Blurring boundaries : public values and the private sector

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Master Programme: Political Sciences - Public Policy and Governance

Research Project: Managing Public and Private Organisations; What’s the difference?

Supervisor: Dr. Anne-Marie Reynaers Second reader: Prof. dr. Mark Rutgers

Author: Bram Joanknecht, BA

Date: 24 June 2016

Blurring Boundaries

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Abstract

The primary purpose of this study is to provide insight into the prevalence of public values in the private sector and to investigate the justifications and reflections of the private sector on the incorporation of these values. In order to do so, this study adopts a qualitative, semi-inductive research approach in the form of a multiple comparative case study of six Dutch-based multinationals. The inventory of public values is made by means of a content analysis of the 2015 annual reports, codes of conduct and mission statements of the selected multinationals. The justification and reflection upon the incorporation of these values is researched by means of semi-structured interviews with managers of these multinationals.

The results show that twelve public values are incorporated by the multinationals. These values are: Transparency, Integrity, Diversity, Lawfulness, Sense of Community, Continuity,

Respect, Honesty, Incorruptibility, Trust, Openness and Reliability. The justifications and

reflections upon this incorporation are based on instrumental, political and integrative theories. The main reason for multinationals to incorporate public values is that these values contribute to the profitability and continuity of their organisation (instrumental theories). Multinationals secondly incorporate public values based on a vision of their role in society and their public responsibility (political theories). Multinationals finally incorporate public values because society expects them to do so and multinationals adhere to this call (integrative theories).

The results of this research show that certain values are ‘blurring’. A number of traditional public values are incorporated by the private sector, which makes the definition of these values depended upon the context in which they are incorporated. Although boundaries in values between the public and the private sector are fading, the rationale behind the incorporation of these values ultimately differs. The main reason for multinationals to incorporate public values is based on instrumental grounds. This makes the justification and reflection upon the incorporation of public values different from public sector organisations, where the incorporation of public values directly is seen as a goal and end in itself.

Keywords: Private Sector, Public Values, Multinationals, CSR, Annual Report, Code of Conduct,

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Acknowledgements

I would like to thank my supervisor Anne-Marie Reynaers. She has provided precious guidance to lead my research in the right direction, helped me in the game of producing knowledge and supported me to stay motivated throughout the completion of this master thesis.

Secondly, I would like to express my gratitude to all respondents from Ahold, AkzoNobel, FrieslandCampina, ING, Rabobank and Unilever for making the time to contribute to the results of this thesis.

Finally I would like to thank friends, family and peers from the thesis group who kept me productive in every stage of the research project.

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1.Public Values in the Private Sector

1.1 Introduction

With the rise of New Public Management (NPM) and Corporate Social Responsibility (CSR) traditional boundaries between the public and the private sector appear to be fading. Under the influence of the NPM paradigm in the 1980s and 1990s, it was believed that government had become too big, too bureaucratic and too slow, leading to inefficiency and a loss of public money (Noordegraaf, 2004; 78). The performance of public institutions and managers needed to be evaluated using business standards, and government had to be managed like a corporation (O’Flynn, 2007: 354). “Steering, not rowing”, was the maxim (Osborne, 1993: 352). The ideal of the welfare state had diminished and the role of governments in society had to be reshaped. As a result, extensive effort was made to incorporate market-based values in the public sector. This incorporation would make the public sector smaller, more efficient and better equipped to the demands of a modern, dynamic society. Many private values such as efficiency, entrepreneurship and profitability have since then been introduced in the public sector (Osborne, 1993. Kaboolian,1998).

The decline of the Welfare State, the increasing complexity of modern globalised society and the emerging of CSR on the other hand has given the private sector a role in the organisation of society. It is argued that public sector organisations are no longer solely responsible for the organisation of society, and that the private sector also has become accountable (Bozeman, 2007). Especially multinationals might contribute in this respect because the globalised world makes national governments to some extent inadequate to the demands of a modern society (Aguilera and Yip, 2004; 58). It is argued that the responsibility of the private sector does not end at the factory door anymore. Private organisations form a big part of society and they can contribute to society by incorporating public goals and accompanying public values in their business activities (Bozeman, 2007). This contribution is thus not only based on profit and return on investment but includes the incorporation of public values like integrity, lawfulness and honesty in the business activities of these organisations.

NPM management techniques have become quite popular in the management of Dutch and other governments. As a result, the effects of the NPM principle on the management of public organisations and the incorporation of private values in the public sector have been

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6 researched rather extensively (Bouckaert, 2006. Heinrich, 2002. Stewart and Walsh, 1992). In the private sector however, it remains to be seen which public values are being adopted by market-based companies, and how managers of these companies justify and reflect upon the inclusion of these public values in their business activities. If market-based companies are accountable for public values, is it then only by virtue of obligation to public law, or is there a broader sense in which private companies relate to public values (Jørgenson and Bozeman, 2007)? Under the flag of Corporate Social Responsibility (CSR) and integrated reporting (IR), attention in the private sector has shifted in the last decades towards ethics and integrity of management and business and non-financial reporting. Obliged but on a voluntary base as well. Given this shift, it now seems that not only private values have been moved into the public sector, but that public values are also entering the private domain.

In order to test this assumption, actual research into the prominence of public values in private organisations has to be conducted. At this point, there is a lively debate about the fading of traditional boundaries but a lack of empirical research on the prominence and content of public values in private sector organizations (Van der Wal, et. al. 2006; 2). As the boundaries between public and private are fading, do private companies then have a role in the fulfilment of public values? And if they do, what are private companies actually doing with regards to public values and how do multinationals justify and reflect upon this activity? This thesis is a step in formulating answers to these questions by moving in the direction of the exploration, justification and reflection on the use of public values in the private sector.

