International Business- Article Review

How can leaders of multinational organizations be ethical by contributing to corporate social responsibility initiatives? Guidelines and pitfalls for leaders trying to do good

Paresh Mishra *,1, Gordon B. Schmidt 1

Purdue University, Fort Wayne, 2101 E. Coliseum Boulevard, Fort Wayne, IN 46805, U.S.A.

Business Horizons (2018) 61, 833—843

Available online at www.sciencedirect.com

ScienceDirect www.elsevier.com/locate/bushor

KEYWORDS Corporate social responsibility; Multinational enterprises; Greenwashing; Transformational leadership; Participative leadership

Abstract Corporate social responsibility (CSR) is a laudable goal for multinational enterprises (MNEs) because of the significant positive impact they can bring to the society and environment around the world. However, there are significant challenges to the practice of CSR in MNEs. This article discusses two major barriers to CSR that are especially significant for MNEs: leaders’ attitudes and cultural variance. We then apply insights from Rest’s ethical decision-making and cross-cultural research to offer guidance to leaders of MNEs to implement CSR in their organizations. We present a multistep process by which leaders first reflect on and clarify what goals they want to accomplish in the realm of CSR and then how to build consensus for those goals and modify them to incorporate the values and beliefs of local constituents. # 2018 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.

* Corresponding author E-mail addresses: [email protected] (P. Mishra),

[email protected] (G.B. Schmidt) 1 Authors contributed equally and are listed alphabetically

https://doi.org/10.1016/j.bushor.2018.07.011 0007-6813/# 2018 Kelley School of Business, Indiana University. Pu

1. Globalization: A love/hate relationship

Globalization is one of the most hotly debated topics in the social sciences. This is not surprising because it is a complex phenomenon with multiple and competing narratives, ideologies, and world-

blished by Elsevier Inc. All rights reserved.

834 P. Mishra, G.B. Schmidt

views. More importantly, it is a force that brought about profound changes in economies, govern- ments, cultures, technologies, organizations, peo- ple, families, and the environment–—and not always in positive ways. Whether we love globalization for the opportunities it brings or hate it for the dis- ruptions it causes, it is undeniable that the world we live in today is historically the most globalized world ever, and we are on a relentless path toward even more globalization.

Seemingly trivial and routine decisions that we make today in our personal and professional lives impact the lives of people on the opposite side of the planet. The shoes or shirts that we buy at some fashion store in the U.S. may have ripple effects in the lives of thousands of people working in a sweat- shop in Bangladesh where these products might have been manufactured. A manager’s decision to upgrade all the computers in his office with the latest models every 2 years may impact the lives of factory workers manufacturing and assembling these gadgets across different parts of Asia or the environment and health of millions of people living in certain regions of China, India, Nigeria, and Ghana that have become the dumping grounds of the developed world’s electronic waste (Kiddee, Naidu, & Wong, 2013).

The globalized world has made each one of us into the metaphorical butterfly of Edward Lorenz’s (1995) Butterfly Effect; in a dynamically intercon- nected system like the Earth’s ecosystem, the mere flapping of the wings of a butterfly in Brazil can cause a tornado in Texas a few days later. In the dynamic interconnectedness of the globalized world, a seemingly minor action of a human being has the potential to influence the lives of thousands of people around the globe. If a single human being’s action can impact so many lives around the world, one can only imagine the potential scale of the impact generated by a multinational enter- prise (MNE).

The size of many MNEs today is mind-boggling. Some have annual revenues that surpass the annual GDP of the vast majority of countries; the world’s largest 100 economies in 2016 consisted of only 31 countries but 69 corporations (Green, 2016). The annual revenue of Walmart, the largest corpo- ration on this list, was higher than the annual GDP of all but just nine countries of the world. Thus, if the magnitude of the impact of a human being’s action can be equivalent to that of a butterfly creating a tornado, then the impact potential of an MNE could be even larger than a cataclysmic Geostorm–—borrowing the name of a 2017 science fiction disaster film–— spread across the entire world.

