CSR under scrutiny
A longitudinal study into CSR response strategies in the Dutch
financial sector pre- and post crisis
MSc. Business Administration – Strategy Track
Master Thesis
Author: Ryan Bulthuis
Student number: 10676996
Date: 25 March 2016
Supervisor: Lars Moratis
Statement of Originality
This document is written by Ryan Bulthuis who declares to take full
responsibility for the contents of this document.
I declare that the text and the work presented in this document is
original and that no sources other than those mentioned in the text
and its references have been used in creating it.
The faculty of Economics and Business is responsible solely for the
supervision of completion of the work, not for the contents.
Table of contents
Abstract
4
Introduction
5
Literature review
9
Definition
Rationale
CSR Fit
Credibility
Strategies
Conceptual Model
Methodology
24
Data collection
Data analysis
Empirical Findings
35
ABN AMRO
ING
Rabobank
Discussion
59
Conclusion
66
References
68
Abstract
Only five years after the end of the financial crisis many questions remain
concerning the role of banks in the cause of the crisis. Moreover, questions
remain pertaining to how banks responded to alleged accusations of their
involvement in the crisis and their responsibility to reform the sector in a
sustainable manner.
This paper provides insight into the strategic responses banks deployed
after the financial crisis, specifically in regard to remuneration policies.
Through analysis of the years 2007, 2011, 2012, 2013 and 2014 this
research paper demonstrates how banks responded to issues around
remuneration. The findings are interpreted on the basis of Oliver’s
framework regarding responsive strategies towards institutional pressures.
The findings of this paper demonstrate that the involved banks ABN AMRO,
ING and Rabobank applied an acquiesce response, based on compliance
with regulations and legislation and over time demonstrated variation in
responses. Remuneration policies were reformed and amended and
integrated into existing business operations such as human resources and
performance management.
Introduction
Over recent decades the ways of doing business have changed considerably. Whereas just over 100 years ago, as part of the industrial revolution, the introduction of the conveyor belt facilitated efficiency, mass production and profit maximization, the market has changed towards one that increasingly values firms’ ethical considerations over profitability and growth. This change in the orientation and focus of business efforts has resulted in a relatively new stream of research that aims to gain and advance understanding of ethical firm behavior under the overarching concept of corporate social responsibility (CSR). Even though CSR entails a relatively new direction for research, the relevance and importance of CSR in the current market environment was already demonstrated by the end of the last century. A number of studies in the 1990s have focused on the link between firms’ financial performance and CSR efforts,
suggesting improved financial performance as a result of increased CSR activities (Pava and Krause, 1996; Stanwick and Stanwick, 1998; Mc Guire, Sundgren and Schneeweis, 1998). Furthermore, in the same period, a number of other studies have demonstrated positive consumer responses towards firms’ social initiatives (Brown and Dacin, 1997; Creyer and Ross, 1997; Ellen, Mohr and Webb, 2000; Folkes and Kamins, 1999; Murray and Vogel, 1997; Sen and Bhattacharya, 2001). From a strategy perspective, CSR thus provides ample opportunity for differentiation between firms, positively affecting consumer attitudes and ultimately contributing to the competitive advantage that firms seek within a competitive environment.
The potential of a good CSR orientation should however not be mistaken for a simple tool to boost firm performance or an easy way to success. Instead, CSR efforts require careful consideration in order to not result in unsuccessful campaigns and waste
of company resources, or moreover negative consumer responses towards corporate image and business activities, which can potentially result in deteriorating firm performance. This understanding of the potential for different outcomes of CSR activities results from a more recent stream of research that has investigated the outcomes of CSR efforts by applying a focus on the fit of firms’ CSR efforts, arguing in favor of high-‐fit initiatives in order to achieve desired results of improved image and positive customer response (Hill and Becker-‐Olsen, 2005). This notion of fit arguably raises questions about the limitations of CSR activities: do all firms possess potential to participate in CSR efforts on the basis of the nature of the business and its activities? Research into the integration of new CSR initiatives has started to answer this question, by for instance providing a framework for new CSR initiative adoption on the basis of the core-‐periphery thesis (Yuan, Bao and Verbeke, 2011). Another study by Palazzo and Richter (2005) has introduced the idea of transactional and transformative CSR as a solution to CSR implementation in the tobacco industry. Both studies confirm the idea that different firms in different sectors use varying approaches and strategies to implement CSR into their routines and business activities.
