Search for: Corporate social responsibility in the oil and gas companies

Year:2005

Article: https://watermark.silverchair.com/j.1468-
2346.2005.00470.x.pdf?token=AQECAHi208BE49Ooan9kkhW_Ercy7Dm3ZL_9Cf3qfKAc
485ysgAAAnUwggJxBgkqhkiG9w0BBwagggJiMIICXgIBADCCAlcGCSqGSIb3DQEHAT
AeBglghkgBZQMEAS4wEQQMvgRuBPJnydtR1b0AAgEQgIICKHyf6Hd2nRr9M8qKLlG
yqmdUEC6_Oy2iBf3iLyhM4GpTGCxT5tqd-
h61QKSBnQJXJZ5RmpOzGaDqJzFDePewkz_cbfPoP8S8RBvyWK_Of6Isge3gPTTL7x8g9
bcb1Vvm2vga42dTH__dxSznv9K5fC_gWGvxy0k57sX8sn_d4d6OxJ01KSdkyNNGUrw_-
Gtj4vWi_slYqoSWfsHuoGzrHx7FEf03vIpwJ1W50-EPd-DWt0DXTDTAjz3PCUd8P1a49-
tAw7sV9bp1I6ez-75OLS9vz9uCBIlKNJV_r67dku-
KF4WT9BI9ky4UXeYtEVjo5fY_YfdBrhTlmfGeATpdCVPJ0j9vBB9jekzk2s6nvcjM5Emw
zPN1WTJZbklVy-
kDQ9VGJOMMapohmskrIJ1NcaMn3dtCbkbS2upQm58pFAZMwR9kQD4ImGZsM1bU-j-
hvBsK7w52y42B8ykM46Ryu0NKlaHV8MuRzBPBu6YUZmTOVjtj5pJoNj0KfhPnj05vyW
bY-iUP5QlYhy176XO74EjVGEkOyRulOnbI1f-
3WcZRKwHaNTn_hxNqjuL9LBspDiTvZSshIsT3gQU5lYyO1EJd9UNRvxt3H2TbEFHTsV
aHsy4eKNeZRSwzjHigvM5rI0UxqkV29UXxaO4yj7gKetREwWv7HvS2O-zhdhRvJa7Xi-
1oEuQzCUy6ZKMleYaRblXVeB8DkJNhbU-iWRvqCnSFyK4nJ9M9Vw

Topic: The false developmental promise of Corporate Social Responsibility: evidence from
multinational oil companies

Gist:
The oil and gas sector has been among the leading industries in championing Corporate
Social Responsibility (CSR). Oil companies attach greater importance to their social and
environmental impact and they engage more with local communities than they used to in the
past.

?? Royal Dutch/Shell and BP have become significant players in renewable energy, and have
professed to be combating carbon dioxide emissions in order to minimize their contribution
to global warming.

Furthermore, oil companies have initiated, funded and implemented significant community
development schemes.

According to one estimate, global spending by oil, gas and mining companies on community
development programmes in 2001 was over US$500 million.1 Oil companies now help to
build schools and hospitals, launch micro-credit schemes for local people and assist youth
employment programmes in developing countries. They participate in partnerships with
established development agencies such as the US Agency for International Development
(USAID) and the United Nations Development Programme (UNDP), while using NGOs to
implement development projects on the ground.
However, the effectiveness of CSR initiatives in the oil, gas and mining sectors has been
increasingly questioned, and there is mounting evidence of a gap between the stated
intentions of business leaders and their actual behaviour and impact in the real world.

Some oil industry insiders are also highly critical of CSR

These are the views of three different industry insiders:

• ‘CSR is a waste of time.’

• ‘CSR is about managing perceptions and making people inside and outside the company
feel good about themselves.’

• ‘CSR is a red herring in terms of development projects.’

Of course, oil companies have plenty of ‘CSR believers’ and genuine CSR practitioners who
would undoubtedly like to dismiss such claims. But criticism by industry insiders must be
taken seriously, and calls for an assessment of CSR practice.

The impact of CSR must also be seen in a much broader context of international
development, not least since CSR is now being advocated by policy-makers as an alternative
route to the public delivery of development

Several World Bank and USAID officials interviewed for this article saw CSR as a
potentially long-term solution for delivering development.

Therefore, CSR cannot be seen solely through the lens of the ‘business case’, as the
expectations of what CSR could potentially accomplish are much broader. From society’s
point of view, it is important to assess the contribution that oil companies can make to
development.

To put it differently: Can companies deliver development? For instance, is expenditure of

US$500 million for local community development money well spent?

CSR activities in oil companies have many elements, encompassing employment issues,
environmental issues and local community issues.

This article focuses on the last of these three categories and, more specifically, on local
community development projects.

These projects are sometimes labelled as mere philanthropy in the western world and do not
appear on CSR radar screens, but in many developing countries—particularly in Africa—
firms are expected to assist their local communities actively.

When asked by the World Business Council for Sustainable Development how CSR should
be defined, for instance, Ghanaians stressed local community issues such as ‘building local
capacity’ and ‘filling in when government falls short’.
Taking this grass-roots African understanding of CSR as a starting point, this article takes a
look at local community development projects funded by oil companies and tries to assess
their actual and potential impact on development.

What follows is a critical account which suggests that the actual and potential contribution of
oil companies to development faces structural constraints. Indeed, this article suggests that
the current CSR agenda may be inappropriate for addressing social problems in developing
countries and may divert attention from broader political, economic and social solutions for
such problems.

Main body:

Motives for CSR engagement and their implications:

Maintaining a stable working environment

Managing external perceptions

Keeping employees happy

Pitfalls of the ‘business case’

The evolution of CSR and its limitations:

Country-specific/context-specific issues

Failure to involve the beneficiaries of CSR

Lack of human resources

Social attitudes of oil company staff

Failure to integrate CSR initiatives into a larger development plan

Best practice in CSR

Negative developmental impact of the oil industry

Conc:

local community assistance is seen as the key corporate responsibility in some developing
countries, and this focus allows us to consider the constraints of current CSR approaches.
Perhaps the key constraint on CSR’s role in development is the business case, that is, the
subservience of any CSR schemes to corporate objectives. This article does not question
companies’ right to make profit, but it does suggest that profitmaximizing motives are often
incompatible with good development practice.

Furthermore, this article has identified a number of constraints on CSR, including country-
and context-specific issues; the failure to involve the beneficiaries of CSR; the lack of human
resources; social attitudes of oil company staff, and the failure to integrate CSR projects into
larger development plans.

As it exists today in the oil industry, CSR has limited potential for fostering genuine local
community development in practice.

Notwithstanding this multitude of constraints, this article does not deny a place for private
firms in development.

Beyond their purely economic role, multinational firms could be expected to play a
constructive part in macrolevel development and governance. But the current CSR agenda
fails to address the crucial issues of governance and the negative macro-level effects that
multinational firms cause in host countries. The issue is not that regulation can solve most
social problems; government interventions have indeed frequently failed in developing
countries. Rather, the CSR discourse appears to have marginalized debates on governance
and macro-level solutions to complex society-wide problems. There is a real danger that a
focus on CSR may divert attention from broader political, economic and social solutions to
such problems.

Idea:
This article focuses on the last of these three categories and, more specifically, on local
community development projects.

This article does not question companies’ right to make profit, but it does suggest that
profitmaximizing motives are often incompatible with good development practice.
There is a real danger that a focus on CSR may divert attention from broader political,
economic and social solutions to such problems.