The immense scale of impact of MNEs is not just hypothetical. Research published by Heede (2014) showed that just 90 large companies contributed 66% of the total humanity-caused global warming emissions between 1751 and 2010. According to a report by The Economics of Ecosystems and Biodi- versity (TEEB) that is part of the United Nations Environment Program, the monetary cost of the environmental damage caused by businesses was estimated at $4.7 trillion per year (Fellow, 2013). Globalization contributed to the acceleration and intensification of global climate change that affects us all. This Great Acceleration, as it has been termed, is changing the Earth’s geology and eco- systems at such grand scales that scientists say a new human-induced geological epoch called the Anthropocene epoch as begun (Barnosky et al., 2012).

Because of MNEs’ high potential for global im- pact, it is critically important that every MNE con- ducts its business with the utmost sensitivity and responsibility. In other words, the importance of ethics in the global business landscape is more important than ever.

The purpose of our article is to make a case for corporate social responsibility (CSR) as the primary means of conducting responsible business in to- day’s globalized world. We first discuss the mean- ing of CSR and its varied manifestations. Next, we discuss the role of leadership in CSR. Then we identify the key drivers and barriers that influence leaders’ approach to CSR in MNEs. We classify these factors as either generic, which would apply to MNEs across the world, or culture specific, which would be relevant only in certain regions of the world. Based on this analysis, we offer a few suggestions for leaders of MNEs to help them over- come some of the unique challenges that come from implementation of CSR strategies in the glob- al environment.

2. What is CSR?

CSR is a complex topic. It rests on the idea that all businesses have a responsibility toward the larger society. It is a form of self-regulation that tries to eliminate or at least minimize the harm it may otherwise cause through its business processes. It is also the eagerness with which business organiza- tions consider the interests of the larger society their responsibility and proactively attempt to do good for the society and environment.

Researchers have proposed numerous defini- tions of CSR that can vary significantly, in part because CSR is a dynamic concept and thus its

Guidelines and pitfalls for leaders trying to do good 835

meaning varies by time, context, and culture. What may be seen as good and responsible in one country or in one era may seem reprehensible in another.

However, despite the plethora of definitions of CSR, there is a general agreement about its core aspects. Drawing on the work of Carroll (1999), McWilliams and Siegel (2001), and many other re- searchers, we conclude that CSR refers to all those organizational actions that are meant to further the good of society and environment, and go beyond the company’s legal obligations. There are two key components within the construct of CSR. First, while businesses perform a wide variety of actions, CSR refers only to a subset of those actions that are explicitly aimed toward the betterment of society and the environment. Second, CSR only refers to those society- and environment-friendly actions that an organization is not legally mandated to perform. In other words, CSR is associated with voluntary actions. While paying environmental tax may help the environment, it would not be consid- ered CSR because businesses are legally obligated to pay their taxes.

As long as the above two conditions are met, perhaps any action could be designated as CSR. CSR actions may be directed inside the firm (e.g., mak- ing the production process more environmentally friendly), across the firm’s value chain (e.g., pro- curing goods only from certified fair trade suppli- ers), and outside the firm (e.g., creating infrastructure for local communities). The avenue of social good can also vary and includes environ- mental (e.g., only using sustainable materials in production), worker welfare (e.g., paying a living wage), and charity work (e.g., donations into a community).

A popular way of conceptualizing CSR is through the idea that organizations should be pursuing not only the financial bottom line but also the triple bottom line, which includes social and environmen- tal performance along with the traditional financial considerations (Norman & MacDonald, 2004).

CSR actions can vary widely across MNEs. They may include making charity donations, supporting of local communities, using ecofriendly materi- als, volunteering organizational time and resour- ces to social causes, and even safeguarding human rights in areas with unstable governments. As MNEs spread across many different countries, CSR also spans many countries. This raises the inevitable question: Should MNEs opt for a CSR strategy that is homogenous across the world or should they tweak their CSR approach to the idiosyncrasies of the different countries in which they operate?

3. Global versus local strategies of CSR

Arthaud-Day (2005) identified four different CSR strategic orientations that MNEs take. In the multi- national orientation, companies seek to take up social responsibilities that conform to local culture, custom, and religion. A Western MNE operating in a developing country may decide to be more accom- modating to child labor, realizing that children may engage in labor to contribute financial support to their poor families.

The second orientation is the global approach to CSR, which focuses on hypernorms, or universal principles that are valued in all cultures (Arthaud-Day, 2005). According to Donaldson and Dunfee (1994), who coined the term, MNEs should pursue hypernorms by providing quality health and safety standards for all employees, by respecting fundamental human rights of all people and by instituting systems that minimize all forms of envi- ronmental pollution.

