Corporate Social Responsibility or Corporate Shared Value? Perceptions of Future South African Financial Business Leaders.

D.A.L. Coldwell

INTRODUCTIONPorter and Kramer’s (2011) view that capitalism needs to reinvent itself to survive the crisis of confidence brought about by the recent global financial collapse and surmount the ensuing painful process of building some semblance of order and growth to western economies, depends on the extent to which it can be universally accepted and adopted as a working paradigm for future business leaders, and financial leaders in particular.

Flawed as many of the existing economic and financial assumptions may be, a new system of capitalism such as proposed by Porter and Kramer (2011) in their model of Corporate Shared Value (CSV) to replace the older model of Corporate Social Responsibility (CSR), will only take root if both the hearts and minds of future generations of financial business leaders are convinced of their cogency and appropriateness.

PURPOSE OF THE STUDY To interrogate the extent to which future South African business leaders regard a new paradigm embracing CSV rather than CSR type approaches (Porter and Kramer, 2001) as appropriate and preferable.

THE OBJECTIVES OF THE STUDY

• To develop measuring instruments for CSV and CSR.

• To assess the validity and reliability of the measuring instruments using appropriate statistical procedures and analyses.

• To measure the perceptions of CSV and CSR in a sample of emergent business leaders

• To investigate CSV /CSR preferences in a sample of emergent business leaders.

BRIEF LITERATURE REVIEW The actual cause or causes of the financial crisis are probably multifaceted and to single out the evil machinations of irresponsible leaders in high places oversimplifies the actual forces that brought the financial crises into being.

Castree (2009), for example, suggests that there are at least five cogent explanations for the financial crisis, ranging from the popular and less cognitive, to the more cerebral and thus reasonable.

Explanation 1: “corrupt and greedy bankers are to blame”;

” But the search for villains did not begin-and-end with a few ‘rogue traders’. Even the most demagogic elements of the news media could not pretend that this was the nub of the problem. Instead, the spotlight was shone on a broader set of actors and a rather different cause: namely, high financiers in general (‘fat cats’) and their collective greed in particular. This story-line became a common-place of the low- and middle-brow news” (Castree ,2009,p. 6).

Explanation 2: “light touch regulation is to blame”.

Castree (2009, p.9) suggests that a paucity of effective regulation is often the favored explanation among a significant section of the world’s political and economic elite.

Explanation 3: “casino finance is to blame”.

Here the lacuna in the regulatory financial system allowed profit mad traders to exercise their appetite for risk and their operational freedom to bring disaster on long standing and reputable business organizations such as Barings bank.

Explanation 4: “macro-economic imbalances are to blame”.

This explanation is technical and macro rather than the more individually-oriented explanations discussed hitherto. Essentially it suggests that the financial crisis was brought about by excess international liquidity and was symptomatic of an imbalanced global economy (Wolf, 2008).

The fifth explanation is that Anglo-Saxon neo-liberalism is to blame (Foster and Magdoff, 2009).

This explanation runs parallel with Porter’s ( 2012) in that it suggests that the dominant neo-liberalism capitalistic system needs to be tempered with a more socially just form of capitalism

Castree (2009) suggests that each of these explanations has a certain cogency that appeals to different segments of the socio-political spectrum and that they can even be taken together as a composite explanation of the financial crisis.

Castree favors explanation 5; a crisis in Anglo-Saxon liberalism with macro-economic explanation 4, because of their broadness in scope and potential generalizability.

Interestingly, a novel biologically based 6th explanation of financial crises has recently been put forward by Coates( 2012)

Coates suggests the underlying causal factor for “ casino finance”-type risk taking may reside in the way risk-taking behavior transforms body chemistry, to extremes of euphoria and risky behavior on the one hand, and anxiety and risk aversion, stress and depression on the other.

Porter and Kramer (2011) maintain that capitalism can only succeed in solving the problem it created by undergoing a paradigm shift through adopting corporate shared value (CSV) in place of corporate social responsibility (CSR).

Essentially CSV comprises a form of integrationist thinking capitalism where social responsibility becomes not separated “added on “ feature but an integral part of business strategy an function.

DEFINITION OF CORPORATE SHARED VALUE

“Policies and operating practices that enhance the competiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.”