1.2 Research aims and research question

The main objective of this master thesis is to contribute to the ongoing debate on the values of the private sector and the newly argued role of the private sector in the fulfilment of public values. It seems that the blurring of boundaries between the public and the private sector leads to a responsibility of the private sector in the safeguarding and incorporation of public values. If this responsibility exists, research has to be performed on the presence of public values in the private sector. Furthermore, attention also has to be paid to the justification and reflection upon this incorporation by members of the private sector to not only find out which public values are being adopted but also why these values are being adopted. The following research question is formulated to find answers to these problem statements:

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“Which public values are incorporated by Dutch-based multinationals and how do multinationals justify and reflect upon these values?”

The phrase ‘Which public values […]’ refers to the presence of public values in the private sector and contributes to the mapping of public values in the private sector. This part of the research question thus helps in the formulation of an overview on the prominence of public values in the private sector. The phrase ‘[…] How do multinationals justify and reflect upon

these values’ refers to the justification and reflection of members of the private sector on the

incorporation of public values. This part of the research questions helps in mapping the reflections and justifications by the private sector on the incorporation of public values and answers the question of why these public values are being adopted.

1.3 Relevance

The goal of this thesis is to contribute to the debate about the incorporation of public values in the private sector by empirically scrutinizing which public values are incorporated by private companies, and by inquiring into the motivation and justification of these companies to do so. In this way, the results of this research could contribute to the academic debate about whether or not private companies contribute to the safekeeping of public values and formulate answers on why companies in this sector might do so. Because there is a lack of empirical research into the prominence of public values in the private sector, this thesis helps in filling the gap between normative arguments on the role of the private sector in the fulfilment of public values and the actual and practical status of public values in the private sector. This thesis then contributes to the academic debate on public values by actually mapping the prevalence of public values in the private sector and by shedding light on the current state of public values in leading multinational companies in the Netherlands. Furthermore, the focus on the justification and reflection on this incorporation helps in the mapping of motivations of the private sector to incorporate public values, something that in the context of public values has not been studied before.

On social grounds, this research helps in defining who contributes to values like equality, transparency and integrity nowadays. Can the private sector be seen as guardians of these values, or is it still the public sector that is ultimately responsible? By empirical inquiry into these values, the role of private organisations in the fulfilment of public values can be

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8 researched. This study answers the question if there is still a clear boundary between the responsibilities of the public and the private sector and researches the normative statement that the private sector should incorporate public values. This thesis, then, helps in filling the gap between what ‘ought’ and what ‘is’ by analysing the current situation of public values in private organisations (Noordegraaf and Abma 2003: 857).

Finally, the research outcomes of this study may assist organizations writing annual reports, codes of conducts and mission statements in formulating a more well-thought message which fits with the perspective of the organisation and its members and is based on the public values multinationals strive to fulfil in society. Multinationals are paying more attention towards non-financial rapportage and the expectation of the Dutch Ministry of Economic Affairs is that in reasonable amount of time integrated reporting will be the standard for performance reporting by Dutch-based multinationals (Ministry of Economic Affairs Transparency Benchmark 2016). This thesis may give multinationals that are currently writing non-financial reports instruments and tools to integrate their corporate values better, more clearly and distinctively from their peers.

1.4 Outline

This study consists of three parts. In chapter 2, values and public values are defined, the current literature on the prominence of public values in private organisations is reviewed and theories on possible reasons for the private sector to incorporate public values are outlined. The as to date performed research on Corporate Social Responsibility (CSR) is discussed and the ‘gap’ in the literature in relation to public values is brought to light. Chapter 3 focusses on methodological considerations, where triangulation, the research strategy adopted in this thesis, is explained. This focus is on qualitative, semi-inductive research, consistent of a multiple comparative case study in the form of a content analysis of annual reports, missions statements and codes of conducts and semi-structured interviews with managers of the selected Dutch-based multinationals. Chapter 4 consists of two parts. The first part focuses on the results of the prominence of public values in private organisations by the formulation of an overview of mentioned values in the annual reports, mission statements and codes of conduct of the analysed multinationals on basis of the content analysis. Part two elaborates on the justification and reflection of managers of the analysed multinationals upon the

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9 incorporation of public values and discusses the results of the semi-structured interviews. The first part of this chapter will show some overlap with the second part because in the content analysis attention is also paid to the reflection and justification in the texts upon the use of public values. These findings are used as an upbeat for the interviews on the justification and reflection on the use of public values. Chapter 5 presents conclusions on the most prominent public values and the justification and reflection upon this inclusion by the researched multinationals. These results are coupled to the debate about the blurring of boundaries between the public and the private sector and the accompanying current literature on public values in private organisations. Finally advice for future research in the field of public values and private organisations is formulated.

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2. Theoretical Framework

In order to answer the research question of this study, four themes will be discussed and elaborated upon in this chapter. These themes are; Values, Public values, Public values in

private organisations and Possible reasons for multinationals to incorporate public values. The

first two paragraphs of this chapter constitute the conceptualisation of values, and public values in particular, which forms the base of this study. This clarification contributes to the mapping of public values in private organisations and helps in the discussion about the reflection and justification of multinationals to incorporate public values. Paragraph 2.3 focuses on the movements of Corporate Social Responsibility (CSR) and Integrated Reporting (IR) and will present them as an upbeat to the incorporation of public values by private organisations. It is argued that these movements contribute to the blurring of boundaries between the public and the private sector and can be seen as a catalyst in the movement towards the incorporation of public values by the private sector. Finally in paragraph 2.4, possible reasons for multinationals to incorporate public values will be presented on basis of current literature on motivations to invest in Corporate Social Responsibility (CSR). A link between the CSR and public values will be made where reasons to incorporate CSR are coupled to possible reasons to incorporate public values. Paragraph 2.5 will present an overview of the conclusions of this literature study.

