The perceived influence of the ethical sphere of Corporate Social Responsibility on Management Control Systems: A systematic

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Master Thesis

The perceived influence of the ethical sphere of Corporate Social Responsibility on Management Control Systems: A systematic

literature review 2000-2015

Word count (Excl. appendices and references): 12249

MSc “Organizational and Management Control”

Supervisor: dr. Berend van der Kolk Co-assesor: dr. Ben Crom

Student: Iulia Emine Rotar, Student Nr: S2731193, University of Groningen, July 2015,

Tel.: 0683149767 E-Mail: i.e.rotar@student.rug.nl

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Abstract

The aim of this thesis was to provide a better overview on the perceived influence of the ethical aspects concerning CSR goals and activities on MCS. The research method adopted for this thesis was to conduct a systematic literature review between 2000 and 2015. This topic has been examined from several theoretical lenses that have underlined the role MCS have in shaping and implementing CSR activities and objectives. Previous literature has studied the relationship between CSR and MCS focused on environmental and social accounting issues such as reporting and accountability to external stakeholders. Several authors have posited that CSR is a topic that has gained importance in both the academic community as well as with practitioners. However, in both circles there has been a lot of debate with respect to this topic, due to the fact that there are issues with how CSR should be defined and how it should be implemented/ incorporated within a business’s strategy.

Corporations often find it necessary to incorporate CSR objectives in their MCS in order to align their moral or ethical social obligations in order to increase the overall performance of the firm. This aspect has been found to be problematic, because corporations define CSR in a manner that best suits their needs. Also, the results suggest that there are various MCS

employed by firms with regards to how this issue can be tackled and that the design of control mechanism depends on the context, organisational culture and environment in which the business operates. The overall results suggest that CSR can be seen as a business system that has the purpose of responding to societal and environmental needs. Furthermore, it has been suggested that the ethical sphere of CSR is embedded in the myriad of MCS employed by a corporation.

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1. Introduction

1.1 Background

Corporate social responsibility, over time has become an increasingly important topic for both the academic research community as well as practitioners, because it is often integrated within a business’s strategy (Costas& Kärreman, 2013; Durden, 2008). CSR has been argued to stand for corporate responses to issues pertaining to ethical, environmental and social realms (Costas& Kärreman, 2013; Deegan et al., 2002). Accounting research has investigated issues with regards to management of CSR activities, which are often described as: social accounting, corporate social responsibility, sustainability accounting, social and environmental accountability (e.g.: by being ethical in disclosing social responsible

information to stakeholders as well as ethical/ responsible decision making) (Mathews, 1997;

Gray et al., 1998; Deegan et al., 2002; Gray, 2002). For example, authors Norris and

O’Dwyer (2004) while conducting research with regards to how management controls (such as: informal or social, self and clan controls) measured external social responsible information, found that the outcomes were not measured formally, but instead informally. The informal approach, as the case study showed created an important awareness level within the corporation with regards to social responsible goals. Another example of a paper that investigated the measurement and monitoring of Corporate Social Responsibility from a stakeholder perspective is that of Durden (2008). In his research, the author found that the management control system (MCS) used by the corporation did not measure or monitor Corporate Social Responsibility (CSR). However, Durden (2008) found that both formal and informal control mechanisms have a very important part in the development of a MCS that encompasses social responsibility activities.

This topic has gained attention from practitioners as well. Covalence SA and Ethisphere are two organizations that specialize in researching ethical standards of companies on a worldwide basis and they argue that: “companies are hungry for actionable data they can use to advance their programs, culture of ethics and corporate brands” by “comparing their

performance against the best, leading companies” (Covalence Ethical Quote, 2001; Ethisphere, 2015). Additionally, according to a recent scientific study commissioned by Aflac with

regards to the corporate social responsibility of multinational corporations, yielded results showed that: “79% of consumers believe companies that stay true to their ethics and values outperform others in their field" (CEO Forum Magazine, 2015). In the past this topic was

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4 described as “the dominant approach to the moral dimension of business that came to be known as corporate social responsibility” (Stark, 1993; Solomon, 1992; Hoffman, 1989).

Additionally, the relationship between the ethical sphere of corporate social responsibility and various management control mechanisms (e.g.: such as formal, social or informal, self and clan control systems) has been examined by employing different research methods by using the multitude of definitions, propositions, hypotheses and theories that were developed over time (Aupperle et al., 1985; Alexander & Buchholz, 1978; Arlow & Gannon, 1982). In the past the research community, has focused on persuading business managers to look beyond responsibility in terms of profitability but instead to focus on legal and voluntary ways in which social responsible goals could be achieved (Dobers, 1996; Glachant, 1994).

Furthermore, it has been argued that during the 1990s, there have been attempts to integrate CSR objectives and activities (Carroll, 1979; Clarkson, 1995; Swanson, 1995) through regular management systems, such as formal and informal controls (Roome, 1992).

Previous literature that has tackled this topic is rather out of date as it can be seen from the preceding statements and not only that but various definitions and terminologies have been forwarded for describing CSR activities (Dahlsrud, 2008; Prado Lorenzo, Gallego Alvarez & Garcia Sanchez, 2009). However, due to changes that have occurred over the years in the business environment and society, numerous articles have been published (mostly from a social accounting or environmental perspective) with regards to this topic. For example, in recent years, it has been debated, how CSR activities influenced the design and use of

management systems, by including ethical, environmental, legal and social aspects associated with CSR (Dobers, 2009). Due to the broadness of this topic, this phenomenon has been examined from different theoretical lenses and perspectives and within various fields.

Furthermore, it can be argued that since it is an interesting topic for both practitioners and the academic community a systematic literature review is an appropriate method to research this phenomenon from an ethical perspective (Messer-Davidow et al., 1992). On to the topic of corporate social responsibility ethics and management control mechanisms ( which include for e.g.: formal control systems, informal control systems, diagnostic and interactive controls) to our knowledge there have been no systematic literature reviews or meta- analysis

conducted based on the journals published in recent times. While taking into account the preceding arguments, it can be said that there is a literature gap with regards to the topic at hand, which encouraged us to research the perceived influence of the ethical domain of CSR

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5 and management controls based on business ethics journals published during the period of 2000 to 2015.

1.2 Previous Research and Literature Gap

The relationship between CSR and financial performance has been debated since the 1960s (Cochran & Wood, 1984), and various experiments have researched how CSR (e.g.:

socially responsible ethical decisions) is measured in terms of performance by the use of management control systems since the 1990s (Simons, 1990).

For example, Oliver (1991) argues that corporations’ responses to societal

expectations of responsible behaviour have been linked to management controls mechanisms.

It has been argued that until Carroll’s in 1979 development of the model for corporate social performance, the idea of CSR was not widely accepted by businesses.

Carroll (1979;1991, p. 41) defines the ethical domain of CSR as:” responsibilities which embody those standards, norms or expectations that reflect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders’ moral rights”. The author has developed the model “Pyramid of Corporate Social Responsibility” in 1991, which shows that the

foundation of CSR activities lies with a corporation being financially stable. Furthermore, in 1991, he highlights the relationship between the adoption of ethical behaviour based on CSR objectives and the ease with which these approaches are embraced by managers, mostly because of their contribution to the financial performance of the firm.

However, in recent years, it has been argued that CSR can be regarded as a corporate attempt to institutionalize ethics in order to attain strategic goals and CSR activities are embedded in management control systems or are seen as a form of management control system (such as formal control systems and informal control systems, social control systems and clan control systems, diagnostic and interactive controls) within multinational

organizations (Durden, 2008; Costas& Kärreman, 2013).

Management control, according to the definition offered by Anthony (1988), is a process which assists managers in influencing the members of an organisation to implement the organisation’s strategies and goals. Furthermore, Abernethy & Chuan (1996, p.573) have defined management control systems as: “a combination of control mechanisms designed and implemented by management to increase the probability that organizational actors will behave in ways consistent with the objectives of the dominant organizational coalition’’. With regards to the ethical domain of CSR (such as: socially responsible or ethical decision making), it is

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6 important to define informal control systems and formal control systems, because it has been argued that they encompass other control mechanisms such as: social controls, behaviour and output controls (Ouchi, 1977). Formal controls can be defined as the written procedures and norms that are used to direct behaviour in order to achieve strategic company objectives as well as detect and impede misconduct (Ouchi, 1977; Norris & O’Dwyer, 2004). Additionally, informal controls encompass shared values, beliefs and traditions, which are deeply engrained in a corporation’s culture and have the purpose to guide the behaviour of employees (Ouchi, 1977; Norris & O’Dwyer, 2004). Authors Costas& Kärreman (2013), argue that the use of formal controls and informal controls come in the aid of managers to embed issues with regards to ethical social responsibilities in order to guide employee behaviour as well as increase a corporations performance.

It has been suggested that, the ethical aspect of CSR is an important issue for corporations as well as academia in today’s business environment (Adams & Frost, 2008; Filatotchev &

Nakajima, 2014). Furthermore, the dynamic between a corporation’s ethical responsible behaviour and a corporation’s overall performance has evolved over the years and has been researched by both the research community and practitioners due to its impact on societal actors, environment and the economy (Blowfield & Frynas, 2005; Jones, Mackey & Whetten, 2014). Previous literature, has examined corporate social responsibility from a management accounting perspective (which includes strategic management, social accounting management, sustainability accounting etc.) as well as from a business ethics perspective (for example by using stakeholder theory), which led us to believe that there are several theoretical views with respect to the perceived influence of CSR on MCS (Messer-Davidow et al., 1992).

In order to address the broad scope of management control and ethical scope of CSR that influence the activities of multinational corporations, this thesis will use a systematic literature review in order to narrow this gap between these multiple perspectives. Furthermore, the approach will be useful in consolidating the extant body of literature that exists with

regards to this topic (Crossan &Apaydin, 2010).

1.3 Specific Research Question

In relation to the literature gap, the thesis aims at answering the following research question:

What are the different theories and perspectives used by researchers in order to examine the perceived influence of CSR on MCS?

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1.4 Overview of the Thesis

The thesis contains five main chapters. The introductory chapter (Chapter 1) has outlined the increasing interest from both the academic research community and practitioners with regards to socially responsible ethics (such as ethical decision making) and the use of management control systems (such as: formal and informal control systems) in contemporary organizations under Section 1.1. The chapter has also outlined the problem of the study, as well as the gap in the literature and the strategy to employ in filling the gap. The literature review (Chapter 2) will address the background of the research problem through a systematic literature review and appraisal of the existent body of research on the topic. On this note, the chapter will address the existing literature on the topic of the ethical sphere of CSR and the various MCS used by businesses to tackle issues that pertain to CSR, which will aid in the development of a theoretical framework to guide the thesis. The methodology (Chapter 3) will outline the methods used in collecting and analyzing data for the study. Chapter 4 will engross the presentation of the data obtained and will act as a form of introduction to the next chapter.

Additionally in Chapter 4 an analysis of the findings through a confrontation with the findings with the literature review conducted in Chapter 3. The chapter will compare the different theories or perspectives with regards to the topic by using the extant literature and point out at the additions the study makes to the body of literature. Chapter 5 will show how the study answered the study question by creating a logical link between the introduction and the conclusion. Also, the chapter will conclude on all major points from the entire work and summarize all the fundamental implications for future study.

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2. Literature review

2.1 Overview

This chapter will give an overview of the general research done on the topic of the ethical sphere of CSR and MCS. It will present some of the perspectives and definitions that were used with regards to the topic at hand. This chapter is necessary in identifying the progress of research in this field and make the analysis of the thesis easier. Furthermore this section will provide an overview with regards to the theories and different perspectives on what previous literature has researched with regards to the topic at hand.

2.2 Corporate Social Responsibility of a Business

It has been debated that the relationship between a firm’s social responsibility, or social responsiveness and its financial performance has been of interest to both the academic research community as well as practitioners since the 1960s (Cochran & Wood, 1984; Dierkes

& Antal, 1986; Steiner, 1972; Davis, 1973). In order to better understand the broadness of CSR, a definition that incorporates all the relevant aspects is offered.

Carroll (1979, p. 500) defines the social responsibility of a corporation or a business as the economic, ethic, legal and discretionary expectations that society has of a firm.

Furthermore, it has been argued that by looking at the levels from the model “Pyramid of Corporate Social Responsibility” that a firm “has not only economic and legal obligations, but ethical and discretionary (philanthropic) responsibilities as well” (Carroll, 1991).

With regards to the ethical aspect of a corporation social responsibility, Nollkaemper (2006, p. 181) argues that responsibility, can be seen in terms of obligations to respect and follow “primary rules” in order to benefit stakeholders and consequences for not following or breaching of rules. Additionally, Selznick (2002, p.29) states that:” An ethic of responsibility calls for reflection and understanding, not mechanical or bare conformity. It looks to ideals as well as obligations, values as well as rules…”. Based on the preceding statements, it can be argued that corporations have an ethical social responsibility, due to the fact that their activities impact the welfare of society, which includes various groups of stakeholders.

Since the term “stakeholder” is often used when discussing CSR, it was necessary for this thesis to define this concept. Freeman & Reed (1984) define stakeholders as: “any group or individual who can affect or is affected by the achievement of the firm's objectives", which underlines a different perspective with regards to managers’ support of CSR activities. Based on the preceding definition it can be concluded that CSR does not only encompass a

company’s’ shareholders, but it also includes social responsibility towards other stakeholders

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9 such as society or public interest groups, customers, employees, suppliers, as well as

governmental bodies (Freeman & Reed, 1984;Marrewijk, 2003). Previous literature states that social responsible activities are related to increasing and maximizing the wealth of the firm (Keim, 1978). Furthermore, due to the environmental changes in terms of social responsibility (e.g.: greenwashing, ethical performance etc.) that have occurred over time with society as well as with businesses, they have led to changes with regards to the societal constraints imposed on business activities (Keim, 1978; Belkaoui, 1976; Watts & Zimmerman, 1978).

Therefore it was concluded that with regards to the aforementioned changes that occur within the social environment, it was expected of corporations to take into account social goals, otherwise, those corporations would be held accountable for their unethical and irresponsible activities (Keim, 1978b; Belkaoui, 1976; Watts & Zimmerman, 1978). These ethical

responsibilities have been argued to incorporate those norms and standards, or in other words the expectations of what the stakeholders and society view as fair (Carroll, 1979).

In management research, some of the theories that address the topic of CSR activities and management controls within corporations are the stakeholder theory, agency theory and institutional theory, which are discussed in the following parts of this chapter.

2.3 Economics theory

It has been argued that Ansoff (1965) was the first to interpret and explain the

“stakeholder theory” in order to define the goals of the corporation. Furthermore, the author stated that a very important objective of a corporation is the ability to find a balance with regards to the conflicting demands and needs of various stakeholders (including non- financial stakeholders) have of the firm. However with regards to the stakeholder theory, it has also been suggested that: “it remains very fuzzy as a concept” (Antonacopoulou & Meric, 2005, p.

22) as it is unclear whether this can be seen as a normative (ethical) or instrumental (management) approach (Donaldson & Preston, 1995; Deegan, 2002). While taking into account these two theoretical avenues of stakeholder theory it has been portrayed as “a theory of organisational management and ethics” (Philips et al., 2003, p. 480). Within the ethical strand (or normative) of the stakeholder theory it has been indicated that corporations need to be managed in an ethical manner in order to satisfy the needs and demands of the stakeholders (Freeman & Reed, 1983; Hasnas, 1998). To sum up, from the normative (ethical) perspective it has been implied that there is a need for firms to include the necessities of the stakeholders as well as to highlight the importance of social responsibility of operating in accordance with

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10 ethical expectations of the environment in which the corporations operate(Hasnas, 1998;

Cormier et al., 2005).

The second strand,which considers the managerial (or instrumental) aspect of stakeholder theory, addresses the issue of managing the interests of diverse stakeholder

groups, especially those that are involved with controlling the socially responsible activities of corporations (Hasnas, 1998; Deegan, 2002). Furthermore this managerial perspective has been argued to be connected to legitimization of the business as well (Deegan, 2002). Within this perspective, stakeholder theory was said to be:” used to identify the connections, or lack of connections, between stakeholder management and the achievement of traditional corporate objectives (e.g. profitability, growth)” (Donaldson & Preston, 1995, p.71).

Additionally, Ackerman (1975),Ackerman& Bauer (1976) and Wood (1994) outlined three characteristics of a corporation’s social response to societal pressures: (a) designing plans, procedures and policies in order to cope with change in conditions (for example by institutionalization of social policies that prioritised certain social issues), (b) monitoring the environmental conditions (such as: establishing organisational structures that have a role in managing social issues) in order to cope with the requirements of the stakeholders, (c) a corporation’s institutionalized commitment to incorporate response patterns to societal demands within the firm’s norms and procedures. Literature prior the year 2000, has argued that from an ethical perspective, monitoring and establishing organisational structures (such as management control systems) , corporations employ various forms of management control mechanisms that align the behaviour of employees with social responsible goals in order to increase the overall performance of a corporation (O’Reilly, 1989).

Furthermore, O’Reilly (1989) states that “if some control systems were not in place to direct and coordinate activities” corporations would not be seen as “efficient and effective”.

Swanson (1995) as well as O’Reilly (1989) discusses the importance of MCS (such as:

social control systems) in guiding CSR activities that would benefit all the stakeholders within the environment in which the corporation operates.

However, more recent literature such as the paper from Durden (2008, p. 687), which uses an ethical (normative) perspective of stakeholder theory argues that a corporations needs to incorporate social responsibility goals into “workable components of the MCS”.

Furthermore, the author stresses the importance of guiding the MCS with respect to social responsibility goals by using “two key dimensions”: formal control systems and informal control systems.

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11 Another, recent perspective offered by Zwetsloot (2003) analyses the differences between MCS that were used in the 1990s and CSR, and highlights the importance of developing new control mechanisms that give equal importance to all socially responsible activities. Additionally, Zwetsloot (2003) argues that while CSR focuses on “doing the right things” while management systems, more specifically rational control mechanisms focus on

“doing things right the first time” and that CSR (e.g.: ethical decision- making) is likely to trigger the development of new MCS.

Another perspective offered by authors Costas& Kärreman (2013) is that CSR initiatives can be seen as an integral part of MCS, due to the fact that CSR encompasses a broad spectrum issues which includes ethical, social and ecological aspects.

2.4 Economics & Strategic management

Wood et al. (1986) and Post et al. (2002) argue that CSR has mostly focused on organizational level analysis and therefore the role of individuals in exhibiting social as well as ethically responsible actions. It has been argued, that in relation to socially responsible corporations, it is important that managers display ethical and responsible behaviour with regards to CSR activities (Hunt et al., 1990). Furthermore it has been argued that top managers that exhibit an interest in ethics and social responsibility, play a vital role in

implementing CSR (Waldman and Siegel, 2008;Singhapakdi et al., 2008). With regards to the role top management plays in the ethical sphere of CSR, it has been argued by Chrisman et al.

(2007) and Davis et al. (1997) that agency theory and institutional theory are two perspectives, that are concerned with parts that managers have within corporations under the taken for granted assumption that there is a distinction between ownership and control.

With respect to the ethical sphere of CSR, agency theory states that managers act “ as agents are individuals who seek to maximise their own utility, even at the expense of the value of the firm” (Jensen &Meckling, 1976; Godos-Díez, et al.,2011). Furthermore, on the topic of ethical sphere of CSR and management control mechanisms, Caldwell& Karri (2005) argue that agents are “inherently opportunistic”, and this type of unethical behaviour can be corrected by employing “efficient control mechanism”. The purpose of using control

mechanisms is to increase profits, which are the main interest of shareholders of the firm. In addition to this, it has been argued that from the agency theory perspective, it does not consider the ethical or moral aspect of CSR; and therefore it does not allow researchers to tackle social matters that have developed over time (Godos-Díez, et al., 2011). Moreover, authors Frank (1996), Goshal (2005) and Godos-Díez, et al., (2011) stress over the importance

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12 of the ethical aspect of CSR which should be taken into account, because “business takes place in a cooperative social context” where managers display ethical behaviour characterised by pro- organisational behaviour. Another conflicting perspective, was forwarded by

Friedman (1970), where it was that explained that engaging in CSR activities represents a means to an end for managers to further their own agenda (social, political or career wise) in the detriment of shareholders, while the resources spent on CSR activities could be used to increase firm efficiency.

Another theory used with respect to the ethical aspects of CSR is institutional theory.

It has been explained by Surroca, Tribó& Zahra (2013) that institutional control has a

‘moderating’ role on regulatory systems and civil society. Surroca et al (2013) define

institutional control as the set of norms and rules through which pressure to comply with said norms is imposed on organizations. From an institutional perspective, it has been argued that institutional researchers have focused only on contextual factors that motivate multinational corporations to conform to stakeholder pressure and to their external environment (Heugens

&Lander, 2009; DiMaggio &Powell, 1983, 2012). Nonetheless, some researchers such as Matten& Moon (2008) discuss the importance of understanding to which extent stakeholder pressure is ingrained in organizations, searching to highlight the difference in the levels of compliance across countries.

However, Godos-Díez, et al. (2011) claim, that agency theory does not suit social demands and that complementary theories should be used that fulfil this condition, such as the stakeholder theory and stewardship theory. With regards to the stewardship theory Donaldson

& Davis (1991) have argued that the basic idea of this perspective is the need for managers, to uphold ethical and moral standards and “do the right thing”, without considering how the ethical decisions could affect the firm’s financial performance.

2.5 Criticism and issues with MCS

In order to achieve socially responsible goals or strategic goals of a corporation, like meeting CSR objectives, firms need to control their activities. However, current literature fails, to provide a solution that encompasses a variety of management control mechanisms in order for management to measure and control sustainable performance (Perez et al., 2007; Gray, 2010; Gond et al., 2012). Furthermore, Arjaliès & Mundy (2013) as well as Gond et al. (2012) posit that there is an increasing need to better understand the part that management control mechanisms play in the facilitation of managing CSR activities that are a prerequisite in

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13 attaining the objectives of an organization. Social accounting research, which focuses on the ethical aspect of CSR, seems to indicate that disclosure is motivated by the need for

legitimizing organizational activities that would be in the benefit of all stakeholders (Deegan, 2002). As Donaldson & Preston (1995, p.72) say:” in effect, do (don’t do) this because it the right (wrong) thing to do “which highlights the ethical aspect of CSR. Furthermore,

according to Donaldson &Preston (1995, p. 85) managers have the responsibility to “select activities and direct resources to obtain benefits for legitimate stakeholders”. With regards, to the previous quotes, Durden (2008) posits that the selection and direction of activities and resources underlines the importance of management control mechanisms within corporations.

Furthermore, Durden (2008) forwards the idea that the control systems in place guide managers in the way that CSR activities are conducted and at the same time managers can account for their actions and be responsible to all stakeholders. In order for corporations to be ethical and socially responsible in their CSR activities, a suitable MCS should be used. More importantly one that is aligned with stakeholder interests in order for the firm to respond in an adequate manner by offering the information required by stakeholders as well as to operate in a socially responsible way (Durden, 2008). Social accounting has been researched from a management accounting perspective and Lamberton (2005, p.19) argues that: “The provision of sustainability accounting information to internal users would focus on the provision of relevant and decision useful information to management”. Furthermore, Lamberton (2005) posits that the use of performance indicators and relevant data would help managers towards achieving organizational goals by comparing the information with sustainability targets. By doing so the corporation would be able to fulfil the multidimensional CSR goals.

Various control instruments are said to be available to managers for the purpose of measuring sustainable performance, as well as to monitor and evaluate the behaviour of employees. However, one of the issues with control systems are the multiple definitions available as well as the similar terminologies used to define control mechanisms. In order to better highlight the differences in perspectives, a few definitions are exemplified.

Emmanuel et al. (1990, p.97) cited Sizer and defines management control

(management control mechanisms) in the following manner: “management control consists, in part, of inducing people in an organisation to do certain thing and to refrain from doing

others”.

Additionally, Merchant (1985) explains that the purpose of a corporation’s

management control systems design is to motivate and guide employees in performing and undertaking activities that are aligned with the firm’s strategic goals and needs.

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14 Another perspective that was forwarded in understanding control systems is that of Simons (1995). More specifically the author forwarded the notion of belief systems that were defined as a set of organizational norms, regulations, values and codes of conduct that

managers use to direct and guide the behaviour and decisions of organizational members. In their study Arjaliès & Mundy (2013) use Simons’ levers of control perspective to examine how CSR strategic goals and activities were reflected in belief systems.

Thus, based on the previous statement, it can be concluded that these control

mechanisms serve several purposes such as: providing managers with essential information which is required for ethical and responsible decision-making; as a tool that helps preventing opportunistic behaviour by motivating employees in a responsible manner to accomplish the corporations’ objectives by linking them (the objectives) to reward systems (Flamholtz, Das

&Tsui, 1985; Lindsay et al., 1996; Merchant & Van der Stede, 2007).

For example, Rouse and Putterill (2003) proposed the use of a performance

measurement framework, since it reinforces the idea of socially responsible accounting for a corporation’s activities and it has a focus on stakeholder interests. In their research they explained/argued that the needs, demands and expectations of stakeholders need to be incorporated when designing performance measurement approaches. From the ethical perspective of CSR, measuring performance implies the performance measurement of information made available to stakeholders (Rouse & Putterill, 2003).

Another study conducted by Norris & O’Dwyer (2004) highlights that with regards to social responsible decision making the corporation’s controls could be characterized as:

“social, self and clan based” which coincide with “a highly informal control approach”

(p.191).

Within management control literature a broader view is offered with regards to forms of management control systems: organisational, self and social control (Dalton and Lawrence, 1971; Hopwood, 1974). Formal control mechanisms are argued to be a component of

organisational control mechanisms which have the purpose to guide and direct the ethical and socially responsible behaviour of employees by using the corporations specified norms, procedures and policies in order to achieve strategic organisational goals (Ouchi, 1977; Norris

&O’Dwyer, 2004). Furthermore, it has been argued by Norris & O’Dwyer that formal control systems not only encompass organisational goals, codes of ethics, budgets and reward criteria, but also performance measurement standards which are consistent with the need to measure CSR activities. In contrast to formal systems, informal mechanisms are correlated or

incorporated in social controls, and this type of control mechanism cannot explicitly measure

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15 behaviour. Falkenberg & Herremans (1995) posit that informal controls can be seen as the shared values, beliefs and traditions that are embedded within the corporation with the purpose of guiding the behaviour of employees.

Durden (2008) comments on the study of Norris & O’Dwyer, and states that despite the fact that informal control mechanisms raise awareness within the corporation about social responsible goals they also create conflict for managers because said goals were not reflected in the formal control system of the firm.

Another issue with management control systems, as stated by Malmi & Brown (2008), is that management control systems should be studied as a package as opposed to in isolation because they depend on other organizational factors such as the environment in which they operate. Furthermore, another organizational factor that has to be taken into account is organizational culture, since it can affect the design and implementation of the MCS (Chenhall, 2003; Malmi & Brown, 2008).

From the extensive body of literature that exists on management control it can be argued that corporations use several types of controls that have been designed in order to better meet the needs of the firm and assist managers in a beneficial way (Chenhall, 2003).

A final issue with management control systems is that in literature, there are various interpretations, definitions, terminologies (which are sometimes used to describe similar concepts) and perspectives with regards to this topic and therefore it was necessary to explain some of the ones that guide employees towards achieving CSR objectives.

The literature review shows the vastness of the area of interest; the next chapter, methodology will give the procedure for carrying out the systematic literature review and narrowing down the number of papers for analysis.

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3. Methodology

The literature review that forms chapter two of the paper depicts the different perspective with regards to the ethical aspect of CSR and management control systems, and how the use of several types of control mechanism are used in the strategic management of social responsible activities. In order to answer the research question that arose from this area of interest, a structured systematic literature review seemed to be appealing (Crossan & Apaydin, 2010).

Elements of Shields (1997) were used so as to analyse the articles in a structured manner;

these were the methods that he established in the 1990s while classifying research on

management accounting. One of the reasons this classification seemed appropriate was that in the literature review, the journals in question focused on a social accounting perspective of the ethical sphere of CSR. Given the large body of literature, that exist with regards to the topic at hand, a systematic literature review helps with employing a transparent and reproducible procedure as well as with increasing the quality of the thesis (Crossan & Apaydin, 2010, Kitchenham et al., 2009).

According to the methodology established by Crossan & Apaydin (2010), a systematic

literature review can be conducted in three steps: the planning, execution, and the reporting of the findings.

3.1 Data Collection

Considering the fact that most literature with regards to the ethical sphere of CSR and management control was from management accounting journals, a new perspective from a business ethics view would provide a better understanding with regards to the different theories or perspectives that have been forwarded on this topic, between the years 2000 and 2015.

In order to search for relevant articles for the topic at hand, the article written by Albrecht et al (2010) was useful in identifying journals that were relevant for the ethical sphere of CSR and MCS. The work presents findings conducted on global surveys that were administered to the business ethic scholars. The method was used to better to understand the quality of business ethics within an organization. Therefore based on the data collected, the results managed to provide a collection of the top business ethics journals concerning quality. The enumerated articles used for this systematic literature review included mostly articles that were published in the Journal of Business Ethics (J.Bus.Ethics), the Organization Science (Organ. Sci.), Business Ethics Quarterly (BEQ.), and Business Ethics: A European Review

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17 (Bus. Ethics Eur. Rev), the Academy of Management Journal (AMJ), the Academy of

Management Review (AMR), the Strategic Management Journal (SMJ), Business and Society Journal (Bus. & Society), Administrative Science Quarterly (Admin.Sci.Q.) and Harvard Business Review (HBR) among others. Under the “Other” category the articles selected were not from the aforementioned journals and this category includes: the Accounting, Auditing &

Accountability Journal (AAAJ), the Journal of Management Accounting Research (JMAR), the Organization Journal, the Academy of Management Perspectives (AMP), Business

Strategy and the Environment (Bus. Strateg. Environ), the British Accounting Review (BAR), the International Journal of Productivity and Performance Management (IJPPM).

In order to retrieve articles relevant for the topic of this thesis, SmartCat was used, because it contains access to worldwide databases as well as and advanced search engine. The initial phase in the data assembly involved the selection processes based on the keywords.

Step 1: The Identifying Initial Selection Criteria: Keywords and Search Terms The keywords used in the research include the corporate social responsibility, ethics, management control, management control system. These terms were identified to be

commonly used within an organization setting in the papers examined so far. Therefore, the selected keywords helped with developing a search that fulfilled a general selection

requirement that was useful for the initial pool to ensure maximization of data inclusion. The general selection or the basic criteria was: that the journals were published in the English language, peer- reviewed (in order to ensure the quality of the retrieved sources) and articles published between the years 2000- 2015. The keywords were used as selection criteria for the topic. Therefore, the main words were utilized as the basis of the research analysis. The number of results yielded with this search in total from the journal ranking provided by Albrecht et al (2010): 614. Because the keyword combination yielded a small number of papers and in some of the journals no articles were found namely in: Organ.Sci, Admin. Sci.

Q and HBR, the search was widened on the basis of what is considered a key paper, namely the one written by Norris & O’Dwyer (2004).

Step 2: The selection Process based on the Snowballing method

As previously mentioned, in some of the journals that were included in the ranking, no articles were found, thus the snowballing method was applied (which is considered step 2) to widen the search.

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18 The second step of the data collection involved using approaches that were considered to be appropriate when conducting a systematic literature reviews. There was an evaluation of the available information with regards to the topic at hand and replication of the published literature works. For this literature review snowballing was used as one of the primary

methods of searching for relevant literature work and later applied in the systematic literature review (Wohlin,2014),. Furthermore, the use of snowballing was found to be the most

appropriate alternative to utilize in database searches, since it is an approach suitable to obtain detailed information about the subject. The snowballing process started by using a key

document such as the paper from Norris & O’Dwyer (2004), which is a rather well- known article (based on the frequency with which this article is cited :111 times). Based on this document, the search continued with backward and forwards processes by referencing the already existing literature works (Wohlin, 2014). The step entailed the identification on new literature information regarding the topic, and that in turn included more references. Also, the snowball method had to fulfil the basic criteria previously mentioned, which was used to limit the search. Based on the snowballing method used on this key paper the initial yielded results, before applying the basic criteria, were: 160 results. After the basic filters were added the number of peer reviewed journals was: 49.

The journals were checked for their relevance to the topic and duplicates were identified as well. The identified duplicate during this step was:Egan, M. (2015). Driving Water Management Change Where Economic Incentive is Limited. Journal Of Business Ethics, 132(1), 73-90. Some of the journals that were excluded: Perspectives in Education (e.g.:“Developing main language instruction. Developments in The Molteno Project- literacy, language and educator development: Many languages in education: issues of implementation”

by Viv Rodseth) , Acta Criminologica (e.g.: “Informant application in South African conservation crime management: criminological affordances” by Friedo J.W Herbig ), Potchefstroom Electronic Law Journal (e.g.: “Competitive legal professionals' use of technology in legal practice and legal research” by T. Du Plessis). After examining the journals, only one article was included, because it fulfilled the basic criteria and was relevant for the topic:Hosoda, M., & Suzuki, K. (2015). Using Management Control Systems to Implement CSR Activities: An Empirical Analysis of 12 Japanese Companies. Business Strategy And The Environment, 24(7), 628-642. Because as it can be observed, the article is not from a journal mentioned in the ranking from Albrecht et al (2010) it was included in table 1 under “Others”. Therefore after the first two steps the number of journals was 615.

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19 Step 3: Citation method

In order to find more articles that are relevant for the topic of the research, the citation method was used in Google Scholar. As with the snowballing method, the key paper used for this step was the one written by Norris &O’Dwyer (2004). Furthermore, this method has been argued to check the frequency with which this paper was cited (Belter, 2016). This method also had to fulfil the basic criteria previously mentioned. It was found that that this article was cited 111 times. After applying the basic criteria the results yielded 100 results. The principal aim of this thesis was to provide a clearer overview of the different theories or perspectives that exist in literature with regards to the ethical sphere of CSR and MCS. Therefore, the first group of interest consisted of the journals found after the first two steps. The second group consisted of the application of the citation- based selection method to the initial pool. The main entry was retained in the first group. The other entries that were entered in duplication were eliminated from the following groups (Wohlin, 2014). One of the duplicates included the article: “The Impact of Corporate Sustainability on Organizational Processes and Performance”, written by Robert Gecole. Therefore after this step in total the number of articles was: 715.

By using the citation method, each description of a document and the references for that source are made available as well as the frequency said journal was cited. Additionally, citation searches retrieve new information based on older publications that are on the same subject. Also by using this method we were able to find 13 articles which were relevant for the topic, however these were from other journals and were included in table 1 presented at the end of this chapter. Furthermore, they are represented in table 1 under the name “Other”.

As previously mentioned the journals that fall in the category “Other” include: the Accounting, Auditing & Accountability Journal (AAAJ), the Journal of Management Accounting Research (JMAR), the Organization Journal, the Academy of Management Perspectives (AMP), Business Strategy and the Environment (Bus. Strateg. Environ), the British Accounting Review (BAR), the International Journal of Productivity and Performance Management (IJPPM).

The systematic literature review has been identified to be reliable because it presents a clear procedure that is useful in the evaluation processes (Wohlin, 2014). The reviews

obtained provide an opportunity to compare the results of two studies that have a common research question that has been performed by two independent researchers. The evaluation processes provide robust differences in the processes and the people leading to production of stable outcomes.

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20 Step 3: Narrowing down domain

Allan & Lexchin (2008) established abstract method as a method that can be used to narrow down to the required papers basing on the abstracts and the titles for the papers. Also, it has been argued by Rathbone, Hoffman & Glasziou (2015) that through the use of this method, it is possible to prevent the selection of the articles that are mainly based on the topic and hence, was able to minimize the possible researcher bias. An analysis of the objectives along with other relevant information that was found in the abstract (e.g.: theories and keywords used by the authors) was done in order to select the most objective articles. An in- depth analysis of the abstracts resulted in 43 papers that were seen significant for the research.

However, in order to come up with the most significant papers for this research, a systematic assessment was done by examining the abstract, title, keywords and finally the entire content.

This process has helped with the identification of 25 articles unique papers that were used for the examination. These papers selected based on their entire content would eventually be used as the relevant papers for this thesis, as portrayed in the table below.

Table 1-Articles

Journal Name

AMR J.Bus.

Ethics

BEQ AMJ Bus.&Society Bus.Ethics Eur.Rev

SMJ Other Total

Nb. Of Hits per Journal

117 72 1 84 11 256 73 100 714

Nb. Of articles selected based on their abstract

8 10 1 5 4 2 13 43

Nb. Of articles selected based on their entire content

3 6 1 1 3 2 1 8 25

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3.2 Data Analysis

As described by Crossan &Apaydin (2010), after collecting the relevant data, the next part was the data analysis. In this part, in order to analyse the selected papers, it was necessary to group them. So as to achieve this, the classification follows the guideline forwarded by Shields (1997), which was especially useful. Based on the literature review from chapter 2, the classification was applied in accordance with the method described by Shields (1997) as analysed below.

3.2.1 Research Methods

So as to effectively classify the articles, the guidelines used by Shields (1997) were essential in making a distinction of the most applicable research methods including; case/

field- study, analytical, reflection, and archival study. This identification is essential since an advice of the methods that seems most applicable can be made. However, after examining the selected articles, it was seen that many articles were relatively combining more than a single research method particularly the case studies that were often combined with other research methods in order to analyse the collected data (e.g. interviews, questionnaires, surveys and empirically tested hypotheses) were classified as mixed methods (Eisenhardt, 1989).

3.2.2 Setting

As identified by Shields (1997), classification of studies can be achieved through the activity or the industry. However, for example some of the articles did not specify the industry or, like with case studies focused on several industries and conducted comparison between countries and regions. In order to provide a clearer overview, the countries and regions are presented in the ANNEX.