The third approach is the international approach, which involves exporting domestic CSR philosophies and practices from where the organization is head- quartered to other countries without making any effort to adapt them to the circumstances in foreign countries. This is not often a recommended ap- proach because it can result in a version of moral imperialism, where the morals of one country are imposed on other countries. It can also be ineffec- tive as citizens of other countries might resent or even resist the attitudes and actions imported from far-off lands (Arthaud-Day, 2005).

The final approach offered by Arthaud-Day (2005) is the transnational approach, where organizations recognize that global and local approaches to CSR need not be mutually exclusive, and that local perspectives should be taken into consideration even while implementing global universals.

4. The necessity of a balanced approach

In this article, we take the position that the trans- national approach is the ideal approach for MNEs because it provides a counter to the universal/local dichotomy. Effective CSR is not about universal versus local values, but about marrying the univer- sal ethical values with the local ones. It’s about recognizing the universal values and acting accord- ing to them, but in a way that doesn’t disrespect the values and traditions of the local culture. This often would include engaging workers across the MNE in discussing and creating those applications of

836 P. Mishra, G.B. Schmidt

universal values. So to some degree, it’s about giving the universal values a local color in the practice of CSR, helping to motivate agreement and action across the MNE.

The primary reason the transnational approach is most suitable for implementing CSR in MNEs is because MNEs operate in a global environment that is dynamic. Thus, the company’s approach to im- plementing CSR also needs to be dynamic. A dynam- ic approach recognizes the fact that in a global environment, new factors will periodically emerge that may necessitate changing the nature and ex- tent of CSR responsibilities practiced by an MNE. MNEs cannot afford to be stuck in the other ap- proaches described by Arthaud-Day (2005) because they are relatively static and assume that the so- cial, political, economic, and legal environment within which the company operates will always be in line with either universal, ethnocentric, or local values.

5. Role of leaders in CSR

MNEs–—like other forms of business organizations–—are legal entities that have a legal standing in the eyes of law. However, it’s the leaders running the MNEs who make all the important decisions on behalf of these organiza- tions. Therefore, leaders play a crucial role in how and even whether MNEs engage in CSR.

Leadership refers to the process of influencing a group or an organization to realize certain objec- tives. When CSR is viewed as an organization’s goal to further the good of society and environment beyond its legal obligations, the importance of leadership in CSR becomes obvious. Even when CSR is defined in terms of realizing the goal of fulfilling the triple bottom line, the role of leader- ship is undeniable.

Perhaps the most important reason why the role of leadership is critical to MNEs is that the basic structure and system of all MNEs–—unlike those of nonprofit organizations or democratic governments–—are geared toward maximizing prof- its. As discussed in the introduction to this article, the actions of MNEs may have huge societal and environmental impact, which causes us to advocate for MNEs to take up social responsibilities. However, since the systems within MNEs weren’t specifically created to do good for the society and environment, without leadership intervention, there may be little to no practice of CSR in MNEs. Leadership matters in CSR. Effective CSR in MNEs is only possible with responsible and effective leadership in these orga- nizations.

Stated differently, leaders are the actual drivers of CSR in MNEs. Their attitudes and behaviors can significantly influence the extent and nature of CSR practiced at any MNE. Unfortunately, research that combines leadership and CSR is in its infancy (Strand, 2011). Leadership and CSR are large inde- pendent bodies of literature in the business disci- pline, but there are very few studies that examine the role of leadership in CSR. The good news is that the studies that have investigated the intersection of leadership and CSR help in the identification of some significant global and local factors that can prevent leaders from implementing CSR in MNEs. We list these barriers to CSR, and later suggest ways to overcome them.

6. Barriers to effective CSR in MNEs

CSR literature has identified many barriers to ef- fective CSR. However, not all of these factors are relevant for MNEs. The cost/benefit ratio of a CSR initiative may be very relevant for small and medium-sized enterprises (SMEs) that have limited financial capacity but are of little to no relevance for MNEs that have the advantage of economies of scale (Laudal, 2011; McWilliams & Siegel, 2001). In this short review of barriers, we focus primarily on psychological factors that are likely to influence the extent of CSR practiced in MNEs.

