Human Behavior & the Corporate Social Responsibility of Firm Leaders

Economic analysis typically attributes differences in corporate social responsibility (CSR) between firms to either, 1) differences in beliefs concerning what companies should do, or 2) differences in the ‘objective’ situations faced by firms. Whether firm leaders should take a ‘morally neutral’ / instrumental view of stakeholders, or take an intrinsic view of stakeholders guided by a ‘moral compass’, is generally viewed as an exclusively normative issue. Given the assumptions concerning individual and firm behaviour from traditional economic theory, the instrumental and morally neutral perspective wins unequivocally leaving situational characteristics such as firm size, industry dynamics, and the ability to differentiate products as the only causes for the observed differences in CSR between firms that are explored.