Organizations and Society Lecture 1 PDF

**Organizations and Society** Lecture 1 --------- Organizations can make choices to contribute to society in a meaningful way. - Sustainability contribution. - Employee rights programs. Maneuvering of organizations in society can be understood as a two-way process: Achterbergh & Vriends 200...

**Organizations and Society** Lecture 1 --------- Organizations can make choices to contribute to society in a meaningful way. - Sustainability contribution. - Employee rights programs. Maneuvering of organizations in society can be understood as a two-way process: Achterbergh & Vriends 2009 Afbeelding met tekst, ontvangst, schermopname, Lettertype Automatisch gegenereerde beschrijving **ARROW 1**: organizations choose how to incorporate attenuating programs (programs that decrease the probability of dysfunction and unwanted side effects) of amplifying programs (increase the probability of an organizational awareness of social responsibility). INCORPORATING societal values and norms into their structure. Into decision premises. **ARROW 2**: organizational decision will be structured by performance related goals and societal values. = Incorporating society into the organization **ARROW 3**: reinforce decision premises. Strengthening awareness and reflection on the societal role and responsibility. **ARROW 4**: reinforcing the premises. Reinforcing the societal programs. = incorporating themselves into society. **Modern society**: General characteristics; - **Risk society**. Danger and risk. Technology has transformed danger into acceptable risk, but also created new risks and awareness of risks. - **Functionally differentiated**. Society is complex, decentred and internally differentiated. A lot of subsystems with their own structures. - **Organization** **society**. Society is an organizational society. There are systems and production of values is done by organizations. [Dependency of organizations within and between subsystems]. Organizations can follow their own self-interest. - **Market society**. Resources is governed by a global free market. No equal distribution; limited by governments, rules, power is unequally distributed. - Capital ist.  Debates: 1. Globalization: **Johnson** GOOD Vs **Stiglitz** NEGATIVE Globalization effective due to; faster and cheaper transportation, communication, income that permitted expansion of trade, reduction barriers to trade. Sources of benefits; Free flow of ideas, capabilities, spread of literacy, flow of institutions that are required for sustained economic growth. The poor have benefited; life expectancy has increased; clean water, improved sanitation, vaccination, food suppliers. DISLOCATION due to growth. Drawbacks; skills that were valuable before, may lose their value. increase inequality of income. Why is wealth still unequal; BECAUSE there are no institutions of policies in some parts of the world that are associated with economic growth. And restriction of free markets. Stiglitz Globalization leads to more interdependency, integration. Some benefits; free flow of capital, goods, technology. Gowing awareness of global problems. CAN be successful if it is managed by the national government. Shortcomings; majority of wealth from poor to rich. Developing countries burned with depth. WHY? Economic globalization outpaced political globalization. NO democratic institutions to effectively handle it. No institutions to regulate the flow of capital, money, knowledge. Specific problems; intellectual property rights, global warming, global debt. 2. Capitalism and responsibility: Friedman VS Freeman Freeman & Parmar 2007 Critics on traditional capitalism; - Competition over cooperation. Sometimes cooperation is necessary to survive. Value creation can emerge from joint resolution of issues. - Problem of business ethics. Ethics is assumed to have a limited role in capitalism. Ethics is left out from the story. - One dominant stakeholder. - Business in a liberal democracy. Government is busy solving problems. Stakeholder capitalism is the solution; 1. Stakeholder cooperation. Value creation. 2. Stakeholder engagement. Needs of multiple stakeholders must be met. 3. Stakeholder responsibility. Being proactive about effects on others. 4. Complexity. People are capable of acting from many different values and points of view. Their values are connected to their social context. 5. Continuous creation. Motivation and collaboration. 6. Emergent competition. Win-win. Benefits; long-term performance, enhanced reputation. Challenges; balancing interests. BASIS: making voluntary agreements that are sustainable over time in pursuit of value creation. Friedman 1970 A corporation = artificial person. So no responsibilities. Owners; maximize profits within the rules of society. Organizations only have one responsibility; maximalization of profit. They have the duty to act in the interests of shareholders. As much profit as possible, as long as they abide by the law and standards. CSR is not motivated by social responsibility but by profit maximalization. It is outside the scope. IF they get negative attention from shareholders, press, ngo's that damage the revenue, than they should change to avoid profit losses. Johnson 2002 Globalization is far more than the international movement of goods and investment. It is also the flow of ideas, capabilities, spread of literacy, institutions and policies. Benefits; higher life expectancy, increased agricultural productivity. There is inequality in income, But; restrictions on markets. Policies and regulations should be implemented to ensure that the benefits of globalization are more distributed. Stiglitz 2008 Globalization shortcomings; Richer became richer, poorer became more poor. - Lack of transparency - Inadequate regulation - Dominance of powerful multinationals. Globalization has meant that we have become more integrated, more interdependent. We have extra responsibilities, but there are no democratic institutions to do this effectively. There is a need for improved global governance and regulation. There is an optimistic view on globalization which made them blind for the problems. We have the knowledge, but don't do anything about it. Resolve the shortcomings. Lecture 2 --------- Organizations can incorporate societal programs into their decisions. They do it different; freedom of choice. 