 19
November 2007.
Strulik, Torsten and Helmut Willke (eds) (2006), Towards a Cognitive Mode in Global Finance:
The Governance of a Knowledge-based Financial System, Frankfurt and Chicago, IL:
Campus/Chicago University Press.
Tsingou, Eleni (2006), The role of policy communities in global nancial governance: a critical examination of the Group of Thirty, in Torsten Strulik and Helmut Willke (eds),
Towards a Cognitive Mode in Global Finance. The Governance of a Knowledge-based
Financial System, Frankfurt and New York: Campus, pp. 21337.
Walsh, James P. and Walter R. North (2005), Taking stock of stakeholder management,
Book Review Essay, Academy of Management Review, 30, April, 42638.
Willke, Helmut (2006), Global governance, Bielefeld: transcript.
Willke, Helmut (2007), Smart Governance: Governing the Global Knowledge Economy,
Frankfurt and New York: Campus.
Wood, Donna and Jeanne Logsdon (2001), Theorising business citizenship, in J. Andriof and
M. McIntosh (eds), Perspectives on Corporate Citizenship, Sheeld: Greenleaf, pp. 83103.

PART VII
THE FUTURE OF
GLOBAL CORPORATE
CITIZENSHIP

25 The future of global corporate

citizenship: toward a new theory of the
rm as a political actor
Guido Palazzo and Andreas Georg Scherer

Introduction
What is the responsibility of business in society? The potential answers to
that question depend on the specic cultural, political and economic constellation of the society in which corporations operate. Whenever the constellations will change the answers will change. During the second half of
the 20th century, business operations were framed by relatively stable legal
and moral parameters imposed by national governments and homogeneous social communities. The 21st century has started with the rise of
the transnational corporation (TNC) and the erosion of both the national
regulatory power and the clearness and homogeneity of moral custom
(Palazzo and Scherer 2006; Scherer and Palazzo 2008). As a result, the traditional taken-for-granted division of labor between business and politics
is blurred. Business activities are politicized because of the growing global
problems with unintended social and environmental side-eects, the
growing power of business actors on the global playing eld and the selfregulatory activities of some of them (Scherer and Palazzo 2007).
The debate on corporate social responsibility (CSR) has started to reect
upon the theoretical and practical consequences of globalization only
recently. However, the faster the societal context changes, the less useful the
established concepts of corporate responsibility become. In the highly
inuential CSR pyramid of Carroll (1991), for instance, there seems to be
no place for the privatization of human rights violations. Carrolls concept
is implicitly building on the idea of the intact nation-state in which human
right violations are sanctioned by the government. Respecting these rights
is thus rather a taken-for-granted element of legal requirements. Ethics has
more to do with fairness or honesty toward customers or employees, and it
is dicult to categorize the avoidance of slave labor in ones supply chain
merely as expected. However, given the lack of legal governance on the
global playing eld, the avoidance of slave labor does not belong in
Carrolls category of legal responsibility, because there is yet no global legal
framework that can be applied directly to non-state actors: [t]he statecentric framework of international human rights law and attendant
577

578

Handbook of research on global corporate citizenship

institutions is at present ill-equipped to regulate powerful non-state actors

like TNCs, which are, by denition, not constrained by notions of territorial sovereignty (Kinley and Tadaki 2004, p. 1021). And nally it is also not
compatible with the idea of merely desired but not expected corporate
philanthrophy. What is the responsibility of business in society under these
conditions? As Carroll himself has argued, corporate responsibilities derive
from societal expectations at a given point in time (Carroll 1979, p. 500).
The privatization of human rights violations points beyond the descriptive
power of the common understanding of CSR as manifesting in Carrolls
pyramid.
Moving from the 20th to the 21st century, from the national industrial
society to the global knowledge society, from a national or international to
a global business logic, one has to admit that the traditional answers we
have given in the past and the problems we analyze today, no longer t. We
need a thorough evaluation of the emerging global problems, fresh answers
and new theoretical concepts (Walsh 2005). The concept of corporate citizenship (CC) may be helpful in this respect as it reminds us of the new
political mandate of the global business rm that goes beyond the traditional understanding of social responsibilities merely as a response to the
expectations of the most powerful actors in society (Carroll 1979; Strand
1983). This new corporate political responsibility, however, also points in a
direction other than the common analysis of political behavior of business
rms with the help of concepts such as political strategy and corporate
lobbyism (Boddewyn and Brewer 1994; Hillman et al. 2004). This line of
management research has developed an instrumentalist view on how business rms may inuence public policy decisions (Hillman and Hitt 1999,
p. 825) so that their economic interests are served. However, this instrumentalist view of power politics seems to widen the legitimacy gap even
further and to intensify the lack of corporate accountability. It appears that
we need a much more enlarged concept of politics that is able to respond
to the loss of corporate legitimacy (Palazzo and Scherer 2006), to integrate
the various initiatives of private actors contributing to the production of
global public goods (Kaul et al. 2003; Matten and Crane 2005), and to help
re-establish democratic political order beyond and above the nation-state
(Scherer and Palazzo 2007). The late Iris Young has suggested such an
enlarged concept of politics that may help us to nd new theoretical
ground. Following her proposal, by political we mean a process in which
people organize collectively to regulate or transform some aspects of their
shared social conditions, along with the communicative activities in which
they try to persuade one another to join such collective actions or decide
what direction they wish to take (Young 2004, p. 377). As we shall emphasize below, communicative action and deliberative politics are key concepts

The future of global corporate citizenship

579

in our endeavor to further develop CC and to contribute to a new theory

of the rm.
The exciting group of scholars from various disciplines who have contributed to this Handbook have made the attempt to tackle some of the
questions and to propose new research directions. However, this is only the
very beginning of a long scientic journey in uncharted waters. Many questions are still open and many aspects of the debate still waiting for a thorough analysis. In fact, while outlining the role of business under the
postnational constellations (Habermas 2001), the Handbook has even provoked new questions that have to be dealt with on the future CC research
agenda. In this concluding chapter, we would like to outline a few topics
that emerge from the discussions of the Handbook and from our point of
view should be on top of the future research agenda.
The meaning and the limits of responsibility
Iris Marion Young (Chapter 7) has proposed a shift from a liability to a
social connectedness model of responsibility. Her key argument is that
being linked to a social or environmental problem means that one has the
moral obligation to engage in joint eorts to solve the problem. The impact
of a corporation and not so much its legal cover are the yardstick of such
a forward-looking concept of responsibility. Others suggest a shift from
causality- to capability-based responsibilities where the corporations
capacity to resolve problems of common concern will be the key factor
(Wettstein 2005). These approaches do not deal with accusations but focus
on solutions. These ideas may help us to reconsider the concept of corporate responsibility and to respond to the challenges of expanding global
supply chains, where responsibility often disappears in the ramications
and fragmentation of collaborative networks and where corporations tend
to act as externalizing machines (that is, someone else should solve the
problem, not me) (Bakan 2004). Anecdotal evidence shows that responsibility is expanding in at least four directions, following already a social connectedness logic. First, since the early 1990s, corporations have been asked
to deal with human rights and working conditions downstreaming their
supply chain. Some corporations have acknowledged a certain responsibility for the monitoring of their suppliers behavior. Second, there is a tendency to hold corporations accountable for the impact of their products on
their customers or even for the behavior of the customers themselves.
Banks have to control the sources of their customers money. Tobacco companies are obliged to invest in smoking prevention programs. Caterpillar is
criticized for selling their bulldozers to the Israeli army, Daimler for selling
a luxury Maybach car to the king of Swaziland. And McDonalds and
Coca-Cola are expected to join societys ght against the future obesity and

580

Handbook of research on global corporate citizenship

diabetes pandemic. Third, corporations are joining the ght against key
global challenges such as AIDS or global warming. Fourth, the global
knowledge society is reintroducing the question of historical responsibility
on the agenda of many companies: the role of corporations such as IBM,
Volkswagen or Unilever in the Third Reich is being examined again (see, for
example, Forbes 2007). The war in Vietnam and the business activities in
apartheid South Africa are additional historical responsibility frontiers.
Some corporations such as Volkswagen have started to deal with their past
and are considering it a key element of their CC responsibilities (Grieger
2007). Others hesitate to open that Pandoras box.
These examples show the dilemma of a social connectedness model of
corporate responsibility. The ever-enlarging societal expectations toward
corporations have led to a multiplicity of citizenship activities that downstream, upstream and sidestream the supply chain. Where do these activities stop? Are corporations, for instance, responsible for their rst-tier
suppliers or should they control for the human rights performance of their
second- and third-tier suppliers as well? This is not only a theoretical question, because some corporations already do go that deep. And if we
assume that corporate responsibility has to go that deep, what does that
mean for corporations such as Wal-Mart with its more than 60 000 suppliers? What should the role of McDonalds be in the ght against obesity
and where does that ght risk the corporations existence? Where are the
limits of responsibility and how can it be managed along highly complex
supply chain networks? What does it mean to be a good (global) corporate
citizen within the context of a social connectedness model of responsibility? These questions are not limited to the supply chain problematic.
Rather it appears that there is a growing uncertainty both in practice and
in scholarly debates on where the limits of responsibility may be for companies operating in an increasingly competitive environment. Finally, corporations cannot be responsible for any social misery or environmental
disaster (Scherer and Smid 2000; Margolis and Walsh 2003; Scherer et al.
2006).
Toward a new concept of corporate politics
In the managerial literature, politics is dened as power in action (Pfeer
1981, p. 7; Hollingsworth 1998, p. 491). Corporate politics is usually understood as a power game, in which self-interested corporations ght for scarce
resources, and try to avoid regulation or to inuence public opinion in
their favor (Keim 2001; Bonardi et al. 2005; Bonardi and Keim 2005).
Consequently, corporations are not political actors in a strict sense. They
are not obliged to legitimize their activities as long as they stay within the
limits of laws and moral custom. The emphasis in economic theory on

The future of global corporate citizenship

581

freedom of choice in the market sphere suggests that legitimization in the

market sphere is automatic and that markets thus avoid the typical
legitimization problem of the state (Peters 2004, p. 1). Corporations thus
are perceived as depoliticized private business actors who try to inuence
public political processes, institutions and actors in order to promote their
private prot-maximization goal. Politics in this sense does not go beyond
mere lobbyism.
The dominating neoliberal private/public and business/politics divide is
challenged by the discussion on global CC in our Handbook. On the global
playing eld, corporations become political (Matten and Crane 2005) or
politicized (Scherer and Palazzo 2007) actors in a dierent sense. First, the
politicization of the corporation is building on the observations that global
business activities provoke problematic collective eects and bindings
(Palazzo and Scherer 2006). This is of particular relevance against the
background of potential contradictions between a corporations (global)
citizenship engagement and its lobbyism activities. The inuence of the
pharmaceutical companies on the global regulation of patent protection,
the aggressive lobbyism of oil companies against national and global political attempts to ght global warming or the tobacco industrys subversion
of health politics illustrate the problem. Second, corporations participate
in solving global political problems. As outlined in our book, anecdotal evidence shows that corporations assume direct political responsibilities,
where governmental actors are not able or willing to do so (Crane, Matten
and Moon, Chapter 2).
As a result, the concept of a politicized corporation points beyond the
idea of politics as backdoor bargaining. The debate on global CC that
unfolds in our Handbook shows that the power game concept of politics
is too narrow. The mainstream liberal understanding of politics becomes
problematic, because both the growing impact and the growing involvement of corporations in global politics provokes questions of legitimacy
(Palazzo and Scherer 2006; Scherer and Palazzo 2007). It seems dicult to
interpret the CC activities that are discussed under the power game paradigm. The participation of corporations in multistakeholder processes of
global governance is based on the transparency of public discourse, and
lobbyism follows the logic of conspiratory backdoor bargaining (de
Jonquires 1998; Rondinelli 2002). The UN Global Compacts study on
responsible lobbyism illustrates the growing need for a critical discussion
of the narrow understanding of corporate politics. The future debate on
global CC will have to examine critically the established understanding
of politics, the interface of CSR/CC and lobbyism and it will have to
reconceptualize the taken-for-granted private/public dichotomy. Where
are the limits of and what are criteria of responsible lobbyism? How can

582

Handbook of research on global corporate citizenship

corporations align their CSR communication and their lobbyism activities? What are the required mechanisms of control and accountability?
Governance without government
One of the key insights of many contributions to our Handbook is that
under the postnational constellation, corporations create more negative
side-eects for society, are under more public pressure due to their sometimes doubtful impact, and have started to increase their eorts to solve the
problems to which they are connected. When under pressure, corporations
often start to engage in self-regulatory activities. They formulate a code of
conduct and communicate it to their suppliers. However, these measures
are often highly ineective because they are not linked to enforcement
mechanisms and thus provoke even more pressure from civil society. A
much more promising engagement emerges where corporations collaborate
with civil society actors and transnational or national political bodies in
order to solve the social and environmental problems in which they hold a
stake (Zadek 2004). We have described this as the corporate embeddedness
in processes of democratic will-formation and problem solving in a
transnational context of political governance (Scherer and Palazzo 2007,
p. 1110). Obviously, by participating in multistakeholder initatives of rule
setting and enforcement, private rms have started to become an actor in
global regulatory processes. In contrast to a national regulatory context,
under the postnational constellation, non-state actors play an active role in
what has been described as governance with and without government (see,
for instance, the contributions of Wolf, Kobrin, Doh and Zrn, Chapters
1114, respectively). Self-regulatory initiatives with standards, monitoring
processes and labels are, for instance, progressing in the global garment
industry (MacDonald and MacDonald 2006) and in forest products
(Bartley 2003).
On the one hand, these emerging governance standards, frameworks and
control mechanisms might help to ll the global legal vacuum for multinational business activities. On the other, they suer from a democratic
decit in all their dimensions (Koenig-Archibugi 2004; Wolf 2005). The formulation and enforcement of laws has been under the control of elected
governments in the national context. In that tradition, our understanding of
democracy includes at least three elements that are problematized by the
governance without government logic. First, it shifts regulatory power from
elected bodies to private actors. Second, it replaces hard law by soft law.
Third, it challenges the democratic ideal of civic sovereignty and representativity. As a result, both, the actors, and the processes they start to develop
and control rules, provoke legitimacy problems (Palazzo and Scherer 2006;
see also Boddewyn 1995). Habermas (2006, p. 176) reminds us that:

The future of global corporate citizenship

583

only states can draw on the resources of law and legitimate power. Even if nongovernmental actors can satisfy the initial regulatory needs of cross-border functional systems through private forms of legislation . . . these regulations will not
count as law if they are not implemented by nation-states, or at least by agencies of politically constituted international organizations.

