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48 2007 PDF
48 2007 PDF
Jean-Pascal GOND
Guido PALAZZO
Kunal BASU
Abstract
The purpose of this paper is to critically evaluate the instrumental perspective on
corporate social responsibility by relying on sociological analyses of a well known
organization: the Sicilian Mafia.
such as the propensity to exploit a governance vacuum in society, a strong culture that
demarcates the inside from the outside, and an extreme form of the profit motive.
Instrumental CSR has the power to accelerate a firms transition to Mafia status
through its own pathologies. Lessons for future CSR research are derived, with specific
emphasis on understanding a firms social embeddedness, acknowledging limitations in
regulating corporate behaviour in the global economy, and most critically, the risk of
viewing CSR simply as a means rather than as an end.
Key-words
Corporate
Social
Responsibility,
Instrumentality,
Sicilian
Mafia,
Stakeholder
Management , Metaphor
Introduction
The purpose of this paper is to critically evaluate the instrumental perspective on
Corporate Social Responsibility (CSR), relying on sociological analyses of a well known
organization: the Sicilian Mafia. As postulated by Friedman (1962), an instrumentalist
view of CSR justifies socially responsible behaviours solely on economic grounds, that
is, considers such to be appropriate only when their underlying motivation is the
attainment of superior financial performance (see Vogel, 2005). Focussing on strategic
manoeuvring and the use of appropriate marketing tools, instrumental CSR is
synonymous with profit maximization (Garriga & Mel, 2004), and seen to be gaining
currency under the current climate of corporate scrutiny (e.g. Lee & Kotler, 2005;
Maignan & Ferrell, 2003; McWilliams & Siegel, 2001; McWilliams, Wright & Siegel,
2006; Porter & Kramer, 2002, 2006).
Corrupt organizations that collapse in financial scandals or multinationals that are
notorious for systematic violations of human rights or collaboration with repressive
regimes might be viewed similarly to organizations such as the Mafia.
Indeed, as
behaviours of illegal and immoral organizations (such as the Mafia) and the illegal and
immoral behaviours of normal and legitimate business firms. Further, in the extreme,
adoption of an instrumentalist view of CSR could even qualify certain activities of the
Mafia as being socially responsible.
seen as quite similar, sharing an extreme profit motive with significant overlaps in
organizational cultures.
moral pathologies that are embedded in mainstream economic theory and management
behaviours (see Ferraro, Pfeffer & Sutton, 2005; Ghoshal, 2005; Pfeffer, 2005).
Further, as the example of Enron demonstrates, the status of a corporation could
change from most admired to most despised, thereby rendering possible the
metamorphosis of a business firm into a Mafia in terms of its intrinsic character.
Current
discussions
on
the
new
Russian
Robber
Barons
show
that
such
metamorphosis might occur even in the reverse (Rawlinson, 2002), whereby a despised
firm comes to be admired in society.
The Mafia has mainly been portrayed as evil in the management literature or as the
extreme antithesis of an ethical organization. For instance, Husted (1998) invokes the
Mafia in evaluating the ethical constraints of trust, whereas Gallager and Goodstein
(2002: 439) or Wood, MacDermott and Swan (2002) refer to it in describing the
limitations of certain business practices such as partnerships.
However, such
references avoid a full analysis of the Mafia in organizational terms and succeed in
reducing it to utter irrelevance (e.g., Colle & Gonella, 2002; Wood et al., 2002).
In
contrast to the above, we suggest analysing the Mafia, both as a metaphor and as a
particular organizational form, investigating the Sicilian Mafia in particular to draw
inferences regarding socially responsible behaviour.
might consider the Mafia as a business dealing in a very specific commodity: the
protection of people.
metaphor is one that links two phenomena that are perceived as somewhat overlapping
but with significant differences between them (Morgan, 1980: 612).
appears to be a potentially powerful metaphor for a business firm: it shares the profit
motive with a corporation, but differs from it in many respects such as the use of
violence and systematic illegality.
Studying the Mafias social organization in parts of Sicily namely the Cosa Nostra as
it had existed over several centuries, Gambetta (1993) has adopted the lens of
economic analysis in describing its essential character and the typical contexts within
which it operates most successfully. The latter are characterized by mutually observed
low-trust expectations as in the famous case of the market for lemons described by
Akerlof (1970) where the buyer fails to ascertain the quality of the car he/she wishes to
purchase while the seller remains sceptical of receiving the payment reflecting the true
quality of the car. Consequently, both the buyer and the seller might agree to pay a
third party to guarantee the transaction, provided the added cost is lower than the
potential transaction loss expected by both parties. By paying such a premium, both
the buyer and the seller signal their respective credibility and benefit from the
transaction, although its potential value to both sides remains lower than one that could
be expected in a situation of perfect information and perfect trust. The viability of the
Mafia is thus directly related to the demand for protection and the Mafia could be
viewed from an economic perspective as the supplier of protection.
