Worldcom scandal is one of the worst corporate accounting scandals of all time (Ackman, 2002). The movie about the bankruptcy of Woldcom (Hennig, 2008) showed that the fraud was accomplished by the accounting department, which understated expenses (‘line costs’) by capitalizing them. Accounting methods were used to mask its declining financial condition by falsely professing financial growth and profitability to increase the price of WorldCom’s stock (J, 2007). Not only the story about Worldcom is fascinating, but also the manager/CEO called Bernard Ebbers. He was found guilty of charges and was convicted for charges and sentenced to 25 years in prison. The role of management in this case was really notable and questionable in my opinion. My assumption is that management did not act ethically. Note that the Woldcom case will not be discussed in more detail in this chapter or other chapters. The actions that the manager/CEO perfomed, were driven by personal motives (Beresford et al., 2003). This should be seen on a larger scale: that our actions are driven by our personal motives and there is no exception to the corporate social responsibility (hereinafter: CSR).
Switching from my personal experiences to theory, Corporate Social Responsibility, which is defined by the European Commission (2001, p5) as a concept by which ”companies decide voluntarily to contribute to a better society and a cleaner environment’ by ”going beyond compliance and investing ‘more’ into human capital, the environment and the relations with stakeholders” (p.8). It requires awareness and commitment (Sethi, 2003; Pedersen, 2010) for bringing social and environmental improvements. In many defininitions provided by various scholars, the role of management has been emphasised. For management, in 2004, Hemingway & Maclagan used the definition from Mostley et al (1996) and quoted that: ‘Corporate social responsibility refers to managements’ obligation to set policies, make decisions and follow courses of action beyond the requirements of the law that are desirable in terms of the values and objectives of society’ (Hemingway and Maclagan, 2004, p34). From the research of Menon and Menon (1997) and McWilliams and Siegel (2001), CSR is seen as a response to the competitive environment and the demands on managers from various stakeholder groups (Hemingway & Maclagan, 2004). CSR is the result of the individual action values and action of management (Hemingway and Maclagan, 2004) rather then just a result of corporate policy.
Literature has suggested that corporate social responsibilities are widely driven by the personal values of the managers in a decision making position (Hemingway and Maclagan, 2004). Managers shape the moral values being practiced in the firm they work (Desai and Rittenberg, 1997 as cited in Hemingway & Maclagan, 2004) and being a moral actor in an organisation (Wood, 1991; Swanson, 1995; as cited in Hemingway, 2002), management behaviour plays an important role in the execution of the Corporate Social Responsibility. According to Finklestein and Hambrick (1996), CSR is partially the product of managerial decisions and discretion (Waldman et al., 2006). Managers have the responsibility towards the implementation of the CSR (Agle et al., 1999; Waldman et al, 2006).
The formal adoption of CSR by corporations may be associated with the changing personal values of managers. If values operating at an industry level, as well as personal level values are researched, then our understanding of CSR can be enhanced (Hemingway, 2002). In 2002, Hemingway quotes from Harrison (1975): ‘It is more likely that the manager would accommodate his personal values to the purposes of the organization in such a way as to further his [or her] own aspirations’ (Hemingway, 2002, p17). Managers may provide misleading information regarding the firm’s financial in pursuit of individual stakeholder benefit. As different stakeholders have their own interest, management may act to satisfy the interest of the particular stakeholder and make policies improving firms CSR (Prior et al., 2008). In 2014, Remisova and Lasakova stated that factors like responsible managerial behaviour and decision-making, examples managers set for others in the company, their moral integrity, ethical leadership style, and conscious management of employee ethical behavior delineate the conditions for effective CSR operations.
By considering how management behaves differently toward the implementation of CSR, managers will have better understanding on CSR and improve their decision-making on CSR. This research examines whether or not management behaviour has effects on corporate social responsibility behaviour.
1.2 Research Objective
In this part, the scope of problem and question is set. This research paper concentrates on the influence of management behavior on CSR behavior in large companies for the following reasons. First of all, top management has to be made aware about the strategic importance of the CSR (Ven and Graafland, 2006) for its effective implementation. From the theory of the firm’s perspective, management should be more concerned in maximizing shareholders’ value (Hemingway, 2002; McWilliams and Siegel, 2001). From this point of view, CSR is a management response towards the competitive environment along with the demands on managers from various stakeholder groups (Hemingway, 2002).
