Corporate Social Responsibility in Saudi Firms: A Global Review

Introduction to CSR Definitions and Historical Evolution

References to corporate social responsibility (CSR) reportedly occurred numerous times before the 1950s; however, in regard to CSR definitions, that particular decade birthed the "modern era." Carroll (1999) complements the current study as it expands on the historical progression of CSR definitions. According to Carroll, Bowen initially defined the social responsibilities of businessmen, explaining that the concept relates to the obligations businessmen have to pursue particular policies, to make deliberate and desirable decisions, "or to follow those lines of action which are desirable in terms of the objectives and values of our society" (Bowen as cited in Carroll, p. 270). During the 1960s, the "Iron Law of Responsibility" held that "social responsibilities of businessmen need to be commensurate with their social power" (Davis, as cited in Carroll, p. 271). Davis and others during this decade, however, did not include specific details regarding the firm's obligations.

Although definitions of CSR began to flourish during the 1970s, no succinct definition of the social responsibility construct emerged. Carroll attributes the following definition to Davis during this decade:

For purposes of this discussion it [CSR] refers to 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 in its decision-making process the effects of its decisions on the external social system in a manner that will accomplish social benefits along with the traditional economic gains which the firm seeks. (p. 313)

It means that social responsibility begins where the law ends. A firm is not being socially responsible if it merely complies with the minimum requirements of the law, because this is what any good citizen would do. (Davis, as cited in Carroll, p. 277)

Instead of more original definitions of CSR evolving during the 1980s, research focused on alternative thematic frameworks as well as greater efforts to measure and conduct research on CSR. Carroll summarized his definition during the 1990s as: "The CSR firm should strive to make a profit, obey the law, be ethical, and be a good corporate citizen" (p. 289). In the future, any new definitions or revisions of current CSR definitions will likely evolve from the foundation researchers established over the past half century, but will expand to embrace concerns of society as a stakeholder in the global arena.

Stakeholder Considerations and Firm Value

Stakeholders do not perceive all corporate social responsibility (CSR) activities as equal, positive, or equally positive. People perceive corporate actions or the firm's investments in CSR as good or bad, positive or negative, favorable or unfavorable. In turn, these perceptions contribute to creating the value of the firm. The study by Peloza and Shang (2011), similar to the present study, reviews the extant literature. While this study focuses on implementing CSR in Saudi firms, Peloza and Shang investigate particular CSR activities and outcomes included in previous research. These authors also integrate a number of ways in which CSR investment can augment value for consumers. Different individuals perceive the diverse range of socially responsible corporate behavior as representing "different things in different places to different people and at different times" (Peloza & Shang, p. 118). Consequently, corporations must carefully consider how they utilize and implement the concept.

The unpredictable relationship between CSR and a firm's financial performance evolves from the diverse evaluations of various CSR activities or investments by both major and minor stakeholders. "CSR in the form of community or diversity programs provides insurance against negative events while CSR in the form of governance, employee relations or product relations does not" (Peloza & Shang, 2011, p. 118). In most areas of CSR, however, when the level of investment surpasses a particular point, it may not improve consumer perceptions of value but instead prove destructive to the firm's financial performance.

Some managers invest in CSR activities to develop a social or environmental impact, while others seek a financial return. Peloza and Shang (2011) stress that the potential for CSR to create firm value correlates with its ability to generate positive stakeholder relations. The firm's inclusion of CSR activities alongside more traditional product attributes and benefits can boost the firm's overall value proposition.

CSR Across Various Countries

Zhang (2008) examines changes that have transpired in the concept and application of CSR in transitional China since the start of market reform and identifies factors that affect CSR:

Our analysis indicates that the large SOE has been retreating from CSR on both social and economic fronts; however, in an environmental context, performance has been improving. Newer smaller firms, on the other hand, show better performance from an economic point of view, but have performed less well in terms of their social and environmental responsibilities. Since the large SOE's apparent improvement in environmental CSR may be partly attributed to its declining production levels, we conclude that the current performance of both the large SOE and the small private firms need significant improvement. Considering that the case study firms are typical examples of Chinese businesses, our conclusion is that CSR engagement is low in all of China. (Zhang, 2008)

For cultural and historical reasons, Chinese private businesses have been given low status in all industrial sectors in China. Socialist China has traditionally been opposed to capitalism, which in practice is represented by private business. During the Great Leap Forward and the Cultural Revolution, all individuals were required to work for the commune and the state; having a small private business was considered as pursuing capitalism, and hence was considered anti-socialist. With such a strong political position, many private businessmen were brutally purged, and many of their families suffered as well. Historically, therefore, Chinese governmental policies have always favored state-owned enterprises (SOEs) and not granted concessions to private businesses. Since the economic reform, the Chinese state has softened its attitude toward private business, but businessmen still distrust the stability of current policy. (Zhang, 2008, p. 221)

In both China and the Eastern European countries, central and local governments have a strong influence on CSR but have limited willingness to stimulate it. Local governments possess considerable power, including the right to levy their own taxes as established by regional legislatures, and the economic performance of the region carries great importance for local politicians given the way they themselves are judged. Hence, differing interests among government, enterprises, and individuals have made CSR a negotiation process between the state, enterprises, and individuals. (Zhang, 2008)

Russell (2010) synthesizes an assortment of theories into an explanatory framework to build understanding for the collection and analysis of qualitative data drawn from the UK oil and gas industry. Like the present study, Russell considers the interdependence of CSR strategy formulation and firm managers' individual beliefs, perceptions, and biases. These beliefs, which appear to constitute the primary factors influencing CSR decisions, "are tempered by balancing shareholders' interests and stakeholders' expectations, and are affected by the global (in the case of corporations) or the local (in the case of corporate subsidiaries and small-medium size enterprises) contexts" (Russell, p. 5). Additionally, business leaders must reconcile industrial, personal, organizational, global, and societal values as well as ethical beliefs, while simultaneously balancing traditional organizational goals such as profit maximization. These constraints, coupled with the need to increase stakeholder empowerment and grant social legitimacy, present critical challenges for business leaders today.

The personal engagement of employees — and chiefly that of top-level leadership — determines the quality of CSR implementation. The in-depth case study by Schwedler, Lewis, and Birkin (2010) examines the implications of adopting CSR practices within a UK water business. This study also considers significant stakeholders involved in the process, as does the present study. Despite a strong ethical commitment, Schwedler, Lewis, and Birkin find that the business case proved to be the dominant strategic factor. These authors also determined that external disturbances and pressures served as the most noteworthy influences of fundamental change, indicating that a need for greater government intervention exists.

Conclusion

In a similar, yet distinctly different way, the researcher relates a number of specific steps that could help Saudi firms incorporate CSR. The foregoing review of the literature demonstrates that CSR implementation is shaped by historical, cultural, religious, and organizational factors that vary significantly across national and sectoral contexts. Understanding these dimensions is essential for developing a CSR framework that is both globally informed and locally appropriate for the Saudi business environment.