Gambetta
(1993:17) explains that the Mafia could best be understood as a profit maximizing
corporation acting on the market of private protection (see also the recent analysis of
the Camorra organization by Saviano, 2006) and concludes that the main market for
Mafia service is to be found in unstable transactions in which trust is scarce and fragile.
Such in the case, for instance, with illegal transaction in which no legitimate
enforcement agency in other words, the state is available.
It follows then, that the development of mafia-type activities is more likely where state
authorities have failed to enforce rules protecting property rights.
Such a situation
might emerge when a nation or a region switches from one political regime to another,
for example, one that was characterized by feudalism (with a small number of owners)
or socialism to one where private capital becomes a key element of the economic order
(e.g., the transition of Russia from its Soviet past to its capitalist present) leading to an
increase in the demand for protection. Following Gambetta one might argue that the
Mafia operates in weak governance contexts in which it replaces the third party
enforcement power of the state to a certain degree through private and limited delivery
of protection.
As a business organization that operates in the market for private protection, the Mafia
requires and has developed its own corporate culture with specific rules and discernible
forms of behaviour. According to Gambetta (1993) the most important Mafia rule is the
Omert which prescribes absolute silence that insiders must observe with respect to
outsiders.
forbidden.
blur its public presence. The power of the Mafia organization is thus built upon a
knowledge imbalance: the Mafia itself systematically gathers information on relevant
outsiders, while remaining shrouded in secrecy. The Omert and the contributing
knowledge imbalance create a strong corporate culture with a clear view of the inside
and the outside.
means for achieving the organizations objectives. The Mafia can be understood as the
extreme form of organizational self-referentiality, intentionally strengthened by the use
of quasi-religious rituals during the initiation ceremony (Falcone, 1991).
The
consequence, of course, of such an organizational self-referentiality is its social disembeddedness described by John Dewey in his metaphor of the robber band:
The robber band cannot interact flexibly with other groups; it can act only
through isolating itself. It must prevent the operation of all interests save
those which circumscribe it in its separateness (Dewey, 1954: 148).
Mafia organizations are disembedded from their societal context even when they find
acceptance within their local contexts of operation.
values, its own goals, its own methods, its own people, and its own language.
All
actors outside of that system are mere means and never ends in themselves. They are
protected, promoted or simply left alone as long as they serve the self interest of the
Mafia. If outsiders become a threat, the Mafia organization will act against them. The
clear distinction between us and them serves as a source of legitimacy for the use
of violence.
best when it is supported by a strong corporate culture with clear values that direct the
behaviours of employees.
interpretation of the profit motive as the Mafia. Despite being an advocate for profit
maximization, even Milton Friedman (1970) had argued that such had to be framed and
tamed by legal rules and moral custom. As our following discussion shows, the absence
of both forms of regulation, hard and soft, create the environment in which deviant
firms engage in unbridled profit maximization leading often to striking parallels with
criminal organizations.
1. Deregulated Markets
While deregulation does not necessarily lead to deviant behaviour, the reduction of
rules and enlargement of autonomy of the actors increase the risk of deviance
significantly. The rising number of corporate scandals in the 90s, particularly the
collapse of Enron, illustrates the deviance risk of unregulated or deregulated business
operations. Enron positioned itself as a firm that would revolutionize the natural gas
industry, turning it from a slow and traditional business into a fast moving and
competitive sector. For Enron managers, who believed in the virtues of deregulation
(Levine, 2005: 726), beating the (weak) regulatory system and exploiting its gaps was
considered a paramount duty.
rules. If the government sets up rules, we adhere to them. Its like the tax code. No
one expects you to pay more taxes than you owe (Tonge, Greer & Lawton, 2003: 12).
Levine has described the behaviour of Enron as the systematic attempt to disconnect
itself from societal norms (Levine, 2005).
that rewarded short term success and personal greed (Sims & Brinkmann, 2003), the
Enron case highlights the three conditions (mentioned above) of metamorphosing a
normal corporation into a Mafia-like organization.
2. Transition economies
Rossouw (1998) has pointed out that white collar crime more than doubled in South
Africa in the first year of transition from the Apartheid regime to the democratically
formed government. Likewise in Russia, the post-communist era was dominated by an
uncontrolled gangster capitalism (Rawlinson 2002, 301). Rossouw (1998: 1564) has
further claimed that Unethical business practices can transform these young political
democracies and market economies of newly formed democracies into kleptocraties.
