Monday, May 11, 2009

Leadership Styles

Leadership style is the manner and approach of providing direction, implementing plans, and motivating people. Kurt Lewin (1939) led a group of researchers to identify different styles of leadership. This early study has been very influential and established three major leadership styles. The three major styles of leadership are (U.S. Army Handbook, 1973):
Authoritarian or autocratic
Participative or democratic
Delegative or Free Reign Although good leaders use all three styles, with one of them normally dominant, bad leaders tend to stick with one style.
Authoritarian (autocratic)I want both of you to. . .
This style is used when leaders tell their employees what they want done and how they want it accompished, without getting the advice of their followers. Some of the appropriate conditions to use it is when you have all the information to solve the problem, you are short on time, and your employees are well motivated.
Some people tend to think of this style as a vehicle for yelling, using demeaning language, and leading by threats and abusing their power. This is not the authoritarian style, rather it is an abusive, unprofessional style called bossing people around. It has no place in a leader's repertoire.
The authoritarian style should normally only be used on rare occasions. If you have the time and want to gain more commitment and motivation from your employees, then you should use the participative style.
Participative (democratic)Let's work together to solve this. . .
This style involves the leader including one or more employees in the decision making process (determining what to do and how to do it). However, the leader maintains the final decision making authority. Using this style is not a sign of weakness, rather it is a sign of strength that your employees will respect.
This is normally used when you have part of the information, and your employees have other parts. Note that a leader is not expected to know everything -- this is why you employ knowledgeable and skillful employees. Using this style is of mutual benefit -- it allows them to become part of the team and allows you to make better decisions.
Delegative (free reign)You two take care of the problem while I go. . .
In this style, the leader allows the employees to make the decisions. However, the leader is still responsible for the decisions that are made. This is used when employees are able to analyze the situation and determine what needs to be done and how to do it. You cannot do everything! You must set priorities and delegate certain tasks.
This is not a style to use so that you can blame others when things go wrong, rather this is a style to be used when you fully trust and confidence in the people below you. Do not be afraid to use it, however, use it wisely!
NOTE: This is also known as lais…sez faire (or lais…ser faire), which is the noninterference in the affairs of others. [French : laissez, second person pl. imperative of laisser, to let, allow + faire, to do.]
ForcesA good leader uses all three styles, depending on what forces are involved between the followers, the leader, and the situation. Some examples include:
Using an authoritarian style on a new employee who is just learning the job. The leader is competent and a good coach. The employee is motivated to learn a new skill. The situation is a new environment for the employee.
Using a participative style with a team of workers who know their job. The leader knows the problem, but does not have all the information. The employees know their jobs and want to become part of the team.
Using a delegative style with a worker who knows more about the job than you. You cannot do everything! The employee needs to take ownership of her job. Also, the situation might call for you to be at other places, doing other things.
Using all three: Telling your employees that a procedure is not working correctly and a new one must be established (authoritarian). Asking for their ideas and input on creating a new procedure (participative). Delegating tasks in order to implement the new procedure (delegative). Forces that influence the style to be used included:
How much time is available.
Are relationships based on respect and trust or on disrespect?
Who has the information - you, your employees, or both?
How well your employees are trained and how well you know the task.
Internal conflicts.
Stress levels.
Type of task. Is it structured, unstructured, complicated, or simple?
Laws or established procedures such as OSHA or training plans.
Positive and Negative ApproachesThere is a difference in ways leaders approach their employee. Positive leaders use rewards, such as education, independence, etc. to motivate employees. While negative employers emphasize penalties. While the negative approach has a place in a leader's repertoire of tools, it must be used carefully due to its high cost on the human spirit.
Negative leaders act domineering and superior with people. They believe the only way to get things done is through penalties, such as loss of job, days off without pay, reprimand employees in front of others, etc. They believe their authority is increased by frightening everyone into higher lever of productivity. Yet what always happens when this approach is used wrongly is that morale falls; which of course leads to lower productivity.
Also note that most leaders do not strictly use one or another, but are somewhere on a continuum ranging from extremely positive to extremely negative. People who continuously work out of the negative are bosses while those who primarily work out of the positive are considered real leaders.
Use of Consideration and StructureTwo other approaches that leaders use are:
Consideration (employee orientation) - Leaders are concerned about the human needs of their employees. They build teamwork, help employees with their problems, and provide psychological support.
Structure (task orientation) - Leaders believe that they get results by consistently keeping people busy and urging them to produce.
There is evidence that leaders who are considerate in their leadership style are higher performers and are more satisfied with their job (Schriesheim, 1982).
Also notice that consideration and structure are independent of each other, thus they should not be viewed on opposite ends of a continuum. For example, a leader who becomes more considerate, does not necessarily mean that she has become less structured.
See Blake and Mouton's Managerial Grid as it is also based on this concept.
PaternalismPaternalism has at times been equated with leadership styles. Yet most definitions of leadership normally state or imply that one of the actions within leadership is that of influencing. For example, the Army uses the following definition:
Leadership is influencing people -- by providing purpose, direction, and motivation -- while operating to accomplish the mission and improving the organization."The Army further goes on by defining "influence" as a:
means of getting people to do what you want them to do. It is the means or method to achieve two ends: operating and improving. But there¹s more to influencing than simply passing along orders. The example you set is just as important as the words you speak. And you set an example -- good or bad -- with every action you take and word you utter, on or off duty. Through your words and example, you must communicate purpose, direction, and motivation.While "paternalism" is defined as (Webster):
a system under which an authority undertakes to supply needs or regulate conduct of those under its control in matters affecting them as individuals as well as in their relationships to authority and to each other.Thus paternalism supplies needs for those under its protection or control, while leadership gets things done. The first is directed inwards, while the latter is directed outwards.
Geert Hofstede (1977) studied culture within organizations. Part of his study was on the dependence relationship or Power Difference -- the extent to which the less powerful members of an organization expect and accept that power is distributed unequally. Hofstede gave this story to illustrate this Power Difference:
The last revolution in Sweden disposed of King Gustav IV, whom they considered incompetent, and surprising invited Jean Baptise Bernadotte, a French general who served under Napoleon, to become their new King. He accepted and became King Charles XIV. Soon afterward he needed to address the Swedish Parliament. Wanting to be accepted, he tried to do the speech in their language. His broken language amused the Swedes so much that they roared with laughter. The Frenchman was so upset that he never tried to speak Swedish again.
Bernadotte was a victim of culture shock -- never in his French upbringing and military career had he experienced subordinates who laughed at the mistakes of their superior. This story has a happy ending as he was considered very good and ruled the country as a highly respected constitutional monarch until 1844. (His descendants still occupy the Swedish throne.)Sweden differs from France in the way its society handles inequality (those in charge and the followers). To measure inequality or Power Difference, Hofstede studied three survey questions from a larger survey that both factored and carried the same weight:
Frequency of employees being afraid to express disagreement with their managers.
Subordinates' perception of their boss's actual decision making style (paternalistic style was one choice).
Subordinates' preference for their boss's decision-making style (again, paternalistic style was one choice). He developed a Power Difference Index (PDI) for the 53 countries that took the survey. Their scores range from 11 to 104. The higher the number a country received, the more autocratic and/or paternalistic the leadership, which of course relates to employees being more afraid or unwilling to disagree with their bosses. While lower numbers mean a more consultive style of leadership is used, which translates to employees who are not as afraid of their bosses.
For example, Malaysia has the highest PDI score, being 104, while Austria has the lowest with 11. And of course, as the story above illustrates, Sweden has a relative low score of 31, while France has a PDI of 68. The USA's is 40. Note that these scores are relative, not absolute, in that relativism affirms that one culture has no absolute criteria for judging activities of another culture as 'low' or 'noble'.