2.1 Values

The attention to values has grown partially because of the rise of New Public Management (NPM) in the 1980s and 1990s. The way government was run was being scrutinized and values stood at the center of this new wave of restructuring government activities. The structure and underlying assumptions about the role of the state and its organization was being questioned. These questions were partly answered by a new focus on the incorporation of private values by public institutions. This trend contributed to the attention towards values as a research object. The concept of values as such, however, remains very much elusive (Van der Wal, 2008). This section will therefore try to provide some clearance around the concept of values. Academic interests in the phenomenon of values derive from political theorists, psychologists, economists, sociologists, and especially philosophers (Bozeman, 2007; 113). The fact that so many different disciplines show interest in values does not contribute to a

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11 clear understanding of the concept. In many articles, scholars refuse to provide a solid definition of values and if they do, great variation among these definitions is shown. Because of this discrepancy it is argued that values are ‘essentially contested concepts’ (Gallie, 1955, p. 169). This challenged notion gives relevance to contemporary study of values, as meaning changes over time and the concept is subject to constant scrutiny.

Social psychologist Rokeach states that values can be perceived as ‘enduring believes that a

specific mode or conduct or end state of existence is personally or socially preferable to on opposite or converse mode of conduct or end state of existence’ (Rokeach, 1973, 5). Bozeman

understands values as ‘a complex and broad-based assessment of an object or set of objects

(where the objects may be concrete, psychological, socially constructed or a combination of all three)’ (Bozeman, 2007; 117). Van der Wal defines values as ‘qualities and standards that have a certain weight in the choice of action’ (Van der Wal, 2008; 23). More practically, these

definitions taken together constitute that values can be perceived as guidelines for action and decision-making (Ozar 1997: 645). They provide reasons for action and choice and judgments about such reasons (Raz, 1986; 126). In sum, values can eloquently be described as `judgments of worth', be it principles or standards of behaviour (Pollock, 1998).

One complicating factor to the study of values is that values cannot be seen or heard as such. Values are deep-rooted in cognition and are therefore hard to detect (Schmidt and Posner, 1986; 448). Bozeman formulated a number of assumptions that can help in the detection of values. According to him values express evaluative judgements, have both cognitive and emotional aspects, are relatively stable, have the strong potential to affect behaviour, change (if at all) only after deliberation and help define one’s sense of oneself (Bozeman, 2007; 117).

If values are contested concepts and therefore difficult to observe, where can one find them then? The answer is that values need to be observed in the ways they manifest in behaviour and action (Beyer, 1981). They can be find by reading constitutions, mission statements, strategic papers, and legislation, and can be elicited by studying cases of decision-making (Jørgenson and Rutgers, 2015; 6). Recent public administration literature has begun to move from philosophical discussion of values to a concern with identifying aspects of values (Van Wart 1998; Jørgenson, 1996; Van Deth and Scarbrough, 1995; Kirlin 1996). As scholars try to empirically assess what exactly constitutes values, the research moves towards the

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12 identification of values in practice. This thesis then, contributes to this debate, by examining the use of values in the organisational field of Dutch-based multinationals.

2.2 Public Values

Now that values have been discussed, the question should be asked what public values actually are. According to Moore, values can roughly be divided into public and private values. Private values are associated with satisfying individual desires and public values are about achieving social outcomes (Moore, 1995). Public values and preferred social outcomes are once again at the heart of our society. Not only the blurring of the boundaries between the public and the private sector puts public values in the centre of attention, the debate about the current refugee crisis in Europe also centres on core public values of Western democracy. Public values play a role in the justification to give shelter to refugees on the one hand, and compromise arguments of opponents against this shelter on the other. Public values can also be found in the 2015 United Nations conference on climate change in Paris (COP), where values like sustainability, responsibility and solidarity stood at the centre of the agreement. It is clear that values are of great importance in these debates.

Public values can be described as “The construct of collectively expressed, politically mediated preferences of society” (O’Flynn, 2005; 23). This notion of collective preference is an important aspect of the public values paradigm. Public values are in essence the sum of shared preferences by the people of a certain society and can therefore be seen as the combined view of the public about what they regard as valuable (Alford, 2002; 339. Talbot, 2006.).The reasoning that a value is public only if the collective benefits from it is a common presumption in all analyses of public values (Bruijn and Dicke, 2006; 720).

Research has centred on the identification of different types of public values. A commonly applied approach is to focus on core values in terms of ‘the most frequently referred to values’ (Rutgers, 2008). A good and thorough example of such classification is the research by Jørgenson and Bozeman. Their survey resulted in an inventory of frequent registered core values (Jørgenson and Bozeman, 2007; 358). Just as Jørgenson and Bozeman, Dahl and Lindblom started to classify the values they found into categories (Dahl and Lindblom 1953). Where Jørgenson and Bozeman make a distinction between core / nodal and neighbouring values, the latter speak of prime and instrumental values, but this is just semantics. The instrumental and neighbour values can be seen as values that are close to each other, are

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13 nevertheless not identical but show overlap (Jørgenson and Bozeman, 2007; 370). Prime and nodal values are those values that are ends in themselves and have a lot of related values. They take a central position in a network of values and stand out (Jørgenson and Bozeman, 2007; 370). In their inventory research, Jørgenson and Bozeman found the following nodal values: human dignity, sustainability, citizen involvement, openness, secrecy, compromise, integrity and robustness. Other scholars also conducted extensive research on public values and distinguished different values that account to the public. The below mentioned values are the most frequent mentioned public values in these studies: honesty, humaneness, social justice, impartiality, transparency, integrity, obedience, reliability, responsibility, accountability, and courage (Rutgers, 2008, Van der Wal, et. al, 2006. Vermeulen, 2003). New public values may enter and old ones may go but this generally happens only after great social change and the passing of generations (Bozeman, 2007; 14). Given the above depicted values, the question then remains; where does one look for public values? Bozeman states that public values can be found in fundamental laws and constitutions, fundamental myths of nations, speeches of public officials, mission statements of public agencies and in academic literature (Bozeman, 2007; 15). The key question in public values according to him is whether those public values endorsed by the social collective have been provided or guaranteed (Bozeman, 2007; 15). This thesis will try to answer this question by adding an extra dimension to these sources by exploring the presence public values in the private domain.