The notions of fit, potential, sector specific factors and approaches to
implementation of CSR initiatives lead to increased understanding of the difficulties of CSR, all ultimately relating to a firms’ CSR credibility. Even though CSR is more
prominent than ever, research has demonstrated that only 4 in 10 people believe firms communicate honestly about their CSR activities (Moratis, 2015), and that CSR is mostly used as a tool to fake ethical or sustainable firm behavior (Moratis, 2015; Bronn & Vrioni, 2001; Laufer, 2003; Jones, Comfort, & Hiller, 2008; Gallego-‐Alvarez, Prado-‐ Lorenzo, Rodr ́ıguez-‐Dom ́ınguez, & Garćıa-‐Sanchez, 2010). Influencing, or increasing CSR credibility thus seems to be at the heart of the interest of firms that seek to profit
from their CSR efforts, and this therefore has generated a stream of research into firms’ CSR credibility. A specific stream within this research agenda on credibility focuses on the strategies companies use in order to increase the credibility of their CSR
communication, resulting in concrete CSR guidance standards among which for instance ISO26000 (Moratis, 2015). However, due to differentiation among markets, firms and other factors that may still need to be identified, further research into specific sector-‐ related CSR strategies under different circumstances is necessary to both identify potentially different strategies and add to the validity and generalizability of prior research. Specifically, sectors that are considered to be of unsustainable nature require attention in this regard (Moratis, 2015). Therefore, this master thesis will fill the gap within the CSR credibility literature by investigating the CSR strategies used by Dutch banks post credit crisis in order to provide further understanding of the CSR strategies used in a sector that suffered from a change in public perception due to disruptive events, triggering for instance the occupy movement as a reaction to the exposed banking culture. The research question that will guide this research is:
How and through which strategies do banks react to CSR issues in a sector under scrutiny?
The following sub-questions will support the research question:
1. How does reporting content in regard to the investigated theme change over time 2. How do stakeholders, time and organizational type relate to the observed response
strategies
By answering these questions, this master thesis will contribute to the existing literature on CSR credibility by filling the gap of strategic CSR responses within a sector that
suffers from negative public opinion. This thesis will therefore make further
contributions to the research stream in which Palazzo and Richter (2005) researched the position of tobacco companies in this regard. However, the case of the Dutch banking sector will provide a different perspective due to the previously predominantly positive CSR image of the sector, and in that respect will provide a unique contribution to the field. Furthermore, research by Jizi, Salama, Dixon and Stratting (2013) concerning CSR disclosure in the US banking sector post mortgage crisis will be complemented by research with a different sample, time span and insights into the CSR strategies of banks that were saved with public resources through government intervention. Besides
academic contributions, this thesis will also provide a number of valuable, practical insights for CSR professionals. First, this thesis will expose the (former) weak points in the CSR strategy of the researched firms. Second, this thesis will demonstrate what types of strategies are used to overcome the negative attention received prior. Third, this thesis will demonstrate to what extent firms can and have to change in order to restore credibility. Lastly, by paying attention to the organizational structure and ownership type of the investigated banks, this research will provide one with insights into how response strategies and firms’ interests are related.
Literature Review
Definition
Over recent decades corporate social responsibility (CSR) has become an increasingly important topic to organizations. The idea of acting socially responsible has received attention from media, scholars and management practitioners in a world in which information is increasingly available and in which awareness of society and the environment is constantly increasing. Even though the idea that businesses have a certain degree of responsibility over their actions is not entirely new, recent
developments have demonstrated that CSR has evolved into a boardroom subject, often motivated by shareholder interests and government legislation (Porter and Kramer, 2006). Arguably, the increased availability of information about atrocities and firms’ unethical behavior plays a great role in this regard. Exposure of Nike’s abusive labor practices in the early 1990s and the more recent environmental catastrophe involving British Petroleum’s Deepwater Horizon oil platform are just two examples feeding into the idea that societal and environmental problems are the result of (bad) organizational practices (Porter and Kramer 2006; Walker and Wan, 2012, Spence, 2011).
