Ethics of the firm, for the firm or in the firm? Purpose of extrinsic and intrinsic CSR in Switzerland
Authors: Looser Stéphanie , Wehrmeyer Walter 
Published: August 2016

Purpose

Despite the increased recognition and emphasis on corporate social responsibility (CSR) as a topic and highly formalised CSR control systems, numerous well-publicised problems and scandals often involving multinational enterprises (MNEs) continue to emerge. These companies are mostly extrinsically motivated in CSR. They operate with highly formalised CSR systems that, in many cases, miss the prevention of anti-social and illegal behaviour. This might reflect the failure of extrinsic CSR to integrate the ethical dimension and/or the failure of intrinsic CSR to formalise and thus benefit from economies of scale. Currently, the conviction is growing that if CSR is to have a meaningful impact, it should be a matter of intrinsic motives, morale and ethical values rather than a formalised management tool. This research aims to focus on a sample of small and large companies in Switzerland, aiming at a comparison of key motives for CSR related to actual CSR implementation, performance and company size.

Design/methodology/approach

The study examined two groups: seven owner-managers of small- and medium-sized enterprises (SMEs) and seven managers of MNEs. Each group met for two focus group discussions that were qualitatively and visually analysed using MAXQDA.

Findings

The results show that CSR implementation in the examined Swiss SMEs is more related to moral commitment than to profit maximisation. These companies are often driven by soft assets, such as networks, by the nexus of mission and value set; by a system of initiatives and integrated behaviour; by proximity and informal, flat organisational structures; by the aspiration and ambition of craftsmanship or excellent service (instead of profit); by community involvement; by recruiting from the local community; by the willingness to grow slowly and steadily; by the avoidance of atomic markets; and finally, by the mental set up and sociological tradition of the stewardship concept. This contrasts with the extrinsically motivated approach of the MNEs under research. While MNEs follow their approach of “ethics for the firm that must pay”, the findings here identified potential transition cases of “ethics in the firm” and “ethics of the firm” within Swiss SMEs. This is consistent with others, resembling the need of this dichotomy to be revised.

Research limitations/implications

The cross-sectorial approach limits the degree to which motives can clearly be attributed to actual CSR performance or company size.

Practical implications

The results imply that policymakers, public institutions, scientific community, etc. should be careful when establishing systems that favour financial returns from CSR engagement, because, first, other research showed that a behaviour attributed to extrinsic motives is mostly perceived as dishonest and misleading, for instance, consumers. Second, extrinsic motivation might crowd out morale and paying lead actors for behaving altruistically or philanthropically might decline their intrinsic motivation. Notably, the crowding out of intrinsic motivation by extrinsic incentives is a phenomenon well-researched not only in regard to CSR but in various other areas linked to human behaviour. This has important implications for nearly every business operation, especially for mergers and acquisitions, as well as for the growth of businesses.

Social implications

It seems unsuitable to support social goods in intrinsic CSR by the implementation of a system of financial incentives (or consequences). Thus, an economic cost-benefit is inappropriate where CSR needs an ethical stand. The difference between extrinsic and intrinsic CSR is very difficult to bridge – both have powerful incentives and drivers preventing a potential cross-over.

Originality/value

In sum, this study showed that CSR is meaningful and justifiable even if it is not profitable in the first place or implemented in and managed through formalised systems. This leads to two conclusions: first, care should be taken when emphasising the extrinsic approach in relation to social goods and second, the cost of a possible mismatch in a climate of ethical principles might be substantial for societies’ moral inclination.