The Role of CSR in the Governance of the ‘New Firm’: An Empirical Study of the French Telecommunications Industry

This paper seeks to show that Corporate Social Responsibility (CSR) can be used as an instrument of corporate governance, especially in what we call the ‘new firm', which is defined as vertically disintegrated and intensive in human capital. Using Critical Resource Theory (CRT), the study advances that corporate governance has to be re-founded in order to take into account inalienable critical resources incorporated in the fundamental internal and external partners of the firm. After underlining the corporate governance issues raised by the ‘new firm', it is argued that CSR can be useful as a means to regulate power relationships between key productive partners of the firm, beyond its legal boundaries. Based on the analysis of official reports and semi-structured interviews of the four major French operators of telecommunications, the study shows that CSR is voluntarily used by firms to maintain long-term wealth-creative employment and subcontracting relationships, through the deployment of formal and informal governance mechanisms. This analysis provides both a theoretical and a qualitative study support to challenge the shareholder value model of corporate governance. As such, it suggests new avenues of research for both the re-foundation of corporate governance literature, as well as for the comparative perspective. It also offers insights both to practitioners and policy makers interested in improving corporate governance based on the acknowledgment of the power of key employees and subcontractors. In addition, it provides examples illustrating the way executives use CSR for enhancing corporate governance mechanisms.