Year:2017

Link: file:///Users/aslan170797/Downloads/1-s2.0-S0959652616001888-main.pdf

Article: Barriers to and enablers of sustainability integration in the performance management

systems of an oil and gas company

Gist:

Main Body:

Lit review:

In line with the growing recognition of the concept of sustainable development, which draws
attention to ‘meeting the needs of the present generation without compromising the ability of
future generations to meet their needs’ (WCED, 1987), business organisations are now
expected to manage the consequences of their operations on the community and environment
responsibly.
With increasing attention on the industry comes increasing sustainability research related to
engineering, as well as scientific and technological advances, such as innovation in water and
carbon technology
Management and accounting research pertaining to the petroleum industry have focused on
the meaning and role of sustainability, the integration of sustainability into systems and
strategy, managing risks, corporate social responsibility and environmental management
(Parast and Adams, 2012; Spangler and Pompper, 2011), sustainability reporting (Boyle and
Depraz, 2006; Dong and Burritt, 2010; Krishna et al., 2012) and sustainability accounting
tools (Baxter et al., 2002; Roy, 2009).
However, most studies concerning this industry have been from a practitioner's viewpoint

This article is about

Furthermore, there has been limited focus on the subject of sustainability integration in
performance measurement, management and control in this industry.
Operations, organisations' strategic goals,

Various researchers have highlighted the importance of managing sustainability issues for the
success and survival of organisations

Such increasing awareness, which goes beyond business image exercises, has shifted the
attention of sustainability management research from the question of why companies should
attend to sustainability issues to how sustainability issues could be integrated into
organisational systems and processes

The nexus of any organisation is its management control systems (MCSs), which function to
ensure that all processes and activities of the organisation are aligned to its strategies and
objectives
However, definitions and descriptions of MCSs either overlap or vary significantly from each
other

Ferreira and Otley (2009) used the term ‘performance management systems (PMSs)’ to
describe the management and control of organisational performance in a holistic manner.
PMSs include all aspects of organisational control (including controls related to MCSs) and
indicate a move away from conventional methods of segmenting control in organisations

Performance management and measurement systems may be used to integrate

sustainability concerns into business management and incorporate economic, social and
environmental goals into organisations' mission, strategies, actions and culture

However, sustainability integration in PMSs is still an emerging field and its role in
supporting sustainability within organisations has not been well researched

Consequently, Schaltegger and Wagner (2006) defined sustainability performance

management and measurement as the measurement and management of the interface
between business, society and the environment.

further structured the notion of sustainability management control from a systemic

perspective, widening the sustainability balanced scorecard concept to describe finance-
oriented, market-oriented, process-oriented, knowledge and learning-oriented and non-market
oriented sustainability MCSs.

Basic frazi

Nevertheless, it is important that the concept of management control be widened and the
conceptualisation of sustainability management control be developed in a structured manner

As such, we have further extended the concept of sustainability management control by using
the term sustainability performance management (SPM) to encompass the management and
control of sustainability performance (economic, environment and social organisational
performance), in line with a holistic approach to control, as proposed by Ferreira and Otley
(2009).

We also regard sustainability control systems (SCSs) as part of sustainability performance

management systems (SPMSs) and as an extension of traditional MCSs that address the
interrelationship between economic, environmental and social issues related to organisational
activities.

Among the examples of SCSs are sustainability planning, environmental budgeting, material
flow cost accounting, sustainability performance measurement, socio-eco-efficiency analysis,
and environmental investment appraisal

A number of researchers have examined the use of MCSs (Cresti, 2009; Gond et al., 2012;
Riccaboni and Leone, 2010), and PMSs (Epstein, 2008; Pedersen and Neergaard, 2008) to
integrate sustainability goals into organisational strategy
Prior studies have highlighted the interrelationship between formal and informal control
systems in influencing managers' behaviour and decisionmaking related to the environment
and society

Other studies concerning SCSs have proposed tools and techniques to align sustainability
strategy with management accounting and control systems

Such systems include the performance prism model (Neely et al., 2002), sustainability
balanced scorecard (Bieker et al., 2001; Epstein and Wisner, 2001; Hansen and Schaltegger,
2014), dartboards and clovers of sustainability (Bonacchi and Rinaldi, 2007) and the
corporate sustainability performance pyramid(Epstein and Wisner, 2006).

However, most studies have focused on the impact of such tools on the economic and
environmental aspects of performance (Cresti, 2009).

Even so, a few researchers have attempted to explain the process of how sustainability
reporting and environmental management could be used to improve the sustainability
performance of organisations. Moreover, they have identified the enablers of, and barriers to,
such processes

For example, Perez et al. (2007) argued that environmental management systems could
embed environmental concerns in organisations through stakeholder engagement, training
and organisational learning mechanisms

Similarly, Albelda (2011) shed light on the role of management accounting practices as
facilitators of environmental management, by increasing the visibility and control of
environmental management.

Furthermore, Brown et al. (2005) found that motivational intervention and incremental
change could be supported by incorporating environmental information in accounting
information systems.

In terms of measuring and managing performance, enablers of, and barriers to, measuring and
implementing performance measures

However, there has been limited research specifically focussing on the enablers of, and
barriers to, sustainability integration in PMSs

One study highlighted the importance of performance evaluation systems (formal controls) in
monitoring and assessing the value and effectiveness of environmental strategies and actions

The integration of sustainability key performance indicators into management processes such
as in planning and performance measurement was also found to be important

Perego and Hartmann (2009) found that increased quantification of environmental

performance measures led to an alignment with environmental strategy.
Hence, there have been calls for more research in this area, especially with respect to MCSs
and PMSs. This paper therefore complements existing research by investigating the barriers
to, and enablers of, sustainability integration in the PMSs of an oil and gas company.

3. Theoretical framework:

to study the management of sustainability performance comprehensively, a well-structured

framework would be needed to link the management of the environmental and societal
aspects of business and the resulting information with business strategy and (economic)
information.

there is a lack of integrated frameworks for sustainability integration in PMSs that provide a
holistic overview of performance.

Institutional pressures for sustainability were studied in terms of coercive, normative, and
mimetic pressures throughout the different stages of sustainability integration

Sustainability framework

The framework consists of twelve questions and two factors which denote three levels of
analysis. The first level consists of eight issues that are considered to be the core of PMSs
(vision and mission, key success factors, organisation structure, strategies and plans, key
performance measures, target setting, performance evaluation and rewards systems). The
second level of analysis includes the final four issues (information flows, systems and
networks; PMSs use; PMSs change and strength and coherence) that pervade the whole
PMSs structure and provide a more holistic perspective of performance management.

also categorised the levels of MCS and SCS integration as high or low, based on three
dimensions of integration (cognitive, organisational and technical).

The enablers of, as well as the barriers to integration, can be identified from a socio-technical
perspective,

Sustainability integration within organisational strategy is defined by Gond et al. (2012, pg.
206) as “the degree of overlap between two types of control systems” (MCSs and SCSs)”

Sustainability goals may be incrementally added in MCSs, and environmental, social and
economic concerns gradually incorporated into SCSs that are growing into more
comprehensive systems

Technical artefacts include budgets, financial reports, and computer based supply chain
models, while corresponding socio-technical control artefacts involve the budgeting process,
financial control structures and processes, and control structures and processes in computer
software

3.1. Dimensions of integration:

4. Methods

The selection of the case organisation was based on the stratified purposeful sampling
strategy (Patton, 1990), as the case illustrated characteristics that fulfilled the purpose of the
study. OilCom (the case organisation), a state owned company, was undergoing
transformation in the area of sustainability
!!!!
Observations during site visits, reviews of public documents (i.e., annual reports and
sustainability reports), analysis of relevant internal company reports (such as environmental
management manuals, HSE policies, Corporate Social Responsibility (CSR) reports and Key
Performance Indicators (KPIs)), and presentations in briefings and seminars by relevant
employees enabled the triangulation of data.

5. Findings: OilCom's pathway to sustainability integration

Mimetic and coercive institutional factors were the main cause of the development of SCSs
in OilCom, which initially focused on safety aspects

Since its inception, OilCom prioritised safety as the industry was well known for having high
safety risks.

5.1. Dormant decoupled strategy

5.2. Compliance driven strategy

We need to consider things apart from the traditional economic aspect (of business), or even
traditional HSE management. We need to embrace the whole sustainability issue more
holistically, instead of just talking about compliance.”

The HSE personnel involved had to educate themselves about the concept in order to
implement sustainability related strategies.

Cognitive barriers were still present among employees in other departments. Initially,
employees, especially the older generation, resisted a sustainable orientation.

“Some [managers] would say, ‘this is a very good and nice thing, but we are not a charity
club, we are a business entity’

5.3. Peripheral sustainability integration

However, organisational barriers frustrated attempts to develop and implement the

framework, such as a lack of formal structures to execute activities in key areas
“Then the climate change issue came in, because we are in the carbon industry. Definitively
we will have to be involved in the discussion on climate change. So then we did a lot of
studies on climate change issues, carbon issues. Then the water problem came in, we had a
group of experts looking at water (issues). Responsible planning and the managing of
products were looked at next. Then the societal thing, societal benefits, (and the) stakeholder
issue came in. Slowly, it was forming. Then we realised that there really was a sort of
framework we could form. So it was gradual, not a one day thing.”