4 modes of incorporation. In the isolating mode; a cost/benefit analysis, weighing costs and benefits of compliance or non-compliance with relevant programs. I. What helps to realize contingent organizational goals? Is it smart for the organization? BOX 1; sticking to rules, do what mandatory. BOX 2; own initiative In the Inclusive mode; incorporate societal programs into their decision because they decide it is the right thing to do. In line with Freeman. Programs enable citizens to live a fulfilled life. II. Is incorporation the right thing to do? BOX 3; follow rules, that effect good behavior BOX 4; provide what is necessary, existing rules are insufficient. Incorporation = how organizations select, interpret and integrate. They make a decision that is underpinned by deeper normative decisions. These underpinnings are rooted in different philosophical traditions. 1. Utilitarianism or consequentialism 2. Deontological or duty ethics 3. Virtue ethics Utilitarianism Nathanson (N.D) Action is morally right if the consequences of that action are more favorable than unfavorable. Striving for maximum well-being. How to assess Need to make a cost-benefit analysis resulting in an overall measure of goodness/utility of the potential options to act. - Identify the positive outcomes - Identify the negative outcomes - Calculate the overall price of an action - Choose the option with the highest utility Difficulty: what is the best outcome. Limitations. I. Whom to take into account II. Can positive and negative outcomes be measured? III. Some rights, personal rights, are uncalculable IV. How to compare/weight positive and negative outcomes. Nathanson (N.D.) Act-utilitarians: perform the action that will create the greatest net utility. Against utilitarianism: wrong answers to moral questions. Rule-utilitarians: Action is morally justified if it conforms to a justified moral rule. The rule is justified if its inclusion into the moral code would create more utility than other possible rules. Consistently applied. Against: some cases violating the rule is better than obeying by it. Conflicting interests. Deontology/duty ethics McCormick (N.D.) & BBC (2014) Focus on general, binding rules. Actions based on sense of duty, law or principle. You need to do the right thing, even its produces bad results. Finding general rules which can be applied regardless of the situation or context. The action needs to be done for a good will. How do you know? KANT: Categorical imperative TEST 1: It needs to pass the test of the Categorical imperative. Always act in such a way that it should become a universal law. No exceptions; should the exception be the rule? TEST 2: Treat humanity in always as an end and not as a means. Value of human beings. IN LINE WITH THE RESPONSIBLE MODE. Implies the need to go beyond existing social programs if these are insufficient. Kants criticism on utilitarianism; its focus on consequences and its potential to disregard the intrinsic worth of individuals. Limitations: - General/universal rules vs specific situations. - What about extreme situations. - Difficult to deal with conflicting duties. Virtue ethics Athanassoulis (N.D.) Criticism on the two above traditions. Broader perspective. Live a virtuous live, have or develop a virtuous character. Virtues; wisdom, courage, temperance, justice. Relevance of moral education and development. Virtues are developed by education and principles. How to find a moral character? How to find the mean between two extremes? By doing it, using intuition, developing good habits and practical wisdom. Learning from good examples. How to realize on the organization level? - Al members should strive on individual level for being virtuous and acquire good habits. - Organizations programs (HR, technology, culture) need to be set up in a way that people are enabled to act in a virtuous way. Limitations: - Good intentions do not make good results. Good motivation, but not an ideal outcome. - Lack of guidance on how to act. - Complexity of organizational & societal questions. - Responsibility of individuals remains unclear as development of character is beyond individual control. In the case of drug usage: Christie et al. 2008 Harm reduction = Supervised injections sites and Needle exchange programs. Abstinence = to get individuals of drugs and decrease consumption. - Utilitarianism: The authors argue that, based on the evidence that harm reduction is effective in reducing negative consequences such as HIV infection and overdoses, a utilitarian would probably advocate harm reduction over abstinence-focused policies. - Deontology: Since harm reduction focuses on preventing negative consequences and not on the intention of the drug-using person, the authors argue that Kant would probably not favour harm reduction. - They suggest that since abstinence-focused policies can lead to more negative consequences such as deaths and HIV infections, the case for a 'hard' approach (no compassion) disappears and compassion is the appropriate moral response. Choose harm reduction if the programs does not promote the use of it and support that substance use behavior. Applied ethics Dittmer N.D. Applied