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CALIFORNIA MANAGEMENT REVIEWVolume XXIX, Number 3, Spring 1987© 1987, The Regents of the University of California

The Corporate Social PolicyProcess: Beyond BusinessEthics, Corporate SocialResponsibility, and CorporateSocial Responsiveness

Edwin M. Epstein

In early 1986, the Haas family, the descendents of Levi-Strauss, took thenation's largest apparel manufacturer private by completing a $2 billionleveraged buyout of non-family stockholders. 1 One aspect of the buyoutwas particularly noteworthy. In announcing the proposed buyout, RobertD. Haas, President and Chief Executive Officer of Levi-Strauss & Co.,indicated that returning the company to family ownership not only wouldfacilitate overall business operations, safeguard against a hostile takeover,and enhance profitability, but would better allow management "to focusattention on long-term interests [and] would be the most appropriate wayto ensure that the company continues to respect and implement its important values and traditions.!"

For those familiar with Levi-Strauss, the inclusion of value considerations among the rationale for the leveraged buyout was hardly surprising.The company has had a long and proud tradition of progressive businesspractices, philanthropic programs, and commitment to "sociallyresponsible" corporate relations with employees, plant communities, and other"stakeholders." When the firm went public in 1971, after 121 years offamily ownership, it advised investors that it intended to continue itssometimes costly and controversial social commitments and to preserveits values. 3 Shortly after the company went public, members of the Haasfamily began exploring how to "institutionalize" the values underlying ahitherto relatively small, regional, family-run jeans manufacturer. Thismove may have been particularly important because, for the first time in its

A much longer and more In-depth version of trus essay IS available as a Working Paper from theCenter for Research In Management, 554 Barrows Hall, Universttv of California, Berkeley, CA94720, (415) 642-4041

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Copyright © 2001 All Rights Reserved

100 EDWIN M. EPSTEIN

history, the now rapidly growing, increasingly diversified, billion-dollar,multinational enterprise would be headed by a family outsider.

The Levi-Strauss story poses a basic question faced by corporatemanagement: How can the leadership of a large complex business organization best incorporate into their firm's decision-making processes thedifficult but essential task of defining (and redefining), evaluating, andinstitutionalizing the values which underlie its policies and practices as wellas determine its unique culture?

For business scholars, the first question begets a second issue: Whatconceptual contributions can management thought make to business practitioners seeking to institutionalize value considerations into ongoing organizational decision-making processes? "Values" and "value considerations" in this context refer to norms in addition to the traditionallydefinedeconomic objectives of firms withina market system.

The importance of these questions is underscored by some recentevents which have cast American business firms in a negative light.

• Major U.S. industrial firms and financial institutions have been criticized severely for their operations, investments, loans and other involvements in the Republic of South Africa.4

• Several leading companies, including Manville Corporation, A.H.Robins Co., and Continental Airlines, have sought to limit substantial,class-action liability claims by employees or customers by filing forbankruptcy. 5

• Toxic waste disposal practices by some "clean," high-technologycompanies in Silicon Valleyand elsewhere have been shown to be a sourceof groundwater carcinogens. 6

• Industrial plant closings and relocations in economically depressedparts of the United States have resulted in legislative proposals torestrict the efforts of firms seeking to terminate or move facilities. 7

• More than 2,000 persons died from toxic fumes released at aUnion Carbide facilityin Bhopal, India.8

• There were revelations during 1985-86 that major defense contractors, including General Dynamics and General Electric, had knowinglyover-charged the U.S. government. 9

• The uncovering ofwhat has been characterized rather melodramaticallyas a "white collar crime wave," including the discovery that stockbrokers in a major securities house (E.F. Hutton) were involved in anoverdraft scheme which cost banks an estimated $10 million over atwo-year period, and the disclosure of illegal securities trading bycorporate "insiders" including investment bankers, Wall Street lawyers, and arbitrageurs. 10

• Several business firms and their top managers have been indicted foralleged criminal acts arising out of employee work conditions and the


THE CORPORATE SOCIAL POLICY PROCESS 101

safety of goods and services offered by the firm. In one case, involvingthe Film Recovery Systems Corporation of Chicago, three officers ofthe chemicals processing firm were convicted of murder after an illiterate plant worker ordered to clean a large vat containing cyanideresidue died of poisoning. 11

Although these incidents vary significantly in the amount of socialharmresulting from illegal or, at a minimum, questionable business practices,each case raises questions about the values underlying certain policiesandpractices of American businesses and their managers. How-in the wordsof a recent Fortune article on industrial "snooping" 12_can we differentiatecorporate behavior which is "merely hardball" from that which is "utterlysleazy" (or even illegal)? By incorporating value considerations into organizational decision processes, can we insure, moreover, that businessfirms and their leaders will not cross the thin line separating vigorouscompetition from behavior which is morallyobjectionable?

