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Effects of corporate social responsibility and irresponsibility policies

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  • Armstrong, J. Scott
  • Green, Kesten C.

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.

Suggested Citation

  • Armstrong, J. Scott & Green, Kesten C., 2012. "Effects of corporate social responsibility and irresponsibility policies," MPRA Paper 43007, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43007
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    Cited by:

    1. Singhapakdi, Anusorn & Lee, Dong-Jin & Sirgy, M. Joseph & Senasu, Kalayanee, 2015. "The impact of incongruity between an organization's CSR orientation and its employees' CSR orientation on employees' quality of work life," Journal of Business Research, Elsevier, vol. 68(1), pages 60-66.
    2. repec:eee:jbrese:v:80:y:2017:i:c:p:82-97 is not listed on IDEAS
    3. Armstrong, J. Scott & Green, Kesten C. & Graefe, Andreas, 2015. "Golden rule of forecasting: Be conservative," Journal of Business Research, Elsevier, vol. 68(8), pages 1717-1731.
    4. repec:gam:jsusta:v:10:y:2018:i:4:p:1041-:d:139072 is not listed on IDEAS
    5. repec:eee:finana:v:52:y:2017:i:c:p:213-227 is not listed on IDEAS
    6. Maurer, Rainer, 2015. "Auf dem Weg zur weltanschaulichen Bekenntnisschule: Das wirtschaftspolitische Leitbild der Hochschule Pforzheim," Beiträge der Hochschule Pforzheim 152, Pforzheim University.
    7. Paniagua, Jordi & Sapena, Juan, 2014. "Is FDI doing good? A golden rule for FDI ethics," Journal of Business Research, Elsevier, vol. 67(5), pages 807-812.
    8. Mazzei Matthew J. & Gangloff Ashley K. & Shook Christoper L., 2015. "Examining multi-level effects on corporate social responsibility and irresponsibility," Management & Marketing, De Gruyter Open, vol. 10(3), pages 163-184, October.
    9. Ionel JIANU, 2015. "The Role of Food Companies in Consumer Protection Through the Sustainable Reporting," The Journal of Accounting and Management, Danubius University of Galati, issue 3, pages 75-84, December.

    More about this item

    Keywords

    accountability; affirmative action; decision making; ethics; externalities; free markets; minimum wage; paternalism; principal-agent problem; regulation; seer-sucker theory; stakeholder accounting; stakeholder theory; sustainability;

    JEL classification:

    • 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

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