ethics is a branch of ethics that focuses on the practical application of moral pincriples and theories to real-world situations. Bijv. MNEs 1. Exploitation of producing in developing countries 2. Make more and higher jobs Van Staveren (2007) Ethics in economics. Deontology is a good framework for ethics in economics than utilitarianism. - Fair competition. Deontology emphasizes the fair treatment and transparency. - It may help to increase welfare. BUT encounters problems when applied to concrete and complex real-life situations. NO ranking system in applying moral rules or exceptions. SO; another theory of ethics for economics; **virtue ethics**. [Middle way] between **utilitarianism** and **deontology**; people are concerned with both consequences and duties in the real world, but subject to social relations and context. Lecture 3 --------- **CSR:** corporate social responsibility. = organizational responses to societal expectations. CSR can be seen as a corporate philanthropy, risk management and value creation. Philanthropy making profit, giving it back to society. Through donations. Shortcomings; lacking connection to core business. Only about how to spend their profit, not on how to make them. Short term. Risk management minimizing reputational and financial risks. Shortcomings; Focuses on preventing bad practices, not on contributing positively. Focuses on avoiding damages to firm reputation. Risk for greenwashing. TREND: ESG Risk management. BUT no uniform definition of ESG and how the performance should be assessed. High variance in ESG ratings.  Value creation, Business case. CSR infrastructure consists of: - Market Business initiatives; codes of conducts, monitoring, reporting, investment. - Civil society institutions; multi-stakeholder initiatives, NGO's, ratings, rankings. - State/government institutions; Acts and laws, standards, guidelines.  GPN: global production network or Global Supply chain; Distributed responsibility. Example Rana Plaza; who is responsible for the factory collapse. Can be approached on different levels: Firm level, national level, transnational level. At firm level; codes of conducts or audits. Critique on audits; By whom/how are the audits conducted. Audit fatigue; too many audits. No shared responsibility. Standard squeeze; more standards, while prices are shrinking. At firm level to improve labor standards; Collective as opposed to unilateral. Union inclusive. Legally binding. Based on shared responsibility. Crane et al. (2014). Critique on CSV of Porter and Kramer. CSV = transform social problems relevant to the corporation into business opportunities. Strengths; - Offers some promise for more integrated thinking about the intersection of business and social progress. - It provides a clear role of government in the social initiatives of companies. The governments need to make regulations that enhance shared value. Shortcomings; 1. It is based on false pretenses about existing literature. Is unoriginal. 2. Ignores the social and economic tensions in responsible business behavior. Suffers from failure to deal with trade-offs between economic and social value creation. There is no guidance for the situations where social and economic outcomes will not be aligned for all stakeholders. 3. Is naïve about the challenges of business compliance. Compliance of these values is no obviousness. No clear measurement and reporting. Porter & Kramer (2011) Old view = Social and community issues fall outside the scope of a business. Shared value = policies and operating practices that enhance the competitiveness of a company while simultaneously improving economic and social conditions in the communities in which it operates. Economic, social ánd environmental creation. I. Reconceiving of products; identify all social needs of products and services. Meet societal needs. II. Redefining productivity in the value chain; re-examine processes/transportation, supply chains. Resource use, energy use, employee productivity. III. Enabling local cluster development. Building clusters to improve company productivity. Focus on firm success and communities success. Creating economic value through the creation of societal value. Other actors: 1. Governments; creating regulation that stimulate CSV 2. NGO's: cooperation with business to share their expertise. 3. Consumers; making conscious choices. Mosley (2017) GVC's = Global value chain. Subcontracts. Challenges for labor rights in GVC's: - Trends occur; consumers care less about fairtrade. - Cost and time pressures can generate violations of workers' rights. Governance challenges; Intergovernmental institutions are often unwilling or unable to address labour issues. Resources are limited for enforcing rules. Rise of private sector regulation: Private governance= private sector regulation of labor issues. 1. Codes of conducts. Example: UN launching codes. 2. Consumers; willing to pay more for ethically produced items. Has been insufficient to improving labor conditions: Shareholders/consumers less attentive towards labor issues. Monitoring is difficult within a global value chain. Governments may provide the legal rights to organize, but fail to enforce in the right place. Governments have a crucial role. They have to obtain labor laws and support trade unions. They devote the resources towards monitoring and enforcing standards. Circumstances under which labor laws are better protected: I. Democratic regimes. II. Strong unions an left leaning governments. III. In high value-added markets with right aware consumers. IV. Small and less complex GVC's. Easier to hold supply chain partners accountable. Other actors that can play a role; Activistic shareholders, international agreements Global framework agreements = GFA agreements between multinationals and unions. Multi-stakeholder initiatives; national governments and intergovernmental organizations. Waddock (2008) Emerging infrastructure for Corporate Responsibility. 