A move towards organisational integration only occurred after 2000, which involved setting
up a greenhouse gas (GHG) working group, tasked with facilitating submission of data to the
United Nations Framework Convention on Climate Change.

With a corporate sustainability framework established, OilCom began to look at

sustainability reporting more seriously, partly because of negative human rights publicity
from incidents at international joint venture operations

The government also issued social responsibility guidelines at this time, outlining how
statecontrolled companies could contribute to society.

Concurrently, the country's stock exchange required the disclosure of CSR activities for all
listed firms

. These events created coercive pressures that forced OilCom to establish a corporate
sustainability unit and publish its first sustainability report. The initial sustainability report
provided minimal information because not many areas of the sustainability framework had
been formally executed.

Two years later, the carbon reduction management unit was formed in response to the
growing need for formal structures

Again, organisational barriers slowed further progress. There was no sustainability unit or
GHG working group in any of its subsidiaries.

Although sustainability champions were appointed in certain subsidiaries, they were not well
trained in sustainability as their experience was in HSE related processes.
The hiring of personnel with sustainability work experience was limited to sustainability
working groups and units in the headquarters. This resulted in both the subsidiaries and joint
ventures limiting sustainability practices to the HSE and corporate affairs departments, which
focused on traditional HSE and CSR related functions.

Thus, there was a lack of social control, as well as limited sustainability socialisation
processes among employees.

However, due to the fact that the supply chain partnerships focused on linking economic and
environmental regulatory issues instead of social and wider environmental issues (Miemczyk
et al., 2012), audits had limited value in stimulating discussions about sustainability, as
auditors could not generate comprehensive sustainability performance data

As noted by Cramer (2002), for a corporate sustainability strategy to succeed, a well-

balanced and multidimensional performance management and measurement system must be
developed

Obtaining legitimacy was especially important as OilCom's image had to be improved due to
a number of reputational issues faced in certain joint ventures, as well as concerns about the
organisation's independence from government interference

Vokrug tebya proishodit to, chto ti pozvolil

Several international institutions had given OilCom a lower than average ranking among oil
and gas companies for transparency and accountability issues, mainly due to revenue
disclosure concerns.

What that means?

Brainwashing??
Several initiatives to increase cognitive integration of sustainability in the traditional PMSs
were made. Top management mindset has improved in recent years due to coercive,
normative and mimetic institutional pressures.

Furthermore, most people interviewed understood the devastating effects of environmental

and social issues on company operations.

5.3.1. Movement towards better integration

There has been a movement towards an ‘integrated sustainability strategy’ in OilCom, with
some promise of future potential, which could be seen from a number of different initiatives
to promote further technical, organisational and cognitive integration.

the meaning of sustainability was not fully understood by employees in the subsidiaries and
suppliers. For example, an executive at the subsidiary understood sustainability in terms of
economic returns and maintaining operations but did not associate the term with either the
environment or society.
Among the HSE and public relations department personnel, sustainability was only
understood in terms of mitigating the impact on society and the environment due to
operations.

Although the relationship of sustainability to daily operations was taken into account to some
extent, wider issues such as biodiversity were given more consideration at OilCom
headquarters.

Hence, it is not surprising that the HSE department is now considering searching for and
recruiting finance/accounting managers with sustainability backgrounds.

Other types of technical integration have put OilCom further along the path to sustainability
integration. Sustainability reporting practices have improved as OilCom enhanced the
materiality and relevance of greenhouse gas, energy, water and waste data.

OilCom has also been expanded to include themes related to social performance such as
ecosystem and indigenous issues during project development.

A new procedure, the Environmental, Social and Health Impact Assessment (ESHIA), was
established to enhance the traditional EIAs to enable better embedding of sustainable
principles.

As part of its effort towards incorporating new technologies that have a positive sustainable
impact, OilCom has set up an R&D centre

This has led to the introduction of green equipment, which reduces air pollution, water usage,
waste generated and energy used.

6. Discussion

6.1. Research implications

Conc:

Idea:
Link:
https://www.tandfonline.com/doi/pdf/10.1080/00207543.2017.1387303?needAccess=true

Name: Business sustainability and corporate social responsibility: case studies of three gas
operators in China

Year:2017

Idea:

Gist:

Lit review:

Conc:

Link: file:///Users/aslan170797/Downloads/1-s2.0-S0363811115000946-main%20(1).pdf

Article: Corporate social responsibility in the oil and gas industry in Qatar perceptions and
practices

Idea: Qatar vision 2030 is based on four major pillars: Human development, social
development, economic development and environmental development

Being the continuing commitment by companies to behave ethically and contribute to

sustainable development while improving the quality of life ofthe employees,the local
community and the welfare of society, as well as meeting the expectations ofthe stakeholders,
corporate social responsibility (CSR) has become nowadays increasingly important and
indispensable for any organization’s success, corporate image and reputation.

Successful companies are those that value CSR and integrate it in their programs and
activities. In fact, there is a high affinity between the principles of quality management and
CSR.

Despite the growing interest in this topic, there is still no general agreement on the
precise meaning of CSR

The current discussion of CSR is predominantly concerned with the additional contributions
that corporations make to the wellbeing of society.

In particular, this is reflected in the strong focus on the idea of caring about the welfare of
society as a whole. Accordingly, contributing to “doing well by doing good” is a frequently
encountered credo for corporations in business practice and business research. Indeed, CSR
can contribute to a fruitful interplay between business and society. In addition, CSR offers
corporations a variety of opportunities to benefit from, ranging from enhanced customer
loyalty to favorable media coverage, penetration of new markets and improving the well
being of the community

This paper is about: This paper looks at how oil and gas companies in Qatar define CSR,
what are the CSR activities they engage in, do they conduct CSR assessment, how do they
develop CSR strategies, how do they select their stakeholders, how do they publicize their
CSR activities, what resources do they allocate to CSR, to what extent they contribute to
sustainable development, and how do they evaluate their CSR activities, and what benefits do
they get from them.

Problem:

Lit rev: two research tools namely a questionnaire and in-depth interview.

there is a gap between awareness and practice of SR. On the one hand, although there is high
recognition for its importance and role for organizations in Qatar, SR practices are still
limited. Results also showed that SR activities in organizations in Qatar are not
systematically organized, and are carried out in most cases by individuals rather than an SR
unit... Results also revealed that a national SR policy is needed because this policy will
greatly and positively affect SR practice. Findings showed that the suggested national SR
policy is expected to greatly enhance the SR initiatives and practices of public companies and
public sharing companies in Qatar. Based on these results it is recommended that the
government play a wider and greater role in SR

national SR policy
4. Defining corporate social responsibility

Corporate social responsibility (CSR) is also known by a number of other names. These
include corporate responsibility, corporate accountability, corporate ethics, corporate
citizenship or stewardship, responsible entrepreneurship, and sustainable development and
environment to name just a few. As CSR issues become increasingly integrated into modern
business practices, there is a trend toward referring to it as “responsible competitiveness” or
“corporate sustainability.” A key point to note is that CSR is an evolving concept that
currently does not have a universally accepted definition. Generally, CSR is understood to be
the way firms integrate social, environmental and economic concerns into their values,
culture, decision making, strategy and operations in a transparent and accountable manner
and thereby establish better practices within the firm, create wealth and improve society. The
International Organization for Standardization provides the following definition along the
lines of ISO 26000:

The need for organizations in both public and private sectors to behave in a socially
responsible way is becoming a generalized requirement of society. It is shared by the
stakeholder groups that are participating (. . .): industry, government, labor, consumers,
nongovernmental organizations and others, in addition to geographical and genderbased
balance (International Organization for Standardization, 2008: 4).

This is another working definition adopted by the International Institute of Sustainable

Development in 2007:

Social responsibility (is the) responsibility of an organization for the impacts of its decisions
and activities on society and the environment through transparent and ethical behavior that is
consistent with sustainable development and the welfare of society; takes into account the
expectations of stakeholders; is in compliance with applicable law and consistent with
international norms of behavior; and is integrated throughout the organization.

