N. Craig Smith

Corporate Social Responsibility: Whether or How?:

Corporate social responsibility (CSR) is not a new idea. However, CSR has never been more prominent on the corporate agenda than it is today. This article examines the pressures for increased corporate attention to CSR and whether this attention is warranted and likely to be sustained. It differentiates between the business case for CSR and the normative case and concludes that often there may be a compelling business case for making a substantial commitment to CSR, but an individual firm must assess the extent to which the general business case for CSR applies to its specific circumstances. For some firms, CSR may be a major influence on corporate strategy. Companies making a substantial commitment to CSR—because of a business or a normative case—are likely to find that this involves major challenges with respect to the formulation and implementation of CSR strategy, not least because of the uncertainties inevitably associated with determining a firms societal obligations.

Why We Boycott: Consumer Motivations for Boycott Participation

Although boycotts are increasingly relevant for management decision making, there has been little research of an individual consumers motivation to boycott. Drawing on the helping behavior and boycott literature, the authors take a cost–benefit approach to the decision to boycott and present a conceptualization of motivations for boycott participation. The authors tested their framework during an actual boycott of a multinational firm that was prompted by factory closings. Consumers who viewed the closures as egregious were more likely to boycott the firm, though only a minority did so. Four factors are found to predict boycott participation: the desire to make a difference, the scope for self-enhancement, counterarguments that inhibit boycotting, and the cost to the boycotter of constrained consumption. Furthermore, self-enhancement and constrained consumption are significant moderators of the relationship between the perceived egregiousness of the firms actions and boycott participation. The authors also explore the role of perceptions of others’ participation and discuss implications for marketers, nongovernmental organizations, policymakers, and researchers.

The New Marketing Myopia

During the past half century, in general, marketers have heeded Levitts (1960) advice to avoid “marketing myopia” by focusing on customers. In this article, the authors argue that marketers have learned this lesson too well, resulting today in a new form of marketing myopia, which also causes distortions in strategic vision and can lead to business failure. This “new marketing myopia” stems from three related phenomena: (1) a single-minded focus on the customer to the exclusion of other stakeholders, (2) an overly narrow definition of the customer and his or her needs, and (3) a failure to recognize the changed societal context of business that necessitates addressing multiple stakeholders. The authors illustrate these phenomena and then offer a vision of marketing management as an activity that engages multiple stakeholders in value creation, suggesting that marketing can bring a particular expertise to bear. They offer five propositions for practice that will help marketers correct the myopia: (1) map the companys stakeholders, (2) determine stakeholder salience, (3) research stakeholder issues and expectations and measure impact, (4) engage with stakeholders, and (5) embed a stakeholder orientation. The authors conclude by noting the implications for research.

Why Managers Fail to Do the Right Thing: An Empirical Study of Unethical and Illegal Conduct

We combine prior research on ethical decision-making in organizations with a rational choice theory of corporate crime from criminology to develop a model of corporate offending that is tested with a sample of U.S. managers. Despite demands for increased sanctioning of corporate offenders, we find that the threat of legal action does not directly affect the likelihood of misconduct. Managers’ evaluations of the ethics of the act, measured using a multidimensional ethics scale, have a significant effect, as do outcome expectancies that result from being associated with the misconduct but not facing formal sanctions. The threat of formal sanctions appears to operate indirectly, influencing ethical evaluations and outcome expectancies. Obedience to authority also affects illegal intentions, with managers reporting higher prospective offending when they are ordered to engage in misconduct by a supervisor. Why do managers engage in unethical and illegal behavior? What are likely to be effective remedies to this misconduct? One response to the recent wave of corporate scandals has been substantial custodial sentences for executives from firms such as Enron, WorldCom, ImClone, Adelphia, and Tyco (Sorkin and Bayot, 2005). Some have questioned whether sentences as long as 25 years might be disproportionate to the crime (Economist 2004a). However, even with highly punitive sentencing of corporate offenders, there may be justifiable skepticism of its effectiveness in deterring future corporate misconduct. Despite frequent demands for stronger regulations and increased sentencing, the study reported here suggests that the threat of formal sanctions may be ineffective, at least in isolation. Further, there might also be a role for ethics, though policymakers give this potentially important factor far less attention and researchers have only rarely considered the two in combination. In contrast, this paper examines the role of both legal and moral constraints on corporate crime. We view the misconduct evident in recent business scandals as a failure of moral and legal prohibitions. We draw on criminology as well as the management literature to develop and test a model of corporate offending, identifying how moral evaluations of the act, formal sanctions and other possible outcomes (notably informal sanctions, such as the loss of respect of family and friends) serve to inhibit a manager from engaging in illegal and unethical conduct. In the next section, we turn to criminology, where research on crime by firms and their managers has largely gone unnoticed within management, including a rational choice theory of corporate crime that builds on a deterrence framework. We relate this to the empirical research and conceptual models of (un)ethical decision making in organizations and build on the two literatures to propose our model and formulate hypotheses that are tested with a sample of managers. We conclude with a discussion of our findings, including their implications for managers and public policy.

