Corporate Social Responsibility: HRD As a Mediatorof Organizational Ethical Behavior

Corporate Social Responsibility: HRD As A MediatorOf Organizational Ethical Behavior

Refereed Paper

MacKenzie, Clíodhna; Garavan, Thomas; Carbery, Ronan

Abstract

A substantial body of research on Corporate Social Responsibility (CSR) has emerged over the last decade highlighting the need for organizations to address the triple bottom line CSR philosophy of economic, social and environmental goals and objectives. This paper reviews some of the current HRD literature that examines the theme of corporate social responsibility (CSR) and addresses how HRD professionals can clarify ambiguity around CSR practices through a better understanding of the sensemaking processes of the organizational actors. Understanding the sensemaking processes will illuminate how HRD professionals can contribute to the achievement of the triple bottom line CSR philosophy and ensure CSR goals and objectives are realistic and not rhetoric. We propose a conceptual model that elucidates the potential positive impact of HRD interventions when linked to a balanced scorecard measurement instrument.

Keywords:Ethics, Organisational Behaviour, HRD, Corporate Social Responsibility

Advancing the Role of HRD as a Mediator of Organizational Ethical Behavior

The role of HRD in today’s contemporary organizational setting may be shifting beyond purveyor of learning, training & development and human & organizational development to now include the role of gatekeeper of corporate social responsibility (CSR) and ethical behavior. The tenuous surface level process and structure analysis of CSR appears deficient when one examines the failure of many organizations that claimed to be paragons of ethical behavior (see Ashforth and Anand, 2003; Balthazard et al., 2006; Ely, 2009; Kish-Gepart et al., 2010; Lange, 2008; Lehman and Ramanujam, 2009; Levine, 2005; Stein, 2003; Van Fleet and Griffin, 2006; Weyhrauch and Culbertson, 2009).Whilst these examples of corporate social irresponsibility have been shown to include forms of unethical behavior and in some cases illegal and corrupt behavior, they highlight the difficult and often compromised positions HRD professionals can find themselves in when the organizational rhetoric conveys one message and the reality is somewhat different. The dichotomy of serving two masters, the organizations management and leadership on the one hand and the employees on the other hand often results in what Bierema (2009)notes is a return to a stockholder orientation that favours managerial and organizational welfare above all else. This internal stakeholder dichotomy is complicated further by the competing demands of external stakeholders and institutional pressures (DiMaggio and Powell, 1983; Meyer and Rowan, 1977; Oliver, 1991). Mintzberg et al (2002)have cogently argued that the organization can engage in a series of half-truth’s solely focused on profit maximization and increasing shareholder wealth -CSR practices appearing little more than rhetorical lip service (Campbell, 2007). It is this degree of ambiguity and doublespeak that poses the greatest difficulty for HRD professionals to pursue a triple bottom line (Cornelius et al., 2008; Garavan and McGuire, 2010) philosophy.

It is possible however, for HRD professionals to clarify any ambiguity around CSR policies and practices, provide an ethical frame of reference for all organizational stakeholders (SHRM, 2008) and at the same time, become instrumental in the development of an ethical climate and culture (Ardichvili and Jondle, 2009; Foote and Ruona, 2008). Through continued development and implementation of its own policies and procedure around CSR objectives, it can contribute to the facilitation of a positive triple bottom line culture. HRD professionals are in a central position to ensure that the organization’s CSR orientation is realistically achievable and not rhetorically vacuous.

Methodology

The literature on CSR illustrates that is a broad meta-construct incorporating economic, social, environmental and reputational dimensions; it is multi-perspective, contextual, temporal and organizationally diverse capturing the shift away from a purely financial bottom line philosophy to one that reflects a more diverse set of goals and objectives aimed at addressing environmental and societal goals(Cornelius et al., 2008; Gioia, 2003; Laufer, 2003; Siegel, 2009) as well as economic goals. Given the accepted position that CSR has an applied management focus, the initial search criteria included the top tier management journals along with the wider social science journals that captured the focus of Human Resource Development (HRD), Ethics and Sensemaking central to this paper.