As issues of sustainable development become more important, the question of how the
business sector addresses them is also becoming an element of CSR. The term corporate
social responsibility or corporate citizenship is re-defined and implied differently in each
Yet, the basic understanding of CSR
corporation.

maximizing profit by giving back to the

community. While, the main focus of a CSR program is dedicated to the greater
good, a secondary motivation is increase of profits The United Nations defines CSR as the
following:

CSR is generally understood as being the way through which a company achieves a

balance of economic, environmental and social imperatives, while at the

same time addressing the expectations of shareholders and
stakeholders (Hohnen, 2007).
The true nature of the CSR remains uncertain, but looking back at history, one can observe
the nature of CSR and how it developed throughoutthe years and became a vital aspect of
almost every national, international and global organization. The beginnings were in the
1950’s when it was referred to as Social Responsibility. In the 1950, corporations and
organizations were not yetfamiliar with the idea of giving back or losing profitfor a
substantial matter (Carroll, 1999a,b). However, Howard R. Bowen revolutionized this idea by
his publication Social Responsibilities of a Businessman which rewarded him with the

title of the father of Social Responsibility, in his book he gave a clear understanding of why
the modern – at the time – the businessman owed back to the community. And because of
this definition of SR did the modern understanding of CSR come to be

In the 1960’s, the literature of SR came to expand, and with that a more cemented
understanding of SR. The prominent figure of the era is Keith Davis, who wrote articles and
textbooks in regards to SR. Davis’s most important contribution is his argument of social
responsibility and business power

The 1970’s witnessed the era of CSR proliferation. Heald (1970) made an important
contribution to the understanding of CSR with his textbook, The social responsibility of
business: company and community. Although, Heald did not define the meaning of CSR in
his book he however, used arguments and discussions thatfollowed the past definitions and
understanding of CSR.

mechanical method to approach CSR. They approached this by re-adapting Maslow’s theory
of hierarchy. Tuzzolino and Armandi’s need of hierarchy did not redefine CSR, it did
however help organizations see what criteria needed to be fulfilled or met, humanizing the
elements, as in Maslow’s hierarchy. Edward M. Epstien however provided a definition of
CSR in his search for social responsibility, responsiveness and business ethics.

The 1990’s provided different themes within the umbrella of CSR. The themes of stakeholder
theory, business ethics theory, and corporate citizenship were developed in this era.

With every era a new definition of SR or now known as CSR had been evolved or re-written
from Bowen in 1953 definition to Hopkins in 1998 and to finally the UN’s definition of CSR
.The basic concept of CSR has always remained the same. The act of CSR is to provide a
benefit that extends beyond the firms interest, i.e., profit and benefits the society at large. As
Bowen (1953) used the terms objectives and values of our society, similarly to Davis’s
(1960) definition which extend beyond the firms interest.

In the 1980’s, the definition has evolved to include the obligations to the firm’s stakeholders
and shareholders. However, we see the primary obligation is the society, as Jones (1980) has
defined. In 1998, the definition by Hopkins (1998) has transformed slightly to correlate the
meaning of Stakeholder being both internal and external; actual stakeholders, and the
companies image within the community, while the prior definition by Jones made a clear
distinction that stakeholders are not the public.

This definition is somewhat mirrored in the UN’s definition of CSR.

Corporate social responsibility is usually based on four pillars: environment, sustainable

development, workers’ rights, human rights, and anti-bribery and anti-corruption
.It is widely defined as the way corporations integrate social, environmental
and economic issues and concerns in their values, culture and
practices. CSR activities cover usually the following: corporate governance and ethics,
health and safety, environmental stewardship, human rights, labor rights, sustainable
development, conditions of work: safety, health, hours of work, wages. It also deals with
industrial relations, community involvement, development and investment. (sports,
healthcare, educational projects, arts and cultural activities), involvement of and respect for
diverse cultures and disadvantaged peoples, corporate philanthropy and employee
volunteering. CSR is concerned as well by customer satisfaction and adherence to principles
of fair competition, anti-bribery and anticorruption measures, accountability, transparency
and performance reporting, and supplier relations for both domestic and international supply
chains.

Conc:

In Qanar: high level of awareness exists in the country and among the oil and gas companies.
However; CSR activities are very limited and do not cover all areas of CSR. The activities
are limited to sporting events, health, education and environment. Areas such as human
rights, workers rights, anti-bribery and anti-corruption measures, accountability, transparency
and performance reporting, corporate governance, ethics and conditions of work namely
safety and health, hours of work and wages are not covered by the oil and gas companies
CSR activities.

!Horoshaya fraza - In fact there is a gap between the level of awareness and practice.

This is due mainly to the corporations’ focus on publicity and media attention as well as
pleasing the government more than anything else.

CSR is not institutionalized in the oil and gas companies in Qatar. There is an interestin CSR;
however there are no distinct units or departments as such. This is one ofthe main reason why
research is lacking. As a result most companies have no clear cut CSR policy and strategies.

Consultations with stakeholders are very scarce and usually top management takes decisions
on what activities to engage in and what stakeholders to select.

The challenges are huge. Corporations should focus now on the kinds of activities they
engage in and the quality of CSR programs they offer to society.. CSR should be enforced by
law, through regulations, criteria and professional international standards in order to improve
its performance and to meet local and international challenges. Qatar government as well as
corporations should have a clear CSR policy based on systematic research and scientific
investigation. More budgets should be allocated to CSR activities.
Corporations should invest more in CSR by establishing units or departments dedicated to
this endeavor and by having qualified and specialized professionals in the field for better
performance and outputs.

Because of a lack of research and systematic inquiry, strategic planning is missing in all four
companies of the study. The same CSR activities are undertaken year after year focusing on
education, health and sports. Corporations should engage in more CSR activities dealing with
ethical matters and governance, working environment, and human rights.

Otrivok iz individual and Corporate Social Responsibility

CSR

https://scholar.princeton.edu/sites/default/files/rbenabou/files/843_final.pdf

Individual and Corporate Social Responsibility

The concept of Corporate Social Responsibility have emerged as a backlash to market

failures and crisises.
concerns to corporate social responsibility, contrasting three possible understandings of the
term: firms' adoption of a more long-term perspective, the delegated exercise of prosocial
behaviour on behalf of stakeholders, and insider-initiated corporate philanthropy. We discuss
the benefits, costs and limits of socially responsible behaviour as a means to further societal
goals

Main body:
Textbook economics has thus long embraced the shareholder-value approach, which posits
that firms should be controlled by profit-maximizing shareholders while other stakeholders
are protected by contracts and regulation

In a nutshell, following Pigou (1920), the state, and not citizens or firms, is in charge of
correcting market failures and income or wealth inequality

Yet society's and law-makers' demands for individual and corporate social responsibility as
an alternative response to market and redistributive failures have recently become more
prominent

movement is gaining momentum, especially with the empowerment of civil society (non-
governmental organizations or NGOs) and the equitable-trade/responsible-investment movem

(i) social responsibility is likely to be a normal good; (ii) information about companies'
practices throughout the world has become much more accessible and quick to travel; (iii) the
scope of environmental and social externalities exerted by multinationals in less developed,
more laxly regulated countries is likely to have expanded in pace with globalization; (iv) the
long-run cost of atmospheric pollution (e.g. global warming), or at least the public's
awareness of it, has risen significantly.

Responding to such demands, business leaders, governments and academics are now also
emphasizing the notion of corporate social responsibility (CSR).

A standard definition of CSR is that it is about sacrificing profits in the social interest.

the firm must go beyond its legal and contractual obligations, on a voluntary basis. CSR
thereby embraces a wide range of behaviours, such as being employee-friendly, environment
friendly, mindful of ethics, respectful of communities where the firm's plants are located, and
even investor-friendly.

1)
Why do citizens and corporations empower themselves and substitute for elected
government? A first and clearly relevant motivation is that government may itself fail.
Government failures have multiple origins:

Capture by lobbies and other interest groups. Gover

Territoriality of jurisdiction. policy constraints.

A combination of inefficiency, high transaction costs, poor information and high delivery
costs.

2)
use preferences are heterogeneous, it is inevitable that some consumers', investors' or
workers' values will not be fully reflected in policy.

Individual Social Responsibility

The implied conclusion that buying social prestige is part of the incentive to engage in
prosocial behaviour is confirmed by several recent experiments:

A blood donation experiment in Italy awarded bronze, silver and gold 'medals' for how often
people donated blood (Lacetera and Macis 2008).

