This paper examines whether employees genuinely hold stakeholder status within U.S. corporate social responsibility (CSR) frameworks, using the cases of Volkswagen's neutral stance during a United Auto Workers organizing vote in Chattanooga, Tennessee, and Target's labor disputes at its Valley Stream, New York store. Drawing on instrumental stakeholder theory and interviews with small business owners, the paper contrasts how large corporations and small firms relate to employees as stakeholders. It argues that despite impressive philanthropic expenditures, major corporations such as Target often fail to translate CSR commitments into meaningful employee relations, while Germany's co-determination model—reflected in Volkswagen's approach—offers a more authentic integration of employee interests into corporate governance.
A United Auto Workers unionization vote recently made the news, in part because the vote was taking place in the Southeastern United States, where conservative state legislators have historically treated organized labor with hostility. What seemed most newsworthy about this event, however, was that the corporation — Volkswagen — decided to take a neutral position (Paresh, 2014). The vote took place at the Chattanooga, Tennessee plant, where workers ultimately decided to reject union membership by a narrow margin. The national news media also took note when several conservative Tennessee politicians remained true to their anti-union ideology by threatening to end subsidies for Volkswagen and to push production of a new vehicle to Mexico. Experts in labor law believed these threats were coercive enough to have influenced the vote, and the UAW agreed. Just days after the vote, UAW leaders filed a complaint with the National Labor Relations Board (NLRB) in an effort to have the vote set aside.
The neutral position taken by Volkswagen, especially after being threatened by Tennessee politicians, stands out because Americans tend to assume corporations will take a confrontational position when faced with union contract negotiations or labor organizing activity. The shareholder-stakeholder divide is so ingrained in the American psyche that Volkswagen's neutral stance came as a genuine shock. This essay examines why Volkswagen made this choice and whether employees truly enjoy stakeholder status within U.S. corporate social responsibility (CSR) paradigms.
The primary stakeholders for any commercial enterprise, aside from the entrepreneur(s), are the creditors, employees, local community, and environment (Ho, 2010). Within a capitalist society, friction between business owners and stakeholders has always existed, and the balance of power has almost always favored large corporations. The main remedies for this imbalance of power have been organized labor on behalf of employees and government agencies and non-profits on behalf of the environment. Within the United States, a kind of "cold war" seems to exist between these factions, and open hostility occasionally bursts into public consciousness when something out of the ordinary occurs.
The need for collective bargaining or the threat of unionization will probably never be rendered obsolete in a capitalist system. This sentiment was captured by a quote cited by Marens (2008) as the opening salvo in his thesis on early CSR scholars: "I have come to the view, however, that corporate power is so potent and so pervasive that voluntary social responsibility cannot be relied on as a significant form of control of business" (p. 55). Ho (2010) acknowledges a similar limitation when considering the influence that activist shareholders and institutional investors have on corporate relations with stakeholders, but rather than take a skeptical perspective, she offers a more optimistic view of future trends — one that suggests shareholders and institutional investors are gradually emphasizing the influence of stakeholder interests on the bottom line. In other words, profits remain the core mission of any commercial enterprise, but taking into consideration the interests of stakeholders is increasingly viewed as simply good business practice.
Profitability is also the primary concern of small business owners (SBOs); however, SBOs tend to be more sensitive to the needs of stakeholders (Fassin, Van Rossem, & Buelens, 2010). When Fassin and colleagues (2010) interviewed SBOs about the concepts of CSR — including business ethics, sustainability, and profit — many remarked that ethics is something personal, even private, but that CSR and sustainability are intimately linked to a business's public persona. These concepts were not viewed by SBOs as mutually exclusive, but rather as overlapping and complementary. Philanthropy was also viewed by some SBOs as a private affair that should never be used as a centerpiece for marketing campaigns — a sentiment at least one interviewee noted is often violated by major corporations.
The sentiment that philanthropy should not be used as part of a marketing campaign or corporate image was reiterated by Barnett (2007), with the inclusion of several quoted examples in his article on stakeholder influence. Some of the cited examples included Philip Morris donating water to flood victims and McDonald's adding salads to their menu. These examples were contrasted with the philanthropic activities of a few major corporations that have made a long-term commitment to the local communities they serve. The SBOs interviewed by Fassin and colleagues (2010) commented on this difference as an emergent property of corporate size: large corporations tend to focus on more superficial goals, such as short-term profits, whereas small businesses tend to focus on sustainability. One example given by an interviewee was the difference in philosophy between major international oil corporations and local distributors. The major oil corporations emphasize the need for safety, but when discussing safety with local distributors, the emphasis shifts to low-cost safety. From the perspective of SBOs, who live within the communities they serve, safety is not negotiable, even when the economy is struggling — though one SBO moderated this position by noting that safety regulations sometimes go too far given the inherent risk of any business enterprise.
