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Multilevel Pressures on Firms to Engage in Social Change

Aug 15, 2007

Since academic research has broadly shown that CSR impacts positively on firm financial performance, attention has now turned to understanding why organizations engage in CSR. Aguilera and colleagues put forward that firms are pressured to fulfill societal goals broader than pure profit generation as a result of their being embedded in social and national systems. Hence, firms are exposed to internal and external pressures including regulation, business practices, and employee attitudes that push them to engage in CSR.

Numerous examples of firms engaging in social change as a result of such pressures can be found. One such example is Royal Dutch Shell, whose operating practices were changed in response to public and consumer outcries. While such responsible engagement can be seen as reactive, other evidence suggests that firms engage in proactive social behavior, for example through the strategic management of social performance (i.e. sustainability). Whether reactive or proactive, social engagement can be seen as the firm’s response to internal and/or external pressures to engage in responsible behavior. Where CSR is genuine and implemented strategically, firms become agents of social change.

The authors detail the instrumental (i.e. self-interest driven); relational and moral motives that drive actors at the individual, organizational, national and transnational level to engage in CSR. Firstly, they argue that at the individual level, employees’ perceptions of the firm’s fairness (indicated by firm CSR activities) shape employees’ attitudes and behaviours towards the firm. Employees prefer to work for firms they deem fair (moral), and they believe will treat them fairly (instrumental). A firm that is aware of this will engage in CSR to increase employee job satisfaction, employee commitment, and performance; and decrease employee turnover and absenteeism. From a relational perspective, if employees feel that they are treated fairly by managers, they are more inclined to want to engage in good relationships with others (co-workers and the community), thereby exerting pressure on the corporation to engage in socially responsible actions.

At the organizational level, the authors propose that internal groups (including managers and owners), and external groups (e.g. customers) also exert pressure on the firm to engage in social change. Generally, owners want firms to engage in CSR when it benefits the firm reputationally or economically, and thus the owners financially (i.e. instrumentally). Consumers generally want the firm to engage for ideological reasons which are largely relationally and morally motivated. The CSR programs that the firm thus engages in are those that the organizational groups with most power want it to adopt.

At the national level, regulations set social expectations about responsible corporate behaviour. Instrumentally, these regulations promote competitiveness within the nation’s firms. However, nations also push firms to engage CSR for the purposes of social cohesion (relational motive), and because of firms’ collective responsibility to build a better society (moral motive).

At the transnational level, where there is a risk that no global government might lead to lowered firm governance and social responsibility, societal norms and public voices act to provide pressure to firms to engage in social change. Transnational actors such as the UN are often driven by altruistic, or moral, motives to make the world better, but are able to motivate firms to engage in activities that achieve this as a result of their size, and thus their power (instrumental motives), and their networks (relational motives).

Motivational factors occur simultaneously within actors at the different levels. In addition, actors across the multiple levels of analysis interact to push firms to engage in CSR. The ways in which motives combine and actors interact determine the extent to which firms engage in CSR. This combination in turn determines the extent to which the firm’s engagement results in positive social change.

Aguilera, R.V., Rupp, D.E., Williams, C.A., and Ganapathi, J. (2007). Putting the S back in corporate social responsibility: A multilevel theory of social change in organizations. Academy of Management Review, 32 (3): 836-863.