Evaluating business behavior in value terms is hardly novel. For centuries, the morality and societal impact of business activity has beenscrutinized by both religious and secular authorities. Within the UnitedStates, for nearly a century, a virtual galaxy of publics, ranging fromgovernment officials to the media, clergy, and single interest stakeholders-and, indeed, business leaders themselves-have monitored thevalue premises together with the socialand political consequences of business performance. Frequently, the legalprocess has been utilized to channelor constrain particular aspects of business behavior which are deemed bypublic authority to be contrary to prevailing socialvalues.

Scholars from a variety of disciplines have contributed significantly toefforts to develop useful conceptual catagories for assessing the totality ofbusiness performance (non-financial as well as financial) and assertingcorporate leadership in what has been termed the "management of values." Over the years, three concepts have been employed by scholars,managers, and other observers to gauge business performance in thisbroader context-business ethics, corporate social responsibility, and,somewhat more recently, corporate social responsiveness.

These conceptual categories influencehow we think about the socialroleof business organizations and their leaders. Indeed, concepts of appropriate social performance-and, conversely, inappropriate social performance - may even have an impact on public policy in the form of judicialdecisions, legislation, executive orders, and administrative regulations.Less dramatically, public expectations concerning what constitutes "ethical, responsible, or responsive" business behavior may translate intodemands or constraints on particular aspects of business operations.

In the following pages, I examine the similarities and differences amongthese related, sometimes conflicting and frequently overlapping concepts.



I also suggest, moreover, the conceptual and operational utility of a fourthnotion- what I have called the "Corporate SocialPolicy Process"- whichincorporates key elements from business ethics, corporate social responsibility, and corporate responsiveness notions.

The Corporate Social Policy Process constitutes a useful integrativeanalytical framework for scholars and other observers of corporate socialperformance. Moreover, the Corporate Social Policy Process can assistbusiness decision makers and their companies to undertake, in the terminology of Charles S. McCoy, 13 the "management of values" by seeking todefine, evaluate, and institutionalize within the firmcore values drawn bothfrom its past and our collective Western cultural heritage.

The Social Performance of Business in the United States:Business Ethics, Corporate Social Responsibility, and

Corporate Social Responsiveness Reconsidered

Historically, large business organizations have been viewed ambivalentlywithin the United States. While this country has frequently been characterized as the quintessential "Business Civilization," one in which corporateenterprise has been more lauded and less constrained than in virtually anyother advanced industrial nation, 14 considerable public skepticism has persisted regarding the integrity and responsible use of power by businessorganizations and those who run them. IS Accordingly, legal mechanisms andpolitical processes have been employed both to constrain corporate powerand to establish standards of acceptable business social performance. Notwithstanding the deregulatory movement of the past decade, the elaborateregulatory framework established over the past century remains largelyintact and continues to function as a primary means by whichever-escalatingpublic expectations concerning acceptable business behavior are articulatedand implemented. 16

Despite the American reliance on legal processes to define individual andorganizational rights and obligations, there is widespread recognition thatthe law, although certainly a necessity, is not a sufficientmeans for expressing key societal values and establishing standards of business performance. 17 Over the years, accordingly, there have been three definitional andtypological tracks along which analysis of corporate socialperformances hastraveled- first two, "business ethics" and "corporate socialresponsibility,"then three when "corporate social responsiveness" was added. Managers,scholars, and policy analysts alike have used them to define and evaluatebusiness policies and practices in non-legal, value-oriented terms.

Before the past decade, when disciplinary and conceptual cross-pollination increased substantially, philosophers and theologians tended to posebusiness-related value issues primarily in business ethics terms, whereasmanagement thought has tended to emphasize the corporate social responsibility and corporate social responsiveness concepts. Not surprisingly,business leaders concerned with the management of values have employed



all three conceptual categories with little interest in the definitional nicetiesso intriguing to scholars. Moreover, executives often tend to vieworganizational social performance issues simply as extensions of their individualethical concerns.

Although overlapping conceptually, the three tenns do have distinctivemeanings. Each highlights different aspects of business socialperformance,has a different focus on individual as opposed to organizational action,attaches different importance to moral reflection and choice, and stressesdifferently the products or outcomes of organizations' activities as contrasted with their internal decision-making processes. These significantdifferences and the disciplinarytraditions mentioned above notwithstanding,the three concepts are often employed interchangeably in the corporatesocial performance literature and, occasionally, even within a single study,without any explicit recognition of their differences.

