Abstract

The United Nations Global Compact has generated a lively debate among academics, activists, and policy practitioners. Given the scope and ambition of this program, and the prestige of the United Nations associated with it, its supporters believe it will fundamentally reshape how businesses practice corporate social responsibility. Its critics view it as a flawed program because it does not impose verifiable obligations and does not compel its participants to adhere to their program obligations. We present an approach to study CSR programs grounded in rational-choice institutionalist theory, building on previous work viewing CSR programs as clubs which can produce reputational benefits for members as well as positive societal externalities, provided that they incorporate institutional mechanisms to prevent member shirking. This perspective puts the focus squarely on the institutional rules of the UNGC and their impacts on member behavior. While we conclude that the UNGC has not yet demonstrated a capacity to generate across-the-board improvements in CSR performance beyond what member firms would have done otherwise, we are hopeful that its sponsors and leaders can undertake worthwhile changes in program design to align member incentives with program objectives.