Selection of Journals

The selection of top tier management journals was the initial first step in this literature review process and was conducted using the following Grade 4 (*ABS Rankings) general management journals: Academy of Management Review, Academy of Management Journal, Administrative Science Quarterly, Journal of Management and Harvard Business Review. As the focus of the paper is on the Human Resource Development (HRD) role in the development/implementation/communication of CSR initiatives, a search of HR (HRM/HRD) and organizational studies journals was appropriate and covered the topics ofsensemaking and cognition in the searches, these journals included but were not limited to: Human Resource Management (HRM), Human Resource Development Review (HRDR), Human Resource Development Quarterly (HRDQ), and Human Resource Development International (HRDI), Organization Science, Organization Studies, Human Relations, Organization. Finally, as Ethics is a central focus of this paper, a search of Grade 4 (*ABS Rankings) Ethics focused journals included but was not limited to: Journal of Business Ethics, Corporate Governance: An International Review, Business Ethics Quarterly, and Business Ethics: A European Review

Selection of Articles

It was necessary to delineate the search criterion for this paper given the broad meta-construct of CSR, to that end, a number of theme’s were used as general search area’s which provided a narrower search criteria for each theme. The search criterion included but was not limited to: Human Resource Development (HRD and CSR, HR and CSR, Leadership and Ethical Behavior, CSR and Leadership, Corporate Social Irresponsibility); Ethics (Corporate Governance and CSR, Corporate Social Responsibility and Ethical Organizational Behavior, Ethical Behavior and Corporate Governance, CSR and Financial Performance, CSR and Unethical Behavior, Corporate Social Irresponsibility); Sensemaking(CSR and Sensemaking, Corporate Social Irresponsibility, Corporate Governance and CSR, Culture and Sensemaking, Culture and Cognition, Culture and Ethics, Ethics and Sensemaking). The search term Corporate Social Irresponsibility was included in all the themes illustrating the boundary spanning concept of CSR. The literature search used standard academic databases such as: Business Source Premier, Academic Source Premier, Econlit, Web of Science and Web of Knowledge. As this literature review is not an exhaustive literature review, many of the results of the search on CSR were outside the scope of this paper.

Defining Corporate Social Responsibility

As a broad meta-construct, Corporate Social Responsibility (CSR) and its various synonyms reflect a clearly articulated set of organizational goals and objectives beyond those of the purely economic bottom-line (Friedman, 1970)that address the wider social and economic reach of the organization (Chih et al., 2010; Dunne, 2008; Matten and Moon, 2008).

Although there are many definitions of corporate social responsibility (see Basu and Palazzo, 2008; Benz and Frey, 2007; McWilliams and Siegel, 2000; McWilliams and Siegel, 2001; Ryan et al., 2010) the definition offered by McWilliams et al. (2006) and Basu and Palazzo (2008) seem most appropriate for the focus of this paper in addressing whether HRD can act as a Mediator of organizational ethical behavior.

McWilliams et al. (2006: 1) provide a succinct definition of CSR amid the many conceptualizations and definitions, theydefined CSR as “…situations where the firm goes beyond compliance and engages in actions that appear to further some social good, beyond the interests of the firm and that which is required by law”. Similarly, Basu and Palazzo (2008) propose a definition of CSR based on their sensemaking perspective which is applicable from a HRD perspective. They noted it is a “…process by which managers within an organization think about and discuss relationships with stakeholders as well as their role in the greater good…and behavioral disposition” (p. 124). Basu and Palazzo’s (2008) definition is particularly noteworthy given it addresses the strategic multi-stakeholder orientation of HRD (see Garavan, 2007; Peterson, 2008; Ulrich and Brockbank, 2005; Wright, 2008).

Basu and Palazzo (2008: 122) have noted that prevalent academic enquiry of CSR falls into three general themes: stakeholder driven, performance driven and motivation driven(see Campbell, 2007; Matten and Moon, 2008; McWilliams et al., 2006)with some of the broader literature focused on the ethics dimension central to CSR practices(e.g. Foote and Ruona, 2008; Kulik, 2005; Levine, 2005). These general themes are integral to HRD interventions. In their examination of CSR, Basu and Palazzo (2008) argued there had been little by way or research that focused on institutional variables; specifically internal variables such as mental models and sensemaking processes. Given the central role of HRD in the development of human capital in the pursuit of sustained competitive advantage (Garavan, 2007; Peterson, 2008) it seems appropriate that HRD have a central role to play in any conceptualizations of CSR seen through a sensemaking perspective.