More often, however, scholars have tended in the opposite directionthat is, to focus conceptually on either business ethics or corporate socialresponsibility with little apparent recognition of conceptual complementarities or mutual practical concerns. This intellectual dualism is somewhatironic. During any given time, the business ethics and corporate socialresponsibility literatures have been mirror images with regard to specificissues and concerns. Common themes in both the business ethics andcorporate social responsibility literature during the 1950s and 1960s, forexample, were pricing policies; shady sales inducements (call girls, kickbacks, and the like); corporate support of the arts and goodworks; organizational pressures on employees; "business bluffing"; military production;corporate illegality (particularly in the antitrust and price-fixing areas);management self-dealing; and the treatment of blacks. 18

Some of these preoccupations have largely disappeared from the contemporary business ethics and corporate social responsibility agenda.Others remain salient. They have been joinedby the developments listed atthe outset of this article as well as by such matters as foreign bribery;affirmative action for women and minorities in employment, advancement,and procurement; U.S. multinationals' investment, marketing, employee,and politicalpractices in the Third World; employee whistle-blowing; mergerand acquisition (including "Golden Parachute" and "Greenmail") activities;distributive justice; corporate environmental practices (toxic waste, "acidrain," and the like); product quality and safety; industrial health and safetystandards; employee rights on and to the job (protection against sexualharassment and workers' job "ownership"); and the effectiveness of corporate self-regulation versus accountability imposed externally (typically bygovernment regulation). 19 These newer themes also have permeated thecorporate social responsiveness literature of the past decade. The criticalpoint is that identical business social performance issues continue to beraised under three conceptual rubrics - typically, with little explicitrecognition of the commonalities among the three. 20



Metaphorically, business ethics, corporate social responsibility, and corporate social responsiveness can be envisioned as three overlapping circlessharing common conceptual space yet possessing distinctive intellectualproperties. One further point is critical. Because values underlie all three,business ethics, corporate social responsibility, and corporate socialresponsiveness are dynamic as opposed to static concepts. Notions of ethical,responsible, and responsive vary with time, place, and circumstance. Thenorms used today to evaluate individual and organizational social performance in the United States differ significantly from criteria used in thiscountry a century ago and from those whichprevail currently inother nations(e.g., Iran and the Soviet Union).21 Value changes and value differences-inshort, value pluralism-are inevitable, if troublesome, concomitants of arapidly changing and heterogeneous world.22 Moreover, this value pluralismand the related value tensions are long-standing characteristics of theAmerican civic culture. They are, arguably, fundamental to an open, democratic society. 23

Value preferences are based on aesthetic, philosophical, or religiousconsiderations, racial or sexual prejudices, individual or group interests, andeven "gut-feeling" and whimsy. 24 Business ethics, corporate socialresponsibility, and corporate social responsiveness are normative analytical concepts, and require business decision makers to choose from among theseconflicting values and apply them in specificcases. 25

Business Ethics, Corporate Social Responsibility,Corporate Social Responsiveness-Distinctions without

Differences and Does It Really Matter?

Although the three concepts deal with closely related, even overlapping,themes and concerns, they are analytically discrete and do make distinctionswith real conceptual differences.

Businessethics concerns the systematic, value-based reflection by managers, traditionally individually but increasingly in collective settings, on themoral significance of personal and organizational business action and itsconsequences for societal stakeholders. Moral reflection is central to thebusiness ethics concept.

Corporate social responsibility relates primarily to achieving outcomesfrom organizational decisions concerning specific issues or problems which(by some normative standard) have beneficial rather than adverse effectsupon pertinent corporate stakeholders. The nonnative correctness of theproducts of corporate action have been the main focus of corporate socialresponsibility.

Corporate social responsiveness pertains principally to development oforganizational decision-making processes whereby, consistent with the limitations of incomplete and imperfect information, corporate decision makerscollectively anticipate, respond, and manage the total ramifications of organizational policies and practices. The concept, accordingly, is decidedly



process oriented. It should be noted that although the concept of corporatesocial responsibility has a very strong product focus, the contemporaryconcept of business ethics combines aspects of both product and processwithin its distinctive setting of moral reflection.

Finally, to distinguish between business ethics and corporate social responsibility, the concepts have differed historically regarding the degree ofmoral emphasis contained in the examination of specific issues of corporatesocial performance. Ethical analysis poses questions regarding the rightnessor wrongness, and the goodness or badness of business behavior. Theanalysis is not simply in policy terms, since it considers how businessbehavior calls into question fundamental values embedded withinAmericansociety concerning rights, justice, equity, utility, and virtue. Put slightlydifferently, it is arguable that although allof the aspects ofbusiness behaviorthat generate social performance issues withina business ethics context alsogenerate social policy concerns relevant to the corporate social responsibility concept, the degree ofmoral salience inherent in a given corporate socialperformance issue may vary greatly from very low to very high. Considerthe following examples:

• Finn"A" determines to raise prices of a basic manufacturingproduct at atime when the federal government is striving to reduce inflationarytendencies in the economy and requests major producers to hold theprice line. This illustration, a "typical" corporate social responsibilitycase, raises issues with serious social policy implications and requiresnormative evaluation on the part of the firm's management. Yet moralreflection and judgment do not appear necessarily to be a major elementof the decision.