Keeping the above in mind, it seems that some picture paternalistic behavior as almost a barbaric way of getting things accomplished. Yet, leadership is all about getting things done for the organization. And in some situations, a paternalistic style of decision-making might be required; indeed, in some cultures and individuals, it may also be expected by not only those in charge, but also the followers. That is what makes leadership styles quite interesting -- they basically run along the same continuum as Hofstede's PDI, ranging from paternalistic to consultive styles of decision making. This allows a wide range of individual behaviors to be dealt with, ranging from beginners to peak performers. In addition, it accounts for the fact that not everyone is the same.
However, when paternalistic or autocratic styles are relied upon too much and the employees are ready and/or willing to react to a more consultive type of leadership style, then it normally becomes quite damaging to the performance of the organization.
ReferencesHofstede, Geert (1977). Culture and Organizations: Software of the Mind new York: McGraw-Hill.
Lewin, K., LIippit, R. and White, R.K. (1939). "Patterns of aggressive behavior in experimentally created social climates." Journal of Social Psychology, 10, 271-301
Newstrom, John W. & Davis, Keith (1993). Organizational Behavior - Human Behavior at Work. New York: McGraw-Hill.
Schriesheim, Chester A. The Great High Consideration- High Initiating Structure Leadership Myth: Evidence on its Generalizability. The Journal of Social Psychology, April 1982, 116, pp. 221-228.Return
U.S. Army Handbook (1973). Military Leadership.
Tannenbaum, R. & Schmidt, W. How to Choose a leadership Pattern. Harvard Business Review, May-June 1973, No. 73311 (originally published in March-April 1958 issue).

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Activity - How to determine your leadership style -

Decision Making

For Decision making in groups, see Group decision making.

Sample flowchart representing the decision process to add a new article to Wikipedia.
Decision making can be regarded as an outcome of mental processes (cognitive process) leading to the selection of a course of action among several alternatives. Every decision making process produces a final choice.[1] The output can be an action or an opinion of choice.
Contents
1 Overview
2 Decision making processes topics
2.1 Cognitive and personal biases
2.2 Neuroscience perspective
3 Styles and methods of decision making
4 See also
5 References
6 Further reading
7 External links
//

[edit] Overview
Human performance in decision making terms has been the subject of active research from several perspectives. From a psychological perspective, it is necessary to examine individual decisions in the context of a set of needs, preferences an individual has and values they seek. From a cognitive perspective, the decision making process must be regarded as a continuous process integrated in the interaction with the environment. From a normative perspective, the analysis of individual decisions is concerned with the logic of decision making and rationality and the invariant choice it leads to.[2]
Yet, at another level, it might be regarded as a problem solving activity which is terminated when a satisfactory solution is found. Therefore, decision making is a reasoning or emotional process which can be rational or irrational, can be based on explicit assumptions or tacit assumptions.
Logical decision making is an important part of all science-based professions, where specialists apply their knowledge in a given area to making informed decisions. For example, medical decision making often involves making a diagnosis and selecting an appropriate treatment. Some research using naturalistic methods shows, however, that in situations with higher time pressure, higher stakes, or increased ambiguities, experts use intuitive decision making rather than structured approaches, following a recognition primed decision approach to fit a set of indicators into the expert's experience and immediately arrive at a satisfactory course of action without weighing alternatives. Recent robust decision efforts have formally integrated uncertainty into the decision making process. However, Decision Analysis, recognized and included uncertainties with a structured and rationally justifiable method of decision making since its conception in 1964.