2.3 Public values in Private Organisations

The traditional notion that only governments can contribute to public values has been contested (Moore, 1995). Scholars argue that public values are rooted in society and culture, in individuals and groups, and not just in government (Melchior and Melchior, 2001).

According to them, the same moral dimensions and criteria can be applied to all kinds of organizations, be it public or private (Caiden 1999. Kaptein 1998: 9). Although review suggests that government has a special role as guarantor of public values, public values are not the exclusive province of government, nor is government the only set of institutions having public value obligations (Jørgenson and Bozeman, 2007; 374). It is insufficient to equate the term public values with government responsibility; to say that a public value is held says nothing

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14 about responsibilities for providing for the public value (Bozeman, 2007; 16). Public values can thus also be guaranteed by private businesses (Bruijn and Dicke, 2006; 720).

The debate about whether public values are safe in private hands is the logical

consequence of liberalization and privatization (Bruijn and Dicke, 2006; 718). If, for example, there are public values for universal, high-quality healthcare, and all health care is privately provided and is, indeed, effective, affordable, and universal, then there is no public values failure (Bozeman, 2007; 16). Furthermore, many argue that a corporation has rationality, intentions, goals, values and knowledge that exist independently of their constituents (Kaptein and Wempe, 2002). Within the organizational context, (public) values are then supposed to guide members of the organization in their choice of action, so that a certain outcome can be achieved that is in the interest of the organization (Van der Wal et. al, 2006; 4). Public values can also be used as a measurement to describe the value that an organization contributes to the common good of society, be it a public or a private organization (Moore, 1995). Thus companies compete on public values, trying to win the favour of consumers by considering the protection of public values to be of paramount importance (Bruijn and Dicke, 2006; 726). There are two trends that contribute to the incorporation of public values by the private sector. These are Corporate Social Responsibility (CSR) and Integrated Reporting (IR). In the following part of this section CSR will be discussed fist, and IR thereafter.

CSR in this study is considered to be a ‘corporate engagement in actions that further some social good, beyond the direct interests of the corporation and that which is required by law’ (Caroll, 1979; 4. Van der Wal, 2008). CSR has increased dramatically over the last 30 years and is characterized by a more structural and institutional approach to the ethics of business and management (Kaptein and Wempe, 2002; 29-39). It emphasizes traditional public sector values such as sustainability, social responsibility, accountability, solidarity, reliability and fairness (Kaptein and Wempe, 2002; 237-246). Studies have convincingly shown that

organizations have their own values which are encoded in the organizations culture and are stimulated by CSR approaches (Deal and Kennedy, 1982). However, in CSR reporting it can be argued that the focus has been on mostly instrumental or only 1 - 8 prime values, and that the notion of public values can and should be placed in a much broader perspective (Van der Wal, 2008). Kaptein and Wempe, for example, mention five social behavioural principles (norms) and seven ethical qualities (values) that a corporation should possess: openness, empathy, fairness, solidarity and reliability (principles) and clarity, supportability, consistency, visibility,

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15 realizability, discussibility and sanctionability (qualities) (Kaptein and Wempe, 2002; 5). Where CSR naturally focusses on sustainability and social responsibility, public values contain these elements but include much more values like honesty, transparency and incorruptibility, to name a few. CSR and public values thus show reasonable overlap because CSR also

emphasizes similar concepts, but public values can and should be placed in a broader perspective.

The second trend that contributes to the incorporation of public values by the private sector is Integrated Reporting (IR). In this trend, company reporting is not only focussed on financial statistics but also on social, human an environmental parameters. Multinationals are starting to include these parameters in their annual reports and account them to the success of the organisation. This means that specific chapters in annual reports are devoted to

accountability on non-financial performance. Non-financial performance is related to CSR and public values because these parameters both concern not pure profit but rather the social, human and environmental impact of a company. The Dutch Ministry of Economic Affairs expects that this trend will continue to rise and that more and more companies will start to implement these factors into their annual reports (Ministry of Foreign Affairs Transparency Benchmark, 2016). An assumption on IR is that it serves the interest of companies with public claims to being accountable and transparent, and that more and more companies will

therefore incorporate non-financial performance in their business strategies and reports, because this fits in the trend of CSR and a movement towards public values at large. Companies that pay attention towards IR can actually show that they are accountable and transparent because they report on non-financial performance, which supports the claims they make about their performances.

In the past, research on the availability of public values in private organisations has been conducted. Van der Wal and colleagues performed research on business ethics and central values in private companies (Van der Wal, et. al, 2006). Amongst other data, they provide an overview of the most often mentioned core values in the codes of conduct of four Dutch-based multinationals. In their research, they examined the codes of conduct of Shell, Schiphol Group, Rabobank and ABN AMRO (Van der Wal, et. al, 2006; 21). The results they found are depicted in table 2.1.

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Table 2.1 Core Values in Codes of Conduct of Dutch-Based Multinationals (Van der Wal, et. al, 2006; 21).

Corporation Core Values

Shell Honesty, Integrity, Respect for People (Trust, Openness, Professionalism, Teamwork)

Schiphol Group Respect, Effectiveness, Involvement Rabobank (Member and customer) Functionalism,

Sustainable Relationships, Integrity (of actions), Sense of community

ABM AMRO Integrity, Teamwork, Respect, Professionalism

In their results, the researchers mention great overlap between the core values mentioned by the four Dutch based multinationals (Van der Wal, et. al, 2006; 22). The authors make the claim that this result does not say anything about the differences and similarities between the business practices of the companies mentioned (Van der Wal, et. al, 2006; 22). The authors emphasize that one is more likely to find differences in the use of public values in the business principles and mission statements of these multinationals. The most interesting differences, however they argue, will probably be found when managers and other employees are interviewed on their reflection and justification on the use of values (Van der Wal, et. al, 2006; 22). These interviews are what the in-depth second part of research in this master thesis will contain.