In Russia as well as in South Africa, the new market economies overemphasized selfinterest as the main driving force of business transactions (Rawlinson, 2002; Rossouw,
1998) and both transition economies were dominated by a legally and morally unbridled
form of the profit motive.
market economies and Robber Baronism were in essence synonymous, that uncivilized
business practices were an unavoidable precondition for creating free markets
(Rossouw, 1998).
organizational crime, was also manifested through the self-centred behaviour of the
new corporations who chose to be unencumbered by broader societal responsibilities.
In fact, as described by Rossouw (1998: 1567), in the case of Russia there seemed to
be a lack of commitment to curb unethical behaviour that might harm the new society.
3. Globalized markets
In the ongoing process of globalization, the power of (national) political authorities to
regulate the behaviour of corporations is eroding (Habermas, 2001).
Beyond the
nation-state, there are few governance institutions or frameworks that could regulate
global business either through enforceable laws or through a set of shared values
(Donaldson, 1996; Zyglidopoulos, 2002). As a result, multinationals tend to operate in
largely unregulated contexts (Beck, 2000; Scherer, Palazzo & Baumann, 2006), and
such a regulatory vacuum is at times exploited by some of them who display Mafia-like
behaviours.
profiting from the legal vacuum created in the wake of the West African civil wars
(Roberts, 2003). The mining giant Rio Tinto has been accused of collaborating with the
corrupt military regime in Indonesia and elsewhere (ICEM, 1998).
Multinationals in
general have been accused of forcing nation states to compete with each other to set
the lowest social and environmental standards as well as the lowest tax rates and
sometimes tend to operate with a clear differentiation between the inside and the
outside. They behave responsibly in societies of which they feel a part of, but engage
in deviant behaviours in those which they simply regard as their external field of
operation (Sethi, 1975), thereby increasing the risk of becoming metamorphosed into
Mafia types of organizations.
(1962 & 1970) saw no fault with a profit maximizing variety of CSR and a very large
number of empirical investigations have striven to establish a (positive) correlation
between social and financial performance (more than 130 studies, according to Margolis
& Walsh, 2003; also see Margolis & Walsh, 2003; Walsh, Weber & Margolis, 2003;
Rowley & Berman, 2000). What is in fact new is the widespread adoption of the CSR
for profit theme by practitioners.
A CSR-led thrust to enhance corporate reputation with salutary impact on economic
performance has permeated the academic literature as well.
(2003), for instance, or Bhattacharya and Sen (2004) suggest relying on CSR as a
marketing tool for generating market-related benefits to corporations, whereas several
authors (McWilliams, Siegel and Wright, 2006; Husted and Allen, 2001; Kotler and Lee,
2005; McWilliams and Siegel, 2001; Porter and Kramer, 2006) provide rationale for
ensuring competitive advantage and strategic gains arising out of successful CSR.
The new instrumental CSR is thus portrayed as a panacea to solve negative perceptions
regarding
corporate
malpractices,
and
therefore
as
being
naturally
good.
Consequently, the fundamental relationship between a firm and the society in which it
operates is left largely unexplored. This, however, is the key to understanding the real
basis of a firms CSR commitment as well as the vital lever that holds the potential for
transformation (Banerjee, 2003; Kuhn & Deetz, 2007; Jones, 1996).
comparing certain Mafia practices with those that are benchmarked as superior in the
CSR
literature.
The
following
three examples
draw
direct
parallels
between
and
received
endorsements
of
their
reprehensible
actions
from
local
attempts to seek legitimacy for exploitation of resources for the benefit of their
shareholders in developed countries. As recent studies show, the results of the CSR
engagement in underdeveloped countries are quite questionable, bringing sometimes
more harm than benefit to the local stakeholders (Blowfield & Frynas, 2005; Frynas,
2005; Livesey, 2001).
2. Adopting Strategic Philanthropy
Strategic philanthropy a term coined by Porter and Kramer (2002) is aimed at
achieving a convergence between corporate performance and social welfare (see also
Porter and Kramer, 2006; Kanter, 1999; Kotler and Lee, 2005). In a very similar vein,
the Sicilian Mafia has been known for providing free services to its potential customers
of private protection in order to create a syndrome of dependency and an obligation for
reciprocity
among
local
stakeholders.
Strategic
philanthropy
or
cause-related
marketing practices to highlight CSR could as well enhance the dependency of even the
most strident of all stakeholders, namely the civil society organizations who might
stand to benefit from such programmes.
