Chapter 3: Integration of Public Policies 9.

Promote, create and supervise evaluation and accountability mechanisms

10. Promote, verification and certification mechanisms
3.1 INTEGRATING DIFFERENT APPROACHES OF GOVERNMENT 11. Support financially and participate in public-private-civil society partnership
ACTION ON CSR 12. Generate mechanisms for credit by companies, community investment or tax
relief for socially responsible companies
There are three main approaches in the analysis of government action on CSR, such 13. Carry out public campaigns promoting CSR and public awards and recognition
as: 14. Create or facilitate the creation of multi-stockholder forums, financing for CSR
organizations and business networks 15. Create public departments or posts in
1. The first approach deals with the themes and instruments used by charge of CSR and interministerial programs
governments in their initiatives to promote CSR. 16. Favor sustainable market development and sustainable competitiveness
17. Leadership by example (internal CSR policies)
• This perspective analyzes the theme, policies and instruments that
governments apply in order to promote and develop CSR.
• This approach can highlight the dichotomy between voluntary 3.3 STAGE 2: APPLYING THE RELATIONAL GOVERNANCE
compliance and legislation that is often formulated when discussing APPROACH TO THE ANALYSIS OF CSR PUBLIC POLICIES
government action to promote CSR.
• CSR can also be viewed in relation to regulation in each of its different The methodology of the relational model was initially developed by Mendoza
areas of application, health and safety at work, workers' rights, (1991-1996).
consumers' rights, socially responsible investment, policy of support for • The concept of the "relational state" wants to focus on the new role of
enterprise and SMEs, etc. the state in advanced societies in confronting the crisis of the welfare
state in the face of globalization and the internalization of the economy.
2. The second approach deals with players and contexts.
• The relational state locates the relations between the public and private
• This perspective takes into account the relationship between the players sphere between the state and society responsibility (Mendoza, 1996): in
involved and the interrelationships and co-responsibilities that are created the field of co-
to promote CSR in a globalized world.
• Furthermore, it incorporates the analysis of the milieu, the cultural The term co-responsibility involves firstly the existences of common objectives,
context and the socioeconomic tradition of the country in which the secondly the assuming of specific responsibilities for their attainment, and thirdly
government framework for CSR is developed. the effective articulation of the responsibilities taken on by each party.
• It analyzes the link between CSR policy and the socioeconomic tradition • in the relational state, collective interest cease to be regarded as the
and key indicators. exclusive property of the state, and the participation of society-primarily
• This approach considers the development of frameworks for the through nonprofit associations and organizations-becomes something
implementation of public policies, and also the government departments not only desirable but also legitimate.
concerned.
It is concluded that the welfare of the community is derived from each sector
3. The third approach deals with the relational and strategic aspects, by assuming its responsibilities, but they find that present social challenges, the
analyzing models for action on the basis of the conception and development of the globalization and internationalization of the economy and the crisis of the welfare
discourse on CSR and the design of strategic visions. In this approach, the functions state have resulted in the players having less capacity to solve social problems
of leadership are also very relevant. separately.

Consequently, the construction of the analytical framework comprised three The relational model set forth the idea that only if responsibilities are shared in
distinct stages: the areas of common interest, assuming the active collaboration of all social
players, society itself and enterprise, in collaboration with state, can today's social
Stage 1: Applying the CSR matrix to government action. and environmental challenges be met.
Stage 2: Applying the relational governance approach to the analysis of CSR public
policies. It is a case of articulating "joint projects" in which the two parties reach an
Stage 3: Developing the analysis model for government profiles of CSR. agreement on the objective to pursue, contributes resources to that end, and
therefore assume responsibility for the outcome (see Figure 3.1).