1. Market/business initiatives. I. Codes of conduct, standards and principles II. Monitoring, certification. ISO III. Transparency and Reporting. Systems for ESG Responsible investment: 2. Civil society. I. Multi-Stakeholder initiatives. Across sectors. UN. II. NGO's; activists and watchdogs. III. Media: journals and magazines; publications of ratings and rankings. 3. State/government institutions; hard laws, standards. Challenges for the infrastructure; complexity, a lot of standards, etc. Lecture 4 --------- [Shareholder value ] Approach Increase the company value for the owners in order to generate an appropriate return on the capital invested by them. = making profit. Assumptions/propositions Maximizing shareholder value = CSR = FRIEDMAN. Capital markets are perfect markets. Clearly, measurable success parameters. Managers act opportunistically, purely according to their individual benefit. Critique short-term thinking and action. Risk of manipulation of performance indicators. Increase internal competition. Lack of involvement of various stakeholder groups. Negative image of man. - Negative consequences for people and planet. Exploiting resources and misuse of power. [Stakeholder perspective ] Approach Stakeholder = any group/individual who is affected by or can affect the achievement of an organizations object. Who or what are the stakeholder of the firm; normative. To whom do managers pay attention? Descriptive. Mitchell, agle & Wood (1997) Identification and weighting of stakeholders according to power, legitimacy and urgency. 1. Power; one actor can get another actor to do something that would not otherwise have been done. 2. Legitimacy; generalized perception that the actions of an entity are desirable, proper or appropriate. 3. Urgency; degree to which stakeholder claims call for immediate attention. Assumptions/propositions maximizing profit is important, but it is not the only goal, also satisfying the expectations, securing legitimacy. If the goals are in conflict, they must be mediated. Critique - From shareholder value; stakeholder perspective leads to an increase in the complexity in the management process. Conflicting goals. Endangers the company's survival. - Other critique; Political perspective; Scherer & Palazzo 2007 Globalization leads to the erosion of the state's ability to regulate. - Problems to provide public goods. - GVC's are shifting to regions where the rule of law and democratic institutions are lacking or poorly developed. - Increasing complexity and multitude stakeholder expectations. - New political actors; NGO's, multinationals There is the need for a new perspective on the role of organizations in society that captures political activities of non-state actors and closes regulatory gaps in current global governance. Monological ethical perspectives = theorists take a position outside the social world. Looking for universal principles to investigate/justify behavior. = Virtue ethics, Deontology. Problems I. Discursive deficit; a universal view from nowhere. - It cannot be justified in the world characterized by pluralism of values and cultures. - Validity of a norm can only be checked and justified in a discursive process in which the people are supposed to accept the norm are involved. THUS must discursively interact with actors to define what is right/wrong/fair/unfair. II. Pragmatic deficit; philosophical theories must give priority to democratic processes. Requirements for a new perspective; 1. Globalized concept of political governance; decentralized authority inclusive non state actors. 2. Priority of democracy over philosophy. Impossible to establish universal philosophical principles under pluralism of cultures, values and lifestyles. 3. Normative perspective 4. Discursive perspective; conditions of cultural diversity and value pluralism. - Deliberative democracy tie in with market based economy and the efficiency advantages of controlling via the price system for social coordination. Descriptive approach = clarifies the real business practice for example of the decision-making processes of managers. Normative approach = ethical dimension. Company has the moral responsibility to represent the interests of the stakeholders. Instrumental approach = operational value of the stakeholder. Building stakeholder relationships is essential for the long-run goals, such as profit maximalization. Mitchell et al. 1997 Broad definition of stakeholders; everyone who is affected. Small definition of stakeholders; Those who are essential for the survival of the organization. Stakeholder salience = The degree to which managers give priority to competing stakeholder claims. Stakeholder Attributes; Power, legitimacy and Urgency. Power. Carry out your will without resistance. You have power when you can gain access to coercive, utilitarian or normative means to impose its will in the relationship. Legitimacy. Socially accepted and expected structures. Generalized perception/assumption that the actions of an entity are desirable, proper and appropriate withing social constructed systems of norms. Urgency. Immediate attention. Time sensitivity. Criticality. Time + importance. 1,2,3: latent stakeholders; possession of only one of the attributes. 4,5,6: moderately salient stakeholders; two attributes. Expectant stakeholders; they expect something. 7; highly salient stakeholders.  1. Dominant stakeholder; power remains unused due to only one attribute. Media. 2. Discretionary stakeholder; have a claim but no power to influence the firm. No pressure on managers. NGO's. 3. Demanding stakeholder; buzzing in the ears of managers. Protester. 