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ORIGINAL ARTICLE
The social regulation of corporate social irresponsibility:
Reviewing the contribution of corporate reputation
Giulio Nardella1Stephen Brammer2Irina Surdu3
ESCP Business School, London, UK
Bath School of Management, University
of Bath, Bath, UK
Warwick Business School, University of
Warwick, Coventry, UK
Correspondence
Giulio Nardella, Sustainability & Global
Strategy, ESCP Business School, London,
UK.
Email: gnardella@escp.eu
Abstract
Whilst it is assumed that stakeholders penalize and deter corporate social
irresponsibility (CSI), instances of CSI persist. Correspondingly, the literature
on social regulation—which describes how non-governmental stakeholders exert
their regulatory influence on organizations—remains fragmented. To act as a
springboard for future studies, this review examines the contribution of corporate
reputation to our understanding of how CSI is socially regulated. Our analysis of
alarge(n= studies) multidisciplinary body of literature unearths a set of
nuanced relationships between CSI and corporate reputation. We synthesize a
conceptual framework in order to map the diverse landscape of literature and its
contributions. We then highlight important gaps among—as well as between—
research streams to present a future research agenda. Accordingly, this review
contributes to closing ‘the loop’ between CSI, corporate reputation and social
regulation, thereby opening up new pathways for future research.
INTRODUCTION
At minimum, organizations are expected to meet those
responsibilities enshrined in law (Aguinis & Glavas, ;
Carroll & Shabana, ; Jamali & Karam, ; Lee,
). Yet, all-encompassing prescriptions for business
practice are challenging for legislators (Buckley, ;
Campbell, ; Foss et al., ). Thus, to address the
limitations of the state, non-governmental stakeholders
are also expected to ‘regulate’ organizational behaviour
(Campbell, ; Freeman & Evan, ; North, ).
When acting in a social regulatory capacity, corporate
social irresponsibility (CSI)—defined as ‘claims of stake-
holder impairing behaviour ascribed to organizations fol-
lowing perceived or substantive inter/intra-organizational
(in)actions which diverge from stakeholder expectations,
rules of law and/or institutional logics in home or host
markets’ (Brammer et al., , p. )—is expected to be
penalized and deterred by non-governmental stakeholders
© British Academy of Management and John Wiley & Sons Ltd.
(Aguilera et al., ; Pfarrer et al., b;Raytonetal.,
). Although non-governmental stakeholders lack the
legislative authority of governments, the removal of their
approval and support is assumed to have significant ‘conse-
quences’ for corporate reputations, consequences that are
thought to be worth avoiding (Armour et al., ;Barney,
; Frooman, ; Hall, ).
However, in practice, organizations are not always
deterred from behaving irresponsibly (Barnett, ;
Carroll & Olegario, ; Davis, ; Neville et al., ;
Surroca et al., ). Tax avoidance (e.g. Google, Amazon,
Starbucks), human rights abuses (e.g. Primark, Apple,
H&M, Nike, Lockheed Martin) and environmental harm
(e.g. BP, ExxonMobil, DuPont, Volkswagen Group) are
among the many areas in which CSI persists. Though
CSI remains a perseverant feature of the business land-
scape, corporate reputation has been theorized to be an
important ‘informal enforcement mechanism’ which
penalizes, and hence deters, CSI (Atanasov et al., ,
Int J Manag Rev. ;–. wileyonlinelibrary.com/journal/ijmr 1
2NARDELLA .
p. ; see also Karpoff, ). Accounting for a large
proportion of total company value, corporate reputations
are critical social approval assets (Pfarrer et al., ), the
value of which is dependent on stakeholder perceptions
(Fombrun & Rindova, ; Fombrun & Shanley, ).
Due to the (often assumed) ease with which negative
stakeholder perceptions can be generated, management
scholarship has, and largely continues, to propagate the
notion that reputations are distinctly ‘fragile assets’ (Hall,
; Plummer, ;Wang&Li,).
Nevertheless, research has begun to nuance our under-
standing of CSI and corporate reputation. Studies which
delineated CSI from corporate social responsibility (CSR)
(Clark et al., ; Strike et al., ), for example, have
theorized that the mechanisms which promote/deter CSI
are multifaceted (Barnett et al., ; Mena et al., ).
Research has also illustrated that corporate reputations
appear more resilient to CSI (Nardella et al., ;Shu&
Won g, ), as well as more complex than prior studies
had implied (Ravasi et al., ; Roulet, ). In parallel,
responsible business advocates are increasingly regarding
CSI as a key concern, and as such have called for renewed
interest in the ‘quasi’-regulatory role of non-governmental
stakeholders (Brammer et al., ; Buckley et al., ;
Oxford Centre for Corporate Reputation, ). Corre-
spondingly, the longstanding idea that non-governmental
stakeholders socially regulate CSI (Smith, ) continues
to be questioned among increasingly diverse domains of
scholarship (Aguilera et al., ; Buckley, ;Haack&
Scherer, ; Nardella et al., ; Whittington & Yakis-
Douglas, ; Zaman et al., ). Yet, the contribution
of corporate reputation to this debate remains obscured, as
the literature remains fragmented.
In the absence of efforts to consolidate the literature,
studies have explored a myriad of interrelated, overlap-
ping and sometimes ambiguous concepts when referring
to social regulation, that is, the process by which non-
governmental stakeholders exert regulatory influence on
organizations. A multitude of terms, including ‘corporate
control’, ‘non-state market-driven governance’, ‘external
governance’, ‘implicit regulation’ and ‘soft regulation’, are
among an increasingly growing list of concepts propagated
within siloed and distributed literatures (e.g. corporate
governance, business ethics, finance, economics, strategy
and international business, to name a few). Currently,
researchers have lacked the ability to: () evaluate the con-
tributions of extant research; () generate an overview,
as well as () identify important gaps in our understand-
ing. Questions regarding how,when and to what extent
non-governmental stakeholders penalize and deter CSI
remain. We thus propose that more work is needed to
unify the considerable, as well as scattered, branches
of literature on social regulation. The consolidation of
this field is pertinent, as our understanding of social
regulation may hold the solutions needed to curb CSI,
as well as attend to the many grand societal challenges
exacerbated by irresponsible corporate conduct.
To act as a springboard for future research and galvanize
literature unification, this study consolidates the contri-
bution of corporate reputation to our understanding of
how CSI is socially regulated. Due to the multidisciplinary
appeal of CSI, corporate reputation and social regulation
(Aguilera et al., ; Dupont & Karpoff, ; Pfarrer et al.,
b), we begin by outlining the landscape of concepts
and definitions. Here, we pay particular attention to the
concept of social regulation, given the multitude of terms
used to discuss social regulatory processes, as well as CSI
and corporate reputation. Further, we go on to describe
our methodology (Briner & Denyer, ) to systemati-
cally review the literature (n= studies, between
and ). Subsequently, we present our key results. In
the main body of the review, we outline the literature’s
thematic content. Careful content analysis informs the
development of our conceptual models, which describe ()
key relationships within extant research and () important
knowledge gaps. Lastly, we propose an agenda for future
research. In differentiating our review from past works
(e.g. Aguilera et al., ; Clark et al., ; Valor et al.,
; Zaman et al., ), we shed light on the role of cor-
porate reputation in socially regulating CSI. Overall, we
reveal that there is considerable scope to advance this body
of literature, for the benefit of scholars, policymakers and
society alike.
Accordingly, this paper makes three main contributions.
First, we consolidate the literature on corporate reputa-
tion’s role in ‘socially regulating’ CSI. In so doing, we offer
researchers much-needed clarity concerning a previously
fragmented literature. By synthesizing knowledge across
multiple disciplines, we also present an overview, enabling
comparisons to be made. Consolidating the literature is
timely, with debates regarding CSI penalties and deter-
rents accelerating (Cuervo-Cazurra et al., ; Davis, ;
Whittington & Yakis-Douglas, ; Zaman et al., ).
Second, we contribute to the literature concerning the
regulation of corporate conduct (Campbell, ; Haack
& Scherer, ;Mayer,)aswellascorporaterepu-
tation (Bitektine et al., ; Mishina et al., ;Ravasi
et al., ) by offering a nuanced theoretical frame-
work to guide future research development that integrates
CSI, corporate reputation and social regulation. Though
significant insights have been generated previously, the
literature remained scattered among siloed branches of
scholarship, hindering diffusion of key contributions.
For instance, in the absence of wider recognition, the
assumption that corporate reputations are distinctly ‘frag-
ile’ assets is still propagated, limiting the appreciation
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 3
of reputation’s complexity and, thus, the development of
more refined perspectives.
Finally, our review contributes to the theoretical devel-
opment of CSI (Clark et al., ; Jain & Zaman, )
and the emerging literature on the challenge of penalizing
and deterring irresponsible business activities (Nardella
& Brammer, ; Whittington & Yakis-Douglas, ).
Specifically, the theoretical frameworks provided in our
study enrich the literature by closing ‘the loop’ between
CSI, corporate reputation and social regulation. From this,
we identify important gaps in our understanding, thereby
opening up new paths for future research.
CONSTRUCTS AND DEFINITIONS
Social regulation
In addition to the role played by the government, the
notion that non-governmental stakeholders exert influ-
ence on businesses is well established (Campbell, ;
Freeman & Evan, ; Meyer & Rowan, ; North,
). In turn, work which has articulated the precise
nature of social regulation and, critically, distinguished
this concept from others remains limited. Concepts such as
non-state market-driven governance, implicit regulation,
private governance, external corporate governance and
multi-stakeholder initiatives (among many others) have
emerged to describe how stakeholders ‘regulate’ organiza-
tional behaviour. Many terms have been propagated, each
focusing on different aspects of non-governmental stake-
holders’ regulatory behaviour. However, we have yet to
render a holistic conceptualization. Thus, Table provides
key definitions of social regulation in order to delineate
these from related concepts.
Since precise definitions are ‘fundamental to the
progress of all fields of scientific inquiry’ (Greve et al., ,
p. ), building upon extant literature, we establish the
following definition:
Social regulation. The process by which non-
governmental stakeholders exert coordinated,
diffuse or latent influence on organizations
to voluntarily adjust their behaviour by lever-
aging the risk and/or cost of stakeholder
disapproval, conflict and reprisal.