Even though the past decades have had great impact on the meaning and
application of CSR, also increasing the desire for CSR, it remains unclear how to exactly define the concept. One of the earliest works elaborating on the social responsibility of corporations traces back to the 1950s, when Bowen argued that corporations should aim to balance its decisions with societal expectations (Bowen, 1953). Through the years this early notion of the relation between corporations and society has received much scholarly attention, providing both scholars and practitioners with more detailed insights into the mechanisms and strategies that affect this relationship. Although not all
answers have yet been found, much can still be learned about what exactly entails CSR and what its function is or will become in the future, the existing literature provides one with starting points for further development of and research into the topic. When trying to answer what CSR is we therefore first focus on the research readily carried out that provides one with understanding of the basic elements that can not be disregarded in the definition of CSR. As a starting point we look at the much-‐cited work by Carroll (1991) and to the responsibilities companies have within society. According to Carroll four responsibilities can be identified in regard to societal stakeholders that are of importance for long term survival of the company: economic, legal, ethical and discretionary. This approach, which focuses on the responsibilities of companies towards its stakeholders entails that a company needs to abide to laws and other regulatory requirements, meet stakeholder expectations and do so in a voluntary manner. This last notion of voluntary behavior moves beyond mere compliance efforts. The work by Carroll (1991) can be extended by the ‘Triple Bottom Line’ approach of Elkington (1997). The triple bottom line approach to CSR as presented by Elkington (1997) extends the understanding of CSR by defining firms’ economic, social and
environmental responsibilities as the three domains that organizations should strive to balance. Specifically, the economic dimension relates to the economic impact on firm’s environment; the social dimension to the societal impact and the environmental dimension relates to the impact on nature and planet. The findings of Carroll and Elkington are supported in more recent research into how CSR can be defined by Dahlsrud (2008). According to Dahlsrud the impact on economy, environment, society and the relation with stakeholders and voluntary motivation are the five reoccurring elements of CSR definitions. These insights provide focus areas as well as opportunities for strategy scholars and practitioners to use CSR as a strategic tool (Were, 2003).
This section has demonstrated how societal pressures fulfill an important role in regard to CSR and its definition. Meeting stakeholder expectations in this regard is at the center of what CSR aims to achieve. Consumers, media, shareholders, investors and politicians are some examples of the stakeholders that can pressure organizations to behave increasingly responsible towards their environment. CSR should therefore be considered a stakeholder-‐oriented concept, which entails an approach in which
organizations move beyond a classical understanding of business practices (e.g. invisible hand) by performing duties to satisfy external stakeholder needs (Maon et. al., 2009; Spence, 2011; Maignan et. al., 2005). Given the relevance of stakeholder-‐orientation within CSR and the diversity among firms and stakeholders one can expect different approaches and interests across different sectors. Furthermore, stakeholder
expectations can change over time. Additional insights into different sector-‐specific scenarios can therefore advance understanding of how and why firms engage in CSR efforts and how firms and stakeholders affect each other.
Rationale
The business world has moved far away from a situation in which business success was only understood as the product of profitability and growth. Instead, the 21st century and
part of the 20th century have provided, and this progress has by no means stagnated, the
stage for developments in another direction. Whereas until halfway 20th century
businesses were mostly concerned with maximizing financial profits for itself and shareholders, societal pressure has pushed organizations into a direction in which organizations increasingly take responsibility for the world they shape and participate in. As stakeholders within society require more than simply growth and profitability (Yuan et. al., 2011) organizations have moved away from a situation in which
philanthropy was merely seen as a waste of resources (Pinkston & Carroll, 1996) towards a system in which CSR has replaced the concept of philanthropy as a valuable means to achieve growth and secure profits (Yuan et. al., 2011; Jamali et al., 2009; Porter and Kramer, 2002). The social, or ethical orientation of firms thus has gone through stages of development, arguably partially motivated by a future perspective of growth and stability. Especially the paradigm shift from an understanding of company spending on society in the form of philanthropy as a cause of deteriorating business performance towards a system in which CSR is considered as contributing to company performance is notable. This is supported by a growing body of academic research that argues in favor of the positive relation between CSR activities and financial performance (Pava and Krause, 1996; Stanwick and Stanwick, 1998; Mc Guire, Sundgren and Schneeweis, 1998), as well as a positive relation between CSR and consumer responses (Brown and Dacin, 1997; Creyer and Ross, 1997; Ellen, Mohr and Webb, 2000; Folkes and Kamins, 1999; Murray and Vogel, 1997; Sen and Bhattacharya, 2001).