Therefore, the debate on corporate citizenship, as far as it accepts the

idea of the globally politicized corporation, has to develop eective
and legitimate concepts for the non-electoral democratic accountability
and the public control over public decision-making (MacDonald and
MacDonald 2006, pp. 90 and 92) of the regulatory eorts of global multistakeholder initatives. The concept of moral legitimacy through communication (Habermas 2003; Risse 2004; Palazzo and Scherer 2006) and the
concept of deliberative democracy (Habermas 1998; Nanz and Steek
2004; Scherer et al. 2006; Scherer and Palazzo 2007) are key aspects in this
endeavor. However, there are a number of problems that need to be
addressed: how can global corporate responsibility eorts be aligned with
the idea of democratic accountability? What is democracy beyond the
nation-state and what role do non-state actors play in it? What characterizes the legitimacy of soft law processes and outcomes? What conditions
have to be fullled in order to make companies and non-governmental
organizations (NGOs) legitimate actors in political processes? How can
regulatory initatives without governmental power deal with the free-riding
challenge that is the unavoidable side-eect of soft law? What role can existing transnational institutions such as the World Trade Organization, the
IMF, the International Labour Organization or the World Bank play in
these regulatory processes?
Leadership and moral innovation
There is a broadly shared assumption that leadership is a key driving force
of corporate ethics and corporate responsibility (Carlson and Perrewe
1995; Paine 1996; Weaver et al. 1999; Parry and Proctor-Thompson 2002,
Trevio et al. 2003). Ramus (2001) argues, for instance, that supervisory
support is essential for CSR engagement and Parker discovered that it is
a key aspect of a corporations engagement in self-regulation (Parker
2002, p. 99). We suggest that leadership is of particular importance for
corporations that assume a political responsibility as discussed in our
Handbook, simply because such an engagement can point far beyond
traditional business operations and responsibilities (see Maak and Pless,
Chapter 19). However, despite this assumed causality, the link between
CSR and leadership has achieved surprisingly little research attention
(Doh and Stumpf 2005, p. 3; see also Waldman and Siegel 2005; Bies et al.
2007).

584

Handbook of research on global corporate citizenship

While some companies might be inuenced by what Trevio et al. (2000,

p. 130) have called ethically neutral leadership, others might take a proactive role and make values an explicit and evident part of the leadership
agenda (ibid.). Ethical leadership might help to transform the taken-forgranted understanding of corporate responsibility and establish new standards within and across industries. Examples that illustrate the key role of
leadership in CSR/CC are the decision of Nike to make its suppliers
network transparent, BPs decision in the early 1990s to acknowledge
global warming as a fact or Chiquitas concept of radical third-party
control. These corporations act as institutional entrepreneurs (DiMaggio
1988; Dorado 2005) and propel more sophisticated concepts of CC among
their peers. As a consequence, standards that once were considered innovative, proactive and voluntary, thus might become a new industrial standard that is enforcable. Logsdon and Yuthas (1997, p. 1218), for example,
note that what was considered to be post-conventional behavior in the
past, such as the social desirability of voluntarily reducing air pollution
from factories to protect public health, became subject to conventional
moral reasoning with the passage and implementation of state and federal
air pollution legislation in the 1960s and 1970s.
The future CC debate needs to examine the role of leadership in this
process of institutional change. Especially on the global playing elds
absent or weak context of clear, standardized and enforceable mechanisms
and institutions of governance, the debate on transformational leadership
(Antonakis and House 2002) might oer important insights for the understanding of the relevance of some corporations proactive engagement for
the change of responsibility standards. Transformational leadership abilities are explicitly value based and foster an awareness of moral and ethical
implications to transcend self-interest for that of the greater good among
followers (ibid., p. 7). The emerging literature on positive psychology
(Snyder and Lopez 2002) and positive organizational scholarship (Cameron
et al. 2003) may also be fruitful in this respect (see Adler, Chapter 17).
Building upon the extensive literature on institutional entrepreneurship,
transformational leadership, positive psychology and organizational scholarship will be important for the understanding of many of the widely
neglected dimensions of CC: under what conditions will business leaders
take over social and environmental responsibility? How do corporations
and managers learn and unlearn to act on a specic level of responsibility?
How do corporations and managers learn from each other? How do multistakeholder initatives such as the Forest Stewardship Council emerge?
How do responsibility standards and societal expectations emerge or
change over time? How does moral entrepreneurship drive the transformation of industrial standards?

The future of global corporate citizenship

585

The dark side of responsibility

Paradoxically, CC behavior often leads to more critique from civil society.
It is criticized by NGOs for not going far enough or for just being a faade
with business as usual in the background (Laufer 2003). Developing
methods to evaluate the reality behind the rising tide of citizenship communications will be a key challenge in the future. However, in recent years,
an even more severe critique of the whole corporate responsibility movement has been raised (Banerjee 2007). It has been argued that multinational
corporations (MNCs) use their citizenship activities in order to disguise the
neocolonial exploitation of resources in developing countries (Banerjee
2003), often doing more harm than good to local stakeholders (Livesey
2001; Bloweld and Frynas 2005; Frynas 2005), excluding those who are
most aected from corporate decision making (Khan et al. 2007) and stabilizing existing hegemonial ideologies and distributions of power (Levy
2008). In the discourse on corporate responsibility, the values of the colonial power are routinely privileged in framing, interpreting and addressing
the issues at stake (Khan et al. 2007, p. 107). It will be an important scholarly frontier to understand these potential imperialistic tendencies that
exist in the conceptualization of CC as well as in the concrete behavior of
corporations and the demands of NGOs (see also Edward and Willmott,
Chapter 18, Banerjee, Chapter 23 and Mir, Marens and Mir, Chapter 23).
As long as scholars, corporations and NGOs are mainly coming from a
Western context, corporate citizenship with a high probability will be
understood in a Western way. How can the debate on global CC avoid the
two traps of imperialism and relativism? How can the contributions of
scholars, companies and stakeholders from the developing world be
strengthened and receive more visibility?
Conclusion
Taking into consideration all the questions that might follow from the
politicization of the global rm, we are convinced that the future debate on
the role of business in society will have to follow an interdisciplinary logic.
The fast transformation of the societal context in which corporations
operate, cannot be ignored. This global transformational process is examined by scholars in various disciplines. Of course, these scholars rarely use
the terminology of the business and society eld, but without a deep understanding of these overarching political, legal, sociological and philosophical discussions, the impact of scholars in the CSR/CC eld will be limited.
Thus, the main goal of our Handbook is to embed the CC debate in that
interdisciplinary context. It is a rst attempt to discuss the consequences of
globalization for this debate with scholars from political philosophy,
political studies, legal studies and other neighboring disciplines, and to

586

Handbook of research on global corporate citizenship

understand their analysis of the changing dynamics of business actors,

political actors and civil society. We have to continue that dialogue across
the dierent language games.
The dominating theory of the rm characterizes the company as a
private actor with a limited liability and a focus on shareholder value
(Jensen 2002; Sundaram and Inkpen 2004). It builds upon a strong concept
of property rights, believes in the magic of the market, and trusts in the stability and regulatory power of (national) law and moral custom that
together constitute the basic rules of the society (Friedman 1970, p. 218).
It draws a clear line between public and private, business and politics, corporate governance and corporate responsibility. Within the business and
society eld, this concept has rarely been questioned but rather has been
taken for granted. Most of the authors of our Handbook, while focusing
on a variety of topics, share the assumption that this understanding of the
rm is coming under the pressure of globalization.
On the global playing eld, the TNC is rising as a new Leviathan
(Chandler and Mazlish 2005). Global political institutions are still incomplete and lack the capacity to legitimately set and enforce standards of economic conduct for private business rms (Braithwaite and Drahos 2000).
At the same time, business rms operate as political actors and inuence
governmental institutions or take over public responsibilities that traditionally have been assumed by the state only. It is obvious that these developments lead to a democratic decit that can only be compensated if these
corporate political actions can be embedded in processes of public deliberation and control. The new concept of deliberate democracy may be helpful
in this respect as it shows us how legitimate policies and institutions can
emerge from the collaboration of public, private and civil society actors
(Palazzo and Scherer 2006; Scherer and Palazzo 2007).
However, the picture appears to be incomplete as long as we focus only
on political processes outside the rm while neglecting the corporate
decision-making process. Therefore, we suggest that inasmuch as corporations engage in global governance, their internal processes and structures
have to become more democratic (Driver and Thompson 2002; Parker
2002; Scherer et al. 2006; Scherer and Baumann 2007). This obviously has
consequences for corporate governance structures (see also Thompson,
Chapter 21). These have to be changed and become more transparent,
inclusive and participatory so that democratic control over corporate
action will be enhanced even when MNCs operate beyond governmental
control or shift their activities into environments where democratic state
institutions are weak and the rule of law is absent. It appears that a new
theory of the global rm is necessary, and it will without any doubt emerge
from the debate on the consequences of the postnational constellation for

The future of global corporate citizenship

587

the order of society. We hope that our Handbook will make a contribution
to that debate.
References
Antonakis, J. and R.J. House (2002), The full-range leadership theory: the way forward, in
B.J. Avolio and F.J. Yammarino (eds), Transformational and Charismatic Leadership: The
Road Ahead, Amsterdam: JAI, pp. 333.
Bakan, J. (2004), The Corporation: The Pathological Pursuit of Prot and Power, London:
Constable.
Banerjee, S.B. (2003), Who sustains whose development? Sustainable development and the
reinvention of nature, Organization Studies, 24, 14380.
Banerjee, S.B. (2007), Corporate Social Responsibility: The Good, the Bad and the Ugly,
Cheltenham, UK and Northampton, MA, USA: Edward Elgar.
Bartley, T. (2003), Certifying forests and factories: states, social movments, and the rise of
private regulation in the apparel and forest products eld, Politics and Society, 31, 43364.
Bies, R.J., J.M. Bartunek, T.L. Fort and M.N. Zald (2007), Corporations as social change
agents: individual, interpersonal, institutional, and environmental dynamics, Academy of
Management Review, 32, 78893.
Bloweld, M. and J.G. Frynas (2005), Setting new agendas: critical perspectives on corporate
social responsibility in the developing world, International Aairs, 81, 499513.
Boddewyn, J. (1995), The legitimacy of international-business political behaviour,
International Trade Journal, 9 (spring), 14361.
Boddewyn, J. and T. Brewer (1994), International business political behaviour: new theoretical directions, Academy of Management Review, 19, 11943.
Bonardi, J.P. and G. Keim (2005), Corporate political strategies for widely salient issues,
Academy of Management Review, 30, 55576.
Bonardi, J.P., A. Hillman and G. Keim (2005), The attractiveness of political markets: implication for rm strategies, Academy of Management Review, 30, 397413.
Braithwaite, J. and P. Drahos (2000), Global Business Regulation, Cambridge: Cambridge
University Press.
Cameron, K.S., J.E. Dutton and R.E. Quinn (2003), Positive Organizational Scholarship:
Foundations of a New Discipline, San Francisco, CA: Berrett-Koehler.
Carlson, D.S. and P.L. Perrewe (1995), Institutionalization of organizational ethics through
transformational leadership, Journal of Business Ethics, 14, 82938.
Carroll, A.B. (1979), A three-dimensional conceptual model of corporate performance,
Academy of Management Review, 4, 497505.
Carroll, A.B. (1991), The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders, Business Horizons, 34 (4), 3948.
Chandler, A.D. and B. Mazlish (eds) (2005), Leviathans: Multinational Corporations and the
New Global History, Cambridge: Cambridge University Press.
de Jonquires, G. (1998), Network guerillas, Financial Times, 30 April, 12.
DiMaggio, P.J. (1988), Interest and agency in institutional theory, in L.G. Zucker (ed.),
Research on Institutional Patterns and Organizations: Culture and Environment, Cambridge
MA: Ballinger, pp. 322.
Doh, J.P. and S.A. Stumpf (2005), Towards a framework of responsible leadership and governance, in Doh and Stumpf (eds), Handbook on Responsible Leadership and Governance in
Global Business, Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp. 318.
Dorado, S. (2005), Institutional entrepreneurship, partaking and convening, Organization
Studies, 26, 385414.
Driver, C. and G. Thompson (2002), Corporate governance and democracy: the stakeholder
debate revisited, Journal of Management and Governance, 6, 11130.
Forbes, N. (2007), Multinational enterprise, corporate responsibility and the Nazi dictatorship: the case of Unilever and Germany in the 1930s, Contemporary European History,
16 (2), 14967.