RELEVANCE OF THE CONCEPT OF CSV TO SOUTH AFRICAThe idea of shared value creation has a particular resonance in the South African context. Since the dismantlement of the apartheid state and the institution of South Africa’s first democratically elected government, expectations have been high that government and business in consort would find solutions to poverty and unemployment faced by a large proportion of the South African population. However, business and government corruption has stymied service delivery to poor communities (Times, 2012).

METHODResearch designThe research design incorporates an exploratory correlation cross-sectional that utilizes parametric statistical tests (Ghauri and Gronhaugh, 2002). SampleThe non random sample consisted of fourth year Accountancy students at the University of the Witwatersrand. The entire third year auditing class was approached for inclusion and 123 chose to respond.55% of students were male and 45% female. 60% of students were black, 20% Indian and 20% white. The students’ average age was 21 years.

Accounting students were specifically chosen for the sample because they were considered to be familiar with corporate social responsibility and its financial effects on the performance of the organization. And, many of them were likely to comprise the corpus of a future business elite.

Measuring instruments

The measuring instruments consisted of five items each for the CSR and CSV scales. Items were arranged on a five point Likert-type scale ranging from “strongly agree” to “strongly disagree” with a neutral “neither agree nor disagree”. Items were devised from Porter and Kramer’s (2011) detailed explication of the concepts of CSR and CSV.Tests of normality were conducted for both the CSR and CSV scales using the Kolmogorov-Smirnov (with Lillefors significance correction) and Shapiro-Wilk tests and were not found to violate normality significantly.

ReliabilityTests of internal consistency using Cronbach Alpha revealed that the CSR scale attained an acceptable and CSV a marginally acceptable Cronbach Alpha value of C=0.688; and C=0.550 respectively.

George and Mallery (2003: 231) suggest that Cronbach Alpha coefficients range from > .9 (excellent) to >.8 (good). And from >.7 (acceptable) to> .6 (questionable), with> .5 (poor) to <.5 (unacceptable). Nunnally (1967, p. 226), however, suggests an internal consistency score of .5 as a minimum acceptable convention for exploratory studies.

Validity

Construct validity of the measuring instruments was assessed by subjecting the variables to a principle components factor analysis with a varimax rotation in an attempt to obtain a simple structure.

Very briefly, the Kaiser-Meyer-Olkin MSA = .749. with Bartlett’s test of sphericity = 0.000 attained indicated that the data were middling-to-good factor analytical material. Four components obtained eigen values greater than 1 (2.997-1.003). These components explained 63.5% of the variance. Varimax rotation with Kaiser normalization indicated four components one of which was a doublet and was therefore not interpreted. The three remaining components achieved a relatively simple structure and were interpreted as follows:

Factor 1 Interpreted as CSR component consisted of four out of the original five items (with the fifth item loading 0.225, (marginally under the 0.33 conventional cut-off rule). The largest item loading under this factor, item 1 : “The ethical aspects of running a business should remain distinct from its profit maximization function” loaded 0.819 on this component. It was interpreted as CSR financial separation.Factor 2The underlying dimension of Factor 2 is indicated by item 6 : “ A company’s ethical investments should be integral to making it an effective competitor”. This Factor was interpreted as CSV financial integration.

Factor 3 The underlying dimension of this factor is encapsulated in the heaviest loading item: “ A company’s ethical investments should realign the entire company’s budget to mutual community and company social and economic value creation.” Thus factor 3 is interpreted as CSV social integration.

 

  CSR

CSV

NValid 123 123Missing 0 0Mean 15.5447 11.9837Std. Error of Mean .43030 .30479

Median 16.0000 12.0000Mode 17.00 11.00a

Std. Deviation 4.77228 3.38023

Variance 22.775 11.426Skewness -.823 -.830Std. Error of Skewness .218 .218

Kurtosis 1.209 2.443Std. Error of Kurtosis .433 .433

Range 24.00 19.00Minimum .00 .00Maximum 24.00 19.00a. Multiple modes exist.  