[edit] Decision making processes topics
According to behavioralist Isabel Briggs Myers, a person's decision making process depends on a significant degree on their cognitive style.[3] Myers developed a set of four bi-polar dimensions, called the Myers-Briggs Type Indicator (MBTI). The terminal points on these dimensions are: thinking and feeling; extroversion and introversion; judgment and perception; and sensing and intuition. She claimed that a person's decision making style is based largely on how they score on these four dimensions. For example, someone who scored near the thinking, extroversion, sensing, and judgment ends of the dimensions would tend to have a logical, analytical, objective, critical, and empirical decision making style.
Other studies suggest that these national or cross-cultural differences exist across entire societies. For example, Maris Martinsons has found that American, Japanese and Chinese business leaders each exhibit a distinctive national style of decision making.[4]
Some of the decision making techniques that we use in everyday life include:
listing the advantages and disadvantages of each option, popularized by Plato and Benjamin Franklin
flipping a coin, cutting a deck of playing cards, and other random or coincidence methods
accepting the first option that seems like it might achieve the desired result
prayer, tarot cards, astrology, augurs, revelation, or other forms of divination
acquiesce to a person in authority or an "expert"
choosing the alternative with the highest probability-weighted utility for each alternative (see Decision Analysis)

[edit] Cognitive and personal biases
Biases can creep into our decision making processes. Many different people have made a decision about the same question (e.g. "Should I have a doctor look at this troubling breast cancer symptom I've discovered?" "Why did I ignore the evidence that the project was going over budget?") and then craft potential cognitive interventions aimed at improving decision making outcomes.
Below is a list of some of the more commonly debated cognitive biases.
Selective search for evidence (a.k.a. Confirmation bias in psychology) (Scott Plous, 1993) - We tend to be willing to gather facts that support certain conclusions but disregard other facts that support different conclusions.
Premature termination of search for evidence - We tend to accept the first alternative that looks like it might work.
Inertia - Unwillingness to change thought patterns that we have used in the past in the face of new circumstances.
Selective perception - We actively screen-out information that we do not think is important. (See prejudice.)
Wishful thinking or optimism bias - We tend to want to see things in a positive light and this can distort our perception and thinking.
Choice-supportive bias occurs when we distort our memories of chosen and rejected options to make the chosen options seem relatively more attractive.
Recency - We tend to place more attention on more recent information and either ignore or forget more distant information. (See semantic priming.) The opposite effect in the first set of data or other information is termed Primacy effect (Plous, 1993).
Repetition bias - A willingness to believe what we have been told most often and by the greatest number of different of sources.
Anchoring and adjustment - Decisions are unduly influenced by initial information that shapes our view of subsequent information.
Group think - Peer pressure to conform to the opinions held by the group.
Source credibility bias - We reject something if we have a bias against the person, organization, or group to which the person belongs: We are inclined to accept a statement by someone we like. (See prejudice.)
Incremental decision making and escalating commitment - We look at a decision as a small step in a process and this tends to perpetuate a series of similar decisions. This can be contrasted with zero-based decision making. (See slippery slope.)
Attribution asymmetry - We tend to attribute our success to our abilities and talents, but we attribute our failures to bad luck and external factors. We attribute other's success to good luck, and their failures to their mistakes.
Role fulfillment (Self Fulfilling Prophecy) - We conform to the decision making expectations that others have of someone in our position.
Underestimating uncertainty and the illusion of control - We tend to underestimate future uncertainty because we tend to believe we have more control over events than we really do. We believe we have control to minimize potential problems in our decisions.

[edit] Neuroscience perspective
The anterior cingulate cortex (ACC), orbitofrontal cortex (and the overlapping ventromedial prefrontal cortex) are brain regions involved in decision making processes. A recent neuroimaging study,[5] found distinctive patterns of neural activation in these regions depending on whether decisions were made on the basis of personal volition or following directions from someone else. Patients with damage to the ventromedial prefrontal cortex have difficulty making decisions[6].
Another recent study[7] found that lesions to the ACC in the macaque resulted in impaired decision making in the long run of reinforcement guided tasks suggesting that the ACC is responsible for evaluating past reinforcement information and guiding future action.
Emotion appears to aid the decision making process: Decision making often occurs in the face of uncertainty about whether one's choices will lead to benefit or harm (see also Risk). The somatic-marker hypothesis is a neurobiological theory of how decisions are made in the face of uncertain outcome. This theory holds that such decisions are aided by emotions, in the form of bodily states, that are elicited during the deliberation of future consequences and that mark different options for behavior as being advantageous or disadvantageous. This process involves an interplay between neural systems that elicit emotional/bodily states and neural systems that map these emotional/bodily states.[8]

[edit] Styles and methods of decision making
Styles and methods of decision making were elaborated by the founder of Predispositioning Theory, Aron Katsenelinboigen. In his analysis on styles and methods Katsenelinboigen referred to the game of chess, saying that “chess does disclose various methods of operation, notably the creation of predisposition—methods which may be applicable to other, more complex systems.”[9]
In his book Katsenelinboigen states that apart from the methods (reactive and selective) and sub-methods (randomization, predispositioning, programming), there are two major styles – positional and combinational. Both styles are utilized in the game of chess. According to Katsenelinboigen, the two styles reflect two basic approaches to the uncertainty: deterministic (combinational style) and indeterministic (positional style). Katsenelinboigen’s definition of the two styles are the following.

