Annales. Ethics in Economic Life" Financed Through Contract No

ANNALES

EDITORIAL BOARD Joanna Dzionek-Kozłowska (Editor-in-Chief), Rafał Matera (Deputy Editor-in-Chief) Janina Godłów-Legiędź, Janusz Skodlarski, Jan Jacek Sztaudynger, Danuta Walczak-Duraj SCIENTIFIC COUNCIL Chairman: prof. Czesław Domański, PhD, University of Lodz prof. dr. Tevfik Erdem, Gazi Üniversitesi (Turkey) prof. Wojciech Gasparski, PhD, Kozminski University, Business Ethics Centre prof. David J. Jackson, Bowling Green State University (USA) prof. Bożena Klimczak, PhD, Wrocław University of Economics revd. Biju Michael SDB, PhD, Salesian Pontifical University, Jerusalem (Israel) prof. dr. Nail Öztaş, Gazi Üniversitesi (Turkey) dr Přemysl Pálka, PhD Tomas Bata University in Zlín (Czech Republic) prof. Sharaf N. Rehman, University of Texas (USA) prof. Michał Seweryński, PhD, University of Lodz prof. Heather Hadar Wright, PhD, Wittenberg University (USA) INITIATING EDITIOR Agnieszka Kałowska EDITOR OF THE ISSUE Joanna Dzionek-Kozłowska TRANSLATORS Marta Koniarek, Wojciech Szymański, Dorota Woronowska PROOFREADING Mark Muirhead, Sharaf N. Rehman TYPESETTING Joanna Dzionek-Kozłowska TECHNICAL EDITOR Anna Sońta

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CONTENTS 5

Michał Kasiński, University of Lodz Ethical and political dilemmas of local self-government in Poland in the course of systemic transformations (1990–2018) 7

Ewa Kulesza, University of Lodz The protection of customer personal data as an element of entrepreneurs’ ethical conduct 27

Małgorzata Zajaczkowski, Warsaw School of Economics Ethical aspects of the world trading system on the example of Fair Trade 45

Beata Bielska, Katarzyna Tamborska, Nicolaus Copernicus University in Toruń Transnational corporations as entities of informal influence. Some reflections based on the example of their engagement in activities directed at LGBT groups in Poland 59

Maciej Soin, Lodz University of Technology Philosophical difficulties of stakeholder theory 75

Krzysztof Tapek, Jagiellonian University Corporate social responsibility in the light of Kant’s categorical imperative 85

Michał A. Michalski, Adam Mickiewicz University in Poznań Consumer social responsibility 97

Iwona Codogni, Cracow University of Economics The chances and limitations of applying a CSR strategy in Polish enterprises 111

Robert Rogowski, State University of Applied Sciences in Nowy Sącz The practice of CSR implementation in Polish companies according to the CSR advisors 125

CONTENTS 6

Urszula Gołaszewska-Kaczan, University of Bialystok Jacek Marcinkiewicz, University of Bialystok Jarosław Kilon, Grupa Partnerska BUCHALTER Assessment of investment attractiveness in shares of socially responsible companies based on the RESPECT index in 2009–2017 141

Agnieszka Marek, The John Paul II Catholic University of Lublin Corporate social responsibility in FC Barcelona as Carroll’s CSR Pyramid in practice 153

Artur Grabowski, University of Economics in Katowice Activity of German sports (football) enterprises and Corporate Social Responsibility 167

Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 7–26 doi: http://dx.doi.org/10.18778/1899-2226.21.7.01

Michał Kasiński University of Lodz Faculty of Law and Administration Institute of Local Self-Government Law e-mail: [email protected]

Ethical and political dilemmas of local self-government in Poland in the course of systemic transformations (1990–2018)*

Abstract

The study presents critical reflections on the course and results of Polish local self-government reforms from March 1990, when after 40 years of the system of territorial soviets (national councils), self-government was reintroduced into communes, until January 2018, when an attempt to improve the systemic institutions of self-government in communes, poviats and voivodships was once again revisited. The author points out significant discrepancies between the basic ethical and political values of local self-government, i.e. democracy, independence and efficiency, and the changing content of self-government systemic laws as well as the practice of local authorities’ operations, and formulates proposals aimed at repairing Polish local self-government by adjusting its organisation and functioning to the principles resulting from the Constitution of the Republic of Poland and the European Charter of Local Self-Government. He considers as the most important the elimination of pathological phenomena of simulated local democracy which include: a drastically low turnout in elections and referenda, the disappearance of democratic responsibility of local self-government bodies, and the auton- omy of the directly elected executive body of the commune from the influence of the local representation. From this point of view, he positively assesses the new regulations, strengthening the guarantee of transparency of operations carried out by local self-government bodies and control rights of councillors, as well as expanding the catalogue of initiative, consultative and control powers of citizens. He

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 12(2), 141–153. 8 MICHAŁ KASIŃSKI points out, however, that ensuring real democracy in of the local authorities requires a deeper reconstruction of the principles of self-government, the election process, and strengthening the role of representation in creating and enforcing the responsibility of executive bodies.

Keywords: local self-government, local democracy, democratic responsibility, local self-government representation, local government unit executive body, European Charter of Local Self-Government

JEL Classification: H70, N44, R50, Z18

1. The origins of local self-government in Poland

Historical circumstances of the liquidation of local self-government and the imposition of the Stalinist model of Soviet power in the countries of Central and East- ern Europe at the turn of the 1940s and 1950s caused a much faster erosion of that model than in the USSR itself. One of the important reasons for that phenomenon was the presence in the social consciousness of the systemic alternative in the form of self-government traditions destroyed by the external pressure which were an important component of the sense of national identity and political culture. The vitality of the idea of local self-government in Poland is demonstrated by the fact that despite the great efforts made to remove it from the consciousness of society, the communist authorities themselves decided to refer to it at a time when their social base was rapidly shrinking and the ideology of “real socialism” went bank- rupt. In 1976, phraseological changes were introduced into the Constitution of the Polish People’s Republic, ascribing to national councils the features of not only organs of state authority but also basic units of social self-government. Under the conditions prevailing at the time, national councils could not fulfil such a role, as they did not come from a democratic choice and were not able to act independently fostering local interests. On the contrary, they were even more strongly associated with the apparatus of the Communist Party and devoid of social influence. It was also a period of deep centralisation of governance of society and management of the economy. After August 1980, the opposition circles demanded the restoration of real territorial self-government. The programme of “The Self-Government Republic”, adopted at the First Congress of the Independent Self-Government Trade Union “Solidarity”, was heading in that direction. It included the thesis: “Territorially, organisationally and materially independent self-government must be a real representation of the local community.” Marek Śliwiński (2005) has pointed to the social and even the anarchic and socialist character of the programme which postulated workers’ self-management at the enterprise level and civic self-governance at the level of a bottom-up built state (pp. 84–85, 140). It did not include the de- ETHICAL AND POLITICAL DILEMMAS… 9 mand for decentralisation of public authority following the example of the 19th-century liberal state, but it also cannot be read as an approval for the then existing centralised system. On the other hand, the project of general reconstruction of the social system towards pluralism and democracy was presented, and the content of that concept showed many similarities to the idea of subsidiarity. After many years, Bronisław Geremek (2002), reminisced in the text intended for an international audience stating that:

The heart of the great Solidarity movement was the dream of freedom and democracy understood as the inherent right of every human being to decide about his own destiny and to share responsibility for the fate of the nation. (p. 122)

The ethical dimension of the original version of the Solidarity’s programme is noteworthy. According to Jerzy Regulski, it was supposed to be a programme of the moral rebuilding of society, making it a community based on direct, authentic ties, as opposed to an alienated state and party-government administration (2000, p. 38). Thus understood self-government was an alternative not only to the communist system but also to parliamentary democracy in its traditional form. Local self-government was to be an element of the self-governing Republic of Poland, in which the main role was foreseen for workers’ self-government. The implementation of the trade union’s programme did not necessarily mean a revolution or a political coupe. Edmund Wnuk-Lipiński (2000, pp. 53–64) sees in the first, romantic period of Solidarity, a culture of dialogue and cooperation, which was later gradually replaced by Lenin’s question “who, whom?” The course of social conflicts in the 1980s led to a state in which the culture of dialogue disappeared, and confrontational attitudes, the language of contempt, and hate speech destroyed the credibility of ethical ideals proclaimed by both sides of those conflicts. The Solidarity programme became only a political manifesto of the opposition. After the imposition of martial law, the struggle for local self-government continued. As a result of subsequent political and economic changes, however, the situation was fundamentally different from the vision that the first Solidarity programme presented. That programme was not implemented at all in terms of internal relations as the transformation of Poland’s economic system from the socialist to capitalist one occurred. Śliwiński says that the transformation was almost exclusively the work of the former elites of the Communist Party for whom the inefficient and fossilised real socialism simply stopped being beneficial. The new system was created in the 1980s, despite the resistance and boycott on the part of the then underground Solidarity movement, under the Polish People’s Republic’s laws and decrees regarding the privatisation of state assets, and its main beneficiaries were high party officials, the members of the government and directors of enterprises involved in the creation of domestic joint stock companies, which were seemingly domestic and foreign-invested enterprises, known as joint venture companies (Śliwiński, 2005).