• Company "B," a Western multinational, produces and markets incountry"Y," a third-world nation, an item that, because of its known highlycarcinogenic properties, is banned from the market in industrializedcountry "X," the firm's home situs, but not incountry "Y."This example,a "typical" business ethics case, poses a social policyissue in which thenecessity for moral reflection on the consquences of corporate actionpotential harm to health or life- for users of the item is, I wouldsubmit,inherent to the decision.

Both examples, to be sure, pose important social performance considerations which the organizations' management must address. Arguably,however, the level of moral significance in terms of fundamental societalvalues (e. g., distributive justice and the attendant notion of "do no harm")arising from the two issues differs substantially. I recognize that personsimbued with notions of the sanctity of free-market operations and thethreat to individual and societal freedom posed by governmental intervention in the economy may not share my view of the relative moral salienceinherent in these two specific cases. I believe, however, that the basicpoint remains valid.



The Corporate Social Policy Process

What can management thought contribute to management practice that isuseful operationally to business organizations which seek to institutionalizevalue considerations into their ongoing decision-making processes? Business ethics, corporate social responsibility, and corporate social responsiveness involve discrete ideas and processes. The question persists whether afourth unifying conceptual approach which combines and integrates keyelements of the three is both feasible and useful. Such an approach would,ideally, facilitate the articulation, institutionalization, and examination ofvalue considerations within business organizations as well as provide amechanism for evaluating the overall social performance of the finn. Thetime appears to be ripe to "capture" and unite the larger idea of the corporatesocial policy process.

I offer the corporate social policy process concept not as yet anotherabstract, academic typology, but to contribute to managerial analysis andaction in concrete cases and facilitate ongoing business behavior that is moreethical, socially responsible, and socially responsive than would have beenachieved by applying only one of the older concepts. The nub of the corporate social policy process is the institutionalization within business organizations of the following key elements from business ethics, corporate socialresponsibility, and corporate social responsiveness.

• From business ethics-value-based moral reflection and choice concerning individual and organization behavior.

• From corporate social responsibility-an issue-oriented concern with thespecific products (consequences) of corporate actions.

• From corporate social responsiveness-a focus upon the individual andorganizationalprocesses through whichvalue-based, issue-oriented moralreflection and choice occurs.

Figure 1 details the respective contributions of these three older notions tothis integative concept.

To comprehend more fully the potential utility of the corporate socialpolicy process for both corporate decision makers and analysts of businesssocial performance, it is instructive to examine the key analytical elementsunderlying the concept. These eight components are:

• Relationships and Interactions of the corporation and its officials withinternal and external, domestic and international stakeholders includingstockholders, diverse employees, customers, suppliers, governmentalunits, community constituencies, (on occasion) even competitors, andother individual and collective persons affected by the organization'spolicies and practices.

• Issues or Policy Concerns which arise from actions of the finn, or frompotential interactions between the firm and its multiple stakeholders.



Figure 1. Contributions of Business Ethics, Corporate SocialResponsibility, and Corporate Social Responsiveness to the

Corporate Social Policy Process

Corporate Social PolicyProcessInstitutionalization within the corporation of processes facilitating valuebased individual and organizationalreflection and choice regarding themoral significance of personal andcorporate action. Individual and collective examinationof the likelyoverall consquences of such actions,thereby enabling the finn's leadersboth individually and collectivelywithin the organizational setting toanticipate. respond to and managedynamically evolving claims and expectations of internal and extemalstakeholders concerning the products (specific issues or problemrelated consequences) of organizational policies and behavior.

=

Business EthicsValue-based reflection and choiceconcerning the moral significance ofindividual and organizational actionby business decision makers. Thisreflection and choice emanates fromand pertains to critical issues andproblems confronting the organization and its leaders.

+

Corporate Social ResponsibilityDiscernment of specific issues,problems, expectations and claimsupon business organizations andtheir leaders regarding the consequences of organizational policiesand behavior on both internal andexternal stakeholders. The focus isupon the products of corporateaction.

+

Corporate Social ResponsivenessDevelopment of individual and organizational processes for detennining, implementing, and evaluatingthe firm's capacity to anticipate, respond and manage the issues andproblems arising from the diverseclaims and expectations of internaland external stakeholders.

These relationships vary dynamically with time, place, competing values, and organizational relationships. They require long-term ratherthan immediate resolution (e.g., employee claims to "property rights"in their jobs is an issue confronting many U.S. firms today, just as toxicwaste clean-up was an issue-now a full-fledged problem-a decadeearlier).

