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CORPORATE SOCIAL RESPONSIBILITY : An institutionalist approach. Robert BOYER PSE (Paris School of Economics), EHESS, CEPREMAP International Conference on « Business Governance and Social Responsibility, EAEPE-CNAM May 22nd 2008 - Paris. INTRODUCTION.

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corporate social responsibility an institutionalist approach

CORPORATE SOCIAL RESPONSIBILITY:An institutionalist approach

Robert BOYER

PSE (Paris School of Economics), EHESS, CEPREMAP

International Conference on « Business Governance and Social Responsibility, EAEPE-CNAM

May 22nd 2008 - Paris

introduction
INTRODUCTION
  • Since the 70s, managerial paradigms and macroeconomic policies have been in permanent flux.
slide3
During the last decades, analysts have been proposing various alternatives to Fordism, both as a firm organization and a macroeconomic growth regime:
    • Toyotism as overcoming the weakness of Fordist organization and new growth regime
    • A service led economy and a consumer driven firm
    • Information and communication technology led growth and start-up
    • Knowledge based economy and firms as a learning entity
    • Finance led regime and firms governed by shareholder value
    • Competitiveness led growth and new configuration for multinationals.
slide4
But these forecasts have proved to be largely erroneous, probably because they extrapolate only onecanonical principle…

…And they were mimicking organizations and macroeconomic regime as simple as the Fordist configuration…

…And they were supposed to be uniform all over the world.

slide5
Would Corporate Social Responsibility (CSR) be the right answer both at the level of firms governance and growth regimes in an integrated world?

…Since it is a priori more complex because it proposes to articulate three principles…

Profit – People - Planet

the organization of the pr e sentation
THE ORGANIZATION OF THE PRESENTATION

1 – What is Corporate Social Responsibility (CSR): A strict or an extended definition ?

2 – The various institutionalist theories facing CSR

3 – A regulationist approach of CSR

slide7
4 – Does CRS define a new compromise of government and mode of governance of firms?

5 – Is CSR the embryo of an re-articulation of the national and international regulation modes?

6 – Conclusion

i what is csr
I. WHAT IS CSR?
  • A strict definition…
    • « The RSE aims at promoting the integration by firms of social, environmental and economic concerns in their activities and their interactions with the various stakeholders on a voluntary basis. »
    • Its origin is in the requests of NGO back to the Seventies, and this movement has been strengthening and and diversifying since then.
slide9
… Or an extended concept?…
    • Another form of good governance…
    • Beyond the shareholder value…
    • Stimulated by the Socially Responsible Investment (SRI)…
    • Including ecologicallysustainable development…
    • Supplemented by the rise of the equitable trade…
    • And the emergence of an ethical finance.
figure 1 the csr as a logic permeating the various institutional forms
Figure 1 – The CSR as a logic permeating the various institutional forms

Rating Agencies

Civil Society

Shareholders

Consumers

R4

R3

R7

FIRM

R1

Wage earners

Competitors

Local Communities

R5

R2

Subcontracting

R’1

Wage earners

R6

State

Environment

slide11
Major features common to both approaches
    • A complex mix of criteria more than one single objective
    • Principles which go beyondthe borders of a single firm…
    • …because they cross the valuechain at the world level
    • Relatively fuzzy nature of the CSR indexes compared with the precision of financial evaluations
ii the institutionalist theories facing rse
II. THE INSTITUTIONALIST THEORIES FACING RSE
  • The New Institutionalist Economies (NIE)
    • Douglass North (1990, 2005) stresses the role of the beliefs, social norms, informal rules besides the law and public interventions.
    • Avner Greif (2005) investigates the nature of individual behaviors allowing the emergence of the basic institutions that sustain the co-operation, necessary to the blooming of the market
figure 2 the csr as the internalization of reputation effects

Rational institutionalism

Figure 2 – The CSR as the internalization of reputation effects

Competitive premium

1

Reputation towards the consumers

Ethical firm

Reputation towards the investors

Access to the financing

2

slide14
Consequently, they are the external actors who discipline the firm
  • The virtuous circle of the reputation effects may exist independently of any beneficial impact of the CSR on the financial performances.
  • If the firms are opportunist and not ethical, they can have interest to exploit this reputation effect and thento break with their good former behaviour.
  • It is not any example in history of emergence of institutional arrangements founded exclusively on reputation, without any control of a third party.
figure 3 csr as a countervailing mechanism against the commodification of labor money and nature

An institutionalism à la Polanyi

Figure 3 – CSR as a countervailing mechanism against the commodification of labor, money and nature

ECONOMY

Commodification of

SOC I ETY

  • Labor
  • Money
  • Nature
  • Basic social rights
  • Financial stability
  • Ecological Pact

