Carroll (1991) encouraged researchers in Social Issues Management (SIM) to continue to measure Corporate Social Performance (CSP) from a variety of different perspectives utilizing a variety of different measures. In addition, Wolfe and Aupperle (1991) (and others) have asserted that there is no, single best way to measure CSP and that multiple measures and perspectives help develop the field. However, Pfeffer (1993) suggest that a lack of consistent measurement has constrained organization studies (and by implication, the field of social issues (...) management,) in its development as a field. It may be in the best interest of social issues management researchers to try to development a common body of measures and data. Recently, Kinder, Lydenberg and Domini & Co. (KLD — a social choice investment advisory firm) has made available their social performance database. The KLD data have potential to become a widely accepted set of CSP measures. The purpose of this paper is to present a construct validity study comparing the KLD data to other measures of CSP. (shrink)

>With assets of over US$1.0 trillion and growing, public pension funds in the United States have become a major force in the private sector through their holding of equity positions in large publicly traded corporations. More recently, these funds have been expanding their investment strategy by considering a corporations long-term risks on issues such as environmental protection, sustainability, and good corporate citizenship, and how these factors impact a companys long-term performance. Conventional wisdom argues that the fiduciary responsibility of the pension (...) funds trustees must be solely focused on their beneficiaries and, therefore, their investment criteria must be based strictly on narrowly defined financial measures. It is also asserted that well-established financial measurements of corporate performance already include long-term risk assessment through discounted present value of future flow of earnings. Consequently, all other criteria are contrary to the best interest of the pension funds beneficiaries. In this paper, we assert that, contrary to conventional wisdom, pension funds, and for that matter other mutual funds, must be concerned with the long-term survival and growth of corporations. These measures are generally referred to socially responsible investing (SRI) and when applied to corporations, it is termed socially responsible corporate conduct (SRCC). We demonstrate that current measurement of future risk assessment invariably understates, and quite often completely overlooks, these long-term risks because of the inherent bias towards short-run on the part of financial intermediaries whose compensation depends greatly on short-term results. Furthermore, there is ample evidence to suggest that these intermediaries have been engaging in self-serving practices and thus failing in their duties to serve their clients, i.e. pension funds, best interests. Because of their large holdings in the total market as well as individual companies, these funds cannot easily divest from poorly performing companies without destabilizing the companies stock and overall markets. Hence, they must opt for a strategy of emphasizing investment criteria that encourage companies to take into account long-term aspects of their operations in terms of their impact on environment, sustainability, and community welfare, to name a few. We argue that an exclusionary, and even a primary, focus on short-term financial criteria is no longer a viable option. It also calls for the pension funds to encourage greater transparency and accountability of the entire corporate sector through improved corporate governance. Thus socially responsible investing practices are not merely discretionary and desirable activities; they are a necessary imperative, which both the corporations and public pension funds, and other large institutional holders, will ignore at serious peril to themselves. Finally, the paper considers some of the recent developments where corporations have been responding to these challenges and how their actions might be strengthened through greater disclosure and transparency of corporate activities. It also makes recommendations for the pension funds to support further research in creating new measurement standards that further refine the concept of socially responsible investing as a necessary ingredient of long-term corporate survival and growth in the context of a changing economic, environmental and socio-political dynamic. (shrink)