The lists in this article may contain items that are not notable, encyclopedic, or helpful. Please help out by removing such elements and incorporating appropriate items into the main body of the article. (February 2008)
The combinational style is characterized by
a very narrow, clearly defined, primarily material goal, and
a program that links the initial position with the final outcome.
In defining the combinational style in chess, Katsenelinboigen writes:
The combinational style features a clearly formulated limited objective, namely the capture of material (the main constituent element of a chess position). The objective is implemented via a well defined and in some cases in a unique sequence of moves aimed at reaching the set goal. As a rule, this sequence leaves no options for the opponent. Finding a combinational objective allows the player to focus all his energies on efficient execution, that is, the player’s analysis may be limited to the pieces directly partaking in the combination. This approach is the crux of the combination and the combinational style of play.[9]
The positional style is distinguished by
a positional goal and
a formation of semi-complete linkages between the initial step and final outcome.
“Unlike the combinational player, the positional player is occupied, first and foremost, with the elaboration of the position that will allow him to develop in the unknown future. In playing the positional style, the player must evaluate relational and material parameters as independent variables. ( … ) The positional style gives the player the opportunity to develop a position until it becomes pregnant with a combination. However, the combination is not the final goal of the positional player—it helps him to achieve the desirable, keeping in mind a predisposition for the future development. The Pyrrhic victory is the best example of one’s inability to think positionally.”[10]
The positional style serves to
a) create a predisposition to the future development of the position;b) induce the environment in a certain way;c) absorb an unexpected outcome in one’s favor;d) avoid the negative aspects of unexpected outcomes.
The positional style gives the player the opportunity to develop a position until it becomes pregnant with a combination. Katsenelinboigen writes:“As the game progressed and defense became more sophisticated the combinational style of play declined. . . . The positional style of chess does not eliminate the combinational one with its attempt to see the entire program of action in advance. The positional style merely prepares the transformation to a combination when the latter becomes feasible.”[11]

[edit] See also
Agent (economics)
Argument map
Analytic hierarchy process
Business Decision Mapping
Choice architecture
Cognition
Collaborative intelligence
Decision theory
Decision downloading
Critical thinking
Emotions in Decision Making
Facilitation
Flipism
Forecasting
Game theory
Group dynamics
Groupthink
Kepner-Tregoe
Linear Partial Information
List of thought processes
Majoritarianism
Majority rule
Mindset
Minoritarianism
Morphological analysis
Multiscale decision making
Online deliberation
Optimism bias
Path dependence
Player
Portal:thinking
Risk
Risk management
Planning fallacy
Psychology of reasoning
Public choice theory
Rulemaking
Situational awareness
Society for Judgment and Decision Making
Uncertainty
Utility theory

[edit] References
^ James Reason (1990). Human Error. Ashgate. ISBN 1840141042.
^ Daniel Kahneman, Amos Tversky (2000). Choice, Values, Frames. The Cambridge University Press. ISBN 0521621720.
^ Isabel Briggs MyersMyers, I. (1962) Introduction to Type: A description of the theory and applications of the Myers-Briggs type indicator, Consulting Psychologists Press, Palo Alto Ca., 1962.
^ Martinsons, Maris G., Comparing the Decision Styles of American, Chinese and Japanese Business Leaders. Best Paper Proceedings of Academy of Management Meetings, Washington, DC, August 2001 [1]
^ Interactions between decision making and performance monitoring within prefrontal cortex
^ Damasio, AR (1994). Descarte's Error: Emotion, reason and the human brain. New York: Picador. ISBN 0333656563.
^ Kennerly, et al. (2006)
^ [2]
^ a b Katsenelinboigen, Aron. The Concept of Indeterminism and Its Applications: Economics, Social Systems, Ethics, Artificial Intelligence, and Aesthetics Praeger: Westport, Connecticut, 1997, p.6)
^ V. Ulea, The Concept of Dramatic Genre and The Comedy of A New Type. Chess, Literature, and Film. Southern Illinois University Press, 2002, p.p.17-18])
^ Selected Topics in Indeterministic Systems Intersystems Publications: California, 1989, p. 21

Corporate Social Responsbility

Corporate Social Responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB) and corporate social performance'[1] is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure their adherence to law, ethical standards, and international norms. Business would embrace responsibility for the impact of their activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, business would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: People, Planet, Profit.
The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.
Contents
1 Development
2 Approaches
3 Social accounting, auditing and reporting
4 Potential business benefits
4.1 Human resources
4.2 Risk management
4.3 Brand differentiation
4.4 License to operate
5 Criticisms and concerns
5.1 CSR and the nature of business
5.2 CSR and questionable motives
6 Motivations
6.1 Ethical consumerism
6.2 Globalization and market forces
6.3 Social awareness and education
6.4 Ethics training
6.5 Laws and regulation
6.6 Crises and their consequences
6.7 Stakeholder priorities
7 Latin America and the Caribbean
8 See also
9 References
10 Further reading
11 External links
//

[edit] Development
Business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment.
In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).
Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia, descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have re-branded their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).
The term CSR came in to common use in the early 1970s although it was seldom abbreviated. The term stakeholder, meaning those impacted by an organization's activities, was used to describe corporate owners beyond shareholders as a result of an influential book by R Freeman in 1984. [2]
Whilst there is no recognized standard for CSR, public sector organizations (the United Nations for example) adhere to the Triple Bottom Line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation.