588

Handbook of research on global corporate citizenship

Friedman, M. (1970), The social responsibility of business is to increase its prot,

New York Times Magazine, 13 September 1970, reprint in T. Donaldson and P.H.
Werhane, (eds) (1988), Ethical Issues in Business, Englewood Clis, NJ: Prentice-Hall,
pp. 21723.
Frynas, J.G. (2005), The false developmental promise of corporate social responsibility: evidence from multinational oil companies, International Aairs, 81, 58198.
Grieger, M. (2007), Historical responsibility: corporate forms of remembrance of national
socialist forced labour at the Volkswagen plant, in W.C. Zimmerli, K. Richter and
M. Holzinger (eds), Corporate Ethics and Corporate Governance, Hamburg: Springer,
pp. 21128.
Habermas, J. (1998), Three normative models of democracy, in Habermas, The Inclusion of
the Other: Studies in Political Theory, Cambridge, MA: MIT Press, pp. 23952.
Habermas, J. (2001), The Postnational Constellation, Cambridge, MA: MIT Press.
Habermas, J. (2003), Truth and Justication, Cambridge, MA: MIT Press.
Habermas, J. (2006), Does the constitutionalization of international law still have a chance?,
in Habermas, The Divided West, Cambridge, UK: Polity, pp. 11593.
Hillman, A.J. and M.A. Hitt (1999), Corporate political strategy formulation: a model of
approach, participation, and strategy decisions, Academy of Management Review, 24,
82542.
Hillman, A.J., G. Keim and D. Schuler (2004), Corporate political activity: a review and
research agenda, Journal of Management, 30, 83757.
Hollingsworth, R.J. (1998), New perspectives on the spatial dimensions of economic coordination: tensions between globalisation and social system of production, Review of
International Political Economy, 5 (3), 482502.
Jensen, M.C. (2002), Value maximization, stakeholder theory, and the corporate objective
function, Business Ethics Quarterly, 12, 23556.
Kaul, I., P. Conceio, K. Le Goulven and R.U. Mendoza (eds) (2003), Providing Global
Public Goods, Oxford: Oxford University Press.
Keim, G.D. (2001), Business and public policy: competing in the political market place, in
M.A. Hitt, R.E. Freeman and J.S. Harrison (eds), The Blackwell Handbook of Strategic
Management, Oxford: Blackwell, pp. 583601.
Khan, F.R., K.A. Munir and H. Willmott (2007), A dark side of institutional entrepreneurship: soccer balls, child labour and postcolonial impoverishment, Organization Studies, 28,
105577.
Kinley, D. and J. Tadaki (2004), From talk to walk: the emergence of human rights responsibilities for corporations at international law, Virginia Journal of International Law, 44,
9311022.
Koenig-Archibugi, M. (2004), Transnational corporations and public accountability,
Government and Opposition, 39, 33559.
Laufer, W.S. (2003), Social accountability and corporate greenwashing, Journal of Business
Ethics, 43, 25361.
Levy, D.L. (2008), Political contestation in global production networks, Academy of
Management Review, 33, forthcoming.
Livesey, S.M. (2001), Eco-identity as discursive struggle: Royal Dutch/Shell, Brent Spar and
Nigeria, Journal of Business Communication, 38, 5891.
Logsdon, J. and K. Yuthas (1997), Corporate social performance stakeholder orientation and
organizational moral development, Journal of Business Ethics, 16 (12), 121326.
MacDonald, T. and K. MacDonald (2006), Non-electoral accountability in global politics:
strengthening democratic control wihtin the global garment industry, European Journal of
International Law, 17, 89119.
Margolis, J.D. and J.P. Walsh (2003), Misery loves companies: rethinking social initiatives by
business, Administrative Science Quarterly, 48, 268305.
Matten, D. and A. Crane (2005), Corporate citizenship: towards an extended theoretical conceptualization, Academy of Management Review, 30, 16679.
Nanz, P. and J. Steek (2004), Global governance, participation and the public sphere,
Government and Opposition, 39, 31434.

The future of global corporate citizenship

589

Paine, L.S. (1996), Moral thinking in management: an essential capability, Business Ethics
Quarterly, 6, 47792.
Palazzo, G. and A.G. Scherer (2006), Corporate legitimacy as deliberation: a communicative
framework, Journal of Business Ethics, 66, 7188.
Parker, C. (2002), The Open Corporation, Cambridge: Cambridge University Press.
Parry, K.W. and S.B. Proctor-Thompson (2002), Perceived integrity of transformational
leaders in organisational settings, Journal of Business Ethics, 35, 7596.
Peters, F. (2004), Choice, consent, and the legitimacy of market transactions, Economics and
Philosophy, 20, 118.
Pfeer, J. (1981), Power in Organizations, Marsheld, MA: Pitman.
Ramus, C.A. (2001), Organizational support for employees: encouraging creative ideas for
environmental sustainability, California Management Review, 43 (3), 85105.
Risse, T. (2004), Global governance and communicative action, Government and Opposition,
39, 288313.
Rondinelli, D.A. (2002), Transnational corporations: international citizens or new sovereigns?, Business and Society Review, 107, 391413.
Scherer, A.G. and D. Baumann (2007), The role of the transnational corporation in
the process of legalization: insights from economics and corporate social responsibility, in
C. Brtsch and D. Lehmkuhl (eds), Law and Legalization in Transnational Relations,
London: Routledge, pp. 20225.
Scherer, A.G. and G. Palazzo (2007), Toward a political conception of corporate responsibility: business and society seen from a Habermasian perspective, Academy of Management
Review, 32, 1096120.
Scherer, A.G. and G. Palazzo (2008), Globalization and corporate social responsibility, in
A. Crane, A. McWilliams, D. Matten, J. Moon and D. Siegel (eds), The Oxford Handbook
of Corporate Social Responsibility, Oxford: Oxford University Press, pp. 41331.
Scherer, A.G., G. Palazzo and D. Baumann (2006), Global rules and private actors:
Towards a new role of the TNC in global governance, Business Ethics Quarterly, 16,
50532.
Scherer, A.G. and M. Smid (2000), The downward spiral and the U.S. model principles: why
MNEs should take responsibility for the improvement of world-wide social and environmental conditions, Management International Review, 40, 35171.
Snyder, C.R. and S.J. Lopez (eds) (2002), Handbook of Positive Psychology, Oxford: Oxford
University Press.
Strand, R. (1983), A systems paradigm of organizational adaptations to the social environment, Academy of Management Review, 8, 9096.
Sundaram, A.K. and A.C. Inkpen (2004), The corporate objective revisited, Organization
Science, 15, 35063.
Trevio, L.K., M. Brown and L.P. Hartman (2003), A qualitative investigation of perceived
executive leadership: perceptions from inside and outside the executive suite, Human
Relations, 56, 537.
Trevio, L.K., L.P. Hartman and M. Brown (2000), Moral person and moral manager: how
executives develop a reputation for ethical leadership, California Management Review,
42 (4), 12842.
Waldman, D.A. and D. Siegel (2005), The inuence of CEO transformational leadership on
rm-level commitment to corporate social responsibility, in J.P. Doh and S.A. Stumpf
(eds), Handbook on Responsible Leadership and Governance in Global Business, Cheltenham,
UK and Northampton, MA, USA: Edward Elgar, pp. 195220.
Walsh, J.P. (2005), Book review essay: Taking stock of stakeholder management, Academy
of Management Review, 30, 42652.
Weaver, G.R., L.K. Trevio and P.L. Cochran (1999), Integrated and decoupled corporate
social performance: management commitments, external pressure, and corporate ethics
practices, Academy of Management Journal, 42, 53952.
Wettstein, F. (2005), From causality to capability: towards a new understanding of the multinational corporations enlarged global responsibilities, Journal of Corporate Citizenship,
19 (autumn), 10517.

590

Handbook of research on global corporate citizenship

Wolf, K.D. (2005), Private actors and the legitimacy of governance beyond the state: conceptional outlines and empirical explorations, in A. Benz and I. Papadopoulos (eds),
Governance and Democratic Legitimacy, London: Routledge, pp. 200227.
Young, I.M. (2004), Responsibility and global labor justice, Journal of Political Philosophy,
12, 36588.
Zadek, S. (2004), The path to corporate responsibility, Harvard Business Review, 82, 12532.

Index
3M Pollution Prevention Pays Program
178
AA 1000 ESG standards 67
Aarup, K. 396
Abbott, Jennifer 116
Abbott, Kenneth W. 263
Abdelal, Rawi 254
accountability 945
Achbar, Mark 116
Ackerman, R.W. 57
activism, NGOs 273
acts citizenship 484
adjudication, remedy and relief
imbalance 90, 93
Adler, N.J. 377, 3945
advertising
CC (corporate citizenship) 3367
CSR (corporate social
responsibility) 3234
advocacy NGOs 2756
see also activism, NGOs
AES 197, 201
Agamben, G. 536
agency theory 3823
Aggarwal, R. 86
Agle, B. 189, 195, 198
Aglietta, M. 539
Agnew, John 5656
Aguilera, R.V. 395
Ahluwalia, D. 527
AIDS, battle against 254
Akdeniz, Yaman 257
Albert, Matthias 298
Albrow, Martin 298
Alchian, A.A. 542
Alegria, F. 537
Alford, R.R. 19092, 194, 203
Alien Torts Claims Act 1789 (ATCA)
348, 350
Aligada, R.A. 4856
Altman, Barbara W. 25, 29, 3312
Ames, R.E. 396
Amoco 213

Anand, V. 1889, 195

Anderson, Benedict 443, 529
Anderson, James 256
Anderson, Sarah 347
Andra-Warner, Elle 233
Andriof, J. 3, 26, 30, 51, 613, 209, 211
Annan, Kofi 230, 35960, 491
anticipatory scholarship 38990
Antigua, internet gambling 258
Antonakis, J. 584
apartheid 278
Apea, Yvonne 368
Appelbaum, Richard P. 142, 163
Appiah, Kwame A. 44041, 445
Apple Corporation 529
Aquinas, St Thomas 121
Aquino, K. 189, 194
Arendt, Hannah 439, 450
Argenti, P. 277, 282, 2867
Aristotelian approach to business
challenges to the Aristotelian model
1313
corporate culture 12831
corporations as community 1238
overview 12023
Aristotle 195
Arrighi, G. 539
Ashforth, B.E. 18890, 195, 198
Ashman, D. 282, 286
Astley, W.G. 456
ATCA (Alien Torts Claims Act 1789)
348, 350
Aupperle, K.E. 81
Austin, J. 2835, 287
Austrom, D.R. 60, 282
Baade, Hans W. 233
baboons 208
Bagnoli, M. 329
Baier, Kurt 441
Baiman, S. 383
Bakan, J. 50, 209, 319, 328, 458, 466,
469, 579
Baker, D. 534, 537