Secondly, a decade ago, management of companies were not much focused on CSR communication (Arvidsson, 2003; Bukh et al., 2006). With the change in economic environment the focus towards CSR is increasing in corporate communication (Arvidsson, 2010). With the rising importance of the CSR, the real meaning of the CSR becomes confusing and misunderstandings are being created around it (Leonidas et al., 2012). One can say that these misconceptions arise due to inconsistencies in developing academic debates about not only CSR but also on Corporate Governance and Corporate treatment of stakeholders (Corporate citizenship). The strategic theory of the firm perspective focuses on incorporating corporate image management with the need to facilitate the integration of a global workforce, which would seem to represent business self-interest, and can have the conflict with an altruistic impulse among business leaders or managers (Hemingway & Maclagan, 2004). CSR is not just a random event of unrelated CSR activities. It is the process of systematically monitoring and addressing the demand of different stakeholder groups (Lindgreen et al., 2009). Prior et al (2008) agreed with Castelo and Lima (2006) that CSR is related to ethical and moral issues concerning corporate decision-making and behaviour.
Thirdly, engaging in CSR is proved to be beneficial for larger firms (Godfrey et al., 2009). Small companies are, on average, less optimistic about the financial payoff of CSR than large companies (Ven & Graafland, 2006). This is the reason why this research paper focuses on how management behaviour affect CSR behaviour in large companies. In this thesis, I define large companies as quoted companies on a stock exchange.
Finally, Hemingway (2002) quoted from Maclagan (1998) that key individuals will be instrumental in formulating and implementing companies’ CSR policy: ‘Corporate social responsibility may be viewed as a process in which managers take responsibility for identifying and accommodating the interests of those affected by the organization’s actions’ (Hemingway, 2002, p.147). Based on this conclusion, this research analyses the influence of management behaviour on CSR behaviour in large companies.
1.3 Research Questions
In large companies, various stakeholders influence the CSR behaviour of the companies. Among them management has the foremost influence in the CSR behaviour of the company as they are in a position to make key decision affecting the company. It is crucial to understand what influence the management behaviour has and how it affects the CSR behaviour of the company. Therefore, to clarify the relationship between management behaviour and CSR, this research is guided by the main research question, which has been conceived as follows:
‘What is the influence of management behaviour on Corporate Social Responsibility behaviour of a firm’?
In order to answer the main research question, further questions need to be asked to get the information on important aspects of the research question. And hence, the subsequent sub-questions have been articulated:
1. What is the reason to expect a relationship between management behaviour and CSR behaviour?
In this research it is crucial to understand the two basic components of the research i.e., management behaviour and CSR behaviour. With the understanding of these two components, the relation between management and the CSR will be clear. With this understanding the influence of management behaviour towards CSR behaviour can be explained and provide supporting information to answer the main research question.
2. What is the evidence in the literature on the relationship between management behaviour and CSR behaviour?
This research is based on the review of the literature and many researches have already been done on the topic of the relations between management and CSR. Retrieving the evidence from past literature for this subject will give an important insight into the topic, historical background information and studies already performed. This detailed background information will be used to support the analysis of the influence by the management behaviour on CSR behaviour.
1.4 Research Methodology
1.4.1 Literature review methodology
The search for relevant information comes from the following range of media:
‘ Articles from journals are the main source in this research paper.
1.4.2 Article search method
The subsequent journals provided most of articles that are included in this research project:
‘ Management Accounting Research
‘ Journal of Business Ethics
‘ Management Decision
‘ Resources Policy
‘ Journal of Cleaner Production
‘ Procedia – Social and Behavioral Sciences
‘ Expert Systems with Applications
‘ Economics Letters
‘ Tourism Management
‘ Strategic Management Journal
‘ The Journal of Socio-Economics
‘ Procedia Economics and Finance
‘ Public Relations Review
‘ The Academy of Management Review
‘ Munich Personal RePEc Archive
‘ Journal of International Business Studies
‘ Corporate Governance: An International Review
‘ Centre for Management and Organisational Learning
Identification of key words
In order to retrieve relevant articles, the following keywords have been used in various combinations: management, relationship managers and corporate social responsibility (CSR), managers as CSR driver, CSR motive, manager’s motive in CSR, CSR component, relationship stakeholder and CSR, agency theory on CSR, stakeholder management theory, stakeholder’s perspective in CSR, management CSR decision and CSR definition related to management.