We provide four main justifications for our proposed def-
inition. First, conceptions of social regulation tend to imply
a process of business regulation outside of the boundaries
of the state. The notion of ‘governance without govern-
ment’ (Nolan, ), therefore, represents one of the core
elements of social regulation. Accordingly, our proposed
definition addresses the influence of non-governmental
stakeholders in exerting pressures on business. Non-
governmental stakeholders are distinct, as their legitimacy
mainly stems from the ‘social license to operate’, rather
than legislative authority (Buhmann, ). Second, the
above definition specifies that social regulation can emerge
via three main manifestations: () through coordinated
stakeholder efforts, such as activism/social movements
(King & McDonnell, ) and multi-stakeholder ini-
tiatives (de Bakker et al., ); () diffusely,among
unorganized, individual members of society, who remain
central in the process of contesting corporate reputations
and influencing performance (Ravasi et al., ); and ()
in latent form, as organizations anticipate and respond
to ‘known’ stakeholder concerns in lieu of manifesting
disapproval, conflict and reprisals (Pfarrer et al., b).
Third, our proposed definition explicitly identifies the
voluntary response of the firm in its capacity to appreciate
and react to social regulation. Though this does not imply
a ‘willingness’ by businesses to conform (Durand et al.,
), firms choose to adapt to stakeholder pressure.
Finally, social regulation involves a process of leveraging
the risk and/or cost of stakeholder discontentment and
sanctions. The threat of stakeholder disapproval and sanc-
tions has been mostly implicit or, indeed, absent from prior
conceptions. In our proposed definition, we emphasize
that (at minimum, the threat of) stakeholder disapproval,
conflict and reprisal is one of the most critical means by
which social regulation is able to motivate organizations
to engage with stakeholders and/or alter their behaviour.
In addition, here, we also acknowledge the emerg-
ing ‘corporate control’ literature (Barnett et al., ;
Jain & Jamali, ; Walsh & Seward, ;Whitting-
ton & Yakis-Douglas, ). Conceptually, there are
(potentially) strong parallels between ‘corporate control’
and social regulation. Yet, corporate control is not included
in our overview of related concepts because ascertaining its
precise meaning remains obscured by inconsistent appli-
cations. For example, within the finance and international
business domains, corporate control refers to the process
by which a controlling financial stake in a company is
acquired (Glendening et al., ). As such, we under-
score the need for literature consolidation and conceptual
clarity.
Corporate social irresponsibility
Though the term ‘irresponsibility’ may intuitively invoke
meaning which allows for lay understanding, a holistic
definition of CSI has, until recently, been lacking. Issues
with defining the CSI concept have emerged—partly
as a consequence of its complex, socially constructed
4NARDELLA .
TABLE 1 Definitions of social regulation and related concepts
Concept Author(s) (year: page)
Non-government
stakeholders
Voluntary
business
responses Sanctioning Examples
Social regulation Pfarrer et al. (b: ) • • ‘an alternative to imposing formal sanctions to correct corporate
wrongdoing [that] involves informal social forces’
Lim and Tsutsui (: ) • • ‘involves attempts by various actors to interpret, guide, and control
economic processes that increasingly span national boundaries’
Sheehy (: ) • ‘private business self-regulation’
Civil regulation Vog el (:) • • ‘voluntary, private, nonstate industry and cross-industry codes that
specify the responsibilities of global firms for addressing labor
practices, environmental performance, and human rights
policies’
Implicit regulation Rayton et al. (: ) • • ‘[the avoidance of] potential reprisals from constituents, politicians
and potential regulators’
Non-state market-driven
governance
Cashmore (:) • • ‘the market and its supply chain provides the institutional setting
within which governing authority is granted and through which
broadly based political struggles occur’
External corporate
governance
Aguilera et al. (: ) • ‘mechanisms that originate outside the focal firm, which help to
ensure that executives respect the rights and interests of
company stakeholders, guarantee that stakeholders engage in
fruitful relationships, provide financial transparency, and offer
overall strategic guidance’
Shi et al. (: ) • ‘involves attempts by various actors to interpret, guide, and control
economic processes that increasingly span national boundaries’
Private governance Falkner (:–) •‘the interactions among private actors [which] give rise to
institutional arrangements that structure and direct actors’
behavior in an issue-specific area’
Brammer et al. (:) •‘[the] social space of private, but collective forms of self-regulation’
Moral regulation Toivonen and Martí
(:)
• ‘form of institutional intervention in which some actors act to
problematize the conduct, values, behavior, or culture of others
by imposing different forms of regulation upon them. These
projects seek to construct, impose, and enforce any normative
judgment that some conduct is intrinsically bad or wrong’
Multi-stakeholder
initiatives
Mena and Palazzo (:
)
•‘private governance mechanisms involving corporations, civil
society organizations, and sometimes other actors, such as
governments, academia or unions, to cope with social and
environmental challenges across industries and on a global scale’
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 5
nature. Indeed, the significant interpretive scope of CSI
has led some scholars to propose that ‘corporate behavior
is socially irresponsible only to the extent that observers
perceive it as such’ (Lange & Washburn, ,p.).
Challenges in defining CSI have also arisen with respect
to integrating the subjective dimensions of CSI, alongside
its potential to encompass objective illegality (Nardella
& Brammer, ). Whilst many definitions of CSI have
traditionally emphasized the former, relatively more
recently, critical efforts have been made to integrate and
extend the multiple dimensions of CSI, including aspects
of ‘harm’, ‘intentionality’ and ‘culpability’, among others
(e.g. Clark et al., ; Jain & Zaman, ;Murphy&
Schlegelmilch, ).
In Table , we illustrate the background of CSI def-
initions, together with key definitions of the closely
related concepts: ‘corporate misconduct’ and ‘organiza-
tional wrongdoing’. The definitions shown in Table
reveal that the distinctiveness between CSI, organizational
wrongdoing and corporate misconduct is a relatively nar-
row one, which constitutes an opportunity for scholars to
integrate or better delineate these concepts.
In this paper, we adopt a broader notion of CSI, and
hence employ the following definition:
Corporate social irresponsibility.‘Claimsof
stakeholder impairing behavior ascribed to
organizations following perceived or sub-
stantive inter/intra-organizational (in)actions
which diverge from stakeholder expectations,
rules of law and/or institutional logics in
home or host markets’ (Brammer et al., ,
p. ).
Brammer et al. () offer a holistic definition of CSI
which adds further clarity to the concept, due to the inclu-
sion of CSI behaviour that follows organizational ‘inaction’
and the recognition that what is judged to be CSI may
diverge significantly between markets/locations. Notably,
whilst CSI scholars have typically focused on manifest
irresponsible conduct, inactivity to address sources of irre-
sponsibility may also qualify as CSI behaviour. Corporate
inactions to address CSI, as well as divergence in CSI
perception, are most acute within the international opera-
tions and global supply chains of multinational enterprises
(cf. Crane et al., ; Narula, ).
Corporate reputation
Contrastingly, scholars have long deliberated on the pre-
cise meaning of corporate reputation, thus distinguishing
reputation from other constructs, such as image, identity,
celebrity and legitimacy (Barnett et al., ; Bitektine
et al., ; Chun, ; Lange et al., ; Pollock et al.,
;Walker,). We outline key definitions of corporate
reputation in Table below.
In this review, we adopt the following definition:
Corporate reputation. ‘A collective representa-
tion of a firm’s past actions and results that
describes the firm’s ability to deliver valued
outcomes to multiple stakeholders. It gauges
a firm’s relative standing both internally with
employees and externally with its stakehold-
ers, in both its competitive and institutional
environments’ (Fombrun & van Riel, ,
p. ).
Research on corporate reputation focuses on the nature
and content of stakeholder perceptions of the firm
(Bitektine et al., ) and the dynamics that enable
individually held judgements to aggregate into collective
representations of the organization (Ravasi et al., ).
Corporate reputations can therefore be shared among
(Lange et al., )—but sometimes diverge between
(Ertug et al., )—various stakeholder groups. Fombrun
and van Riel’s () definition is therefore sufficiently
broad to capture the contribution of corporate reputation
across multiple disciplines.
RESEARCH METHODS
In this study, we employed the systematic review evidence
synthesis approach (Briner & Denyer, ), whereby we
engaged in: planning the review; searching and locat-
ing articles; data coding and analysis; appraising and
synthesizing key contributions; and evaluating best evi-
dence to formulate future research directions (see also
Jones & Gatrell, ). Given its relative maturity as a
research area—and the multiple disciplines which publish
on CSI and corporate reputation—a systematic review evi-
dence synthesis approach is an effective means of bringing
together studies based on a set of key themes. By synthe-
sizing the literature, we aim to achieve a greater level of
understanding and conceptual development beyond that
of any individual study.
Planning the review and locating articles
We developed an inclusive list of search terms drawn from
different disciplinary fields. The search was conducted in
Web of Science (WoS) because ‘it is one of the most compre-
hensive databases incorporating research from numerous
6NARDELLA .
TABLE 2 Definitions of corporate social irresponsibility (CSI) and related concepts
Concept Author(s) (year: page)
Social
construct
Legal
construct
Business
actions
Business
inactions Examples
Corporate social
irresponsibility (CSI)
Armstrong (: ) • ‘a decision to accept an alternative that is thought by the
decision maker to be inferior to another alternative when
the effects upon all parties are considered. Generally, this
involves a gain by one party at the expense of the total
system’
Strike et al. (: ) • • • ‘the set of corporate actions that negatively affects an
identifiable social stakeholder’s legitimate claims’
Harris and Bromiley (:
)
• • • ‘the organisational pursuit of any action considered
illegitimate from an ethical, regulatory, or legal standpoint’
Kotchen and Moon (: ) • • ‘a set of actions that increase externalised costs and/ or
promote distributional conflicts’
Oh et al. (: ) • • ‘a firm’s violations of regulatory guidelines and a failure to
meet minimum standards’
Brammer et al. (: ) • • • • ‘claims of stakeholder impairing behavior ascribed to
organizations following perceived or substantive
inter/intra-organizational (in)actions which diverge from
stakeholder expectations, rules of law and/or institutional
logics’
Organizational misconduct Greve et al. (:) • • • ‘behavior in or by an organization that a social-control agent
judges to transgress a line separating right from wrong;
where such a line can separate legal, ethical, and socially
responsible behavior from their antitheses’
Neville et al. (:) • • • ‘activities and actions that organizational members engage in
to deceive or swindle investors or other key stakeholders.