An important debate in the study of public values is whether or not public values should be judged in terms of intentions or outcomes. This debate is about whether values-based actions should be assessed in terms of the actor’s motivations, the expressive theory, or if they should be assessed in terms of the outcomes resulting from actions, the consequentialist’s theory (Parfit, 1984). A content analysis of business codes and interviews with managers of these multinationals as will be applied in this study delineates the responsibilities multinationals

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17 and Brinkmann, 2003). Adherents of the consequentialist philosophy sometimes referred to as ‘moral realism’, emphasize that only real outcomes are important in judging values (Schueler, 1988). As a result, researchers should focus on the results of CSR and public values, and not on the intentions mentioned on forehand, so they argue. Opposed to this believe, Anderson formulated the Expressive theory in which she rejects the idea that values and morality should be assessed only in terms of real outcomes (Anderson, 1993). Expressive theory views moral behaviour not in terms of the ultimate outcomes, which may be unknowable, but in terms of the rational values they express (Bozeman, 2007; 119). Thus it is the motivations and willingness to show certain behaviour that makes a difference under expressive theory. Expressive values are intentional; they imply that moral behaviour can be based on goal-orientated principles and not just results (Bozeman; 2007; 119). The expressive theory will be at the base of this research.

2.4 Possible Motivating Factors to Incorporate Public Values

As mentioned before, the justifications and motivations for multinationals to incorporate public values have not yet been researched. However, scholars did study motivations for private companies to incorporate CSR techniques in their business activities. Although public values and CSR are different concepts, they share the notion of collective benefits and indirectly relate to the well being of society (Bruijn and Dicke, 2006; 720). This chapter will therefore present the findings on the motivations to incorporate CSR, which could contribute to the analysis on the justification and reflection of multinationals to incorporate public values. At the end of the research, conclusions can be made upon the differences and similarities between the motivations to incorporate public values and the motivations to incorporate CSR.

According to scholars, motivations for private sector parties to incorporate CSR focus on one of the following aspects of social reality: economics, politics, social integration and ethics (Garriga and Melé, 2004). On basis of this division, it is possible to formulate four theories on motivations to incorporate CSR which are called: instrumental theories, political theories,

integrative theories and ethical theories (Garriga and Melé, 2004; 32). These four theories will

be elaborated upon in the remaining part of this paragraph. First, according to instrumental theories, the only consideration for CSR is the economic aspects of the interaction between business and society (Garringa and Melé, 2004; 52). These theories are called instrumental

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18 because CSR is understood solely as a means to the end of profits. According to Friedman ‘the only responsibility of business towards society is the maximization of profits to the shareholders within the legal framework and the ethical custom of the country’ (Friedman, 1970). According to this theory, an adequate level of investment in philanthropy and social activities is acceptable for the sake of profits (McWilliams and Siegel, 2001). So investments in CSR are then only a question of enlightened self-interest (Keim, 1978). Following this theory, the only motivation for multinationals to incorporate public values is the economic benefits that they could generate.

According to political theories, the social power of the multinational is emphasized. This power in the political arena and responsibility towards society leads the multinational to accept social duties and rights (Garringa and Melé, 2004; 63). The decline of the Welfare State and the incorporation of private values in the public sector can be seen as a factor that had impact on this category. One resulting factor is the emergence of the term ‘corporate citizenship’ (Altman and VidaverCohen, 2000). This term equates with a sense of belonging to a community. And with the diminishing of the state, multinationals needed to take the community in which they are operating into account. Theories and approaches in this category are focused on rights, responsibilities and possible partnerships of businesses and government in society. They see multinationals as having a responsibility in the fulfilment of social values, because they form a large part in the organisation of society (Garringa and Melé, 2004; 63). A justification for multinationals to incorporate public values following this theory is based on the political role of the organisations in society.

According to integrative theories, multinationals ought to integrate social demands in such a way that their businesses operate in accordance with current social values of society. Multinationals depend on society for its own continuity and growth. They therefore need to respond to demands that create social legitimacy and greater social acceptance for their activities. It is crucial to consider the gap between what the organization’s relevant publics expect its performance to be and the organization’s actual performance (Garringa and Melé, 2004; 65). Social responsiveness and issues management constitute to the closing of this gap. Multinationals should perceive this gap and choose a response in order to close it (Ackerman and Bauer, 1976). Issues management emphasizes the process for making a corporate response to social issues. This theory presents the voice of society as an imperative to incorporate CSR. The reason why multinationals might adopt public values coupled to this

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19 theory is founded in the integration of appeals from society.

Finally, according to ethical theories, the relationship between business and society is founded upon ethical values. This theory is based on principles that multinationals should express the right thing to do and try to build a good society (Garringa and Melé, 2004; 66). Multinationals fulfil a role in this ethical proposition. They have a great impact on society and can help in safeguarding basic moral and ethical norms and values. Because the multinational can be seen as having moral dimension they should actively work on CSR out of an altruistic perspective. The principles include attention towards universal rights, sustainable development and the common good. Multinationals therefore ought to accept social responsibilities as an ethical obligation (Garringa and Melé, 2004; 65). Coupled to this last theory, multinationals might adopt public values based on ethical and moral grounds.

In summary, four different justifications for the incorporation of CSR can be differentiated. Where the instrumental justification focuses on the business perspective of CSR, the political justification is all about the responsibility multinationals have in society. The integrative theory centres upon the integration of social demands and the ethical justification concerns considerations as universal rights, the common good and multinationals task in the fulfilment of these considerations.

2.5 Conclusion

As the overview of previous research and current literature has shown, the concept of (public) values is studied in many different contexts but remains hard to define. Public values are values that account to the public and are derived from the public. Literature review has shown that the fulfilment of public values is not only a public matter. Private parties can just as well contribute to the fulfilment of public values and the attention towards the incorporation of these values has risen under the flag of CSR and IR. Finally, because there is a lack of literature on motivations for multinationals to incorporate public values, motivations for multinationals to incorporate CSR have been presented and four different perspectives have been provided. Even though public values and CSR are different concepts, they also show similarities. Because of this lack of research into specific motivations to incorporate public values, the motivations for the incorporation of CSR will be used as input for the analysis of possible justifications and reflections upon the incorporation of public values.

