Compliance with socially responsible norms of behavior:reputation vs. conformity

The Social Responsibility of Business typically involves self-regulation, which entails spontaneous compliance with social norms or standards that are not imposed by hard law. In the debate on Corporate Social Responsibility, its voluntary basis has been stressed both in some official documents1 and, more significantly, by the major scholars of the stakeholder approach. In particular, the effectiveness of social responsible behavior requires a change in beliefs and motivations rather than in formal rules. For example, Margaret Blair and Lynn Stout (1999) argue that the internal hierarchy of public corporations should play a mediating role among all the team members (stakeholders of the firm) that does not require a change in the corporate law, but a shift from the dominant paradigm of shareholder primacy towards a team production model. Also in the stakeholder theory (Freeman et al. 2010), the importance of modifying the current mindsets about business is highlighted as a determinant factor for “putting business and ethics together” in a way that is implementable in the real world. In order to understand the mechanisms that lead economic agents to comply with socially responsible norms that are not legally enforced, and do not coincide with profit, or self-interest, maximization, our starting point is the analysis of Corporate Social Responsibility as an institution, in the sense of Aoki (2001), who conceptualizes institutions as equilibria, i.e. self-enforcing systems of beliefs and behaviors, where individual and collective cognitions and motivations are intertwined. In this interpretation, the organizational process may be considered as a game among agents with different knowledge, beliefs and motivations; an institution refers to that portion of agents’ equilibrium beliefs common to (almost) all of them regarding how the game is actually played.