4. Expectant; dominant stakeholder; powerful and legitimate. Matter to managers. Board directors. 5. Expectant; dependent stakeholder; urgent and legitimate claims. Depend on others for the power to carry out their will. Natural environment. 6. Expectant; dangerous stakeholder; urgency and power. Lack of legitimacy, they will be dangerous. Terrorist. 7. Definitive; stockholder. Critic; ethical framework. Three step process for managers: 1. Managers need to recognize and understand the various stakeholders. Primary/secondary. 2. Managers need to assess the salience of different stakeholders. 3. Managers need to integrate the stakeholder salience into the decision making process. Scherer & Palazzo (2007) Critique on positivist: Reduce CSR as a tool for maximizing profit. Critique on post-positivist: Discursive deficit/pragmatic. Critique modern CSR: No universal rules at all; too much skepticism. Critique critical research strategy: 'ideal speech situation' never equal or ideal. Evolution of CSR, need to go more towards a political conception of CSR. CSR should be understood as an ongoing process of dialogue between business and society. Open and inclusive deliberation. Habermas; Deliberative democracy = establish a political order where economic rationality is circumscribed by democratic institutions and procedures. Tie in with market-based competitive economy and the efficiency advantages of controlling via the price system for social coordination. Basic assumption: Necessary to make routines of bargaining, campaigning, voting and other important political activities more public-spirited both process and outcome. Focus on field level; value creation in a particular network or issue field. Market must not be isolated from democratic control and process of self-control. Political decision making based on dialogue and public justification; lead to more informed solutions. Political co-responsibility From voluntary, business-driven and philanthropic actions to long-term political cooperation between the company and state and civil actors. I. Business are political actors who have a responsibility to take part in democratic processes. II. Stakeholder participation in decision-making shaping CSR initiatives. III. Growing attention between business and NGO's. Global governance; CSR must be discussed in a transnational context. Limitations of deliberative concept of CSR: - Demands a reconceptualization of the responsibilities of national and transnational political institutions. - Conflicts of interest, power imbalances. - How can it be implemented? Schembera 2018 Largest voluntary initiative = UN Global compact. To offer means and guidance to address social, environmental and anti-corruption issues in the absence of legally binding global governance systems. Critique on the UNGC general; Vague principles, little concrete guidance, participants join to benefit from its reputation without the intention to improve the 10 principles, lack of enforcement. COP; corporations have to report annually on the progress they have made in implementing. Critique; lack of evaluation criteria. Cherry picking. I. The longer a company has been a participant in the UNGC, the higher the degree of implementation. II. Strong local UNGC networks positively affect the relationship between the duration of UNGC participation and the level of implementation. Differentiation program to combat blue washing; 1. Alignment of incentive structures 2. Provision of training 3. Installation of a compliance procedure. Lecture 5 --------- Institution and institutionalized rules = Classifications built into society as interpretations. Such rules may be simple taken for granted or may be supported by public opinion. Environment of organizations consists of institutionalized expectation structures that shape the design of the organization. It is about conformity of the organization with socially shared values, normative expectations, laws and general rules that ensures legitimacy. EXAMPLE: Companies are involved in CSR because they are expected to be socially committed. Organizations that incorporate socially legitimized elements into their formal structures maximize their legitimacy. BUT these the formal structure does not always reflect the most efficient solution for coordination or control of problems. - Inconsistent expectations Legitimacy = generalized perception that the actions of an entity are desirable, proper within a socially constructed system. It is not the possession of an organization, it represents a relationship. And it has different expectations/perceptions. 1. Pragmatic; self interest 2. Moral; societal appropriateness 3. Cognitive; comprehensibility, taken for grantedness. Most difficult to achieve. Deepest and most stable type of legitimacy. No explicit evaluation. Organizational decoupling There could be potential conflicts between formal structure and most efficient solution. Different expectations. [Policy-practice decoupling] = Gap between organizational practices and formal structures. EXAMPLE: Greenwashing. How to minimize review and evaluation; - Strategic manipulation, influence of social expectations by manipulating the perception of actors. - Legitimacy spillover; the strong legitimacy of a group of organizations can result in the legitimacy of similar organizations. 