[edit] Approaches
Some commentators have identified a difference between the Continental European and the Anglo-Saxon approaches to CSR.[3] And even within Europe the discussion about CSR is very heterogeneous.[4]
An approach for CSR that is becoming more widely accepted is community-based development projects, such as the Shell Foundation's involvement in the Flower Valley, South Africa. Here they have set up an Early Learning Centre to help educate the community's children, as well as develop new skills for the adults. Marks and Spencer is also active in this community through the building of a trade network with the community - guaranteeing regular fair trade purchases. Often alternative approaches to this is the establishment of education facilities for adults, as well as HIV/AIDS education programmes. The majority of these CSR projects are established in Africa. A more common approach of CSR is through the giving of aid to local organizations and impoverished communities in developing countries. Some organizations[who?] do not like this approach as it does not help build on the skills of the local people, whereas community-based development generally leads to more sustainable development.[clarification needed Difference between local org& community-dev? Cite]

[edit] Social accounting, auditing and reporting
Main article: Social accounting
Taking responsibility for its impact on society means in the first instance that a company accounts for its actions. Social accounting, a concept describing the communication of social and environmental effects of a company's economic actions to particular interest groups within society and to society at large, is thus an important element of CSR.[5]
A number of reporting guidelines or standards have been developed to serve as frameworks for social accounting, auditing and reporting:
AccountAbility's AA1000 standard, based on John Elkington's triple bottom line (3BL) reporting
Accounting for Sustainability's Connected Reporting Framework.
Global Reporting Initiative's Sustainability Reporting Guidelines
GoodCorporation's Standard developed in association with the Institute of Business Ethics
Green Globe Certification / Standard
Social Accountability International's SA8000 standard
The ISO 14000 environmental management standard
The United Nations Global Compact promotes companies reporting in the format of a Communication on Progress (COP). A COP report describes the company's implementation of the Compact's ten universal principles.
The United Nations Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) provides voluntary technical guidance on eco-efficiency indicators, corporate responsibility reporting and corporate governance disclosure.
Verite's Monitoring Guidelines
The FTSE Group publishes the FTSE4Good Index, an evaluation of CSR performance of companies.
In some nations legal requirements for social accounting, auditing and reporting exist (e.g. in the French bilan social), though agreement on meaningful measurements of social and environmental performance is difficult. Many companies now produce externally audited annual reports that cover Sustainable Development and CSR issues ("Triple Bottom Line Reports"), but the reports vary widely in format, style, and evaluation methodology (even within the same industry). Critics dismiss these reports as lip service, citing examples such as Enron's yearly "Corporate Responsibility Annual Report" and tobacco corporations' social reports.

[edit] Potential business benefits
The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balanced scorecards). Orlitzky, Schmidt, and Rynes[6] found a correlation between social/environmental performance and financial performance. However, businesses may not be looking at short-run financial returns when developing their CSR strategy.
The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. CSR may be based within the human resources, business development or public relations departments of an organisation,[7] or may be given a separate unit reporting to the CEO or in some cases directly to the board. Some companies may implement CSR-type values without a clearly defined team or programme.
The business case for CSR within a company will likely rest on one or more of these arguments:

[edit] Human resources
A CSR programme can be an aid to recruitment and retention,[8] particularly within the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an interview, and having a comprehensive policy can give an advantage. CSR can also help to improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering.

[edit] Risk management
Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These events can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks.[9]

[edit] Brand differentiation
In crowded marketplaces, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values.[10] Several major brands, such as The Co-operative Group, The Body Shop and American Apparel[11] are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice.

[edit] License to operate
Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps, they can persuade governments and the wider public that they are taking issues such as health and safety, diversity or the environment seriously, and so avoid intervention. This also applies to firms seeking to justify eye-catching profits and high levels of boardroom pay. Those operating away from their home country can make sure they stay welcome by being good corporate citizens with respect to labour standards and impacts on the environment.

[edit] Criticisms and concerns
Critics of CSR as well as proponents debate a number of concerns related to it. These include CSR's relationship to the fundamental purpose and nature of business and questionable motives for engaging in CSR, including concerns about insincerity and hypocrisy.

[edit] CSR and the nature of business
Corporations exist to provide products and/or services that produce profits for their shareholders.[12] Milton Friedman and others take this a step further, arguing that a corporation's purpose is to maximize returns to its shareholders, and that since (in their view), only people can have social responsibilities, corporations are only responsible to their shareholders and not to society as a whole. Although they accept that corporations should obey the laws of the countries within which they work, they assert that corporations have no other obligation to society. Some people perceive CSR as incongruent with the very nature and purpose of business, and indeed a hindrance to free trade. Those who assert that CSR is incongruent with capitalism and are in favor of neoliberalism argue that improvements in health, longevity and/or infant mortality have been created by economic growth attributed to free enterprise.[13]
Critics of this argument perceive neoliberalism as opposed to the well-being of society and a hindrance to human freedom. They claim that the type of capitalism practiced in many developing countries is a form of economic and cultural imperialism, noting that these countries usually have fewer labor protections, and thus their citizens are at a higher risk of exploitation by multinational corporations.[14]
A wide variety of individuals and organizations operate in between these poles. For example, the REALeadership Alliance asserts that the business of leadership (be it corporate or otherwise) is to change the world for the better.[15] Many religious and cultural traditions hold that the economy exists to serve human beings, so all economic entities have an obligation to society (e.g., cf. Economic Justice for All). Moreover, as discussed above, many CSR proponents point out that CSR can significantly improve long-term corporate profitability because it reduces risks and inefficiencies while offering a host of potential benefits such as enhanced brand reputation and employee engagement.