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3. Methods

This chapter presents the methods that are used to answer the research question

“Which public values are incorporated by Dutch-based multinationals and how do multinationals justify and reflect upon these values?” The chapter introduces methodological

considerations for the qualitative semi-inductive research design and justifies the selection of cases that is to represent the Dutch-based multinationals. Furthermore, motivating factors that are used for collecting data are explained and the method of analysis is presented. Finally, the internal and external validity of the research design are discussed.

3.1 Research approach

This study adopts a qualitative research approach. The essence of qualitative research is meaning production, which involves an interpretive, naturalistic approach in which researchers study objects in their natural settings (Denzin and Lincoln, 1994; 2). This study furthermore consists of a semi-inductive research approach (Eisenhardt and Graebner, 2007; 25). As the theoretical framework of this study has shown, literature on values exists but only to some extent in relation to public values in the private sector. Literature also exists on specific motivations for the private sector to incorporate social responsibilities (CSR), but not in the field of public values. It therefore has to be seen whether or not current literature matches with findings from the analysis. The semi-inductive research approach helps to incorporate existing literature but also leaves room for what empiricism has to offer, and therefore functions as a suitable research design for the study of public values in private organisations (Eisenhardt and Graebner, 2007; 25).

Lastly, this thesis follows a multiple comparative case study approach. This design relies on multiple sources of evidence and allows for the observation of values in the natural settings in which they occur (Stake, 1995. De Graaf, 2003). This methodology enables the exploration of differences within and between cases and facilitates exploration of a phenomenon within its context using a variety of data sources, which makes it a suitable research design for the study of public values in private organisations (Den Hertog and Van Sluijs, 1995).

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3.2 Case Selection

The organizations that were analysed were multinational companies based in the Netherlands. Morse and Field note that the choice of research field has consequences for the efficiency of the results, and state that maximisation should be the vocal point (Morse and Field, 1996; 231). The choice for multinational companies is therefore justified, because research has shown that multinationals form a significant portion of the companies that report on non-financial statistics (Brown, De Jong and Levy, 2009). Multinationals also played an active part in developing and promoting non-financial rapportage (Brown, De Jong and Levy, 2009). Furthermore, successful previous research has been executed on the most frequently mentioned values in the codes of conduct of the 200 largest multinationals worldwide, which shows that multinationals form a good source of conducting value research (Kaptein, 2004). Lastly, because of the size and scope of these multinationals, it can be argued that these organisations fulfil a role in society that furthers commercial ends only. Only the amount of workers these organisations employ has significant influence on society as such. Searching for public values in these organisations was therefore further justified, because the possibility that these multinationals pursue public values is greater.

The choice for multinationals with headquarters in the Netherlands was a purposive sample, which helps in filling in parts of the theoretical gap by empirically researching one specific group in the private sector based on geographical and organisational boundaries (Randall and Gibson, 1990; 463). In the selection of cases, the following multinationals were selected: Rabobank, ING, Unilever, FrieslandCampina, Ahold and AkzoNobel. All these multinationals are publicly known as being ‘Dutch’ in a sense that they have a long history in the Netherlands and that they are well known in Dutch society. The people that were interviewed all fulfilled management positions in their organisations. Their specific function alternated, but all of the interviewees had experience with reporting in general and non-financial reporting in specific. The choice for these managers enabled a thorough interview about the justification and reflection upon the use of public values, as the managers all had experience in this area. The functions and gender of the interviewees in random order are presentend in table 3.1

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Table 3.1 Functions and gender of interviewees

Multinational Function Gender

A1 Corporate Communications Netherlands Male

B1 External Affairs Officer Male

C1 Global Value Manager Female

D1 Manager Sustainability Reporting Male

E1 Director Communication and Sustainability Male

F1 Sustainability Officer Female

3.3 Data Selection

In order to gain empirical insight into the relation between private companies and public values this research consisted of a combined-methods approach, which is a preferred methodology in case-study research (Boeije, 2005; 22). The first part of the research question ‘Which public values are incorporated by Dutch-based multinationals’ is answered by means of content analysis. A content analysis can be defined as ‘a research technique for making

replicable and valid inferences from data to their context’ (Krippendorff, 1981; 21). It is a

coding operation and data interpreting process where analysis is performed via a selective reading of the material from a certain angle (Bogdan and Biklen, 2003. Wester, 2006; 6). In the content analysis, a clustering system and search protocol was applied to determine the importance, relevance, and characteristics of the values deducted from the documents. Because of the explorative nature of the research design, elements in the texts of the documents that referred to justifications and reflections upon the use of public values were also selected in the first phase of the research. This overview was used as input for the interviews and to verify earlier findings from the analysis. The documents that were selected as input for the analysis were the 2015 annual reports, codes of conduct and mission statements of the six Dutch-based multinationals.

The second part of the research question ‘How do multinationals justify and reflect upon

these values’ is answered by means of semi-structured interviews that were held with

managers of the same multinationals that were selected for the content analysis. The semi-structured interview design helped in getting a clear view on the justification and reflection of these managers on the use of public values by their organisation. This was partly so because

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23 the semi-structured interview desing gave interviewees the possibility to talk freely about certain topics and created space for reflection (Boeije, 2005; 58). Questions that were asked to respondents can be found in Appendix I. The design of the questionairy was twofold. First, some general questions about the role of the private sector in the fulfilment of public values were asked. Second, specific question were formulated about findings in the content analysis of the documents of the multinational in question. The interview design was necessary to fully understand the values multinationals strive for. It was not sufficient to analyse the annual reports, mission statements codes of conduct only, because values that a multinational claims to pursue are not always shown in annual reports (Kaptein and Wempe, 1998). Judging individual annual reports, mission statements and codes of conduct in terms of comprehensiveness was therefore not justified, and extra in-depth research was required (Kaptein, 2004; 27).