591

592

Index

Baldwin, Richard 259

Ballinger, J. 51415
Bandura, A. 196
Banerjee, S.B. 87, 426, 460, 468, 536,
585
Bansal, P. 468
Barber, Benjamin R. 437
Bardhan, P. 465
bargaining and negotiating power
imbalance 90, 923
Barley, S.R. 191, 197, 202
Barlow, M. 534
Barnard, C. 319
Barnett, M.L. 3956
Barney, J.B. 321, 3956
Baron, D. 325, 3289
Bartels, Lorand 354
Bartlett, Christopher A. 267, 381, 431
Bartley, T. 582
Barton, S.L. 86
Baskins, Roberta 515
Bastin, Lucas 355
Bateson, G. 170
Batterson, R. 878
Baucus, D.A. 464
Baucus, M.S. 464
Bauer, R.A. 57
Baumann, D. 586
Baumhart, R.C. 81
Baumol, W.J. 5, 823
Baysinger, B. 455
Bearak, B. 88
Beck-Gernsheim, E. 173
Beck, Ulrich 1, 4, 87, 89, 167, 173,
433, 43941
Beder, S. 168
Beetham, David 365
behavioral scripts 1978
Behrman, J. 88
Beisheim, Marianne 297
Beitz, Charles 140
Bell, Daniel 297
Bellofiore, R. 87
Bendell, J. 50
Benhabib, Seyla 43940, 442, 450
Benner, T. 305, 570
Bennett, J. 218
Bennett, R.J. 385
Bennis, Warren 434
Benoit, Bertrand 260

Bercusson, B. 81
Bergenstein, S. 455
Berger, I.E. 282
Berger, P.L. 190
Berle, A. 536
Berlin, I. 478
Berman, Paul Schiff 265
Bernstein, S.D. 384
Berry, J.M. 88
Bertelli, A.M. 472
Best Practice in Investment Promotion
(UNCTAD) 461
Bhagwati, J. 88, 367
BHP Billiton 39091
Biersteker, Thomas J. 231, 253, 263,
305
Bies, R.J. 2, 395, 583
Billenness, S. 213
Binstein, M. 81
Birch, David 30
BITC (Business in the Community)
50, 55
Bittner, E. 409
Black, J. Stewart 431
Blackman, S.A.B. 5
Blackwater USA 5356
Blair, M.M. 480
Blair, Tony 253, 280
Blank, T. 532
Blau, Peter 145, 162
Blecher, Taddy 3878
Block, Peter 435
Blood Diamond (2006 film) 32
Blowfield, M. 585
Boatright, John R. 40, 333
Boddewyn, J. 267, 394, 454, 456, 460,
578, 582
Bodwell, Charles 63, 64
Body Shop 438
Boesky, Ivan 81, 118
Boggs, C. 461, 4656
Bohman, James 440
Boj, D.M. 525
Boland, R. 389, 394
Bonacich, Edna 142, 163
Bonardi, J.P. 455, 458, 580
Bond, P. 530
borders, significance of 2567
Bornstein, D. 68
Bosch, Robert 307

Index 593
Bossone, Andrew 360
Boston College Center for Corporate
Citizenship 63
Botkin, J.W. 375
bottom feeders 488, 495
boundary-spanning functions 567
Bourdieu, P. 1456, 171, 174, 192, 454,
458
Bovens, M. 410
Bowden, C. 81
Bowen, H.R. 78, 54041
Bowerman, Bill 514
Bowie, N.E. 78, 80
BP
CSR 330
overthrow of democratically elected
government in Iran 537
Bradley, Ed 515
Bradley, R. 282
Braithwaite, J. 23, 5, 88, 163, 352, 586
Branco, Manuel 553
branding, images 51314
Branson, Richard 449
Braun, Rainer 161
Braungart, M. 177
Breitmeier, Helmut 245
Breman, J. 534
Brenner, R. 539
Brenner, S.N. 60, 86
Brent Spar 5051, 507
Bressel, Nina 228
Brewer, T.L. 267, 454, 456, 460, 578
Brickson, S.L. 395
Brief, A.P. 189
Brighouse, Harry 440
Brinkbumer, K. 449
British South Africa Company 212
Brock, Gillian 440
Brock, Lothar 298
Brody, William R. 259
Brook, D. 535
Brown, L.D. 61, 66, 285
Brown, M.E. 202
Brubaker, R. 532
Brunder, Christopher M. 254
Bruno, K. 471
Buchanan, Allen 141, 232, 23840,
242, 245
Buchanan, James 569
Buchholz, R. 318

Buckley, P.J. 37881, 395

Buffet, Warren 392
Bull, Hedley 225, 252, 26061
bureaucracy, the 13031
Burke, L. 29
Burns, James M. 4345, 438
Burrough, B. 81
Burt, R.S. 283
Burtless, G. 466
business citizenship 64, 211
Business, Competitiveness and
Development program (World
Bank) 185
business ethics 8083
see also Aristotelian approach to
business
Business in the Community (BITC)
50, 55
Butler, J. 425
Butler, K.C. 378
Calavita, K. 43
Callahan, D. 540
Calland, R. 413
Callero, P.L. 412
Calton, J.M. 61
Cameron, K.S. 384, 584
Campbell, J.L. 382
Capitalism and Freedom (Friedman)
480
CARE (Cooperative for Assistance
and Relief Everywhere, Inc.) 286,
288
Cargill Seeds office, Bangalore,
burning of 546
Carlson, D.S. 583
Carr, Alfred 121
Carroll, Archie B. 1, 34, 2830, 52,
78, 84, 3312, 540, 556, 5778
Carson, Rachel 276
Cascio, W.F. 375
Cashore, Benjamin 2634
Casson, M.C. 37981, 395
Castells, Manuel 266
Caterpillar 579
cause-based partnerships (CBPs)
2834
Caux Roundtable Principles 67
Cavanagh, John 347
Caves, R. 381

594

Index

Caza, A. 384
CBPs (cause-based partnerships)
2834
CC see corporate citizenship
CCI (corporate community
involvement) 545
CCR (corporate community relations)
545
Celebration, Florida 110
CEPCO (Oaxaca State Coffee
Producers Network) 287
Cerny, Philip G. 298
Cescau, Patrick 449
Chamberlain, Neil 540
Chambers, R. 4, 366
Chan, A. 88, 367
Chandler, A. 51
Chandler, A.D. 3, 586
Chandler, David 297
Chandra, A. 86
Chappell, Tom 778, 78
charity, duty of 108
Charlton, A. 88, 367
Chatterjee, Deen K. 440, 445
Chatterjee, P. 527, 5323, 5456
checkbook citizenship 1056
Cheney, Richard 536
Chevron 330
Chittister, J. 385
Christmann, P. 87
Chua, A. 209
CI (Conservation International) 2868
CIA, overthrow of democratically
elected government in Iran 537
Cialdini, R.B. 106
CIDA University 3878
Cisco 5067
Citigroup 26
citizenship
applied to corporations 3440
contemporary notions of 4044
definitions 334, 315
emotive connections 5289
ethical analysis 3335
as organizing principle 32
and stakeholders 4828
see also fragments, theorization
Ciulla, Joanne 431, 4345
CIVICUS (World Alliance for Citizen
Participation) 3312

civil society
definitions 274
global governance roles 2313
new centrality of 3356
Clapham, A. 4, 301, 366
Clark, L.H. 541
Clark, T. 480
Clarke, T. 534
Clarkson, M.B.E. 59, 61, 562
Clawson, D. 540, 543
Clemens, E.S. 191
Clinton, Bill 516
club NGOs 275
Coase, R.H. 395
Cobb, J.B., Jr 80
Coca-Cola Company 26, 169, 534, 579
Cochran, P.L. 578, 60, 81, 86
codes of conduct 188
see also governance instruments,
ethicization of corporate
behavior
cognitive legitimacy 317
cognitive schemas 1967
cognitive work 176
Cohen, D. 88
Cohen, Joshua 265
Cohen, R. 4, 440
Coleman, G. 51
Coll, S. 81
Collaborative Continuum 283
Collins, Denis 40
Collins, J.C. 58
Collis, D. 381
Collopy, F. 389, 394
commandment of transparency (CT)
5056
Commission on Co-determination
(Mitbestimmungskommission) 299
Committee for Economic
Development 541
Communist Manifesto (Marx) 554
communities of interest 101
community apathetic citizens 112
community builders 111
community creators 11011
community engagement, typology
11013
community exploiters/destroyers
11213
community good citizens 11112

Index 595
community stakeholders, and
corporate citizenship 1002
Compa, Lance 161
competitive markets, and stakeholders
847
competitive rights of stakeholders 85
compliance verification 945
complicity 350
Congo, Democratic Republic of 214,
217
Connolly, William 163
Conrad, Joseph 527
Conservation International (CI) 2868
Constant Gardener, The (2005 film)
32
Convention on the Rights of Persons
with Disabilities 348
Conzelmann, Thomas 234, 237, 240,
245
Cook, F.J. 81
Cook, J.M. 191
Cooper, Cynthia 413
Cooperrider, D.L. 377, 389
corporate citizenship (CC)
advertising 3367
concept development
concept stages 5565
concept stages framework 656
context 5052
history 3313
root concepts 525
and corruption mitigation 192200
definitions 52, 624, 75, 168, 1867,
21011, 31618, 331, 410
emergence of 446
environmental responsibilities 1758
facets/elements 52832
gaining employee buy-in 4058
as interdisciplinary topic 46
as participation in a polity 41013
and peace 21619
strategic 33940
as synonymous with political CSR 3
use of terminology by business
equivalent view 2930, 414
extended view 3031, 41319
limited view 289, 414
overview 258
violations of 5358
corporate communities 1278

corporate community involvement

(CCI) 545
corporate community relations (CCR)
545
corporate culture, an Aristotelian
metaphor 12831
corporate democracy 492
corporate fabricated spaces
responsibilities 177
corporate governance, overview 4767
Corporate Governance and
Sustainable Peace conference
21112
corporate nature responsibilities 1778
corporate political responsibility 578
corporate reputation 55
Corporate Reputation Review 62
corporate responsibility (CR) 52, 612
Corporate Responsibility Officer 26
corporate social accountability 8995
corporate social obligation 84
corporate social performance (CSP)
524, 58, 75, 316
corporate social responsibility see CSR
Corporate Social Responsibility
Practice 3612
corporate stakeholder responsibility
54
corporateNGO interactions 2816
future of 28890
illustrations of 2868
Corporation 20/20 (US organisation)
68
Corporation, The (2003 film) 11618,
119, 132
corporations
anti-corruption resources 198200
as citizens 356, 645
as citizens or states 34
and citizenship 315
claims on legal citizenship 485
as governments 368
as legal subjects 4778
political activity 4546
as political actors
functional differentiation and
global contexts 56570
liberal economy and de-politicized
corporation 55965
overview 5523, 57073

596

Index

political economy and politicized

corporation 5539
see also future research directions,
toward a new concept of
corporate politics
as a politicalcultural formations
4623
as psychopaths 11618
self-image see Aristotelian approach
to business
structure and identification within
40910
value to society 3378
see also post-Westphalian transition,
multinational firms as political
actors
corruption
corporations role in fighting 1856
definitions 1868
economic approaches to mitigation
1889
efficient 465
institutional approach 190
institutional logics 19091, 1934
mitigation and corporate citizenship
192200
organizational behavior perspective
18990
overview 203
political-actor mitigation approach
200203
and politics 4634
social actors 191
see also Foreign Corrupt Practices
Act
Cortes, Katia 368
cosmopolitan citizenship
and the corporation 412
and responsible leadership 431,
4418
cosmopolitan ethics 4438
see also ethical cosmopolitanism
cosmopolitan mindset 4413
cosmopolitanutilitarian view 1389
cosmopolitanism 43841
country-specific advantages 380
Cox, Simon 358, 366
Cox, Taylor, Jr 432
CR/CR1 (corporate responsibility) 52,
612

CR2 (corporate reputation) 62

CR3 (corporate [stakeholder]
relationships) 6061
Cragg, W. 2
Crane, A. 25, 31, 35, 37, 3940, 46,
512, 645, 78, 105, 1689, 1867,
193, 197, 20911, 216, 234, 273,
302, 3325, 395, 411, 414, 487,
528, 530, 5567, 565, 578, 581
Creed, W.E.D. 191, 196, 202, 410, 412
cross-sectoral social partnerships
(CSSPs) 282, 284
Crossley, N. 50
Crouch, C. 43, 481
Csikszentmihalyi, M. 383
Csordas, T.J. 172
CSOs (civil society organizations) see
NGOs (non-governmental
organizations)
CSP (corporate social performance)
524, 58, 75, 316
CSR (corporate social responsibility)
advertising 3234
alterations to legitimize corporate
excess 53845
competitive advantage potential
3256
concept development 556
definitions 52, 75, 31518
ethical legitimacy 31822
externalities and public goods
32831
future research directions 46972
globalization impact 879
limits 4689
and market structure 3245
normative and ethical norms 8083
see also Aristotelian approach to
business
overview 5779, 5857
political economy of 454
post-paternalistic rationalizations
7780
private and public responsibility
3278
as product differentiation 3223
profit and the public welfare 3267
stakeholder theory 835
stakeholder view 4689
strategic view 469

