Effects of corporate social responsibility and irresponsibility policies
AbstractThis 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 43007.
Date of creation: 01 Dec 2012
Date of revision:
accountability; affirmative action; decision making; ethics; externalities; free markets; minimum wage; paternalism; principal-agent problem; regulation; seer-sucker theory; stakeholder accounting; stakeholder theory; sustainability;
Other versions of this item:
- Armstrong, J. Scott & Green, Kesten C., 2013. "Effects of corporate social responsibility and irresponsibility policies," Journal of Business Research, Elsevier, vol. 66(10), pages 1922-1927.
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-10 (All new papers)
- NEP-EXP-2012-12-10 (Experimental Economics)
- NEP-RES-2012-12-10 (Resource Economics)
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