• Problems - issues or policy concerns that have come to the fore andnecessitate immediate attention by business decision makers. An issueor policy concern may remain at a low level of public (and corporate)awareness and not require decisions for a considerable period of time.For example, equal workplace opportunity for women and minorities,



while long an issue, took decades to surface as a problem. An organization's or a manager's ability to diagnose an issue, assess alternatives,and resolve it before it achieves immediacy provides an importantmeasure of effective corporate socialperformance.

• Criteria (norms and values)-Corporate leaders and stakeholderssearch continuously for more sophisticated standards by which toevaluate individualand organizational action. At the most general levelthey employ such "positive" criteria for judging behavior as "ethical,""responsible," "responsive," "good," "just," "rightful," "lawful,""beneficial," "appropriate," "harmonious," "doing no harm," and"public-interested." As we have seen, however, such general benchmarks require amplification and interpretation to be useful in specificcases. Some business firms have sought to facilitate this all-importantassessment stage by adopting organizationalcodes ofconduct or ethicalcredos which are intended to serve the needs of a particular enterpriseor are tailored from standards developed for an entire industry. At theirbest, such codes and credos provide useful guidelines for specificdecisions. Ultimately, however, company decision makers must exercise judgment and choose from among competing norms in order to putinto effect an explicit or implicit set of organizational standards. Acompany's history and traditions, its organizational culture and ethos,its operating and competitive situations, and the value preferences ofits key decision makers will be crucialdeterminants of whichnorms areutilized. Normative pluralism, as we have seen, is an inevitable concomitant of a heterogeneous and complex society characterized byvalue diversity and value tension.

• Goals- Organizational leaders, both individually and collectively, mustalso then determine organizational purposes and objectives in the context of a given issue or problem, and the operative norms and values.They consider the results which the organization wishes to achieve, theorganization's perceived need and effective capacity to deal with theissue or problem; and the likely impact of its actions upon pertinentstakeholders. Typically, there is a range of possible outcomes whichfirms can seek to accomplish and to which organizationalstrategies canbe geared.

• Decision-Making Processes-Such processes encompass the individual and organizational mechanisms by whichinformationis gathered,goals are explicitly established, normative and "objective" criteria forevaluating the firm's policies and practices are determined, reflectionoccurs, and choices are made to arrive at decisions about social policyissues or problems facing firms. Institutionalization, which is a crucialaspect of organizational decision making, occurs when social policyconsiderations have been internalized within the ongoing, normal decision-making processes of firms and managers-in short, when social



policy factor have been completely integrated into the strategic management function.

• Implementation-Once decisions are made, they must be carried out.Implementation-the effectuation of decisions and policies-perforcevaries greatly among organizations and managers with regard to boththe means by which decisions are carried out an the vigor and efficacyunderlying the efforts to achieve the stated objectives. Laudable corporate social performance intentions can be undercut by lax or ineffectivelower-level management implementation.

• Evaluation, the final step, is essential. As with all aspects of individualand organizational decision making, comprehensive and accurate assessment of what was intended, what actually occurred, what wasachieved (or what failed to be achieved)-and why-must take place.Evaluation requires a reconsideration of the key elements of goals andcriteria in ascertaining individual or organizational successes and failures. It requires judgments to be made regarding the effectiveness oforganizational decision making and implementation processes.

These eight interrelated elements of the corporate social policy are represented schematically in Figure 2.

I have not chosen the term corporate social policy process to describethis integrative concept inadvertently. Each word contributes to the overriding concept.

• Corporate indicates organizational action both in the unitary sense (thebehavior of the firm) and the aggregative sense (the sum total of thebehaviors of the individual decision makers).

• Social pertains to the total sweep of the products (overall economic,political, ecological, social and cultural consequences) of corporateaction as it affects diverse stakeholders with regard to the multiplicity ofissues and problems engendered from corporate presence of behavior.In utilizing the term "social" rather than "public," I am aware that I amnot following the lead of some other scholars; I am returning "public" toits more usual meaning of that which relates to actual or desired stateaction by governmental instrumentalities.

• Policy is used here in its usual sense of "principles guiding action. "26

However, my concern in developing the concept of corporate socialpolicy process is with both principles and action- with the rationale anddecisions determining an organization's behavior and with the actualbehavior that results from the rationale and decisions.

• Process denotes a system for determining, implementing, and evaluating-in brief, managing-corporate social policy. It is a systeminstitutionalized within the organization rather than one functioning onan ad hoc basis. Institutionalization, in fact, lies at the heart of theprocess concept. I do not mean to suggest by use of the term institutionalization a rigidifying of organizational policies and practices.