CSR

slide16
In a sense the CSR aims at thwarting excesses of globalization and the shareholder value
  • The RSE relates to the human and social rights on the one hand, the safeguarding of the environment on the other hand…
  • …but not on the requirement of financial and monetary stability at the world level….
  • …While nowadays the management of financial crises has a major impact on the viability of any CSR.
iii r gulation approaches and the csr
III. RÉGULATION APPROACHES AND THE CSR :
  • An evidence of the erosion in the institutionalization of the wage labor nexus
figure 4 the shift in the hierarchy of the institutional forms from the 60s to the 90s
Figure 4 – The shift in the hierarchy of the institutional forms : from the 60s to the 90s

Forms of competition

Forms of competition

Wage Labor Nexus

Wage Labor Nexus

Monetary regime

Financial regime

Versus

State

State

slide19
If the wage labor nexus( WLN) is thus dominated…
  • It is important to act on the other institutional forms that shape the WLN…
  • For example, in order to compensate for the loss of influence on the labor market, use the boycott of the products whose production does not respect the social or environmental rights…
  • This strategy is promoted by Anglo-Saxon activists.
slide22
An analysis of the globalization: international insertion becomes the key factor.
    • Through the liberalization of the foreign trade
    • By the delocalization of production
    • By the financial globalization
slide23
…What explains the international character of the CSR
  • It relates primarily to the multinationals…
  • Whereas national regulations remain heterogeneous...
  • Thus CSR aims at an international homogenization , via privately generated standards.
slide24
CSR : an evidence for the erosion of State capacity ?
    • A double shift: decentralization of public action and new supranational governance
    • A tendency to the break-up of the State and autonomization of various of its functions
      • The monetary policy:independenceof Central Banks
      • Finance: agency for financial stability
      • Public services: independent administrative agencies
      • The budget: proposal of an independent rating agency
slide27
…This shift affects even developing countries
  • A striking example: Chinese SME of Shanxi apply for international certification…
  • The multinationals of the Third World claim to implement CSR
  • The standards of the CSR shape the governance of emergent countries
slide28
Financialization: an avenue for restoring some power to employees?
    • For Michel Aglietta (1998) the financiarisation is irreversible…
    • So that the employees must accept saving and pension funds in order to compensate for the wage concessions…
    • ..Still more to control the direction of the investment , by requiring that it contribute to the improvement of employment and the living standards

It would be a justification of the SRI

slide29
But this optimism is mitigated by other researches
  • Sabine Montagne (2006): Finance won against the need for security in the management of pension funds.
  • Robert Boyer (2000), Michel Aglietta and Antoine Rébérioux (2004) conclude to the instability of the current financial regime.
  • The mobility of the capital supports the attempt by OECD to consider that freedom of management for multinationals is a higher principle than the national laws (AMI).
  • The speed of the financial innovation outclasses the capacity of reaction of the employees
slide30
The macroeconomic factors which supported the emergence of the CSR
    • Internationalization erodes the capacity of negotiation of the employees…
    • A stiffer competition on product markets feeds back into employment and wages…
    • Therefore a possible relevance of boycott…
    • The financialisation may trigger the emergence of countervailing powers
    • The imbalances of the world economy threaten the supply of global public goods.
figure 7 csr trans nationalization and soft law
Figure 7 – CSR: trans nationalization and soft law

Loss of autonomy of Nations-States

Internationalization

Capacity of boycott by the consumers

Rise of NGOs

Erosion of the bargaining popwer of the employees

Erosion of the institutionalized compromises of the fordism

Proposal for new standards and codes of good governance

Financialisation

CSR

Socially responsible investment

Threats on global public goods

Protection of the environment

slide32
6. Preliminary conclusions: TR and CSR

C1 – It is important not to confuse an alternative of managerial principle with the logic of a mode of regulation.

C2 – The diversity and pervasiveness of CSR across institutional forms makes difficult the diagnosis of the related growth regime.

C3 – A quite problematic coherence

  • At the level of the firm
  • In terms of national and international regulations
iv is csr defining a new compromise of government for firms
IV. IS CSR DEFINING A NEW COMPROMISE OF GOVERNMENT FOR FIRMS?
  • The viability of a firm: the internal consistency of three logics
    • A response to competition on product markets
    • A form of organization and control over thewage labor nexus
    • Getting access financing
  • Typical configuration of the fordist firm
figure 8 the organization of the fordist firm
Figure 8 – The organization of the fordist firm

Financial regime

Form of competition

Product / Financing

Firms’

Gouvernment

Subcontracting

Production

Wage Labor Nexus

slide35
Multiplicity and increasing diversity of the domains governed by the principle of transparency
    • Standards of quality and safety of the products
    • Environmental standards
    • Code good governance concerning subcontractors
    • Standards of decent work
    • Standards for the ethical investment.
slide36
Figure 9 – Segmentation andexternalization of the principles of management under the requirement of transparency

