Corporate social responsibility (CSR) in Asian firms: a strategic choice perspective of ethics and compliance management
| Pages | 633-655 |
| Published date | 07 October 2019 |
| DOI | https://doi.org/10.1108/JABS-03-2019-0094 |
| Date | 07 October 2019 |
| Author | Ajai Gaur,Koustab Ghosh,Qinqin Zheng |
| Subject Matter | Strategy,International business |
Corporate social responsibility (CSR) in
Asian firms: a strategic choice perspective
of ethics and compliance management
Ajai Gaur, Koustab Ghosh and Qinqin Zheng
Abstract
Purpose –The decision regarding ethics and compliance management (ECM) adoption and its actual
implementation is usually deliberated as an important corporate social responsibility (CSR) matter.
Building on the strategic choice perspective, this study aims to investigatethe forces and mechanisms
underlyingthe link between ECM adoption andits substantial implementation.
Design/methodology/approach –The study is based on survey data of multi-national companies
(MNCs)in Asia.
Findings –The authors find that firms adopt ECM initiatives due to the impact of critical field events
coupled with institutional mimesis and the salience of risk reduction. Moreover, reinforced by top
management support and ethics transgressions, firms are inclined to engage in sincere ECM
implementation.
Originality/value –The study examines importantantecedents of ECM adoption and implementationin
marketMNCs. In doing so, it contributes to thebroader CSR literature.
Keywords Corporate social responsibility (CSR), Institutional theory, Multinational corporations,
Ethics and compliance management (ECM), ECM adoption, ECM implementation, Strategic choice
Paper type Research paper
1. Introduction
Ethics and compliance management (ECM) has become an important and widespread
(Mitra et al.,2019;Trevin
˜oet al.,1999). Prompted by the government, customers and
professional organizations, such as the Ethics and Compliance Officers Association
(ECOA), several large corporations have formal programs or independent offices for
managing ethics and legal compliance within their broader corporate social responsibility
(CSR) programs (Weaver et al., 1999b;Verkerk et al., 2001). Nevertheless, like many other
CSR activities, ECM activities are largely undertaken on a voluntary basis and can be
viewed as “actions that appear to further some social good, beyond the interests of the firm
and that which is required by law” (McWilliams and Siegel, 2001, p. 117). As a result, there
is a great deal of variance in the actual delivery of ECM programs in companies from
different countries.
There are two distinct issues in ECM management: ECM adoptionand ECM implementation
(Hartman et al.,2014;Paine, 1994). ECM adoption represents preliminary compliance to
external pressures with little strategic intention. Subject to public scrutiny, it focuses mainly
on official posturing to meet the legal and regulatory requirements and minimize risks. ECM
adoption is, therefore, often done in the spirit of ceremonial adoption due to external
institutional pressures (Okhmatovskiy and David, 2012;Marquis and Qian, 2014;Chandler
and Hwang, 2015;Chan and Ananthram, 2018). On the other hand, ECM implementation is
Ajai Gaur is based at
Rutgers University, Newark,
New Jersey, USA.
Koustab Ghosh is based at
Indian Institute of
Management, Rohtak,
India. Qinqin Zheng is
based at Fudan University,
Shanghai, China.
Received 26 March 2019
Revised 10 May 2019
Accepted 23 May 2019
Funding: This study was
funded by China’s National
Natural Science Foundation
(71272004) and the Planning
Project of Philosophy and
Social Sciences in Shanghai
(2017BGL004).
All authors made equal
contribution, names appear in
the alphabetical order.
DOI 10.1108/JABS-03-2019-0094 VOL. 13 NO. 4 2019, pp. 633-655, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 633
more relevant to the strategic need for substantialethical improvement and moral reflexivity
in individual firms. With less public visibility, ECM practices are typically implemented within
the realm of organizational operations. However, more public scrutiny and social
surveillances push firms to have a substantial and deliberate disposition toward ECM and
implement ECM practices more rigorously and seriously like any other principal function of
the organization (Verkerk et al., 2001). ECM adoption is, thus, ceremonial adoption of ECM
due to external institutional pressures, whereas ECM implementation is actual adoption and
conscious strategic choice on part of the organization. However, we have a limited
understanding of the linkages between ceremonial ECM adoption and actual ECM
implementation. The divergence between ceremonial adoption of ECM versus its actually
implementation is particularly important for Asian firms who feel pressured for ECM
adoption, despite not having the resources and capabilities to do so. In this paper, we
address this oversight.
According to the legitimation view, organizations adopt ECM programs to strengthen the
appropriateness of their actions within a given set of regulations and social norms that are
acknowledged by their stakeholders (Suchman, 1995;Chan and Ananthram, 2018). By
improving their legitimacy, firms aim to elicit the approval of their stakeholders, which may
translate into survival, long-term sustainability and lower risk (Bansal and Roth, 2000;Gaur
and Lu, 2007;Voss, 2014;Verbos and Humphries, 2015). In this sense, the main focus of
ECM adoption is the necessity for firms to comply with multiple stakeholder pressures, as
well as the potential challenges that arise for firms when stakeholders’ requests are
inconsistent.
As organizations face practical difficulties in responding to conflicting beliefs in a
fragmented environment, they may adopt only a few practices. It would, thus, be a risky
proposition for organizations to select only a certain number of beliefs from the external
environment that are consistent with their internal practices (DiMaggio and Powell, 1983;
Meyer et al.,1987;Verbos and Humphries, 2015). The presence of multiple stakeholders,
divergent values and conflicting beliefs makes such an institutional environment
fragmentary by nature, to which organizations struggle to adapt (Gaur, 2007;Judge et al.,
2010;Singh and Delios, 2017;Bhaumik et al.,2019). Therefore, organizational decoupling
is likely to happen due to a mismatch between ECM practices and external perceptions
(Weick, 1976;Powell, 1988).
Accordingly, there is a common perception that many companies hastily create an ethics
and compliance program simply to shield their top management from blame. A major
approach for firms to manage the conflicts arising due to stakeholder pressure is to
introduce ECM as a veneer rather than a solid practice (Weaver et al., 1999b). This attitude
of punishment avoidance may be counterproductive. The Volkswagenemissions scandal in
2015 is a typical example of ECM adoption. To meet the official standards, Volkswagen
intentionally deployed a special program call TDI in cars to activate emissions controls only
during regulatory testing. However,the engines emitted over 40 times the permitted level of
nitrogen oxides during real-world driving. Clearly, ECM adoption may not reflect the real
responsible ethical intent of organizations. Companies simply buy “off-the-shelf” packages
of ECM policies, regulations and monitoring procedures, with minimum adaptation (Weaver
and Trevino, 2001).
Conversely, if treated in a responsible manner, ECM can be implemented rigorously, like
other prime functions in the organization(Verkerk et al.,2001). A number of studies examine
different practices for substantial ECM implementation within organizations. For example,
Paine (1994) suggested that an integrity-based approach with commitment to ethical
aspirations is more effectivein motivating employees. ECM implementation, thus, combines
compliance with an emphasis on managerial responsibility for ethical behavior. Tyler et al.
(2008) further advocate a value-based culture for ECM implementation that may
substantively motivate employees to be productive and engage in responsible behaviors.
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