Figure2. Key Elements of theCorporate Social Policy Process

Relations/Interactions:Amongthe Corporation and

DiverseStakeholders

Evaluation

Implementation

Decision-Making Processes(Institutionalization)

Issuesand PolleyConcerns

Problems (IssuesRequiring Immediate

Attention)

Criteria(Normsand Values)

Goals(SocialPerformanceOutcomes andObjectives)


THE CORPORATE SOCIAL POLICY PROCESS

Conclusion

111

When the "clarifying statement" reached its finalform, word went down to "run it pastDave Goodkind for the ethical angle. " I was evidently counted on to detect and correctethical sour notes to which he and his staff might be tone deaf .... Around this WhiteHouse nothing seems to be in itself right or wrong, you see, moral or immoral,law-abiding or criminal. There's only one standard: things either work or they don'twork. Vaguely sensing the limits of that viewpoint, they run the statement past me for"the ethical angle. "27

Although set in a politicalrather than a business context, novelist HermanWouk's depiction of the ethical climate of the Nixon White House during theheight of the Watergate scandal captures the essence of this article, albeit bya negative example. Value considerations, if they are truly to contribute tothe organization's well-being, must be institutionalized within an organization's ethos, culture, and operative rules of the game. An examinationof thesocial performance implications of an organization's actions for internal andexternal stakeholders must be incorporated into its normal decision-makingprocesses.

A product of management thought, the corporate social policy processconcept is intended to facilitate management practice. The concept shouldassist business firms and their leaders to incorporate value considerationsand social performance issues into ongoing organizational and/or individualpolicies and practices by providingan integrative analyticalframework whichdraws upon and fuses key elements of the older concepts ofbusiness ethics,corporate social responsibility, and corporate social responsiveness. Theconcept should prove useful to both business practitioners and analystsinterested in the social performance of the modem corporation and, in amodest way, take us a step further in the search for the elusive paradigm forbusiness andsociety. 28

This paradigmatic quest remains no less important and certainly no lessdifficult in 1987 than it was a century earlier when our advanced, complex,industrial economy- with the large corporation as the dominant organizational construct for business activity-first emerged. With this emergencecame the necessity to insure that our key institutions function in a mannerconsistent with what Eric Fromm has identified as "one of the most fundamental features of Western thought: the faith inhuman progress and inman'scapacity to create a world of justice and peace." 29 Business organizationsand those who run them have a crucial role to play in achieving that world.The search for economic efficiency constitutes the core of the Science ofManagement, and efforts to achieve justice and peace by means of thesensitive and effective management of values lies at the heart of the Art ofManagement. Together, these two endeavors can contribute to a societywhich is both rational and humane, reasoned and civilized. The achievementof this duality within the American Business Civilization is what the corporate social policy process is all about.



ReferencesAuthor's Acknowledgement: This article is dedicated with great affection to my BerkeleyBusiness School collegue, Professor Dow Votaw, who for more than two decades has beenmy professional mentor and, more importantly, my close friend. An earlier version of themanuscript was presented as my "Chairman's Address," at the Social Issues in ManagementDivison Session, Academy of Management Meeting, Boston, Massachusetts, August 14,1984. My research was facilitated greatly by assistance from the Program in Business andSocial Policy, Center for Research in Management, Berkeley Business School, University ofCalifornia, Berkeley, which funded the exceptionally able assistance of Ms. Martha L. Reiner,a doctoral student at U. C., Berkeley, in the Business and Public Policy Program.

1. Joan O'C. Hamilton, "Levi Strauss Wants to be a Family Affair Again," Business Week,July 29, 1985, pp. 28-29; Patricia A. Bellew, "Levi Strauss Board Studies BuyoutOffer," The WallStreetjournal, July 16, 1985, p. 16.

2. Mark Lacter, "Levi's Buyout-It's Official,"San Francisco Chronicle, July 16, 1985, p,51.

3. Patricia A. Bellew, "Levi Strauss & Co. 's Chief May Propose $1 Billion Bid to TakeConcern Private," TheWallStreetjournal,July 12, 1985, p. 6.

4. Lise J, McCue, "Loans to South Africa Opposed: Groups Rap Banks in Hearings onHouse Bill," American Banker, June 9, 1983, p. 3; "Businessmen Raise Their Voice,"The Economist, September 10, 1983, p. 75.

5. Paul Brodeur, Outrageous Misconduct: TheAsbestos Industry On Trial (New York, NY:Pantheon Books, 1985); Morton Mintz, At Any Cost: Corporate Creed, Women, andtheDalkonShield(New York, NY: Pantheon Books, 1985); Curtis Alexander, "Robins Runsfor Shelter: The Drugmaker Files for Bankruptcy to Cope with the Dalkon ShieldDisaster," Time, September 2, 1985, p, 32; Iacyln Fierman, "Safe in Chapter 11,"Forlune, March 5, 1984, p. 143; Edward Greer, "Going 'Bankrupt' to Flee the Public,"The Nation, October 16, 1982, p. 360; WilliamB. Glaberson, "The Bankruptcy LawsMay Be Stretching Too Far," BusinessWeek, May 9, 1983.