Another interesting finding of the study, which concurs with similar ones for philanthropy in
the arts and education in several countries, is that people tend to 'bunch' right above the cut
offs for each category (e.g. Buraschi and Cornelli 2003). In the absence of image concerns,
contributions would be much more evenly spread.
Such 'concerns about not looking image-concerned' resonate, as they are present in our
everyday lives. Most people hesitate to boast about their good actions and would much rather
have third parties advertise these acts for them. This follows naturally from the logic of
inference: someone who brags about his good deeds signals that he is image concerned and
creates a suspicion about the extent of his true altru

!!!

Before switching to CSR policies of Oil and Gas companies it is important to understand how
CSR movement came to life and what it implies nowadays.
Nowadays almost every corporation’s success depends on its corporate image and reputation.
To achieve that, companies commit to contribute to sustainable development, behave
ethically and increase employees’, local community’s and society’s welfare and quality of
life. Also, they have obligations to meet the expectations of stakeholders. All that is included
into CSR policies and companies which integrate them have a lot of benefits. But there are lot
of nuances as well. And although this topic is very relevant to organisations, general
agreement on universally accepted definition of CSR is still uncertain.
However, experts, scientists and policymakers identify 3 visions of CSR. But before
proceeding to 3 different views of CSR, it is important to how Social responsibility came to
life and what is Individual social responsibility.
Corporate social responsibility also can be referred as corporate ethics, corporate stewardship
or citizenship, corporate accountability, corporate responsibility and responsible
entrepreneurship.
Putting in simple words CSR is the way firms integrate economic, social and environmental
factors into their policies, decision making, values, culture, operations and strategy to make
company more transparent. That allows to establish better practices within the firm, improve
society and create wealth. In business environment CSR is understood as tool to maximise
profit through returning to community.
(Carroll, 1999a,b) argues that Looking back to history can illustrate how CSR developed over
years. It first appeared as a Social Responsibility in 1950 at the times when organisations
knew only how to make profit, but not to give back. With publication of Social
Responsibilities of a Businessman Howard R. Bowen was entitled in history as a founder of
Social Responsibility(SR). First time in history was described why companies should interact
with community and why they owed back to it.
Later in the 1960’s more scientists started to expand on this topic. Keith Davis published
articles and works on SR in which he constructed SR model with 5 principles.
1970’s was a period of flourishing for CSR. That is due to Heald who wrote a textbook
named “The social responsibility of business: company and community”. The precise
definition of CSR wasn’t found, but this textbook increased understanding of CSR.
Later Armandi and Tuzzolini tried to describe CSR with Maslow’s hierarchy theory. It didn’t
happen, but this method helped to find the needed criteria to meet CSR.
In 1980’s the definition of CSR started to involve commitment to organisation’s shareholders
and stakeholders.
In 1990’s such topics as business ethics theory, corporate citizenship and stakeholder theory
were devised. Definition of CSR evolved in 1998, when Hopkins divided the notion of
stakeholders into internal and external, which were direct stakeholders and the ones which
were important to company’s image. In modern times UN created their definition of CSR
which included four aspects: sustainable development, environment, worker’s rights, human
rights, and anti-bribery and anti-corruption. To include these aspects companies nowadays try
to integrate social, environmental and economic issues, what becomes possible by integrating
ESG(environment, society and governance) factors. ESG factors comprise: health and safety,
human rights, ethics and corporate governance, working conditions: health, wages, safety,
hours of work, labor rights. SP the main goal becomes customer’s satisfaction, as well as
transparency, competition on fair terms, exclusion of corruption and bribery, increasing
company’s accountability and performance reporting.
As a result, the definition of CSR was evolving starting from 1950’s Bowen’ to eventually
UN’s definition of CSR. But the essence and meaning were always the same, which is to
form benefit not only as a firm’s interest, but also be of value for society. Simply put by
Davis’s (1960) definition to “extend beyond the organisations’ interest”.
However, there is disparity between practical use of CSR, and this developed through years
concept. This happens mainly due to the fact that companies pay particular attention to media
services and publicity, rather than actual developing CSR concept.

II. Corporate Social Responsibility

Corporate social responsibility (CSR) is somewhat of a 'catch-all' phrase for an array of

different concept

capital. Some CSR advocates argue that there is a business case for good corporate
behaviour, while others discuss it in terms of sacrificing some profit in the quest for the social

three alternative vision of CSR

Views

Vision 1: 'Win-win ('doing well by doing good)

Gatar case:
!!!
The current discussion of CSR is predominantly concerned with the additional contributions
that corporations make to the wellbeing of society.

In particular, this is reflected in the strong focus on the idea of caring about the welfare of
society as a whole. Accordingly, contributing to “doing well by doing good” is a frequently
encountered credo for corporations in business practice and business research. Indeed, CSR
can contribute to a fruitful interplay between business and society. In addition, CSR offers
corporations a variety of opportunities to benefit from, ranging from enhanced customer
loyalty to favorable media coverage, penetration of new markets and improving the well
being of the community
!!!

According to some advocates of CSR, being a good corporate citizen can also make a firm
more profitable. Since firms presumably have no interest in simultaneously reducing profits
and harming society (damaging the environment, hurting workers or consumers), There are
two ways in which it could be reasonably interpret-elaboration

The first one involves the existence of limits to governance and managers' temporal horizons.
As a large literature in finance has emphasized, firms often suffer from a short term bias.

This may be due to poorly structured managerial incentives, but such biases can also result
from well-designed schemes. First, monetary incentives often put more weight on short-term
than on long-term performance

In practice, short-termism often implies both an intertemporal loss of profit and an externality
on stakeholder

That is, managers take decisions that increase short-term profit, but reduce shareholder value
and hurt workers or other constituencies

Alternatively, a firm could economize on safety or pollution control; this also increases short-
run profits, but creates contingent liabilities down the road-risk of future lawsuits, consumer
boycotts and environmental clean-up costs

The upshot is that in this first vision, CSR is about taking a long-term perspective to
maximizing (intertemporal) profit

This suggests that socially responsible investors should position themselves as long-term
investors who monitor management and exert voice to correct short-termism

Vision 2: Delegated philanthropy (the firm as a channel for the expression of citizen values)

For the reasons discussed in Section I, some stakeholders (investors, customers, employees)
are often willing to sacrifice money (yield, purchasing power and wage, respectively) so as to
further social goals. Put differently, stakeholders have some demand for corporations to
engage in philanthropy on their behalf. The corresponding CSR profit sacrifice is then passed
through to stakeholders at their demand
Note that one needs to explain why people would want corporations to do good on their
behalf, rather than doing it on their own or through charitable organizations, churches, etc.

Information and transaction costs are clearly important

Another argument for asking corporations to behave prosocially is that the desired actions are
often not about transferring income to less-favoured populations, but about

refraining from specific behaviours, such as polluting the environment; here there is no
substitute for asking the firm to behave well when the state does not impose constraining
regulations

giant supermarket chain organizing relief convoys to a zone hit by a hurricane, or a large
water-treatment utility setting up a programme of digging water wells for poor, remote
villages in a developing country

Many examples come to mind: Starbucks increases its demand by buying fair-trade coffee
and tea. Other firms advertise heavily that their clothing is made from organic cotton, or is
the product of fair trade. Some corporations provide incentives for employee engagement in
community service, thereby boosting public relations with the local communities and
attracting motivated employees (Besley and Ghatak 2005; Brekke and Nyborg 2008).

View that corporations engage in socially responsible behaviour (SRB) on behalf of

stakeholders is also supported by the observation that 'sin stocks' (tobacco, alcohol, casinos)
exhibit higher returns (Hong and Kacperczyk 2009).

On the other hand, and as we will later discuss, other empirical research fails to demonstrate
a link between CSR behaviour and a lack of profitability

The idea that firms exercising CSR are responding to consumer and investor demand, that
they 'do good' on their behalf, is consistent with the greater prevalence of such practices
among firms that are large, are profitable, produce final goods and are scrutinized by NGOs.

Visibility with respect to stakeholders demanding SRB thus incentivizes firms to engage in
such behaviour.

As with individuals, the image concerns of corporations also have their darker side, taking
here the form of'greenwash': disseminating a misleading picture of environmental friendliness
or other SRB, or one that is accurate in some dimensions but serves to obscure less savoury
ones.