From the SBOs' perspective, the relationship between stakeholders and shareholders is more nuanced than what is observed for major corporations (Fassin, Van Rossem, & Buelens, 2010). One SBO interviewee described an employee relations policy that kept aging or disabled employees within the ranks of the firm rather than downsizing them into unemployment. Shareholders, however, were considered essential to the enterprise's success and to the ability of SBOs to engage in CSR and sustainability. This was moderated somewhat by one SBO who noted that any business operating in the red will naturally pay less attention to CSR and sustainability.
Based on the above discussion, the relationship between entrepreneurs and stakeholders differs in significant ways when comparing major corporations with SBOs. Entrepreneurs often view themselves as intimately connected to the communities where they live and work, and therefore tend to place a greater emphasis on CSR, ethics, and sustainability — as long as the business remains profitable. By comparison, some major corporations have made CSR a prominent feature of their public image while privately focusing on short-term profits and cost-cutting measures that may increase the risk of harm to employees and local communities. The organization-stakeholder relationship therefore differs in significant ways between small businesses and major corporations, although this remains a generalization that may or may not apply to any given business.
Barnett (2007) lays out the arguments both for and against CSR. One example he uses is the claim that close to $2 million dollars each week is donated to local charities by the big-box chain Target. CSR opponents argue that this money would be better spent increasing corporate efficiency and shareholder earnings, especially in a highly competitive market. The anti-CSR argument goes further, claiming that even if CSR funding were not a significant expenditure in terms of efficiency or competitive edge, it still represents a redistribution of wealth from shareholders to the local community — and therefore a form of theft. A more concise expression of this argument is that CSR amounts to personal gain at the expense of shareholders and therefore constitutes an "agency loss." Barnett (2007) cites a definition of agency loss that captures the sentiment of most CSR opponents: that CSR is never in the best interests of a firm and should only be engaged in when required by law.
The pro-CSR argument presented by Barnett (2007) is based on stakeholder theory, which holds that a firm's relationship with all stakeholders impacts the bottom line. Instrumental stakeholder theory, with its emphasis on the interests of primary stakeholders, proposes that profitability is determined in part by how well owners relate to employees and the wider community. From this perspective, a firm's perceived trustworthiness is shaped in part by its philanthropic activities, which in turn increases employee pride in their employer and thus job satisfaction. CSR proponents argue that this has a significant positive impact on operating costs, efficiency, brand image, and therefore profitability. For example, a portion of increased profitability would come from lower employee turnover, less interest in unionization, and retention of more experienced workers. A strong CSR record also tends to buffer a corporation's public image against transient scandal, thereby preserving profit margins.
The pro-CSR argument presented by Barnett (2007) does not, however, fully acknowledge the more nuanced perspective of Fassin and colleagues (2010), which suggests that the manner in which a corporation conducts CSR will determine how stakeholders judge its philanthropic acts. As discussed above, a reflexive philanthropic gesture will have little impact on public image, but a long-term commitment will.
A glance at Target's 2012 CSR statement (2013) reveals a company earning over $73 billion in revenue during fiscal year 2012 (p. 4), while still contributing over $4 million weekly to local communities (p. 85). This represents 5% of profits, which places Target solidly within the pro-CSR camp. The majority of contributions went to fund education initiatives and programs, such as reading proficiency. The more than $200 million contributed in 2012 represents a portion of the $777 million total donated so far by Target to education. In 2012, employees also volunteered close to 700,000 hours to community projects.
The CSR philosophy adopted by Target was not based on a hasty memo circulated through management, but represents an intentional decision designed to place the corporation in good standing with the communities it serves (2012 Corporate Responsibility Report, 2013). Target partnered with Business for Social Responsibility to identify and prioritize stakeholders and CSR issues using an evidence-based approach. The five key priorities identified through their research were: (1) environmental sustainability, (2) responsible sourcing, (3) employee satisfaction, (4) safety and preparedness, and (5) education. The stakeholders identified through this research were consumers, employees, political representatives, government agencies, communities, investors, and vendors.
"Target's philanthropy undermined by anti-union tactics"
"German co-determination model contrasted with U.S. practice"
CSR can have a major impact on profits and therefore should be considered an important element of any enterprise. Target appeared to have perfected this strategy, but recent labor unrest has called into question the true intentions behind the corporation's philanthropic activities. The best CSR approach — which seems to prevail in Germany — is similar to how small business owners tend to relate to stakeholders. Under this CSR philosophy, employees as stakeholders can have a significant impact on profits, and any business seeking to increase productivity and efficiency should pay close attention to the needs of its workforce. When Volkswagen demonstrated this approach in Chattanooga, the entire nation took notice, and it seems likely that Volkswagen's sales will benefit as a result. The labor strife taking place at Target stores in New York State, however, will likely tarnish Target's exemplary philanthropic image and lead to a loss of market share in upscale neighborhoods. Based on the analysis presented here, employees do not currently enjoy genuine stakeholder status within the United States.
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