The case study: a useful research method for information management

This paper urges greater recognition of the case study as a research method for information management. It acknowledges concern about the representatives of case studies but by specifying the relationships between epistemology and research methods shows that this concern is misplaced. Representatives is irrelevant for many research purposes, particularly when the distinction is made between logical and statistical inference. The validity of explanations or theory derived from case studies depends on the logic of the analysis and acknowledgement of ceteris paribus conditions, not on how typical the cases may be. Typologies of case studies have been proposed and these are considered, together with recommendations for the conduct of systematic and rigorous case study research. It is stressed that research problems should be addressed using appropriate research methods. Research of the important problems within the management area frequently demands a qualitative research approach, though it would seem that such an approach is often ignored because of a positivist research orientation. An assessment of the strengths and weakness of the case study method, which highlights its potential in the vital role of theory-building, leads to the conclusions that this method has much to commend it to information management researchers (1).

Integrating Social Responsibility and Marketing Strategy: An Introduction

Corporate social responsibility (CSR) is increasingly being recognized by firms as central to core business activities, as opposed to a peripheral consideration largely associated with philanthropy. This trend has major ramifications for marketing strategy that were explored at an international conference on “Integrating Social Responsibility and Marketing Strategy” held at the Boston University School of Management in September 2003. The conference was co-chaired by C.B. Bhattacharya of Boston University and N. Craig Smith of London Business School and sponsored by the Aspen Institute’s Business and Society Program; Boston University School of Management; London Business School; the Marketing Science Institute; and the California Management Review and the Center for Responsible Business at the Haas School of Business at the University of California, Berkeley.This Special Issue of California Management Review on “Integrating SocialResponsibility and Marketing Strategy, edited by C.B. Bhattacharya, N. Craig Smith, and David Vogel, contains a subset of the papers presented at the conference following a process of peer review. In the first article, “Doing Better at Doing Good,” based on their ongoing consumer research in this domain, Bhattacharya and Sen propose a contingent, detailed model of when, why, and how consumers respond to CSR initiatives. A key insight from their model is that in addition to the sponsoring company, the participating consumers and the issue/cause also benefit from social initiatives. A broad perspective is also offered by Waddock and Bodwell in the second article, “Managing Responsibility.” The authors identify parallels with the total quality movement and propose total responsibility management as an appropriate response to pressures today for increased corporate attention to CSR.

Consumer Boycotts and Consumer Sovereignty

Consumer boycotts may be understood as consumer behaviour, and the concept of consumer sovereignty is identified here as the implicit paradigm for the marketing desciple, this is then applied to illustrate and explain the workings of consumer boycotts which are seen to have two dimensions: degree and domain, information is shown to be important in determining the domain of consumer sovereignty and pressure groups may play an important role in providing this. Three case examples of boycotts support the argument.

SOCIALLY RESPONSIBLE PRICING: Lessons from the pricing of AIDS drugs in developing countries

Corporate social responsibility has major implications for pricing decisions in some markets. An extreme case is the pricing of life-saving drugs in developing countries; industry critics have pointed to price as an obstacle to treatment and a factor in the deaths of millions of AIDS victims. This article examines socially responsible pricing in the form of differential pricing across markets, taking into account ability to pay and social welfare. An analysis of AIDS drug pricing between 1999 and 2003 suggests that, in fact, the high prices of AIDS drugs in developing countries sub-optimized contribution earnings in those markets. In the 1990s, multinationals could have earned greater contribution in developing countries by reducing prices, while also saving thousands of lives. However, that could have jeopardized earnings in developed countries, and this, together with other factors, created barriers to socially responsible pricing. Neither multinationals nor developing-country governments can alone create conditions for socially responsible pricing to prevail. This article identifies the role of different players in addressing barriers to socially responsible pricing, including multinationals, governments, non-governmental organizations, and multilateral institutions such as the World Trade Organization and the World Health Organization. This article also offers lessons for managers in industries with characteristics similar to the drug industry, where socially responsible pricing also may be needed, if not demanded.

Deception in retailer high-low pricing: A “rule of reason” approach

Abstract Marking up to mark down and referring to a fictitious “regular” price in retail advertising can deceive consumers and cause consumer injury. The practice, known as high-low pricing, has become widespread in the intensely competitive retail environment. Consumers respond to this practice by drawing one of several inferences about the value of the product and the prevailing competitive price. Whether the consumer is deceived depends on the inference drawn. This paper integrates legal, public policy, consumer behavior, and retailing perspectives to examine the issue and propose retailer and regulatory solutions. To date, regulators have attempted to impose a “per se” approach. Through analysis of retailer motivations, consumer behavior and the May D&F case, a “Rule of Reason” approach is suggested as an alternative solution to this issue of significant concern to retailers and public policymakers alike.