Minor and Morgan (2011) present a slightly different motivation for firms to commit to CSR efforts. According to Minor and Morgan a good reputation as result of CSR efforts can provide reputation insurance after disruptive events affecting the firm. This approach has overlap with the above-‐presented literature arguing in favor of CSR as a means to influence performance, but adds to these findings by demonstrating how firms may profit from CSR to insure and retain performance. On the basis of these findings one may expect companies that paid extensive attention to CSR before disruptive events to suffer less from these events. Furthermore, how does a formerly good reputation affect CSR response strategies after these disruptive effects? Insights into different sectors and situations may provide answers to these questions.
The existing literature has thus established the relation between firm performance and CSR as an important element in a firm’s willingness to commit to (sometimes costly) CSR practices. This can be understood as a result of desired good reputation as discussed by Barnea and Rubin (2010) resulting in a strong market position and competitive advantage as discussed by Bénabou and Tirole (2010). The relevance of reputation in regard to performance can furthermore, in addition to the potential positive effects, be well understood through various examples of deteriorating performance as a result of bad reputation. Dell and Toyota are just two examples of companies that suffered significant losses in value of products as well as a loss in company value (Minor and Morgan, 2011) as a result of bad media attention affecting the reputation of the firm.
The rationale for firms to engage in CSR efforts can, according to the existing literature be well understood. The increasing number of studies arguing in favor of CSR effects on profitability and consumer attitudes is a positive development and a
motivating factor for firms to engage in CSR activities. However, it is important to add a certain degree of nuance to the large body of research with positive outcomes in regard to firms’ ability to harvest the fruits of CSR efforts. Especially when compared to
philanthropic activities as presented in the previous paragraph, CSR can easily be mistaken to be a simple solution to the shortcomings of philanthropy as presented above. Especially given the somewhat chronological development of firm behavior from merely donating philanthropic activities towards CSR, in which philanthropy suffers from an image of resource wasting and CSR as increasingly linked to performance benefits, it is important to note that CSR should not be considered a simple next step or the final stage of engagement with society or the environment. This would provide an incorrect idea of the complexity of CSR. Instead, CSR should be considered in terms of a
more over arching approach, in which donating resources in a philanthropic manner can still be incorporated, but is complemented by a more thorough idea or strategy that also involves contextual factors that allow for the firm to reap benefits of its activities (Porter and Kramer, 2002; Porter and Kramer, 2006).
From the research presented in the previous sections one can conclude that CSR may not be ignored by organizations that strive to be competitive, and that successful implementation of CSR efforts can have significant positive effects for the organization that can lead to competitive advantage and improved (financial) performance. However, one should not take CSR as a simple tool that always leads to the above mentioned advantages and successes. Instead, a socially responsible organization requires understanding of its societal responsibilities and environment that can form the basis for satisfaction of stakeholder expectations. When done correctly, this can ultimately result in performance improvements or even retention of performance after disruptive events. This does however raise questions as to what extent organizations are capable of satisfying stakeholder expectations, and if all organizations have equal opportunities in this regard. Stakeholders across different sectors and between firms vary, as well as the associated expectations. Different sectors may therefore face different obstacles in regard to successful implementation and execution of CSR efforts. Furthermore, if good CSR reputation provides a tool for reputation insurance does this have an effect on the CSR strategies a firm adopts after disruptive events? Research into efforts in specific sectors and situations can therefore advance the understanding of how and if firms in different sectors commit to CSR.
CSR Fit
The previous sections allow us to draw at least two conclusions. First, CSR has received increased attention over previous years and should not be disregarded as an element while doing business in the 20th century. Second, tying in with the first conclusion, CSR is
desirable for firms as it may positively influence firm performance. The effects of CSR do however depend on the extent to which CSR efforts positively influence or satisfy
stakeholder expectations. In regard to these expectations, we discuss the role of perceived fit between organization and CSR.