Index 597
CSR (corporate social responsibility)
corporate attitude classification
4889
CSR1 (corporate social responsibility)
56
CSR2 (corporate social responsiveness)
567
CSR3 (corporate social rectitude) 58
CSR4 (cosmos, science,
religion/spirituality) 589
CSR5 (corporate stakeholder
responsibility) 5960
CSSPs (cross-sectoral social
partnerships) 282, 284
CT (commandment of transparency)
5056
Curtin, Deane 42
Curwen, P. 81
Cutler, A. Claire 229, 234, 243, 253,
255, 263, 2667, 305, 570
cynics 4889
Dagger, Richard 437
Dahl, R. 35, 478
Daimler 579
Dale, Ernest 540
Dalton, Maxine A. 431
Daly, H.E. 80
Daniels, J. 544
Daino, Roberto 366
Danone 449
Darrow, Mac 346, 363, 366
Das, T.K. 282
Davenport, Kim 30
Davidson, Caroline 514
Davie, L. 387
Davis, G.F. 4
Davis, James H. 435
Day, K. 81
De Bakker, F.G.A. 5, 281, 395
De Caelo et Mundo (Aristotle) 502
de Jonquires, G. 581
de Schutter, Olivier 349
de Tocqueville, Alexis 274
Deetz, S. 409
defense contractors 5356
DeGeorge, Richard T. 80, 186, 432
degree of symbiosis 102
Dehn, G. 413
Deitelhoff, Nicole 245

Delanty, Gerard 41
Deleuze, G. 51213
deliberative democracy
achieving grip for 41719
and extended corporate citizenship
41517
in practice 41921
vs radical democracy 4078
democratic corporate citizenship
4235
democratic interventionist state
challenges for 2979
overview 2937
Demsetz, H. 542
Den Hond, F. 5, 281, 395
Deng, F. 2
Denson, Charlie 523
Derber, C. 462, 530
derivative stakeholders 107
Deutsch, Karl W. 297
Deutsche Bank 26
Devlin, P. 199
Diageo 26
Dicken, P. 87
Diermeier, Daniel 431, 434
DiMaggio, P. 191, 196, 382, 454, 458,
584
Dine, Janet 358
discursive power 46061
Disney 110, 141, 143
distributive justice 74
Dobel, J.P. 285, 2889
Dobson, Andrew 42
Doctors without Borders 276
Doh, J.P. 185, 274, 27882, 284, 286,
431, 464, 583
Doha Declaration on TRIPS and
Public Health (2001) 3567
Dolphin Tuna case 279, 355
Domini Index 68
Donaldson, T. 39, 60, 63, 80, 84, 320,
332, 4323, 437, 448, 543
Donlan, W. 106, 114
Doonesbury 516
Dorado, S. 584
Dorsey, D. 386
Dow Jones Sustainability Index 68
Dowell, G. 166
Drahos, P. 2, 88, 163, 352, 586
Driver, C. 493, 586

598

Index

Droege, Scott 382

Drucker, Peter 120
Dryzek, J.S. 4
Dubbink, W. 3
Dun & Bradstreet 254
Dunfee, T.W. 63, 80, 105, 108, 212,
217, 437, 543
Dunham, L. 1012, 111
Dunning, J.H. 381, 395, 461
Dupuy, Pierre-Marie 264
Dutta, P.K. 325
Dutton, J.E. 384
eBay 111
ECAs (export credit agencies) 362
ecological citizenship 423
economic governance
post-Westphalian transition 2513
in a transnational world order
26066
Economist, The 319, 326, 3379
efficient corruption 465
Egan, D. 456, 460
Eigen, Peter 280
Eisenhardt, K.M. 282
Eitel, Maria 517
EITI (Extractive Industries
Transparency Initiative) 280
Elkind, P. 392
Elkington, J. 51, 433
Elliott, Kimberly Ann 142, 144, 155
embodied corporate citizenship 1725
embodied corporate community
responsibilities 1767
Emirbayer, M. 191, 196, 202
emotional work 176
employment at will 132
employment contracts, humanizing
180
Endres, Alfred 300
Engardio, P. 506, 51920
Enron 82
entitlements (citizenship characteristic)
345
entrepreneurial nomadism 51213
environment, social issues and
governance (ESG) 90
environmental citizenship
embodiment perspective 17072
examples 169

overview 16670, 1813

see also corporate citizenship (CC),
environmental responsibilities;
Wal-Mart, response toward the
environment
Environmental Defense Fund 276
Equator Principles 361
equivalent corporate citizenship see
corporate citizenship (CC), use of
terminology by business,
equivalent view
Errath, B. 185
Esbenshade, Jill 156, 161, 163
ESCR Net 362
ESG (environment, social issues and
governance) 90
ethical cosmopolitanism 440
see also cosmopolitan ethics
ethical traders 489
Ethical Trading Initiative 68
ethics
of assistance 4456
of care 4445
of recognition 444
see also business ethics;
cosmopolitan ethics
ethics-morals duality 415
Ethics Officers Association 50
Etzioni, A. 80
European Social Investment Forum 68
Evan, W. 133, 543
Eviatar, D. 377
Ewen, S. 195
Expert Commission for the Further
Development of the Codetermination of Employees in
Companies 299
export credit agencies (ECAs) 362
Export Credit Guarantee Department
(UK) 362
Export Development Canada 362
extended corporate citizenship see
corporate citizenship (CC), use of
terminology by business,
equivalent view
external responsibility assurance
systems 667
externalities rights of stakeholders 85
Extractive Industries Transparency
Initiative (EITI) 280

Index 599
ExxonMobil 26, 169, 209, 210, 302,
330, 3745, 5045
FaceBook 111
facilitative element of CC 530
Fagre, N. 456
Fair Labor Association (FLA) 517
Fair Trade Labeling Organization 67
Falk, Richard 38
Fama, E. 383
Fast Food Nation (2006 film) 32
Fayerweather, John 267
Featherstone, Lisa 141
Feddersen, T. 3245
Feenstra, R. 531
Feinberg, Joel 158
Feldman, Dan 362
Ferguson, Adam 563
Ferraro, F. 396
Ferrell, O.C. 3, 30
Fichtner, U. 449
Fikentscher, Wolfgang 233
Fine, B. 461
Fineman, S. 176
Finger, Matthias 231
Finnemore, Martha 245
Fishman, C. 375
Fitzgerald, Peter 368
FLA (Fair Labor Association) 517
Fletcher, George 1623
Fligstein, N. 19091, 193, 203, 412,
45463, 465, 470, 472
Flint, D. 506, 525
Florent-Treacy, Elizabeth 435
Florini, Ann M. 230
Fombrun, C.J. 29, 55, 62, 193, 322,
332, 41011
Forbes, N. 580
Ford Foundation 287
Ford Motor Company 117, 210, 302
Foreign Corrupt Practices Act (US
1977) 50, 349
Forest Stewardship Council (FSC) 67,
244, 264, 280, 41921
Forest Troop baboons 208
forestry, global policy on 4678
Fort, T.L. 2, 21117, 219, 395
Foucault, M. 460, 5034, 546
Fougre, M. 544
foundational values 634

four faces of corporate citizenship,

The (Carroll) 29
Fouts, P. 321
fragments
overview 5278, 5457
theorization 5328
Framework Convention on Corporate
Accountability 471
Franck, T. 530
Frank, R. 322
Fraser, N. 416, 4234
Frederick, W.C. 1, 50, 559, 65, 69,
541
Fredrickson, B. 383
Freeman, Edward, Strategic
Management: A Stakeholder
Approach 59, 84
Freeman, J. 457
Freeman, R.E. 3, 54, 5762, 78, 84, 86,
102, 110, 116, 133, 319, 332, 375,
432, 434, 543
Freeman, Richard B. 142, 144, 155
French, Peter 149
Friedland, R. 19092, 194, 203
Friedman, A.L. 469
Friedman, Milton 5, 12021, 303, 307,
319, 326, 332, 351, 376, 396, 461,
480, 541, 5423, 564, 586
Friedman, T.L. 209, 215, 220, 374,
440, 443
Frieslandfood 507
Frost, P.J. 176
Froud, J. 495
Frynas, J.G. 4, 585
FSC (Forest Stewardship Council) 67,
244, 264, 280, 41921
FTSE4Good 68
Fuller, J.G. 81
Fung, A. 4, 161
future research directions
CSR (corporate social
responsibility) 46972
governance without government
5823
leadership and moral innovation
5824
meaning and the limits of
responsibility 57980
toward a new concept of corporate
politics 58082

600

Index

Gadbury, Sir A. 504

Gap 141
Gardberg, N.A. 41011
Gardner, John 434
Gargiulo, M. 457
Garsten, C. 529
Gates, Bill 449
GATT (General Agreement on Tariffs
and Trade) 279
Gaus, Micha 141
GCC (global corporate citizens) 477
GCC advocacy classification 490
GCC governance 48992
Gearhart, Judy 161
Geertz, Clifford 125
General Motors (GM) 74, 213
see also GM Colmotores
George, Bill 434
Gerde, V.W. 543
Gereffi, Gary 259, 262
Getz, K.A. 455
Ghemawat, P. 375, 380
Ghoshal, Sumantra 267, 381, 395, 431
Gianturco, D.E. 362
Giddens, A. 146, 191, 195
Gilbert, D.R., Jr 61, 110
Gilbert, Jacqueline A. 432
Gillham, J.E. 383
Gilligan, Carol 444
Gilligan, T. 3245
Gills, B.K. 461
Glazebrook, M. 210
GLBT (gay, lesbian, bisexual and
transgender) employees 410, 412,
424
global business citizenship 211, 414
global citizenship, and stakeholders
1035
global corporate citizens (GCC) 477
Global Corporate Citizenship The
Leadership Challenge for CEOs
and Boards 25
global corporate governance
financial sector 4956
framework 48992
Global Crossing 82
Global Exchange 287
Global Fund 35960
global governance
business roles 2335

civil society roles 2313

future research directions 5823
without government 2626
institutional demands for legitimacy
2415
new modes of 23541
NGO influence 27781
overview 2256
political modernization 22730
statehood in transition 23031
global justice
obligations and global connections
13841
see also responsibility, social
connection model
see also structural injustice
Global Reporting Initiative (GRI) 60,
67
global resources dividend 446
global risk society 433, 439
global society
21st-century challenges 3745,
3914
business as part of 3758, 3834
globalization
and human rights 3434
impact on CSR 879
and power 4668
rise of corporate authority 3446
Glynos, J. 425
GM (General Motors) 74, 213
see also GM Colmotores
GM Colmotores 213, 217
Golden Age of American capitalism
539
Goldstein, J. 17
Gonzalez, Miguel 358
good corporate citizenship 29
Goodin, Robert 152, 158, 162
Goodpaster, K.E. 78, 320
Googins, B. 65, 284
Gossett, William T. 25
governance instruments
ethicization of corporate behavior
3003
market-compatible mechanisms
299300
governance structures 45960
see also global governance
government corruption 464

Index 601
Grameen Bank 68
GrameenDanone Food Co. 449
Grandin, G. 459
Granovetter, M. 190, 457
Grant, Wyn 31
Graves, S.B. 51
Grayson, David 52
Graz, Jean-Christophe 234
Grecco, Celso 449
Green, K. 166
Greenleaf, Robert K. 436
greenwashing 285
GRI (Global Reporting Initiative) 60,
67
Grieger, M. 580
Griffiths, Percival Joseph 233
Grimsey, D. 4
grip
achieving grip for deliberative
democracy 41719
definitions 409, 415
Grossman, Gene 259
GSMs (global social movements) 278
Guattari, F. 51213
Guay, T.R. 278, 281
Guha, R. 527
Gulati, R. 283, 457
Gurria, A. 185
Ha, Joseph 516
Habermas, Jrgen 1, 45, 65, 187, 242,
249, 265, 413, 41516, 41819,
422, 4267, 528, 579, 5823
Habisch, A. 3, 29
habitus 171
Hadden, T. 477
Hafner-Burton, Emilie 354
Haidt, J. 383
Haigh, Matthew 32, 44
Hall, Peter 251
Hall, Rodney B. 231, 253, 263, 305
Halliburton Corporation 536
Handbook of Positive Psychology
(Snyder and Lopez) 384
Handy, Charles 569
Hannan, M. 457
Hannerz, Ulf 439
Hanson, G. 531
hard law 263
Harrison, J.S. 61, 282