3.2.3 Theories & Sub theories

Based on the Shields (1997) framework, literature review, I found a distinction of the following theories: economics theories (e.g.: agency theory, stakeholder theory and business ethics), sociological studies (e.g.: institutional theory), strategic management theories (those that are related to strategic uncertainties and contingencies as well as strategic control and entrepreneurship theory). Entrepreneurship according to the book written by Kuratko (2016) is related to strategic management theory and therefore it was added in the strategic category.

Stakeholder theory and business ethics were included in the economics category, based on the arguments forwarded by Freeman & Reed (1983) and more recently by Freeman (1994).

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3.2.5 Results

In order to better present the results, an appropriate method such as making a summary of the results of the most important papers that were included in the literature review, which includes 25 papers. Discussion of the most relevant articles was done based on the research methods used by the authors, theories and sub theories as well as the setting as it was previously mentioned. A better overview of the list that contains the articles is presented in the ANNEX. The analysis and results of the relevant articles that were selected are presented in the following chapter.

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4. Results and Analysis

In the section of data collection of this structured literature review, we were able to indicate the peer reviewed articles that were selected for the analysis which were published between the years 2000 to 2015. The papers were classified according to the method, theories and results.

4.1 Research methods

The table below shows the classifications of the articles according to the different research methods that were used. According to the table, it is evident that the most common method of research is the mixed method approach method with 7 articles out of 25.

Furthermore, the mixed method approach included 3 comparative case studies combined with empirically testing of hypotheses. The other 4 articles that were grouped under the mixed approach method were case studies combined with empirical testing. The next research method that was frequently used was case/field study with 6 articles out of 25, followed by archival method which included 5 articles out of 25. Four of the papers were classified as other (since the methodology section was not evident) while a further two were found to apply analytic method. In addition, only one of the papers was a reflection.

Research Method No. of articles

Case/Field Study 6

Analytic 2

Mixed method approach 7

Reflection 1

Archival 5

Other 4

Total 25

4.2 Theories

The table below further represents the classification according to the theories that were used by the researchers. According to the findings, it is clear that economic and strategic management theories appear to an important theoretical source of inspiration of the

researchers. Most of the theories relied upon appeared to be from the major social sciences.

These were: economics, sociology and strategic management. Economics was identified to be the most common with a frequency of 12 articles out of 25. Strategic management followed with 10 articles out 25. One was classified as ‘Unknown’ due to its unique perspective and also 1 article combined strategic management theories with economics theory. Additionally one article used sociological studies theory.

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Theory No. of papers

Economics 12

Strategic Management 10

Sociological Studies 2

Unknown 1

Total 25

4.2.1 Sub- Theories

The table below further represents the classification according to the sub theories that were used by the researchers. The results indicate that economic and strategic management theories appear to be frequently used by researchers. It was worthwhile to notice that articles

combined theories as shown in the table below. One of the journals combined stakeholder and business ethics theory while the other combined institutional and agency theory. However, strategic control has been highlighted to be the most common with a frequency of 10 articles out of 25.It was followed by stakeholder theory with a frequency of 5 articles out of 25. Out of the total number of articles, it can be seen that one articles uses agency theory and another article institutional theory. Furthermore one of the relevant articles was classified as

‘Unknown’ because no theory was evident from the literature.

Theory No. of papers

Stakeholder Theory 5

Strategic Control 10

Business Ethics 1

Unknown 4

Institutional Theory 1

Combination 3

Agency theory 1

Total 25

4.3 Setting

Because CSR is examined at an international level, namely in multinational corporations the setting is mostly international. Furthermore, concerning industries and locations the broadness of the researchers is adequate and it covers multiple industries and regions. Case studies, surveys and questionnaires were distributed among different industries and the results were then combined and analysed such as is the case of Hosoda & Suzuki (2015). The authors analysed 12 Japanese companies that covered multiple industries such as:6 electronic appliances companies, 2 food companies, 1 maritime trade company, 1 fiber products

company and 1 was classified as other. Other authors focused on pharmaceutical companies such as O’Riordan &Fairbrass (2013). Another study that focused on data from multiple

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25 industries was the written by Brammer& Millington (2004) such as: construction, real estate, gas, oil, mining, manufacturing (which included food, drink, tobacco, pharmaceuticals just to name a few) as well as services (banking, insurance and so on). In the annex the industry was not included, however the countries were specified as well as the results found in articles.

Other papers were set on international and generic, while the rest had no setting. Both CSR and MCS are far beyond boundaries of single organization or nation. International research in the research papers includes several countries and regions as it can be seen in the ANNEX.

Moreover comparisons were also made between emerging economies and western economies such as: Rettab, Brik & Mellahi (2009). The articles were useful in providing an overview of the different perspectives of how CSR activities influence MCS.

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5. Discussion

In this part of the systematic literature review, an overview of the papers as well as comments with regards to the topic at hand is provided. To get more recent information, peer reviewed articles published from 2000 to 2015 were used. The major results showed that the methods used to conduct the research study had their different advantages and disadvantages. The answers available in articles have been useful in answering the thesis question. In this part, the results from thee relevant articles based on the chosen topic of the perceived influence of the ethical sphere of CSR on MCS as well as their relationship with the MCS is discussed.

5.1 CSR of a Business

Mixed method approach &Case/field study approach

Previous studies from a strategic management perspective have focused on linking MCS to CSR activities and have sought to explain the part MCS have in influencing CSR goals (Simmons, 1990). Furthermore, from a strategic perspective this issue has been researched and it has been argued by Gray (2002) that the focus was on the relationship that exists between CSR and performance. However, a recent case study such as the one written by Durden (2008) explains that CSR aspects are reflected in MCS. Contrary to his

expectations the results didn’t confirm his hypotheses because his major finding suggested that CSR measures were not included in the MCS. One limitation was that Durden’s (2008) case study focused on a small business in New Zeeland therefore, as it has been suggested by the author that a bigger company would have been more appropriate. The major finding of this paper was that this particular business did not explicitly define CSR goals and thus neglected the link with all its stakeholders. However, the method was helpful in obtaining data and results from a strategic perspective, and one of the proposed solutions to tackle this identified problem are said to be informal controls and formal measurement mechanisms (Ouchi, 1977; Norris & O’Dwyer). Additionally, it is important to take into account the stakeholders needs in order to comply with the ethical aspects of CSR (Carroll, 1991).

Another comparative case study is the one from Blasco & Zølner (2010). The authors used a mixed method approach by making a comparison between an emerging economy, namely México and a developed economy France and the data collected was useful in

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27 empirically testing their hypotheses. Contrary to the previously mentioned study, Blasco &

Zølner (2010) took into account the importance of organizational culture, which has been found to play an important part because it takes into account the needs of the stakeholders.