This co-responsibility takes the form of joint projects between the state, civil
3.2 STAGE 1: APPLYING THE CSR MATRIX TO GOVERNMENT
society and the private sector with appearance of shared areas of dialogue, public-
ACTION
private partnership (PPP) projects and conflict resolution networks.
The CSR analysis model was developed by Vilanova (2003).
This model includes six aspects: vision-mission- values, stakeholders, works, the
market, the environment, and accountability (see Figure 1.3: Conceptual Matrix of Figure 3.1 Areas of Responsibility in the Relational State
CSR).
• This led us to make an aggregate list of themes and instruments
In this application framework for the relational model we adopt an approach that
explicitly includes players and their contexts.
developed by government in the field of CSR (see Table 3.1 below).
• From this relational perspective, the possible CSR public policies are
Table 3.1 Themes and instruments applied by European governments in the no longer limited to one single area, that of one-way action from the
field of CSR. government to the business world.
• In fact, the CSR public policies adopted by governments are directed
Themes to some degree at one or other of these interrelations (see Figure 3.2).
1. Enterprise policy 2. Environmental policy and national strategies for sustainable • By applying the relational model of CSR policies, it is possible to
development (sustainable planning) reorder the material generated by identifying themes and instruments,
3. Consumer protection policy 4. Trade policy 5. Employee training policy and so we can systematize CSR public policies taking into account the
6. Continuing education policies 7. International cooperation policy players involved (see Figure 3.2 and the attachment in Table 3.3).
8. Social policy and social cohesion/exclusion 9. Employment policy, labor
practices and rights, work-life balance • This constitutes a richer approach than that which focuses solely on
10. Social dialogue, an inclusive labor market, social and vocational integration and themes and instruments, as it incorporates the complexity of the
unemployment interrelations among social players.
11. Social clauses • Furthermore, as it takes into account the players and their context, this
12. Renewal of socially and economically less-favored areas approach enabled us to reformulate the debate between legislation and
13. Social economy, entrepreneurs and small organizations voluntary compliance, especially in those aspects that reduce it to
14. Socially responsible investment and consumption, fair trade dichotomy between the two.
15. Business cases of good practice in CSR
16. Action and involvement of businesses in the community (investment,
partnership) How does the relational model overcome the legislation versus voluntary
17. SMEs and social responsibility compliance dichotomy?
18. International action by business delocalization (human rights, corruption, etc.)
19. Social action by business First, from the relational perspective, legislation on CSR can only cover a very
20. Company restructuring narrow range of the spectrum of possible policies.
21. Human rights
22. Public procurement
• Legislation affects some of the political measures on CSR that have
been taken by governments and are to be found mainly within the
23. Social responsibility of the public administration CSR (corruption)
relationship between government and business.
25. Sustainable tourism.
24. Support for governments of developing countries regarding 26. The third • Among the measures that have been incorporated through regulatory
sector and social volunteering framework-mostly in connection with the transparency of business
practices, we find: regulations favorable to SRI in pension and
INSTRUMENTS investment funds, regulations that either encourage or oblige listed
1. Develop a favorable legal framework (SRI, pension funds, social labeling, etc.) companies to publish sustainability reports, the introduction of social
2. Develop favorable fiscal framework and financing instruments for companies labelling, a regulatory framework for public procurement, and the
3. Promote CSR instruments (social labeling and indexes) and reporting inclusion of CSR clauses in some commercial codes.
methodologies (GRI or sustainability reports)
4. Promote management measures and tools rewarding action by companies Second, we see that the dichotomy between legislation and voluntary compliance
(awards) 5. Apply EU legislation on CSR and sustainability is overcome when we observe that the regulations on CSR that can affect
6. Apply and promote international instruments and agreements on CSR (OECD, companies in the present economic framework come not only from governments
ILO, Global Compact) but also from other agents such as, international chambers of commerce, certain
7. Participate in international summits and European conferences. on CSR international organizations (OECD, ILO), sectoral business associations, or self-
8. Promote transparency and exchange best practices regulation by the companies themselves or business sectors
Third, self-regulation may appear as a result of agreements among the various
players, without taking the form of legislation. Characteristics
STAGE 3: DEVELOPING THE ANALYTICAL FRAMEWORK FOR
GOVERNMENT PROFILES OF CSR 1. Partnership as a shared strategy among sectors for meeting socio- employment
challenges
In applying the relational model to CSR public policies, we can gain an overview of 2. Soft intervention policies to encourage company involvement in governance
government action, taking into account the players involved and their contexts. challenges affecting the community (entrepreneurship and voluntary service)
3. Updated version of the existing social agreement and emphasis on a strategy of
In this connection, there is a pattern for analysis that accounts for how CSR policy sustainable development
is inserted into the government structure and the framework of public policies. This 4. Regulatory creation of discussion groups for the different social actors to achieve
enabled us to analyze the following: public consensus on CSR

1. The profiles and models of action adopted by governments Countries

2. Actions and public policies 1. Denmark, Finland, The Netherlands, Sweden
3. The discourses devised by governments on the concept of CSR, considering the 2. Ireland, The United Kingdom
dissemination, the means and the organizations used 3. Austria, Belgium, Germany, Luxembourg
4. The incorporation of CSR into the governmental structure 4. France, Greece, Italy, Spain, Portugal

In other words, there is an index for analyzing CSR policies that takes into account The Business in the Community Model
the fundamental elements for the construction and implementation of CSR strategies This model refers to the Anglo-Saxon countries: Ireland and the UK.
(see table 3.2): • In these countries, government action is conceived more as a
facilitating or mediating element.
1. Government CSR policy: Vision, mission and objectives; strategies and
priorities, origin of the political discourses chronological evolution of the policy
• Government initiatives in the CSR framework focus on supporting the
private sector and facilitating sustainable economic development and
2. Internal government CSR structure: government departments that have taken
the economic regeneration on which the collaboration of the private
on responsibilities on CSR policy, position of political figure, organizational
sector rests. These countries seek to solve social problems, such as,
structure, centralized or decentralized
3. CSR responsibilities at different levels of government: organizational structure unemployment and social exclusion through CSR policies that involve
businesses.
for CSR. Crosscutting policies, regional/decentralized government government, and
local • This is a response to crises of social governance, whereby governments
4. CSR role of other organizations: government agencies, intermediary attempt to promote areas of co-responsibility.
organizations, multi-stakeholder organizations, international organizations, • The governments have employed soft intervention policies to apply
institutional support and relationship with existing international agreements on CSR: CSR measures.
ILO conventions, OECD guidelines for multinational enterprises, UN Global
Compact participation in international bodies concerned with CSR The Sustainability and Citizenship Model
5. Important elements: relevant actors in the process, turning points and objectives, This is the models that prevail in continental Europe, such as: Austria, Belgium,
(Socioeconomic, political and cultural context), welfare state evolution and tradition France, Germany and Luxembourg in this group.
This group was divided into two models:
A compilation can be scan in the table that appear as an appendix to this chapter, in • The Citizenship Sub-model, which comprises Austria, Belgium, Germany
which policies and programs are ordered according to the relationship among and Luxembourg, and
players, as in the relational model:
• the Regulatory Sub-model, which consist of France. The governments of
1. CSR in the public administration. these countries took on CSR around the time of the publication of the Green Paper
2. CSR in the government-business relationship. by the European Commission.
3. CSR in the government-society relationship.
4. CSR in the government-business-society interrelationship (relational CSR). Their initial vision of CSR focuses generically on encouraging enterprise to play
an active role in policies grouped under sustainable development strategies. The
We have classified government policies and programs according to the rational idea is to generate businesses that also work for a sustainable future in the countries
model. From this perspective, the thematic and instrumental approach is totally where they operate.
integrated into a relational and strategic approach. These stages that we have gone • The countries that follow this model have a long tradition of social and
through in our analysis enable us to identify clearly the fundamental aspects of the workers rights and a historical background of dialogue between trade unions and
political debate on the development of CSR: companies.

