Abstract
Since Ackerman in Corporate social responsiveness, the modern dilemma (1973), pleaded for the institutionalisation of corporate social performance (CSP) in business processes, researchers have focused on the role of strategy in CSP. This article demonstrates that CSP is institutionalised within the governance structure. We will attempt to make this clear by means of a description of the Dutch system of corporate governance. Under certain circumstances Dutch companies are already bound to CSP due to prevailing legislation. A governance perspective shows that CSP is institutionalised within a company’s governance structure. “Processes of responsiveness”, since long regarded as a starting point of CSP-analysis, appear to be decision-making processes. Within these processes the expectations of the stakeholders can be institutionalised, trust can be built and interests can be incorporated. This makes CSP context-dependent. However, it is possible to analyse companies by comparing the companies’ individual governance structures. The article concludes that CSP-analysis can fruitfully extend into analysing in the role of the stakeholders in the influence-pathways that are incorporated within the governance structure.
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Dr. Frank Jan de Graaf is researcher at the University of Amsterdam Business School and Adviser Responsible Investment at PGGM Investments.
Cor A. J. Herkstroter is holding the chair International Management at the University of Amsterdam Business School.
With gratitude to Aime Heene, Nikolay Dentchev, Matthew Haigh, Harm Jan de Kluiver, Jonatan Pinkse, Bas Steins Bisschop and two anonymous reviewers.
Appendices
Appendix 1
Article 28 of the Works Councils Act (WOR) since 1998
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1.
The works council promotes, as much as within its powers, the observance of all regulations that apply to the company in the field of the employment conditions, as well as the regulations in the field of the employment conditions and times for work and rest of the personnel employed within the company.
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The works council, moreover, promotes according to its powers the work progress meetings, as well as the transfer of authority within the company, so that the persons employed within the company may be involved as much as possible in the regulation of the employment in the section of the company in which they are employed.
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The works council in general guards against discrimination within the company and particularly promotes the equal treatment of men and women as well as the hiring of the handicapped and minorities in the company.
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The works council promotes, according to its powers, the company’s care of the environment, including which the creation or modification of facilities, be they policy- related, organisational and administrative, in relation to the environment.
Appendix 2: The broad social objective of companies is defined in the articles of association of e.g. Dutch financial institutions
Dutch companies have defined their social responsibility in the articles of association. They all did this in various ways reflecting the organisation’s specific character.
The ING Group, the largest financial service organisation of The Netherlands with a balance sheet value of approx. 830 billion Euros has laid down its objective in the Foundation for ING Continuity. This foundation issues depositary receipts of shares. When the continuity of the company is endangered, for instance in case of a hostile takeover, she can issue additional shares to protect the company. This broad social objective, legally necessary in the Netherlands to establish anti-takeover measures, is also found in article 3, section A:
The promotion of the interests of the holders of (depositary receipts of) shares (....) of the ING Group N.V. (....) also with consideration for the interests of (I) the company itself (II) the interests of companies that are operated by the company and the companies that are affiliated with the company in a group (III) the interests of all other parties affiliated with the company in such a way that all of these interests will be weighed and preserved as well as possible.
ABN AMRO Holding N.V., a bank with a balance sheet total of over 560 billion Euros, has defined the broad social objective in the articles of association, article 2. lid 3:
The promotion of the direct and indirect interests of all parties that in any way are involved in the company, as well as of the company’s continuity and the continuity of the companies affiliated with it.
The company interest may also be emphatically formulated for a single stakeholder group. The Rabobank Group (balance sheet total 403 billion Euros), has a cooperative association. This is emphatically a member objective. In Article 2, section 1 of the articles of association it says:
The objective of Rabobank Nederland is the promotion of the interests of its members.
The social role may also be formulated quite specifically, as is the case with the Triodos Bank N.V. This niche player (balance sheet total 800 million Euros) focuses on and invests in projects characterised by a social or an environmental objective. Article 2, section 2 of the articles of association states:
With the operation of the bank, the company strives to make a contribution to social innovation on the basis that any human being should be able to develop in freedom whilst having equal rights and being responsible for the consequences of his or her economic actions for his fellow human being and the earth, all in the widest sense of the word.
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de Graaf, F.J., Herkströter, C.A.J. How Corporate Social Performance Is Institutionalised Within the Governance Structure. J Bus Ethics 74, 177–189 (2007). https://doi.org/10.1007/s10551-006-9229-8
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DOI: https://doi.org/10.1007/s10551-006-9229-8