Hart, O. 481
Hart, S.L. 689, 274, 321, 395
Harte, G. 469
Harvey, D. 535, 545
Hasenclever, Andreas 305
Hassel, Anke 301
Haufler, Virginia 235, 245, 263
Hawken, P. 395
Hay, C. 87
Hayek, Friedrich 213, 461, 479, 557,
563
Heald, M. 540
Heap, Simon 277
Held, David 4, 241, 265, 269, 440, 442,
444, 4478, 568
Helyar, J. 81
Henderson, P.D. 5
Henisz, W.J. 192, 197, 455
Hennart, Jean F. 395
Hepple, B. 81
Herling, J. 81
Hertz, N. 37, 307, 343, 466
Hertz Rent-a-Car 128
Hess, D. 2812
Hessen, R. 462
Hewlett-Packard 26, 117
Hilary, J. 367
Hill, C.W.L. 60, 84
Hillgenberg, Hartmut 264
Hillman, A.J. 455, 578
Hirsch, Seev 395
Hirschman, A.O. 200
Hirst, P.Q. 497
Hitt, M.A. 455, 578
Hobbes, Thomas 556
Hobsbawm, E. 529
Hock, Dee 389
Hoffman, A. 456, 460
Hohfeld, W.N. 478
Hollingsworth, R.J. 580
homeworkers 1434
Honneth, Axel 444
Honore, Tony 150
Hooijberg, R. 431
Hoppe, H. 325
Horst, T.J.J. van der 178
House, R.J. 584
Hsia, R.Y.-J. 289
Hsieh, N. 105, 108
Hudsons Bay Company 233

602

Index

human rights
and aid-based development 35864
and commercial enterprise 34752
and globalization 3434
and international trade and
investment 3528
overview 3645
Human Rights Council of Australia
363
Human Rights Norms for
Corporations (UN) 351
Hunt, S.A. 197
Hunt, S.D. 196
Hunter, J.D. 195
Husted, B.W. 5, 465
hypernorms 63
IBM 74, 76, 117, 132, 580
ICANN (Internet Corporation for
Assigned Names and Numbers)
305
ICCPR (International Covenant on
Civil and Political Rights) 3489
ICCR (Interfaith Center for Corporate
Responsibility) 278
ICESCR (International Covenant on
Economic, Social and Cultural
Rights) 348
identities 1945
identity-based citizenship 434
Ikeda, Satoshi 33
Illouz, E. 194
ILO (International Labour
Organization) 345
image, branding 51314
IMF (International Monetary Fund)
345, 460
individual, the 1235
INFACT (Infant Formula Action
Coalition) 278
information asymmetry 324
information imbalance 9092
Infosys 198
Inkpen, A.C. 5, 586
institutional logics
corporate influence on 1934
definitions 19091
institutional theory 3812
integrative stage (business-NGO
relationships) 283

integrity 50810
see also transparency, openness and
integrity
Intellectual Property Committee (IPC)
2545
Interfaith Center for Corporate
Responsibility (ICCR) 278
internal-democratic element of CC 530
internal responsibility management
systems 66
internalization theory 37980
International Business Leaders Forum
(IBLF) 50
international business scholarship
37883, 38894
International Labour Organization
(ILO) 345
International Monetary Fund (IMF)
345, 460
International Organization for
Standardization (ISO) 264
international regulatory framework,
corporate involvement 13
international society 252
International Covenant on Economic,
Social and Cultural Rights
(ICESCR) 348
Internet Corporation for Assigned
Names and Numbers (ICANN)
305
internet gambling 258
interpenetrating systems model 567
IPC (Intellectual Property Committee)
2545
Iscar Ltd 392
Isin, Engin F. 33, 41, 45
ISO (International Organization for
Standardization) 264
ISO 14000 Environmental
Management Standard 181
ISO 26000 standards 67
ITT, overthrow of democratically
elected government in Chile 537
Ivancevich, John M. 432
J.C. Penny 143
Jensen, M.C. 5, 66, 81, 84, 319, 383,
542, 564, 586
Jeurissen, Ronald 31
John, C.H. St. 61

Index 603
Johnson, Harry G. 395
Johnson, J. 106
Johnson, J.L. 283
Johnson, M. 171
Johnson, Mark 448
Johnson, Nancy Brown 382
Johnson, S. 198
Johnston, Doug 368
Jonas, Hans 155
Jones, Kent 357, 358, 364, 367
Jones, Marc T. 32, 44
Jones, T.M. 60, 84, 320, 332, 432
Jordan, Michael 514, 515
Jrgensen, M. 425
Joss, Robert 367
Jost, J.T. 196
Journal of Corporate Citizenship 26
Juan Bosco Obrero 213
justice see distributive justice; global
justice; responsible leadership, and
social justice; structural injustice
Kahler, Miles 303
Kakabadse, Nada K. 553
Kalegaonkar, A. 285
Kalisvaart, S. 178
Kant, Immanuel 139, 213, 439, 543
Kanter, R.M. 77, 326
Kaplan, Rami 36
Kapoor, I. 418
Karliner, J. 471
Karmel, R.S. 84
Kasky, Marc 517
Kastein, E.B. 88
Kaufmann, D. 185, 189
Kaul, I. 3, 578
Keady, Jim 516
Kearney, A.T. 297
Keating, Charles 81
Keay, John 233
Keck, Margaret E. 231, 245
Keim, G. 455, 580
Kell, Georg 570
Kellow, A. 274
Kelsen, H. 484
Kenis, P. 4
Kennedy, P. 4
Kenneth Galbraith, John 541
Keohane, Robert O. 232, 23840, 242,
245, 250, 265, 269, 568, 570

Kerr, Jeffrey L. 40
Kerwer, Dieter 300
Kets de Vries, Manfred F.R. 435
Keyes, C.L.M. 383
Khan, F.R. 585
Khan, M.H. 464
Khattak, Saba Gul 143
Kim, B. 455
King, Andrew 380, 395
Kingsbury, B. 5
Kinley, D. 45, 348, 351, 366, 578
Kinzer, S. 537
KLD Research and Analytics 68
Klein, N. 162, 534, 537
Klitgaard, R.E. 189
Kluge, Norbert 296
Knight, Phil 51418, 521
Knill, Christoph 230
Kobayashi, Sayaka 4056
Kobrin, Stephen J. 1, 3, 250, 2568,
265, 269
Koenig-Archibugi, M. 45, 269, 582
Kogut, B. 282
Kolk, Ans 3012
Kooiman, Jan 225, 2278, 230, 242,
245
Korten, D.C. 2, 37, 209, 4667
Kostova, Tatiana 308
Kotschwar, B. 279
Kraakman, R.R. 478
Kramer, M. 326
Krasner, Stephen 263, 566
Krauss, M. 87
Kruger, M. 5
Krugman, Paul 298
Kuhn, Thomas 392
Kwok, C. 219
Kwong, Peter 142
Kyj, Myron J. 30
Kymlicka, Will 33, 440
labor, commodification and
objectification of 173
Laclau, E. 407, 413, 41516, 4245
Lad, L.J. 60, 282
Lado, A. 381
LaFraniere, Sharon 390, 396
Lakoff, G. 171
Lamont, James 254
Lamy, Pascal 262, 345, 352, 3656

604

Index

language, and corruption 1967

Lash, S. 539
Laszlo, Chris 395
Laufer, W.S. 585
Law of Peoples, The (Rawls) 138, 445
Lazonick, W. 542
Le Livre du Ciel et du Monde (Oresme)
502
Leading Corporate Citizens (Waddock)
59, 63
Leamon, A. 199
Learmount, S. 469
Leary, Virginia 355
Lee Gifford, Kathie 515
legal studies 45
legitimacy
definitions 317
see also CSR (corporate social
responsibility), ethical
legitimacy; global governance,
institutional demands for
legitimacy
Lehmann-Grube, U. 325
Lehmbruch, Gerhard 227
Lehmkuhl, Dirk 230
Lehmkuhl, Ursula 233
Leibfried, Stephan 294, 308
Leipziger, Deborah 349
Lessard, D.R. 378
Letnes, Bjrn 346
Levi Strauss 38
Levitt, T. 31819, 332
Levittown, PA 110
Levy, D.L. 5, 36, 456, 460, 585
Lewis, M. 81
Lewis, M.K. 4
Lewis, S. 530
Liedtka, J.M. 58, 116
lifeworldsystem duality 415
Lilienthal, David 253
limited corporate citizenship see
corporate citizenship (CC), use of
terminology by business,
equivalent view
Lindblom, C.E. 85, 294, 558
Lindenberg, M. 277, 2839
Lindgreen, A. 464
Lindow, Megan 387
Linklater, Andrew 41
Linux 111

Lipschutz, Ronnie D. 161

Livesey, S.M. 168, 409, 585
Locke, John 140
Locke, R. 514, 519
Logan, D. 30, 51
Logsdon, J.M. 3, 289, 31, 35, 64,
99100, 1867, 211, 218, 414, 487,
530, 556, 584
London, T. 281, 284
Lopez, S.J. 3834, 584
Lord, Michael D. 31
Lorsch, J.W. 81
Lovins, A.B. 395
Lowe, Ross E. 308
Luckmann, T. 190
Luhmann, Niklas 567
Luibicic, Robert J. 161
Luo, Y. 283
Luthans, F. 384
Luther, Martin 121
Lutz-Bachmann, Matthias 440
Maak, Thomas 4312, 4347, 444
Macalister, T. 202
MacDonald, K. 5823
MacDonald, T. 5823
MacIntyre, A. 116, 195
MacIver, E. 81
Mackey, A. 5, 3956
Maguire, S. 191, 193
Mahmood, I.P. 455
Mahon, J.F. 57
Maignan, I. 3, 30
Maingot, A.P. 465
Maitland, E. 465
Making Globalization Good (Dunning
2003) 381
Malkin, Jesse 559
Malott, R.H. 541
management accountability 84
management studies 5
Manby, B. 537
Mandel, E. 459
Mandeville, Bernard de 553
Mansbach, A. 413
Manville, Brook 40
Mara-Drita, I. 19091
Marceau, Gabrielle 367
March, James G. 245
Marens, R. 54041, 543, 545, 547

Index 605
Margolis, J.D. 2, 396, 4689, 580
market politicization 293, 3058
Marquis, C. 382, 395
Marsden, C. 30, 52, 623
Marsh, D. 87
Marshall, Alfred 258
Marshall, T.H. 3, 34, 296, 308
Martens, Kerstin 232
Marvel, H. 326
Marwell, G. 396
Marx, Karl 554
Mathews, Jessica T. 23031
Mattel 109
Matten, D. 25, 3031, 37, 39, 46,
512, 645, 78, 81, 105, 1689,
1867, 193, 197, 20911, 216, 234,
273, 302, 3325, 395, 411, 414,
487, 528, 530, 5567, 565, 578,
581
Mau, B. 374, 395
Mauro, P. 185, 1889
May, Larry 155, 158, 163
Mayer, Peter 245
Mayntz, Renate 227, 243
Mazlish, B. 3, 586
Mbembe, A. 536
McAfee, K. 460
McDonalds Corporation 26, 111, 324,
57980
McDonough, W. 177
McGrew, Anthony 250
McIntosh, M. 3, 26, 30, 51, 623, 209,
211, 491
McLean, B. 392
McVea, J. 3, 84
McWilliams, A. 5, 31518, 3216,
3323, 469
Means, G. 536
Meckling, W. 319, 383
Medetsky, A. 289
MEIs (multilateral economic
institutions) 278
Merck & Co. 26, 179
Merleau-Ponty, Maurice 171
Meyer, J. 457, 460
micro-finance 689
Microsoft 26, 179, 529
Miethe, T.D. 426
Miles, S. 469
Milgrom, P. 323, 481

Milken, Mike 81
Mill, J.S. 554
Millennium Challenge Account 363
Miller, David 138
Miller, John 144
Miller, Roger LeRoy 308
Miller, W.H. 26
Milstein, M.B. 274
Mintzberg, Henry 436
Mir, A. 547
Mir, R. 547
Mirvis, P. 65, 284
Misangyi, V. 186, 188, 190, 194,
1978
Mische, A. 191, 196, 202
Mitchell, R.K. 61, 84, 432, 469
Mokhiber, R. 2
Moldoveanu, M.C. 5
Molz, Rick 375
Monbiot, G. 466
Monsato 5334
Montesquieu, Charles 213
Moon, C. 381
Moon, J. 3, 31, 35, 46, 645, 99100,
1867, 211, 302, 414, 487, 528
Moorthy, R.S. 432
moral legitimacy 317
moralsethics duality 415
Moran, T.H. 88
Moravcsik, Andrew 304
Moreau, R. 198
Mrth, U. 5
Mosakowski, E. 381
Mosdorf, Siegmar 307
Moskowitz, M. 77
Moss, Scott J. 563
Motorola Inc 169, 324
Mouffe, C. 407, 416, 418
Moulettes, A. 544
Mufson, S. 209
multilateral economic institutions
(MEIs) 278
Munck, R. 534
Mntefering, Franz 260
Mure, L.T. La 277, 284
Murphy, D.F. 51
Murphy, Liam 163
Muthu, S. 532
Myers, D. 383
MySpace 111