10 MICHAŁ KASIŃSKI Jadwiga Staniszkis describes the process in question as creating political capitalism: the economic class emerging in that period, promoted for that role by political power, sought to obtain a status based essentially on its economic potential (1989, p. 127). That period was characterised by the attempts on the part of the authorities to modernise the current political system in the framework of the so- called plans for the democratisation of public life. In that context, we can observe, among others, a formal (but not political) concession regarding the territorial system, which was expressed in the Act of July 20, 1983 on the System of National Councils and Local Self-Government. It defined national councils as simultaneously the organs of state and local self-government. That concept was contradictory in its nature and could not be reconciled with the classical construction of local self-government (Stahl, 1988, p. 167). In practice, it was also a mystification: council members still could not be elected on a democratic and pluralistic basis and no communal property, which is an indispensable basis for the activity of local self-government, was established. Under those conditions, the law could not fulfil the hopes placed in it. The incomplete success of reform efforts, the inefficiency of the existing system, and especially the deteriorating economic situation and the total loss of authority of the local administration in the late 1980s prompted the Communist Party to pursue a dialogue with a moderate part of the opposition and search for solutions acceptable to society. At the beginning of 1989, the Round Table Talks became an expression of that dialogue. The compromise also required concessions from the other party. Solidarity parted with the idea of implementing the fundamental theses of the original programme of self-government-based society reconstruction, though not with the thought of local self-government as such. The compromise concerning the model of territorial self-government was not achieved at the Round Table, though the new concept of the local self-government system presented at the time by the opposition became gradually established in the awareness of politicians and social activists. It was fundamentally contrary to the existing model of national councils, but also different from the one expressed in the first Solidarity programme. The concept did not provide for systemic relations of territorial self-government with other forms of social self-governance, and especially with workers’ self-government. In the revised programme, the trade union combined the postulate of rebuilding local self-government with the liberal- democratic concept of the state, referring to the Worldwide Declaration of Local Self-Government, adopted in 1985 at the World Congress of the International Union of Local Authorities in Rio de Janeiro. In that document, local self- government was defined as an independent unit, separate from the state administration, operating within the framework of state structures whose scope of rights and obligations set forth in the statute (NSZZ “Solidarność”, 1989). Such an approach referred to the classical formulas of self-government in the state of law and was previously presented in the liberal circles, the Young Poland Movement and in some intellectual circles.

ETHICAL AND POLITICAL DILEMMAS… 11 The introduction of the new concept into the political circuit is seen as the achievement of the Solidarity–opposition team of experts at the Round Table. Its chairman, Regulski, states that during the negotiations the greatest emphasis was placed on the issues of self-government independence, financial separation, and democratic elections. The government-coalition team, chaired by Sokolewicz, agreed to the majority of those demands. However, the agreement was not official- ly signed due to the existence of differences in views on three issues. The government side demanded the retention and the Solidarity side demanded the removal of the constitutional definition of national councils as organs of state authority and self-government. The government wanted to introduce full voivodship self- government, with legal personality and its own property, along with general elections to voivodship councils (being concurrently state bodies). The Solidarity side believed that in the first stage of the reform, commune-level self-government ought to be established, while voivodships should be left as territorial units for the purpose of government administration, including, however, the representation of communes from the voivodship area endowed with social control competencies. The government side demanded that the state administration is maintained in communes alongside self-government, and the local self-government side demanded the liquidation of that administration (Regulski, 2000, p. 50 et seqq.). Those discrepancies between the positions of the negotiators and the limited possibility of reaching a compromise were in a sense understandable. The negotiators were not political decision-makers, but they realised that it was a discussion on the fundamental and lasting transformation of the system. From today’s perspective, it can be seen that the debate taking place then was a sign of a revival of a culture of dialogue and cooperation. Only on the basis of such a culture, relying on models of understanding among people with diverse points of view on public affairs, different world outlooks, social views, and even competing political interests, authentic and lasting democracy can be built.

2. The first stage of the local self-government reform (1990–1997)

The local self-government reform became possible after the victory of Solidarity in the parliamentary elections on June 4, 1989. On the initiative of the Senate, after a long-standing discussion and legislative work, on March 8, 1990, the Sejm (the lower chamber of the Polish Parliament) passed the Act on Local Self- Government (consolidated text in Journal of Laws, 2001, No. 142 as amended, currently entitled: Act on Commune Self-Government, consolidated text, Journal of Laws, 2018 item 994). On the same day, the Sejm adopted a constitutional amendment introducing the provisions that the Republic of Poland guaranteed the participation of local self-government in the exercise of power. The Sejm also passed commune council electoral regulations, and after a dozen or so days, the Act on Local Self-Government Employees, regulating, among others, issues of granting property rights to communes and the creation of civil servant corps 12 MICHAŁ KASIŃSKI of self-government administration. The dualistic model of the territorial system was complemented by the Act on Territorial Organs of General Government Ad- ministration and the so-called Competence Act. Elections to commune councils took place on 27 May 1990, and thus the first stage of the local self-government reform in Poland began. The victory of civic committees in the first local elections was assessed, rather prematurely, as the actual collapse of the bureaucratic-centralised system, as empowered local communities transferred along with the electoral mandate the power to local power structures (Buczkowski, 1997, p. 219). Others considered the voter turnout as a measure of success, and that was disturbingly low (42.7% of those eligible to vote). Despite this fact, success was actually achieved and consisted not so much in filling 50% of seats by candidates of citizens’ committees but in the social qualifications of new councillors and obtaining a high degree of representativeness of commune councils. The basis for that success was the electoral law which created a wide range of opportunities for local communities, groups of citizens and their various organisations to propose candidates for councillors, without granting any preferences to political parties. Andrzej Piekara points out that all that resulted in favourable circumstances for genuine and creative stimulation of socio-political life, especially the social activity of micro- communities. Also, conditions for positive selection of candidates for local authorities, based on substantive and civic criteria of evaluation, appeared. The beginnings of authentic, pluralistic public opinion related to the election campaign emerged. Most importantly, the voters became convinced that they could make decisions on the composition of the most important authority: the commune council. The local authority met the conditions for its democratic legitimisation and social acceptance (2005, pp. 147–148). The systemic model of local self-government introduced in 1990 corresponded to the classical western (continental) models and to a large extent referred to solutions from the interwar period. However, it differed from those models in that it was a one-stage model. Only communes, both in urban and rural areas, were recognised as local self-government units by virtue of law. They could merge into commune unions and also had a voivodship representation (the regional assembly), but there was no self-government at the higher level. The voivodship was defined by law as a territorial unit created for the implementation of government administration by the voivode and its apparatus. For the same purpose, the voivodship was divided into districts of general administration in which only governmental bodies operated—the heads of district offices. The voivodes were granted strong supervisory powers towards commune self-government, whereas commune self-government was given substantively limited competences as well as inefficient and unstable financial sources of its operations. The recognition of the commune as the basic local community of residents, competent in public matters of local importance not reserved for other entities, and the creation of a legal way for communes to form a supra-commune level for performing public tasks in the form of a voluntary commune union was an important step towards the principle of subsidiarity. An important democratic feature of the ETHICAL AND POLITICAL DILEMMAS… 13 new territorial system was granting residents of the commune the right to decide directly on all important matters of the commune through a local referendum (regarding the commune council recall and self-taxation for public purposes on an exclusive basis), the free election of councillors according to the rules ensuring the representative character of the governing body, the election of the executive body (the commune board) by the commune council and its responsibility before the council. Decentralisation to the level of the commune expressed itself in the creation of a guarantee of carrying out independent actions in the scope of its own tasks and the right to take legal action against unlawful interference of the supervisory authority, the introduction of commune property, the determination of sources of its own revenue and subsidies from the state budget based on objecti- fied criteria, as well as the creation of a new professional category of local self- government employees. A strong advantage of the 1990 reform was the introduction of self-government to existing communes, without the need to correct the territorial division. The network of communes was shaped already in the 1970s relatively rationally, as most communes had social and economic ties formed to implement public tasks. Communes as territorial units were in principle prepared for the adoption of the local self-government system. This is one of the main reasons for the success of the commune reform (cf. different assessments of the reform in Piekara (2005, p. 151) and Regulski (2000, p. 367 et seqq.)). The provisions of the Constitutional Act of October 17, 1992, the so-called Small Constitution, recognising local self-government as the basic form of organising local public life, the commune as the basic unit of this self-government, and the possibility of creating other units through the statue, were undoubtedly the manifestation of decentralisation and self-governmental trends (published in the Journal of Laws, No. 84, item 426). Also, the adoption of the Act of 7 October 1992 on the Regional Chambers of Accounts (consolidated text in the Journal of Laws, 2016, item 561 as amended) as well as the Act of October 12, 1994 on Local Self- Government Appeal Boards (consolidated text in the Journal of Laws, 2001, No. 79, item 856 as amended), and especially the ratification of the European Charter of Local Self-Government in 1993 (in the Journal of Laws, 1994, No. 124, item 607 with corrections) pointed to the intention to consolidate the independent position of local government units in the public authority system. However, it did not mean that decentralisation was recognised as a fundamental, lasting and integral principle of that system. Despite the removal of the hegemony of the Communist Party, the failure of the local self-government reform still loomed ahead. It was an imperfect, unfinished reform. The political solutions of the first half of the 1990s did not lead to the dismantling of the centralised and bureaucratic system of state governance; they only made a breach in the system, increasing in fact its disfunctionality. Its higher levels were left almost entirely under the control of hierarchically organised government administration bodies. There was no reform of the territorial division necessary to allow for the regionalisation of the country. Local authorities were not provided with stable and sufficiently efficient sources of income and independence in making budget expenditures and managing communal property. After the SLD–PSL (SLD—Democratic Left Alliance; 14 MICHAŁ KASIŃSKI PSL—Polish People’s Party) coalition took power (1994–1997), decentralisation was stopped halfway, threatening to return to the full version of the centralised- bureaucratic model in governance of society and management of the economy.