6.1. Leader’s attitude about CSR

CSR would not be possible in any organization with- out the firm’s leadership having favorable attitudes toward CSR. Leaders will commit to CSR only when they truly believe in its value. However, a leader’s conception of CSR, especially those in charge of large MNEs, is not always positive. This is because they usually had their education and training in the tradition of a free-market economy in which the prevailing view is that CSR is not the responsibility of any business organization (Ghoshal, 2005). Peter Drucker, who is considered the father of modern management, once asserted in an interview: “CSR is a dangerous distortion of business principles. If you find an executive who wants to take on social responsibilities, fire him fast” (Banerjee, 2007, p. 51).

While the proponents of CSR contend that busi- nesses have social and environmental responsibili- ties, the opponents vehemently argue against businesses having such responsibilities. In a debate on what constitutes the social responsibility of business (Friedman, Mackey, & Rodgers, 2005), John Mackey, the founder and CEO of Whole Foods,

Guidelines and pitfalls for leaders trying to do good 837

talked about his business not depending on the invisible hand and embracing the new form of capi- talism that worked consciously for the common good. However, the Nobel Prize-winning economist Milton Friedman argued in the same debate that the one and only one social responsibility of businesses was to increase profits. Reiterating views from his book Capitalism and Freedom, Friedman (1962) argued that as long as businesses don’t engage in any fraudulent activities, the pursuit of profits was all that mattered. Similar disagreements have also been expressed by others. Jack Welch, the former CEO of General Electric (GE), criticized GE’s later foray into green and socially responsible business practices, emphasizing that the main social respon- sibility for a company should always be to win (Singh, 2011).

6.2. Cultural influences on CSR

The topic of CSR gets muddled when we discuss its relevance in the context of global business environ- ments because values, norms, and practices vary dramatically across nations and cultures. When customers and consumers of a country are well informed about societal and environmental mat- ters, they are likely to put pressure on MNEs to engage in responsible business practices. The cul- ture, traditions, and values of the national origin of the MNEs–—as well as the host country–—can influ- ence the level of CSR practiced by the MNEs. The culture of the country of origin may influence the style of functioning of MNEs and how much emphasis they place on human welfare and environmental issues. The culture of the host country can also influence CSR tremendously.

Waldman et al. (2006) found that cultural factors strongly influence the CSR values of leaders. Spe- cifically, they found that leaders coming from cul- tures with high levels of institutional collectivism demonstrated positive attitudes toward CSR. They also found that MNEs in high power distance cultures had lower concern for stakeholders such as employ- ees, customers, and the environment. Strand (2011) reported that leaders from feminine cultures tend to demonstrate stronger CSR performance than those from masculine cultures.

Although it is not clearly known why certain cultures may be associated with low CSR, it is possible that numerous mechanisms are at play. Leaders from high power distance cultures may be more removed from the difficulties faced by em- ployees and customers, and consequently have less empathy for them. Also, employees tend to not express their voice freely in high power dis- tance cultures, which may place less pressure on

leaders to act responsibly. Since masculine cul- tures tend to give economic growth a higher pri- ority and care for people and the environment a lower priority (Hofstede, 1983), leaders in these cultures may feel less normative pressure to en- gage in CSR.

CSR can also be controversial in nature as people with different values may not agree on what corpo- rate behaviors are responsible; there are prominent examples of organizations that have engaged in what has been termed greenwashing, taking corpo- rate actions that look environmentally responsible to the public but in fact have little positive impact, being little more than public relations stunts (Banerjee, 2007). CSR is a major concept in inter- national business and an area almost all organiza- tional leaders need to engage in.

7. Why do MNEs act irresponsibly?

To understand why MNEs act unethically or irre- sponsibly, it is critical to understand the factors that influence moral decision making. We apply Rest’s theory of individual ethical decision making to explain the causes behind the moral and immor- al decisions that occur in global business organiza- tions. Rest (1986), in his landmark treatise on moral development, identified four distinct com- ponents of ethical decision making. In order for people to act morally in any particular situation, first and foremost, they have to interpret the situation from a moral dimension. In other words, they have to be morally sensitive to how their action might affect other people or the environ- ment positively or negatively. Second, they have to figure out the morally right course of action (moral judgment). They next need to have the intention (or moral motivation) to act in consonance with their judgment. Finally, they would need to have sufficient ego strength, perseverance, and imple- mentation skills to follow through on their inten- tions (moral character). According to Rest, people may behave unethically because of lapses in any of the above stages.