FINDINGS

Table1. Frequency distributions for the CSR and CSV measuring instruments

Table 1 indicates that mean, median and mode scores are generally higher on the CSR than the CSV measuring instrument.This suggests that the respondents generally felt that separated corporate social responsibility rather than integrated shared value was considered the better corporate format

     

    CSR CSV  

 

CSR

Pearson Correlation 1 .470**

 

  Sig. (2-tailed)   .000  

  N 123 123  

 

CSV

Pearson Correlation

.470** 1  

  Sig. (2-tailed) .000    

  N 123 123  

 

**. Correlation is significant at the 0.01 level (2-tailed)

 

Table 2. Correlation matrix of scores on the CSR and CSV measuring instruments.

PEARSON CORRELATION COEFICIENT

Pearson correlation coefficient of r=0.470,

0.01indicates that CSR and CSV are positively

correlated suggesting a communality in the

underlying variance each concept explains.

PAIRED SAMPLE T TEST AND WILCOXON SIGNED RANK TEST

To investigate the CSR/CSV relationship in more detail

A paired sample t test was used and checked with a Wilcoxon signed rank test.

Tables 3 and 4. indicate the findings

Before conducting the analysis of variance a Levene test for equality of variances was calculated which indicated the homogeneity of variance criterion was not violated (1.017, p =0.442).

 

  Mean N Std. Deviation

Std. Error Mean

Pair 1

CSR 15.5447 123 4.77228 .43030

CSV 11.9837 123 3.38023 .30479

Table 3. Paired sample t test for CSR and CSV scores

  Paired Differences t df Sig. (2-

tailed)Mean Std.

DeviationStd. Erro

r Mean

95% Confidence Interval of

the Difference

Lower

Upper

Pair 1CSR - CSV

3.5609 4.3648 .393

2.7818

4.340

9.05

122

.000

The paired sample t test displayed in Table 3 suggests

a significant difference in CSR and CSV mean scores (t=9.048, P<0.01).

Mean differences also indicate that the respondents generally scored higher on the CSR measuring instrument.

  N Mean Rank

Sum of Ranks

CSV - CSR

Negative Ranks

96a 62.63 6012.00

Positive Ranks

20b 38.70 774.00

Ties 7c    Total 123    

a. CSV < CSR

b. CSV > CSR

c. CSV = CSR

 

  CSV - CSR

Z -7.227b

Asymp. Sig. (2-tailed)

.000

a. Wilcoxon Signed Ranks Testb. Based on positive ranks.

Table 4. Wilcoxon Signed Rank Test

Table 4 indicates Z = -7.2273, P<0.01 and thus the difference between the CSR and CSV scores is statistically significant. Calculation of the effect size indicates a large effect size =0.46 (Cohen, 1988)

Discussion of the findings

The findings indicate that although CSR and CSV are positively correlated, there is a significant difference in respondents’ scores. Generally speaking, CSR separation was chosen over CSV integration among the selected third year accountancy students.

T he separation of social responsibility expenditure by a company is preferred to the new integrated shared value approach advocated by Porter and Kramer (2011).

Tentatively this suggests that the future emphasis of financial management will follow the existing paradigm which Porter and Kramer (2011) maintain is the root cause of the crisis of capitalism

Shared value vis a vis sustainability :closely allied conceptsKramer (2012) emphasizes the paradigm of shared value that he proposes is in no way counter posed to sustainable development, a closely allied concept:

“but our intent is not to sweep aside sustainability. Rather, we see Shared Value and sustainability as complementary and overlapping concepts that give rise to mutually reinforcing but different agendas for action”.

The Corporate shared value principle is differentiated from sustainable development by Its:

• More socially integrated orientation driven by business self-interest and

• Greater short- term and practical focus.

CONCLUSION

• The findings suggest that CSR is preferred to CSV in the current sample .

• In the South African context where the distinction between the ‘haves’ and the ‘have- nots’, is sharp and pervasive, this is worrying. • If Porter and Kramer (2011) are to be believed, remedial steps are needed to ensure that the ‘baby’ of capitalism is not thrown out with the dirty ‘bath water’ of corruption and greed with which it has recently become associated.

LIMITATIONS OF THE STUDY

• Sample is small and selected non- randomly from one South African University .

• CSR and CSV measuring instruments are novel and require further refinement and modification.

• The concept of corporate shared value is of recent origin and does not yet have widespread currency.

• The concept of CSVhas blurred boundaries with sustainable development.

Many thanks for your sustained attention!