With assets of over US$1.0 trillion and growing, public pension funds in the United States have become a major force in the private sector through their holding of equity positions in large publicly traded corporations. More recently, these funds have been expanding their investment strategy by considering a corporation's long-term risks on issues such as environmental protection, sustainability, and good corporate citizenship, and how these factors impact a company's long-term performance. Conventional wisdom argues that the fiduciary responsibility of the pension (...) funds' trustees must be solely focused on their beneficiaries and, therefore, their investment criteria must be based strictly on narrowly defined financial measures. It is also asserted that well-established financial measurements of corporate performance already include long-term risk assessment through discounted present value of future flow of earnings. Consequently, all other criteria are contrary to the best interest of the pension funds' beneficiaries. In this paper, we assert that, contrary to conventional wisdom, pension funds, and for that matter other mutual funds, must be concerned with the long-term survival and growth of corporations. These measures are generally referred to "socially responsible investing" and when applied to corporations, it is termed "socially responsible corporate conduct." We demonstrate that current measurement of future risk assessment invariably understates, and quite often completely overlooks, these long-term risks because of the inherent bias towards short-run on the part of financial intermediaries whose compensation depends greatly on short-term results. Furthermore, there is ample evidence to suggest that these intermediaries have been engaging in self-serving practices and thus failing in their duties to serve their clients', i.e. pension funds', best interests. Because of their large holdings in the total market as well as individual companies, these funds cannot easily divest from poorly performing companies without destabilizing the companies' stock and overall markets. Hence, they must opt for a strategy of emphasizing investment criteria that encourage companies to take into account long-term aspects of their operations in terms of their impact on environment, sustainability, and community welfare, to name a few. We argue that an exclusionary, and even a primary, focus on short-term financial criteria is no longer a viable option. It also calls for the pension funds to encourage greater transparency and accountability of the entire corporate sector through improved corporate governance. Thus socially responsible investing practices are not merely discretionary and desirable activities; they are a necessary imperative, which both the corporations and public pension funds, and other large institutional holders, will ignore at serious peril to themselves. Finally, the paper considers some of the recent developments where corporations have been responding to these challenges and how their actions might be strengthened through greater disclosure and transparency of corporate activities. It also makes recommendations for the pension funds to support further research in creating new measurement standards that further refine the concept of socially responsible investing as a necessary ingredient of long-term corporate survival and growth in the context of a changing economic, environmental and socio-political dynamic. (shrink)

This paper explores the financial reporting scandals of the past decade and the resulting U.S. legislative attempts to impose ethical behavior and control the incidence of new reporting problems via the Sarbanes-Oxley legislation. We begin with a brief historical perspective followed by assertions of ethical consequences of legislation with discussions of key recent corporate scandals, the motives for the frauds, and the consequences. Ethics related provisions of the Sarbanes-Oxley Act are discussed with the potential impact of the legislation on the (...) likelihood of similar future frauds and accompanying prognosis for future corporate ethical behavior. (shrink)

The ethical climate in Turkey is beset by ethical problems. Bribery, environmental pollution, tax frauds, deceptive advertising, production of unsafe products, and the ethical violations that involved politicians and business professionals are just a few examples. The purpose of this study is to compare and contrast the ethical beliefs of American and Turkish consumers using the Ethical Position Questionnaire (EPQ) of Forsyth (1980), the Machiavellianism scale, and the Consumer Ethical Practices of Muncy and Vitell questionnaire (MVQ). A sample of 376 (...) subjects that consists of American consumers (n = 188) and Turkish consumers (n = 199) was used to compare the ethical beliefs and practices of the two samples. The MANOVA results for the two nationality groups found that five out of six criterion variables differed between the two groups. The implications of this study are intended to assist marketers to develop strategies that suit a particular market and lessen their risk of entry. (shrink)

Stakeholder theory is often unable to distinguish those individuals and groups that are stakeholders from those that are not. This problem of stakeholder identity has recently been addressed by linking stakeholder theory to a Rawlsian principle of fairness. To illustrate, the question of stakeholder status for the non-human environment is discussed. This essay criticizes a past attempt to ascribe stakeholder status to the non-human environment, which utilized a broad definition of the term "stakeholder." This paper then demonstrates how, despite the (...) denial of stakeholder status, the environment is nonetheless accounted for on a fairness-based approach through legitimate organizational stakeholders. In addition, since stakeholder theory has never claimed to be a comprehensive ethical scheme, it is argued that sound reasons might exist for managers to consider their organization's impact on the environment that are not stakeholder-related. (shrink)

This article begins with an explanation of how moral development for organizations has parallels to Kohlberg's categorization of the levels of individual moral development. Then the levels of organizational moral development are integrated into the literature on corporate social performance by relating them to different stakeholder orientations. Finally, the authors propose a model of organizational moral development that emphasizes the role of top management in creating organizational processes that shape the organizational and institutional components of corporate social performance. This article (...) represents one approach to linking the distinct streams of business ethics and business-and-society research into a more complete understanding of how managers and firms address complex ethical and social issues. (shrink)

