Corporate Social Responsibility in Russia and Comparative Analysis Perspective: For Ethics and Fairness in Markets

Satoshi Mizobata
KIER (Kyoto Institute of Economic Research), Kyoto University mizobata@kier.kyoto-u.ac.jp Singger-Polignac Foundation, France: Ethics and Religions for a Fair Economy 23-24 January 2014

Why KIER engages comparative economics?: Market quality theory, CIA (comparative institutional analysis) and comparative economic studies

Market quality concept as an index capturing how well a market functions. High quality markets are indispensable for achieving healthy economic growth. (Yano, 2009) Comparative approach from stakeholder view: Institutional approach and variety of capitalism approach: corporations in evolving diversity increased interests in CSR and social exchanges between business corporations and other social entities. (Aoki, 2010) There is no single model of good corporate governance. Different legal systems, institutional frameworks and traditions mean that a range of different approaches have developed around the world. (Preface, OECD Principles of Corporate Governance, 1999) CSR characterizes its own society and economic system.

Original research division of KIER

Comparative approach

CSR (corporate social responsibility) as a research target

Economic institution analysis

Market quality theory CIA and institutional approach

Fairness and competition

Ethics and institutions

1. CSR concept and approach

General view: compliance with rules and norms and profit-making. The companys behavioural responsibility which guarantees unity of companys existence and development of the society and actively supports it. (Davis and Blomstrom, Business and Society, 1975) Shareholder (neoclassical) approach: The view has been gaining widespread acceptance that corporate officials and labour leaders have a social responsibility that goes beyond serving the interest of their stakeholders or their members. This view shows a fundamental misconception of the character and nature of a free economy.There is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud (Milton Freedman, Capitalism and Freedom, 1962, p.133). Peter Drucker: On the one hand, he strictly criticized shareholder capitalism as a harmful and irresponsible logic. In the time when knowledge value is important than capitals value, human capital must be focused. On the other hand, he criticized the contemporary CSR concept. The new concept of social responsibility no longer asks what the limitations on business are, or what business should be doing for those under its immediate authority. It demands that business take responsibility for social problems, social issues, social and political goals, and it become the keeper of societys conscience and the solver of societys problems. Managers need to be able to think through the limits on social responsibility set by their duty to the performance capacity of the enterprise in their charge. Stakeholder approach: Corporate society has been focused based on this approach. New ethical approach: enterprises contributing social goodness; deterrent to markets with no control; CSR is based on ethics.

2. Characteristics of CSR by size and by force in Russia: contradiction and mixture

Hyper CSR: bigger than its appearance Personal philanthropy is remarkably smaller than corporate philanthropy (1/15). This relation is contrary to the developed countries, and it shows a specificity of civil society. (L.Polishchuk, 2009) 70% Russian companies participate in philanthropy in any forms. More than 100 philanthropy funds have already been established in Russia. (Beryaeva and Eskindarov eds., 2008, p.112) Poor CSR: shabby from the global standards Backwardness of institutions and motivation of Russian companies; reluctance to open their non-financial reports because of opaqueness of ownership; preferring obligation to voluntarism; volatility to business conditions Obligatory CSR: formalization of CSR in the national level and in the regional level using the official agreements; PPP; formal impact from government and business society (Social Charter on Russian Business); social consciousness Voluntary CSR: an increase of non-financial reports issues; social function of enterprises; insider-oriented; enhancing civil society by NGOs and NPOs (e.g. environment protection)
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3. Great discrepancies between Russian CSR and global standards: Russian CSR pyramid
Social philanthropy

desired
expected

Social philanthropy
desired

Ethical responsibility

Ethical responsibility
requested

expected

Legal responsibility

Legal responsibility

requested

Economic responsibility

Economic responsibility
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4. Evolution of CSR: a product of path-dependency

CSR institutions testifies path Corporate Social Function dependent evolution of corporate business society. In transition economies, the social assets could not be transferred smoothly to municipalities. Globalization strongly affected not only on Original Social Function market structure but also on enterprise structure. As a result, Newly imported CSR CSR is a mixture of western and domestic. Strong influence of the Soviet socialist legacy hyper and shabby; public and regional policy; inward oriented behaviour mixture of Continental and path dependent Each country has its own personality. Time (impact of ethcis) 1992 2000 6

5. Stakeholders determine CSR and its type.

Influence of stakeholders (Russia) Influence of stakeholders (Japan)

managers

Conclusion: For fairness and ethics from CSR

Who pays costs of CSR?: society (EU), community (Japan), government (Russia) R model: Market failure is compensated by the government. The Government linkage promotes CSR.--- Corporate Russia J model: Government failure is compensated by company. Market competition promotes CSR.--- Corporate Japan High market quality (CSR based market; following the rule and high compliance) has enhanced fairness of the market and the society. Economic development and innovation needs higher quality market. There is no single model of CSR. 1) Social institutions and voluntarism can be regarded as slow-moving in transition, compared with some economic fast-moving institutions such as prices, transactions. 2) Ethics is strongly dependent on the social norms which has been conveyed from the past. J model: The three way satisfaction (seller, buyer, society) in 18th century R model: corruption and misuse of institutions
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