Corporate Social Responsibility – The Financial Imperative

The concept of corporate social responsibility (CSR) has emerged as a critical dimension ofmany organization’s strategic goals and objectives. Today’s organization actively promotes CSR practices and achievements in their mission,vision and financial statements along with public articulation of those efforts by senior management (Scalet and Kelly, 2010).It is however, unclear whether these statements reflect the reality of their true CSR position or the rhetoric of what makes the organization appear like a good citizen. Over the past decade, CSR objectives have become quite prominentin organizational vision, mission and financial statements following incidents of corporate social irresponsibility (see Dhir, 2009; Giroux, 2008; Jensen et al., 2009; Kulik, 2005; Levine, 2005; Werther, 2003). The question of whether this reflects an overridingorganizational philosophy that addresses the triple bottom line(Cornelius et al., 2008; Garavan and McGuire, 2010) of economic, social and environmental accountability remains ambiguous at best.

The economic importance of aCSR mandate is evident in the literature on CSR and Corporate Financial Performance (see Brammer and Millington, 2008; Orlitzky et al., 2003; Surroca et al., 2010). Orlitzky et al (2003) noted there was a positive association between Corporate Social Performance (CSP) and Corporate Financial Performance (CFP) and argued that market forces have a positive outlook on organizations that engage in socially responsible behavior, a departure from the hard line economic position of Friedman (1970) who noted that the raison d’être of business was to make as much money as possible without breaking the law. Similarly, Surroca et al (2010: 464) found that Corporate Responsibility Performance (CRP) which they defined as “…a broad array of strategies and practices that a company develops to deal with and create relationships to deal with its multiple stakeholders and natural environment” is positively linked to Corporate Financial Performance through the organization’s intangible assets. They found that CFP stimulates the development of intangibles such as human capital, culture and reputationwhich have a positive knock-on effect on CFP, thus highlighting implications for HRD interventions at the organizational level(Foote and Ruona, 2008; Garavan et al., 2010; Garavan and McGuire, 2010). However, in the research carried out by Hine and Preuss (2009)they provide a counter argument highlighting that empirical evidence that CSR/CRP increases or impacts positively or negatively on CFP is lacking either way.

CSR and Human Resource Development

There is a growing body of research on HRD’s contribution to Corporate Social Responsibility with Garavan and McGuire (2010) arguing that HRD is viewed as central to the pursuit of financial (economic) and non-financial (social and environmental) organizational goals. Fenwick and Bierema (2008)similarly note that HRD, given its commitment to individual and organizational development, seems well positioned to contribute the any conceptualizations of CSR. There is however, much debate about whether HR professionals see CSR as central to their role in the organizationother than acting as a compliance based gatekeeper of organizational ethical violations. This point was highlighted by the Society for Human Resource Management report “The Ethics Landscape of American Business” (SHRM, 2008: 17)which found that 58% of respondents in their study believed they were not “part of the ethics infrastructure” but were primarily there to enforce ethics violations. This was in contrast to the 72% of respondents who argued that they had a “moderate or large” role in the formulation of ethics polices and procedure, noting a degree of ambiguity around corporate ethics, central to any CSR mandate.The question of whether HRD can translate the triple bottom line philosophy into tangible results will be the challengewhich has been highlighted by Bierema (2009: 75) who trenchantly argued that the conflicted position of HRD generally tends to give way to a “stockholder orientation” which is focused on the financial bottom line and ignores the social orientation unless mandated by law. The recent global economic crisis has pushed CSR, ethical behavior and corporate governance front and centre of the business agenda in today’s contemporary organization and this provides an ideal time to examine whether CSR policies and practices are genuine and socially focused or merely window dressing for the doublespeak and half-truth’s that Mintzberg et al (2002) noted. More crucially, the ability of HRD professionals to move beyond the historical performative role highlighted by Peterson (2008)and Wright (2008)may prove to be a difficult task unless they can bring something credible and sustainable to the table.

HRD professionals will need to challenge their traditional role within the organization without alienating the powerful internal stakeholders whose primary objective may be more aligned withthe financial and not environmental or social goals. Moreover, HRD professionals will need to be cognizant of the institutional variables highlighted by Matten and Moon (2008) that have the capacity to influence the CSR orientation and behavior of various organizational actors. The impact of these institutional pressures can result in questionable ethical behavior with adverse social and environmental outcomes (MacKenzie et al., 2010).

