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CORPORATE SOCIAL RESPONSIBILITY: An institutionalist approach Robert BOYER PSE (Paris School of Economics), EHESS, CEPREMAP International Conference on.

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Presentation on theme: "CORPORATE SOCIAL RESPONSIBILITY: An institutionalist approach Robert BOYER PSE (Paris School of Economics), EHESS, CEPREMAP International Conference on."— Presentation transcript:

1 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 Paris

2 INTRODUCTION  Since the 70s, managerial paradigms and macroeconomic policies have been in permanent flux.

3  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 Toyotism as overcoming the weakness of Fordist organization and new growth regime A service led economy and a consumer driven firm A service led economy and a consumer driven firm Information and communication technology led growth and start-up Information and communication technology led growth and start-up Knowledge based economy and firms as a learning entity Knowledge based economy and firms as a learning entity Finance led regime and firms governed by shareholder value Finance led regime and firms governed by shareholder value Competitiveness led growth and new configuration for multinationals. Competitiveness led growth and new configuration for multinationals.

4  But these forecasts have proved to be largely erroneous, probably because they extrapolate only one canonical 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.

5  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

6 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

7 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

8 I. WHAT IS CSR? A strict definition…  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. » « 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. Its origin is in the requests of NGO back to the Seventies, and this movement has been strengthening and and diversifying since then.

9  … Or an extended concept?… Another form of good governance… Another form of good governance… Beyond the shareholder value… Beyond the shareholder value… Stimulated by the Socially Responsible Investment (SRI)… Stimulated by the Socially Responsible Investment (SRI)… Including ecologically sustainable development… Including ecologically sustainable development… Supplemented by the rise of the equitable trade… Supplemented by the rise of the equitable trade… And the emergence of an ethical finance. And the emergence of an ethical finance.

10 Figure 1 – The CSR as a logic permeating the various institutional forms Civil Society Shareholders Rating Agencies Consumers FIRM R1 Wage earners Environment Competitors Subcontracting R’1 Wage earners State Local Communities R5 R4 R7 R3 R2 R6

11  Major features common to both approaches A complex mix of criteria more than one single objective A complex mix of criteria more than one single objective Principles which go beyond the borders of a single firm… Principles which go beyond the borders of a single firm… …because they cross the value chain at the world level …because they cross the value chain at the world level Relatively fuzzy nature of the CSR indexes compared with the precision of financial evaluations Relatively fuzzy nature of the CSR indexes compared with the precision of financial evaluations

12 II. THE INSTITUTIONALIST THEORIES FACING RSE The New Institutionalist Economies (NIE)  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. 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 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

13 Figure 2 – The CSR as the internalization of reputation effects Competitive premium Ethical firm Access to the financing Reputation towards the consumers Reputation towards the investors 1 2  Rational institutionalism

14 Consequently, they are the external actors who discipline the firm 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. 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. 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. It is not any example in history of emergence of institutional arrangements founded exclusively on reputation, without any control of a third party.

15 Figure 3 – CSR as a countervailing mechanism against the commodification of labor, money and nature  An institutionalism à la Polanyi ECONOMY Commodification of 1.Labor 2.Money 3.Nature CSR SOCIETYSOCIETY 1. Basic social rights 2.Financial stability 3.Ecological Pact

16 In a sense the CSR aims at thwarting excesses of globalization and the shareholder value 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… 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…. …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. …While nowadays the management of financial crises has a major impact on the viability of any CSR.

17 III. RÉGULATION APPROACHES AND THE CSR : 1.An evidence of the erosion in the institutionalization of the wage labor nexus

18 Figure 4 – The shift in the hierarchy of the institutional forms : from the 60s to the 90s Wage Labor Nexus Forms of competition Monetary regime State Forms of competition Financial regime Versus Wage Labor Nexus

19 If the wage labor nexus( WLN) is thus dominated… If the wage labor nexus( WLN) is thus dominated… It is important to act on the other institutional forms that shape the WLN… 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… 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. This strategy is promoted by Anglo-Saxon activists.