1. The debate on the themes and instruments inherent in a CSR policy The Agora Model
2. The debate on which players should participate in the design of a CSR policy, how This model refers to the Mediterranean countries: Greece, Italy, Portugal and
they should be involved in their process and the interest of each of them in the Spain.
process • They are all countries that have taken on CSR recently.
3. The debate on how CSR should be understood (and the policy that matches it
best), considering the economic, social and cultural context of each country.
• It was the action of the European Commission that drove the government
development of CSR in these countries, as none of them took part in the debate
opened by the European Commission, nor did they respond to the Green Paper.
. Therefore, the debate on public policies and CSR may, likewise, be difficult to
piece together and to solve when interlocutors focus on their own aspect of the three • Most of these governments are currently engaged in developing and designing
debates, to the exclusion of those of the others. public strategies and policies for CSR.
• They are still at an incipient stage.
3.5 MODELS OF CSR PUBLIC POLICIES IN EUROPE • We have called this the Agora model because in the Mediterranean countries
the discussion on the political application of CSR arises from discussion processes
The application of this relational and strategic approach enabled us to analyze in which the government invites companies and other social players (business
government initiative on the basis of the coincident profiles that we devised. This organizations, universities, trade unions, etc.) to debate on the action to be taken.
analysis concluded with the identification in the EU-15 countries of four ideal
typology of models of CSR governmental action in the area of the development of 3.6 CSR public policies and the welfare state
public policies for promoting CSR (see Table 3.3)
In the development of public policies on CSR, the social, cultural and political
The Partnership Model context of each country is of paramount importance.
This model groups together the countries of northern Europe and takes into account • Those readers who are familiar with the literature on the development of the
their approach to CSR public policies. welfare state in Europe will have detected similarities between the models of public
policies and CSR that we have identified and the divisions that are usually made
• Included in this classification are Denmark, Finland, the Netherlands and when analyzing the different forms and experiences of the welfare state.
Sweden. In these countries with a strong welfare state tradition, the
governments have gone from acting as a protecting state, taking • An in-depth study of the relationship between CSR public policy models and
responsibility for social issues, to adopting a more facilitating role, welfare state development models remains to be conducted.
sharing the rising costs of solving social issues through public and private • Getting the right approach to CSR public policies will in the long run be a
partnerships. fundamental element and symptoms of the debate on the redefinition of the welfare
• They are countries with a historical tradition of social negotiation in state.
which the relationship between government and enterprise has a strong
component of cooperation. 3.7 ATTACHMENT TO THE GOVERNMENT PROFILE OF CSR
• CSR public policies are formulated within the framework of social Classification of Government Policies and Programs According to the Relational
affairs and integration into society and employment. Approach.
• Local government is intensely involved, channeling the creation of
partnership and thus, fostering the concept of social co-responsibility Towards the Suppliers
among administrations, companies and social organizations. Business must ensure that terms of contracts with suppliers be clearly stated and
honored in full. The abuse of economic power especially in dealing with smaller
Table 3.3 Models of Government Action in the Development of Public Policies firms must also be avoided.
for Endorsing CSR in
Towards the Owners and Other Providers of Capital
Model Owners and providers of capital must be provided an adequate return on their
1. Partnership 2. Business in the Community 3. Sustainability and Citizenship capital to ensure the security of their investments. Hence, business must utilize the
4. Agora financial resources of the providers of capital with responsibility and efficiency
 Table 3.2 Index for Analyzing Government Action on CSR

Towards the Local and National Government COUNTRY:

While it is agreed that the responsibility of government is to enact legislation and ISSUE
formulate implementing policies and programs, it is the duty of business to involve 1. Government CSR Policy
itself in the discussion of proposed legislation and to propose sound policies in the 2. Internal Government CSR Structure
use of human and material resources. 3. CSR Responsibility at different levels of government
4. Scope of CSR policy
Towards Society in General 5. CSR role of other organizations
Realizing that business utilizes an important degree of the nation's resources, it is the
duty of business to make sure that the resources are deployed in such a manner which IMPLEMENTATION
will benefit society in general and which does not conflict with the needs and
reasonable aspirations of the communities in the areas where they operate. 1. Vision, objectives, strategies and priorities Origin of the discourse
chronological evolution
The Businessmen and the Code 2. Position of political figure. Organizational structure centralized or
An important element in the Code concerns the important understanding of the key Decentralized
role of the businessman and/or the professional manager in the success of all 3. Cross-cutting policies. Regional/decentralized government. Local
endeavors. government
• As is widely recognized elsewhere in the world today, the entrepreneur and 4. Domestic vs. International. Cross-sector or Sector-oriented. Centralized or
the manager are the prime movers of development. decentralized Government agencies
5. Intermediary organizations. Multi-stakeholder organizations. International
• The Code recognizes this and has in fact been formulated on the basic premise organizations
that the modern manager is the strategist for human development.
6. Players
• Moreover, the Code recognizes that ultimately, all business is essentially an 7. Environmental context (Socioeconomic, political tradition)
expression of human relationships and that therefore the man or woman who brings 8. Welfare state evolution
all of these relationships together towards a common end must be guided by
humanist, ethical principles in his actuations.
• The Code, therefore, devotes a section to such principles for the professional True or false
manager. 1. "Prestige" is associated with a company's reputation as an earner and as a leader
in its industry in particular and of the business sector in general.
Using the Code
The Code seeks also to be pragmatic and not merely conceptual. These steps hold 2. The Professional Manager is perceived as essentially providing managerial
true for any enterprise regardless of size, whether public or private, whether a expertise and leadership, and his or her rewards may, in fact, include ownership by
proprietorship, partnership or a corporation. way of being given stock options or what is commonly called "a piece of the
action".
The first recommended step would involve the examination, understanding and
acceptance of the Code by the policy makers in the enterprise. 3. The criterion of allocating tasks tasks and responsibilities is not established on
• As the Code dwells on basic principles and cannot cover or anticipate every the basis of the public or private nature of the organizations taking part, but rather
possible situation not sufficiently specific to guide the individual at every instance, on the basis of their ability to meet a particular social need most appropriately and
effectively.
the next step involves the development by policy makers of detailed guidelines and
policies for use by their employees. 4. The term co-responsibility involves firstly the existences of common objectives,
secondly the assuming of specific responsibilities for their attainment, and thirdly
• The BBC has plans to organize workshops which interested officers of any the effective articulation of the responsibilities taken on by each party.
enterprise attend and participate in the objective of formulating specific guidelines.
5. There is a pattern for analysis that accounts for how CSR policy is inserted into
The last step necessarily involves an evaluation and regular audit of the the government structure and the framework of public policies.
implementation of the Code and the attendant set of specific policies and guidelines.
• The Code recommends this as possibly an annual procedure which serves to 6. Regular buyers unconsciously expect preferential treatment, e.g., the ability to
ensure adherence as well as to appraise performance of the firm as a whole, its key be given first preferences in being allowed to choose, or in being allotted a regular
officers and its employees. share of regularly purchased goods.

Relationship of Business to its Publics 7. Soft infrastructure refers to laws, ordinances, rules and regulations, and services.
Along with the evolution of its nature and structure also evolved its relationship with 8. Hard infrastructure refers to horizontal construction such as roads, bridges, pier;
what we may call its "publics", groups of people and/or organizations it deals with and, vertical constructions such as power towers, buildings, etc.
in the conduct of business. Since the early 1900s, a view of these relationship and
the attendant rights and privileges, obligations and duties have remained relatively 9. Government expects from its public the payment of the necessary taxes, tariffs
stable, unquestioned as the "guide- posts" for "appropriate", "proper", "right", and and other fees, based on all incomes, needed to enable them to provide the
even "ethical", business conduct. infrastructure.