The increasing attention for CSR, the growing body of literature promoting CSR, and the potential benefits that can result from CSR activities can be misleading. Although many organizations have adopted a new approach it is important to be cautious when it comes to the selection of causes or the implementation of new CSR strategies. Arguably, if the intention of the organization is only to do good, this point can likely be
disregarded. However, if an organization intends to reap benefits from its CSR activities it is important to understand consumer reactions towards social initiatives. Research into the acceptance of social initiatives has demonstrated that consumers do not always respond positively if these initiatives are not considered to be of a sincere nature. In such cases firms fail to reap the benefits of their efforts (Hill and Becker-‐Olsen, 2005; Barone, Miyazaki, and Taylor, 2000; Brown and Dacin, 1997; Creyer and Ross, 1997; Ellen, Mohr and Webb, 2000; Sen and Bhattacharya, 2001). Moreover, research suggests that insincere firm behavior can result in punishment by consumers (Hill and Becker-‐ Olsen, 2005; Sen and Bhattacharya, 2001; Simmons and Becker-‐Olsen, 2004). From prior research we may thus conclude fit is essential for organizations that aim to benefit from their CSR activities, but also to prevent negative responses towards the
But how does this work across different sectors? Arguably, not all organizations have equal opportunities to engage in CSR activities and ultimately reap the benefits of CSR efforts. Even for new businesses, start-‐ups, it may prove difficult to juggle and satisfy stakeholder expectations, so how does this work for more conventional
organizations, especially if these organizations are active within sectors that suffer from a negative reputation? CSR claims from such organizations may be regarded
opportunistic and lack credibility. Examples include the negative influence of tobacco companies on public health, or the effect of airlines and oil companies on the
environment. Moreover, and in the scope of this paper, how do organizations respond to negative public perception towards issues and how do these organizations aim to
establish or restore fit after disruptive events? Research from the late 1970s and early 1980s already offered the stage for research into the problematic relationship at the corporate-‐public interface. Research by Miles (1982) into the tobacco industry provided some of the first insights into the strategic changes within the tobacco industry in
response to reports linking smoking to cancer. Furthermore, Post (1978) already studied corporate responsiveness in relation to public issues (Bhambri and Sonnenfeld, 1988). The relation between firm characteristics and external societal performance also received attention, when Brenner (1979) and O’Toole (1979) researched this in the context of changing public opinion (Bhambri and Sonnenfeld, 1988).
For marketing practitioners the alignment of fit and expectations between organizations and customers may be an interesting direction for research, but for this paper we take a slightly different approach. Instead, this paper aims to provide insight into how and if organizations respond to a newly created issue after disruptive events that affect the public perception and sincerity of their claims. Newly created issues in the institutional environment may require entirely new CSR routines and affect the
perceived fit of readily established CSR. Understanding of these mechanisms contributes to the overall understanding of how organizations deploy strategies in order to restore or create CSR credibility and associated fit. Previous research has merely established understanding of the relationship between the relevant elements in regard to fit, without paying thorough attention to the strategies that are adopted in response to events that change public opinion. This paper therefore contributes to the CSR literature by investigating the implications for CSR strategy within a sector that needs to restore its social corporate image after disruptive events
Credibility
Moving from the topic of fit, we further explore how organizations are ought to
incorporate CSR into their organization in order to profit from these efforts. The topic of fit between factors internal to the organization and its CSR efforts discussed in the previous paragraphs can be supplemented by understanding of integration of CSR efforts with organizational rationale and routines. According to Peloza (2012), there is often a gap between performance of a firm and stakeholder perceptions in regard to CSR. Essentially, for organizations to reap benefits from CSR efforts, ‘they must create both real and perceived sustainability performance’ (Peloza, 2012). Following this argumentation Peloza identified a number of traits an organization that aims to improve the credibility of its CSR efforts needs to focus on. First, sustainability efforts need to become an integral part of the operations of the business, instead of mere peripheral compliance. Second, responsibility is taken for consequences of operations. Third, GRI standards have been implemented. Fourth, sustainability has been integrated into the brand. Fifth, operational initiatives and communications are carefully tied to the heart of
the business. Lastly, Peloza argues in favor of embracement of sustainable strategies into the business, moving away from mere reporting.
The previous sections have established a definition of CSR, the rationale for CSR through a perspective on competitive advantage and reputation insurance after
disruptive events. This section has further supported the information from the previous sections by providing insight into the research on assumed fit across different sectors and associated perception of credibility. The next section will present strategies organizations can use in regard to their CSR efforts and provide the framework to evaluate the findings of this research.