Quality standards

Reputation

Effects

Rating Agencies, including social rating, Socially Responsible Investment

World pacts

Product

Finance

Environment

Codes of good governance

Respect of the humans rights

ISO Standards

Production

Subcontracting

Labor

Standards of decent work

Environmental Externalities

slide37
A coherence that is more problematic than ever
    • From a strict technical point of view, how to assess the compatibility of these diverse standards?
    • A contrario, the criteria are so numerous that each firm will select those which are most favorable its interests.
    • In political terms: profit, individuals and environment, have quite different impacts!
    • The dissolution of the concept of firm’s government , replaced by that of governance.
v is the csr an embryo of a new balance between national and international regulation modes
V. IS THE CSR AN EMBRYO OF A NEW BALANCE BETWEEN NATIONAL AND INTERNATIONAL REGULATION MODES?
  • From micro to macro: what are the processes of extension and generalization of the CSR?
figure 10 actors and processes that could generalize the csr
Figure 10 – Actors and processes that could generalize the CSR
  • NGOs and experts proposals
  • Standardization and implementation
  • Ex: Social Accountability Standard 8000
  • ISO 14001 - AFAQ 1000NR - GRI
  • Global compact
  • Local and marginal innovations
  • Standardization, routines, norms
  • Ethial Codes
  • Soft Law
  • Hard law
  • Voluntary adhesion of the firms
  • Diffusion by :
  • Mimetism
  • Favorable impact on the performance
  • Adoption by public authorities
  • Law on New Economic Regulation 2001 (France)
  • Possibly European directives on corporate law

Possible impact upon firms’ governance / Régulation modes

slide40
The CSR: a trial and error process in search for a multi-polar and internationalized mode of regulation
    • The wage labor nexus is not any more the central institutional form.
    • The transformations of the international regime, finance and competition shape the redesign of the wage labor nexus
    • The era of the CSR is an attempt at rebalancing of the institutional forms
slide41
Figure 11 –The Golden Age: The Fordist wage labor nexus logic shapes all the other institutional forms

Form of competition

Oligopolistic

Shapes

Wage Labor Nexus

Financial regime

Fix exchange rate

International insertion

slide42
Figure 12 –The 80s and 90s: the erosion of wage labor nexus under the pressure of other institutional forms changes

Form of competition

Flexibility strategy

Wage labor nexus

Financialization

Financial regime

Segmentation

International insertion

slide43
Figure 13 –The epoch of CSR: domination of internationalization and a new balance between institutional forms

Form of competition

Boycott

SRI

Wage labor nexus

Financial regime

CSR

Decent work

International insertion

slide44
An emerging configuration more than one stabilized regime
    • Obvious limits of a voluntary adhesion
    • Composite and sometime obscure character of standards proposed by third parties (i.e rating agencies)
    • A low capacity for implementing CSR to the alliance of top-managers and financiers
    • A premium given to the multinationals against Nation-States.
    • A problematic compatibility with democratic principles.
conclusion
CONCLUSION 

C1 : The diffusion of CSR is an invitation to analyze the relations between the management of the large firms and macroeconomic evolutions

Macro Crisis  erosion of the institutional forms sectoral and local innovations addition of their macroeconomic impacts

slide47
C2 : An institutional emergence triggered from the crisis of the Fordism:
  • Loss of employees bargaining power,
  • Internationalization of the production,
  • Financial globalization,
  • Segmentation and externalization of the functions of the State,
  • Political difficulties in redesigning institutionalized compromise.
slide48
C3 : The firm is the source of major externalities in the various fields:
  • Social,
  • Environmental,
  • Economic,
  • Financial.

C4 : In a sense the CSR aims at promoting the internalization by the firm of these externalities

slide49
C5 : CSR appears to be a new form of good governance of the firms, and an antidote to the domination of the shareholder value…

…But the voluntary nature and the variable geometry of the CSR make problematic its effectiveness.

slide50
C6 : A major uncertainty concerning the diffusion of the CSR as a form of government of the firms
  • Afashion that will fade…
  • A reassuring rhetoric hiding almost unchanged practices….
  • An evidence for the raising concerns for a form of business ethic in reaction to recent financial scandals and crisis…
  • Supported by world standards and/or European directives…
  • With a possible incorporation in the legal system in the very long run.
slide51
C7 : The CSR is only a weak determinant for emerging growth regimes
  • Pluralityof the possible compromises between various components of the CSR…
  • Strong dependence with respect to the relative bargaining power of multinationalsand governments….
  • A major gap between developed countries andthe rest of the world…
  • Uncertain viabilityof the related international regime.
many thanks for your attention robert boyer
Many thanks for your attentionRobert BOYER

Paris-Jourdan Sciences Economiques (PSE)

48, Boulevard Jourdan 75014 PARIS

+ 33 (0)1 43 13 62 56 -

  • boyer@pse.ens.fr

: WEB :http://www.jourdan.ens.fr/~boyer/