3. Implementing a code of conduct
Implementation an employees code of conduct is often portrayed as a good practice to
improve CSR by reinforcing the corporate esprit de corps (e.g. Maignan & Ferrell, 2001,
2004). The Sicilian Mafia has proved itself to be extremely efficient in this regard. The
tradition of Omert, previously mentioned, guarantees the secrecy around its activities
through a scrupulously observed code of honour (for illustrations of this practice in
novels, see Sciascia, 2003, 2004).
examples of how each of the instrumental CSR practices could be perverted into
irresponsible and damaging forms of managerial action.
some of these perverted practices have in the past led to infamous CSR controversies.
For
instance,
the
creation
of
customer
dependency
through
(an
apparently
philanthropic) free sampling of powered milk products by Nestl had led to the
controversy over infant formula.
Agle and Kelley (1997) have suggested that an excessive focus on the outcomes of a
CSR programme designed with instrumental ends in mind could in fact encourage
deviant behaviours.
They have shown how processes to manage CSR (in their case,
political fund raising) could easily come to transgress the basic principles of social
responsibility (for instance by stigmatizing non donors) and simply come to rest on
generating economic benefits.
programmes should not be taken at face value, but attention focussed on their
underlying drivers.
In addition to relying on the Mafia metaphor to illuminate the pathologies of
instrumental CSR, our understanding of such an organization could also be used to
derive more general lessons concerning CSR analysis that we turn to next.
argued that several organizational factors might immunize managers from ethical
reasoning (see Swanson, 1995, 1999), with impression management helping to create
a symbolic shield around the company in order to guard it from external pressures
(Weaver et al. 1999).
Our analysis strengthens such insights by suggesting that CSR, if solely perceived as a
means employed towards instrumental ends, could reinforce corporate immunization
and create an ethical myopia among managers. Yet, the growing popularity of such a
means-driven view among practitioners is exemplified by Crane (2000) for green
marketing in the UK, for the French investment sector (Djean, Gond & Leca, 2004),
and for NGOs in Israel (Shamir, 2005).
advocated that tools such as a code of conduct, often perceived as a way of enhancing
corporate responsibility, can in fact be counter-productive, immunizing corporations
from outsiders evaluations. In their view, the increasing number of social performance
metrics can paradoxically decrease corporate social performance. In a similar vein, our
research suggests evaluating CSR in ways that would differentiate firms simply using
CSR as a means and erecting a faade of social responsibility to those that actually
consider it to be the end goal. In this regard, the case of Enron appears to be the most
apt.
Now, when most people hear the word Enron they think of corruption
on a colossal scale... Not long ago, the same company had been heralded
as a paragon of corporate responsibility and ethics - successful, driven,
focused,
philanthropic
and
environmentally
responsible
(Sims
&
scholars
themselves
have
at
times
st
failed
to
make
the
above
behaviour (see Eisenhardt & Sull, 2001, as well as its critique: Whittington et al. 2003)
obviating the need to identify and recognize ethically inspired CSR. More research is
needed to provide an accurate analysis of practices used in the burgeoning field of CSR
evaluation.
corporation into a mafia type of organization. Similar to the Mafia, if the firms
corporations operate in a legal and moral vacuum were they themselves have to define
the limiting parameters of their own behaviours.
actors, however, could turn out to be problematic.
Self-regulation of self-interested
As King and Lenox (200) have
shown in their analysis of the Responsible Care Program of the chemical industry, selfregulation without external monitoring can lead to opportunism. Instrumental CSR in
fact heightens the problems resulting from corporations attempting to replace the state
in terms of its political responsibilities. The key research question here, of course, is to
what extent the practice of instrumental CSR impedes the development of industrywide governance frameworks, given its own variety of social performance analysis.
Conclusion
The rising interest in CSR has led to the popularity of an instrumental approach that
reduces social responsibility to a handmaiden of profit maximization.
The risk of
business firm culpable to similar illegal and immoral acts as the Mafia, particularly as
there might be significant parallels between their chosen acts and driving motivations.
Given particular contexts of operations, such parallels might indeed appear striking,
raising the danger of corporate scandals. Studying the pathologies of the Mafia, then,
might hold lessons for a legal business firm in terms of its contextual behaviours,
organizational culture, and its driving objective with respect to the maximization of
profit and the achievement of social welfare.
Potential perversions of
instrumental CSR best
practices
Engaging in strategic
philanthropy,
cause-related marketing and
providing free products and
services to the local
community dubbed as betasites
Creating a strong
dependency among
stakeholders through tied
grants/gifts
Encouraging forced buying
as a result of previous giving
Buying reputation, e.g., the
tobacco industrys ploy to
buy favourable scientific
research results
Developing corporate
culture-based norms for
guarding business objectives
Suppressing dissent and
whistle-blowing.
Building reputation as
guarantor of assets
Practicing marketing
communications through CSR
communications to increase
social acceptance
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