Unearthing the Roots of Corporate Social Irresponsibility

Unrealistic performance expectations, a pressure-cooker culture and stress are just some of the factors that lead to irresponsible workplace behaviour.

Unrealistic performance expectations, a pressure-cooker culture and stress are just some of the factors that can lead to irresponsible workplace behaviour.

the debate around corporate social responsibilIN RECENT YEARS, ity (CSR) has evolved from whether firms should be responsible for more than just profits to how firms can be profitable while respecting people and communities and preserving the environment. While CSR has been widely embraced, corporate social irresponsibility (CSIR) continues to be widespread. Examples range from oil spills to misrepresenting the environmental benefits of products to unsafe working conditions, sexual harassment, unethical sales practices and accounting scandals.

Some of the organizations involved in these activities have even had reputations for CSR achievements. Indeed, research shows that some may be motivated to engage in CSR as a proactive way to camouflage, offset or compensate for prior or future CSIR.

In this article I will take a look at the roots of CSIR and what leaders can do to eradicate it in their organization.

Enablers of Irresponsible Behaviour

Individuals function within systems that are either enablers of CSIR or deterrents of it. Following are five common enablers of CSIR that leaders can take steps to proactively influence.

Pressure — or a lack thereof—has been shown to be PRESSURE. an antecedent of fraud, greenwashing and other forms of CSIR. Pressure can come in many forms and from different people or institutions. Scholars have studied how pressure from different stakeholder groups in relation to CSR initiatives influences the adoption of environmental practices. This research considers

different degrees of adoption, from superficial or symbolic adoption at one end of the spectrum to substantial adoption and the internalization of environmental practices at the other end.

Evidence suggests that pressure from customers and industry groups often relates to superficial or symbolic adoption, whereas pressure from shareholders, banks, financial institutions, or suppliers relates to substantial adoption or ‘corporate greening’. One study showed that firms that achieve performance above social expectations are more likely to engage subsequently in illegal behaviours. The authors reason that the pressure organizations face to surpass their own performance achievements might explain their subsequent illegality. Thus, it appears that the source of the pressure does matter, and it can facilitate or deter CSR progress and even facilitate CSIR.

One common form of pressure is time pressure. Organizations are under constant pressure to move quickly in response to increased competition, especially in industries where innovation is critical. In a study of organizational speed in two beverage producers over a ten-year period, researchers considered the frequency of activity related to CSIR (e.g. product recall, pollution). Findings showed a greater number of organizational mishaps in the beverage producer that scored higher on organization speed. Elsewhere, a study of CSR managers reported that they experience intense pressure to improve in the various CSR rankings and face what can be unrealistic performance expectations, which can give rise to CSIR.

Much has been written about the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. In a Federal ruling, BP was found to be primarily responsible (although not solely responsible) for the disaster. Interpretations of the ruling make note of the role that the decision to continue drilling in an effort to save time and money played in the disaster despite evidence from testing that suggested the drilling should stop.

The design of incentive systems can encourINCENTIVE SYSTEMS. age the type of risky decision-making that, if left unmanaged, can result in unethical behaviour. One high-profile case is Enron, where practices contributed to a culture that rewarded risky behaviour and a focus on the short term. A ‘rank-and-yank‘ performance review system, heavy reliance on stock options, and potential for large bonuses put pressure on individuals to close deals even if they created little or no value for Enron. The company was able to mask the downside of deals gone wrong due to the low transparency that permeated the enterprise more generally and to the low transparency that was afforded by some of these practices. Elsewhere, a study of CEO pay structure and CSR found that a structure that rewards short-term performance relates to less CSR compared to a structure that focuses on longterm performance.

The Role of Organizational Climate

‘Climate’ is the collective perceptions individuals develop from their cumulative experiences in a workplace. Individuals’ interactions with policies, practices, procedures, and the work context more broadly comprise climate perceptions. The experiences of each employee are referred to as ‘psychological climate’, where as the aggregated composite of the experiences and perceptions of several individuals at work comprises the ‘organizational climate’.

Climate has been shown to impact work outcomes at the individual, group, and organization level of analysis. Two types of climates are of particular interest in terms of CSIR:

CLIMATE. Aspects of the work context that are of an ETHICAL ethical or moral nature shape what has been referred to as the ‘ethical work climate’. Research shows that the perceptions employees have of the organization’s CSR initiatives relate to their

A strong diversity climate has been associated with increased loyalty, customer satisfaction, and lower turnover.