Effects of Corporate Social Responsibility and Irresponsibility Policies

27 Pages Posted: 28 Jan 2013

See all articles by J. Scott Armstrong

J. Scott Armstrong

University of Pennsylvania - Marketing Department

Kesten C. Green

University of South Australia - UniSA Business; Ehrenberg-Bass Institute

Date Written: November 27, 2012


This article reviews experimental evidence on the effects of policies intended to promote behavior by firms that is more socially responsible and less socially irresponsible. Corporate social responsibility (CSR) can provide firms with opportunities for profit, but changes are likely to increase total welfare only if firms adopt them freely and without taxpayer subsidies. Mandated CSR circumvents people’s own plans and preferences, distorts the allocation of resources, and increases the likelihood of irresponsible decisions. Evidence that government policies will increase welfare and a compelling argument that proven benefits justify reductions in freedom are necessary in order to justify CSR mandates. To date, this has apparently not been achieved. Corporate social irresponsibility (CSI) is concerned with whether firms undertake harmful actions that managers would be unwilling to undertake acting for themselves, or that a reasonable person would expect to cause substantive net harm when all parties are considered. Markets in which stakeholders are free to make decisions in their own interests provide some protection against CSI. Tort and contract law provide additional protection. Nevertheless, managers sometimes act irresponsibly. Codes of ethics that require fair treatment of stakeholders while pursuing long-term profit reduce the risk of irresponsible decisions. Management support and stakeholder accounting are important for successful implementation. Firms may wish to consider these measures; many already have.

Keywords: accountability, affirmative action, decision making, ethics, externalities, free markets, minimum wage, paternalism, principle-agent problem, regulation, seer-sucker theory, stakeholder accounting, stakeholder theory, sustainability

JEL Classification: M14

Suggested Citation

Armstrong, J. Scott and Green, Kesten C., Effects of Corporate Social Responsibility and Irresponsibility Policies (November 27, 2012). Journal of Business Research, 2013, Available at SSRN: https://ssrn.com/abstract=2207952

J. Scott Armstrong (Contact Author)

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States
215-898-5087 (Phone)
215-898-2534 (Fax)

HOME PAGE: http://marketing.wharton.upenn.edu/people/faculty/armstrong.cfm

Kesten C. Green

University of South Australia - UniSA Business ( email )

GPO Box 2471
Adelaide, SA 5001
+61 8 83012 9097 (Phone)

HOME PAGE: http://people.unisa.edu.au/Kesten.Green

Ehrenberg-Bass Institute ( email )


HOME PAGE: http://www.marketingscience.info/people/KestenGreen.html

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