3. The second stage of the local self-government reform (since 1998)

It was necessary to wait for fundamental changes almost until the end of the 20th century. In 1997, the new Constitution of the Republic of Poland was enacted and adopted by the National Assembly in a referendum. In June and July 1998, on the initiative of the centre-right government of Jerzy Buzek, the Parliament enacted the systemic laws marking the second stage of the local self-government reform.1 The 1998–1999 reform assumed the creation of a new territorial system of Poland and the building of civil society institutions in accordance with the principles of decentralisation of public authority and subsidiarity set out in the new Constitu- tion. The decentralisation of public tasks was aimed at limiting the central administration’s activities to managing changes of strategic importance and pursuing the policy of protecting the national interest in the administration process. The remaining tasks were to be carried out by the territorial administration at the regional and local level. At the regional level, both decentralised local self-government and territorially decentralised government administration were established. The basic task of voivodship self-government was guaranteeing the civilisational development of the region, mainly through the determination and implementation of its regional policy, and the organisation of public services within the voivodship. The government administration under the authority of the voivode as a representative of the Council of Ministers was assigned the role of protecting the uniformity of the state and national interests. For this reason, the voivode was granted the competence to coordinate the activities of all governmental (combined and non- combined) units in the voivodship, adjust the government policy implementation to the voivodship conditions, supervise public law entities, including local self- government, as well as ensure public safety and order in the voivodship. At the local level, all public tasks were entrusted in principle to self- government organised on two levels: the already existing commune level and the new poviat one. Their role was defined as the implementation of their own tasks in order to meet collective needs of residents of a given commune or poviat as well

1 Act on Poviat Self-Government of 5 June 1998 (consolidated text in the Journal of Laws, 2018, item 995), Act on Voivodship Self-Government of 5 June 1998 (consolidated text in the Journal of Laws, 2018, item 913), Act on Government Administration in the Voivodship of 5 June 1998 (in the Journal of Laws, No. 91, item 577), replaced by Act on the Voivode and Government Administration in the Voivodship of 23 January 2009, (consolidated text in the Journal of Laws, 2017 item 2234), Act on the Introduction of the Three-tier Division of the Country of 24 July 1998 (in the Journal of Laws, No. 98, item 603, as amended). ETHICAL AND POLITICAL DILEMMAS… 15 as government administration tasks stipulated by statutes and entrusted to it on the basis of agreements. Poviat self-government was to carry out supra-commune tasks, with the exception of conducting business activity. The introduction of the three-tier basic territorial division was considered a necessary condition for the implementation of the reforms. The most important from this point of view was the creation of voivodships, which due to their area, population, social situation and economic potential could be considered as self- governmental regions, corresponding to European standards. A three-fold reduction in their number (16 instead of 49) was supposed to remove an obstacle to the regionalisation of Poland expected by the main bodies of the European Union. A by-product of the creation of large voivodships as self-governmental regions (more precisely self-governmental and governmental ones) was the restoration of poviats. Far too many poviats were created from the point of view of the requirements of rational governance, as many as 308 the so-called rural poviats (after two years, 7 more, and so 315 in total). However, there were no changes in the number of communes or their statutory model, except for the creation of 65 towns with the rights of poviats. An important reform of commune self-government was carried out in 2002, replacing the previous collegial boards elected and recalled by commune councils with the new single-person executive bodies of communes: commune heads, mayors and city presidents, elected directly by residents and recalled before the end of the term only through a local referendum.2 Unfortunate- ly, the last reform served not so much the development of local democracy as the transformation of the influence of political parties on the functioning of the commune authority centre. It fundamentally changed the system of power in communes, destroying the pervious relative balance of power between legislative and executive bodies in favour of the clear dominance of the latter.

4. The consequences of the reform: the success or crisis of local self-government

According to the intentions declared by the creators of the reform, it was aimed at improving the system of public authority in Poland, ensuring higher efficiency than before in solving social problems and the functioning of local units in accordance with the principles of democracy, social pluralism, decentralisation and subsidiarity established in Europe. From the perspective of past years, it can be stated that the manner of introducing systemic changes and their consequences did

2 Act on Direct Elections of the Commune Head, Mayor and City President of 20 June 2002 (in the Journal of Laws, No. 113, item 984 as amended) expired. Currently: Act on the Electoral Code of Poland of 5 January 2011 (consolidated text in the Journal of Laws, 2018 item 754), Act on Local Referendum of 15 September 2000 (consolidated text in the Journal of Laws, 2016, item 400 as amended). 16 MICHAŁ KASIŃSKI not fully correspond to the presented assumptions. In addition, after the entry into force of the laws introducing the reform, social and political phenomena which hindered or prevented the implementation of some of its objectives occurred. The 1998–1999 reform did not include the reconstruction of the state governance centre; hence the structures of ministries and central offices were not adapted to the situation in which they no longer implemented separate ministerial policies. As a result, the reform consisted to a significant extent in the “decentralisation of budgetary difficulties.” In the first years, numerous dysfunctions appeared related to the transfer of new tasks to the self-government of voivodships and poviats without providing funds for their implementation, for example, in the field of health protection, education, social policy, environmental protection, unem- ployment and employment promotion, modernisation of rural areas, or the management of public roads. In those areas, there continued to remain governmental specialised administration departments whose maintenance still absorbed a significant part of budgetary funds or separate funds. Those defects were corrected in the following years, mainly by creating a stronger basis for the regional development policy implemented by voivodship self-government. In particular, the financial equilibrium of many local government units at this level could already be obtained to a greater extent by means of financial resources from the European Union Structural Funds. Until recently, there was a tendency to expand the scope of activity of voivodship self-government, primarily at the expense of voivodes, concurrently the duties of co-operation in the scope of implementation of developmental tasks were imposed on the voivode and local self-governments. Nevertheless, the internal integration of self-government within the boundaries of individual voivodships remains weak; the underdevelopment of ties between local self-governments and voivodship self-government in the scope of shaping the content of basic legal documents concerning regional development is still noticeable. In fact, communes and poviats have an insignificant influence on the content of the voivodship development strategy, the regional operational programme and voivodship programmes adopted by the regional assembly. They are mainly petitioners of voivodship authorities in the procedures for obtaining aid funds. The political mechanism of decision-making processes in voivodship self- government enables the management of its activities by the central national parties that have factions (councillors’ clubs) in the regional assembly and representatives on the voivodship executive board, leaving no room for a greater influence on these processes to be exerted by local self-governments and non-governmental organisations. In the relations between communes and poviats and voivodship self-government, it is difficult to find important elements of the implementation of the constitutional principle of subsidiarity. In the last two decades, at both levels of local self-government, there have been more or less successful systemic changes aimed at strengthening the democracy and the efficiency of the functioning of the commune or poviat authority. The scope of civic participation has been increased and new institutions have been launched (e.g.: opinion-providing referenda, civic legislative initiatives, civic budgets in some cities), and the rules for cooperation between self-government ETHICAL AND POLITICAL DILEMMAS… 17 authorities and non-governmental organisations have been regulated. Since 2002, the aforementioned changed legal model of the executive body has prevailed in communes, and in poviats the traditional model has been maintained: the collegial board is still elected by the poviat council, but the position of its chairman (staroste) has been strengthened along with his or her single-person competences, especially in the field of control over poviat services, inspection bodies and guards (police, state fire brigade, construction inspectorate, and sanitary inspection). A not very effective attempt has been made to realign the accountability of the decision-making bodies (commune councils, poviat councils), and in communes also the executive bodies, to residents, mitigating the validity conditions of the recall referendum (submission of valid votes by at least 3/5 participants of the last elections for the recall-threatened body). The legal possibilities of playing a creative role in the field of local development by local and regional self-governments have been extended, but these possibilities are being used to a small degree. All this has proven to be insufficient to stop the return of centralistic and bureaucratic tendencies in the functioning of local self-government as well as the entire public administration. One of the reasons for this process is excessive politicisation (in the sense of being party-bound) of the activities of self-government bodies, especially in larger cities and poviats. For many years, it was considered a consequence of a faulty electoral law favouring voting based on party lists and the distribution of seats according to the principle of proportionality. Less attention was paid to the style of activity of party council clubs. Meanwhile, the credibility of the constitutional and statutory construction of the free mandate of self- government councillors is questionable, since they are chosen by residents but mainly among candidates of one or other party, and when making important decisions they are bound by the party (club) discipline. These two factors essentially limit the scope of representation by councils of interests other than political ones present in the local community as well as the influence of non-party organisations and social communities on the way of solving problems related to meeting residents’ needs. The introduction in 2014 of the principle of majority elections to commune councils in single-mandate constituencies (apart from towns with poviat rights), contrary to expectations, has not improved the situation, as on the scale of the country candidates of national parties have won more votes than others. The causes of this phenomenon may vary. The most important, in my opinion, is the inconsistency of the reform. It has not encompassed the other of the above- mentioned factors: the legal status of the councillor has not changed; it is not strictly related to the protection of voters’ interests, and especially to keeping electoral promises. Residents may still recall the whole council in a referendum, but they cannot recall a single councillor who has compromised his or her vow or has otherwise lost social credibility. One of the main reasons for the alienation of elected local authorities has not been removed, which has had a negative impact on their social authority and the ability to effectively solve the problems of collective life.