Furthermore, this factor has been argued by Chenhall (2003) to be very important, because it influences the design and use of MCS.

Similarly to the study of Durden (2008), Shum& Yam (2011) state that one limitation to their research was their sample size. Despite this issue, all their assumptions were confirmed and furthermore they took into account the ethical aspects of CSR.

Therefore it can be said that, the most effective way of evaluating the effects is by studying the types of technology being used, the nature of the company culture, and the environment of the organization, the structure, and the strategies being utilized (Chenhall, 2003) and by including the relevant ethical aspects in order to meet the stakeholders needs (Carrol, 1991).

One particularly interesting study was that of Arjaliès &Mundy (2013) that examined how MCS are used to manage CSR goals and activities. This article is interesting, because the research method was designed as a longitudinal field study. As argued by Pettigrew (1990), longitudinal field studies are important, because they examine organizational issues within a larger time frame. Consistent with the strategic control perspective, the results of Arjaliès

&Mundy (2013) imply that all CSR aspects are important to increase the performance of businesses. Arjaliès &Mundy (2013) used Simon’s framework to conduct an empirical study on the levels of control in management systems that aim at guiding the behaviors of

employees. Thus it can be argued, that management control literature contains some elements of what is needed. For instance, in Simons' analysis, what he calls "belief systems" are closely related to those conditions. In fact, Arjaliès &Mundy (2013) while using Simons' framework, they focus on one of the basic assumptions about behavior, and that is that individuals desire to contribute. According to Simons, an "organizational block" occurs when an organization is

"unsure of its purpose;" and the remedy is to "communicate core values and mission." The

"lever of control" for that purpose is the one he calls "belief systems" (Simons, 1995, p. 173).

Furthermore, by using Simons’ framework, it has been highlighted by the researchers that the ethical aspect of CSR is incorporated in MCS.

Another, case study however offered an institutional perspective with regards to how corporations manage their CSR goals and activities is the one written by Matten &Moon (2008). Furthermore, the authors explain that due to an increasing concern expressed by the public and stakeholders with regards to the ethical problems in business, organizations have

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28 tried to control the problem by institutionalizing ethics. In addition to helping control ethical problems, different forms of ethics institutionalization may have a disparate impact upon different aspects of the organizational climate. Their results suggested that there are

differences in how CSR has been perceived and reflected in the control systems in the US and European corporations. One factor that might explain the difference is the organizational culture (Chenhall, 2003).

Additionally, other shortcomings have been observed from the case/field study approach. For example, there are no research works that have been conducted to verify the effectiveness of the ethical decision-making process, which have been argued to be integrated within the “explicit” and “implicit” controls as argued by Matten &Moon (2008). There is little information that reveals the impact of the MCS on individual factors. Additionally, the framework used in the decision-making process is only useful as an initial step towards the comprehensive decision-making process model. The model has been found only to serve a broad classification of variables that are related to the ethical and the fraudulent behaviors within an organization (Langfield-Smith, 1997; Chenhall, 2003).

5.2 Criticism and issues with MCS

Archival, Analytical, Reflection & Other

MCS represents a broad area of investigation that even the researchers have been faced with difficulties on whether to build on identifying emerging issues or existing areas of study (Chenhall, 2003; Malmi & Brown, 2008). The success and the effectiveness of a MCS is dependent on the contemporary setting that include the structural arrangements, company size, the environment in which the firm operates and culture (Chenhall, 2003; Langfield- Smith, 1997). Furthermore, it has been argued by Chenhall (2003) that all these

contemporary aspects are linked together. MCS plays important roles such as being of great assistance to managers in the achievement of CSR goals and anticipated organizational outcomes (Flamholtz, Das& Tsui, 1985; Merchant, 1985; Chenhall, 2003; Vranceanu, 2014).

Some limitations are shown in archival studies conducted in the countries like the UK, US as well as the ones that were generic or that had no setting (Chatterji & Toffel, 2010;

Collier & Esteban, 2007; Costas &Karreman, 2013;Filatotchev & Nakajima, 2014). While, some of these selected articles were selected to be representative of all the other companies and organizations located in different regions of the globe, some had no setting. However, as it can be observed the methods used to gather the data was effective because it provided a rich descriptive detailed information regarding organizations. The samples were a close

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29 representation of the complex organizational structures and systems that are available in almost every other organization. This type of research method further identified that forms of incentives that were available to agents as presented by the management teams with the purpose of influencing “formal” and “informal “commitment to socially responsible goals (Collier & Esteban, 2007; Costas &Karreman, 2013;Hahn, Preuss, Pinkse & Figge, 2015).

Formal and informal control systems, thus have shortcomings, but are necessary in spite of them (Norris & O’Dwyer, 2004; Hosoda &Suzuki, 2015). The total absence of formal systems of evaluating performance, perhaps associated with reward systems, it can be argued to be dangerous. Performance indices have to be seen as a check on the expected results, which cannot be 'really' measured (Mason & Simmons, 2014).But provided that there is a reasonable correlation between the 'real' variable and the measured performance, a

quantifiable variable is a help to any decision-maker to check whether the intangible results the firm wishes to obtain appear somehow in tangible form (Mason & Simmons, 2014).

As previously stated, researchers use a variety of control mechanisms. For instance, the work by Lange (2008) revealed that ethics and fairness were reflected in what he defines as

“corruption control”. Furthermore, he adds that these two contexts need to be used in evaluating the MCS use and design in order to achieve goal congruence.

Future research could focus on the taking into account factors that have been identified to influence the results provided or the elements that were ignored in the selected studies. For instance, Collier & Esteban (2007), state that organizational culture is important, because it influences the ethical decision making processes linked to CSR activities. Therefore, the issue of culture should be put to consideration when conducting a new research to studying the ethical aspect of CSR and how they influence the design of MCS within any organization (Chenhall, 2003).

Control of an organization is a platform that allows consistency and predictability of the company. The controls are also defined as the steps that are taken by the management team to ensure that all the sections and parts of an organization (which is important as CSR is very important for multinational corporations) function in a manner that is considered

consistent with the organization’s policies (Swanson 1995; O’Reilly, 1989; Merchant, 1985).

According to the paper written by Costas &Karreman ( 2013) the control systems have been found to be useful within an organization because it enables the managers to provide the right information on what is going on with the company to the employees, shareholders, suppliers,

The perceived influence of the ethical sphere of Corporate Social Responsibility on Management Control Systems: A systematic

Master Thesis