606

Index

Nader, Ralph 57
Nanus, Bert 434
Nanz, P. 583
Narayan, Deepa 347
Nation and its Fragments, The
(Chatterjee) 533
nation-state, definitions 529
National Resource Defense Council
276
Nationalist Thought and the Colonial
World (Chatterjee) 532
natural persons 486
Nature Conservancy, The 276
Nazi memorabilia trading 2578, 298
Neidenthal, P. 171
Nron, P.-Y. 34, 26, 31, 35, 46, 187,
197, 487
Nestl S.A. 278
Neubert, R.L. 29
neutrality result 324
Newell, P. 456, 460, 467
Newton, L.H. 278
Newton, T. 469
NGO Watch 290
NGOs (non-governmental
organizations)
and business 2816
definitions and classifications 2747
future involvement in corporate
citizenship 28890
illustrations of corporateNGO
interactions 2868
influence on global governance
27781
overview 2734
Nguyen Thi Lap 515
Nguyen, Thuyen 515
Nichols, P.M. 213
Nicomachean Ethics (Aristotle) 195
Nigh, D. 57
Nighthawks 258
Nike
company reporting 324
controversies 51417
corporate citizenship statement 302
Corporate Responsibility Report
51822
embracing language of corporate
citizenship 210
historical overview 514

integrity 522
lawsuit 51718
openness 507, 522
outsourced manufacturing 109
ranking on 100 Best Corporate
Citizens List 562
as rhizomatic 518
squandering opportunity to exhibit
internal-democratic citizenship
behavior 532
as surrogate government 38
sweatshops 141, 537
transparency study 51424
Nilakant, V. 382
Nixon, R. 209
Noddings, Nel 444
Nokia 302
Nolan, Justine 345, 350
Nlke, Andreas 234
nomadic thinking 512
non-governmental organizations see
NGOs (non-governmental
organizations)
nonprofit sector see civil society
Noonan, J. 419
Nordstrom 143
Norman, W. 34, 26, 31, 33, 35, 46,
187, 197, 487
Norms see Human Rights Norms for
Corporations
North, Douglass C. 308
North, Walter R. 564
Norval, A.J. 411, 418
Novak, M. 85
Novartis 5012
Nowak, P. 283
Nozick, R. 461
Nussbaum, Martha C. 430, 433, 438,
440, 446, 449
Nye, Joseph S., Jr 250, 265, 269
Oakes, L.S. 192
Oaxaca State Coffee Producers
Network (CEPCO) 287
Ober, Josiah 40
OBrien, R. 278
Ocasio, W. 190
OECD (Organization for Economic
Cooperation and Development)
186, 188, 345

Index 607
OECD Guidelines for Multinational
Corporations 67, 349, 4912
Oetzel, J. 215
Offe, Claus 300
Offenheiser, R. 288
Ohl, Cornelia 300
Oliver, C. 283
Oliviero, Melanie Beth 163
Olsen, Johan P. 245
Olsson, C. 51415
ONeill, Onora 14041, 141, 447
Ong, A. 534, 544, 547
openness 5068
see also transparency, openness and
integrity
operational NGOs 276
Oresme, N. 502, 524
Organization for Economic
Cooperation and Development
(OECD) 186, 188, 345
Orientalism, construct of 538
Orlie, Melissa 163
Orlitzky, M. 327, 468
ORourke, D. 161, 516
Orts, E.W. 84, 87, 89
Ott, R. 537
outsourced manufacturing see value
chain members
Ovett, Davinia 368
Oxfam 2878
Paine, L.S. 199, 3956, 583
Palacio, Ana 366
Palacios, Juan Jos 32, 35
Palazzo, G. 23, 5, 45, 635, 7980,
169, 173, 187, 209, 234, 302, 307,
317, 336, 375, 395, 414, 41617,
41922, 437, 480, 487, 528, 553,
555, 5612, 564, 5778, 5813, 586
Palmisano, Samuel 259
Panasonic 26
Pandey, G. 533
Pandey, P. 547
Park, H. 465
Parker, B. 2824
Parker, C. 3, 5, 583, 586
Parker, Mark 523
Parkinson, J.E. 39
Parry, Geraint 33
Parry, K.W. 583

Parsons, R. 410
Pastin, Mark 128, 133
Pateman, C. 424
paternalistic corporations
altered expectations 767
as good 746
Paterson, M. 456, 460, 467
Pattberg, Philipp 244
Payne, S.L. 61
peace
through commerce 21116
and corporate citizenship 21619
future through commerce and
corporate citizenship 21920
rise through commerce and
corporate citizenship 20910
Pearce, J.A., II 282, 286
Pearce, R.D. 395
Peason, Ruth 161
Peck, C. 212
Pendleton, C. 534
Peng, M.W. 378, 380
Penrose, E. 321, 395
People, Planet and Profits report 51
pernicious CSR 326
Perrewe, P.L. 583
Perrini, F. 395
Perrow, C. 4624
Peters, F. 581
Peterson, C. 3834
Pfeffer, Jeffrey 283, 391, 580
Pfizer 26
Phelps, L.D. 86
philanthropic stage (business-NGO
relationships) 283
philanthropy 289, 1056
see also philanthropic stage
(business-NGO relationships)
Philippine Business for Social Progress
285
Philips 26
Phillips, L. 425
Phillips, R.A. 85, 101, 103, 1067
Philosophy and the Principles of
Auditing (Flint) 5056
Picketty, T. 543
Piga, C. 324
Pimlott, Daniel 258
planned obsolescence 178
Pless, Nicola M. 4312, 4346, 438

608

Index

PMFs (privatized military firms) 536

Pogge, Thomas 141, 162, 353, 359,
440, 4456
Polanyi, Karl 251, 308
political corporate social responsibility
theory 3
political cosmopolitanism 440
political model of the firm 39
political philosophy 4
political rights 3
political science 45
Political Theory and International
Relations (Beitz) 140
politicalcultural perspective of
markets 45660
politics
and corruption 4634
see also future research directions,
toward a new concept of
corporate politics
Pollin, Robert 144, 163
Pollner, M. 409
Pontusson, Jonas 298
Porras, J.I. 58
Porter, M.E. 110, 326
positive deviance
examples 3868
overview 3845
theory 3856
positive scholarship 3834, 3889
Post, J.E. 567, 5960, 65, 432
post-Westphalian transition
economic governance 2513
implications for the firm 2669
multinational firms as political
actors 2535
overview 24951
potential stakeholders 104
Powell, W.W. 109, 382
power
and globalization 4668
of institutional actors 46062
Power and Morality in a Business
Society (Selekman and Selekman)
542
pragmatic legitimacy 317
Prahalad, C.K. 68, 360, 395, 433, 547
Prasad, A. 538
Prashad, V. 527
Prescott, J.E. 455

Preston, L.E. 39, 567, 5960, 65, 84,

320, 332, 432
Princen, Thomas 231
Principles for Responsible Investment
51
Principles of Political Economy (Mill)
554
private political authority 255
private rights 3
privatized military firms (PMFs) 536
process (citizenship characteristic) 34
Procter & Gamble 179
Proctor-Thompson, S.B. 583
profit-maximizing CSR 321
profit seeking 12021
profits, as motivation 11820
programmatic NGOs see operational
NGOs
property rights 459
and corporations as legal subjects
478
Prugl, Elisabeth 144
public shaming 23940
Putin, Vladimir 289
radical corporate citizenship 4213
radical democracy, vs deliberative
democracy 4078
Ragins, B.R. 384
Rainforest Foundation (RF) 42021
Ramus, C.A. 583
Ranger-Moore, J. 460
Rao, H. 191, 382
rating agencies 254
Ratner, Stephen 348, 366
Raufflet, E. 396
Rawls, John 138, 145, 440, 445
reasoning, parameters of 15762
reciprocity 106
Red Crescent 276
Red Cross 276
Redefining Governments Role in the
Market System (Committee for
Economic Development) 541
Redefining the Corporation (Post et al.)
60
Reebok 448
Reed, A. 189, 194
Regan, M.C. 466
Rehbein, K. 2

Index 609
Reich, Robert B. 77, 78, 307, 466
Reilly, Bernard J. 30
Reiman, Jeffrey 162
Reinalda, Bob 23031
Reinhardt, F. 325
Reinicke, W.H. 2, 245
Renzo 143
Reputation Management Institute 62
reputational capital 29
resource-based perspectives 38081
responsibility
dark side of 585
future research directions 57980
liability model 14952
parameters of reasoning 15762
social connection model 1378,
1527
responsibility assurance infrastructure,
scholarship regarding 669
responsible business practice 55
responsible leadership
challenges for 4314
definitions 4345
future research directions 5824
overview 44850
quest for 43031
roles model 4368
and social justice 4478
responsive element of CC 530
Reynolds, Glenn Harlan 257
RF (Rainforest Foundation) 42021
rhizomatic reading of entrepreneurship
and branding 51214
rhizomes 512
Rhodes, Cecil 212
Riboud, Franck 449
Rice, Condoleezza 213
Richardson, Henry S. 152, 158
Richtel, Matt 258
Rifkin, J. 466
Rindova, V.P. 193
Risse, T. 4, 233, 245, 304, 583
Rittberger, Volker 245
Roberts, D. 506, 51920
Roberts, J. 323, 481, 506
Roberts, N. 282
Roberts, Sarah 26
Robillard Resources 143
Robinson, S.L. 385
Rock, Michael T. 160

Roddick, Dame Anita 438

Rodrigues, Lcia 553
Rodriguez, P. 50
Rodrik, D. 88
Roht-Arriaza, Naomi 2634
Romeo and Juliet (Shakespeare) 502
Ronald McDonald House 111
Rondinelli, D.A. 889, 281, 284, 570,
581
Ronit, Karsten 228
Roome, N. 167
Rorty, R. 528
Rose-Ackerman, S. 189, 465
Rosen, Ellen Israel 1623
Rosen, S. 2
Rosenau, James N. 251, 2612, 266
Rosenthal, S. 318
Ross, A. 110, 143
Rossi-Hansberg, Esteban 259
Rost, Joseph C. 4345
Roth, K. 468
Rothschild, J. 426
Rousseau, Jean-Jacques 5034, 556
Rowan, B. 457
Rowley, T. 5
Royal Dutch Shell see Shell
Ruggie, J.G. 45, 45, 234, 25051,
2546, 34851, 3612
Rugman, A.M. 88, 379, 395, 456, 476
Rugmark 67
Rufin, C. 455
Russo, M. 321
Ryan, Annmarie 36
SA 8000 labor standards 67
Saari, D. 530
Sabel, Charles 265
Sachdeva, P.S. 456
Sachs, J.D. 88, 377
Sadisah 515
Saez, E. 543
Said, E. 538
Saiia, D.H. 187
Saini, Angela 357
Salazar, J. de J. 5
Sama, L. 74, 81
Sampson, E.E. 171
Samuelson, R. 76
Sandler, N. 392
Santoro, Michael A. 255

610

Index

Sapolsky, Robert 208

SarbanesOxley Act 413
Sarkar, S. 533
Saro-Wiwa, Ken 50, 537
Sartre, Jean Paul 147
Sassen, Saskia 571
Savage, G.T. 86
Savitz, A.W. 166, 181, 395
Scahill, J. 535
Schaap, A. 418
Schaffer, B. 455
Scharpf, Fritz W. 226
Scheffler, Samuel 139
Scherer, A.G. 23, 5, 45, 512, 635,
7981, 88, 169, 173, 187, 203,
20911, 234, 251, 255, 269, 302,
307, 317, 336, 375, 395, 414,
41617, 41922, 435, 437, 480,
487, 528, 553, 555, 5612, 564,
5778, 58083, 586
Schermerhorn, J.R., Jr 283
Schimmelfennig, Frank 245
Schipani, C.A. 2, 21217, 219, 395
Schipper, F. 502, 506
Schmidt, P. 532
Schmitter, Phillippe C. 227, 303
Schneider, V. 4, 228
Schneiderman, David 33
Scholte, Jan A. 2312, 250, 298
Schoonhoven, C.B. 282
Schrader, Ulf 35
Schriftgiesser, K. 541
Schudson, Michael 437
Schuler, D.A. 2, 455
Schumpeter, J.A. 85, 510
Schwab, Klaus 375
Schwartz, M.S. 1
Scott, W.R. 190, 454, 457, 460
Scully, M. 412
Seeleib-Kaiser, Martin 299
Seitanidi, Maria May 36
Seitz, Bernhard 29
selective public procurement (SPP) 356
Selekman, Benjamin 540
Seligman, M.E.P. 3834
Sell, Susan K. 2545
Sellers, Martin P. 37
Selsky, J.W. 2824
Sen, Amartya 338, 365, 433, 4456,
450