Selection of search engines
The subsequent search engines have been used to identify abstract summaries of related articles:
‘ Science direct
‘ Google Scholar
‘ Saxion bibliotheek
Selection and number of articles
Firstly the articles were selected based on the title and abstract. The first search resulted in a large group of many journal articles. The articles were then filtered removing most of the articles, which were written before the year 2000. Reason for the removal of most of these articles can be found in the fact that recent articles cite earlier published material and provide the updated insight with regard to the subject.
1.5 Introductory literature description
In this research paper, concerning the research question and two sub-questions, the author begin with the outline of the theoretical framework of this thesis. By summarizing, tagging and making the subject list based on the selected journals, the direction to answer the main research question and sub-questions is easier to achieve. Firstly, CSR in general is defined and then CSR’s definition related to management, CSR components in which management plays an important role are presented. It analyses all factors that affect management in their decision-making process, CSR motive and management motive regarding CSR. Secondly, the theory approach related to managers and CSR; identify the relationship between manager, firm value and CSR is applied. Finally, the impacts of management behaviour on CSR are examined.
In order to answer the first sub-question: ‘What is the reason to expect a relationship between management behaviour and CSR behaviour’? CSR definition and CSR management related definition is first stated. Every problem starts with a definition. CSR components are introduced to demonstrate that CSR is not only about social concerns. Also management can influence CSR. Management can be driven by various factors themselves so the studies about factors affecting management are contemplated. Management motive in making CSR decisions and CSR motive are considered in order to notice the relationship between manager and CSR, regarding similarity between these two motives.
Moving on to the second sub-question, the evidence in literature on the relationship between management behaviour and CSR behaviour are demonstrated. Theories including agency theory, stakeholder agency are mentioned to bring in different perspectives with regard to this relationship. Furthermore, previous research on the relationship between personal values and CSR, the relationship between management value and firm value, and finally the relationship between CSR and firm are acknowledged. The logic is to find the connection between these three factors: management, firm performance and CSR, with the goal to find the relationship between management behaviour and CSR.
Eventually, the main research question is answered. With acknowledgement from the justifications of two sub-questions, the relationship between management and CSR will be validated. The research question: ‘How management behaviour influences CSR behaviour in a firm’? will be answered by means of the conclusion of this research paper.
1.6 Study contributions
In this section, the contribution of this research is discussed. As described in section 1.2, CSR topic gain attention these days because a decade ago, management of companies were not much focused on CSR communication. Due to the change in the economic environment, the attention towards CSR is increasing. This paper will put forward how CSR behaviour is influenced by management behaviour towards corporate image, industry value, personal desire analysing the relationship between management and CSR with agency theory. With the help of the analysis, this study will explain the relationship between the management behaviour and CSR behaviour. This research will provide managers with depth knowledge regarding the relation between various factors affecting the management behaviour towards the CSR practice. This thesis will also provide recommendation and suggestions to successfully implement and improve the CSR behaviour with the consensus with management behaviour, which will to be acceptable to all the stakeholders of the company.
In short, this research contributes information and recommendations to the internal control regarding CSR behaviour within a company. Various literatures sources have indicated that management functioning has a considerable influence over CSR behaviour of a firm. With this research, the way the management influences the CSR will be analyzed.
1.7 Thesis structure
This research paper comprises of three chapters. Chapter 1 is the introduction. Chapter 2 provides the literature review based on the journal articles related with the CSR, management behaviour, and CSR behaviour, which answers the two sub-questions in the theoretical framework. Chapter 3 will presents the conclusion drawn from the analysis of the literature and provide recommendation to management on CSR.