Applying Rest’s model into the global business environment, when leaders of MNEs do not behave ethically, it is either because (1) they fail to recognize how their actions affect people and the environment around the world, (2) they lack the capacity to make moral decisions, (3) they don’t feel attracted by the possible outcomes of making a moral choice, and/or (4) they don’t have the character strength to carry through their mor- al intentions in the face of obstacles and chal- lenges.

838 P. Mishra, G.B. Schmidt

8. Solutions

As seen previously, there are significant challenges for leaders in MNEs who are trying to be ethical. These challenges help illustrate why CSR initiatives are often more talk by top leaders than organiza- tional actions. While such talk can be valuable as it can serve an aspirational function (Christensen, Mackey, & Whetten, 2014), most people place greater value on the actions taking place. In this next section, we offer a four-step process to help leaders manage these challenges and help their MNE engage in CSR. Depending on the context of the organization, its employees, stakeholders, and cus- tomers, some of these steps will be more or less relevant and more or less difficult to accomplish. We offer them as a generic model for considering the issues that can arise and initial solutions that can help such issues.

8.1. Step #1: Determine organizational meaning of what is good and craft a connected vision for the organization

People can often disagree on what constitutes an ethical action based on their own moral values. While people can often agree that profit to share- holders, support to the community, and environ- mental well-being are worthy things to strive for, how these balance and what is seen as beneficial to each category varies widely (Eabrasu, 2012).

With such potential for disagreement based on individual values, it is crucial for leaders to define what they mean when they talk about doing good in relation to the environment, community, and share- holders. The assumption that people agree with each other’s implicit and unstated definitions is not well founded (Eabrasu, 2012). Such definitions help define nuanced visions for the mission of the organization.

8.1.1. Intellectual stimulation One way in which leaders might consider definitions of what is good and ethical is through the lens of transformational leadership known as intellectual stimulation. Leaders who engage in intellectual stimulation-related behaviors encourage others to think for themselves and to question long-held assumptions (Robertson & Barling, 2013). This also can be seen as aligning with Rest’s (1986) compo- nents of being morally sensitive, considering how one’s actions may affect others, and moral judg- ment determining the morally right course of ac- tion. In defining the goals of CSR for an organization, leaders can engage in reflections and question

assumptions coming with clear definitions of what good is. When this is clearly defined by the leader, that definition can be better explained to others in the organization.

Defining clearly what the good is for an organi- zation can also be important in making sure the complexity of organizational CSR goals is consid- ered. Organizations do not want to miss important concerns or drawbacks when goals are being con- sidered. During the 2008 economic crisis, the three biggest banks in Iceland collapsed due to bad loans and investments. All three banks were heavily in- volved in CSR initiatives with mission statements and annual reports touting humanitarian and cul- tural donations. They were all devoted to helping the local community through donations (Sigurthorsson, 2012). This proved to be a narrow view, as only donations were viewed as counting as CSR actions, and not other ways of helping the community. This view may have in part led them to ignore the moral consequences of investing com- munity money in risky investments, which ultimate- ly led to the banks collapsing. By not fully and more broadly considering what doing good for the com- munity meant and should entail, their actions in the long run hurt the well-being of the community.

Clearly defining the philosophy of how the orga- nization will balance environmental, social, and economic good is also beneficial. Organizations are often seen as hypocritical or engaging in green- washing because when different values come into conflict, decisions are made favoring initiatives that some employees or some in the public might not prefer. It is important for firms to make clear how various aspects of the organization’s goals interact with each other and which parts of the CSR vision are action focused and which are more future aspi- ration focused (Christensen et al., 2014).

8.1.2. Compelling vision Once organizations have defined the idea of good, organizations need to create a compelling vision. Vision statements help define an ideal future state (Kopaneva & Sias, 2015). The vision should be one that is clear and understandable, but also one that appeals to the goals and values of employees, customers, and stakeholders. The vision here is probably most resonant when it fits with transfor- mational leadership that articulates a compelling and clear vision. Robertson and Barling (2013) wrote about this specifically in relation to environ- mental sustainability; they advocated for an envi- ronmental transformation leader presenting a mission that inspires followers to look beyond in- dividual needs to the collective good of environ- mental stability.