Senge, P. 58
Seo, M.G. 191, 196, 202
Sercovich, F. 87
service-oriented NGOs see operational
NGOs
Sethi, S.P. 74, 76, 79, 81, 834, 879,
92, 94, 278
Sewell, W.H., Jr 1912
Seyfang, Gill 161
Shaffer, Gregory 352, 3678
Shakespeare, Romeo and Juliet 502
Shakti 449
Shane, S. 209
Shanley, M. 62, 322, 332
shareholder activism 281
Sharma, S. 166, 181, 469
Sharplin, A. 86
Shell
Brent Spar 5051
culpability in death of Ken SaroWiwa 537
Nigeria 4478
openness 507
sustainability issues 202
Shell, G.R. 2
Shelton, D. 5
Shenkar, O. 378
Shiva, V. 466
Shleifer, A. 84, 1889, 465
Shrivastava, P. 167, 177, 181
Shylock (Merchant of Venice) 121
Siedel, G.J. 2
Siegel, D. 5, 31518, 3216, 3323,
469, 583
Siemens 74
Sikkink, Kathryn 231, 245
Silent Spring (Carson) 276
Sillanp, Maria 432
Silverman, D. 409
Simmons, Adele 163
Sinclair, Timothy 570
Singer, P.W. 139, 536
SIRI Group (Sustainable Investment
Research International) 68
Slaughter, Anne-Marie 261
Smid, M. 2, 580
Smilov, D. 189
Smith, Adam 445, 5634
and profit motive 11820
Smith, C. 484

Index 611
Smith, Gare 362
Snidal, Duncan 263
Snyder, C.R. 3834, 584
Social Accountability International
SA8000 standard 280
social capital, building 29
social enterprises 35
social investing 29
Social Investment Forum 68
social partnerships 2812
Social Responsibilities of the
Businessman, The (Bowen) 540
social rights 3
socialpolitical governance 225
socially responsible investment (SRI)
movement 68
sociology 4
soft law 2634
Solomon, R.C. 508
Sonenshein, S. 3856
Sony 74
Soros, George 192
Soskice, David 251
South Africa
as example of positive deviance
3878
see also British South Africa
Company
space, geographic, as
politicaleconomic construct
25660
Spar, D.L. 277, 284
Sparks, J.R. 196
Spencer, J.W. 455
Spicer, A. 189
Spiner, J. 528
Spirit of Democratic Capitalism, The
(Novak) 85
Spiro, Peter J. 264
SPP (selective public procurement)
356
Spreitzer, G. 3856
Spruyt, Hendrik 256
Sri Lanka First 21314, 218
Srinivasan, T.N. 356
Stafford, Alan D. 308
stakeholder-company imbalances
9095
stakeholder democracy 39, 484, 4925
stakeholder engagement see CR3

(corporate [stakeholder]
relationships)
stakeholder fairness
corporate obligations 10610
definitions 107
stakeholder management 61
stakeholder relationships 61
stakeholder responsibility 61
stakeholder theory 54, 99100, 103
stakeholders
as citizens 3840
and citizenship 4828
and competitive markets 847
definitions 86, 102, 1267
and global citizenship 1035
stakeholding
economic arguments for 48082
philosophical arguments for 47880
Standard & Poors 254
standards 67
see also ISO; ISO 14000
Environmental Management
Standard; SA 8000 labor
standards; Social
Accountability International
SA8000 standard
Starbucks 282, 2868
Starik, M. 166, 181
Starobinsky, J. 5035
status (citizenship characteristic) 334
status citizenship 484
Steffek, J. 583
Stein, J. 389
Steinmann, H. 81, 88, 187, 525
Stephens, Beth 347
Stephenson, Nick 43
Sternberg, E. 319
Sternin, Jerry 386
Sternin, Monique 386
Stewart, J.B. 81
Stiglitz, J.E. 88, 147, 367
Stinchcombe, A. 191
Stokes, G. 413, 426
Strand, R. 578
Strange, S. 88, 230
strategic CC 33940
strategic CSR 3289
Strategic Management: A Stakeholder
Approach (Freeman) 59, 84
strategic philanthropy 28

612

Index

strategic posture 110

Streeck, Wolfgang 296, 303
Stroup, M.A. 29
structural injustice 1459
structuration 146
Strulik, Torsten 570
Stumpf, S.A. 431, 583
Suchman, M.C. 203, 317, 320, 480
Sullivan, Rory 36
Sundar, Pushpa 30
Sundaram, A.K. 5, 586
Super Size Me (2004 film) 32
supranationalization, and
transnationalization 3035
Sustainable Investment Research
International (SIRI Group) 68
sustainable peace 212
Svendsen, A. 61
Swanson, D.L. 54, 589
Swanson, J. 425
sweatshops 1415
Sweezy, P. 542
system-lifeworld duality 415
Tadaki, J. 45, 578
Tadaki, Junko 348, 366
Tadesse, S. 219
Take, Ingo 231
Tallman, Stephen B. 268, 381
Tanzi, V. 1889
Tappan, S. 527
Target 141
Tata Group 74, 198
Tavis, L. 333
Taylor, Allyn 367
Taylor, C. 195, 461, 465
Taylor, K.M. 4
Teece, D.J. 395
Teegen, H. 5, 2745, 28081, 284, 290
Tefen Model 3923
Teng, B.-S. 282
Terlaak, A. 3956
Texaco 213
Theory of Justice, A (Rawls) 145
Theory of Moral Sentiments (Smith)
445
third sector see civil society
Thomas, A. 213
Thompson, G.F. 32, 35, 484, 487,
49091, 493, 586

Thornton, P.H. 190

TI (Transparency International) 186,
188
Timmons, Heather 258
Tinker, Irene 144
Tippett, E.C. 413
Tisn, M. 189
Tolbert, P.S. 191, 202
Tomas, Amparo 346, 363
Tomorrows Company 68
Total 28
Toulmin, Stephen 130
Toyota 28, 179, 302, 4056
track two diplomacy 215
trading up 299
transaction cost analysis 37980
transactional stage (business-NGO
relationships) 283
Transfair 67
transforming leadership 438
transnationalization, and
supranationalization 3035
transparency
commandment of 5056
historical and philosophical
background 5025
of NGOs 290
openness and integrity 51012
see also integrity; openness
as part of CSR 5012
voluntary codes for 945
see also Nike, transparency study
Transparency International (TI) 186,
188
Treaty of Westphalia (1648)
256
Trevio, L.K. 80, 84, 186, 18890, 202,
584
triple-bottom-line report 51
TRIPS (Trade Related Aspects of
Intellectual Property Rights)
2545, 357
true believers 488
Tsingou, Eleni 570
Tulder, Rob van 3012
Tuna/Dolphin case 279, 355
Turnbull, S. 494
Turner, Bryan S. 334, 41, 45
Twenge, J. 195
Tyco 82

Index 613
UBS 26
UDHR (Universal Declaration of
Human Rights) 348
Ulrich, P. 187, 437
UN (United Nations) 186, 192, 345
UN Global Compact 3767
10th principle 200
codes of conduct 188
corruption principle 465
expectations 234
future research directions 47071
as GCC advocacy 491
human rights coverage 349
increasing commitment to 2
new ways of thinking 60
NGO influence 279
number of companies signed up 51,
67
UN Global Compact Learning Forum
61
UN Human Rights Committee 3489
UN Millennium Development Goals
376
UNCTAD (United Nations
Conference on Trade and
Development) 461
Unger, Peter 139
Unilever 449, 580
Union Carbide, Bhopal gas leak 537
United Nations see UN
United Students Against Sweatshops
(USAS) 517
Unocal Corp 350
Urry, J. 539
US Steel 215
USA, internet gambling protectionism
258
USAS (United Students Against
Sweatshops) 517
Useem, Michael 31
Utting, Peter 360
Uzzi, B. 457
Vagts, D.F. 5
value chain members 10910
Values, Nature and Culture in the
American Corporation (Frederick)
59
values radar 4312
van Hees, Floris 358, 366

van Oosterhout, J. 32, 44, 187

van Tuijl, P. 274
Vanderbilt, Cornelius 213
Varley, P. 88
Verbeek, Bertjan 230
Verbeke, A. 379, 395, 456
Vernon, R. 395, 459
Vertovec, Steven 440
Vidaver-Cohen, Deborah 25
Vietnam, as example of positive
deviance 3867
Villancourt Rosenau, Pauline 305
Vinten, G. 406
virtual advocacy groups 102
Vise, D.A. 81
Vishny, R.W. 84, 1889, 465
Vitale, D. 424
Vitaliano, D. 325
Vogel, D.J. 50, 81, 263, 267, 299, 456,
459
Volkswagen 580
voluntary codes 945
von Oosterhout, J. 3
Vredenburg, H. 469
VW 132
Wacquant, L.J.D. 171, 174
Waddell, S. 28, 59, 61, 656, 282, 422
Waddock, S.A. 29, 5052, 57, 6061,
634, 667, 69, 100, 103, 20910,
282, 332
Wade, Mark 448
Wagner, C.G. 26
Wal-Mart
claims of facilitating citizenship
behavior 529
exploitation 113
response toward the environment
179
size 3745
squandering opportunity to exhibit
internal-democratic citizenship
behavior 532
supplier numbers 580
sweatshops 141
Waldman, D.A. 583
Wall Street (1987 film) 118
Walsh, J.P. 2, 396, 4689, 564, 578, 580
Walton, C.C. 80
Waltz, Kenneth 225

614

Index

Walzer, M. 437, 446, 448, 479, 529

Wapner, Paul 231
Ward, H. 484
Warhurst, Alyson 29
Warner, A. 88
Warner, Michael 36
Warren, B. 459
Warren, D. 385
Warren, M.E. 412
Wartick, S.L. 578
Watnick, V.J. 413
Watts, S. 329
Weaver, G.R. 80, 84, 186, 18890,
1945, 198, 2012, 583
Weber, K. 166, 181, 395
Weber, Max 130, 242, 245, 567
Wehrfritz, G. 198
Weidenbaum, M. 878
Weiser, R. 215
Weissbrodt, D. 5
Weissman, R. 2
Wells, L.T. 395, 456
Wernerfelt, B. 321
Wertheimer, Stef 3923, 393
Werther, William B. 297
Westney, E.D. 3812, 395
Westphalian international order
24950
Wettstein, F. 579
What Does It Mean To Be Human?
(Chittister) 385
Wheeler, David 432
Whetten, D.A. 1, 283
whistleblowing 4056, 413
White, L.T., III 289
Whittington, R. 407
Wicks, A.C. 58, 60
Wikipedia 111
Wiktorowicz, Q. 289
Wildavsky, Aaron 559
Williams, K. 495
Williams, O.F. 23
Williamson, O.E. 395
Willke, Helmut 557, 561, 565, 570
Wilson, O.F. 471
Windhoff-Heritier, Adrienne 294
window in 7980, 83
window out 79
Windsor, D. 28, 100, 21011, 332,
540

Witte, J.M. 305

Wittgenstein, L. 171
Wogaman, P. 80
Wokutch, R.E. 543
Wolf, K.D. 45, 226, 2289, 231, 234,
237, 240, 242, 245, 305, 480, 582
Wood, D.J. 3, 28, 31, 35, 52, 58, 64, 81,
99100, 1867, 211, 218, 414, 487,
530, 556
Wood, R.A. 81
Wootton, B. 479
Worker Rights Consortium (WRC)
517
World Alliance for Citizen
Participation (CIVICUS)
3312
World Bank 186, 188, 192, 345, 460
World Council for Sustainable
Development 51
World Economic Forum 68, 279
2002, New York 256
World Social Forum 68
World Trade Organization see WTO
World Wide Fund for Nature (WWF)
276
WRC (Worker Rights Consortium)
517
Wright, T.A. 384
WTO (World Trade Organization)
and discursive power 460
enabling clause 3545
NGO interest in 279
promotion of human rights 345
social clause 3556
WWF (World Wide Fund for Nature)
276
Xerox 26
Yahoo, Nazi memorabilia auctions
257
Yaziji, M. 284
Yip, George S. 268
Yoffe, D.B. 455
Young, Andrew 516, 521
Young, I.M. 4, 889, 1623, 309, 578
Young, S. 395
Youssef, C. 384
YouTube 111
Yunus, Muhammad 68, 213, 449

Index 615
Yuthas, K. 584
Zadek, S. 3323, 501, 507, 512, 514,
517, 524, 582
Zaheer, S. 308, 381
Zajonc, Tristan 368
Zammit, Ann 35960
Zander, U. 282

Zeisel, Katherine 356

Zelner, B.A. 192, 197, 455
Zilber, T.B. 191
Zimmerman, D.H. 409
Zucker, L.G. 3812
Zrn, Michael 4, 226, 235, 294, 2978,
303, 305, 3089