Vision 2 of CSR does not raise any specific corporate governance issue: management caters
to demand and maximizes profit. As with the long-term perspective, profit maximization and
CRS are consistent.
Vision 3: Insider-initiated corporate philanthropy

interpretation of CSR, corporate prosocial behaviour is (at least in part) not motivated by
stakeholders' demands or willingness to sacrifice money for a good cause, but rather reflects
management's or the board members' own desires to engage in philanthropy.

For instance, corporations often give to charities on the boards of which their executives or
own board members sit, or to institutions (concert halls, opera houses, museums) and causes
(e.g. political thinktanks) which their top management favours.16 Profit is then typically not
maximized.

This type of philanthropy has come under attack from both the right and left sides of the
political spectrum. In a well-known piece, Milton Friedman (1970) wrote in essence that
corporations should not do charity with others' money. Rather, managers and directors should
employ their own wealth to this purpose.

Unlike the citizen-delegation view, the view of corporate philanthropy as manage ment-
initiated raises substantial corporate governance issues.

order to be able to practise corporate philanthropy on a large scale (Cespa and Cestone 2007).
The notion of the mission of management being broader than just maximizing shareholder
value necessarily involves some cost to corporations, making it more difficult for them to
raise funds from investors

In practice, the dividing line between the different notions of CSR?long-term perspective
(vision 1), delegated philanthropy (vision 2) and insider-initiated corporate philanthropy
(vision 3)?may be elusive

Companies don’t do these things:

Consider, for instance, the increasingly popular practices of nominating someone with a
good external reputation as a Corporate Sustainability Officer, or of turning to reputable
NGOs for advice and help. Do firms hire a Corporate Sustainability Officer to serve as an
advocate against short-termism?a kind of environmental risk manager, in effect?within the
firm? Or is this executive meant to be a voice for costly prosocial behaviour demanded by
stakeholders? Similarly, consider the introduction of monetary incentives based on
environmental performance

nce. Are they meant, say, to encourage divisional managers to install carbon-free equipment
that is currently unprofitable due to the world's lax attitude toward climate change, but will
reduce future costs when carbon dioxide is taxed at a more reasonable level? Or is a genuine
desire to do good a better interpretation of green incentives than the long-term perspective
view? In the latter case, are these 'green incentives' the object of intense communication to
shareholders (suggesting vision 2) or a confidential policy (suggesting vision 3

In sum, we see that, as with individual consumers and investors, corporate 'socially
responsible behaviours' often carry much ambiguity as to their exact motivation
Do the data help us to tell these theories apart?

Empirical studies often relate corporate profitability with socially responsible behaviour.

We observed that visions 1 and 2 both predict a positive correlation between CSR and
profits,19 while vision 3 predicts the reverse

Free riding

Socially responsible investment, the fair-trade movement, and the desire to be employed by a
socially responsible institution all involve a private provision of a public good. The
temptation to free ride is substantial.

Should corporate social performance be assessed in absolute or relative terms? For example,
an oil company may pollute a lot, but make substantial efforts to reduce its pollution and be
'best in class’

Defining what is socially responsible

What kind of activism? A much debated question for green or ethical funds is the nature of
their action.

Conc

This paper has argued that there are three possible understandings of corporate social
responsibility: the adoption of a more long-term perspective, the delegated exercise of
philanthropy on behalf of stakeholders, and insider-initiated corporate philanthropy

The latter two understandings build on individual social responsibility, which led us to
review individual motivations for prosocial behaviour. We saw that prosocial behaviour by
investors, consumers and workers is driven by a complex set of motives: intrinsic altruism,
material incentives (defined by law and taxes) and social- or self-esteem concerns. These
three motives are mutually interdependent, and both policy-makers and social activists must
have a good understanding of these interactions in order to properly harness people's desire to
behave prosocially

1
Social responsibility

Legal regime!!!

ABSTRACT

Using CSR ratings for 23,000 companies from 114 countries, we find that a firm’s corporate
social responsibility (CSR) rating and its country’s legal origin are strongly correlated.

Legal origin is a stronger explanation than “doing good by doing well” factors or firm and
country characteristics (ownership concentration, political institutions, and globalization):
firms from common law countries have lower CSR than companies from civil law countries,
with Scandinavian civil law firms having the highest CSR ratings. Evidence from quasi-
natural experiments such as scandals and natural disasters suggests that civil law firms are
more responsive to CSR shocks than common law firms.

The classical view in finance on modern corporations takes a shareholder value maximization
perspective, which holds that corporations are accountable only to profit-maximizing
shareholders, and apart from their contractually determined obligations, have no
responsibility to serve other stakeholders’ interests or to enhance society’s welfare (Friedman
(1970), Benabou and Tirole (2010)).

In reality, however, corporations often focus on objectives beyond profit maximization and
participate in activities that improve other stakeholders’ welfare, such as providing employee
benefits, investing in environment-friendly production processes, selecting suppliers that
avoid the use of child labor, and organizing projects to help the poor in less-developed
countries.

Indeed, corporate social responsibility (CSR), a term frequently used to describe such
stakeholder-oriented behaviors, has increasingly become a mainstream business activity
(Kitzmueller and Shimshack (2012)).
This raises the question of why do some firms want to be socially responsible rather than
pure profit maximizers, and more importantly, why firms in some countries engage in CSR to
a greater extent than firms in other countries.

The common explanation for why companies invest in CSR is that doing so enhances
profitability and firm value,1 a relationship often referred to as “doing well by doing good”
(e.g., Dowell, Hart, and Yeung (2000), Orlitzky, Schmidt, and Rynes (2003), Renneboog, Ter
Horst, and Zhang (2008, 2011), Guenster et al. (2011), Deng, Kang, and Low (2013),
Flammer (2015), Krueger (2015), Dimson, Karakas, and Li (2015)).
Other studies consider the inverse, that is, “doing good by doing well,” by examining whether
it is only well-performing firms that can afford to invest in CSR (e.g., Hong, Kubik, and
Scheinkman (2012)). However, neither of these “doing good—doing well” arguments can
explain the cross-firm or cross-country variation in CSR.

For instance, if on average CSR enhances firm value, why do some companies adopt a CSR-
oriented strategy whereas others do so to a lesser extent, and why do companies in some
countries systematically invest more in CSR than companies in other countries?

In addition, these “doing good—doing well” arguments mostly take CSR to be a voluntary
initiative. Extant studies also usually take only one perspective on CSR, such as employee
satisfaction (Edmans (2011, 2012), Edmans, Li, and Zhang (2014)), environmental protection
(e.g., Dowell, Hart, and Yeung (2000), Konar and Cohen (2001)), corporate philanthropy
(e.g., Seifert, Morris, and Bartkus (2004), Masulis and Reza (2015), Liang and Renneboog
(2016)), or consumer satisfaction (e.g., Luo and Bhattacharya (2006), Servaes and Tamayo
(2013)), and test CSR relations for only one country (typically the U.S.).

However, CSR spans multiple dimensions of firm behavior and captures a firm’s effort to
address various externalities that it generates in the process of pursuing profit maximization
(Tirole (2001)) that are not internalized by shareholders (Magill, Quinzii, and Rochet (2015)).

This multi-dimensional and externality-driven nature of CSR suggests that it should be

fundamentally related to not only a firm’s own choice but also regulations, institutional
arrangements, and societal preferences.

Moreover, beyond looking at CSR as a mechanism to address externalities, we consider CSR

as a more fundamental tradeoff between a shareholder focus and an other-stakeholder focus
(at the firm level) (Ferrell, Liang, and Renneboog (2017)), as well as between rules and
discretion by institutions governing economic life.

Such tradeoffs, as we argue, hinge crucially on a firm’s explicit and implicit contractual
environment, which is likely to be shaped by legal rules and enforcement mechanisms that
differ across countries.
In this paper, we examine whether differences in CSR practices across countries can be
explained by relating CSR to a country’s legal origin, which has been shown to
systematically shape various country-level institutions and the firm-level contracting
environment (La Porta, Lopez-de-Silanes, and Shleifer (2008), Doidge, Karolyi, and Stulz
(2007)).

In the context of CSR, a country’s legal regime determines how “public goods” should be
provided by the private sector (corporations): through regulations and rules, firm discretion,
or government involvement in business (Kitzmueller and Shimshack (2012)).