Figure 3.4 Relationship of Business Organization to its Special Publics 10. Posing the relationship between the state and society in terms of co-
responsibility means abandoning the mistrust that characterized the welfare state
Social Responsibility of Business. and replacing it with a determined attitude of dialogue and cooperation.
"Prestige" is associated with a company's reputation as an earner and as a leader in
its industry in particular and of the business sector in general. MULTIPLE CHOICE
• It is typically associated with such measures as profitability, sales volume,
earnings per share, value of each share, and a number of other well- known financial 1.The following are approaches in the government action on CSR except:
measures. a. analysis ofthe themes and instruments used by governments in their initiatives
to promote CSR
Through the years, the group of people called workers has been divided into two b. b. players and contexts
distinct groups, one retaining the original name of "worker", i.e. labor, and the other c. c. the relational and strategic aspects
termed the "Professional Manager". d. d. None of the above e. All of the above
• The Professional Manager is perceived as essentially providing managerial 2. The following are the stages of construction of the
expertise and leadership, and his or her rewards may, in fact, include ownership by
analytical framework except:
way of being given stock options or what is commonly called "a piece of the
a. Applying the CSR matrix to government action.
action".
b. Applying the relational governance approach to the analysis of CSR public
policies.
The relationship between the business enterprise and its customers carries a
c. Developing the analysis model for government
number of seldom explicitly stated but nonetheless existent expectations. It is often
profiles of CSR
assumed that businesses operate in a free market economy where such a consumer
d. None of the above
has genuine alternatives in sourcing a desired commodity or service.
e. All of the above
the seller develops a complementary set of expectations. He would wish for the
3. The term co-responsibility involves:
customer to "try him out first in every purchase before he decides to buy elsewhere"
a. existences of common objectives"
b. the assuming of specific responsibilities for their attainment
From government is expected "infrastructure", a. term that covers "soft
c. effective articulation of the responsibilities taken on by each party
infrastructure", such as laws, ordinances, rules and regulations, and services, and
d. None of the above e. All of the above
"hard infrastructure", divided into "horizontal construction", i.e. roads, bridges,
piers, and "vertical constructions", i.e. power towers, buildings, etc.
4. The following are ideal typology models of CSR governmental action identified
in EU-15 countries except:
What is considered proper behavior is that each 'actor' in this scheme lives up to
a. Partnership Model b. The Business in the Community Model
mutually agreed upon exchanges and agreements because it is by observing the
c. The Sustainability and Citizenship Model
proper exchanges of values that the relationships will go on smoothly and benefit all.
d. None of the above e. All of the above
Most Calvinists view profit as God's reward for doing a job well, a more moderate
5. Fundamental aspects of the political debate on the development of CSR:
stand is that of Lord Keynes who views "normal" profits as also being a reward,
a. debate on the themes and instruments inherent in a CSR policy
presumably as it remains "normal". The problem of course is that the Father of
b. debate on which players should participate in the design of a CSR policy
Formal Macro Economics somehow forgot to mention what constitutes "normal."
c. debate on how CSR should be understood d. none of the above
e. all of the above
 • Dodd's argument was not that social responsibilities of the corporation had
6. Prestige is associated with the following measures except: replaced its responsibilities to the shareholder but rather that profit making and
a. profitability b. sales volume social service go hand in hand.
c. high employee turn over rate d. none of the above e. all of the above
. A sample of 219 reports of large corporations was inspected and the ethical
7. So called because in the Mediterranean countries the discussion on the political statements in each were tabulated according to the Corporate Social Responsibility
application of CSR arises from discussion processes in which the government invites and Good Governance nature of the ethical statement and the size and industry
companies and other social players to debate on the action to be taken: classification of the firm Results showed that statements with some ethical content
a. Agora b. Partnership c. Business in the community d. None of the above were found in fifty-two of the 219 reports. The fifty-two reports, in turn, contained
e. All of the above 121 statements of moral responsibilities. These statements were classified
according to the public toward which they acknowledged some responsibility. A
8. So called because in the Mediterranean countries the discussion on the political tabulation showed the following:
application of CSR arises from discussion processes in which the government |
invites companies and other social players to debate on the action to be taken: Some typical ethical statements found in these annual reports up as follows: may
a. Agora Model b. Partnership Model c. Relational Model d. None of the be summed
above
e. All of the above 1. Concern for the customer was evidenced in promises to provide quality goods at
low cost, improved goods and services through technology, and honest and
9. Focus on the new role of the state in advanced societies in confronting the crisis intelligent service
of the welfare state in the face of globalization and the internalization of the economy 2. Responsibility to the stockholders was acknowledged in statements delineating
in the field of co-responsibility: corporate management's position as a steward or trustee of company resources so
a. Agora Model b. Partnership Model c. Relational Model d. None of the above that stockholders might be afforded a "fair" return on investment
e. All of the above 3. Management in numerous companies surveyed acknowledged in various ways
their particular responsibility to employees. For example, Macy's declared that it
has long recognized that the excellence of its operation results from the skill and
Chapter 4: Corporate Image care which all of its employees bring to their work and that, accordingly,
management places major emphasis on fair treatment of Macy's people in terms of
The corporate image exists in the minds of people. compensation, working conditions, employee benefit programs, recognition of
individual excellence, and encouragement of individual growth and advancement
• It is a loose structure of knowledge, belief, and feeling. It may be vague or 4. Most Companies are very community conscious and attempt to project their
clear, weak or strong It differs from person to person, from company to company- image of "good citizens" to their neighbors. In the words of General Motors