Strategies
The previous sections have demonstrated the desire for CSR as well as the potential problems firms may face when expanding or engaging in (new) CSR activities. The relation between fit and organizational characteristics demonstrates how inadequate responses can result in inability of a firm to harvest the fruits of its efforts or in worse cases punishment from its customers. This complexity has received scholarly attention from a multiplicity of approaches that aim to provide insights and understanding of responsive strategies, facilitation and integration of CSR initiatives to improve credibility both in the internal and external environment of the organization. This section will first explore research into strategic responses to institutional pressures by focusing on the much-‐cited work by Oliver (1991). After, this section will briefly touch on responses through a strategic dimension (Hill and Becker-‐Olsen, 2005), an
organizational perspective (Yuan et. al. 2011), and finally through a communication perspective (Moratis, 2015), to establish the theoretical background to which the findings of this research will be evaluated.
Strategic responses can be observed in a variety of forms, depending on the intended outcome and alignment with internal organizational goals. In strategic
responses to institutional processes, Oliver (1991) establishes a framework to identify these response strategies by providing a typology of strategic responses. According to Oliver, strategic responses can be subdivided into five categories: acquiesce,
compromise, avoidance, defiance and manipulation. All of these five strategies are then subdivided into three associated tactics. Depending on the involved stakeholders, external and internal pressures organizations may choose to deploy one or multiple of these responsive strategies. According to Oliver, organizations may commonly simply ‘accede to institutional pressures’, but alternative forms may be recognized through a focus on acquiesce. Acquiesce, according to Oliver, can be subdivided into three tactics. First, habit refers to the reproduction of actions and practices by following ‘repeated, customary, conventional or taken-‐for granted’ norms (Oliver, 1991). Second, imitation entails mimicking, conscious or unconscious, of successful institutional models. Third, organizations may choose to comply through ‘conscious obedience or incorporation’, targeting values, institutional requirements and norms. The second tactic, compromise, can be understood through tactics of balancing, pacifying and bargaining. Balancing, a tactical response aims to balance the expectations of multiple relevant constituents. Pacifying tactics focus on accommodation and placation of relevant institutional
elements. Lastly, bargaining refers to involvement of stakeholders through negotiation. The third strategy, avoidance, is characterized through concealing, buffering and escape tactics. Concealing in this regard concerns disguising of nonconformity. This may take place ‘behind a façade of acquiesce’ (Oliver, 1991), while not actually intending to implement the established plans. Alternatively, organizations may choose to apply a buffering tactic, by targeting the extent to which an organization may face public
scrutiny, evaluation or inspection through effective decoupling or detachment of activities. Escape, arguably the most dramatic avoidance tactic concerns significant alteration ultimately resulting in an organizations’ exit of the domain in which it is active. The fourth strategy, defiance is subdivided into dismissive, challenging and attacking tactics. More resistant, defiance may manifest itself through dismissive tactics or ‘ignoring of institutional rules and values’ (Oliver, 1991). The challenging tactic concerns active engagement with the institutional environment through contest. Attack, the last defying tactic concerns the most aggressive response tactic, and entails active assault, belittling or denouncement of institutional norms and values, for instance through public media. The last responsive strategy, manipulation, is the most active response to institutional pressures discussed by Oliver (1991). Co-‐opting, the first related tactic concerns involvement of influential constituents. The second tactic, influence, entails a focus on shaping of values and criteria. This can for instance be achieved through lobbying efforts. Ultimately, controlling tactics are focused on gaining and exerting control over external constituents and their respective application of pressure on the organization.
Oliver (1991) provides one with an overarching framework to identify response strategies towards institutional pressures. This approach on a macro level can be supported by research into the internal strategic rationale motivating these responsive strategies. On the basis of Hill and Becker-‐Olsen (2005) we gain understanding of the strategic rationale behind these forces by focusing on perceived fit. As organizations may fail to reap benefits of their efforts if fit between internal rationales and deployed strategies is perceived to be low, we may expect a change in rationale or motivation towards alignment with (new) CSR efforts. Therefore, especially when organizations opt
for acquiesce or compromising strategies, we may expect an internal orientation that supports these strategies.