Fairness in consumer pricing

Two case studies illustrate problems of fairness in consumer pricing. The May D&F case involves charges of deceptive advertising as a result of the retailers “high-low pricing”; customers were allegedly deceived by artificially inflated “regular” prices and discounts promoted from these prices. The GDC case involves charges that 10,000 consumers were deceived into purchasing homes at prices higher than “fair market value”. Consumer policy and managerial issues are identified and analysis and recommendations provided. These cases are about fairness and trust within market exchange, and the responsibilities of sellers and consumers to provide and use information. Economic assumptions of nonfairness and caveat emptor are shown to be inadequate. The position that a fair price is the market price is questioned and an alternative suggested. Remedies which might be adopted by companies and pursued by policymakers are proposed. By creating more realistic consumer expectations, they would reduce problems of fairness in pricing.ZusammenfassungGegenstand des Beitrages ist die Frage, ob Fairneß bei der Preisgestaltung eine ökonomisch angemessene Forderung ist, und die Frage, worin diese Fairneß eigentlich besteht. Als empirischer Hintergrund werden zunächst zwei US-amerikanische Fallstudien präsentiert, die die Schwierigkeiten der genaueren Bestimmung von Fairneß bei der Preisbildung in konkreten Fällen illustrieren. Im ersten Fall wurde einem Einzelhandelsunternehmen vorgeworfen, irreführende Werbung insofern betrieben zu haben, als mit Preisabschlägen von künstlich aufgeblähten “regulären” Preisen geworben wurde. Eine Gerichtsentscheidung fand dieses Verhalten nicht nur täuschend, sondern verlangte von dem Unternehmen auch die Offenlegung seiner Preisfestsetzungs-Methoden. Der Beitrag zeigt, daß diese Forderung nach Offenlegung unter verbraucherpolitischem Blickwinkel eine suboptimale Lösung ist.Im zweiten Fall wurde einer Immobiliengesellschaft vorgeworfen, in Florida 10,000 Konsumenten zu Kaufverträgen für Wohneigentum gebracht zu haben zu Preisen, denen vorgebliche Schätzwerte zugrundelagen, die 20% über dem eigentlichen Marktwert lagen. Die Käufer kamen überwiegend aus anderen amerikanischen Staaten und waren mit dem lokalen Immobilienmarkt nicht vertraut. Der Fall (und seine rechtliche Behandlung) weist deutlich auf ethische und rechtliche Probleme hin, denen Verantwortliche ausgesetzt sind, wenn sie Preise festsetzen.Die weiteren Folgerungen gehen über den Bereich des Einzelhandels und der Immobilienbranche hinaus. Bei beiden Fällen geht es um Fairneß allgemein und um Vertrauensschutz bei Kaufverträgen, sowie um die Verantwortlichkeiten des Verkäufers bei der Versorgung des Käufers mit Information und die des Käufers zur Aufnahme und Nutzung dieser Informationen. In Übereinstimmung mit sozioökonomischen Positionen wird dargelegt, daß Fairneß bei der Preisfestsetzung von beiden Marktparteien ein offenes und ehrliches Verhalten bei der Verständigung über den Preis verlangt, zu dem der Tausch stattfinden soll. Die Analyse stellt die traditionelle ökonomische Annahme in Frage, nach der der Marktpreis, den die Nachfrager freiwillig zahlen, ein fairer Preis sei. Diese Position ist insbesondere bei Vorliegen von Täuschung unbefriedigend. Das Prinzip caveat emptor stellt sich nicht nur in den Fallstudien als unzweckmäßig heraus, sondern allgemein dort, wo es begrenzte Suchaktivitäten und begrenzte Preisvergleiche durch Konsumenten gibt. Als empirisch gestützte Erklärungen für solche Begrenzungen werden genannt: Das Entscheidungsverhalten von Konsumenten ist häufig durch Anspruchsanpassung, Vereinfachung und Bequemlichkeit gekennzeichnet, zweitens sind Preisvergleiche schwierig, wenn die Informationen unzweckmäßig, unvollständig oder irreführend sind, und drittens vertrauen Konsumenten häufig den Aussagen der Verkäufer.Überhöhte Preise sollten nicht kriminalisiert werden — das wäre ökonomisch disfunktional. Konsumenten sind die besten Kenner ihrer Präferenzen und ihrer Nutzenvorstellungen. Jedoch sollten Anbieter bereit sein, freiwillig Principien der fairen Preisgestaltung zu befolgen, und die Verbraucherpolitik sollte sie in dieser Bereitschaft bestärken. Wenn es gelänge, die Verbrauchererwartungen an Produkte realistischer zu gestalten, würde sich das Problem mangelnder Fairneß bei der Preisgestaltung ohnehin reduzieren.