6. See, for example, Maline Hazle, "3 Tainted Wells Found in South San Jose," San joseMercuryNews, April 3, 1984, p. 18.

7. "Plant-Closing Bills: Labor Takes a Beating," Business Week, August 20, 1984, p. 40;Wayne R. Wendling, "The Plant Closure Policy Dilemma: Labor, Law and Bargaining,"The Annals of theAmerican Acad£my of Political and Social Sciences, 480 (july 1985):203.

8. Ved Mehta, "Letter from New Delhi," TheNew Yorker, September 2, 1985, pp. 51,67-70.

9. Anna Cifelli, "Defense Contractors Circle their Wagons (Defense Fraud Causes BudgetBattle)," Fortune, April 29, 1985, p. 237; Jacob Goodwin, "Brotherhood of Arms:General Dynamics and the Business of Defending America," NewRepublic, August 12,1985, p. 33.

10. "Stealing $200 Billion 'The Respectable Way,'" U.S. Newsand World Report, May 20,1985, p. 83; "Top Hutton Aide Urged Overdrafts in Company Note," The Wall Streetjournal, August 6, 1985, p. 4.

11. "Job Safety Becomes a Murder Issue," Business Week, August 6, 1984, p, 23.12. Steven Flax, "How to Snoop on Your Competitors,"Fortune, May 14, 1984, pp. 28-33.13. Charles S. McCoy, Management of Values (Cambridge, MA: Ballinger Publishing Co.,

1985).14. See, for example, Thomas C. Cochran, Frontiers of Change: Early Industrialism in

America (New York, NY: Oxford University Press, 1981), pp. 15, 23; Thomas K.McCraw, "Business and Government: The Origins of the Adversary Relationship,"California Management Review, 26/2 (Winter 1984): 33-52.



15. Seymour Martin Lipset and William Schneider, The Confidence Gap: Business, Labor,and Government in thePublicMind (New York, NY: The Free Press, 1983); Peter L.Berger, "New Attack on the Legitimacy of Business," Harvard Business Review, 59/5(September/October 1981): 82-89.

16. Eugene Bardach and Robert A. Kagan, "Conclusion: Responsibilityand Accountability,"in Bardach and Kagan, eds., SocialRegulation: Strategies forReform (SanFrancisco, CA:Institute for Contemporary Studies, 1982), pp. 342-344; Murray L. Weidenbaum,Business, Government, and the Public, 2nd ed. (Englewood Cliffs, NJ: Prentice-Hall,1981), p. 11.

17. Wayne A.R. Leys, "Ethics and the Rule ofLaw," TheAnnalsofthe AmericanAcademyofPoliticaland Social Science, 343 (September 1962): 32-38; Ira M. Millstein and SalemM. Katsh, The Limits of Corporate Power: Existing Constraints on the Exercise ofCorporate Discretion (New York, NY: MacmillanPublishing Co., 1981), pp. 229-255;Christopher D. Stone, Where the LawEnds (New York, NY: Harper & Row, 1975), p.113; Thomas Donaldson, Corporations and Morality (Englewood Cliffs, NJ: PrenticeHall, 1982), p. 2; Benjamin Morris Selekman, A Moral PhilosophyforManagement (NewYork, NY: McGraw-Hill, 1959), pp. 165-217; AlvarO. Elbingjr. and Carol]. Elbing,TheValueIssue ofBusiness (New York, NY:McGraw-Hill, 1967), p. 45. Bardach and Kagan,in SocialRegulation, op. cit., p. 350, similarly indicate that responsibility, not simplyaccountability, is necessary because hazards not dealt with by existing regulationscontinually appear.

18. See, for example, Elbing and Elbing, The Value Issue ofBusiness, op. cit., pp. 6, 44,83-84, 93-94, 117; Thomas M. Garrett, Business Ethics (Englewood Cliffs, NJ:Prentice-Hall, 1966), pp. 76, 138, 141, 159; Raymond Baumhart, Ethics in Business(New York, NY: Holt, Rinehart and Winston, 1968), pp. 1, 75, 103; Clarence C. Walton,Corporate Social Responsibilities (Belmont, CA: Wadsworth PublishingCompany, 1967),pp. 7-8,114,156; EarlF. Cheit, "The New Place of Business: WhyManagers CultivateSocial Responsibility," in Earl F. Cheit, ed., TheBusinessEstablishment (New York,NY:john Wiley & Sons, 1964), p. 161.