20 Figure 5 – The 60s: the wage labor nexus is the leading institutional form

21 Figure 6 – The 90s:International insertion is the dominant institutional form

22 2.An analysis of the globalization: international insertion becomes the key factor. Through the liberalization of the foreign trade Through the liberalization of the foreign trade By the delocalization of production By the delocalization of production By the financial globalization By the financial globalization

23 …What explains the international character of the CSR It relates primarily to the multinationals… It relates primarily to the multinationals… Whereas national regulations remain heterogeneous... Whereas national regulations remain heterogeneous... Thus CSR aims at an international homogenization, via privately generated standards. Thus CSR aims at an international homogenization, via privately generated standards.

24 3.CSR : an evidence for the erosion of State capacity ? A double shift: decentralization of public action and new supranational governance 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 A tendency to the break-up of the State and autonomization of various of its functions  The monetary policy: independence of Central Banks  Finance: agency for financial stability  Public services: independent administrative agencies  The budget: proposal of an independent rating agency

25 Table 2 – A epochal change for economic policy A hierarchic and centralized approach A relational and decentralized approach Key Actors Ministry of financeCentral bank and independent administrative authorities Degree of centralization of decisions Strong centralization and coordination at the highest level Shared responsibility of economic policy Source of effectiveness Coherence of the budgetary, fiscal, monetary and regulations Credibility, reputation, expertise and action on the expectations of the private agents Nature of the flows of information Top down from public authorities towards less informed private agents Informal and formal, two sided exchanges between public and private actors. Certain actors can be better informed than the State

26 Method of decision- making Often unilateral, largely centralized with possibly dialogue of the social partners Shared responsibility and continuous learning at all levels and for all actors Instruments Static macroeconomic modeling or adaptive expectations and microeconomic calculus with complete information General assumption of rational expectations within General Equilibrium Models and series of principal/agent contracts with asymmetrical information Example emblematic France in the SixtiesAmerican configuration in the Nineties Periods The Sixties and Seventies The Nineties and first decade of this century

27 …This shift affects even developing countries A striking example: Chinese SME of Shanxi apply for international certification… A striking example: Chinese SME of Shanxi apply for international certification… The multinationals of the Third World claim to implement CSR The multinationals of the Third World claim to implement CSR The standards of the CSR shape the governance of emergent countries The standards of the CSR shape the governance of emergent countries

28 4.Financialization: an avenue for restoring some power to employees? For Michel Aglietta (1998) the financiarisation is irreversible… 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… 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..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

29 But this optimism is mitigated by other researches Sabine Montagne (2006): Finance won against the need for security in the management of pension funds. 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. 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 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 The speed of the financial innovation outclasses the capacity of reaction of the employees

30 5.The macroeconomic factors which supported the emergence of the CSR Internationalization erodes the capacity of negotiation of the employees… Internationalization erodes the capacity of negotiation of the employees… A stiffer competition on product markets feeds back into employment and wages… A stiffer competition on product markets feeds back into employment and wages… Therefore a possible relevance of boycott… Therefore a possible relevance of boycott… The financialisation may trigger the emergence of countervailing powers The financialisation may trigger the emergence of countervailing powers The imbalances of the world economy threaten the supply of global public goods. The imbalances of the world economy threaten the supply of global public goods.

31 Figure 7 – CSR: trans nationalization and soft law Loss of autonomy of Nations- States Capacity of boycott by the consumers Rise of NGOs Proposal for new standards and codes of good governance CSR Protection of the environment Threats on global public goods Socially responsible investment Financialisation Erosion of the bargaining popwer of the employees Erosion of the institutionalized compromises of the fordism Internationalization

32 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 At the level of the firm In terms of national and international regulations In terms of national and international regulations

33 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 response to competition on product markets A form of organization and control over the wage labor nexus A form of organization and control over the wage labor nexus Getting access financing Getting access financing  Typical configuration of the fordist firm

34 Figure 8 – The organization of the fordist firm Product / Financing Firms’ Gouvernment Production Subcontracting Financial regimeForm of competition Wage Labor Nexus

35  Multiplicity and increasing diversity of the domains governed by the principle of transparency Standards of quality and safety of the products Standards of quality and safety of the products Environmental standards Environmental standards Code good governance concerning subcontractors Code good governance concerning subcontractors Standards of decent work Standards of decent work Standards for the ethical investment. Standards for the ethical investment.

