Effects of corporate social responsibility and irresponsibility policies

Abstract

This article reviews experimental evidence on the effects of policies intended to promote behavior by firms that is more socially responsible and less socially irresponsible. Corporate social responsibility (CSR) can provide firms with opportunities for profit, but changes are likely to increase total welfare only if firms adopt them freely and without taxpayer subsidies. Mandated CSR circumvents people's own plans and preferences, distorts the allocation of resources, and increases the likelihood of irresponsible decisions. Evidence that government policies will increase welfare and a compelling argument that proven benefits justify reductions in freedom are necessary in order to justify CSR mandates. To date, this has apparently not been achieved. Corporate social irresponsibility (CSI) is concerned with whether firms undertake harmful actions that managers would be unwilling to undertake acting for themselves, or that a reasonable person would expect to cause substantive net harm when all parties are considered. Markets in which stakeholders are free to make decisions in their own interests provide some protection against CSI. Tort and contract law provide additional protection. Nevertheless, managers sometimes act irresponsibly. Codes of ethics that require fair treatment of stakeholders while pursuing long-term profit reduce the risk of irresponsible decisions. Management support and stakeholder accounting are important for successful implementation. Firms may wish to consider these measures; many already have.

Golden Rule of Forecasting: Be Conservative

“…Causal forces may be sufficiently strong as to overwhelm a long-term trend, such as when a government decides to regulate an industry. In that case, one would expect the iron law of regulation to prevail (Armstrong and Green 2013) with consequent losses of consumer welfare as was found by Winston (2006).…”

Corporate social irresponsibility: review and conceptual boundaries

“…Thus, a set of Armstrong (1977), a pioneer in the study of CSIR, is the first author who posits that impartial observers, through their subjective perceptions, are those who would determine if behaviour is irresponsible. Subsequent studies by Armstrong and Green (2013) and Herzig and Moon (2013) also agree with this initial definition, positing that CSIR is the failure of CSR towards the expectations of society in general, without specifying which group of interests it damages, whereas society, in an impartial way, is in charge of evaluating if a company is socially irresponsible.…”

A feedback-based model for CSR assessment and materiality analysis

“…Company conduct is often characterised by a complex mix between CSR and CSI (Del Bosco & Misani, 2011), which can vary according to stakeholder demands and market needs (Armstrong & Green, 2013). In this regard, Kotchen & Moon (2012) argue that firms will engage in CSR activities in proportion to their level of CSI activities, thus compensating for CSI to avoid being labelled as socially irresponsible.…”