A country’s legal regime also shapes the explicit and (more often) implicit contracts between
shareholders and other stakeholders through its effect on governance structures and the
decision-making process.

A common law origin is a more discretion-oriented system that supports private market
outcomes, places fewer ex ante restrictions on managerial behavior (but discourages
inappropriate or unacceptable behavior by relying on ex post sanctions such as litigation or
other judicial mechanisms), and favors shareholder protection.

A civil law origin, in contrast, is associated with state intervention in economic life through
rules and regulations (e.g. an ex ante delineation of acceptable behavior) and a “stakeholder
view” (La Porta, Lopez-de-Silanes, and Shleifer (2008), Allen, Carletti, and Marquez (2015),
Magill, Quinzii, and Rochet (2015)).

The level of CSR in a country is therefore a result of both a governance tradeoff concerning
the rights and preferences of shareholders and other stakeholders, and the form in which this
tradeoff is made (i.e., by rules or discretion).

Test
To empirically test the legal origin view of CSR, we employ several newly assembled
international databases on firm-level CSR that together cover more than 25,000 large public
companies around the globe. Our CSR data measure corporations’ engagement in and
compliance with environmental, social, and traditional corporate governance (“ESG”) issues,
where engagement refers to a firm’s voluntary investment in CSR projects while compliance
refers to behavior that a firm is required or encouraged to follow.

Engagement and compliance activities across the different ESG dimensions capture various
aspects of stakeholder issues.

As our main focus is on nonfinancial stakeholders (stakeholders other than shareholders,

which are protected by corporate governance mechanisms), our CSR samples mostly rely on
the “E” and “S” dimensions, giving little weight to the “G” dimension.
Using these comprehensive global CSR data, we find that legal origin appears to be the
strongest predictor of CSR adoption and performance at the firm level, stronger than
alternative factors such as political institutions, regulations, social preferences, and a firm’s
financial and operational performance.
Firms with a common law origin score significantly lower on various CSR ratings than civil
law firms, while firms from the Scandinavian legal regime obtain the highest scores on most
of the CSR ratings.

These results survive the inclusion of a large set of country- and firm-level control variables
and the use of different estimation methods such as OLS, GLS, and random-effects ordered
probit models.

The results are further supported by several quasi-natural experiments of global disasters and
scandals that shift societal demand for CSR that allows us to control for country fixed effects
to rule out alternative explanations based on country-level channels.

In these experiments, we find that firms in civil law countries are more responsive to large
natural disasters and industry scandals such as food safety and oil spill pollution.

Such responsiveness does not appear to be explained by changes in firms’ market shares.
When we investigate a number of economic mechanisms for the association between legal
origin and CSR, we find that firms in civil law countries face less shareholder litigation risk
but more regulations concerning stakeholder welfare, rely more on supermajority rules
among shareholders, and have stronger state involvement in their businesses, all of which are
strongly related to higher CSR scores.

Overall, the results suggest that there is a strong link between firm-level CSR and country-
level legal origin, which may help explain cross-country variation in CSR.

CONC

in this paper we examine whether legal origin helps explain cross-country variation in an
increasingly important business activity, namely, CSR.

We assess a firm’s CSR by using proxies for corporate stakeholder concerns, such as
environmental and social policies, and by analyzing large-scale public and proprietary
databases covering over 25,000 securities of large corporations around the world.

We find strong support for the legal origin explanation of CSR scores, much more so than for
alternative explanations, such as CSR’s relation with social preferences, regulatory quality,
political institutions, and culture at the country level, and ownership structure, corporate
governance, and financial performance at the firm level.
CSR scores are higher in civil law countries than in common law countries, and on average
companies with a Scandinavian legal origin have the highest CSR scores.

This is consistent with demand-side arguments that CSR reflects social preferences for good
corporate behavior and a stakeholder orientation, and that such social preferences are more
embedded in rule-based mechanisms that restrict firm behavior ex ante, mechanisms that are
more prevalent in civil law countries.

Such rule-based managerial constraints are less common in common law countries where ex
post settling up mechanisms (i.e., judicial resolutions) are more important.

. In additional evidence we find that the positive link between civil law origin and CSR can
be explained by, among other potential channels: lower shareholder litigation risk, the
presence of supermajority rule in a firm, stronger labor regulations, and a high degree of state
involvement in business.

Evidence from exogenous scandals and disasters further suggests that companies in civil law
countries are more responsive than those in common law countries in terms of improving
their CSR practices when these shocks occur, and that this responsiveness is not likely to be
driven by shifts in market share.

The relevance of our findings is two-fold. At the macro level, our results shed light on the
role of legal origin in driving financial and other economic outcomes, a question subject to
debate since LLSV (1998) first introduces this thesis (e.g., Rajan and Zingales (2003), Roe
(2006), Spamann (2010), La Porta, Lopez-de-Silanes, and Shleifer (2008))

Still, while the debate in the law and finance literature focuses mostly on the protection of
investor rights as well as economic freedom and efficiency based on contracting and
institutional arrangements as governed by legal rules (areas in which the common law origin
appears to be “superior”), little is known about how similar mechanisms relate to the welfare
of other stakeholders.

We show that the common law system supports CSR to less extent than civil law regimes.
This is consistent with LLSV’s premise: the common law tradition emphasizes shareholder
primacy and a private market-oriented strategy of social control, and perhaps because of this
emphasis, it is also less stakeholder-oriented. Stakeholder rights are usually protected by
rules and a state-desired approach to social control.

Of course, CSR may be a result of both rules and discretion, as we find that the level of CSR
is highest under the Scandinavian legal regime, which lies somewhere between heavily rule-
based and discretion-oriented systems.
At the micro level, our findings contribute to our understanding of what drives CSR, which
has recently attracted much interest in finance.

While existing studies focus mostly on the financial and strategic motives for CSR in specific
countries and in specific economic settings, we extend the scope of CSR research to a global
scale by using several large CSR samples with international coverage to analyze the
determinants of CSR at the country level, a question that has received little attention to date.

In addition, we show that our results hold for both CSR engagement and CSR compliance,
which suggests that CSR does not merely focus on corporate strategic actions to boost
financial performance (engagement), or compliance with the rules.

Rather, both engagement and compliance are systematically related to differences in legal
regimes across countries. This focus on the legal contexts underlying CSR also contributes to
the broader theme of corporate governance, especially to the shareholder-stakeholder tradeoff
in modern corporations.

Rather, the results simply show that on average common law societies invest less in CSR

Indeed, some recent studies consider the extent to which CSR crowds out the provision of
public goods provided by other actors (Graff Zivin and Small (2005), Baron (2007)).

In this sense, the higher levels of CSR in civil law countries may reflect constraints to a
larger degree than managerial objectives.

Therefore, firms in different countries may have different value-maximizing levels of CSR,
and it is possible that the legal regimes in some countries can constrain their firms from
achieving such value-maximizing levels, either due to regulations or by shaping a firm’s
attitude towards stakeholders via governance devices.

Overall, the level of CSR in a country reflects the intersection of the supply of socially
responsible behavior by firms and the demand for CSR practices by society, and our findings
suggest that a country’s legal origin may be a primary force behind the equilibrium result.

This result underscores profound role that the legal regime plays in economic life and
suggests that CSR—an increasingly important business activity—is fundamentally related to
the legal origin of a country.

https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=6003&context=lkcsb_research

Socially responsible firms

Legal regime!!!
law, through regulations, criteria and professional international standards

The desirability for corporations to engage in socially responsible behavior has long been
hotly debated among economists, lawyers, and business experts. Back in the 1930s, two
American lawyers, Adolf A. Berle, Jr., and E. Merrick Dodd, Jr., had a famous public debate
addressing the question: To whom are corporations accountable? Berle argued that the
management of a corporation should be held accountable only to shareholders for their
actions, and Dodd argued that corporations were accountable to both the society in which
they operated and their shareholders (Macintosh, 1999).

Two general views, often reflecting the issues raised in the Berle-Dodd debate, on corporate
social responsibility (CSR) prevail in the literature.

The CSR good governance view argues that socially responsible firms, such as firms that
promote efforts to help protect the environment, seek social equality, and improve
community relations, can and often do adhere to value-maximizing corporate governance
practices.