18 MICHAŁ KASIŃSKI This alienation has not been removed by the functioning for four terms of the model of single-person executive bodies of communes elected directly by residents. However, it has caused a disruption of the mechanisms of self-government representation and threatened the continuity of power in the commune. Commune heads, mayors and city presidents have become largely independent of commune councils (city councils), leading to a significant reduction in the role of the latter: by losing the right of recall of the executive body, councillors have been deprived of the basic instrument to enforce the execution of their own resolutions. Contrary to the widespread myth, the vast majority of heads of commune executive bodies have not obtained the position of political leaders in the system of local authority. This is particularly true of the presidents of large cities. Although they have been freed from the imperative pressure of political groups dominating in the councils, the leadership of the regional party branches still has formal and informal channels of direct influence on their people holding offices in the cities, even if they do not act under the party’s name. Moreover, more strongly than before, they are dependent on their own bureaucratic apparatus, and they can also become hostages of economic interest groups which through their own dominating influence on the local government apparatus gain an advantage over competitors and other centres of social influence. Residents’ lack of faith in the effectiveness of enforcing the democratic responsibility of self-government authorities, especially commune heads, mayors and city presidents, means that there are few recall referendums, and most do not bring legal solutions due to a low number of participants. There are quite common cases when a commune head, mayor or city president who has not received a discharge for the budget or for some other reason has lost the trust of the commune council (city council), e.g.: evidently acting to the detriment of residents, still performs the function after “winning” the referendum in which fewer than 3/5 of the participants of the elections in which the person had obtained a mandate took part. Democratic legitimisation of such commune authorities may raise serious reservations. In rural poviats, on the basis of a different legal regulation of the mechanism of responsibility of the democratic executive body (recalled by the council, not the residents), symptoms of the crisis of this institution are also present. The staroste often obtains a dominant position not only in the collegiate executive board but also in relation to the poviat council and becomes virtually irremovable until the end of the term. This is the consequence of the unsuccessful concept of the poviat as the second level of local self-government, fulfilling the tasks related to supra- commune duties but not conducting business activity. From the very beginning, the poviat became an administrative-bureaucratic entity; its authorities are bound not so much by the will of residents as by various interest groups influencing political groups holding the majority in the council and in the poviat executive board. Another serious disadvantage of the system of the poviat is a lack of a systemic connection of the activities of its authorities with the interests of communes belonging to a given poviat, and thus the failure to respect their fundamental role in the system of public authority and the constitutional principle of ETHICAL AND POLITICAL DILEMMAS… 19 subsidiarity. Also, the concept of towns with poviat rights, being an attempt to distinguish the legal category of large cities without violating the dogma of the need to preserve the uniform status of the political system of the commune, has proven to be unsuccessful. Local (as well as regional) self-government partiocracy is one of the manifestations of appropriation of the Republic by the central apparatus of nationwide political parties. Against this background, the consequences of perceiving in the mechanisms of the operation of the self-governmental representation primarily the arena for political games and the bureaucratisation of the functioning of executive bodies along with their isolation from the influence of the legislative bodies and local society are becoming increasingly visible. There is also a noticeable tendency of central offices and leaders of political groups to directly control decision-making processes in local self-government through issuing instructions and orders to party councillors’ clubs as well as party activists holding managerial functions and occupying prominent positions in the executive bodies. Especially at the level of the voivodship, this leads to the removal of the features of authenticity from self-government and to the reduction of the role of regional self-government communities to pure fiction. These negative trends are also present in local self- government. On the other hand, the results of empirical research indicate the tendencies of the local elites to closing themselves off, isolating themselves from the rest of the residents that are often seen as a group of passive public service consumers, able only to choose between providers of these services. Public life abnormalities in the form of mafias or local cliques occupying centres of self- government power for subsequent terms can be observed (cf. Kurczewski, 2007, p. 571 et seqq.). As a result, two concepts of “therapy” of Polish self-government, which may prove more harmful than its diseases, appear more and more clearly. The first is based on the belief in the omnipotence of market mechanisms in social life, spread with obstinacy, without any basis, along with a new dogma about the necessity of full privatisation of public services. The experience of countries where such reforms have been carried out, leads to far-reaching caution in their recommenda- tion. In particular, the trend towards the focus on only economic indicators of the effectiveness of local authorities’ operations, the understanding of their mission as similar to the role of management boards of commercial companies is dangerous. Short-term effects of such an approach may be attractive; the extraordinary success in acquiring and using European funds in Poland is attributed to the business efficiency of commune heads, mayors and city presidents. In the long-term, such reforms, however, result in the loss of access to services by less affluent members of the community, the deterioration of their living conditions, and thus the loss of trust in the elites, and the breakdown of ties that unite the local self-government community (Dębicki, 2001). The other concept is expressed in the intention of “nationalising” of self- government, and at least subjecting local and regional authorities to intense supervision by the government administration, including also political pressure. One cannot underestimate the temptation to de facto assign self-government authorities 20 MICHAŁ KASIŃSKI a role similar to that played by national and local state administration bodies. The tendency to introduce changes in this direction has clearly appeared over the last two years. Under various pretexts, the scope of tasks of local self-government units and the competences of self-government bodies are being limited and not only individual institutions but entire areas of competencies of self-governing bodies (e.g.: water management in the voivodship) are transferred to the competences of voivodes and other bodies of combined administration and existing or newly created bodies of non-combined government administration. The repressive character of supervisory control of self-government exercised by the government- appointed voivodes is increasing, which is indicated by, among others, cases of expanding their interpretation of the premises for a “substitute” termination of mandates of commune heads or mayors due to the alleged violation of the so- called anti-corruption provisions, when the commune council refuses to apply this measure, or issuing discretionary supervisory decisions in matters of the so-called de-communising of the names of streets and squares. The values of liberty and democracy of local self-government are protected by the constitutional principles of decentralisation and the participation of self- government in the exercise of public authority, at least as long as independent judges stand guard over these provisions. However, they do not eliminate the described threats completely. These rules may be subject to reinterpretation lean- ing towards the monism of the local authority. The essence of a monistic system is not in conflict at all with formal and legal declarations on decentralisation and local democracy. In practice, the relationship between these concepts can be sev- ered, and they can be deprived of their true social meaning. It is enough that those in power in the commune, poviat and voivodship will feel empowered to unilater- ally determine the content of public interest and behaviour of residents’ dependent on their will, not allowing residents to co-decide, and depriving them of the space necessary for pursuing individual and group interests that are in need of protection. The liberal facade of the local government system can still be maintained, but the actual political and social pluralism is missing (more in Kasiński, 2009). Political orientation and party affiliation of “local leaders” or “managers” understanding their role in such a way is not really important here, as they become a part of the monistic system that hijacks the entire public sphere, the system whose distinguishing feature is the hegemony of the bureaucratic apparatus of power, separated by a “glass wall” from society, and a sharp caesura between the rulers and the ruled. A negative feedback occurs: the weakening of the elements of democratic ideas and pluralism on the national scale contributes to similar processes in territorial units and vice versa: the tendency of introducing changes in the system of central government leading towards bureaucratic (and even police) monism is supported by analogical changes in the territorial system. Some changes introduced at the beginning of this year in the systemic model of local self-government seem to be heading in a different, pro-local and democratic direction, e.g.: giving the statutory status to citizens’ legislative initiative rights and the institution of the civic budget, granting councillors the right of submitting questions, imposing on councils the duty to define the rules for consulta- ETHICAL AND POLITICAL DILEMMAS… 21 tions and establishing committees dealing with citizens’ complaints, motions as well as petitions and on the executive authorities the duty to submit reports on the status of a given unit at the council session each year as well as to subject the report to the public debate with the participation of residents, introducing the right of refusal of the vote of confidence as grounds for initiating by the commune council a referendum on the recall of the commune head and as the premises for the recall of the executive body by the poviat council or the voivodship assembly (apart from the refusal to grant the vote of approval and “another reason”).3 The practical importance of these solutions, however, can only be evaluated after the next term of office. It will take a long time to assess the consequences of limiting the permissibility of holding the office by a commune head, mayor or president to two terms, due to their extension to five years. Such innovative measures cannot, however, overshadow the importance of the most significant change, which will have consequences in the results of the last elections: the retention of the majority rule for commune councils in single- mandate constituencies only in communes of up to 20,000 inhabitants, in other communes the restoration, and in cities with the poviat status, rural poviats and voivodships the maintenance, of the principle of proportional elections in multi- mandate constituencies, which will provide stronger preferences for candidates from party lists. It will also serve to unify the principles of shaping the composition of representative bodies “from top to bottom”, at all levels of the political system—from the Sejm to commune councils (except the smallest communes), thus restoring or strengthening the partiocracy—probably considered to be beneficial from the point of view of effectiveness of exercising the political control over the state and social organism at all levels. Since the legal structure of the councillor’s mandate has not changed: it is free from voters’ instructions but depends on party instructions imposed, for example, as part of disciplining members of councillors’ clubs. Legal regulations established in order to increase the influence of residents on public authorities may in these circumstances serve to strengthen the influence of local or regional party leadership on the activities of local self- government representations and their executive bodies. The leadership body of the ruling party (coalition) does not really conceal the intention to continue the process of centralisation of public authority and state interference in local self- government. Perhaps the leadership is unaware that it is following the well-worn path leading to various, seemingly already overcome, varieties of centralism that only appear to be democratic. Thus, one should bear in mind Kumaniecki’s warning: centralism always has a cataclysm at the end of its path (1924, p. 133).

3 Act of 11 January 2018 Amending Certain Laws to Increase Citizens’ Participation in the Process of Election, Operation and Control of Some Public Bodies (in the Journal of Laws, 2018, item 130). 22 MICHAŁ KASIŃSKI 5. Conclusions

The experience of the Polish transformation indicates that the introduction of the legal principle of political pluralism does not guarantee a deep reconstruction of the social system aimed at the authentic empowerment of individuals and social groups. After almost thirty years since the beginning of the systemic transformation, the degree of real self-organisation of society and public involvement in public life should be assessed as still remaining highly unsatisfactory. One of the signs of this situation is the growing crisis of local self-government, manifested not only in a low turnout in local self-government elections (since 1990 it has never reached 50% of eligible persons throughout the country), but in general in the weakening relationship between its institutions and direct representative local democracy, especially in the drastic disappearance of democratic responsibility of local self-government authorities. For the first time in recent Polish history, the trends of local democracy development collided with a strong technocratic- bureaucratic counter-trend, this time tinged with vulgar economism or a poorly concealed longing for authoritarian solutions. The idea of establishing the so-called single-person local leadership, i.e. the executive bodies pushing the institutions of the local self-government representation into the shadow at all levels of these authorities, is particularly controversial. I believe that authentic Polish leaders with appropriate experience and talent, and the trust and support of the people should manage the communes and other local government units. It is necessary to create premises, including legal ones that could ensure the selection in the democratic mechanism of people with such characteristics and skills as well as the willingness to act for the benefit of residents in cooperation with active citizens—members of the local community. In practice, however, these are two different types of political personalities. Some politicians consider their activity to be public service, while others undertake such activity to gain prestige, power, and related profits. Such politicians are called ruthless political players, as their actions are subordinated to self-interest instead of public goals (Jakubowska, 2002, p. 83). I express my fear that under current political and legal conditions when a party-based or clique-occupied centre of local authority is increasingly isolated from the social forces in the local self-government community, it is easier to promote ruthless political players, local or regional caciques and mandarins. Unfortunately, some terrible force has been pushing local self- government in Poland in this direction for a long time. To stop these negative processes, it is necessary to awaken the social will to restore the fully democratic character of local self-government so that it can be credibly called a civilisational value and an authentic institution of civil society. Pluralism of the public system cannot bring the expected results if it is not associated with legal and extra-legal factors that stimulate citizens to participate in public life at all levels of the political organisation of society. Ensuring effective, two- way communication between socially active individuals as well as social groups and the centre of local authority is such a factor. In the battle for the necessary ETHICAL AND POLITICAL DILEMMAS… 23 reform of public authority, the first demand should be made to base its system on the principle of subsidiarity, meaning “strengthening the role of citizens and their associations.” Clear recognition is needed in the new or amended Constitution of the Republic of Poland of commune residents’ communities as primary entities of self-governing units, and their authority should be based on “double legitimisation”: derived from the statutory act and at the same time rooted in the natural rights of the commune resident—to self-govern. The state, in recognising the Constitution as the subjective right of an individual to realise together with other individuals (neighbours) the common good in the framework of a self- governmental community, would have the characteristics of a democratic state of law respecting the principle of justice in the deepest sense of the word. The literature emphasises that modern democracy combines the conviction about the natural right of all citizens to participate in making basic political choices with the equally natural right of everyone to enjoy freedom in every sphere of life, and this freedom can be limited only if it is necessary to protect the freedom of individuals and groups (Izdebski, 1993, pp. 51–52). In my opinion, this idea should inspire a way of understanding not only individual but also collective civil rights. Since the system of the modern democratic state combines majority-rule with respect for individual and minority rights, the law of this state cannot ignore the natural right of individuals to the mutual provision of assistance and the association for the implementation of the common good. On the contrary, statutory law should be aligned with, support and protect these natural laws. This is an indispensable condition that determines the building of a healthy society and state that serves its interests. Only in this way can one overcome the antagonism between society and the state in a manner consistent with the axiology of democracy. The implementation of this requirement in the Constitution and legislation can be carried out by following two paths: guaranteeing the freedom of association in voluntary social organisations and creating the institutional framework and basis for the operation of self-government communities, which by virtue of acts of state law participate in the exercise of public authority. I share the view that local self-government is a method of the political organisation of the state: in the sociological and political sense, it combines the features of a natural community of residents with certain features of the legislative and executive authority (Dębowska-Romanowska, 1994, pp. 7–8). In the light of Article 3 Paragraph 1 of the European Charter of Local Self-Government, this means “the right and the ability of local authorities, within the limits of the law, to regulate and manage a substantial share of public affairs under their own responsibility and in the interests of the local population.” The Republic of Poland, by ratifying the Charter, committed itself to respect such an understanding of self- government: it is the right of the local community to make decisions about its affairs and the ability of this community to independently govern and manage its affairs. Local communities do not evolve from the will of the state that only delineates their boundaries, determines the basic features of the public system and defines the framework of their independence. It is true that the state forms the basis for the decision-making actions of a community transforming the 24 MICHAŁ KASIŃSKI corporation of citizens into self-government. However, a democratic state must recognise citizens’ rights to local self-government; it cannot deprive local authorities of responsibility for the way and results of managing local affairs. Democratic local government authorities should respect the legal provisions, but they should also be aware that they govern to represent residents’ interests and with residents’ involvement. The demolition of the left-over from the previous system and now newly built wall separating the centre of local authority and residents that are subordinate to this authority requires, in my opinion, two types of reformatory actions. First of all, it is necessary to make the forms of direct democracy truly real: referenda and local elections as well as social consultations. Practices in the light of which these forms become a parody of democracy (simulated consultations), a testimony to unused democratic opportunities (a low turnout in referenda and elections) or an arena of scandalous political and personal games that are in opposition to the standards of democratic culture should not be tolerated. Secondly, more effective instruments of exerting the influence of citizens and their various associations on the functioning of local self-government bodies are needed. Legal regulations in the light of which the so-called delegation democracy, i.e. reducing residents’ activity to the choice of the council members and possibly the executive body, is permitted have proven to be dangerous, as they may result in the formation of local and regional “power groups” that are not controlled by society. Tools of legal protection against these pathological phenomena can be seen in the new provisions of Act of Local Self-Government of January 2018, providing for the reconstruction of procedures allowing residents’ access to decision-making processes in the council or the assembly, guaranteeing their transparency, and extending the catalogue of initiative, consultative and control powers in this area. However, the introduction of an effective mechanism of democratic choice and democratic accountability of councillors and the executive body would be a decisive step. Commune councillors elected by residents in single-seat constituencies and communes should be given the right to choose the commune head, mayor or city president if no candidate has obtained at least 50% plus one validly cast votes in the general election. It would make the second round of elections—a procedure that has little to do with real democracy—unnecessary. The commune council should also be granted the right to recall the commune head that has lost its trust if less than 50% plus one of eligible population participated and cast valid votes in the recall referendum held at the initiative of the council. Only then will it be possible to speak of the full compatibility of the national commune system with the European Charter of Local Self-Government, which in Article 3 Paragraph 2, obliges the council (or assembly) to provide the council (or assembly) with sufficient competence to recall the subordinate executive body. Is fulfilling the demand for reform in order to protect the most basic values of self-government: democracy, independence, and efficiency of local authorities realistic? One cannot be under the illusion that the change of the ruling party to another one would reverse or hinder dangerous trends of legal transformations of the laws on local self-government in the direction of destroying these values. ETHICAL AND POLITICAL DILEMMAS… 25 Their survival requires an agreement over political divisions, unfortunately only possible on the grounds of the now-defunct culture of dialogue and cooperation.

References

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Ewa Kulesza University of Lodz Faculty of Law and Administration Department of Social Security Law and Social Policy e-mail: [email protected]

The protection of customer personal data as an element of entrepreneurs’ ethical conduct*

Abstract

The right to the protection of personal data, which is part of the right to privacy, is a fundamental human right. Thus, its guarantees were included in the high-level regulations of the European Union as well as the legal norms of the EU Member States. The first Polish law regulating the protection of personal data was adopted in 1997 as the implementation of EU Directive 95/46. The law imposed a number of obligations on public and private entities which process personal data in order to protect the rights of data subjects and, in particular, to guarantee them the ability to control the correctness of processing of their personal data. Therefore, the law obliged data controllers to process data only on the basis of the premises indicated in the legislation, to adequately secure data, and to comply with the disclosure obligation concerning data subjects, including their right to correct false or outdated data or to request removal of data processed in violation of the law. However, as complaints directed by citizens to the supervisory body—the In- spector General for Personal Data Protection—showed, personal data controllers, especially those operating in the private sector, did not comply with the law, acting in a manner that violated their customers’ rights. In the hitherto existing unfair business practices of entrepreneurs, the violations of the data protection provisions that were the most burdensome for customers were related to preventing them from exercising their rights, including the right to control the processing of data, as well as the failure to provide the controller’s business address, which made it impossible for subjects whose data were used in violation of the law or for the inspecting authorities to contact the company, a lack of data security and a failure

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 13(1), 97–105. 28 EWA KULESZA to follow the procedures required by law, the failure to secure documents containing personal data or their abandonment, a lack of updating customer data, the use of unverified data sets and sending marketing offers to deceased people or incorrect target recipients, and excessive amounts of data requested by controllers. The violations of the rights of data subjects recorded in Poland and other EU Member States—among other arguments—provided inspiration for the preparation of a new legal act in the form of the EU General Data Protection Regulation (GDPR) (which entered into force on 25 May 2018). The extension of the rights of people whose data are processed was combined in the GDPR with the introduction of new legal instruments disciplining data controllers. Instruments in the form of administrative fines and the strongly emphasised possibility to demand compensation for a violation of the right to data protection were directed in particular against economic entities violating the law.

Keywords: personal data protection, rights of data subjects, right to information, duties of personal data controller, GDPR, administrative fines, criminal liability, compensation for a violation of the right to personal data protection

JEL Classification: D18, M14

1. Introduction

The right to privacy and the right to the protection of personal data constituting its part, though distinguished as a separate right later, are basic human rights. Their significance is emphasised by the fundamental norms of international law, such as the Convention for the Protection of Human Rights and Fundamental Freedoms, as well as European law—including the Treaty on the Functioning of the Europe- an Union (Article 16) introduced by the Treaty of Lisbon or the Charter of Fun- damental Rights of the European Union (Article 8). The right to the protection of personal data has also been included— alongside the separately formulated right to privacy in Article 47—in the Consti- tution of the Republic of Poland, guaranteeing in Article 51 the right to “informational self-determination” for every person. Article 51 of the Constitution stipulates that no-one may be obliged, except on the basis of the statute, to disclose information concerning his person and that everyone shall have the right to access official documents and data collections concerning himself, as well as the right to correct and delete information which is untrue, incomplete or collected by means contrary to the statute. The data subject has the right of access to the data as well as the right to verify the truthfulness and correctness of the processed data along with the right to request a data correction, which constitutes the essence of personal data protection. THE PROTECTION OF CUSTOMER PERSONAL DATA… 29 Due to the nature of the right to privacy and personal data protection, the legal norms regulating these issues acquire special significance, as they are an instrument to protect people’s rights when they are violated by both public entities and private (business) entities that use personal data in their activity. The importance attached to the protection of personal data is demonstrated by the significance of legal acts regulating the issue of data protection as well as a continuously extended catalogue of legal instruments guaranteeing everyone the right to this protection and the corresponding scope of responsibilities of the so- called personal data controllers.1 This extension of the rights of data subjects and the obligations of data controllers can be clearly seen when comparing European provisions regulating the protection of personal data, i.e. Directive of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (Directive 95/46), and the Act of 29 August 1997 on the Protection of Personal Data, which is the manifestation of its implementation into the Polish legal system, with the currently binding Regulation of the European Parliament of 27 April, 2016, on General Data Protection (hereinafter referred to as the GDPR), repealing the Directive and the 1997 Act. At the same time, despite numerous legal guarantees of data protection, in the practice of the functioning of public and private entities, there are cases in which controllers do not comply with the applicable laws, which leads to a gross violation of the rights of the data subjects. The aim of the article is to show violations of personal data protection provisions by private sector entities in the previous legal environment, which constituted not only a breach of the law but was also unethical behaviour towards customers, and to present new instruments aimed at protecting the right to privacy and personal data, which hopefully will be a more effective means of controlling compliance with the law.

2. The right to the protection of personal data and the observance of the right by private sector entities under the 1997 provisions on personal data protection

The Act on the Protection of Personal Data, which was adopted in Poland in August 1997, imposed on all entities using personal data in their professional activities specific obligations related to their protection, and it guaranteed data subjects the right to control the processing of such data.

1 The term personal data controller, defined in the same manner in both the previous and current provisions on personal data protection, means a natural or legal person, public body, unit or other entity that independently or jointly with others sets the purposes and methods of processing personal data. 30 EWA KULESZA The adoption of the Act on the Protection of Personal Data constituted the implementation into the Polish legal system of the philosophy and principles of protecting personal data detailed in Directive 95/46. It was also the fulfilment of Poland’s obligations under the accession agreements to adapt the legislation to the European Union standards, as well as the implementation of the constitutional provision guaranteeing the right to personal data protection. The Directive explicitly stressed that economic and social integration must lead to a significant increase in the flow of personal data between all entities involved privately or publicly in economic and social activities, and political integration must also lead to an exchange between individual national authorities—under Community law—of personal data for the purpose of performing duties and the implementation of tasks specified by law. However, pursuant to the Directive, the condition for the free exchange of data was the guarantee of the fundamental rights of every data subject: the right to privacy and personal data protection. This meant that the exchange of data had to take place with adherence to confidentiality principles and provide the guarantee of protection against illegal data processing, unauthorised data disclosure, alteration or loss, as well as the guarantee of data subjects’ fundamental rights that constitute the essence of data protection: the right to information and the right to control data processing. A lack of these guarantees of the fundamental rights or differences in the degree of the protection of privacy and personal data in individual countries could lead to limiting data exchange due to discrepancies in the level of protection of individuals’ rights and freedoms. It could even prevent economic projects from happening and make it difficult for public authorities to fulfil their legal obligations. Thus, the level of protection of individuals’ rights and freedoms with regard to privacy and personal data protection needed to be equivalent in all countries which operate in the common market and which cooperate in the implementation of specific political and social activities. The Directive, therefore, identified two basic pillars of economic and political cooperation: the admissibility and even necessity to exchange personal data in cooperation between states, especially in business transactions, as well as the obligation to protect data and guarantee certain rights to people whose data are processed (used) by public and private entities (data controllers). Among the obligations of data controllers related to the protection of personal data, apart from processing data only on the basis of legal premises and with adequate data protection, the Directive required data subjects to be guaranteed the right to information about the processing of data as well as the right of access to and verification of their data. Data controllers’ obligations corresponded to the rights of people whose data were processed, including the fundamental rights to information, to object to data processing, as well as to correct, delete or block data whose processing was incompatible with the provisions of the Directive, in particular, due to their incompleteness or inaccuracy. THE PROTECTION OF CUSTOMER PERSONAL DATA… 31 2.1. Guarantees of the right to the protection of personal data in the light of the 1997 Act

The Act on the Protection of Personal Data, which was the implementation of the provisions of the Directive and Article 51 of the Constitution of the Republic of Poland,2 did not limit the possibilities of using data in the activities of public entities of entities belonging to the private sector, but only imposed specific obligations on those entities. In accordance with the provisions of the Act, each entity collecting, maintaining, storing, changing or deleting, i.e., processing3 personal data, was the so-called data controller,4 obliged to exercise due diligence to protect the interests of data subjects. Pursuant to Article 26 Paragraph 1 of the APPD, this particular due diligence should consist in ensuring that data were processed in accordance with the law, collected for specified, legitimate purposes and not processed in a manner that was incompatible with those purposes, as well as in guaranteeing that data were factually correct and adequate for the purpose of processing, and stored in the form enabling the identification of the people whom they concerned, no longer than it was necessary to achieve the purpose of processing. The rules referred to in Article 26 of the APPD took on special significance for controllers from the private sector (entrepreneurs). In their case, the basis for the collection of data was not—as in the case of state authorities—a legal provision, but another of the premises indicated in the APPD, defining the lawful grounds for data processing. In the case of private sector entities, such a basis could be, for example, a contract between an entrepreneur and data subjects, or the consent of such people to use their data for marketing purposes. The legislator, stressing in the provisions on the protection of personal data the obligation of the data controller to exercise due diligence in protecting the interests of data subjects and indicating that data were to be processed in accordance with the law, required compliance with the principles set out in the Act. This meant that the collection and use of data should only take place on the basis of one of the premises mentioned in Article 23 Paragraph 1 or Article 27 Paragraph 2 of the APPD, for specified, legitimate purposes, that data could not be processed in a manner incompatible with those purposes, and that the data controller was obliged to fulfil the obligations specified in the Act, providing data security and guaranteeing the rights of data subjects, described in detail in the

2 Article 51 Paragraph 5 of the Constitution which stipulates that “principles and procedures for collection of and access to information shall be specified by statute” indicated the adoption of a separate act specifying all particular issues related to the implementation of the right to personal data protection formulated in the Constitution in a general manner. 3 The term “processing” was defined in Article 7 Paragraph 2 of the APPD and is understood as “any operations performed on personal data, such as collecting, recording, storing, developing, altering, sharing and deleting, in particular those performed in information systems.” An analogous definition of processing, although slightly extended to incorporate new forms provided as examples (such as “organising, structuring, adaptation or alteration, retrieval, consultation, combination, disclosure”), can be found in Article 4 Paragraph 2 of the GDPR, which means that the term “processing” will always mean any operations on personal data. 4 The definition of data controller is provided in Article 7 Paragraph 4 of the APPD; currently the definition of data controller is defined in Article 4 Paragraph 7 of the GDPR. 32 EWA KULESZA provisions on the protection of personal data. In this respect, the Polish Act on the Protection of Personal Data, analogically to the then applicable EU Directive, emphasising the possibility of using personal data, provided their controllers with certain obligations, including the condition of guaranteeing data subjects their rights. This meant that the protection of personal data did not prevent the use of personal data to conduct business, but it stipulated that every entity processing personal data should act in accordance with the provisions of the Data Protection Act and with the principles set out in it, without violating the rights of data subjects. It should be emphasised that the provisions on the protection of personal data did not specify only abstract and burdensome duties on the part of the controller. Fulfilling the duties was not solely intended to guarantee data security or appro- priateness (adequacy) of data for the purpose of their collection and use but also to enable the data subject to control data processing, including the right to correct or update personal data in the case of incompleteness, a lack of timeliness, or redun- dancy for the fulfilment of a specific purpose, or collection in violation of the law. It was, and still is, extremely important that the entity collecting and using data should process data only to the extent necessary to achieve set objectives, but it should also guarantee that the data will not be used against the will of the data subject or without the data subject’s knowledge for other purposes or by another entity, and that data will be true and current. This non-use of data for a purpose other than the purpose of the processing was to be guaranteed also by requiring the storage of data in a form enabling their identification only until the fulfilment of the set objective.

2.2. Examples of breaches of the right to data protection by private sector entities under the 1997 Data Protection Act

The fulfilment of obligations specified in the provisions on the protection of personal data has become particularly important in the case of data processing, i.e., data collection and data use by private sector entities. While public entities have a constitutional duty to act on a legal basis and within the law, which means that the legislator determines both the scope and purpose of data processing by these entities, controllers belonging to the private sector obtain data primarily in the framework of concluded contracts or on the basis of customers’ consent to data processing, often based on trust in the data requester. Thus, it was extremely important for the entity requesting data to fulfil the information obligation towards the person from whom the data were requested or whose data were obtained from another entity. This allowed the person whom the data concerned to make an informed decision on making the data available or it enabled the person to exercise his or her rights when the controller obtained data from another entity. In particular, it was important to provide information about the future data controller whose specification could determine whether or not the consent to the sharing and processing of data was given and the information about the obligatory or voluntary manner of data disclosure. THE PROTECTION OF CUSTOMER PERSONAL DATA… 33 Providing information about the data controller could not be limited to giving the company name or the name with the post office address, but it had to include the full name of the company and its exact address which should allow the person whose data were used to contact the economic entity if ever the person wanted to check how the data were actually used, or in order to exercise his or her rights, including the right to object to the use of personal data or request their removal. The information obligation also included specifying the purpose of data collection and entities that were data recipients, or at least a category of such entities. Finally, the information obligation required the indication of the right of access to the data content and the right to correct data, as well as the right to request the deletion of data or the non-use of data for marketing purposes. The obligations of the personal data controllers, pursuant to the Act on Personal Data Protection of 1997, should be perceived not only through the prism of implementing applicable provisions but also as guarantees of the right to privacy and data protection of people whose data the controller processes, ensuring the security of data entrusted to the entity (data controller) by a person for a specific purpose, adequate (relevant) for the purpose of processing. The Act required that the controller should be obliged to provide detailed information about the purpose of data collection and the obligatory or voluntary manner of transfer or collection of personal data, since knowledge passed in the course of performing the information obligation to the person whom the data concerned (even if the data came from another source than the person to whom the data pertained) determined whether the person would consent to the processing of data. The controller was also obliged to inform about the possible transfer of data to other entities, with an indication of at least the category of these entities. The person whose data were to be processed could only knowingly consent to that if he was aware of his rights and had comprehensive knowledge about the purpose of the processing, the obligatory or voluntary manner of data sharing, and the potential possibility of transferring data to other entities. Providing this information was equally important for the data controller (entrepreneur) who could use the data within the limits that the person providing the data was informed about. The fulfilment of the information obligation was therefore equally valid and binding for the person providing the data as for the controller (entrepreneur). Meanwhile, the general practice of entrepreneurs was non-compliance with the information obligation by not providing the purpose of data processing, misleading data subjects by giving a different purpose than the actual one or providing incomplete information, and then freely using the customer data. In particular, marketing companies avoided providing customers with information about the source of data or the full name and address of the company’s headquarters, which prevented customers from exercising their rights, e.g. the right to object to the further use of their data for marketing purposes.5 However, even if the information

5 Cf. cases investigated by the Inspector General for Personal Data Protection (Polish: GIODO): GI-DS- 430/150/06, GI-DS-430/167/06 (Generalny Inspektor Ochrony Danych Osobowych, 2007, pp. 37–38). 34 EWA KULESZA identifying the company (e.g. a marketing one) was given, the people to whom a parcel was addressed could not effectively exercise the right to object to the processing of their data—the objections made were not respected or were taken into account only after the intervention of the data protection authority. A breach of customers’ rights also involved the inability to disagree to the use of data for various purposes (e.g. providing data to so-called cooperating entities) due to the construction of the consent form that did not provide for the possibility of choice; no objection to the free use of data—in the absence of the possibility of not giving consent by the customer—provided a pretext for the free use or even sale of data to other entities.6 Datasets processed for the purposes of concluding a given contract were used to create subsets sold to other business entities, most often to marketing companies, and the multiplicity of additional information about customers facilitated the creation of such subsets according to various criteria (e.g., age, place of residence, education). The data controller believed that since the data were processed on the basis of customers’ consent, the controller became their “owner” and could, therefore, use them freely, regardless of the purpose of collecting the data that customers had been informed about. The controller also recognised that such a dataset could be treated as an additional source of profits from the sale of data. The verdict of the Supreme Administrative Court of February 2008, prohibiting one of the telephone network operators from selling subsets created from its customers’ dataset, offered for sale to other companies, may prove that this is not an example of a hypothetical reprehensible activity on the part of the data controller.7 The collection by a business owner of large amounts of unnecessary, detailed information about customers—under the threat of failure to conclude the contract—was a violation of not only the Act on the Protection of Personal Data, but also the privacy of customers. A classic example was the demand made by sales- people working for telephone network operators that people should present two or even three documents confirming their identity, and then photocopying them. Another action which violated privacy was making a photocopy of the entire (at the time in the form of a booklet) identity card containing information completely unsuitable for establishing the identity of the customers, such as previous places of employment, former places of residence or dates of birth of their children.8 After changing the provisions of the telecommunications law, clearly specifying the scope of customer data processed, it turned out that employees of telephone network operators no longer needed to confirm a customer’s identity and photocopy many documents containing different customer data, although the data contained in the new identity card are relatively limited. However, the problem of appropri- ateness (adequacy) of data for the purpose of processing continued to appear in the activities of banks. They demanded a great deal of information, not only confirm-

6 Cf. cases investigated by the GIODO in 2006: GI-DS-430/224/06, GI-DS-430/250/06 (Generalny Inspektor Ochrony Danych Osobowych, 2007, p. 37). 7 The judgement of the Supreme Administrative Court II SA/Wa 1252/07. 8 Cf. cases GI-DIS-130/99/539, GI-DIS-245/99/654, GI-DP-445/99/451 (Generalny Inspektor Ochrony Danych Osobowych, 2000, p. 118). THE PROTECTION OF CUSTOMER PERSONAL DATA… 35 ing the creditworthiness of the customer, but also family relationships or events from the past, which significantly violated customers’ privacy. From the point of view of the provisions on the protection of personal data, this activity was a breach of Article 26 of the Act, requiring the controller to protect the interests of data subjects, and from the point of view of customers it was an unjustified violation of their privacy, and thus unethical conduct on the part of the entrepreneur. Another form of violating customers’ rights was the processing of data without complying with the information obligation in any respect. In cases submitted to be investigated by the Inspector General for Personal Data Protection, business entities registered abroad (most often in the USA) promoted products and services in the mail-order sale system, without informing customers about their status and address, the purpose of data processing or the data source. This prevented the claimants not only from filing a request to delete data or, for example, not forward data to other entities, but also from determining where the data were obtained from. The activities of such entities were combined with the offer of “cash prizes” provided under the condition of the purchase of a specific product or goods “at a discount price”. Despite the purchase or a transfer of money, however, customers did not receive the goods, or the offers turned out to be unfavourable for the buyers (Case GI-DS-430/465/04). Letters from companies were also formulated as “a decision on the awarding of a grant”, “a payment decision” or they contained information on high winnings being awarded. However, to collect it, the recipient had to meet several conditions, for example, call a given phone number (the cost per minute ranged from a few to over ten Polish zlotys).9 Such activities were classified as fraud to the detriment of the customers. The lack of verification and updating of data at the controller’s disposal is also a flagrant violation of customers’ rights. The processing of substantively correct data, adequate for the purposes resulting from the Data Protection Act, was not only the responsibility of the data controller but also an important instrument to protect the interests of customers. Meanwhile, complaints addressed to the data protection authority indicated that even entities that should exercise special care in protecting customers’ interests (banks and other banking institutions) processed outdated data (e.g. about borrowers), which subjected such people to specific losses in the form of, for example, the refusal to grant loans, since they were considered to be in debt. The reasons for such actions were not only related to technical problems with the functioning of the IT system, for example, a lack of compatibility of the banks’ IT systems with the Credit Information Bureau system, but also simple omissions on the part of the banks, which led to the relevant data being updated after many months. An example could be the case in which a data update—in the form of the transfer of information on the repayment of a loan to the register of the Credit Information Bureau—took place only after 18 months and concerned 55,000 customers (Generalny Inspektor Ochrony Danych Osobowych, 2007, p. 32).

9 Cf. cases GI-DS-430/91/04, GI-DS-430/130/04 (Generalny Inspektor Ochrony Danych Osobowych, 2005, p. 199). 36 EWA KULESZA Cases regarding the use of non-updated datasets by marketing companies were of a different nature and were associated with moral losses. If, in accordance with the Act on Personal Data Protection, when collecting data not from the data subject, companies first complied with the information obligation after obtaining the data, and subsequently undertook marketing activities, they were able to verify and update relevant data, removing not only information about the people that did not consent to the use of their data, but also the data of deceased people. Failure to comply with statutory obligations meant that marketing offers were sometimes directed to the deceased, which was a particularly unpleasant experience for family members, especially when the loved one had been dead for some time, and the marketing offer, formulated in a fairly direct form,10 suggested that the deceased had actively participated in recent weeks in a “game,” and “had just gone to the third stage,” and therefore a prize awaited that person. A separate problem was the fulfilment of the obligation to secure data properly. A lack of data security could lead to unauthorised access to the data by those who could use such information to the detriment of the data subjects. This failure to fulfil the obligation to secure data could take the form of a lack of appropriate technical devices (e.g. the failure to secure the IT system), failure to comply with the procedures and documents related to data security specified in the Act and the implementing regulations, but it could also result from a lack of knowledge of employees of economic entities about the need to protect data or from disregarding employee duties. Occasional cases of finding customer information, e.g. in the form of printouts from banking information systems in the garbage or in public places, indicated a disregard for the issue of data security and, consequently, a disregard for customers.11 A particularly drastic example of negligence was the abandonment of customer documentation in the event of the liquidation of a company or one of its branches. This could indicate a lack of professionalism of the employees of a given economic entity, especially when the data provided not only included information identifying the person but also information related to the person’s health status (cases of throwing out medical documents without its anonymisation) or financial status (bank printouts). Cases of using business IT systems to conduct private correspondence via the company’s Internet access can be explained by the employees’ lack of professionalism, but also—as can be surmised—by the failure to train employees or the failure to apply appropriate procedures. The effect of such actions could have led to facilitating hackers’ access to the company’s IT system and, as a result, to access to large amounts of customer data, data theft or theft of money from customers’ bank accounts.

10 The offers used the names of people, e.g.: “Dear Peter, you have reached the next stage of the competition and won 50,000 Polish zlotys.” 11 Such cases were particularly frequent in the initial period of the Act on the Protection of Personal Data, as evidenced by cases described in the 1999 GIODO report (Generalny Inspektor Ochrony Danych Osobowych, 2000, pp. 136–137). Even nowadays, the media continue to report on documents containing personal data being abandoned, e.g. of bank customers. THE PROTECTION OF CUSTOMER PERSONAL DATA… 37 Violations of customers’ rights were particularly glaring when the business activity conducted was based on the assumption of the mutual trust between entrepreneurs and customers. Customers perceived a lack of banking system security or marketing activities being conducted by banks for other business entities as being particularly unethical due to the universal perception of banks as public trust entities. The manifestation of actions violating ethical standards also included providing the media with information about customers, including information covered by another form of secrecy, such as telecommunications secrecy. For example, a journalist was informed by a telephone network operator about calls and the content of conversations between a person in proceedings before a parliamentary committee of inquiry and other people, and the content of these conversations was later published in the newspaper “Rzeczpospolita”.

3. Special protection of the rights of data subjects in the provisions of the GDPR and the new Act on the Protection of Personal Data

Violations of the provisions on the protection of personal data concerned not only business entities operating in Poland, but they were also observed in other EU countries,12 as indicated by complaints to the European Court of Justice concerning the refusal to delete data from files kept by private entities, despite such requests being made by data subjects.13 The European Commission was inspired to adopt a new legal act introduced into the legal systems of all the EU Member States—i.e. the General Data Protection Regulation (GDPR)14—by the disregard for the applicable provisions on the protection of personal data manifested by private sector entities, non-uniform and inconsistent interpretations of the provisions of the Directive in various EU countries, and diverse ways of implementing the Directive into national legislations.