Guidelines and pitfalls for leaders trying to do good 839

8.2. Step #2: Discuss and gain feedback from employees, stakeholders, and customers on what is good and revise CSR vision accordingly

Even with a compelling vision, leaders need to gain feedback from employees, stakeholders, and cus- tomers on possible CSR initiatives. While the previ- ous steps should help clarify the vision and specific components of the CSR plan, there is always the chance an important area was missed. Members of all three groups may disagree on some aspect of the mission due to individual differences in values or conflicting cultural norms. A CSR initiative focused exclusively on an individual initiative might not seem compelling in a collectivist culture. No leader or leadership team can create a perfect vision; the feedback of others helps it improve and find more acceptance.

8.2.1. Participative leadership Too often, organizations try to avoid criticism or differences of opinion. This can, in part, lead to a top-down approach in which leaders communicate a vision and expect blind obedience to that vision. This may seem to work in high power distance cultures, in which people accept that individuals such as leaders and managers have much more power and influence (Hofstede, 1983), but may not be truly supportive. Participation brings out more opinions regarding what should be done. Ad- ditional moral standpoints do not prevent imple- mentation of moral solutions, rather (Eabrasu, 2012) they help to give more depth and moral nuance. Eabrasu (2012) argued that such discussions and disagreements can lead to moral empowerment of workers, stakeholders, and customers as they feel included and invested in the process. This has the potential to strengthen the scope and power of the CSR initiative.

Discussions with employees regarding the orga- nization’s vision for CSR can also help fill an aspira- tional function. Christensen et al. (2014) argued that discussing important CSR issues helps people aspire to reach those goals. The talk itself gives a vision for what the organization might become. This vision can help compare the current organizational state to a desired future state. This may help motivate workers to consider their own goals and potential role in a CSR initiative. Thus, the discus- sion itself can start the groundwork for acceptance and implementation of the CSR initiative.

It is also important to note that talking to em- ployees helps them to understand the vision of the organization better and in more depth. Kopaneva and Sias (2015) found there is a significant lack of

congruence between official organization mission statements and what employees described as the mission. Employees often did not mention major themes and had a significantly more narrow vision of what the organization looked to accomplish in the present and future. This is a concern for any CSR initiative as employees are the ones who are doing the day-to-day work on the CSR initiative. An inac- curate understanding of the vision can lead to wasted effort and hinder success.

Including employees in the creation of a CSR vision and the form of CSR undertaken should also help in the creation of a CSR vision that employees feel passionate about. One major argument for CSR initiatives from a business perspective is that they can help to recruit and retain talented people who want to make a difference (Sprinkle & Maines, 2010). Discussing CSR definitions and visions with current workers and giving them input is likely to help strengthen such benefits with current employ- ees.

Gaining stakeholders’ feedback is also crucial to the process. CSR initiatives can end up being a point of conflict between the organization and its stake- holders. Barnea and Rubin (2010) found that when firm insiders and managers had less ownership (i.e., stock) in the organization, the organization tended to have higher CSR ratings on their KLD social responsibility index. When managers had ownership of the organization, they were more likely to en- gage in profit-focused actions, not CSR-focused actions. Thus, there seemed to be a conflict be- tween insiders who wanted to conduct CSR initia- tives to improve their own reputation and have the positive warm glow of doing good, and the profit maximization focus of some stakeholders.

To reduce this problem and help secure more stakeholder buy-in, MNE leadership should be in- tentional about including as many stakeholders as possible in the CSR vision creation process. Gilley, Robertson, and Mazur (2010) discussed the impor- tance of including stakeholders in the ethics code creation process. They see stakeholder involvement having importance for making sure ethics codes are comprehensive enough and discovering ways to create mutual value with stakeholders.

While Gilley et al. (2010) discussed this collabo- ration with stakeholders with regard to creating ethics codes, similar principles should apply in crafting CSR visions. Stakeholders may interact with relevant aspects of the CSR area that the organiza- tion does not. Thus, if an organization wants to engage in CSR related to environmental sustainabil- ity, community members may know of areas in dire need of help or areas that could be greatly benefit- ed by cleanup programs. Community members may

840 P. Mishra, G.B. Schmidt

also see unanticipated consequences for CSR ac- tions proposed by the organization. Stakeholders may also want to be active participants in the CSR initiatives rather than just passively informed of company initiatives. Discussions with stakeholders would allow the organization and stakeholders to see areas for collaboration on the important CSR issues. These areas for collaboration will likely differ by stakeholder and might differ by the coun- try or region the organization is in.

Finally, customers need to be part of the discus- sion on the CSR vision of the organization. Custom- ers are likely to be impacted by CSR initiatives in a variety of ways: cost of products, products sold, marketing of products, or organizational messages to donate time or money to causes relevant to the CSR mission. If customers do not agree with how the organization defines good (Eabrasu, 2012) and how the organization spends its profits, the market has the potential to punish the organization by ceasing to purchase from the company. This would hurt the bottom line of company in terms of profits and potentially threaten the company’s ability to stay solvent. In short, a mismatch between CSR vision and customer values could be disastrous.

Customers’ perceptions of the CSR issue can help determine which elements of the stand made by the organization might be seen as beneficial or detri- mental. This could help create a more nuanced approach in balancing fiduciary responsibility and guide where the organization contributes to a CSR mission (Weinzimmer & Esken, 2016). Customers may have valuable knowledge and perspectives on a social issue that help the organization’s vision to be clearer and more focused.

While a mismatch could have major negative repercussions, there are also great opportunities for collaboration between customers and the orga- nization on the CSR vision. Customers can share similar values on topics like environmental sustain- ability and can see the CSR initiatives offered by the organization as a means to give back as well. Thus, the CSR actions of the organization do not just lead to a social good but to increased identification with the organization.

Customer inclusion in determining the CSR vision could also potentially create more dedicated cus- tomers. People can be drawn to organizations that are seen as doing good and thus when customers feel they have had a say in the good an organization does, they may feel more connected to that orga- nization. Once feedback and discussion have hap- pened with employees, stakeholders, and customers, organization leaders need to compile such information and revise the CSR vision. This can be difficult as different groups might have different

goals and values, especially in companies that span multiple countries and societal groups. Still, the discussion helps the organization better see how these important groups will react to and understand a vision that has been presented. This feedback may also lead the organization to modify the CSR vision for the local needs of communities. Different parts of a company may approach the goal of environ- mental sustainability in different ways, but each way may still help the overall CSR vision. This discussion process also builds needed initial support and understanding for the broader CSR vision.

8.3. Step #3: Determine appropriate actions that help make goals a reality and complete actions toward CSR

Once an organization has clearly defined its CSR values and goals, it is crucial for it to make plans to complete the needed actions to make them a reali- ty. A common problem in organizations is a failure to act on the CSR values they espouse (Banerjee, 2007). While the focus is often on organizations like Enron or BP intentionally gaming the system, it is possible that some greenwashing results from a failure of well-intentioned, but ultimately unsuc- cessful plans to act on laudable goals. While CSR talk can be aspirational on its own (Christensen et al., 2014), for CSR initiatives to have the most impact leadership must plan actions carefully.

In order for CSR initiative to succeed, organiza- tions may need to make significant changes to ex- isting organization structures, leader and employee actions, and involvement with stakeholders. With- out making these changes, important parts of CSR may not be successful. Changes might be made to organizational structures so the organization better fits CSR vision needs. The traditional organization structure is focused heavily–—and often exclusively–—on generating profit and shareholder value. Traditional organizational structures with stockholders also have potential concerns in that focus is often placed on value to stockholders, not other social goals that might be found in CSR ini- tiatives. Actions interpreted as working against the financial benefit of shareholders can potentially generate legal action by disgruntled shareholders.

Organizations desiring to place profits and so- cial goods on an equal footing have turned to new methods of corporate organization. The benefit corporation, allowed in various forms in 33 U.S. states, requires a focus on stakeholders as well as shareholders. B Lab is a nonprofit organization focused on encouraging organizations to become benefit corporations; it offers certification for public benefit corporations and has

Guidelines and pitfalls for leaders trying to do good 841

already certified companies in 50 countries (B Corporation, 2018). Such certification–—and most U.S. state-related laws–—requires audits for the organization and annual reporting to the public on what the organization is accomplishing related to its public goals (Kurland, 2017).

For organizations that want their CSR to be cen- tral to their corporate mission, the benefit corpo- ration concept can be very valuable (Benefit Corporation, 2018). B Lab offers many tools for helping to assess progress and impact related to social goals and the certification creates a process by which to monitor and sustain social initiatives. While there certainly remains latitude to try to game the system in such certifications due to lax verification for some aspects, the certification pro- cess itself offers a framework to work toward orga- nizational CSR initiatives (Kurland, 2017). The legal status offered in some states and countries also helps offer protection against bottom-lined focused stockholder lawsuits.