As such, well-governed firms are more likely to be socially responsible

In short, CSR can be consistent with maximizing shareholder wealth as well as achieving
broader societal goals.

Some proponents of the good governance view further argue that firm value maximization
can incorporate stakeholder value, not merely shareholder value (e.g., Edmans, 2011; Deng,
Kang, and Low, 2013)

The opposite view on CSR begins with American economist Milton Friedman‘s well-known
claim that ―the only responsibility of corporations is to make profits‖ (New York Times
Magazine, 1970, p.122).

Extending this view, several researchers argue that CSR is often simply a manifestation of
managerial agency problems inside the firm (Benabou and Tirole, 2010; Cheng, Hong, and
Shue, 2014; Masulis and Reza, 2015) and, hence, problematic (the agency view).

That is to say, socially responsible firms tend to suffer from agency problems, which are also
manifested by managers engaging in CSR that benefits themselves at the expense of
shareholders (Krueger, 2015).

Furthermore, managers engaged in time-consuming CSR activities can lose focus on their
core managerial responsibilities (Jensen, 2001).
Overall, according to the agency view, CSR is generally not in the interest of shareholders.
Friedman even suggested that to think that business should do anything other than make a
profit is to ―harm the foundations of a free society‖ (New York Times Magazine, 1970,
p.122).

Reality could lie somewhere between the good governance and agency views of CSR. Some
CSR-related corporate policies can be the result of good governance consistent with
shareholder value, while others can be driven by agency problems.

For instance, a number of papers show that firm participation in certain social issues, such as
not engaging with sin industries, avoiding nuclear energy, and charity giving, is associated
with higher agency costs and lower shareholder value (e.g., Hillman and Keim, 2001; Brown,
Helland, and Smith, 2006; Di Giuli and Kostovetsky, 2014; Masulis and Reza, 2015). In a
recent study based on the Kinder, Lydenberg, and Domini (KLD) dataset, which provides
CSR ratings for thousands of public US companies, Cheng, Hong, and Shue (2014) find
empirical evidence supporting the argument that managers of large US firms enjoy private
benefits from investing in CSR. Meanwhile, other papers, largely using the same KLD data
set, show that a higher CSR score is on average associated with lower idiosyncratic risk and a
lower probability of financial distress (Lee and Faff, 2009), a lower cost of capital (Goss and
Roberts, 2011; El Ghoul, Guedhami, Kwok, and Mishra, 2011; Dhaliwal, Li, Tsang, and
Yang, 2011; Albuquerque, Durnev, and Koskinen, 2013), more positive sell-side analysts‘
recommendations (Bushee, 2000; Bushee and Noe, 2001), and higher abnormal returns and
long-term post-acquisition returns (Deng, Kang, and Low, 2013).

The CSR empirical literature to date has two major limitations. First, much of the literature is
largely focused only on the ex post effects of CSR. That is, the principal research focus is on
measuring shareholder reactions to CSR as captured by abnormal stock returns (e.g., Dimson,
Karakas, and Li, 2015), the cost of capital (e.g., El Ghoul, Guedhami, Kwok, and Mishra,
2011), and ownership changes (e.g., Cheng, Hong, and Shue, 2014) or on the financial
consequences of CSR spending (e.g., Lee and Faff, 2009)

However, both the good governance and agency views are concerned to a significant extent
with managerial incentives, which are ex ante in nature.

In the agency view, the managerial incentive to engage in CSR is a reflection of the generally
poor incentives of managers at socially responsible firms, i.e., these firms suffer from agency
problems.

These agency problems then manifest themselves in the form of, among others, CSR
activities. In the good governance view, well-run firms, meaning firms in which management
is generally properly incentivized, tend to have managers engaging in appropriate CSR
conduct.
In this way, the debate over CSR connects with the general corporate finance literature on
agency problems and ex ante managerial incentives, a fact that we exploit in our empirical
analyses.

Second, the objective function of a firm is often implicitly assumed in the literature to be
exclusively shareholder wealth maximization, without any independent importance being
placed on third-party effects.

In this regard, it is worth noting that in many countries firms are required by law or social
norms to be concerned not only with shareholders, but also with other stakeholders, such as
employees

Given differing opinions concerning the appropriate objective function within the literature,
question is whether well-governed firms are more
an important research
likely to be socially responsible.

In this paper, we take a comprehensive look at the CSR agency and good governance views
around the globe.

By means of a rich and partly proprietary CSR data set with global coverage across a large
number of countries and composed of thousands of the largest companies, we test these two
views by examining whether traditional corporate finance proxies for firm agency problems,
such as capital spending cash flows, managerial compensation arrangements, ownership
structures, and country-level investor protection laws, account for firms‘ CSR activities

While other studies using a within-country quasi-experimental approach (e.g., Hong, Kubik,
and Scheinkman, 2012; Cheng, Hong, and Shue, 2014) focus on the marginal effect of
variation in agency problems, our data and empirical setting enable us to examine its average
effect.

Instead, consistent with the good governance view, well-governed firms, as represented by
lower cash hoarding and capital spending, higher payout and leverage ratio, and stronger pay-
for-performance,, are more likely to be socially responsible and have higher CSR ratings

In addition, CSR is higher in countries with better legal protection of shareholder rights and
in firms with smaller excess voting power held by controlling shareholders.

Moreover, a higher CSR rating moderates the negative association between a firm‘s
managerial entrenchment and value.
All these findings lend support to the good governance view and suggest that CSR in general
is not inconsistent with shareholder wealth maximization

Conclusion

In most Anglo-American countries, consensus exists that corporate governance is about

―how investors get the managers to give them back their money‖ (Shleifer and Vishny,
1997, p.738).

Corporate social responsibility, because of its focus on stakeholders in addition to

shareholders, is often considered as a form of cash diversion and an agency problem.

In contrast to this agency perspective on CSR stands the good governance view, which states
that CSR activities are often adopted by firms characterized by good governance.

In this debate, legal rules and ownership structures are very different outside the Anglo-
American world, which significantly influences the executives‘ incentives, the fiduciary
duties of the management and the board of directors, and the decision-making process.

In this paper, we utilize public and proprietary data on corporate compliance and engagement
in stakeholder issues to comprehensively assess the agency and good governance views of
CSR.

Instead, higher CSR performance is closely related to tighter cash constraints—usually a

proxy for better disciplined managerial practice in the traditional corporate finance literature
(Jensen, 1986)— and higher pay-forperformance sensitivity.

In addition, CSR is positively related to legal protection of shareholder rights and negatively
related to controlling shareholders‘ expropriation of minority shareholders.

Moreover, we find evidence that a positive correlation exists between CSR and Tobin‘s q in
firms with few agency problems and that CSR and the firm governance that induces CSR
counterbalances the negative association between firm value (proxied by Tobin‘s q) and
managerial entrenchment (captured by the global entrenchment index).

Our empirical results (based on an instrumental variables estimation) suggest that good
governance causes high CSR and that a firm‘s CSR practice is not inconsistent with
shareholder wealth maximization, which induces a positive stance on CSR, also found in
Dimson, Karakas, and Li (2015), and Deng, Kang, and Low (2013).

None of this is to say that more CSR is always better.

Undertaking some CSR activities can be driven by managerial utility considerations, such as
the satisfaction of some personal or moral imperative of the manager, instead of the
enhancement of shareholder wealth (Moser and Martin, 2012).

Moreover, shareholders always internalize the costs of CSR expenditures, and as their
ownership stakes increase, they can reduce spending on CSR.

Our main argument is that, in general, corporate social responsibility need not to be
inevitably induced by agency problems but can be consistent with a core value of capitalism,
generating more returns to investors, through enhancing firm value and shareholder wealth.

several policy implications

Undoubtedly, governments have a responsibility for dealing with market failures and
externalities, but government might not always be incentivized and effective in achieving this
goal.

Governments can be corrupt, inefficient, and even predatory towards the private sector
(Shleifer and Vishny, 1998), in which case they fail to provide public goods.

Therefore, corporate social responsibility in the private sector— the private provision of
public goods (Kitzmueller and Shimshack, 2012)—can be important for preserving social
welfare

While many researchers believe that such private provision of public goods can be associated
with agency problems that divert shareholder wealth and even undermine the foundations of
capitalism, we cast doubt on such belief. Corporate governance reforms should take into
account such positive externalities.