• Additionally, it is rooted in a variety of social attitudes and value systems Corporation, "To be a good neighbor and a good citizen, both in plant communities
which people carry in their minds. and on the national scene, is an important responsibility of a well-managed
• The corporate image, then, may be defined as a composite of knowledge, enterprise."
feelings, ideas, and beliefs associated with a company as a result of the totality of its
activities.
4.2 THE CORPORATE IMAGE FOR EMPLOYEES
United States corporations have invested huge sums of money to project their unique
characters or personalities to the American public in an effort to show dramatically Employees of any organization have an image of that organization. It may be good,
that they are more than organizations to produce goods and services. bad or indifferent.
• Most of the advertising of products consisted of a picture of the factory, or of • people are people means they have some thoughts about the places where
the company's founder, and an 'institutional" message indicating that the product was they work and the products or services which they produce.
superior because the particular manufacturer was responsible for producing it. • The creation of the employees' image of the corporation is top management's
responsibility.
During the depression of the 1930's, when established values and loyalties were
being corroded, all Responsibility and Good Ga many manufacturers abandoned • Management's growing interest in creating for employees an image showing
personal or company names completely and promoted their products and their brands a corporate sense of social responsibility and responsibility toward the employees
with no attempt to identify them with the company that produced them. It was felt themselves is evidenced in its credos or "we believes."
that the consumer cared nothing about the institution behind the product as long as
the product itself and the price were satisfactory. An example of such a credo, one used by Johnson & Johnson is appended as Exhibit
1.11 In it, Johnson & acknowledges five responsibilities.
Promoting of corporate images reached a low point during the 1930's. During Johnson & Johnson lists
the past twenty years there has been an increasing tendency to tie prominent brands • first its responsibility to its customers, which itself modifies the
to a corporate identity. conventional code of responsibility to stockholders.
• This reversal quickened during World War II when producers who were • the second responsibility is said to be that to employees. This is a dramatic
making war materials sought to maintain their reputation in the marketplace although expression of a commitment to due process, to non-market morality, and the broad
no longer producing consumer goods. outline of this credo is actually translated into operating reality. For instance, the
reference to opportunity for advancement is repeated at least twice in Johnson &
The development of corporate images during the past two decades was furthered by Johnson's standard booklet on personnel practices. One practice deals with the
the growth of great industrial complexes. promotion of employees while the second deals with financial assistance for
education.
Finally, the emergence of the super-corporation has created social and sociological
problems related to their size and complexity rather than simply to the selling of their In place of a "labor is a commodity" concept there is now reliance upon the more
products. recent "welfare" concept in labor relations, Richard A. Lester contrasts these
concepts by indicating that,
"Corporate management is increasingly required to justify itself in terms of due • World War I, corporate management regarded labor as a commodity, in line
process of law rather than by an appeal to the market. The corporation in modern with classical theory and the view of the matter underlying the philosophy of F. W.
society evidences integration of the democratic processes hitherto reserved for Taylor's "scientific management."
politics with the private decisions hitherto reserved for economic life." Employment was a short-run business transaction. As a result of union activities
and the growth of socially responsible professional management, there has
developed the idea of employment as a work-life attachment to a firm.
4.1 CORPORATE IMAGES FOR CORPORATE "PUBLICS"
4.3 THE CORPORATE IMAGE FOR THE TRADE
Peter Drucker sees the essence and purpose of the corporation "not in its economic
performance or in its formal rules, but in the human relationships both between the In our complex modern society, personal contact between suppliers and buyers has
members of the corporation and between the corporation and the citizens outside of all but been obliterated.
it." • The corporate image that the trade sees and thinks it knows comas from
opinions they have of a corporation's salesmen, advertising, sales or trade policies,
The modern corporation is an instrument for conducting a profitable business and the corporate trade mark.
enterprise through the pooling of venture capital.
• The contact between a manufacturing company and the middlemen who
• Stress on this fact argues that the Board of Directors' prime responsibility is to distribute that company's products is in an overwhelming number of cases the
return a profit on the investment, that all other responsibilities are purely company's salesman. The chief responsibility for these personal relationships of a
secondary. company, therefore, rests with the salesman.
• Professor E. Merrick Dodd and Professor A. A. Berle over twenty years
ago, Berle did argue that corporate powers were powers in trust for stockholders. In a 1959 survey by McGraw-Hill Research, over 1,000 salesmen of machinery
Dodd insisted, however, that these powers were held in trust for the entire and equipment were asked to check what factors they felt were most important in
community. selling.
• And in "The 20th Century Capitalist Revolution," Berle conceded that • The second most important factor mentioned by eighty-five per cent of the
Professor Dodd had won the argument. salesmen, was "seller's integrity and reputation."
• he said, was based on "a particular view of business as a purely private
enterprise." He went on to say: Image building has become a very important concept in trade relations. It plays an
If we recognize that the attitude of law and public opinion toward important part in building long- lasting loyalty towards a company and its
business is changing, we may then properly modify our ideas as to the products.
nature of such a business institution as the corporation and hence as to • Apparently, the reputation of the company's products overshadowed
the considerations which may properly influence the conduct of those reflections on the integrity and honesty features of their corporate image. Large
who direct its activities. opinion], which ultimately makes law, corporations are concerned, nevertheless, to stress social responsibility in the face
they present to dealers.
Business is permitted and encouraged by the law primarily because it is of service
to the community rather than because it is a source of profit to the owners.