Another approach concerns how organizations implement CSR routines into their new or existing operations. Among these approaches Yuan et. al. (2011) provide a
framework that can be used as guideline for successful integration of new CSR activities. Yuan et. al. present seven patterns of CSR initiative adoption: 1) born CSR oriented, referring to an organization that can easily extend its CSR practices through extension; 2) patching, referring to the creation of new CSR core practices; 3) thickening, referring to the creation of peripheral practices that serve as an extension of core activities; 4) positioning, in which new independent peripheral practices are created; 5) relabeling, in which peripheral, core-‐extending and independent routines are recognized as CSR practices; 6) trimming, entailing elimination of routines detrimental to CSR; and lastly 7) cooperating, in which CSR practices are created through alliances. These seven patterns can in turn be divided into three dimensions, of which the first dimension entails
creation of new routines, the second dimension concerns distinguishing between core and peripheral practices, and the third dimension refers to mechanisms that allow firms to absorb and create routines (Yuan et. al., 2011). The framework proposed by Yuan et. al. provides one with a comprehensive approach towards the integration of new
initiatives in an already existing operation.
The findings of Yuan et. al., can be complemented by another set of strategies that does not merely focus on adoption or integration of new activities, but rather focuses on improving the credibility of efforts and activities through a communicative dimension. This set of strategies is also known under the name of ISO26000. Moratis (2015)
discusses this CSR guidance standard, grounded in quality management, by elaborating on the different strategies proposed to enhance credibility of CSR efforts. By focusing on
the role and use of credibility by engagement, credibility by dialogue, credibility by transparency, credibility by second –or third party judgment, credibility by association, credibility by materiality or focus and credibility by partnering, Moratis provides insight into the different strategies that can be adopted in order to improve the perceived credibility of firms’ CSR efforts.
Considering the different nature of organizations and the activities organizations participate in, research into sector specific cases of changed public perception towards organizations, as well as the associated CSR efforts and strategies may advance
understanding of how organizations use strategies in different situations. This research direction is supported by Moratis, who suggests the idea that different organizations might use different strategies as a result of the environment they operate in.
Organizations active in unsustainable sectors deserve attention in this regard, and specifically the financial sector deserves attention due to its rather unique situation relating to its formerly positive reputation that suffered from negative attention during and after the recent financial crisis.
Conceptual Model
On the basis of the existing literature in regard to CSR and responsive strategies a conceptual framework was designed incorporating the different variables relevant for this study. First, we identify the issue at stake as the independent variable in this research. Second, the role of stakeholders in regard to responsive strategies is the first moderating variable. Closely related to the stakeholder group, we identify ownership structure or ownership type as a second moderating variable. Arguably, this variable has some overlap with the stakeholder variable. However, in this regard the stakeholder variable refers to stakeholders in a broader sense, including for instance governmental,
societal and environmental stakeholders. Ownership structure and ownership type in this regard mainly refers to the internal stakeholders and shareholders. Third, time is included as the last moderating variable. The time variable relates to when the specific CSR issue became relevant, for how long the issue remains relevant and how this develops over time. The dependant variable in this research is the responsive strategy adopted by the investigated organizations. The combination of these variables, included in the model below, allows for research advancing the understanding of how
organizations in a sector under scrutiny respond to (sector-‐specific) CSR issues.
Methodology
This paper aims to gain insights into the response strategies used by organizations in sectors (formerly) under scrutiny. Considering the role of stakeholders in regard to perceived CSR, analysis of the strategies adopted by financial institutions following adverse events in the recent financial crisis can provide these insights. By finding answers to the question how these organizations respond to a perceived change in stakeholder expectations, this understanding may be advanced. The focus of this research is therefore on gaining new insights and to critically assess phenomena in order to provide answers pertaining to what happened following adverse events. For this purpose an exploratory approach was adopted (Yin, 2009), for which both qualitative and quantitative data was gathered and analyzed in order to make observations and expose patterns.
A multiple case study was conducted to gather the data used for this research. This method, focusing on multiple cases rather than one, can provide one with detailed information that can provide deeper understanding of the investigated phenomenon. Furthermore, given the exploratory nature of this research, the findings from a case study can provide researchers with necessary insights to formulate hypotheses and research directions that can form the basis for future research (Berg, 2004). Moreover, the choice for a multiple case study improves both the internal and external validity of the research. If corresponding observations are found between cases, the chance of coincidence decreases, and therefore causal relations can be assumed. As a result,
external validity increases, as the findings may be transferable to other cases (Yin, 2003; Berg, 2004).
