CSR processes in governance systems and structures: The development of mental modes of CSR

Published date01 December 2019
AuthorFrank Jan Graaf
Date01 December 2019
Bus Soc Rev. 2019;124:431–448.
DOI: 10.1111/basr.12183
CSR processes in governance systems and
structures: The development of mental modes of
Frank Jande Graaf1,2
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction
in any medium, provided the original work is properly cited.
© 2019 The Authors. Business and Society Review published by Wiley Periodicals, Inc. on behalf of W. Michael Hoffman Center for Business
Ethics at Bentley University. Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road,
Oxford OX4 2DQ, UK.
1Amsterdam University of Applied
Sciences, Amsterdam, The Netherlands
2Universiteit van Amsterdam Business
School, Amsterdam, The Netherlands
Frank Jan de Graaf, Amsterdam University
of Applied Sciences, Amsterdam,
The Netherlands and Universiteit van
Amsterdam Business School, Amsterdam,
The Netherlands.
Email: F.J.de.Graaf@hva.nl
When corporate social responsibility (CSR) as a sensemaking
process is assessed from a corporate governance perspec-
tive, this implies that stakeholders do not only influence
companies by promoting and enforcing regulations and
other corporate guidelines. They also influence companies
by promoting regulation on influence pathways, by de-
manding that companies develop formal mechanisms that
allow companies and stakeholders to discuss and in some
cases agree on changes to principles and policies. This per-
spective suggests that regulation is an outcome of power re-
lations and is, as such, a reflection of certain mental models.
As such, mental models reveal the political bias in corpo-
rate governance perspectives. For this reason, CSR research
needs to be clear about the underlying assumptions about
corporate governance, and corporate governance research
needs to disclose which mental models of CSR influence
the outcomes. Taking a governance perspective on the de-
velopment of mental models of CSR helps to understand the
interaction between CSR and processes of sensemaking at
the institutional, organizational and individual levels.
corporate governance, corporate social responsibility, sensemaking
Within the development of corporate social responsility (CSR) as a sensemaking processes in which
mental models play a key role (Daniels, Johnson, & De Chernatony, 2002; Fortis, Maon, Frooman, &
Reiner, 2016, Hartman, Werhane, Clark, Vansandt, & Sud, 2017; Parmar, 2017; Werhane, 2008), the
concept can look fuzzy, strongly political, and very difficult to grasp. In this article, I contribute to
organization theory by advancing a corporate governance perspective on CSR as a sensemaking pro-
cess. Hereby, I tie institutional logics (Nigam & Ocasio, 2010) to the development of mental models
of CSR. This helps us to understand the role played of institutional environments in the mental models
of CSR, how CSR is related to ideology in corporate governance, the role played by and character of
influence pathways in CSR, and whether—and if so, to what extent—managerial discretion plays a
role in CSR processes.
Taking a sensemaking perspective on CSR in governance processes helps us to understand how
companies that follow the law still can lose their reputation. I argue that confusion and disagreement
about a company's social responsibility and that of its representatives is part of the nature of CSR,
and that we can understand this better when we view CSR as a sensemaking activity: as a process in
which managers and stakeholders try to understand and influence a company's principles, and thereby
influence the content and outcomes of corporate policies (e.g., Wood, 1991).
Companies interact within a complex institutional environment (Campbell, 2007; Filatotchev &
Nakajima, 2014; Matten & Moon, 2008; Scherer, Palazzo, & Matten, 2014). Such interactions are re-
lated to issues that go beyond narrow economic, technical, and legal requirements (see e.g., Aguilera,
Rupp, Williams & Ganapathi, 2007; Wood, 2010).
When we try to define “narrow economic requirements,” we encounter a number of political and
ideological issues. Is it a question of narrow economic requirements when a healthy, profitable com-
pany fires a worker because financial problems might arise in the longer term, or is this related to
labor market practices in which huge, short term-oriented bonuses play a decisive role? Are we going
beyond “narrow economic requirements” when we discuss the negative effects that a bonus-driven
management culture might have on a company's reputation? The difficulty of pinpointing what we
mean by CSR has been identified as one weakness of CSR research, as it is “conceptually confusing”
(e.g., Carroll & Shabana, 2010; Lindgreen & Swaen, 2010; Schwartz & Carroll, 2008).
The political component of CSR is currently in the spotlight (Frynas & Stephens, 2014; Veldman,
2013). Far from being embarrassed by this, CSR researchers are embracing it. Nowadays, political
agendas lie at the heart of CSR research (Dentchev, 2009). Within descriptive approaches, researchers
are trying to find out how decision makers deal with the normative claims that stakeholders make on
a company in a complex, multilevel institutional environment. In processes of sensemaking, man-
agers and stakeholders “construct” various narratives in order to make sense of a complex reality
(Blindheim, 2015). Greater attention needs to be paid to the material, practical, and structural aspects
of these processes (Berthoin Antal & Sobczak, 2014; Blindheim, 2015).
Taking a corporate governance perspective on CSR as a sensemaking process helps academics and
practitioners to understand the political, normative component of CSR. Within corporate governance,
influence pathways are developed by which a company and stakeholders have to interact, by which
power relations are established, and whereby certain stakeholder interests are given more attention
than others. Power is a critical component of this process. In addition to stable power-related insti-
tutional structures, a certain dynamic develops within governance systems and structures, and these
governance mechanisms also evolve over time. This enables a degree of managerial discretion and
explains whether, when and how a manager is able to set a company's political agenda, an agenda that
has to be attuned with the mental models in the environment.

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