'is interdependent' Substantial influence; try to influence the environment so that it becomes more homogeneous. Manipulation of public perceptions AND change of organizational practices. Change the whole business field by actively spread practice as a new benchmark. [Means-ends Decoupling] = organizations comply with policy and the means it prescribes to achieve its sets ends but od not ultimately achieve these ends. From policy practice decoupling means-ends Accountability and transparency trend pushing organizations towards tight policy-practice decoupling. BUT field opacity (duisternis) 1. Opacity of underlying causes of a particular problem 2. Opacity of effects of a policy. Difficulties in establishing causal relationships between policies and outcomes. Difficulties in measuring the exact results of policy implementation. Wijen 2014: enforcing compliance can threaten the achievement of the intended goals. EXAMPLE: Enforcing compliance with child labor prohibitions may increase the poverty in certain contexts, as the children may contribute to family income. [Sensemaking] Continuous interactive communication process whereby actors interpret shared understanding of the world. It addresses the human mindset of the involved actors. Communication = joint activity within the parties coproduce and there is a moment of understanding. NEED to consider; spatial context; actors, interests and interpretations. Time; dynamics of compliance. Eastern; focus on achievements. West; focus on compliance. Through sensemaking; the tension could be limited. I. Leveling; talking to each other. II. Recalibrating; saw each other more often, focus on the progress. Moral reasoning = Scherer & Palazzo (2007). Organization participates in open discourse with stakeholders to discuss the acceptance of their behavior. GOAL; joint solution, negotiate the statues of legitimacy, outstanding role of language. Scott 2013 Institutions = comprise regulative, normative and cultural-cognitive elements that provide stability and meaning to social life. Three pillars of institutions. I. Regulative = instrumental. 'what happens if you don't follow the rules' II. Normative. 'the goals and how to achieve them. How the game should be played'. III. Cultural-Cognitive: Shared understanding that shape the social reality. Common beliefs, shared logic. Culturally supported. Difference between normative/cultural cognitive; evaluation; no evaluation when it is cultural-cognitive. With normative; the society does. About how it should be done and how to achieve it; social obligations. Expectations to behave in a certain way. People start to address each other. Suchman 1995 Organizational legitimacy Generalized assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed systems of norms, values, beliefs and definitions. It is about the relationship with the stakeholders you don't possess it. = stakeholder theory. Two camps: 1. Strategic legitimacy: Operational resource. High level of managerial control. 2. Institutional legitimacy: constitutive beliefs. Three types of legitimacy: I. Pragmatic: self-interests. Stakeholders conform legitimacy based on whether they perceive the organization is serving their interests or is beneficial in some way. Obtain; generate a specific advantage for the broader public. - Exchange legitimacy. Favorable exchanges. 'if products/services meet their needs/expectations' - Influence legitimacy. Being responsive to their larger interests. Incorporates people into their policy-making structures or adopt standards or performance as its own. 'providing stakeholders with the opportunity to shape policies of give feedback' - Dispositional legitimacy. See the organization as individuals and possess desirable qualities. Have our best interests at heart, share our values, trustworthy. II. Moral; positive normative evaluation of the organization and its activities. If the activity is the right thing to do. Obtain; actions of the organizations must be judged as the right thing to do; if it promotes social welfare. - Consequential legitimacy: Organizations should be judges by what they accomplish. OUTCOME - Procedural legitimacy. Garner moral legitimacy by embracing socially accepted techniques and procedures. Absence of clear outcomes. - Structural legitimacy: organizations are seen as valuable and worthy of support because its structural characteristics locate it within a morally favored category. Focus on the general organizational features. 'quality control'. - Personal legitimacy: individual organizational leaders. - Both discursive evaluation. III. Cognitive. Obtained through comprehensibility and presupposition. - Comprehensibility: availability of cultural models that furnish explanations for the organization. - Taken for granted. For things to be otherwise, it is unthinkable.  Wijen 2014 Moved from policy practice decoupling towards means ends decoupling. Not achieving the intended goals while complying with policies. Highly opaque market; Too much emphasis on compliance can work counterproductive. Opacity = difficulty in measuring the exact results of the policy implementation. Example of an highly opaque (non-transparent) market; socio-environmental governance. A lot of different actors, standards. I. Difficulties in fully understand the nature of field practices (multiple actors) II. To causally relate actor behavior and field outcomes III. To correctly measure the exact field impact of actor behavior. How to ensure compliance? To get to the intended goal? 1. Setting rules. And they need to be explicit, not vague. 2. Devising incentives. Making the standards attractive. Risk = symbolic adoption. For example; sustainable labels. MOTIVATION. 3. Building capacity by transferring knowledge. Transferring the 'best practices'. Resolves the LACK OF KNOWLEDGE. The downside of too much focus on compliance; I. Causal complexity = wicked problem. Multiple actors and factors.; strict rules and standardized solutions do not take the complexity into account can lead to unintended side effects or focus on one problem. II. Practice multiplicity; diverse contexts ask for flexible solutions. Uniform rules can lead to the ignorance of local knowledge and transferring the best practices. Strategies to reduce the tension between compliance and goal achievement; 1. Fostering a systemic mindset. Holistic thinking and reflexivity. 