The response of the Dutch banking sector following the financial crisis provides an opportunity to gain the specific insights into the strategies adopted by organizations active in a sector under scrutiny as discussed above. Formerly appraised for its good CSR reputation, the sector witnessed a significant negative change in public perception affecting the reputation of banks and its employees, especially executives. By focusing specifically the theme of outrage towards a bonus culture and excessive executive remuneration, this research aims to demonstrate how the involved banks deployed CSR strategies aimed at the involved stakeholders. CSR reporting of three Dutch banks was analyzed. These three banks, ABN Amro, ING and Rabobank constitute the three case studies conducted for this research. These banks, considered the three ‘main-‐stream’ banks are diverse in ownership structure and have experienced different events and reforms as part of the recent financial crisis. Therefore, these three cases are considered a representative sample of the Dutch financial sector, providing diversity in
organizational structure, stakeholders, expectations, size and corporate image.
Comparison of the findings can therefore provide additional insights into the underlying factors that explain similarities and differences in CSR strategies.
The actual research was divided into three stages. First, as a preliminary step, issue profiles for the investigated cases were established on the basis of ownership type, founding history and case-‐specific events that took place during the crisis. Second, a longitudinal study was applied to these cases to gain insights into CSR reporting and associated response strategies in regard to remuneration. Finally, an inductive approach on the basis of the framework by Oliver (1991) was applied to the findings in order to develop these observations into possibly generally applicable theory.
The following paragraphs will first explain the methods used for data collection. Second, the methods for data analysis will be discussed. Lastly, the research context will
be provided through a description of the different cases, associated issue profiles and identification of the stakeholders and issues related to the theme of outrage towards bonus culture and excessive executive compensation.
Data collection
By focusing specifically on the theme of remuneration in regard to a bonus culture and excessive executive compensation, this research applies a narrow focus to gain insights into the adopted response strategies of the investigated cases. ABN Amro, Rabobank and ING, the three case studies selected for this research, form a strategic sample of the Dutch sector, as all experienced changes in public perception and operate in the same financial market. Moreover, the three case studies provide different ownership types and associated stakeholders’ expectations that may provide underlying explanations for differences among findings between cases. In regard to the aim of this paper, the choice for these cases therefore provides an opportunity to gain insights into the investigated phenomenon.
For this research secondary data was gathered from public sources. The choice for this type of data, according to Saunders et al. (2009) defined as data that was originally collected for another purpose than the purpose of this research, can be motivated through a focus on the intended audience of the used data. Whereas
interviews can provide extra “detail, depth and an insider’s perspective” (Leech, 2002) and therefore arguably a valid contribution to research into CSR strategies, this research aims to gain understanding of the strategies used to influence public perception.
Therefore, the choice was made to focus exclusively on publicly available information in the form of CSR reports and media coverage. CSR coverage in the form of sustainability reviews, sustainability reports and CSR reports was obtained from company websites
for the year before the crisis, 2007 and the year ending the crisis, 2011. The choice for these years allows for comparison between the situation before and after the crisis. Additionally, reports for three consecutive years after the crisis, 2012, 2013 and 2014 were obtained and used for this research as these reports provide additional data regarding how the used response strategies develop over longer periods. Considering the impact of the financial crisis one may expect implementation of a new strategy or approach to take time. These reports were downloaded in a PDF file format in order to be analyzed for informative content. After, these reports were converted to a Microsoft Word format in order to conduct a total word count and a word count on the for this research relevant parts of text. In addition to the CSR coverage in corporate reports and reviews, a (news) media search was conducted using Google for the years 2007, 2011, 2012, 2013 and 2014. This search was carried out with the purpose of providing
additional information regarding the availability of media influencing the public debate around the investigated sector, to support the findings from the corporate
documentation.
In addition to the above discussed data sources, annual reports for the investigated entities for the years 2007, 2011, 2012, 2013 and 2014 were obtained. These reports were used to establish issue profiles for the investigated cases that
allowed for evaluation of results in comparison with case specific characteristics, as well as to allow for cross case evaluation of results. In a number of the CSR reports reference was made to the annual returns of the same year. For these years, the annual return was consulted to compare findings and extract similar information as the information used from the CSR reports.