Abstract: In this article, I offer a proposal to clarify what I believe is the proper relation between value maximization and stakeholder theory, which I call enlightened value maximization. Enlightened value maximization utilizes much of the structure of stakeholder theory but accepts maximization of the long-run value of the firm as the criterion for making the requisite tradeoffs among its stakeholders, and specifies long-term value maximization or value seeking as the firm’s objective. This proposal therefore solves the problems that arise (...) from the multiple objectives that accompany traditional stakeholder theory. I also discuss the Balanced Scorecard, which is the managerial equivalent of stakeholder theory, explaining how this theory is flawed because it presents managers with a scorecard that gives no score—that is, no single-valued measure of how they have performed. Thus managers evaluated with such a system (which can easily have two dozen measures and provides no information on the tradeoffs between them) have no way to make principled or purposeful decisions. The solution is to define a true (single dimensional) score for measuring performance for the organization or division (and it must be consistent with the organization’s strategy), and as long as their score is defined properly, (and for lower levels in the organization it will generally not be value) this will enhance their contribution to the firm. (shrink)

In this contribution we will briefly discuss the shareholders' need for social, ethical and environmental information and the efforts of corporations to address this need. Looking at three cases, we will raise some doubt with regard to the adequacy of corporate SEE reporting to meet the needs of shareholders. We will discuss the following three cases: BP's investments in Azerbaijan, Nike's management of its labour conditions, of child labour and security issues, and Monsanto's production of genetically modified seeds.

The Corporate Social Responsibility (CSR) field presents not only a landscape of theories but also a proliferation of approaches, which are controversial, complex and unclear. This article tries to clarify the situation, mapping the territory by classifying the main CSR theories and related approaches in four groups: (1) instrumental theories, in which the corporation is seen as only an instrument for wealth creation, and its social activities are only a means to achieve economic results; (2) political theories, which concern themselves (...) with the power of corporations in society and a responsible use of this power in the political arena; (3) integrative theories, in which the corporation is focused on the satisfaction of social demands; and (4) ethical theories, based on ethical responsibilities of corporations to society. In practice, each CSR theory presents four dimensions related to profits, political performance, social demands and ethical values. The findings suggest the necessity to develop a new theory on the business and society relationship, which should integrate these four dimensions. (shrink)

Organizations interested in employee ethics compliance face the problem of conflict between employee and organizational ethical standards. Socializing new employees is one way of assuring compliance. Important for longer term employees as well as new ones, however, is making those standards visible and then operable in the daily life of an organization. This study, conducted in one large organization, found that, depending on organizational level, awareness of an organization's ethical standards is predicted by managerial adherence to and organizational compliance with (...) those standards and/or discussions with peers. Regardless of level, organizational commitment was predicted most strongly by managerial adherence to organizational standards. These findings have theoretical implications for the fields of business ethics, organizational identity and organizational socialization and practical implications for the implementation of ethics policies. (shrink)

How do senior business executives rank their preferences for various ethical principles? And how strongly do the executives believe in these principles? Also, how do these preference rankings relate to the way the executives see the future (wherein business decisions play out)? Research on these questions may provide us with an appreciation of the complexities of ethical behavior in management beyond the traditional issues concerning ethical decision-making in business. Based on a survey of 585 vice presidents of U.S. businesses it (...) was found that: (1) there is a distinct set of principles of ethical conduct that is considered favorable as opposed to another set considered unfavorable among a comprehensive list of 14 ethical principles; (2) the executives believed overwhelmingly that their own individual ethical preferences are better than those of other executives; (3) the strength of their preferences for ethical principles is associated with whether the executives are relatively near-future oriented or more distant-future oriented; and (4), there are very few significant differences in terms of gender, age, education level, private/public education, prestigious/other schools, business/non-business academic backgrounds, and length of job experience. Implications of these findings are discussed. (shrink)

Abstract: Stakeholder theorists have typically offered both a business case and an ethics case for business ethics. I evaluate arguments for both approaches and find them wanting. I then shift the focus from ethics to law and ask: “Why should corporations obey the law?” Contrary to what shareholder theories typically imply, neoclassical or profit maximization theories of the firm can offer answers based only on instrumental justifications. Instrumental justifications for obeying the law, however, are pragmatically and normatively incoherent. This is (...) because the modern corporation is a legal artifact. It exists because communities create the legal framework necessary for its existence. Individual corporations can therefore be said to owe their existence to a partnership (what might be called a social contract) between shareholders and governments, a partnership that is itself built on the shared though often implicit understanding that corporations have an unconditional (categorical) obligation both to obey the law and to treat their stakeholders ethically while generating wealth for their shareholders. (shrink)