Among important institutional investors currently are at least 239 commercial

banks, 200 insurance companies, and 120 investment companies Also
4.4 THE CORPORATE IMAGE FOR THE LOCAL COMMUNITY influencing investors are 1,855 advisory services registered with the SEC (as
of July 31, 1961). 6,500 security analysts who are members of organized groups
Since the end of World War II, the importance of establishing a company's reputation across the country, and financial magazines, rating services, business editors of
as a "good citizen" of the community has become increasingly evident. national news and comment magazines, the business and financial newspapers,
wire services, business columnists - something over 500 outlets.
Benefits which presumably accrue to corporations when good relations are
established are: The prime purpose of projecting a favorable image to the financial community
1. The recruitment of better workers. is to inspire confidence in management policies, confidence that can result in a
2. The reduction of turnover and absenteeism. decision to invest It has been said that this means convincing the potential financers
3. The improvement of job satisfaction and morale. that a company is well run, progressive, and with good prospects for continuous
4. Increased sales. growth.
5. The creation of a better local understanding and acceptance of the company
the corporate "publics," an image may seek to offer assurance of broad, social
Business firms "expect the schools to provide well-educated employees with good responsibility or it may stress only a profit orientation.
attitudes, skill, and work habits; the churches to contribute persons of good morals
and character; the local government to furnish fire, police and sanitary protection The following tangible benefits may be derived from securing favorable investor
and highway facilities; the public utilities to provide water supply, gas, electricity recognition:
and transportation; and the social service organizations to contribute health, hospital 1. A fair and accurate market appraisal of a company's business, industry position
and medical facilities." and prospects 2. Continuing stockholder support for management's long-range plan
and policies
• In return, the community expects business organizations "to provide regular 3. Improved public acceptance of newly issued securities
employment, good working conditions, fair pay and satisfying work; to purchase 4. A preferred position acquisitions with respect to possible
goods and services locally and put more money in circulation in the community; to 5. Prestige in trade, industry, and customer relations through an improved standing
contribute to worthwhile local charitable and cultural projects; to pay its share of in the financial community
taxes to support the local government; and to be a good neighbor keeping a clean
and attractive place of business." For a company to grow and prosper, it needs money. Most corporations need to
raise funds by borrowing or by floating stock or bond issues.
That corporate responsibilities extend to local communities has become widely
recognized in public statements of business leaders and in company policies. The There is also strong evidence that a favorable image affects corporate finances in
largest companies are gradually adapting their public and external relations policies the following tangible ways 1) It improves the price-earnings ratio; 2) it increases
to these obligations. the amount of equity capital available from the public; 3) it improves standing with
• As an example, the General Motors Plant Visits Plan Book states, "Today's investment funds; and 4) it creates a favorable climate for acquisitions.
industrial leaders recognize that it no longer is enough just to build a better
mousetrap. Good industrial citizenship must go hand in hand with the production The considerations just listed suggest projection of a corporate image stressing a
end of business. Good industrial citizenship consists mainly of becoming a part of desire to make money and a capacity to make money.
the community and cultivating genuinely friendly relationships with the people who • The "acceptance" by the corporation of its responsibilities to the financial
live in it." community can best be seen in historical perspective. In 1939 Judge Pecora, who
had been counsel to the Senate Committee on Banking Currency (1933-34) during
Cultivation of an effective community relations program has to become an its investigation of banking and security market practices, wrote the following
indispensable function of prudent management. concerning the results of the reforms:
• As noted in the Community Relations Manual of one of the largest
companies, it is that management function which "appraises plant-community According to Pecora, four statutes marked the beginning of a new era in the history
attitudes, identifies and relates company policies with community interests, and of American finance, the Banking Act of 1933, the Securities Act of 1933, the
initiates programs of action to earn community respect and confidence for the Securities Exchange Act of 1934, and the Public Utility Holding Act of 1935.
company." • Pecora concluded that while all this legislation represented progress,
vigilance was necessary to maintain it.

4.5 THE CORPORATE IMAGE FOR GOVERNMENT Some have said that "corporate democracy" is the answer. Lewis D, Gilbert, a
leader of this movement, lays down the major planks of his platform in these terms:
David E. Lilienthal, in his book Big Business: A New Era, declares:
1. More democratic, better attended, better located regional and annual meetings.
Government has become an active and frequently the dominant factor in economic 2. Full disclosure of corporate financial affairs through proper annual and post-
affairs. Today few important decisions are made by business executives and boards meeting reports.
of directors in which some acts of government do not play a significant part. What 3. Strengthening of the SEC's proposal rule.
is true of business also applies to farmers and workers in industry. 4. Equitable pensions, option control and executive
• That the trend toward the development of government regulatory agencies is compensation with reasonable ceilings and periodic shareholder review.
quite recent is indicated by the fact that, of the thirty independent administrative and 5. Cumulative voting to give the minority representation and the majority the
regulatory agencies of greatest power and influence in Washington benefit of the minority's criticism.
• The government, as client and contractor for a substantial part of the business 6. Preemptive rights to purchase new stock.
7. The elimination of the stagger system of electing board
now being done in the United States, is in a strong position to exercise moral power
8.. The election of auditors by shareholders. 9. The elimination of the millions of
and thus affect private economic practices.
automatic, directors, uninstructed proxy votes cast by fiduciaries for management.
10. The stipulation by SEC order of a maximum sum that can be spent in a proxy
today, only two were in existence by 1900. During the next twenty years, only five
new agencies were created. However, from 1920 to 1960 twenty-three large contest. 11. The nomination of independent directors through the company proxy
statement,
regulatory agencies were created, of these, ten appeared in the period of the New
12. Ownership of stock by directors in the companies on whose boards they sit
Deal.
13. The election of qualified women to boards of directors,
14. Impartial and factual press reports on corporate affairs,
A recent example of this development at the national level is the appearance of the
15. The right of a secret corporate ballot as inviolable in its privacy as a political
Committee on Government Contracts. This small, powerful committee reporting
vote.
to the Vice-President is able to put pressure on private enterprise throughout the
United States to expand job opportunities for minority groups.
corporate leadership is under both public and private pressure to accept
• The Committee on Government Contracts exercises such power to force responsibility to security holders and other elements of the financial community.
profit-making organizations to obey the moral rules and basic values of a democratic
society. 4.7 CORPORATE IMAGE MEASUREMENT

Senator Thurston B. Morton, as Chairman of the Republican National Committee, We have examined the various corporation "publics" and related how a
outlined the task even more specifically. His advice was summed up by Lee H. "responsible" image can influence each of these groups.
Bristol as follows:
Men and women of the business community should not only in their own self-interest The importance that the large corporation places upon projecting a favorable image
but in the interest of the country, participate more fully in party organization work is best illustrated by the fact that United States business spends about one billion
at all levels. They should not hesitate undertake such often unglamorous but highly dollars each year to promote a better corporate image.
important political chores as doorbell ringing, poll-watching, and even soapbox
orating.
• Another indication of the increasing importance of a favorable image is that
all advertising expenditures rose 20.9 per cent between 1953 and 1958, while
"General Promotion" advertising (that category closest to "corporate image"
It is a myth that the businessman who engages in politics automatically harms his
own business advertising) rose 63,3 per cent.

ORC compiled an extensive list of statements concerning large companies from the
4.6 THE CORPORATE IMAGE FOR THE INVESTING COMMUNITY
depth interview phase of their early study.
In referring to the financial community, we are talking about a vast public. • The statements were put through screening and field pre-testing sequence,
and the lists were then refined. In current corporate image studies, a list of
The New York Stock Exchange, in its June 1962 study, estimated that there were statements is presented to a respondent who is told: "Read through the list and keep
seventeen million people in America owning shares in publicly held companies, that Company A in mind.
thirty-five million non-shareholders were on the verge of investing, and, finally,
that some 120 million were indirect shareholders whose savings were invested for • To make analysis simpler, ORC regroups these statements into four subject
them in equity securities by a variety of financial institutions. areas in its report: producer-distributor image statements; management-image
statements; citizenship- image statements; and the employer-image statements.

• The researcher's challenge is to discover which among hundreds of criteria

5. Acknowledged in statements delineating corporate
are most meaningful for people, as they judge the effect of corporate behavior on
their daily life. management's position as a steward or trustee of company
resources so that stockholders might be afforded a "fair" return on
For the statistics resulting from such a study to be meaningful a "benchmark" is investment:
necessary. For example, knowing that twenty per cent of the respondents considered
a. Concern for the customer
a company research-minded is not meaningful in the abstract as it is if you can look
at this score in the context of a profile of the industry as a whole. b. Responsibility to the stockholders
c. Responsibility to employees
Corporate images all have common features as they exist in the public mind, as d. None of the above
people are similar in that they each have a head, arms, legs, etc e. All of the above
The standard image profile developed by ORC was put to a nationwide test in the
early part of 1959, The test was given to a group of adults, who testified to their 6. Serves as peoples guide in giving companies possible image as
images of twenty leading companies. The people were guided by the following list employer, citizen, investment, and producer of goods and services:
of statements touching the companies' possible image as employer, citizen, a. Products stand up well
investment, and producer of goods and services:
b. High standards of quality
True of Fals c. Research-minded
d. None of the above
1. Today, the principal limitations on business are moral and e. All of the above
practical, not economic.
2. Corporate image is measurable and that the modern corporation 7. Major planks of platform in corporate democracy laid down by
is concerned with the type of image projected to its public would Lewis D, Gilbert:
tend to imply that the corporation has a life of its own, a life apart a. More democratic, better attended, better located
from stockholders, making it rational to maximize considerations regional and annual meetings.
such as survival or size rather than profits.. b. Full disclosure of corporate financial affairs through proper
3. The increased concern of the modern corporation for winning annual and post-meeting reports.
long-lasting loyalty from the trade by projecting an image of c. Equitable pensions, option control and executive compensation
reliability, integrity, honesty, and trustworthiness would also tend with reasonable ceilings and periodic shareholder review
to indicate an acceptance of social responsibilities to this "public. d. None of the above
4.The increased interest in good denotes. recognition of moral e. All of the above
responsibility on the part of a corporation.
5. The fact that the corporation is concerned with having a 8. Contents of the Opinion Research Corporation (ORC)'s reports:
reputation for steady work, that the employees are proud of the a. producer-distributor image statements
company, that the trade rates the products of the company as high. b. management-image statements
quality, all tend to indicate that the corporation is concerned with c. citizenship-image statements
its responsibilities to various "publics" and is not strictly profit d. None of the above
oriented e. All of the above
6. Cultivation of an effective community relations program has to
become an indispensable function of prudent management 9. Benefits which accrue to corporations when good relations are
established are
MULTIPLE CHOICE a. The recruitment of better workers
b. The reduction of turnover and absenteeism
1. A composite of knowledge, feelings, ideas, and beliefs associated c. The improvement of job satisfaction and morale
with a company as a result of the totality of its activities: d. None of the above
a. Corporate image e. All of the above
b. Corporate social responsibility
c. Corporation 10. How does favorable image affect corporate finances
d. None of the above a. It improves the price-earnings ratio
e. All of the above b. It increases the amount of equity capital available from the
public
2. The following tangible benefits may be derived from securing c. It improves standing with investment funds; and 4) it creates a
favorable investor recognition except: a. A fair and accurate market favorable climate for acquisitions.
appraisal of a company's business, industry position and prospects d. None of the above e. All of the above
b. Continuing stockholder support for management's
long-range plan and policies
c. Improved public acceptance of newly issued securities
d. None of the above
e. All of the above

3. Ethical statements found in annual

a. Concern for the customer reports:
b. Responsibility to the stockholders
c. Responsibility to employees d. None of the above e. All of the
above

4. Evidenced in promises to provide quality goods at low cost,

improved goods and services through technology, and honest and
intelligent service:
a. Concern for the customer
b. Responsibility to the stockholders
c. Responsibility to employees.
d. None of the above
e. All of the above