36 Figure 9 – Segmentation and externalization of the principles of management under the requirement of transparency Product FinanceEnvironment ProductionSubcontractin g Labor Quality standards Rating Agencies, including social rating, Socially Responsible Investment ISO Standards Environmental Externalities Standards of decent work Codes of good governance Respect of the humans rights World pacts Reputation Effects

37  A coherence that is more problematic than ever From a strict technical point of view, how to assess the compatibility of these diverse standards? 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. 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! 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. The dissolution of the concept of firm’s government, replaced by that of governance.

38 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?

39 Figure 10 – Actors and processes that could generalize the CSR 1.NGOs and experts proposals 2.Standardization and implementation Ex: Social Accountability Standard 8000 ISO AFAQ 1000NR - GRI Global compact 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 A.Local and marginal innovations B.Standardization, routines, norms C.Ethial Codes D.Soft Law E.Hard law

40  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 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 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 The era of the CSR is an attempt at rebalancing of the institutional forms

41 Figure 11 – The Golden Age: The Fordist wage labor nexus logic shapes all the other institutional forms Wage Labor Nexus Financial regime Form of competition International insertion Oligopolistic Shapes Fix exchange rate

42 Figure 12 – The 80s and 90s: the erosion of wage labor nexus under the pressure of other institutional forms changes Wage labor nexus Financial regime Form of competition International insertion Flexibility strategy Financialization Segmentation

43 Figure 13 – The epoch of CSR: domination of internationalization and a new balance between institutional forms Wage labor nexus Financial regime Form of competition International insertion Boycott SRI CSR Decent work

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

45 Table 3 – From the Fordist regime to the CSR configuration Fordist regimeCSR configuration 1.The overall logic Institutional compromises at the national level Voluntary adoption to a series of international standards 2.The nature of institutional forms Codification basic social relations by collective actors Composite mix of norms elaborated by third parties 3.Conception of the firm Government compromise between stakeholders at the firm level… Ideal of transparency with respect to all stakeholders …At odds with the conventional legal conception of the firm as the property of shareholders …At odds with the primacy of shareholder value 4.Relevant territory Nation-StateA network of multinationals and their relations with the environment 5.Links with polity Close links between governments and public administration within the State Independent public or private agencies with few or no relations with politicians

46 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

47 C2 : An institutional emergence triggered from the crisis of the Fordism: Loss of employees bargaining power, Loss of employees bargaining power, Internationalization of the production, Internationalization of the production, Financial globalization, Financial globalization, Segmentation and externalization of the functions of the State, Segmentation and externalization of the functions of the State, Political difficulties in redesigning institutionalized compromise. Political difficulties in redesigning institutionalized compromise.

48 C3 : The firm is the source of major externalities in the various fields: Social, Social, Environmental, Environmental, Economic, Economic, Financial. Financial. C4 : In a sense the CSR aims at promoting the internalization by the firm of these externalities

49 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.

50 C6 : A major uncertainty concerning the diffusion of the CSR as a form of government of the firms A fashion that will fade … A fashion that will fade … A reassuring rhetoric hiding almost unchanged practices …. 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 … 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 … Supported by world standards and/or European directives … With a possible incorporation in the legal system in the very long run. With a possible incorporation in the legal system in the very long run.

51 C7 : The CSR is only a weak determinant for emerging growth regimes Plurality of the possible compromises between various components of the CSR… Plurality of the possible compromises between various components of the CSR… Strong dependence with respect to the relative bargaining power of multinationals and governments…. Strong dependence with respect to the relative bargaining power of multinationals and governments…. A major gap between developed countries and the rest of the world… A major gap between developed countries and the rest of the world… Uncertain viability of the related international regime. Uncertain viability of the related international regime.

52 Many thanks for your attention Robert BOYER Paris-Jourdan Sciences Economiques (PSE) 48, Boulevard Jourdan PARIS  + 33 (0) bb  WEB :


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