3.4 Data Analysis

At the start of the research, analysis of the documents was of explorative nature. When the research progressed, observations were carried out more specifically by way of interviews in order to check earlier findings from the content analysis. This research had a phased design in which data-collection and data-analysis alternated (Seale, 1999). In the content analysis, all interesting passages that directly or indirectly referred to public values were highlighted and used as input for the analysis. The analysis of the documents was performed by collecting values that appeared more than once in the literature, by coding them and dividing them amongst higher prime values. Any part of the text that referred to public values was highlighted and used as input for the analysis. In the process of clustering and coding, going back between data and codes, new clusters were created and old ones changed, which made the establishment of more definite codes possible (Klostermann, 2003; 45). Statements in the texts that referred to two or more public values simultaneously were divided amongst the values mentioned in the text, which meant that certain statements were coded more than once. The goal of the content analysis was of descriptive nature, where an overview of the extent to which certain features appear in the documents was created (Wester, 2006; 9). For the analysis of the second phase of the research design, interviews were encoded and the core concepts analysed. The concepts of the transcripts were compared and fragments

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24 that emphasized the same topic were combined (Boeije, 2005; 66). This cluster was turned into a coding scheme as to make the constructive data analysis possible. The coding tree that was formed on basis of this selection can be found in Appendix II. Because this was a semi-inductive research project, and a first outset on the actual use of public values by private companies, there was no a priori selection of public values that was searched for in the content analysis. Instead, based on academic literature, an overview of possible public values was generated that could help in the search for public values in annual reports, codes of conduct and missions statements (Jørgenson and Bozeman, 2007. Van der Wal, 2008). By analysis of open codes, values and information that might not have been listed by previous research or related to public values indirectly could still be selected as material for analysis. This contractualist view compassed that one begins not with an a priori set of values but instead considered the actual values held by the organisation trying to understand the relationships, especially the commonality, among these values (Bozeman, 2007; 126).

3.5 Validity of Results

A number of factors influenced the validity of the results. In this section, the internal and external validity of the research design are discussed and the strengths and weaknesses of the study are explained.

3.5.1 Internal Validity

A first threat to the internal validity of the study was the means of testing and instrumentation. Because the results of the in-depth interviews were partly determined by the results of the content analysis, the internal validity of the research could be threatened. The first selection of public values from the content analysis steered the semi-structured interviews in a certain direction with regards to which values were being discussed. When no prior analysis was conducted, the results of the interviews might have been different. On the other hand it can be argued that the analysis of the documents helped in the structuring of the interviews and therefore contributed to the justification and reflection by interviewees of the multinationals because their statements could be tested against previous findings.

A second threat to the internal validity of this study was the selection of interviewees.

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25 selection bias could be expected. When other members of the multinationals were interviewed different results might have been found. On the other hand, the selection of interviewees with experience in non-financial reporting provided a better justification and reflection upon the incorporation of public values because these managers all had actual experience with the incorporation of the values found in the first phase of this study.

Additionally, a third threat to the validity of the study has to do with compensatory rivalry. Because interviewees knew that other multinationals were also part of the analysis, social competition was looming. Interviewees might have given different answers than they normally would have because they did not want their company to look bad in comparison to its competition. However, because it was mentioned that the input of the interviews would be anonymised, interviewees might have spoken more freely about the justification and reflection upon the incorporation of public values because they knew the results would not lead to them or to the multinational they represented.

3.5.2 External Validity

The first threat to the external validity of this research derives from a lack of generalizability of the findings. Because this study consisted of a purposive sample, in which only Dutch-based multinationals were analysed, the external validity of this study is quite low. When other countries were also included in the inventory, justification and reflection upon the incorporation of public values, the external validity of the study could have been strengthened. The selection of cases on bases of national boundaries on the other hand contributed to the mapping of public values in one specific area. This frame made it possible to make specific statements on the status of public values in multinational companies in the Netherlands.

A second threat to the external validity of this study is related to the sample of multinationals that was analysed. If a greater sample than six multinationals was selected, the external validity of the findings could have been strengthened. However, analysis showed that after the content analysis and the interviews with the six multinationals, some amount of saturation started to occur. The same public values were found and also the motivations to incorporate public values showed reasonable overlap. It can therefore be questioned if a greater number of multinationals in the sample would have led to different results.

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26 The last threat to the validity of this study has to do with the generalisability of the statements by the interviewees in the sample. Although interview respondents hold key positions in each multinational with regards to the incorporation of public values, it is difficult to determine if the results represent the multinationals as a whole, or that respondents shared individual opinions, as the interviewees cannot speak for the entire multinational as such.

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4. Results

The first section of this chapter discusses the results of the content analysis on the most prominent public values in the annual reports, mission statements and codes of conduct of the six analysed Dutch-based multinationals. This section thus answers the first part of the research question: “Which public values are incorporated by Dutch-based multinationals […]?”. Section two discusses the results of the interviews and answers the second part of the research question: “[…] How do multinationals justify and reflect upon the use of these values?”. Section one and two to some extent show overlap in a sense that the inventory also includes minor observations on the justification and reflection upon the use of public values. These findings contribute to the general observations on the justifications and reflection upon the incorporation of public values in the second part of the analysis.

4.1 Public values in annual reports, codes of conducts and missions statements.

The content analysis of the reports resulted into the findings of twelve different public values. These values were quantified and used as input for analysis. This chapter starts with some general remarks and observations on the findings of the content analysis. Due to the limitation and the scope of this research, five of the most prominent values will be discussed in-depth thereafter. Special attention will be paid to justifications and reflections upon the use of these values in the reports. The last part of this chapter describes the remaining seven values shortly by providing quotations and concludes with a summary on the prevalence of public values in the reports of the analysed multinationals.

