This paper examines the shareholder primacy norm as a widely acknowledged impediment to corporate social responsibility and explores the role of business schools in promoting the SPN but also potentially as an avenue for change by addressing misconceptions about shareholder primacy and the purpose of business. We start by explaining the SPN and then review its status under US and UK laws and show that it is not a likely legal requirement, at least under the guise of shareholder value maximization. (...) This is in contrast to the common assertion that managers are legally constrained from addressing CSR issues if doing so is inconsistent with the economic interests of shareholders. Nonetheless, while the SPN might be muted as a legal norm, we show that it is certainly evident as a social norm among managers and in business schools—reflective, in part, of the sole voting rights of shareholders on corporate boards and of the dominance of shareholder theory—and justifiably so in the view of many managers and business academics. We argue that this view is misguided, not least when associated with claims of a purported legally enforceable requirement to maximize shareholder value. We propose two ways by which the influence of the SPN among managers might be attenuated: extending fiduciary duties of executives to non-shareholder stakeholders and changes in business school teaching such that it covers a plurality of conceptions of the purpose of the corporation. (shrink)

Under conditions of growing interconnectedness of the global economy, more and more stakeholders are exposed to risks and costs resulting from business activities that are neither regulated nor compensated for by means of national governance. The changing distribution of risks poses a threat to the legitimacy of business firms that normally derive their legitimacy from operating in compliance with the legal rules of democratic nation states. However, during the process of globalization, the regulatory power of nation states has been weakened (...) and many production processes have been shifted to states with weak regulatory frameworks where businesses operate outside the reach of the democratic nation state. As a result, business firms have to address the various legitimacy challenges of their operations directly and cannot rely upon the legitimacy of their regulatory environment. These developments challenge the dominant approach to corporate governance that regards shareholders as the only stakeholder group in need of special protection due to risks not covered by contracts and legal regulations. On the basis of these considerations, we argue for a democratization of corporate governance structures in order to compensate for the governance deficits in their regulatory environment and to cope with the changing allocation of risks and costs. By way of democratic involvement of various stakeholders, business firms may be able to mitigate the redistribution of individual risk and address the resulting legitimacy deficits even when operating under conditions of regulatory gaps and governance failure. (shrink)

As a contribution to the emerging field of corporate social responsibility cognition, this article reports on the findings of an exploratory study that compares SME owner–managers’ mental models with regard to CSR and related concepts across six European countries. Utilising Repertory Grid Technique, we found that the SME owner–managers’ mental models show a few commonalities as well as a number of differences across the different country samples. We interpret those differences by linking individual cognition to macro-environmental variables, such as language, (...) national traditions and dissemination mechanisms. The results of our exploratory study show that nationality matters but that classifications of countries as found in the comparative capitalism literature do not exactly mirror national differences in CSR cognition and that these classifications need further differentiation. The findings from our study raise questions on the universality of cognition of academic management concepts and warn that promotion of responsible business practice should not rely on the use of unmediated US American management terminology. (shrink)

In today's world, the corporate image of the largest companies is closely linked to their performance in the field of corporate social responsibility and the disclosure of information on that topic, specifically, on climate change. Since the Board of Directors is the body responsible for this process, the aim of this article is to show the role that companies' Boards of Directors play in the accountability process vis-à-vis stakeholders in relation to one specific aspect which has enormous significance in environmental (...) information: practices used to monitor greenhouse gas emissions. In order to achieve this, we shall verify certain business characteristics, in addition to the size and activity of the Board of Directors, and we shall take different dependence models into consideration. These models will include variables related to the level of independence and diversity of the Board of Directors, which interact with dummy variables representing the company's litigation risks regarding environmental behavior and the institutional macro-context of the organization's country of origin. The results make it clear that Boards of Directors are basically focused on the traditional responsibility of creating economic value, instead of dealing with today's broader business world concepts, which include social responsibility. This focus, therefore, does not favor the accountability process before other stakeholders, if this makes it more difficult to protect the interests of shareholders. (shrink)

In this article, we explore how sense of time and sense of place shape the development of organizational sustainability frames (OSFs). Time and place are fundamental cultural assumptions that influence the way organizations form these frames. Given that globalization and digitalization have fundamentally altered how organizations experience and value time and place, we develop a typology of OSF development and theorize how an organization’s sense of time and sense of place interact to shape the content and structure of OSFs. In (...) so doing, we offer a spatiotemporal perspective to the sustainability literature by bringing together previously disconnected research streams on time and place. We also highlight the importance of understanding the origins, not just the outcomes, of OSFs. (shrink)

Business Ethics: A European Review, EarlyView.

The well-being of generations yet to come must necessarily be an important concern for the present. As an extension of Rawls’ ‘just savings’ principle, one of the arguments for sustainable development is that of intergenerational equity—the idea that future generations must have the same access to natural resources as the present generation. In this article, I attempt to reconcile the divergent positions of the shareholder and stakeholder primacy debate by proposing that directors—acting for the corporation—should preserve intergenerational equity. Three arguments (...) are presented in course of this proposition. Firstly, corporations are perpetual in nature and their continuing existence is predicated upon the ability of individual owners to transfer their ownership. Second, directors have a higher fiduciary duty to the corporation and future shareholders, over that of present shareholders. Finally, in order to safeguard the interests of future shareholders, corporations must necessarily strive to preserve the natural and social environments upon which the future of the corporation and the wealth of future shareholders depend. (shrink)

The well-being of generations yet to come must necessarily be an important concern for the present. As an extension of Rawls’ ‘just savings’ principle, one of the arguments for sustainable development is that of intergenerational equity—the idea that future generations must have the same access to natural resources as the present generation. In this article, I attempt to reconcile the divergent positions of the shareholder and stakeholder primacy debate by proposing that directors—acting for the corporation—should preserve intergenerational equity. Three arguments (...) are presented in course of this proposition. Firstly, corporations are perpetual in nature and their continuing existence is predicated upon the ability of individual owners to transfer their ownership. Second, directors have a higher fiduciary duty to the corporation and future shareholders, over that of present shareholders. Finally, in order to safeguard the interests of future shareholders, corporations must necessarily strive to preserve the natural and social environments upon which the future of the corporation and the wealth of future shareholders depend. (shrink)

This study examines the impact of corporate tax avoidance on board of directors and chief executive officer reputation. Our regression results show that when firms engage in tax avoidance, both directors and CEOs, on average, are rewarded by improvements in their reputations as proxied by an increased number of outside board seats. In particular, both independent directors and non-CEO executive directors undergo positive changes in reputation. We also find that CEOs of tax-aggressive firms experience enhanced reputations by gaining extra board (...) seats. Our main regression results hold based on additional analyses. Overall, this study provides important empirical evidence confirming an association between tax avoidance and the individual reputations of directors and CEOs. (shrink)

This study examines whether corporate social responsibility performance is associated with corporate tax avoidance. Employing a matched sample of 434 firm-year observations from the Kinder, Lydenberg, and Domini database over the period 2003–2009, our logit regression results show that the higher the level of CSR performance of a firm, the lower the likelihood of tax avoidance. Our results indicate that more socially responsible firms are likely to display less tax avoidance. Finally, the results from our additional analysis show that the (...) CSR categories community relations and diversity represent particularly important elements of CSR performance that reduce tax avoidance. (shrink)

Global Corporate Citizenship (GCC) continues to become increasingly popular in large corporations. However, this concept has rarely been considered in small and medium size enterprises (SMEs). A case study of a Norwegian clothing company illustrates how GCC can be also applied to small companies. This case study also shows that SMEs can be very innovative in exercising corporate citizenship, without necessarily following the patterns of large multinational companies. The company studied engages as partner in some voluntary labor initiatives promoted by (...) the government, employs people in marginal situations, and exerts influence for the adoption of good working conditions in its supply chain. Environmental issues and actions of solidarity are also considered within a global scope. Ethics of care and concern for specific aspects of the common good seem crucial as GCC drivers in this company, as do personal values, character, and leadership of the owner-manager of the firm. (shrink)

The present global financial crisis has revived the notion that competitive markets may lead some directors and executives to behave in opportunistic ways considered unethical and even illegal, through the pursuit of self-interest. This article proposes and tests an integrated model that offers new insights into the relationship between board structure, independence and firm value. By incorporating the proportion of independent directors on the board as a moderating factor in this relationship, this study contributes to a better understanding of the (...) entrenchment and convergence-of-interests hypotheses. Using empirical data obtained from 114 Spanish listed companies in a context of economic crisis, from 2007 to 2010, we conclude that having a board with a greater proportion of independent directors reduces the negative association existing between firm value and a large board size and significant board share ownership. (shrink)

As a contribution to the emerging field of corporate social responsibility cognition, this article reports on the findings of an exploratory study that compares SME owner–managers’ mental models with regard to CSR and related concepts across six European countries. Utilising Repertory Grid Technique, we found that the SME owner–managers’ mental models show a few commonalities as well as a number of differences across the different country samples. We interpret those differences by linking individual cognition to macro-environmental variables, such as language, (...) national traditions and dissemination mechanisms. The results of our exploratory study show that nationality matters but that classifications of countries as found in the comparative capitalism literature do not exactly mirror national differences in CSR cognition and that these classifications need further differentiation. The findings from our study raise questions on the universality of cognition of academic management concepts and warn that promotion of responsible business practice should not rely on the use of unmediated US American management terminology. (shrink)

This study examines the extent to which corporate responsibility influences the demand for shares by institutions. The study follows Bushee (Account Rev 73(3):305–333, 1998 ) in categorising institutions as dedicated or transient. The demand for shares is organised according to three factors: a long-term factor, corporate responsibility; a short-term factor, market liquidity; and a time-independent factor, portfolio theory. The rank and importance of the factors for the different types of institutional investor are analysed. For one of two types of dedicated (...) institution, corporate responsibility is as important as portfolio theory in influencing the demand for shares. For all dedicated institutions, corporate responsibility influences the demand for shares more than market liquidity. For two of the three types of transient institution, market liquidity is the most important factor in share selection. For all transient institutions, the least important factor is corporate responsibility. Findings suggest that corporate responsibility positively and significantly influences the demand for shares by dedicated institutions. The discussion considers the extent to which these trends are constitutive of significant shifts in ethicality within the context of institutional investment. Looking at this from within a highly institutionalised Anglo market model, dedicated institutions’ commitment to broader and longer-term concerns could be interpreted as a small but significant step towards a more axiologically informed ethical business practice. Such a form of engagement calls for sensitive attention to a fuller range of features deemed to be relevant to investment decisions, as opposed to more narrow reliance on legislation, codes of practice and fiduciary principles. (shrink)