19. See, for example, Max Ways, "A Plea for Perspective," in Clarence C. Walton,ed., TheEthics of Corporate Conduct (Englewood Cliffs, N]: Prentice-Hall, 1977), pp. 115-116;Clarence Walton, "The Executive Ethic: Viewfrom the Top," inWalton, ed., TheEthicsof Corporate Conduct, pp. 180-187, 192-194; Carl Madden, "Forces Which InfluenceEthical Behavior," in Walton, ed., TheEthics ofCorporate Conduct, pp. 50-55; ThomasDonaldson and Patricia H. Werhane, eds., Ethical Issues in Business: A PhilosophicalApproach, 2nd ed. (Englewood Cliffs, N]: Prentice-Hall, 1983), pp. 3-4; Robert M.Anderson, Robert Purrucci, Dan E. Schendel, and Leon E. Trachtman, Divided Loyalties: Whistle-Blowing atBART (West Lafayette, IN: Purdue University, 1980); RichardT. DeGeorge, Business Ethics (New York, NY: Macmillan Publishing Co., 1982), pp.105, 147, 167, 203, 243; Manuel G. Velasquez, BusinessEthics: Concepts and Cases(Englewood Cliffs, Nj: Prentice-Hall, 1982), pp. 174, 265, 279, 306, 309, 319; Neil H.jacoby, Peter Nehemkis, and Richard Eells, Bribery Extortion in World Business: AStudy ofCorporate Political Payments Abroad (New York, NY: Macmillan, 1977).

20. Howard R. Brown, Social Responsibilities ofthe Businessman (New York,NY: Harper &Row, 1953); Clarence Walton, ed., The Ethics of Corporate Conduct, op. cit., p. 6.Similarly, the same issues are treated within the issues management framework ofanalysis. See, for example, Rogene A. Buchholz, William D. Evans, and Robert A.Wagley, Management Response toPublic Issues: Concepts and Cases in Strategy Formulation (Englewood Cliffs, N]: Prentice-Hall, 1985).

21. DeGeorge, BusinessEthics, op. cit., p. 36; William A. Evans, Management Ethics: AnInterculture Perspective (Boston, MA: Martinus Nijkoff Publishers, 1981).

22. See, for example, Stone, Where the LawEnds, op. cit., p. 112.



23. DeGeorge. BusinessEthics. op. cit., p, 35.24. In The Value Issue ofBusiness. op. cit., Elbingand Elbing stress that business organiza

tions are crucial settings in whichvalues are learned. NeilH. jacoby. "The Corporation asSocial Activist." in S. Prakash Sethi. ed., The Unstable Ground: Corporate Social Polictyin a DynamicSociety (Los Angeles. CA: MelvillePublishing Company. 1974), p, 230.

25. See. for example. Gerald F. Cavanagh. American BusinessValues. 2nd ed. (EnglewoodCliffs. Nj: Prentice-Hall, 1984). pp. 18-22; Neil W. Chamberlain. RemakingAmericanValues: Challenge to a Business Society (New York, NY: Basic Books, 1977); Karl A.Lamb. The Guardians: Leadership Values and theAmerican Tradition (New York, NY:Norton, 1982), pp. 28-65; john William Ward. "The Ideal of Individualism and the Realityof Organization." in Earl F. Cheit, ed., TheBusinessEstablishment, op. cit., p, 37; LouisHartz, TheLiberalTradition inAmerica: An Interpretation ofAmerican Thought since theRevolution (New York. NY: Harcourt, Brace jovanovich. 1955). pp. 55. 213-214; IrvinG. Wyllie. TheSelf-Made Man inAmerica: TheMyth ofRagstoRiches (New Brunswick.N]: Rutgers University Press, 1954); Daniel Yankelovich, New Rules: Searching forSelf-Fulftllmentina World TurnedUpside Isoum (New York. NY:RandomHouse, 1981).pp. 176. 201, 221. 231-232. 247; Robert N. Bellah. Richard Madsen, William M.Sullivan. Ann Swidler, and Steven M. Tipton, Habits of the Heart: Individualism andCommitment in AmericanLife (Berkeley. CA: University of California Press. 1985), pp.23-25. 252-253; Bardach and Kagan. Social Regulation. op, cit., pp. 344-345; DowVotaw, "Genius Becomes Rare." in Dow Votaw and S. Prakash Sethi. The CorporateDilemma: Traditional Values versus Contemporary Problems (Englewood Cliffs. Nl:Prentice-Hall. 1973). pp. 41--42; james Willard Hurst. Law and the Conditions ofFreedom in the Nineteenth-Century United States (Madison. WI: The University ofWisconsin Press. 1956). pp. 6-9; Defieorge, BusinessEthics. op. cit., p. 36.

26. Lee E. Preston and james E. Post. Private Management and Public Policy: ThePrincipleofPublicResponsibility (Englewood Cliffs. N]: Prentice-Hall. 1975). p, 11.

27. Herman Wouk, Inside, Outside (Boston. MA: Little. Brown and Company, 1985). p, 122.28. Lee E. Preston. "Corporation and Society: The Search for a Paradigm." Journal of

EconomicLiterature. 13/20une 1975): 434--453.29. Eric Fromm. "Afterword." in George Orwell. 1984 (New York. NY:The New American

Library. 1981). p. 257.


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