Why do firms do bad things?
|Datum:||15 juni 2022|
Corporate social responsibility (CSR) and irresponsibility (CSIR) are subjects of increasing interest in business practice and research. Researchers keep talking about the benefits of corporate social responsibility and the bad influences of irresponsible activities. For example, corporate social responsibility help firms gain trust and support from stakeholders; on the contrary, irresponsibility activities damage the reputation of focal firms and threaten firm survival. Even worse, bad firm behaviors always appear in the news. One might wonder why corporates do bad things since they lead to various negative outcomes.
First of all, corporate social responsibility is a rational decision made by firms and top managers. A great many of research argue that CSR can increase firm performance in indirect ways, such as enhancing firm capabilities, competitive advantages, and reputation. However, irresponsible behaviors could increase performance straightforwardly. For example, providing unethical sales practices can increase sales and generate revenue in a short time, while dumping raw sewage can reduce the treatment cost. Researchers have discussed the reasons for CSIR behaviors from two perspectives, namely pressures and opportunities.
Pressures are from different people and organizations, including customers, industry groups, suppliers, financial institutions, and shareholders. Higher expectations from internal and external stakeholders bring pressure to corporates. Making already “good” performance better is really hard but firms do not want to disappoint their stakeholders. However, this pressure might increase the likelihood of subsequently illegal behaviors (Mishina, Dykes, Block, and Pollock, 2010). Additionally, the pressure from competitors can also lead to CSIR activities because corporates may do anything to survive. In addition to pressure, CSIR practices need certain environmental and organizational conditions. The legal environment is very important: if laws and regulations are ambiguous, managers might engage in unethical behaviors to take advantage of unclarity in the law. Moreover, the corporates emphasizing innovation generally decentralize controls, creating an opportunity for employees to develop innovative but unethical solutions to problems.
Although CSIR can increase firm performance directly, it might have a negative impact - punishment from stakeholders. However, stakeholders do not always do this. One of the reasons is that stakeholders might not notice the CSIR practices. Despite their noticing the bad behaviors of firms, their judgment of CSIR is affected by various factors, such as firms’ image and their interpretation of the bad events. Therefore, it is possible for firms to rationalize bad behaviors to avoid punishment. When corporates cannot justify their social irresponsibility, they might do something to make stakeholders “forget” the corporate irresponsible event by manipulating the attention devoted to a corporate irresponsibility event and even silencing remembers (Mena Rintamaki and Fleming, 2016). Thus, even if corporates engage in socially irresponsible activities, they might not be impacted adversely. In this case, in which CSIR brings profit without punishment, it is not surprising that corporates made unethical decisions.
Author: Elle Li - firstname.lastname@example.org
Mishina, Y., Dykes, B. J., Block, E. S., & Pollock, T. G. (2010). Why “good” firms do bad things: The effects of high aspirations, high expectations, and prominence on the incidence of corporate illegality. Academy of Management Journal, 53(4), 701-722.
Mena, S., Rintamäki, J., Fleming, P., & Spicer, A. (2016). On the forgetting of corporate irresponsibility. Academy of Management Review, 41(4), 720-738.