4.1.1 Public Values in Reports of Multinationals

The analysis of the documents resulted into a classification of twelve different public values. The values are presented in order of frequency in table 4.1. The results show that transparency, integrity, diversity and lawfulness were the most mentioned values that were found in the analysis. Further analysis showed that these values were mentioned in the reports of every multinational in the sample, which made these four values the most prevalent values of this study. Openness was another value that was mentioned often in the reports and was found in the documents of four of the six multinationals. Continuity, Respect, Honesty and Trust form large parts of the remaining values in the reports and were also

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28 mentioned often by almost all multinationals in the sample. Incorruptibility and reliability were respectively mentioned by two and by one multinational in the sample. In total the public values were mentioned 177 times in the analysed reports of the multinationals.

Table 4.1 Public values in Reports of Multinationals

Public Value Frequency Public Value Frequency

Transparency 25 Continuity 12

Integrity 24 Respect 11

Diversity 24 Honesty 9

Lawfulness 23 Trust 8

Sense of Community 17 Reliability 4

Openness 17 Incorruptibility 3

Table 4.2 displays the public values found in the analysis of the reports per multinational. The results show that the analysed multinationals compare in values they appeal to in their reports. Although some values are stressed more often or clearly by one, a general trend of public values can be distinguished by all. These findings match with previous research on the appearance of values in the reports of multinationals (Van der Wal, et. al, 2006), Kaptein, 2004). As Van der Wal and colleagues argued, difference in interpretation of values between multinationals can possibly be found when employees of the companies are interviewed and asked to reflect upon the incorporation of these values (Van der Wal, et. al, 2006; 22).

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Table 4.2 Public Values in reports of analysed Multinationals

Multinational Public Values

Ahold Lawfulness, Respect, Honesty, Transparency, Integrity, Sense of Community, Diversity

AkzoNobel Integrity, Lawfulness, Incorruptibility, Transparency, Sense of Community, Diversity, Continuity

Friesland Campina Continuity, Trust, Diversity, Sense of Community, Transparency, Openness, Integrity, Honesty, Respect, Lawfulness

ING Honesty, Transparency, Diversity, Openness, Sense of Community, Integrity, Lawfulness, Continuity

Rabobank Respect, Integrity, Transparency, Reliability, Continuity, Lawfulness, Openness, Honesty, Diversity, Sense of Community

Unilever Integrity, Continuity, Honesty, Openness, Lawfulness, Diversity, Transparency, Sense of Community,

Incorruptibility, Respect

In the next part of this section, the values transparency, integrity, diversity, lawfulness and a sense of community will be discussed into more detail. Specific observations regarding the general overview of these values are made, and specific attention is paid to the justification and reflection upon these values.

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4.1.2 Transparency

Transparency is the most mentioned public value in the reports of the analysed multinationals. Every multinationals referred to transparency and all underpin its importance for the organisation, their employees and for society. One finding of the analysis is that multinationals often indicate that transparency is not only an important value but that it also leads to dilemmas. It appears that private companies have a different conception and give a different interpretation to transparency than public sector organisations. Where transparency is a must in governmental organisations, private sector companies have to take the secrecy of their business strategies and the privacy of their customers into consideration. Being too transparent on information about the organisation may lead to a loss of market share, a stronger competition or angry customers who find personal information revealed to the public. Where transparency has to be everywhere in the public sector, the private sector is not obliged to be transparent and in some parts specifically does not want to be transparent. The below mentioned citation of the ING annual report is an example of the quest for this balance.

“We aim to find the right balance between providing the transparency and openness that society and NGOs ask of us, while respecting our customers’ privacy. Being transparent and open about our investments, products and services, and other topics is helping the business move forward and earning the trust of our stakeholders.” (ING Annual Report, 2015; 22)

All multinationals state with regards to transparency that they find it important to be open and clear about the products they sell, the way they are being made, and the way the communicate about them. In the reports it is mentioned that transparency helps customers to make better decisions and that it also is an answer to the growing call from Non-governmental Organisations (NGOs) to be more clear on the role and impact of their organisations on society. Multinationals indicate that they understand that society expects some form of transparency and they respond to this call. For some multinationals, like Ahold with over 16.000 own-brand products in their Albert Heijn grocery stores, even though being transparent about these products proves to be difficult and costly because they need to trace the production line of all the products they sell in order to be transparent, they actively work to become more transparent about the products they offer. The following quotation is an example of how Ahold perceives the importance of transparency:

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“Driven to do what’s right, and meet customer concerns, we strive to communicate openly and clearly on the ingredients and origin of our products. To be able to do this, we are continuously working to enhance our nutritional labelling, and to obtain insight into the origin, processing and handling of our products. Obtaining visibility over the production stages of our suppliers is one of our biggest challenges in this area and requires substantial investments.” (Ahold

Responsible Retailing Report, 2015; 12)

The quotation from the Responsible Retailing report of Ahold furthermore clearly shows that the attention towards transparency on products sterns from customer concerns about the origin of products and the way they are being produced and sold. Transparency is used to help business move forward and serves to build trust on the one hand, and is being referred to in order to meet concerns from society on the other. These results show overlap with the integrative theory, where attention towards CSR is based on concerns and calls from society. Because society stresses the importance of transparency, multinationals are working on the transparency of their products and services.

4.1.3 Integrity

Integrity is a very important value for the analysed multinationals and is found to be a core principal value for three out of six multinationals. Integrity is associated with honesty and lawfulness but is mentioned as a value in itself most often. One finding in the reports is that integrity not only means acting with integrity in contacts with customers and stakeholders but that it also means safeguarding internal integrity for employees. This beholds that employees who report unwanted behaviour inside the company will be handled in an integer and respectful manner and will enter a fair procedure. A second result is that it is clearly stated that integrity is also seen as a business asset. This means that acting with integrity contributes to the image people have of the company and thereby to the business profitability of the organisation. Integrity is therefore very important for multinationals, because it contributes to a positive reputation of the company and to better results as a consequence. The following quotation is an example of this argumentation: