Corporate Governance: An International Review, Volume 16 Issue 4, Pages 294-311 Multinational Corporation Codes of Conduct: Governance Tools for Corporate Social Responsibility?

Research Issue: We investigate the assumption found in code and corporate social responsibility (CSR) literature that suggests codes are primarily associated with the CSR practices of an organization. Research Findings/Results: A web-based study of 150 corporations from three different countries indicates there is little empirical support for this link between codes and CSR. Thus, if a corporation has a code, it is more likely used to govern traditional business concerns, such as compliance with third party governance requirements, internal issues such as conflict of interest, bribery and corruption, insider trading, etc. This is consistent across all three countries. Therefore we must be cautious against assuming a link between codes and CSR. Evidence of the different governance contexts is also briefly discussed. Theoretical Implications: Findings are addressed to theoretical debates about the construction of corporate identity, the amoralization of business, and the globalization of management practices. Practical Implications: Stakeholders must be careful in assuming that the presence of a code indicates CSR commitments or behavior. Stakeholders need to look at the content of the code to confirm or deny this assumption, particularly such stakeholders as investors who tend to use the existence of a code as evidence of CSR practices to tick "check the box. " INTRODUCTION In the vast majority of literature written on codes, there is an assumption (often implicit) that codes are created to encourage and/or ensure corporations act more responsibly. Therefore, this paper explores this assumption by investigating how multinational corporations (MNCs) define and use codes in comparison with other corporate social responsibility (CSR) "tools. " In the CSR and code literature, this assumption can be found in many works such as Diller (1999), Forcese (1997), Alexander (1997), and the ILO (n.d.a. and n.d.b.), where "code" is defined without any indication of the content or commitments to be made, however the body of literature focuses on particular areas of importance with regard to CSR issues. For example, the United States Council for International Business (2004) website corporate responsibility section has a "position/statement document" on codes of conduct, where codes are defined as "commitments voluntarily made by companies, associations, or other organizations that put forth standards and principles of business conduct in the marketplace, and are thus primarily market-driven" (2000: 2). The definition does not describe content, or the nature of the voluntary commitments to be made by the code. These pages also provide a summary of initiatives such as the US Model Business Principles, UN Global Compact, UN Guidelines for Corporate Social Responsibility and the ILO Tripartite Declaration of Principles, Concerning Multinational Enterprises and Social Policy, whose purpose is to encourage greater social and environmental responsibility by corporations. There are no statements that explicitly suggest or question the assumption that codes are to be used for reasons other than to promote CSR commitments. In some cases, this relationship between codes and CSR is made explicit. Kolk, van Tulder, and Welters (1999) define codes of conduct as 'encompass[ing] guidelines, recommendations or rules issued by entities within society (adopting body or actor) with the intent to affect the behavior of (international) business entities (target) within society in order to enhance corporate responsibility' (p. 151) (see also Dickerson and Hagen, 1998; and OECD, 2001). As we will see later, Kolk, van Tulder and Welters (1999) distinguish between these "international" codes and internal codes ". which consist of guidelines for staff on how to behave when confronted with dilemmas such as conflict of interest, gifts, theft, insider trading, pay-offs and bribery" (p. 150), arguing that the internal codes do not address the business-society relationship. For the purposes of this research, CSR is defined as "the firm's consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm. It is the firm's obligation to evaluate the effects of its decision on the external social system in a manner that will accomplish social benefits along with the traditional economic gains" (Davis, 1973, p. 313). The issues are broadly understood to be within the social, environmental, economic (Elkington, 1997), and ethical categories. For our purposes, companies must address issues in at least two of these categories to be considered to be engaging in CSR. Otherwise the issues could be classed under a single-issue heading such as human rights, environment or labor issues. Similarly with codes of conduct, no standard definition exists. Most definitions include the followings: self-regulatory or voluntary in nature, used to influence behavior of specified group(s), purpose is to define intentions/actions regarding a set of issues or towards certain group(s), sometimes from a market-based perspective (e.g. ILO, n.d.a; ILO, n.d.b; Alexander, 1997; Forcese, 1997; Diller, 1999; Kolk, van Tulder, and Welters, 1999; OECD, 2001; Kaptein and Wempe, 2002). Therefore, this paper investigates the assumption in the CSR literature that codes are used primarily to govern CSR issues. This is examined by looking at the reasons corporations give for adopting codes, and the characteristics of the codes that they adopt as presented on their corporate websites. The remainder of this paper presents empirical evidence to suggest that codes are not primarily used as governance tools for CSR commitments but are used as governance tools for other issues such as those requiring compliance, and suggests that to effectively understand the complexity of codes and CSR within MNCs, an integrated theoretical approach is needed. The findings are used to reflect upon three areas of theoretical import: the uses of CSR and codes in the construction of corporate identity; the amoralisation of business; and CSR and codes as manifestations of the globalisation of management practices. RESEARCH PHILOSOPHY AND APPROACH This research is located within a phenomenological interactionist perspective, which sits at the fringe of the interpretivist paradigm (Burrell and Morgan, 1979). The phenomenological interactionist assumes a mid-way position between the subjective and objective by suggesting that although there is no reality to test, we can discern patterns in the meanings associated with social action (Burrell and Morgan, 1979), in this case, codes and their relationship to CSR. In exploring the reasons why corporations choose to adopt codes, and in looking at the characteristics of these same codes, it became clear that in many cases, there was a disconnect between stated corporate intentions with regard to CSR and the use of codes (e.g. "CSR means we have a duty to our communities to operate responsibly" versus codes formalizing rules already enshrined in law and focused on internal workplace issues such as conflict of interest, insider trading, harassment). The literature discussing motivations for code adoption is often quite superficial due to the fact that motivations are often not the primary focus of the investigation. While these authors suggest "common sense reasons for code adoption, these reasons are largely not substantiated with empirical evidence" (e.g. Diller, 1999; Kolk, van Tulder, and Welters, 1999; Aaronson and Reeves, 2002; Sethi, 2002; Lenox and Nash, 2003). Based on the fact that we observed this pattern early in our investigation, and the lack of literature to support any particular relationship between codes and CSR other than as noted above, we considered it was necessary to conduct exploratory, inductive research (e.g., Proffitt and Spicer, 2006) to investigate this relationship in practice. Thus, the research was conducted without an ideal theory in mind about this relationship and no particular hypothesis to test (Eisenhardt, 1989; Crane, 2000) to ensure a rich data set that would help to explain the intricacies of any relationship that may or may not exist between codes and CSR. Therefore, we investigated the websites of 150 corporations from three countries to determine what corporations presented as their motivations for adopting codes, and the characteristics of these codes. This was done for four main reasons: first, a corporation's website acts as a conduit for the corporation's formal and accepted perspective on a range of issues (Maignan and Ralston, 2002; Chapple and Moon, 2005). This formalization creates a plausible, legitimate version of the corporation and its activities for the purpose of public consumption (Coupland, 2003), thereby acting as a form of image standardization on issues it decides to communicate publicly not possible with surveys, interviews or case studies (Chapple and Moon, 2005). Second, it is possible to identify the relative significance given to information by the corporation based on how it is presented. For instance, we can assume that information found on the home page or in bigger, more visible font is more important for the corporation to communicate than information that is retrieved after various links or in small print at the bottom of the page. Therefore, the Internet can provide the researcher with a general idea of the relative importance of issues on any given website, and taken as whole the site provides a narrative of how the corporation wants to be seen by the public (Coupland, 2003). Third, given the debate about the authenticity and reliability of empirical research in business ethics (Crane, 1999), web self-presentations avoid issues of selection bias. Fourth, secondary research is likely to become increasingly more important as access to companies (primary data) continues to decrease (Cowton, 1998). Research fatigue has led certain corporations to post more informatio