[edit] CSR and questionable motives
Some critics believe that CSR programs are undertaken by companies such as British American Tobacco (BAT),[16] the petroleum giant BP (well-known for its high-profile advertising campaigns on environmental aspects of its operations), and McDonald's (see below) to distract the public from ethical questions posed by their core operations. They argue that some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation with the public or with government. They suggest that corporations which exist solely to maximize profits are unable to advance the interests of society as a whole.[17]
Another concern is when companies claim to promote CSR and be committed to Sustainable Development whilst simultaneously engaging in harmful business practices. For example, since the 1970s, the McDonald's Corporation's association with Ronald McDonald House has been viewed as CSR and relationship marketing. More recently, as CSR has become mainstream, the company has beefed up its CSR programs related to its labor, environmental and other practices[18] All the same, in McDonald's Restaurants v Morris & Steel, Lord Justices Pill, May and Keane ruled that it was fair comment to say that McDonald's employees worldwide 'do badly in terms of pay and conditions'[19] and true that 'if one eats enough McDonald's food, one's diet may well become high in fat etc., with the very real risk of heart disease.'[20]
Shell has a much-publicised CSR policy and was a pioneer in triple bottom line reporting, but this did not prevent the 2004 scandal concerning its misreporting of oil reserves, which seriously damaged its reputation and led to charges of hypocrisy. Since then, the Shell Foundation has become involved in many projects across the world, including a partnership with Marks and Spencer (UK) in three flower and fruit growing communities across Africa.
Critics concerned with corporate hypocrisy and insincerity generally suggest that better governmental and international regulation and enforcement, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner.

[edit] Motivations
Corporations are motivated to adopt CSR practices by several different factors.[21]

[edit] Ethical consumerism
The rise in popularity of ethical consumerism over the last two decades can be linked to the rise of CSR. As global population increases, so does the pressure on limited natural resources required to meet rising consumer demand (Grace and Cohen 2005, 147). Industrialization in many developing countries is booming as a result of technology and globalization. Consumers are becoming more aware of the environmental and social implications of their day-to-day consumer decisions and are beginning to make purchasing decisions related to their environmental and ethical concerns. However, this practice is far from consistent or universal.

[edit] Globalization and market forces
As corporations pursue growth through globalization, they have encountered new challenges that impose limits to their growth and potential profits. Government regulations, tariffs, environmental restrictions and varying standards of what constitutes labour exploitation are problems that can cost organizations millions of dollars. Some view ethical issues as simply a costly hindrance. Some companies use CSR methodologies as a strategic tactic to gain public support for their presence in global markets, helping them sustain a competitive advantage by using their social contributions to provide a subconscious level of advertising.(Fry, Keim, Meiners 1986, 105) Global competition places particular pressure on multinational corporations to examine not only their own labour practices, but those of their entire supply chain, from a CSR perspective.

[edit] Social awareness and education
The role among corporate stakeholders to work collectively to pressure corporations is changing. Shareholders and investors themselves, through socially responsible investing are exerting pressure on corporations to behave responsibly. Non-governmental organizations are also taking an increasing role, leveraging the power of the media and the Internet to increase their scrutiny and collective activism around corporate behavior. Through education and dialogue, the development of community in holding businesses responsible for their actions is growing (Roux 2007).

[edit] Ethics training
The rise of ethics training inside corporations, some of it required by government regulation, is another driver credited with changing the behaviour and culture of corporations. The aim of such training is to help employees make ethical decisions when the answers are unclear. Tullberg believes that humans are built with the capacity to cheat and manipulate, a view taken from (Trivers 1971, 1985), hence the need for learning normative values and rules in human behaviour (Tullberg 1996). The most direct benefit is reducing the likelihood of "dirty hands" (Grace and Cohen 2005), fines and damaged reputations for breaching laws or moral norms. Organizations also see secondary benefit in increasing employee loyalty and pride in the organization. Caterpillar and Best Buy are examples of organizations that have taken such steps (Thilmany 2007).
Increasingly, companies are becoming interested in processes that can add visibility to their CSR policies and activities. One method that is gaining increasing popularity is the use of well-grounded training programs, where CSR is a major issue, and business simulations can play a part in this.[citation needed]

[edit] Laws and regulation
Another driver of CSR is the role of independent mediators, particularly the government, in ensuring that corporations are prevented from harming the broader social good, including people and the environment. CSR critics such as Robert Reich argue that governments should set the agenda for social responsibility by the way of laws and regulation that will allow a business to conduct themselves responsibly.
The issues surrounding government regulation pose several problems. Regulation in itself is unable to cover every aspect in detail of a corporation's operations. This leads to burdensome legal processes bogged down in interpretations of the law and debatable grey areas (Sacconi 2004). General Electric is an example of a corporation that has failed to clean up the Hudson River after contaminating it with organic pollutants. The company continues to argue via the legal process on assignment of liability, while the cleanup remains stagnant. (Sullivan & Schiafo 2005). The second issue is the financial burden that regulation can place on a nation's economy. This view shared by Bulkeley, who cites the Australian federal government's actions to avoid compliance with the Kyoto Protocol in 1997, on the concerns of economic loss and national interest. The Australian government took the position that signing the Kyoto Pact would have caused more significant economic losses for Australia than for any other OECD nation (Bulkeley 2001, pg 436). Critics of CSR also point out that organisations pay taxes to government to ensure that society and the environment are not adversely affected by business activities.

[edit] Crises and their consequences
Often it takes a crisis to precipitate attention to CSR. One of the most active stands against environmental management is the CERES Principles that resulted after the Exxon Valdez incident in Alaska in 1989 (Grace and Cohen 2006). Other examples include the lead poisoning paint used by toy giant Mattel, which required a recall of millions of toys globally and caused the company to initiate new risk management and quality control processes. In another example, Magellan Metals in the West Australian town of Esperance was responsible for lead contamination killing thousands of birds in the area. The company had to cease business immediately and work with independent regulatory bodies to execute a cleanup.

[edit] Stakeholder priorities
Increasingly, corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Understanding what causes are important to employees is usually the first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i.e. more loyalty, improved recruitment, increased retention, higher productivity, an so on). Key external stakeholders include customers, consumers, investors (particularly institutional investors, regulators, academics, and the media).