This includes acts that violate laws or regulations or that
are legal but considered morally wrong’
Corporate wrongdoing Zavyalova et al. (: ) • • • ‘firm behaviours that place a firm’s stakeholders at risk and
violate stakeholders’ expectations of societal norms and
general standards of conduct’
Fiaschi et al. (: ) • • ‘transgressions of international soft law instruments’
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 7
TABLE 3 Definitions of corporate reputation
Author(s) (year: page) Nature Content
Aggregate
assessment
Stakeholder
specificity Examples
Weigelt and Camerer (: ) • • ‘a set of attributes ascribed to a firm, inferred from the firm’s past
actions’
Fombrun and Shanley (:) • • ‘the outcome of a competitive process in which firms signal their key
characteristics to constituents to maximize their social status’
Fombrun (: ) • • • ‘a perceptual representation of a company’s past actions and future
prospects that describes the firm’s overall appeal to all of its key
constituents when compared with other leading rivals’
Post and Griffin (:) • • ‘corporate reputation is a synthesis of the opinions, perceptions, and
attitudes of an organization’s stakeholders’
Cable and Graham (: ) • • ‘a public’s affective evaluation of a firms’ name relative to other firms’
Deephouse (:) • • ‘the evaluation of a firm by its stakeholders in terms of their affect,
esteem, and knowledge’
Bromley (: ) • • • ‘a distribution of opinions (the overt expressions of a collective image)
about a person or other entity, in a stakeholder or interest group’
Whetten and Mackey (:) • • • ‘reputation is a particular type of feedback, received by an
organization from its stakeholders, concerning the credibility of the
organization’s identity claims’
Rindova et al. (: ) • • ‘stakeholders’ perceptions about an organization’s ability to create
value relative to competitors’
Rhee and Haunschild (:) • • • ‘the consumer’s subjective evaluation of the perceived quality of the
producer’
Carter (: ) • • ‘a set of key characteristics attributed to a firm by various
stakeholders’
Barnettetal.(:) • • • ‘observer’s collective judgments of a corporation based on
assessments of the financial, social, and environmental impacts
attributed to the corporation over time’
Walker (: ) • • • ‘a relatively stable, issue specific aggregate perceptual representation
of a company’s past actions and future prospects compared against
some standard’
8NARDELLA .
disciplines’ (Walker, , p. ). The search string used
to gather the relevant articles includes (but is not limited
to) CSI terms such as: accusa* OR child labor OR human
right* OR spoil* OR misrepresent* OR misconduct* OR
“negative CSR” OR unequal* OR unethical* OR under-
age* OR undermine* OR unfair* OR scandal* OR violat*
OR wrongdoing* AND reputat*.Given the range of terms
used to examine CSI, the search terms were triangulated
with empirical datasets used in top management studies
(i.e. ASSET and RepRisk) (full lists of search terms and
definitions are presented in Appendices and ). The struc-
tured search (completed in March ) was restricted to
the title, keywords and abstract of the articles. We con-
fined the search to journal articles written in the English
language. The initial search process yielded a total of
items, which, after further scrutiny of their abstracts and
introductions, was reduced to items evaluated against
our eligibility criteria (Briner & Denyer, ). () Because
of the large number of terms used to describe CSI (cf. Valor
et al., ), we cast a wide net in our search terms and,
whilst this enabled us to be comprehensive in our scope, it
required a careful read of the articles to confirm that CSI
was, indeed, a core focus. () Due to the generalized appeal
of the reputation concept, ‘reputation’ may be used tangen-
tially, when, in fact, it is not a substantive underpinning to
(or focus of) the study. Our search strategy was enhanced
by scanning reference lists for additional articles, which
resulted in articles being added to the sample (n=),
then imported into Refworks.
Each researcher received an equal share of the arti-
cles to read carefully. Consequently, we () excluded dupli-
cates, () excluded studies which examined CSI without
discussing corporate reputation and () excluded studies
which examined corporate reputation without discussing
CSI. This process resulted in the exclusion of articles,
leaving items to be considered for the analysis. Figure
provides a summary of the sampling process.
Data coding and analysis
We coded sampled articles, with the purpose of
extracting uniform and standardized information. We used
coding rules to extract information, as coding rules min-
imize the subjective interpretation of coders and enable
researchers to summarize key findings (Neuendorf, ).
To ensure coding accuracy and inter-coder reliability,
We consulted highly cited scholars in the fields of CSI and corporate rep-
utation when collating the list of terms. We continued these consultations
until there was overlap between the search terms suggested for inclusion
by the experts.
The search was conducted in October and updated in March .
we: () developed a coding frame including the title of
the article, authorship, year of publication, type of study
(empirical/theoretical), main theme/relationship studied,
method(s) used, theoretical lens, discipline, main variables
and key findings; () carefully read and coded a subsam-
ple of articles randomly selected into a coding frame
using Microsoft Excel; () refined the coding frame and
coding instructions until reaching an adequate level of
agreement (e.g. agreement about the ‘theme’ in which
an article was placed, about the type of CSI event/events
studied and about coding articles studying multiple CSI
categories); () used liberal indices, that is, the percent-
age agreement technique to measure reliability, which,
following the refinement of the coding frame and coding
instructions, resulted in % reliability levels (we mea-
sured reliability regularly throughout the coding process);
() identified influential studies and calculated total num-
ber of citations for each article; () imported data into
SPSS where statistical analysis was used in order to identify
patterns of interest.
We analysed the key design characteristics of each study
(Bailey et al., ). As per Figure , out of the included
items, around % were empirical studies (n=), %
were conceptual studies (n=, which includes two liter-
ature reviews and two meta-analyses). Scholars studied a
diverse landscape of CSI behaviours, as interest in the topic
has grown in recent years from studies published in the
s to studies published only since (Figure ).
We were impressed with the diversity of disciplines
represented in our sample, including but not limited to
management (n=), communications and public rela-
tions (PR) (n=), ethics and sustainability (n=),
organization studies (n=), finance and economics
(n=), marketing (n=), strategy and international
business (n=), accounting (n=).
The multidisciplinary nature of the literature is also
reflected in the methods employed, where quantita-
tive methods are used predominantly (n= out of
empirical articles), represented by methodological
approaches such as event studies (%; n=), exper-
iments (%; n=), regression analysis of secondary
data (%; n=), other statistical analysis (%; n=)
and surveys/questionnaires (<%; n=). Even so, we
observed that some studies employ qualitative methods
such as secondary data-based case studies or interviews
(n= out of empirical studies); whilst fewer studies
employed multi-method approaches (four articles). Sec-
ondary sources such as share price indices (Karpoff et al.,
) and notable reputation rankings such as Fortune
Magazine’s ‘World’s Most Admired Companies’ survey
(Nardella et al., )continuetobeusedtooperationalize
corporate reputation (for more information on methods,
see Chun, ;Walker,).
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 9
FIGURE 1 A step-by-step process of article collection and synthesis
Literature overview
Despite the significant contributions of corporate reputa-
tion research, the literature which explores reputation’s
role in socially regulating CSI has lacked integration and
an overarching framework. To provide researchers with
clarity here, we review the main constructs and rela-
tionships, appraise key contributions and synthesize two
conceptual models. Figure illustrates the main relation-
ships identified in the extant literature, whilst in Figure
we close ‘the loop’ between CSI, corporate reputation and
social regulation, as well as identifying several important
research gaps.
CSI and corporate reputation
Corporate social irresponsibility and corporate
reputation: Relationship –
Research has explored a variety of CSI behaviours and
stakeholder propensities to contest and penalize corpo-
rate reputations. Some studies have treated CSI as a broad
concept, and thus did not distinguish between different
categories of irresponsibility. We identified articles
which examined one (or more) explicit categories of CSI.
For example, studies concerning the consequences of
customer/consumer-related CSI, such as false advertising,
10 NARDELLA .
FIGURE 2 The evolution of studies on the relationships between CSI and corporate reputation (–)
FIGURE 3 Relationships identified in extant research
product recalls and product harm, have been the focus
of studies in our sample. Unsurprisingly, we found
that customer/consumer-related CSI studies tend to be the
main focus of the marketing discipline. Here, research
associated CSI with the reputation damage of a previ-
ously established brand. For example, Cleeren et al. ()
compared two brand products owned by Kraft and con-
cluded that CSI can reduce the value of reputation. Lu
et al. () also found that product-harm CSI reduced cor-
porate reputations. This strand of research proposes that
CSI is generally (yet not always) associated with negative
reputation effects.
Furthermore, environmental CSI, involving the dam-
age of the ecological environment and its relationship to
corporate reputation, has been discussed in studies.
Here, management research, such as the notable study
by Zyglidopoulos (), found that environmental harms
were associated with significant declines in corporate
reputation, whereas studies in finance and economics,
such as Jones and Rubin () and later Karpoff et al.
(), found no significant evidence of reputation damage
following environmental CSI.
Additionally, ‘governance failures’ too have been
explored through the lens of CSI. Governance-related CSI,
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 11
such as excessive executive compensation, tax avoidance
and financial scandals (e.g. accounting-related CSI and
insider trading), has been the focus of discussion in a
further studies. Research published in general man-
agement outlets, such as the Academy of Management
Journal (Gomulya & Boeker, ; Gomulya & Mishina,
) and more subject-specific journals, such as the
Journal of Business Ethics (Dowling, ; Kaplan et al.,
) and the Journal of Law and Economics (Karpoff &
Lott, ), suggests that irresponsible firm governance
can be associated with reputation damage. That said,
here also empirical evidence varies. For example, some
studies revealed that tax avoidance misaligns with expec-
tations and undermines corporate reputations (Hardeck
& Hertl, ; Hillenbrand et al., ), whilst others
theorize or found no such relationships (Baudot et al.,
; Gallemore et al., ). Similarly, financial scandals,
which are typically the focus of the finance and economics
disciplines, have been found to have negative reputational
consequences (Karpoff & Lott, ), despite contrasting
evidence offered by management research (Roulet, ).
Concerning CSI such as executive compensation, repu-
tation effects have also been found to vary (cf. Schulz &
Flickinger, ).
We identified studies examining the effects of employee-
related CSI (e.g. employee health and safety, working
conditions; n=) and human dignity CSI (e.g. human
rights, child labour; n=) on corporate reputation. Many
of these studies are published within PR outlets, such as
the Journal of Public Relations Research, where PR scholars
use case study research and experiments to study responses
to CSI (cf. Coombs & Holladay, ). As such, employee-
related CSI research typically assumes that CSI enacted
upon this group of stakeholders is reputationally damag-
ing (Coombs, , ; Kauffman, ; see also Love
& Kraatz, ). CSI effects are considered most severe
when employee-related CSI threatens, or results in, loss
of human life (Coombs, ; see also Pearson & Clair,
). However, it should be noted that, empirically, much
of the insight generated by the PR domain has yet to be
demonstrated using a large enough sample of firms and
CSI events. Notable also are those studies in management
which expound on CSI associated with the loss of human
dignity, such as human rights abuses. For instance, Trullen
and Stevenson () and later Fiaschi et al. ()and
Giuliani () discussed the role of scandals in increas-
ing awareness about violations of human rights, the lack
of (perceived) reputation risk for some types of human
rights violations (e.g. discrimination and inequality) and
exploitable distinctions in human rights approaches in
different parts of the world.
Lastly, our analysis identified studies concerned
with idiosyncratic, ‘unethical’ corporate behaviour and
its potential consequences for corporate reputations. For
instance, in the German context, Maiorescu ()exam-
ined the effects of a spying scandal controversy associated
with Deutsche Telekom; the author found a limited effect
of the CSI event on the company’s reputation, which later
became known for its high security standards. Further,
Richards et al. () explained how the National Foot-
ball League (NFL) handled the domestic violence claims
of notorious Ravens football player Ray Rice; the authors
also concluded that the organization’s existing reputa-
tional capital enabled it to weather public criticism for its
poor management of the scandal.
Other studies (%; n=) discussed CSI more broadly,
without comparing between specific categories of CSI
behaviour. Indeed, this trend can be observed more widely
from within (strategic) management. For example, Köl-
bel et al. ()andlaterKimetal.() recognized
that there are different ways in which organizations can
be irresponsible (e.g. human rights, employee relations,
community, product quality), yet the authors empirically
clustered all CSI categories into one measure. In the same
vein, Nardella et al. () focused on the relationship
between CSI occurrence and changes in corporate reputa-
tion, without delving deeper into different types of CSI to
understand their effects independently. In turn, this strand
of studies recognizes why and how CSI events differ in
their perceived ‘severity’, which is an important moderat-
ing factor increasingly associated with negative reputation
effects.
Also important, we observed some differences in the
measures employed by studies included in the review.
Experiments were commonly utilized within the mar-
keting and PR disciplines (i.e. n=/ articles). For
instance, Coombs and Holladay () used a previously
developed -item scale centred around questions about
dishonesty and lack of trust towards the firm. Yoon et al.
() conducted an experiment where they asked partic-
ipants to evaluate the selected company on a seven-point
scale and examined the level of perceived organizational
‘(un)favourability’ and ‘(un)likeability’. Overall, experi-
mental work tends to assume a strong punitive perspective
of social regulation, as studies typically conclude that CSI
is associated with significant damage to corporate reputa-
tions. However, over-reliance on student respondents in
experimental work (e.g. Coombs & Holladay, ;Kim,
;Ye&Ki,; Yoon et al., ) remains a key
challenge to the reliability of these findings.
With reference to the measures employed among the
general management disciplines, we observed the use
of reputation indices, such as RQ (reputation quotient)
and Fortune Magazine’s ‘World’s Most Admired Compa-
nies’ database (WMAC). Using larger samples, studies
typically unearth much more nuanced (even positive)
12 NARDELLA .
relationships between CSI and corporate reputation (%; n
=) (e.g. Breitinger & Bonardi, ; Nardella et al., ;
Zyglidopoulos, ). Survey measures, however, focus on
a limited number of organizational stakeholders. Namely,
WMAC (previously ‘America’s Most Admired Companies’)
measures the perceptions of corporate executives and mar-
ket analysts (and, prior to , within a limited number of
geographies, i.e. the USA), but does not include the percep-
tions of stakeholders such as customers or employees, who
may also influence firm reputation and thus play a role in
CSI’s social regulation.
Comparatively, the finance and economics disciplines
have modelled the impact of CSI on reputation as a func-
tion of the change in stock market valuation of the firm
(Engelen & van Essen, ). In examining the stock
market’s reaction to CSI, finance and economics scholars
posit a more punitive perspective of CSI’s social regula-
tion, arguing strongly that CSI (mostly) has substantive
negative effects on reputation (Alexander, ; Karpoff,
). Notwithstanding their contributions, by focusing on
stock market performance as a proxy for corporate reputa-
tion, research from finance and economics tends to blur
the boundaries between corporate reputation and subse-
quent organizational performance outcomes (i.e. Figure ,
Relationship –).
The micro-foundations of reputation
sanctions and decline
Stakeholder awareness of CSI and negative
stakeholder perception: Relationship A–B
In an effort to understand the underlying mechanisms
by which reputation sanctions and decline emerge, schol-
ars have explored the micro-foundations of the CSI–
corporate reputation relationship. Indeed, since corporate
reputations are conceptualized as aggregations of individ-
ually held stakeholder perceptions (Fombrun & Rindova,
;Ravasietal.,), studies have theorized and
explored how CSI outcomes are likely influenced by
(socio)cognition.
Given the multilevel nature of CSI and reputation, the
influence of stakeholder awareness and perceptions was
discussed in % of studies (n=). In this cluster,
stakeholder awareness (i.e., the extent to which stakehold-
ers are informed of a given situation or event; Barnett,
) is considered an important mediating factor. Stake-
holder awareness may ultimately lead to the diffusion of
individual-level perceptual changes. Such changes at the
micro-level are deemed necessary for aggregate ‘firm-level’
reputational effects to materialize. As the majority of stake-
holders do not experience an instance of CSI first-hand
(Lange & Washburn, ; see also Deephouse & Heugens,
), stakeholder awareness of CSI may initially vary, due
to differing individual interests and motivations to engage
with CSI. Studies therefore purport that stakeholders’ ‘field
of vision’ is often influenced by individual proclivities
(Barnett, ;Wang&Wanjek,). This can lead
to a gating effect, whereby stakeholders attend to some
(CSI) events, but not others. This means that the relation-
ship between CSI and corporate reputation is mediated,
initially, by individual stakeholders recognizing that CSI
had, indeed, occurred. To do this, research suggests that
stakeholders who are more morally concerned with (Kim
et al., ) or impacted by specific issues, such as the
environment, are more attentive to CSI associated with
environmental harm, and may perceive those events as
more egregious (Ouyang et al., ; Russell et al., ;
Wang & Wanj ek, ). For instance, Wang and Wanjek
() used the Volkswagen ‘Dieselgate’ example to explain
how the German public’s perception of the emissions scan-
dal was intensified by the event’s personal relevance (see
also Zavyalova et al., ).
Conceptually, studies which are explicitly concerned
with stakeholder perceptions of CSI are mainly rooted in
theories such as situational crisis communications theory
(Coombs, ), expectancy violations theory (Burgoon,
) and/or attribution theory (Lange & Washburn, ).
Studies that draw on these theories recognize that CSI
events differ in their potential to damage reputations,
depending on, fundamentally, how relevant and egregious
CSI events are perceived to be (cf. Nardella et al., ).
Accordingly, stakeholder awareness and perceptions are
proposed to mediate the relationship between CSI and rep-
utation damage—as these micro-foundational processes
underpin the link between CSI and corporate reputation.
Stakeholder awareness of CSI and negative
stakeholder perception, moderated by
intermediary responses: Relationship A–B(I)
In a small (n=) but growing number of studies, inter-
mediary responses, such as the influence of the traditional
news media, are explicitly considered to moderate the
relationship between stakeholder awareness of CSI and
negative stakeholder perceptions. The broad rationale here
is that, through the disclosure of CSI, the media plays
an important role in increasing stakeholder awareness.
This literature purports that with greater media cover-
age(seeDeephouse&Heugens,; Kölbel et al., ;
Zavyalova et al., ), the likelihood that stakeholders will
view the firm and its (CSI) behaviour negatively increases.
Here, studies have also examined the role of intermediaries
such as non-governmental organizations (Aguilera et al.,
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 13
) and activist movements (McDonnell & King, )
empowered to spread information concerning CSI through
various communication channels. Contemporary media,
in particular social media, are increasingly attended to by
stakeholders, due to their ubiquity and rich user-generated
content (e.g. Aula, ; Barnett et al., ; Schultz et al.,
;Wangetal.,). However, given its potential to
reshape the dynamics by which CSI is experienced, empir-
ical work that focuses on the role of social media is broadly
underdeveloped. Ultimately, the prominence of CSI in the
activities, discussions and disclosures of intermediaries
likely indicates that variation exists concerning ‘which’
CSI events stakeholders will (and will not) become aware
of and evaluate.
Stakeholder awareness of CSI and negative
stakeholder perceptions, moderated by
cognitive processing, biases and expectations:
Relationship A–B(II)
Increasingly also, research regarding the micro-founda-
tions of CSI and corporate reputation recognizes that
stakeholder perceptions are shaped by a range of psycho-
logical factors. Specifically, this set of studies focus on
how cognitive processes, expectations and biases moderate
stakeholder perceptions of CSI and of the firms accused.
We found that studies have drawn, principally, on
attribution and social identification theories to examine
the influence of psychological processes (e.g. Antonetti
&Maklan,; Hoffmann et al., ; Lange & Wash-
burn, ; Love & Kraatz, ; Nardella et al., ;
Zavyalova et al., ). Perspectives which draw on attribu-
tion theories, for instance, posit that corporate reputations
are shaped by subjective psychological processes (Bitek-
tine, ; Lange & Washburn, ; Mishina et al., ).
With reference to ‘in-group biases’, Antonetti and Mak-
lan () explained that knowing the individuals involved
in—or harmed by—CSI intensifies negative perceptions
and subsequent intentions of stakeholders to penalize irre-
sponsible behaviour (see also Lange & Washburn, ).
Moreover, perceived similarity between a stakeholder and
a ‘victim’ of CSI was associated with stronger negative
emotional responses (Antonetti & Maklan, ; see also
Voliotis et al., ). This body of research, in the main,
questions the traditional, punitive perspective of reputa-
tion’s role as a social regulation mechanism, which asserts
that reputations are ‘fragile’ assets (Alsop, ;Wang&
Li, ). From a path-dependency perspective, individ-
ual stakeholder perceptions are considered less sensitive to
CSI because perceptions are ‘perseverant’ (Mishina et al.,
; Nardella et al., ). This strand of research draws
attention to the incompatible logic that CSI is consid-
ered morally objectionable, on the one hand, yet does not
always appear consequential to organizations, on the other
(cf. Reuber & Fischer, ; see also Valor et al., ).
In exploring the paradox aforementioned, a smaller,
though highly notable group of studies (around %;
n=) recognized the importance of time, history and
memory to stakeholder perceptions of CSI (e.g. Mena et al.,
;Ravasietal.,). For instance, Mena et al. ()
explained why some CSI events may become forgotten.
Here, the authors discussed a natural entropy associated
with CSI, because, fundamentally, stakeholder memory
and attention are imperfect. Though empirical evidence
on the moderating influence of stakeholder memory is
limited, other empirical studies have, indeed, examined
how history affects stakeholder perceptions (e.g. Schulz
& Johann, ; see also Shu & Wong, ). Overall,
research on the moderating role of history and stakeholder
memory is in a nascent stage (highlighted more recently
by Mariconda et al., ), as most studies still focus on
the short-term, or indeed immediate alterations in cor-
porate reputation (e.g. Bae et al., ; Karpoff et al.,
).
With regard to the moderating influence of stakeholder
expectations, that is, stakeholders’ belief that something
is likely to happen (Burgoon, ) (%; n= stud-
ies), research explored different aspects of how stakeholder
expectations influenced reputation contestation, sanctions
and decline (e.g. Bae et al., ; Gong et al., ;Hil-
lenbrand et al., ; Janney & Gove, ; Nardella et al.,
; see also Sampath et al., ). Much of this research
explores how firm characteristics—such as high corporate
social performance (Nardella et al., ) and prior rep-
utation (Sohn & Lariscy, ; see also Zavyalova et al.,
)—create expectations of the firm, which then moder-
ate perceptions of CSI. Generally, it is recognized that own-
ing a positive prior reputation can attenuate stakeholders’
negative perceptions of irresponsibility by creating a ‘reser-
voir’ of goodwill (Brammer & Pavelin, ; Godfrey, ;
Pfarrer et al., ; Schnietz & Epstein, ). In this
view, stakeholders are more inclined to afford allowances
to firms with a relatively good track record (e.g. Mahon
& Wartick, ; Tucker & Melewar, ; Vanhamme
& Grobben, ). Jones et al. () showed that firms
with greater reputation scores prior to the stock mar-
ket crash suffered reduced reputation decline relative to
those firms which owned weaker reputations. Raithel et al.
() later confirmed that a good reputation prior to the
global financial crisis mitigated stock market decline
(Wiles et al., ). More recently, Wei et al. ()andBae
et al. () also found that firms with good reputations
suffered smaller market penalties upon CSI revelations.
Overall, there is empirical support that enhanced stake-
holder expectations can act as a buffer, reducing the impact
14 NARDELLA .
of subsequent revelations of CSI (Brammer et al., ;
Janney & Gove, ; Williams & Barrett, ).
However, fewer empirical studies explore when stake-
holder expectations become burdensome (e.g. King &
McDonnell, ; Lin-Hi & Blumberg, ;Zavyalova
et al., ). On the ‘backfire effect’ of higher stakeholder
expectations, Nardella et al. () found that stake-
holders revise down the reputations of firms which had
previously been known as high social performers, partic-
ularly when culpability for CSI behaviour was externally
verified by a court of law (see also Gong et al., ).
Nardella et al. () added that reputation decline
may be heightened for those organizations with previ-
ously low levels of corporate social performance, with-
out ‘conclusive’ evidence of CSI (i.e. verified by a court
of law). Janney and Gove () previously found that
firms with an enhanced reputation for certain char-
acteristics, such as corporate governance, were penal-
ized more for events pertaining to governance fail-
ures. In an experimental study, Sohn and Lariscy ()
point out that CSI events are more prone to ‘back-
fire’ when high-reputation firms are embroiled in CSI
that directly undermines stakeholders’ integrity percep-
tions (vs. stakeholders’ capability perceptions of the
firm). Overall, these studies provide further insight into
how stakeholders’ psychological processing, expectations
and biases can be a double-edged sword, in that psy-
chological mechanisms may amplify, but also attenu-
ate, negative stakeholder perceptions, depending on the
context.
Intermediary response(s) and cognitive
processing, biases and expectations:
Relationships I–II and II–I
A distinct set of studies point to the inter-relationships
between intermediary responses to CSI events and stake-
holder cognitions, biases and expectations. The manner in
which CSI events are portrayed (particularly by traditional
media) can evoke stakeholders’ cognitions, biases and
expectations (Deephouse & Heugens, ). The knowl-
edge of stakeholder biases and expectations may, however,
lead intermediaries to cover those firm behaviours which
are most likely to trigger stakeholder cognition, as well
as conflict with prior stakeholder expectations (see, more
recently, Oliver et al., ). As such, firms may experi-
ence greater attention for CSI when they are considered
‘celebrities’ (Rindova et al., ; Zavyalova et al., )or
indeed, when they already own a highly positive corporate
reputation (King & McDonnell, ).
We identified just over % of articles (n=) which
consider the effects of stakeholder emotions (e.g. Antonetti
&Maklan,, p. ; Busenbark et al., ). This strand
of research emphasizes how observers perceive a CSI
event and interpret it through their cognitive frames,
sometimes diverging with the objective reality of the
CSI event (Busenbark et al., ; Szwajca, ). From
this view, affective factors shape perceptions and expec-
tations, which can lead to the formation/triggering of
certain biases. Although scholars (e.g. Choi & Lin, ;
Grappi et al., ) have studied a range of emotions
(e.g. anger, alert, surprise, worry, confusion), we identified
‘anger’ as the most common emotion explored. Stakehold-
ers’ anger has been associated with increased likelihood
that they will perceive CSI more negatively (Choi & Lin,
; Kim & Cameron, ;Lim&Shim,;San-
dlin & Gracyalny, ; Voliotis et al., ). Broadly,
research concludes that heightened negative stakeholder
emotions lead to the amplification of reputation decline,
as stakeholders become aware, and pay more attention
to, information which elicits negative emotion. Kim and
Cameron ()andlaterLuetal.() empirically
illustrated that anger and sadness affected consumers’
reactions to CSI, shaped expectations of the firm and
influenced perceptions of firm reputation. Grappi et al.
() confirmed that negative emotional responses (such
as anger) increased awareness of CSI, leading to nega-
tive word-of-mouth against the associated firm(s), which,
in turn, was likely to shape stakeholder expectations and
perceptions of firm behaviour.
The link between corporate reputation and
performance decline
CSI, corporate reputation and organizational
performance: Relationship ––
We now zoom out from discussing the micro-foundations
of CSI and corporate reputation to synthesize research
which also explored organizational performance out-
comes. Almost half of the sampled studies (n=)
broaden their conception of CSI’s consequences. Indeed,
as stakeholders’ disapproval of the firm has been closely
linked with its ability to achieve and sustain competi-
tive advantage (Barney, ; Gao et al., ), reputation
decline tends to be associated with unfavourable down-
stream organizational performance (Fombrun & Shanley,
;Wang&Li,). For example, research from
the marketing discipline focused on downstream mar-
ket inefficiencies from reputation damages, such as a
decline in customer purchase intentions (e.g. Ham &
Kim, ; Sweetin et al., ), negative word-of-mouth
(e.g. Skarmeas & Leonidou, ; Xie & Bagozzi, )
or decreased sales (e.g. Lim & Shim, ; Russell et al.,
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 15
). Some studies proposed that consumer resistance fol-
lowing negative news about the company will increase
the probability of protests and enhance negative word-of-
mouth (Trautwein & Lindenmeier, ). Sweetin et al.
() found that consumers’ purchase intentions became
somewhat reduced for irresponsible brands, but their
results were not sufficiently conclusive when comparing
across experimental groups. Trautwein and Lindenmeier
() also found that, indeed, purchase intention can
become reduced in light of CSI. Russell et al. (), in
turn, looked beyond the extent of stakeholders’ disap-
proval for CSI and studied whether willingness to boycott
increased (although, again, this measure is perceptual). As
we discuss next, some studies have questioned whether
stakeholders are always willing to alter their behaviour
in light of CSI (Devinney, ; see also Valor et al.,
).
Organizational performance outcomes have been of
(implicit) importance to the finance and economics per-
spectives (Atanasov et al., ; Karpoff, ;Wans,
), whereby scholars have measured the stock mar-
ket’s response to CSI (%; n=). Specifically, finance
and economics research has adopted a set of methodologi-
cal conventions for examining the influence of CSI on the
(short-term) daily total change in stock value, deducting
any potential costs, including stakeholder compensation
cost, court fines, legal costs and remedial action costs
imposed by the courts. As such, it is important to note that
these studies go on to argue that the residual loss in stock
market performance can be attributed to the erosion of
corporate reputations (e.g. Alexander, ; Armour et al.,
; Ertimur et al., ; Fich & Shivdasani, ;Karpoff
et al., ). However, it remains unclear whether stock
market performance is an appropriate proxy for corporate
reputation (Engelen & van Essen, ). Variation in stock
market performance is more conventional to the study of
organizational performance (Frooman, ), as ‘the mar-
ket consistently overreacts’ in the short term to news of CSI
(Gillet et al., , p. ). Hence, research which explores
the stock market impacts of CSI may overstate the ‘rep-
utation’ damage (actually) incurred. Nelson et al. ()
shared similar concerns, adding that the influence of CSI
on stock market valuations may be limited because a still
too narrow window (typically – days after the disclosure
of CSI) is often employed. Such concerns are reflected in
real-life instances of CSI, such as the Cambridge Analytica
privacy scandal concerning Facebook (now Meta), where
in , the company lost roughly $ billion by March
following the scandal’s exposure to the public. Yet, in less
than a month, Facebook’s stock price rebounded to above
pre-CSI levels.
The micro-foundations of the corporate
reputation–performance link
Negative stakeholder perceptions of CSI and
unfavourable stakeholder behaviour:
Relationship B–C
Lastly, we identified studies on the micro-foundations of
the relationship between corporate reputation and orga-
nizational performance decline. We revealed that around
% of studies (n=) consider changes in stakeholder
behaviour towards the firm. In these studies, unfavourable
stakeholder behaviour was considered to mediate the rela-
tionship between corporate reputation and organizational
performance at its micro-foundations. However, articles
empirically investigated stakeholders’ behavioural inten-
tions, articles theorized stakeholders’ likely behaviour
and only of the articles studied the relation-
ship between stakeholder perceptions and subsequent
real-world behaviour. Studies on stakeholder behavioural
intentions were generally conducted via experiments and
proposed that CSI was likely to lead to stakeholder inten-
tions to penalize the firm (e.g. Hartmann & Moeller, ;
Romani et al., ; Skarmeas & Leonidou, ). These
empirical contributions—while valuable—are somewhat
limited in explaining manifestations of real-world stake-
holder behaviour, as the personal effort(s) and cost(s)
of penalizing the firm for its transgressions are likely
insufficiently incorporated.
Overall, we found the conceptual literature far more
nuanced than the empirical studies (e.g. Bundy et al.,
; see also Mena et al., ). For example, Barnett
() described that individual stakeholder perceptions
of ‘opportunity cost’ and ‘expected impact’ may dampen
the likelihood of behavioural change. This is because the
potential cost incurred from changing behaviour may deter
some stakeholders from acting upon their disapproval.
Further, the perceived opportunity cost may differ in rela-
tion to the substitutability of the firms’ product/service
offering. In other words, stakeholders may be less inclined
to punish an organization for irresponsible behaviour if
they believe that by acting, they will incur (greater relative)
personal cost and not achieve the desired outcome, sug-
gesting that acting upon one’s moral intuitions may require
the perception that others will do the same.
Of the studies which examined real-world stake-
holder behaviour, around % (n=) focused on share
price decline, which mapped investors’ short-term reac-
tions to its public disclosure of CSI (i.e. a –-day
event window; Bae et al., ; Gong et al., ;Kar-
poff et al., ). Importantly, fewer studies (n=)
16 NARDELLA .
examined the medium-term outcomes of actual stake-
holder behaviour. Here, much of the evidence on stake-
holders’ actual behaviour looks at boycotting companies.
For example, King and McDonnel () explore Fortune’s
‘Most Admired Companies’ survey and KDL index. The
authors found that ‘the most grievous violators of CSR
norms are no more likely to be the targets of boycotts
than are firms that have not attracted the public’s atten-
tion as norm violators’ (p. ). Moreover, Gardberg and
Newburry () draw on the RQ survey to examine stake-
holders’ propensity to boycott the firm over the year prior
to the survey. Among demographic differences, the authors
emphasize that (relatively smaller) marginalized groups
have a higher propensity to boycott (although it must be
noted that the study relied on self-reporting).
Negative stakeholder perception of CSI and
unfavourable stakeholder behaviour, moderated
by organizational responses: Relationship
B–C(III)
We identified that % of studies (n=) discussed how
organizational responses to CSI moderated both the rela-
tionship between negative stakeholder perceptions and
stakeholder behaviour, as well as the relationship between
CSI, reputation and performance outcomes (cf. Pfarrer
et al., a). We found particularly relevant contributions
from fields such as marketing and PR (n=). This body
of work discussed organizational best practices (Coombs
& Holladay, ; Kraig et al., ; see also Mitroff, ),
proposing a variety of horses-for-courses-style response
strategies to manage CSI. Here, studies indicated how
managers should accurately appreciate the CSI context
in order to implement the most appropriate response
(Coombs & Holladay, ; see also Bundy et al., ).
Overall, scholars recommended that the communications
of the firm should be swift, because first impressions tend
to form quickly and influence stakeholder reception of
later responses (e.g. Benoit, ; Coombs & Holladay,
; Sen & Egelhoff, ; see also Shu & Wong, ).
Over time, studies have distinguished between proac-
tive (e.g. CSR reporting, see Bebbington et al., )and
reactive communication strategies available to firms when
they are embroiled in CSI accusations (e.g. Benoit, ;
Guerber et al., ; Kline et al., ; see also McDon-
nell and King, ). Notably, Coombs ()proposed
that response strategies likely varied in their degree of
compassion for the victims (i.e. ‘accommodative’ response
strategies) and their motivations to limit the legal and/or
economic exposure to CSI (i.e. ‘defensive’ response strate-
gies). Kline et al. () suggested that (non)equivocal
responses to revelations of irresponsibility tend to use two
primary mechanisms: () an organization can respond ver-
bally via its communications and () tangibly through
remedial action (see also Carberry et al., ). It is also
recommended that messages should be adapted to the
national, cultural context in which they are delivered
(cf. Guerber et al., ). The effectiveness of communi-
cations strategies may, in turn, also be influenced by the
prior reputation of the firm (e.g. Coldwell et al., ;Fen-
nis & Stroebe, ). Fennis and Stroebe () specifically
argued that self-disclosure of CSI is a viable strategy only
when the past reputation of the company is a favourable
one, evoking stakeholder trust (see also Ham & Kim, ).
Overall, despite the practical relevance of appropriately
managing CSI events (Comyns & Franklin-Johnson, ),
large-scale empirical evidence on what constitutes appro-
priate organizational responses to CSI remains generally
underexplored (for exceptions, see McDonnell & King,
;Wang&Li,; see also Bundy et al., ).
DISCUSSION AND FUTURE RESEARCH
DIRECTIONS
Our review of the literature, overall, revealed nuanced and
contingent relationships between CSI and corporate rep-
utation. This synopsis is somewhat in contrast with the
long-propagated notion that corporate reputations are dis-
tinctly ‘fragile’ assets (Alsop, ; Hall, ;Wang&Li,
). Indeed, tropes such as ‘it takes twenty years to build
a reputation and five minutes to ruin it’ (Warren Buffet
in Carroll & Olegario, ,p.)or‘ittakesmanygood
deeds to build a good reputation, and only one bad one
to lose it’ (Benjamin Franklin in Highhouse et al., ,
p. ) increasingly sit uncomfortably against the gen-
eral background of theoretical and empirical research. We
found that significant reputation decline is often exposed
by studies that employ short-term stock market perfor-
mance indicators, or (small-scale) experiments. In turn,
when studies explore (more medium-term) survey evi-
dence, or examine how contextual factors moderate the
impact of CSI on corporate reputation, the scale and scope
of CSI effects generally diminishes. This observation is
important because studies have assumed that the organiza-
tional risks associated with CSI will subsequently deter CSI
(Aguilera et al., , Karpoff, , Whittington & Yakis-
Douglas, ). This assumption largely remains, despite
limited empirical evidence concerning whether organiza-
tions are, indeed, deterred to engage in CSI by the assumed
risks to their corporate reputation (Atanasov et al., ;
Fiaschi et al., ; Godfrey et al., ;Karpoff,).
Put in boarder terms, ‘why wouldn’t corporations behave
in socially irresponsible ways?’ Particularly if firms can
deflect, avoid or subvert the process of (social) regulation
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 17
FIGURE 4 Closing the loop: CSI, corporate reputation and social regulation
and its subsequent outcomes (Campbell, ; Giuliani,
; Nyberg, ).
In order to close the loop between CSI, corporate repu-
tation and social regulation, we emphasize strongly that it
remains largely unclear whether the threat of reputation
sanctions performs the function of curbing CSI behaviour.
Below, we outline new opportunities and pathways for the
theoretical as well as empirical development of the field
(illustrated in the upper half of Figure ).
In relation to theory, we note that there is a wealth of
extant theory developed outside of management enquiry
which remains underexplored. Theories developed among
the psychological sciences (Haidt, ;Fiske&Taylor,
), such as the relational model (Tyler & Lind, )
and social learning theory (Bandura, ), are generally
under-utilized. These theoretical lenses may be particu-
larly valuable in the study of how irresponsible conduct
is influenced from within the firm (see also Parker et al.,
). Similarly, the institutional logics (Lounsbury et al.,
; Thornton & Ocasio, ) and complexity (Brammer
et al., ; Roulet, ) perspectives are likely valuable,
given their ability to explain how macro-institutional pro-
cesses influence firm, group and individual behaviour.
Finally, temporal perspectives also remain critically under-
utilized (Mena et al., ;Ravasietal.,), which, as
we go on to explain, may be necessary to move empirical
research beyond the previous over-reliance on short-term
reputation measures.
In presenting the contributions of corporate reputation
to our understanding of social regulation, we recognize
that there are opportunities to explore and consolidate the
literature on alternative social regulatory mechanisms. We
therefore call upon scholars to engage with further unify-
ing and advancing our understanding of social regulation.
The incorporation of, and cross-fertilization between, dif-
ferent perspectives could offer significant contributions to
the further development of social regulation as a research
area. In the remainder of this section, we outline five main
avenues for future research, illustrated in the upper half of
Figure .
Exploring the efficacy of corporate
reputation as a mechanism for deterring
CSI (FR1)
Historically, research has focused on the reputation contes-
tation, sanctions and decline associated with CSI. There-
fore, it largely remains unclear whether such risks to
corporate reputations perform the function of effectively
‘deterring’ CSI (Karpoff, ; Mishina et al., ; see also
Zarantonello et al., ). Whilst scholars are increasingly
voicing their interest in promoting ‘responsible’ corporate
conduct as well as deterring irresponsible corporate con-
duct (Barnett et al., ; Buckley, ; Gaganis et al.,
; Temouri et al., ), the question remains: Does
reputation risk, damage or volatility influence the propen-
sity of organizations to engage in CSI? Overall, we propose
that exploring the efficacy of social regulation in reduc-
ing the occurrence of CSI provides scholars (from multiple
disciplines) with the opportunity to test and refine their
previously held assumptions.
18 NARDELLA .
Here, we highlight the key opportunities to advance tra-
ditional research approaches and call for cross-fertilization
between disciplines. Research from finance and eco-
nomics, which tends to employ stock market performance
indicators to study CSI, can be enriched by adopting more
novel management theorizing. For example, the adoption
of attribution theory (Lange & Washburn, ; Nardella
et al., ), alongside survey measures—to explore how
CSI is moderated by contextual factors—represents an
important and potentially fruitful area for future research.
Conversely, management studies could be further enriched
by adopting some of the approaches used in finance and
economics. Relatively more recently, research has begun
to focus more on the severity of CSI events (e.g. Busenbark
et al., ). Whilst these approaches are likely valuable,
it remains important to consider different classifications
of CSI, as tends to be the approach taken in areas such
as finance and economics. Hence, exploring distinct CSI
categories, together with measures of CSI’s severity, can
contribute towards the development of more nuanced
perspectives.
Exploring the temporal dynamics of social
regulation (FR2)
The temporal dynamics of social regulatory processes are
also critically underexplored. Though theoretical studies
(e.g. Mena et al., ;Ravasietal.,) have extended our
conceptual understanding, empirical studies have mainly
focused on short-term reputational decline. Hence, we
know little about the reputational consequences of more
sustained negative stakeholder attention and the effects of
gaining ‘infamy’ (Zavyalova et al., ). Indeed, more sus-
tained stakeholder attention and longer-term reputation
effects may well be necessary, fundamentally, to deter firms
from engaging in CSI. Therefore, to advance the literature,
we recommend that researchers explore: () larger time
windows in event studies that utilize stock market per-
formance indicators; () multiple ‘follow-up’ experimental
designs; and () experimenting with more extended lags
between survey measures.
We also draw scholarly attention to the gap concerning
the management of CSI (Mena et al., ; Pfarrer et al.,
b). Whilst much theory and evidence has been gen-
erated by the PR discipline on how companies respond
to reputation risks (Coombs, ; see also Bundy et al.,
), we have yet to see a sustained effort from other
domains of management scholarship. The majority of
extant evidence has drawn on small-scale experiments,
many of which continue to employ student respondents
(Iqbal et al., ). We therefore currently lack the ‘real-
world’ insights necessary to advance our appreciation of
how,andto what extent, firms can influence reputation
contestation, sanctions and decline, as well as shape social
regulatory deterrents.
Exploring how environmental complexity
influences social regulation (FR3)
We also urge scholars to shed more light on how contex-
tual factors influence social regulatory processes. Whilst
we now know more about the micro-foundations of CSI
and corporate reputation (Mishina et al., ; Shea &
Hawn, ; Zavyalova et al., ), theory and evidence
concerning how institutional complexities produce vari-
ance in reputational impacts is limited (Brammer et al.,
; see also Bitektine & Song, ). Here, further con-
tributions from the international business (IB) discipline
would be particularly welcome (Aguilera & Grøgaard,
; Jamali et al., ; Sampath et al., ). Given the
global distribution of CSI, IB is well equipped to explore
how the institutional environment influences firm (CSI)
behaviour through the application of international com-
parative approaches (Mellahi et al., ; Rugman et al.,
). We note that cross-fertilization between manage-
ment disciplines and IB would also be valuable to enrich
our understanding of how social regulatory mechanisms—
such as corporate reputation—unfold within and across
international markets.
We have also witnessed profound technological innova-
tion. Indeed, such advances have the propensity to bring
about new manifestations of CSI, such as the proliferation
of so-called ‘fake news’ and misinformation, or the mis-
use of technologies such as algorithms (Harris, )and
artificial intelligence (Haenlein et al., ; see also Hol-
weg et al., ). Nevertheless, the erosion of traditional
media’s influence by new communication technologies
appears to have fundamentally shifted the pathways in
which CSI is experienced, penalized and therefore (poten-
tially) deterred (del Mar García-de los Salmones et al.,
; Kübler et al., ; Roulet & Clemente, ).
Research on the impact that technology has had on CSI,
corporate reputation and social regulation thus remains
comparatively underdeveloped (Etter et al., ;Wang
et al., ). We propose that cross-pollination between
the marketing and information management disciplines
with broader management, finance and economics studies
may prove useful. In the marketing and information man-
agement domains, the importance of social networks and
online ‘influencers’ is widely recognized to have reshaped
the business landscape (Kaplan & Haenlein, ), par-
ticularly in relation to their accrual of disproportionate
authority to sway stakeholder perception. In this regard,
new technologies represent novel challenges, but also
important opportunities for future studies. For example,
a significant branch of prior research has relied on the
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 19
traditional media’s disclosure and reporting of CSI to gain
insight into (broad) stakeholder perception of events/firms
(Deephouse, ; Nardella et al., ). Yet, new commu-
nication technologies now offer scholars the opportunity
to explore stakeholder perceptions at a much more gran-
ular level, where divergence of opinion may explain how
CSI is responded to differently by varying stakeholder
groups. Furthermore, researchers may also find it fruit-
ful to explore how efforts to punish CSI are thwarted or
‘societalized’ (Brammer et al., ) through social media,
resulting in greater (reduced) penalties and deterrents. For
instance, exploring new methods and sources of data such
as video analysis, social media analysis, content analy-
sis of blogs/message boards and big data approaches—not
significantly evident in the methodological repertoires of
extant studies—may greatly enhance our understanding of
the mechanisms for social regulation.
Exploring how firm heterogeneity
influences social regulation (FR4)
We also emphasize the need for more research concerning
firm heterogeneity. Though our analysis reveals the signif-
icant strides which have been made, gaps in the literature
remain. For example, there is relatively little evidence on
the moderating influence of corporate affiliations. Under-
explored connections between firms and their affiliates
include, but are by no means limited to, connections to
religious institutions (Mohliver & Ody-Brasier, ), phil-
anthropic foundations (Lungeanu et al., ), as well as
political linkages (e.g. ‘cronyism’) (Klein et al., ). Firm
affiliations are pertinent, as increasingly, public trust in
government, institutions and large corporations is waning
(Pew, , ). Hence, more work is needed to explore
whether firm heterogeneity, such as variation in affilia-
tions, influences CSI frequency/severity and stakeholder
propensity to punish firms for CSI. Furthermore, theory
and evidence posit that corporate reputation is a multi-
dimensional and (potentially) stakeholder-specific asset
(Ertug et al., ). Yet, additional research could further
explore when firms experience broad or more siloed rep-
utation damage (e.g. by utilizing social media analysis).
Shedding new light on how differences in interpreta-
tions between stakeholder groups emerge because of firm
heterogeneity continues to be a valuable undertaking.
Exploring the unintended consequences of
social regulation (FR5)
Finally, we draw scholarly attention to the notion that
social regulation may be associated with unintended
and/or undesirable outcomes. For example, there is some
evidence which suggests that organizations may respond
to stakeholder and reputational pressures by moving their
irresponsible practices to other geographical locations
(Surroca et al., ), or by switching between undesir-
able business practices (Carberry & Zajac, ). Though
the scope to understand the unintended consequences of
social regulation is broad, exploring whether heightened
social regulation is associated with unexpected outcomes
for institutions, business and society (Goerzen et al., ;
Narula, ; Ouyang et al., ;Shu&Wong,)can
be a fruitful research area.
CONCLUSIONS
By behaving irresponsibly, organizations were thought to
risk their ‘fragile’ reputations, a risk considered so signif-
icant that it was expected to deter firms from engaging
in CSI. Yet, in practice, CSI persists, as do the majority
of organizations associated with irresponsible behaviour.
To shed light on this puzzle, we reviewed the multidis-
ciplinary literature on the relationship between CSI and
corporate reputation. Upon reflection of the many gran-
ular insights unearthed throughout our review, three key
aspects stand out.
First, the notion that corporate reputations are dis-
tinctly ‘fragile’ assets sits in contrast with the current state
of evidence. Studies increasingly demonstrate the path
dependency, resilience and complexity of corporate rep-
utations. Notably, research has explored how reputation
damage is significantly attenuated by a multiplicity of con-
textual factors. It is important for us to also recognize
that studies which do offer some support to the notion
that ‘reputations are fragile’ have largely been generated
by utilizing methodological approaches that are limited
by a focus on (very) short-term stock market performance
indicators and small-scale experiments (many of which
employ student respondents). Therefore, maintaining the
idea that corporate reputations are fragile appears broadly
inadequate, hampering the development of more refined
perspectives.
Second, studies have also presumed that, because stake-
holders can inflict costs on businesses for their CSI
behaviour, firms will, therefore, be deterred from CSI.
However, after consolidating and evaluating the vibrant
literature on CSI and corporate reputation, we reveal a
scarcity of evidence that explores whether firms are, in fact,
deterred from CSI. Whilst, indeed, there is now a wealth of
evidence concerning what drives companies to ‘do good’
(cf. Campbell, ), there has been comparatively less
attention on what curbs firms from ‘doing harm’. Thus, a
central insight provided by our review is the identification
of a notable lack of studies which explore what influences
the frequency and occurrence of CSI.
20 NARDELLA .
Finally, we have emphasized the critical need for more
research which draws upon temporal and complexity per-
spectives. Current theory and approaches have typically
neglected the role of entropy in stakeholder responses
to CSI, and subsequently the potential for diminishing
firm consequences for CSI over time. Stakeholder abil-
ity/willingness to respond to CSI may, possibly, be short-
lived. Additionally, technological innovations have also
resulted in dynamic new channels of communication by
which stakeholders become informed of, experience and
respond to CSI. Yet, our review indicates our underdevel-
oped understanding of how transformative technologies—
such as social media—influence the process of reputation
damage.
Our hope is that this review will inspire discussion
and debate on the complex role of corporate reputation—
as well as non-governmental stakeholders—in penalizing
and deterring CSI. Overall, after presenting the current
state of evidence, we remain doubtful about the extent
to which corporate reputation provides a sufficient CSI
enforcement mechanism. Thus, our final hope is that stud-
ies will continue to emerge with insights into reputations’
‘regulatory’ efficacy, as well as alternative social regulatory
mechanisms which can effectively deter CSI.
ORCID
Giulio Nardella https://orcid.org/---
Stephen Brammer https://orcid.org/---
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APPENDIX 1: BOOLEAN SEARCH FOR CSI
KEYWORDS
Abuse* OR Accuse* OR Accusa* OR Accident* OR Anger*
OR Anticompetit* OR Anti-compet* OR Antitrust OR
Attack* OR Axe* OR “Backdating stock options” OR Bad*
OR Benevolen* OR Blame* OR Boycott* OR Breach* OR
Break OR Bribe* OR Broke* OR Catastroph* OR “CEO
compensation” OR Cheat* OR “child labour” OR “child
labor” OR “compensation package” OR Complain* OR
Contaminat* OR Controvers* OR “cooking the books” OR
Corrupt* OR “creative accounting” OR Crime OR Crimi-
nal* OR Crisis OR Crises OR Cut* OR Damag* OR Danger*
OR Deceive* OR Decept* OR Defect* OR Deforest* OR
Detriment* OR Devastat* OR Died OR Dies OR Disaster*
OR Discredit* OR Discriminat* OR Dishonest* OR Dis-
put* OR Distort* OR Distrust* OR Endanger* OR Evad*
OR Evasion OR “executive compensation” OR “execu-
tive pay” OR “executive salaries” OR “executive bonuses”
OR Explod* OR Exploit* OR Explos* OR Expose* OR
False* OR Fatal* OR Fault* OR Feud* OR Foul* OR
Fraud* OR Harm* OR Hike* OR Hospitali* OR “human
rights” OR Hurt OR Illegal* OR Ill-treat* OR Immoral* OR
Inequal* OR Infring* OR Injure* OR “insider trading” OR
“insider trades” OR “insider dealing” OR “insider deals”
OR “insider dealings” OR Irresponsib* OR Litigat* OR
Malic* OR Malevolen* OR Malfeasan* OR “management
compensation” OR Manipula* OR Mend* OR Misconduct*
OR Misdeed* OR Mislead* OR Misrepresent* OR Mis-
treat* OR Mistrust* OR Misuse* OR Neglect* OR Negligen*
OR Negative* OR Offend* OR Outcry* OR Outrage* OR
Overcharg* OR Penalt* OR Prevent* OR “price fixing” OR
“price-fixing” OR Prosecut* OR Protest* OR Recall* OR
Redundan* OR Repair* OR Repercussion* OR Restate*
OR Revelation* OR Revolt* OR Risk* OR Ruin* OR Sabo-
tage* OR Scandal* OR Settle* OR Shame* OR Shatter* OR
Shock* OR Spill* OR Spoil* OR Strike* OR “stock options
backdating” OR Sued OR Suing OR Suit OR Suspici* OR
Tamper* OR Tarnish* OR Threat* OR Trust* OR Unequal*
OR Uneth* OR Underage* OR Undermine* OR Unfair*
OR Unlawful* OR Unsafe OR Uproar* OR Urgen* OR Vic-
tim* OR Violat* OR Violen* OR Weak* OR Wound* OR
Wrongdoing
28 NARDELLA .
APPENDIX 2: THE LANDSCAPE OF CSI
CSI event CSI event description
Environmental CSI Spills and pollution CSI resulting in the detriment of the wider natural world, including air, sea
and land, as well as any other natural resources
Treatment of animals
Human dignity Public health CSI associated with non-consumer-related health impacts associated with
organizational behaviour
Human rights CSI events which undermine the basic access to certain resources and
fairness of treatment of individuals
Child labour CSI related to the illegal practice of employment of individuals under the
legal age (includes moral judgements of age appropriateness when the
host government lacks an adequate requirement)
Employee related Freedom of association CSI which undermines employees’ access to join representative bodies such
as labour unions
Diversity and opportunity CSI which employs discriminatory business practices that challenge
stakeholders’ abilities to gain access to resources or fair treatment
Wages and working conditions CSI events describe non-health related incidents that undermine employee
access to resources or fair treatment
Employee health and safety CSI which refers to incidents with actual or potential outcomes to
employee health
Corporate
governance
Management compensation CSI pertaining to perception of wrongdoing regarding management
incentives and remuneration
Shareholder rights CSI perceived to undermine stockholders’ abilities to exercise their legal
rights
Earnings CSI associated with announcements of accounting irregularities which
require the firm to revise its earnings
Insider trading CSI where actors related to the firm use confidential knowledge to exploit
the stock market
Accounting CSI where a firm’s accounts have been manipulated or tampered with
Taxat ion CSI where the focal firm is associated with tax irregularities
Consumer related Customer/consumer CSI where consumers are harmed by a firm’s behaviour and not as a direct
result of a product quality issue
Product and service quality CSI where a firm’s products or services directly harm stakeholders as a
result of potential quality issues
Product recalls CSI where a firm—voluntarily or involuntarily—removes their product
from the market and/or requires customers to return them
Intellectual property CSI where the protected intangible property of a firm is claimed to be
utilized by another without consent
Anti-competition CSI where the firm is associated with a set of illegal business practices
motivated to reduce competition
Ethics A general category of CSI—a relevant aspect related to the ‘ethics’ category is that it sits uneasily with
stakeholder assessments of morality, yet events of breaking ethical norms are not known to breach any
explicit or extant legal parameters
THE SOCIAL REGULATION OF CORPORATE SOCIAL IRRESPONSIBILITY 29
APPENDIX 3: SUMMARY OF KEY STUDIES
Discipline Author(s) (year) Title
Journal, vol.,
page(s) Method Relationship Key themes/findings
Finance &
Economics
Alexander () On the nature of the
reputational penalty for
corporate crime:
Evidence
Journal of Law and
Economics,,
–
Quantitative
Stock price
movements
Multivariate
regression
analysis
–– Corporations incur significant ‘extra-legal’ costs in the form of
stock market devaluations following accusations of CSI.
However, these do not appear significant for certain types of CSI
like environmental/wildlife violations. The authors conducted
additional analyses and found that customers terminated their
contracts with firms following CSI.
Finance &
Economics
Armour et al. ()Regulatory sanctions and
reputational damage in
financial markets
Journal of Financial
and Quantitative
Analysis,,
–
Quantitative
Stock price
movements
Event study
methodology
–– This article offers an event study which explores the stock price
reactions concerning financial misconduct violations of the
Financial Services Authority (FSA) in the UK. Using data from
the London Stock Exchange, the study is consistent with
previous research in finding significant reputation penalties for
financial misconduct.
Finance &
Economics
Atanasov et al.
()
Does reputation limit
opportunistic behavior
in the VC industry:
Evidence from litigation
against VCs
Journal of Finance,
, –
Quantitative
Westlaw database
Probit regression
–– Using a large sample of lawsuits involving venture capital (VC)
firms, the study explored the influence of reputation on the
likelihood of subsequent lawsuits, as well as the decline in future
contracts as a result of litigation. The study finds that more
reputable firms are less likely to be litigated, but when litigation
does occur, more reputable VC firms were found to experience a
greater relative reduction in future business opportunities.
Finance &
Economics
Karpoff () The future of financial
fraud
Journal of
Corporate
Finance,
Quantitative
Predictions based
on the ‘Trust
Triangle’ model
and the
‘Klein–Leffer’
model
SR- This study speculates on the forces which increase/decrease the
propensity for firms to commit financial fraud. The authors
explicate the ‘trust triangle’, in which market forces, reputational
capital, institutions and cultures are considered important to the
process of decreasing incidents of financial misconduct. The
authors speculate that, with increased societal wealth, the
abovementioned forces should act as a greater deterrent to firms
committing financial fraud.
Finance &
Economics
Karpoff et al. ()The reputational penalties
for environmental
violations: Empirical
evidence
Journal of Law and
Economics,,
–
Quantitative
The WSJ Index
Stock price
movements
Event study
methodology
–– This article compares the size of regulatory and reputation
penalties concerning company violations of environmental
regulations. Firms that violate environmental laws were found to
suffer statistically significant legal penalties. However, when
comparing the size of the legal penalty with stock price
reactions, the effects were found to be similar in scope. Thus, the
authors conclude that ‘environmental violations are disciplined
largely through legal and regulatory penalties, not through
reputational penalties’ (p. ).
(Continues)
30 NARDELLA .
Discipline Author(s) (year) Title
Journal, vol.,
page(s) Method Relationship Key themes/findings
Finance &
Economics
Wans () Corporate social
responsibility and
market-based
consequences of adverse
corporate events:
Evidence from
Journal of
Accounting
Auditing and
Finance,,
–
Quantitative
KLD database
Stock price
movement
Logistic regression
–– Firms with higher CSR performance are less likely to announce a
financial restatement. Firms with lower CSR performance
experience greater negative stock price reactions to financial
restatements than firms with higher CSR performance. Results
are consistent with the notion that investors perceive higher CSR
performance to be in line with managers’ incentives to promote
corporate ethical values than with their incentives to cover up
CSI.
General
Management
Nardella et al.
()
Shame on who? The
effects of corporate
irresponsibility and
social performance on
organizational
reputation
British Journal of
Management,,
–
Quantitative
WMAC survey
Linear regression
A–B(II) By exploring the reputation effects of CSI, the authors find that the
relationship between CSI and corporate reputation is highly
context dependent. Specifically, the study finds that firms with
comparatively enhanced corporate social performance
experienced reputation damage only when their culpability for
CSI was validated by a court of law. In turn, firms with the lowest
relative corporate social performance were found to experience
reputation damage without their culpability validated by the
courts. Hence, violating stakeholder expectations can lead to
negative changes in corporate reputation.
General
Management
Mishina et al. ()The path dependence of
organizational
reputation: How social
judgement influences
assessments of
capability and character
Strategic
Management
Journal,,
–
Conceptual A–B(II) Theoretically explores how judgement heuristics and biases
manifest in the development of capability and character
reputations. Thus, the study explores both the positive and
negative sides of corporate reputation by examining the manner
in which different types of reputations are built or damaged.
General
Management
Reuber and Fischer
()
Organizations behaving
badly: When are
discreditable actions
likely to damage
organizational
reputation
Journal of Business
Ethics,,–
Illustrative case
examples
–(I) This study offers a conceptual model concerning the relationship
between CSI and the likelihood of reputation damage. Using
stigmatization theory, the article suggests that corporate
reputation damage may be influenced by the nature of the CSI
event, together with the level of media coverage and the extent
to which stakeholders have goals tied to, and negatively
influenced by, the occurrence of CSI.
General
Management
Roulet () Sins for some, virtues for
others: Media coverage
of investment banks’
misconduct and
adherence to
professional norms
during the financial
crisis
Human Relations,
, –
Mixed methods:
Interviews +
SDC
Thomson Reuters,
Bankscope
database
A–B(II) This study examined CSI within the context of the banking
industry during the financial crisis. The article suggests that
banks, by engaging in CSI, may signal their adherence to
negatively perceived professional norms. The findings show that
the greater the media disapproval of CSI, the more likely banks
are to be selected to join a syndicate, indicating, to some extent,
that CSI can act as a positive signal for organizations to become
engaged in professional misconduct.
