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

  • Lorenzo Sacconi

    ()

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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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
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100281

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  1. Donaldson, Thomas & Dunfee, Thomas W., 1995. "Integrative Social Contracts Theory," Economics and Philosophy, Cambridge University Press, vol. 11(01), pages 85-112, April.
  2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  3. 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.
  4. Tiroley, Jean, 2000. "Corporate Governance," CEI Working Paper Series 2000-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  5. Raghuram G. Rajan & Luigi Zingales, 1997. "Power in a Theory of the Firm," NBER Working Papers 6274, National Bureau of Economic Research, Inc.
  6. 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.
  7. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-18, May.
  8. Edward Freeman, R. & Evan, William M., 1990. "Corporate governance: A stakeholder interpretation," Journal of Behavioral Economics, Elsevier, vol. 19(4), pages 337-359.
  9. Hansmann, Henry, 1988. "Ownership of the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 267-304, Fall.
  10. repec:cup:cbooks:9780521311830 is not listed on IDEAS
  11. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  12. 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.
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