2. Stimulating internalization. Creating responsibilities for realization of the goals. Encourage peer learning/social bonding. 3. Creating niche institutions. Practice multiplicity can be better handled by a master institution. Afbeelding met tekst, diagram, lijn, schermopname Automatisch gegenereerde beschrijving Tackling means-ends; running simulations and crafting scenarios. BUT governing an issue become challenging when there is high complexity and uncertainty involved. Schembera et al. (2023) Sensemaking addressing the human mindset (values, interests and expectations) of involved actors. Communication = joint activity, moment of understanding. You need to consider spatial context and time. Corruption is in a multi-institutional context. Recent years, scandals have triggered demands for greater accountability and transparency in the governance of corruption. Response of the west focusing on strict compliance to remedy the decoupling of policies and practices. Compliance focused models have a closed system approach. Means-ends falls short in addressing the key challenges of anti-corruption. These arise from diverse understandings of fundamental aspects of anti-corruption governance across different contexts. Policy practice decoupling and Governance of Corruption = Focus on compliance when tackling policy practice brings risks. Can give a counterproductive effect WIJEN 2014. Should be more focus on 'open' approach. Should take into account different contexts, it crosses borders, different cultures, understandings. [Sensemaking approach] interactive and communicative process whereby actors interpret phenomena and develop shared understandings of the world. West; compliance focused East; not compliance focused Four mechanisms contribute to an ongoing and open-ended meaning formation process: A. Localized theorizing; interpret of challenges of Corruption through their own local lens. In this way different approaches between east and western. Global shared to distinct context specific. B. Leveling (gelijk maken) = Learning process that led different actors in different contexts to realize that they need to interact with each other to overcome polarized viewpoints. Level different viewpoints, assumptions and expectations across different contexts. 1. Transferring: Be the example. Transferring the best practices. West to East. 2. Contextualizing: to transfer the best practices in your context. 3. Problematizing: questioning different approaches. 4. Admitting failure; failure of attempts to transfer the best practices to non-Western contexts. - It led to a reduction in stereotyping and paved the way for more open-ended debate on greater exchange of viewpoints and perceived problems across different contexts. - The recognition of the need to interact with each other C. Recalibrate: joint sensemaking efforts towards globally shared understanding. Jointly negotiate a shared understanding of policies and practices and means and ends. Repeated interaction. D. Public criticizing: The embeddedness of the processes in global sensemaking implies the occurrence of new gaps leading to public criticism. Oriented to achieve joint progress. Meaning of policy, practice, means and ends is continuously negotiated over time. HOW can Corruption be studied from an institutional theory perspective; The theory helps to explain how corruption can be a product of weak/dysfunctional institutions and shapes them. Connected to institutional environments. Scott 2013 Regulative; rules and laws, against corruption. Institutionalized corruption is wrong, but sometimes taken-for-granted. Suchmann 1995 Cognitive legitimacy; no evaluation. Assumption that it was the best way done. Lecture 6 --------- How can organizations contribute to society in a meaningful way? What is the role of organizations? What should they do? Organizations can make choices Organized irresponsibility = actors are creating risks. Are able to avoid responsibility. It is difficult to attribute the creation of those risks and consequences to specific actors. Risk has become a defining characteristic of modern society, and it is created by society itself. Link with non-liability = legal systems fail to establish liability; cause of the damage cannot be traced to a single entity. Regulatory environment is often individualistic in nature; however, organizations are groups of people, complex, long supply chains. EXAMPLE: MLM = Multi-level marketing. Focuses on recruiting and getting rich. = Strategy that encourages existing members to bring recruits into business by promoting and selling their offering to them. Participants are paid a percentage of their recruit sales. Recruits become distributors, who are independent. = Pyramid. 1. High number of actors; less likely to held accountable for damages; who is accountable. 2. Complex causalities. Division of labor. 3. Long supply chains; legal division/independence. 4. Globalized/locally dispersed. This structure/design of MLM: can help to avoid accountability. Regulatory/legal context can fail to account for organizational misbehavior. Organizing responsibility: Case of AgroFair Increasing fair-trade fruits. Involving smaller companies results in improving their conditions. Market leader in fair trade fruits; - Minimum price guarantee with fair trade premium; able to comply with the requirements of sound agricultural practices. And to respond to social criteria. - Continuous social and environmental improvements of local farmers and their communities. Step-by-Step model for designing and analyzing. 