CSR and Ethics

Incidents of corporate social irresponsibility over the past decade have prompted organizations to become more critical of their ethical orientation and CSR standing within the wider business and social community. The importance of the ethics / CSR relationship has also contributed to the diverse literature relating to research on ethical and unethical organizational behavior (see Biron, 2010; Brass et al., 1998; De Cremer et al., 2010; Gino and Bazerman, 2009; Kane, 2009; Kulik, 2005; Poff, 2010; Trevino et al., 2006) as well as the growing body of HRD related research (e.g. Ardichvili and Jondle, 2009; Foote and Ruona, 2008; Hatcher, 2002). The development of ethics programs is to ensure a degree of conformity among organizational members through adherence to ethical policies and procedure (Weaver et al., 1999). Indeed as the SHRM (2008: 17) noted, HR professionals play a central role in the administration of various ethics related activities. The research carried out by the SHRD found that 83% of respondents believed that HR was the primary organizational resource for ethics related issues, although, there was some ambivalence among HR professionals about their involvement in the ethics infrastructure and policy formulation. This research highlighted the important role of HR professionals in the development of ethics related activities in US companies but also shed some light on the complexity of developing the infrastructure, policies and procedures associated with an organization’s ethical orientation. Following a comprehensive and insightful review of the literature on ethical behavior in organizations, Trevino et al (2006) illustrated some of individual and contextual variables that can contribute to ethical behavior. From an individual perspective, cognitive and affective variable had some bearing on an individual’s predisposition to ethical / unethical actions with contextual organizational variables such as reward/punishment, ethical infrastructure, ethical culture and leadership also determinants in the ethical organizational behavior. Trevino et al (2006: 970) also noted that although external pressures (normative, coercive and mimetic) had the capacity to affect how an organization adopted an ethical stance, the ethical predisposition of the mangers and leadership played a central role in “propagating and modelling” ethical values that might then become internalized by organizational members to become part of the corporate culture (Ardichvili and Jondle, 2009; Martynov, 2009). This point will play a central role in how HRD professionals can moderate ethical organizational behavior.

Foote and Ruona’s (2008: 301)conceptualizationof the institutionalization of ethics and its implications for HRD provided a comprehensive review of the literature on ethics over a 15 year period and revealed that “infrastructure, leadership and involved stakeholders” were paramount in the formulation of a culture that fosters ethical behavior. In their synthesis of the literature, Foote and Ruona (2008) noted that the organization’s culture was central to promoting and sustaining an ethical orientation with HRD acting as a facilitating interconnect that contributed to the “building of infrastructure, developing the stakeholders and working with the leadership” (p.301). A general theme that has emerged in the research on ethics and CSR is that of corporate culture. Ardichvili and Jondle (2009: 226)argued corporate culture was one of the “main determinants of ethical or unethical organizational behavior” and given the centrality of ethics in any conceptualization of CSR, it could have a major impact on the development of ethics / CSR policies, procedures and practices.

CSR and Sensemaking

The extant literature notes that most CSR decisions are primarily mandated by the organization’s managers and leadership(e.g. Berrone and Gomez-Mejia, 2009; Hemingway and Maclagan, 2004; Waldman et al., 2006). CSR practices reflect how managers and leaders frame their mental models, how they perceive who they are in the world, influences how they interact with their stakeholders.Other contextual institutional variablesnoted by Matten and Moon (2008)can also impact and influence the CSR orientation of organizational members, from top leadership to non-management staff(Angus-Leppan et al., 2010; Basu and Palazzo, 2008; Foote and Ruona, 2008). Ambiguity around the organization’s CSR policies and procedures may result in internal stakeholders taking their cues from the organization’s management and leadership resulting in behavior that is divergent from how the organization is promoted in terms of CSR practices (Pinto et al., 2008; Premeaux, 2009; Tett, 2009). Foote and Ruona (2008: 303) argued that leaders often underestimate their “role in the ethical tone of the organization”, furthermore, they noted that moral management and leadership were considered to be at the “crux” of an ethical climate and culture. This cogently argued point has resonance when one examines instances of corporate social irresponsibility over the past decade. Duchon and Drake (2009: 301) noted how questionable practices can become socialized in organizational assumptions and identity, they contend questionable behavior within an organization may transcend the individual, it can be a “consequence of a corporation’s self-concept; a consequence of how it defines itself”. This is consistent with how individual’s schema-driven cognition is heavily influenced through “normative pressures arising from behavior of others” (Harris, 1994: 316).