[edit] Latin America and the Caribbean
The move towards CSR is relatively new in Latin America and the Caribbean and is gaining ground as companies are pressed to adapt to the demands of the global economy. For small and medium enterprises (SMEs) in this region, adopting CSR practices can open doors to new market opportunities and bring a number of other benefits including reduced costs, improved bottom lines and public image, and greater opportunities to do business with other SMEs or larger firms.
The levels of corporate citizenship are corporate governance law, corporate philanthropy and corporate social responsibility. Corporate citizenship, means adhering to laws, and complying with some standards. Corporate philanthropy means helping communities via social investments. Corporate social responsibility requires performance of one's obligations to stakeholders
In addition to these benefits, adopting responsible management practices can also help smaller businesses access the capital they need to grow.[22]
To further promote the expansion of CSR among small and medium enterprises in the region, there are a number of obstacles to overcome: the lack of understanding among SMEs about CSR; the scarcity of trained experts in the region to build business capacity in this area; and insufficient shareholder or government pressure on companies to make their management records public. The Multilateral Investment Fund is working to address these challenges through projects aiming to raise awareness among SMEs in Latin America and the Caribbean about the benefits of CSR and to support smaller companies in their efforts to implement CSR measures. MIF also partners with large companies, foundations and universities interested in building awareness and spreading CSR knowledge to businesses throughout the region.[23]

[edit] See also
Accountability
Beneficiation
Business in the Community
Business philosophy
Chief Green Officer
Civil society
Corporate behaviour
Corporate benefit
Corporate governance
Corporate personhood
Corporate sustainability
Corporation
Csrwire Canada
Customer engagement
Ethical banking
Ethicism
Inclusive business
Not Just For Profit
OECD Guidelines for Multinational Enterprises
Sustainability
The Corporation
Voluntary compliance

