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A Social Contract Account for CSR as an Extended Model of Corporate Governance (I): Rational Bargaining and Justification

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  • Lorenzo Sacconi

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Abstract

This essay seeks to give a contractarian foundation to the concept of Corporate Social Responsibility (CSR), meant as an extended model of corporate governance of the firm. It focuses on justification according to the contractarian point of view (leaving compliance and implementation problems to a related article, [Sacconi 2004b, forthcoming in the Journal of Business Ethics]). It begins by providing a definition of CSR as an extended model of corporate governance, based on the fiduciary duties owed to all the firm’s stakeholders. Then, by establishing the basic context of incompleteness of contracts and abuse of authority, it analyses how the extended view of corporate governance arises directly from criticism of the contemporary neo-institutional economic theory of the firm. Thereafter, an application of the theory of bargaining games is used to deduce the structure of a multi-stakeholder firm, on the basis of the idea of a constitutional contract, which satisfies basic requirements of impartial justification and accordance with intuitions of social justice. This is a sequential model of constitutional bargaining, whereby a constitution is first chosen, and then a post-constitutional coalition game is played. On the basis of the unique solution given to each step in the bargaining model, the quest for a prescriptive theory of governance and strategic management is accomplished, so that I am able to define an objective-function for the firm consistent with the idea of CSR. Finally, a contractarian potential explanation for the emergence of the multi-fiduciary firm is provided. Copyright Springer Science+Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s10551-006-9014-8
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Bibliographic Info

Article provided by Springer in its journal Journal of Business Ethics.

Volume (Year): 68 (2006)
Issue (Month): 3 (October)
Pages: 259-281

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Handle: RePEc:kap:jbuset:v:68:y:2006:i:3:p:259-281

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Web page: http://www.springerlink.com/link.asp?id=100281

Related research

Keywords: fiduciary duties; stakeholder theory; theory of the firm; incompleteness of contracts; social contract; bargaining games; distributive justice; impartiality;

References

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  1. Raghuram G. Rajan & Luigi Zingales, 1997. "Power in a Theory of the Firm," NBER Working Papers 6274, National Bureau of Economic Research, Inc.
  2. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-18, May.
  3. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  5. Tirole, Jean, 1999. "Corporate Governance," CEPR Discussion Papers 2086, C.E.P.R. Discussion Papers.
  6. Edward Freeman, R. & Evan, William M., 1990. "Corporate governance: A stakeholder interpretation," Journal of Behavioral Economics, Elsevier, vol. 19(4), pages 337-359.
  7. Harsanyi,John C., 1986. "Rational Behaviour and Bargaining Equilibrium in Games and Social Situations," Cambridge Books, Cambridge University Press, number 9780521311830, October.
  8. Lorenzo Sacconi, 2007. "A Social Contract Account for CSR as an Extended Model of Corporate Governance (II): Compliance, Reputation and Reciprocity," Journal of Business Ethics, Springer, vol. 75(1), pages 77-96, September.
  9. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  10. Raghuram G. Rajan & Luigi Zingales, 1998. "The Governance of the New Enterprise," CRSP working papers 487, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  11. Donaldson, Thomas & Dunfee, Thomas W., 1995. "Integrative Social Contracts Theory," Economics and Philosophy, Cambridge University Press, vol. 11(01), pages 85-112, April.
  12. Hansmann, Henry, 1988. "Ownership of the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 267-304, Fall.
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Citations

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Cited by:
  1. Michelle Rodrigue & Michel Magnan & Charles Cho, 2013. "Is Environmental Governance Substantive or Symbolic? An Empirical Investigation," Journal of Business Ethics, Springer, vol. 114(1), pages 107-129, April.
  2. Francis Weyzig, 2009. "Political and Economic Arguments for Corporate Social Responsibility: Analysis and a Proposition Regarding the CSR Agenda," Journal of Business Ethics, Springer, vol. 86(4), pages 417-428, June.
  3. Christine Mallin & Giovanna Michelon & Davide Raggi, 2013. "Monitoring Intensity and Stakeholders’ Orientation: How Does Governance Affect Social and Environmental Disclosure?," Journal of Business Ethics, Springer, vol. 114(1), pages 29-43, April.
  4. Lorenzo Sacconi, 2007. "A Social Contract Account for CSR as an Extended Model of Corporate Governance (II): Compliance, Reputation and Reciprocity," Journal of Business Ethics, Springer, vol. 75(1), pages 77-96, September.
  5. Paul Neiman, 2013. "A Social Contract for International Business Ethics," Journal of Business Ethics, Springer, vol. 114(1), pages 75-90, April.
  6. Lorenzo Sacconi, 2012. "The Economics of Corporate Social Responsibility," Econometica Working Papers wp39, Econometica.
  7. Lorenzo Sacconi, 2010. "A Rawlsian View of CSR and the Game Theory of its Implementation (III): Conformism, Equilibrium Refinement and Selection," Econometica Working Papers wp24, Econometica.
  8. Frances Chua & Asheq Rahman, 2011. "Institutional Pressures and Ethical Reckoning by Business Corporations," Journal of Business Ethics, Springer, vol. 98(2), pages 307-329, January.
  9. Alessandro Zattoni, 2011. "Who Should Control a Corporation? Toward a Contingency Stakeholder Model for Allocating Ownership Rights," Journal of Business Ethics, Springer, vol. 103(2), pages 255-274, October.
  10. Giacomo Degli Antoni & Elisa Portale, 2009. "The effect of corporate social responsibility on social capital creation: an empirical study on participation in social cooperatives," Econometica Working Papers wp03, Econometica.
  11. Giacomo Degli Antoni & Lorenzo Sacconi, 2010. "Modeling Cognitive Social Capital and Corporate Social Responsibility (CSR) as Preconditions for Sustainable Networks of Relations," Econometica Working Papers wp19, Econometica.
  12. Degli Antoni, Giacomo & Sacconi, Lorenzo, 2013. "Social responsibility, activism and boycotting in a firm–stakeholders network of games with players’ conformist preferences," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 45(C), pages 216-226.
  13. Samuel Mansell, 2013. "Shareholder Theory and Kant’s ‘Duty of Beneficence’," Journal of Business Ethics, Springer, vol. 117(3), pages 583-599, October.
  14. Lorenzo Sacconi, 2011. "Multi-stakeholder governance for effectively sharing social responsibility 1 (social contracts, deliberative democracy and endogenous conformity)," Econometica Working Papers wp26, Econometica.
  15. Giacomo Degli Antoni & Lorenzo Sacconi, 2008. "A Theoretical Analysis of the Relationship between Social Capital and Corporate Social Responsibility: Concepts and Definitions," Econometica Working Papers wp01, Econometica.
  16. Lorenzo Sacconi, 2012. "Ethics, Economic Organisation and the Social Contract," Econometica Working Papers wp41, Econometica.
  17. Pedro Francés-Gómez & Ariel del Rio, 2008. "Stakeholder’s Preference and Rational Compliance: A Comment on Sacconi’s “CSR as a Model for Extended Corporate Governance II: Compliance, Reputation and Reciprocity”," Journal of Business Ethics, Springer, vol. 82(1), pages 59-76, September.

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