Leader and employee actions also are essential in the action step. It has been recognized that leaders are a key part of CSR initiative success (Christensen et al., 2014). Leaders play an important role in sensemaking for employees and framing organiza- tion initiatives, helping subordinates make sense of organizational events and concepts and how they fit with them. Leaders often are responsible for advo- cating for change and clarifying what workers need to know and do (Yukl, 2012). When leaders engage in transformational leadership behaviors such as in- voking worker ideals and providing inspirational motivation, an organization’s members are more likely to have CSR-related values (Waldman et al., 2006) and perform necessary CSR-related organiza- tional behaviors (Robertson & Barling, 2013).

One potentially important area of leader action is engaging in executive symbolism. Executive sym- bolism is the idea that actions of top leaders can have significant symbolic significance beyond the action itself, signaling important information to employees (Hambrick & Lovelace, 2018). Top lead- ers can greatly impact workers’ perceptions of an idea or initiative through leader actions. Hambrick and Lovelace (2018) identified one major type of these actions, theme-aligned symbolic action, whereby a top leader performs an act intended to demonstrate a theme. Theme-aligned symbolic ac- tions could be particularly important for showing top leader support of the CSR initiative. Such action would help employees makes sense of how they should see and act on an initiative, creating a coherent narrative to believe in and follow.

Stakeholders may potentially be included more in the CSR process if they have a connection with

the CSR mission. If an organization wants to help homeless people in the local community, they will need to connect with social service organizations and other organizations that are knowledgeable of the issue and the people involved. Consultation with stakeholders in Step 2 should help set the stage for stakeholders engaging in the process.

8.4. Step #4: Monitor progress, distribute feedback, and revise as needed

An important last step of the CSR process is consis- tent monitoring of how organization actions impact the CSR vision and goals. Actions may not proceed as intended and could even exacerbate a problem. Gaining feedback helps to see what progress has been made and what should be changed.

Audits and reports are a source of this feedback. For benefit corporations, certification by B Lab requires third-party audits and annual reports (Kurland, 2017). Third-party audits have conditions when companies are B Lab certified, but for other companies a wide variety of methods could be used. Companies could have stakeholders, expert organizations, or even other organizations involved in such audit processes. Companies might also assess their own progress on social goals by bench- marking with companies that adopt similar CSR missions. Annual reports can also be used to com- municate with employees, stakeholders, custom- ers, and the community at large how well CSR initiatives are progressing. Annual reports help to educate those parties about how CSR activities are progressing and even potentially clear up inac- curate perceptions such groups might possess (Shabana & Ravlin, 2016). There are many existing standards for such reports, with benefit corpora- tions having the B Impact Assessment and other suggested formats including the Global Reporting Initiative (GRI) and ISO 2600 (Wilburn & Wilburn, 2014).

One imperative for any organization or leader who truly wants to accomplish CSR social goals is to use audit and report information as feedback. The information generated can be used to evalu- ate where deficiencies exist in current processes and where new progress can be made. When feedback is applied and acted upon well, audits and reports should show a clear trend toward greater success in CSR initiatives and progress toward CSR social goals. Feedback might, in fact, lead to revision of initiatives and visions as social needs and effectiveness of efforts are better understood. Major revisions of visions will often require reviewing the entire process outlined in previous sections.

842 P. Mishra, G.B. Schmidt

9. Summary

MNEs should “develop both global corporate codes of conduct and subscribe to global codes that have been developed by independent international bod- ies” (Carroll, 2004, p. 118), such as the UN Global Compact and OECD Guidelines for MNEs.

In this article, we have described some of the major challenges leaders and organizations face when trying to do good through CSR visions and initiatives. We offered a 4-step process that helps to reduce the impact of such problems and create a CSR vision that is clear and has the support of important parties such as employees, customers, and stakeholders. CSR will always be difficult to create and sustain due to differences in values and tensions between different parts of the triple bot- tom line of economic, social, and environmental needs. Leaders need to be intentional in their processes of creating CSR visions and initiatives in order to be successful. This article offers several considerations that can help leaders be intentional in the pursuit of the good, responsible outcomes for which they strive, helping them to do the good they strive for.

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