1. Provisional identity What does agrofair value? Instrumental or responsible mode? 2. Field orientation Important stakeholders; power/urgency/legitimacy. 3. Specification identity and incorporation mode Sometimes you need to go back to field orientation; refinement is necessary. Certifications. 4. Specification institutions - Regulative; Existence of regulations? If they go beyond; influence; achieving changes on EU level. - Normative/cultural- cognitive. What value, norms and programs are relevant? 5. Decision premises Curran 2018a. Organizational irresponsibility = relationship between agents in which the agents together cumulatively and collectively generate risks for others, but in which all the agents are able to minimize or avoid the culpability for these impacts. Ulrich Beck Link with non-liability; legal systems tend to undermine liability when damages can not be traced back to a single agent. Organized irresponsibility principle = the greater the level of complexity and number of different legal agents, the lower the level of culpability that will be allocated for the risk. Financial crisis and climate change crisis. Risk arbitrage; amplify risk levels to increase the value without bearing the risk. = Amplify risks in ways in which they are placed to benefit from the returns from the risk, while being able to avoid being held responsible for the losses emerging from the risks. Relationship between organizational irresponsibility and risk arbitrage: I. Risk arbitrage increases inequalities. Favoring those with greater power and economic resources. II. Intensifying social risk levels Curran 2018b. Corporate crimes are organizational crimes. The individualism of criminal law cannot capture the dynamics of corporate crime; unlikely to reside to an identifiable person. Power relations continue to be a part of organized irresponsibility. - An individualistic law is not suitable while the cause in corporations is often whole variety of individuals. - An collective law is not suitable while the burden tends to fall on those who are at least responsible. Individuals can disavow responsibility by deflecting blame onto the collective. Organizational responsibility problem is not solely in the individualism of the law or the collectivism of the law, but the dysfunctional combination of both of them. When culpability is to be distributed, the individuals who occupy the collective agents are able to revert to their individual identity and disavow the action of the collective agents. Passas, 2005 Some crimes committed may constitute no criminal law violations, but can have negative effects for society = Legal corporate crimes. EXAMPLE: dropping environmental waste in countries without strict regulations and higher costs. Different costs and externalities appear by these criminal laws; I. Physical costs; death, injuries. II. Financial costs; healthcare expenses. III. Environmental damage; pollution, depletion of natural resources. IV. Undermining democratic system; exploitation of developing countries. V. Crime externalities; gambling contributing to higher crime rates. VI. Undermining economic growth; practices that exacerbate wealth inequality. VII. Undermining international trade; protectionist rules. How to deal with? The new agenda; 1. Consistent application of the definition of organized crime. 2. Engaging with thinking outside the box when addressing harmful corporate practices. 3. Corporate influence on the legislative processes must be curtailed. (No influence of elections, no affecting votes) 4. Transparency and responsibility 5. Substantive discussion must be had and change social norms. Addressing global asymmetries. It needs public support; change social attitudes by appeal to plubic's sense of justice. Externalities can touch them. Provide concrete examples. The case of AgroFair AgroFair applies a business model that provides an answer to gaining market access for smallholder producers. Connecting smallholder producers with EU customers. Challenges of the fruit system at the moment: 1. High concentration of few large companies 2. Intensive production methods 3. Exclusion of smallholder producers. Struggle to meet the economic of scale. Pillar: Co-ownership model: 1. Fair trade certification 2. Co-ownership in a vertically integrated supply chain. Banana producers became shareholder of the company = bottom up supply chain integrations. 3. Direct market access 4. Brand recognition. Success; market growth, improved livelihoods, positive environmental impact. Dilemma's in fostering co-ownership; I. Challenge between self-interest of the farmer and of the company. II. Capacity building. III. Difficult to unite producer organization of various fruit categories. Produced differently. IV. Conflicting interests as producer and being a manager. Arrival of multinationals (trend for fair trade) might again threaten to push smallholder cooperatives out of the international retail market. How to move forward; building strong partnerships. Advocating for policy change. Exploring the opportunities for diversification. STEP-BY-STEP model For designing an organization STEP 1 Provisional identity What does AgroFair Value? Responsible or instrumental mode? CSR Focus? Philanthropic, risk management or value creation? STEP 2 Field orientation Mitchell et al. 1997 Important stakeholders Descriptive, normative, instrumental STEP 3 Specification Identity and Incorporation mode Which incorporation mode? Achterbergh & Vriens 2009 STEP 4 Specification institutions Scott 2013 Beyond or stick to programs. Explain based on pillars; regulative, normative, cognitive. STEP 5 Translation to decision premises Internal; how to they make decisions Who has a say? Strategic regulation; goals, strategy formulation Design regulation; communication pathways, tasks, rules, plans