[edit] References
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^ Freeman, R. Strategic management :a stakeholder approach . Pitman, 1984. ISBN: 9780273019138
^ Williams, Cynthia A.; Ruth V. Aguilera (2008). "Corporate Social Responsibility in a Comparative Perspective". in Crane, A., et.al. (PDF). The Oxford Handbook of Corporate Social Responsibility. Oxford: Oxford University Press. ISBN 0199211590.
^ Habisch, André; Jan Jonker, Martina Wegner, R. Schmidpeter (eds.) (2005). Corporate Social Responsibility across the Europe. Heidelberg: Springer. ISBN 978-3-540-23251-3.
^ R.H. Gray, D.L.Owen & K.T.Maunders, Corporate Social Reporting: Accounting and accountability (Hemel Hempstead: Prentice Hall, 1987)p. IX.
^ Orlitzky, Marc; Frank L. Schmidt, Sara L. Rynes (2003). "Corporate Social and Financial Performance: A Meta-analysis" (PDF). Organization Studies (London: SAGE Publications) 24 (3): 403–441. doi:10.1177/0170840603024003910. http://www.finanzasostenibile.it/finanza/moskowitz2004.pdf. Retrieved on 2008-03-07.
^ "Corporate Social Responsibility and Ethical Careers". University of Edinburgh Careers Service. http://www.careers.ed.ac.uk/STUDENTS/Careers/Corporate%20Social%20Responsibility%20and%20Ethical%20Careers.html. Retrieved on 2008-03-07.
^ Bhattacharya, C.B., Sankar Sen and Daniel Korschun (2008), "Using Corporate Social Responsibility to Win the War for Talent," MIT Sloan Management Review, 49 (2), 37-44; "The Good Company". The Economist. 2005-01-20. http://www.economist.com/surveys/displayStory.cfm?Story_id=3555212. Retrieved on 2008-03-07.
^ Kytle, Beth; John Gerard Ruggie (2005). "Corporate Social Responsibility as Risk Management: A Model for Multinationals" (PDF). Social Responsibility Initiative Working Paper No. 10.. Cambridge, MA: John F. Kennedy School of Government, Harvard University. http://www.ksg.harvard.edu/m-rcbg/CSRI/publications/workingpaper_10_kytle_ruggie.pdf. Retrieved on 2008-03-07.
^ Paluszek, John (April 6-7, 2005). "Ethics and Brand Value: Strategic Differentiation" (PowerPoint). Business and Organizational Ethics Partnership Meeting. Markkula Center for Applied Ethics, Santa Clara University. http://www.scu.edu/ethics/practicing/focusareas/business/ethics-and-brand-value.ppt. Retrieved on 2008-03-07.
^ "Dr. Tantillo’s 30-Second 'How To': How To Brand CSR The American Apparel Way" Marketing Doctor Blog. March 28, 2008.
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^ c.f., Aquino, M.P., Nuestro Clamor por la Vida. Teología Latinoamericana desde la Perspectiva de la Mujer (San José, Costa Rica: Departamento Ecuménico de Investigaciones, 1992), et al.
^ Real Leadership Alliance
^ Friends of the Earth (2005-04-28). British American Tobacco Report Shows Truth Behind Greenwash. Press release. http://www.foe.co.uk/resource/press_releases/british_american_tobacco_r_27042005.html. Retrieved on 2008-03-07.
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^ [Appeal Judgment p247]
^ [Judgment p264]
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Kerr, M., R. Janda, C. Pitts (2009) Corporate Social Responsibility: A Legal Analysis (Toronto: LexisNexis).[1]
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[edit] Further reading
Baker, Mallen. "Arguments against Corporate Social Responsibility". Business Respect. http://www.mallenbaker.net/csr/CSRfiles/against.html. Retrieved on 2008-03-07.
Carroll, A.; A. Buchholtz (2006). Business and Society: Ethics and Stakeholder Management, 6th ed. Mason, OH: Thomson/South-Western. ISBN 0324225814.
Carroll, A. (1998). "The Four Faces of Corporate Citizenship". Business and Society Review. September, vol. 100, no. 1, pp. 1–7
Cavett-Goodwin, David (2007-12-03). "Making the Case for Corporate Social Responsibility". Cultural Shifts. http://culturalshifts.com/archives/181. Retrieved on 2008-03-07.
Clarkson, M. (1995). "A stakeholder framework for analyzing and evaluating corporate social performance". Academy of Management Review. Vol.20, pp.92–117.
Davis, K.; R. Blomstrom (1975). Business and Society: Environment and Responsibility, New York: McGraw-Hill. ISBN 0070155240.
Farnham Castle. "Corporate Social Responsibility: New Fad or Necessity". http://www.intercultural-training.co.uk/articles/general/corporate_social_resp.asp. Retrieved on 2008-03-07.
"Ian Davis on business and society". The Economist. 2005-05-26. http://www.economist.com/printedition/displayStory.cfm?Story_ID=4008642. Retrieved on 2008-03-07. - advantages and limitations of CSR
Fombrun, C. (2000). "The value to be found in corporate reputation". Financial Times, December 4, 2000.
Griffin, J.; J. Mahon (1997). "The Corporate Social Performance and Corporate Financial Performance Debate", Business and Society. Vol. 36. pp.5–31.
Holton, Glyn A.. "Investor Suffrage Movement" (PDF). Financial Analysts Journal 62 (6). http://www.contingencyanalysis.com/home/papers/suffrage.pdf. Retrieved on 2008-03-07.
International Business Report (2008). Corporate Social Responsibility: a necessity not a choice, Grant Thornton.
Jastram, Sarah (2007). "The Link Between Corporate Social Responsibility and Strategic Management". CIS Papers No.17. Centre of International Studies, Hamburg.
Lin-Hi, Nick (2008). "Corporate Social Responsibility: An Investment in Social Cooperation for Mutual Advantage", Wittenberg Center for Global Ethics Discussion Paper 2008-6.
Maignan, I., O. Ferrell, G. Tomas (1999). "Corporate Citizenship: Cultural Antecedents and Business Benefits". Journal of the Academy of Marketing Science. Vol.27, No.4, pp.455–469.
Maignan, I., O. Ferrell (2001). "Corporate citizenship as a marketing instrument". European Journal of Marketing. Vol.35, No.3/4, pp.457–484
Matten, D., A. Crane, W. Chapple (2003). "Behind the mask: Revealing the true face of corporate citizenship". Journal Business Ethics, Vol.45, No.1, p.109.
Menon, A., A. Menon (1997). "Enviropreneurial marketing strategy: the emergence of corporate environmentalism as marketing strategy". Journal of Marketing, Vol.61, pp.51–67.
"Millennium Poll on Corporate Responsibility", Environics International Ltd., in cooperation with The Prince of Wales Trust, September 1999.
Jones, I., M. Pollitt, D. Bek (2006). "Multinationals in their communities: A social capital approach to corporate citizenship projects", University of Cambridge Working Paper 337.
Manne, Henry G. (2006-11-24). "Milton Friedman Was Right". The Wall Street Journal. http://www.opinionjournal.com/editorial/feature.html?id=110009295. Retrieved on 2008-03-07.
Milchen, Jeff (May, 2000). "Inherent Rules of Corporate Behavior". ReclaimDemocracy.org. http://reclaimdemocracy.org/corporate_accountability/corporations_cannot_be_responsible.html. Retrieved on 2008-03-07.
Norman, Wayne; Chris MacDonald. "Triple Bottom Line: a Critique". http://www.businessethics.ca/3bl. Retrieved on 2008-03-07.
Porter, Michael; Mark Kramer. "The Link Between Competitive Advantage and Corporate Social Responsibility" (PDF). Harvard Business Review. http://harvardbusinessonline.hbsp.harvard.edu/email/pdfs/Porter_Dec_2006.pdf.
Rowe, James (2005-01-01). "Corporate Social Responsibility as Business Strategy". CGIRS-Reprint-2005-08. Center for Global, International, and Regional Studies, University of California, Santa Cruz. http://repositories.cdlib.org/cgirs/reprint/CGIRS-Reprint-2005-08/. Retrieved on 2008-03-07.
Sen, Sankar, C. B. Bhattacharya and Daniel Korschun (2006). "The Role of Corporate Social Responsibility in Strengthening Multiple Stakeholder Relationships: A Field Experiment." Journal of the Academy of Marketing Science, 34 (2), 158-66.
SMEs Focus. "Making Europe a Pole of Excellence on Corporate Social Responsibility (CSR)".
Waddell, S. (2000). "New institutions for the practice of corporate citizenship: Historical Intersectoral, and Developmental Perspectives". Business and Society Review, Vol.105, pp.323–345.
Wartick, S., P. Cochran (1985). "The Evolution of the Corporate Social Performance Model". Academy of Management Review, Vol.10, p.767.
Wheeler, David; Maria Sillanpää (1997). The Stakeholder Corporation: a blueprint for maximizing stakeholder value. London: Pitman. ISBN 0273626612.
Wood, D. (1991). "Corporate Social Performance Revisited". Academy of Management Review, Vol.4, pp.691–718.
World Business Council for Sustainable Development (2001), The Business Case for Sustainable Development: Making a difference toward the Johannesburg Summit 2002 and beyond.
World Business Council for Sustainable Development (2000), Corporate Social Responsibility: Making good business sense.
World Business Council for Sustainable Development (1999), Corporate Social Responsibility: Meeting changing expectations.