12 As evidenced by the justification for the first draft of the Regulation of the European Parliament of 2nd January 2012. 13 The most well-known case was that of Schrems v. Ireland’s Data Protection Commissioner (reference no. C-362/14), settled by the verdict of the Court of Justice of the European Union of 6 October 2015, which concerned the request to delete Facebook user M. Schrems’s data from the company’s data collection. Although the issue itself was multi-faceted, and its significance had a broader dimension than only in relation to the protection of the rights of data subjects (in the ECJ judgement, among others, the basis for transfer of EU personal data to the USA was negatively assessed), it was a symbol of the behaviour of private sector entities disregarding their customers’ rights. 14 The EU regulation is an instrument of harmonising law in the European Union, a generally applicable legal act entering the legal order of a Member State. This means that since its entry into force, it has been part of the national law of each Member State and is directly applicable without transposition into national law (cf. Barcz, Górka & Wyrozumska, 2015, pp. 283–284). 38 EWA KULESZA The new provisions create new disciplinary instruments for data controllers as well as strengthen the rights of data subjects and expand the responsibilities of data controllers, especially those who process data based on people’s consent, which is the basic premise for data processing by entities belonging to the private sector (entrepreneurs).

3.1. The GDPR extension of the rights of data subjects

In addition to the extended right to obtain information from the data controller and the right of access to data and the right to correct data already guaranteed in earlier provisions on the protection of personal data, based on the GDPR, everyone has been granted new rights, such as the right to delete data (“the right to be forgotten”), the right to limit data processing, the right to data transfer, the right to object and the right to be informed of a breach of data security. In the framework of this article, it is difficult to discuss all the rights of people whose data are processed. However, it is worth drawing attention to two examples of the provisions contained in the Regulation extending the rights of data subjects. In the course of the work on the GDPR, it was assumed that extending the scope of information provided to data subjects by the data controller at the moment of data collection, as well as the scope of information provided if data were obtained from another source (not from the data subject), should strengthen the rights of data subjects. It was also intended that the fulfilment of the information obligation by the data controller should take place in a concise, transparent, understandable and accessible form, in clear and simple language. Supplementing the information clause with additional information provided to people whose data are collected or already processed and obtained from a source other than the data subject, is supposed to give data subjects the opportunity to make a rational decision, based on wider than ever knowledge, regarding consent (or lack of consent) to data processing. In addition to information already provided to identify themselves, as well as information on the purpose of data processing and possible data recipients or categories of data recipients, and the rights of the data subject, data controllers are obliged to indicate the period during which data will be processed. When this is not possible, they should provide criteria determining this period, along with information about the right to withdraw consent at any time, or about other rights of the data subject, including the possibility to lodge a complaint with the supervisory body or the right of access to personal data. The right to obtain copies of processed personal data, apart from the provisions existing in the earlier legislation on the right to obtain information at the request of the data subject, complements the right to information. The controller’s obligation to supply a copy of data to the person whose data are processed provides the opportunity to control the scope of the information processed.

THE PROTECTION OF CUSTOMER PERSONAL DATA… 39 The importance that the EU legislator attaches to granting individuals real access to data, and not only the information about the categories of data being processed, is demonstrated by a broad discussion of this right in the Preamble to the Regulation (recital 63). In this recital of the Preamble, it is clearly emphasised that every natural person should have the right of access to the data collected “in order to be aware of, and verify, the lawfulness of the processing”, and if possible, the data controller should provide “remote access to a secure system which would provide the data subject with direct access to his or her personal data”. The new provision, which is worth noting, propagated as the “right to be forgotten”, is the right to demand the immediate deletion of data from the files kept by the data controller, and if the controller has publicised the data, this right is extended to other controllers whom the “primary” controller should inform about the fact that the person requests that they should remove all links to these data, copies of personal data or their replications (Article 17 of the GDPR). “The right to be forgotten” applies in the cases mentioned in Article 17 Paragraph 1, including when one of the premises stipulated is met, i.e., when personal data are no longer necessary for the purposes for which they were collected, when the person withdrew the consent which was the basis for data processing, when the person objects to the processing of data, and when there are no reasons justifying data processing, if the data were processed unlawfully or should be removed in order to comply with legal obligations under the law. “The right to be forgotten” is not absolute, as it has been weakened by the exceptions of its application mentioned in Article 17 Paragraph 2 and 3, and is therefore perceived as the law “which promises more than it gives” (cf. Barta & Kawecki, 2018, p. 410). There is also doubt about the possibility of the effective deletion of data that have been made public on the Internet due to the universal access to such data and the possibility of using them by undefined people (entities) who have obtained the data from this generally available source. When discussing the newly established rights of people whose data are processed, one should also point out the right of the data subject—and the obligation of the data controller—to be informed about a breach of data security in the event of a violation of data protection provisions and a high risk of violating the rights or freedoms of people that the data concern (Article 34 of the GDPR). The notification should be made without undue delay and should include a description of the nature of the breach along with information on the possible consequences of the breach and measures taken by the controller to remedy the breach, including measures taken to minimise its effects. The notification should also include the name and contact details of the data protection officer from whom more information can be obtained. The justification for granting data subjects the right to be informed about an event constituting a breach of data protection is the protection against the effects of such an event and the possibility of taking preventive actions.15

15 In annotations to the GDPR, examples of preventive measures, such as changing passwords for access to a specific service, are provided (cf. Bielak-Jomaa & Lubasz, 2018, p. 719). 40 EWA KULESZA 3.2. Strengthening the instruments for disciplining data controllers in their compliance with the provisions of the GDPR and the new Act on the Protection of Personal Data

The purpose of amending the provisions on the protection of personal data was to protect data more effectively by guaranteeing individuals better control over data processing. It was also designed to force data controllers to protect data more effectively as well as observe the rights of the data subjects. Instruments which are intended to “force” data controllers to follow the data protection rules are the GDPR provisions that allow fines to be imposed of on personal data controllers. It also allows people whose data protection rights have been violated to demand compensation. Additionally, the new Act on the Protection of Personal Data of 10 May 2018 includes criminal provisions.

3.2.1. Administrative fines

The Regulation makes it possible for the supervisory authority to impose administrative fines on data controllers that violate provisions on the protection of personal data (Article 83 of the GDPR). Fines should be effective, proportionate and dissuasive, imposed on a case-by-case basis, in addition to or instead of “corrective” measures that the supervisory authority can use based on Article 58 Para- graph 2 of the GDPR.16 The provisions of Article 83 Paragraph 2 determine the conditions that must be taken into account when imposing administrative fines. In any event, the imposition of a fine must be individualised by assessing the nature, gravity and duration of the infringement, taking into account the nature, scope or purpose of the processing, the intentional or unintentional nature of the violation, the category of personal data affected by the breach, and by evaluating the effectiveness of the technical and organisational safeguards applied by the controller to the processed data. The assessment that forms the basis for the determination of the administrative fine is also to be influenced by the attitude of the data controller to the protection of personal data, and, in particular, the existence of previous violations on the controller‛s part. At the same time, the EU legislator recognised that breaches of the right to data protection when controllers are entities belonging to the private sector deserve special condemnation. With regard to these entities, the legislator provided for the possibility of imposing a fine of up to EUR 10 million or 2% of the total yearly global turnover from the previous year in the case of minor offenses listed

16 Pursuant to Article 58 Paragraph 2 of the GDPR, each supervisory body is endowed with “corrective powers” towards a data controller who may have violated or who did violate the provisions of the GDPR by planned or performed processing operations. These powers include issuing warnings and reprimands, ordering the controller to comply with the data subject‛s requests to exercise his or her rights pursuant to this Regulation, ordering the controller to bring processing operations into compliance with the provisions of this Regulation, ordering the controller to communicate a personal data breach to the data subject, imposing a temporary or definitive limitation including a ban on processing, or ordering the rectification or erasure of personal data. THE PROTECTION OF CUSTOMER PERSONAL DATA… 41 in Article 83 Paragraph 4 of the GDPR, or fines of up to EUR 20 million or 4% of the total annual turnover in the case of more serious violations listed in Article 83 Paragraph 5 of the GDPR. They include, among others, the violation of the rights of data subjects (Article 83 Paragraph 5 b of the GDPR), leaving national legislators with the discretion to determine the admissibility of imposing fines and their amount in relation to public sector entities.17

3.2.2. Facilitating the pursuit of civil claims for compensation for a violation of the right to data protection

Article 82 of the Penal Code provides for the possibility of claiming damages for a violation of the provisions on the protection of personal data by any person who has suffered material or non-material damage as a result of an infringement of the Regulation. The right to claim compensation pursuant to Article 82 of the GDPR is not a new solution—a similar provision was included in Directive 95/46. However, this right was not repeated or developed in the existing Polish provisions on the protection of personal data. This meant that people who considered that their right to data protection had been violated could apply to a civil court with a claim to award damages based on the provisions of the Civil Code. Such cases did occur;18 however, the burden associated with going to court rested with those people. Chapter 10 (articles 92–100) of the Act on the Protection of Personal Data currently in force highlights the possibility of pursuing claims for a breach of personal data protection provisions, creating the legal basis for special support from the supervisory body for people who would decide to file a suit, and imposing obligations unknown in the former provisions on the district courts competent to deal with such matters. Providing support in the pursuit of a claim for compensation for a violation of the right to personal data protection, the President of the Personal Data Protection Office may institute proceedings for the benefit of the data subject, and may also—with the consent of the plaintiff—enter the proceedings at each stage. Additioanlly, if notified by the court about pending proceedings, he is obliged to immediately inform the court about any matter regarding the same violation, if such a case is being adjudicated by the President of the Personal Data Protection Office or the administrative court, or if it has been concluded. Courts conducting proceedings for compensation for the damage caused by a violation of personal data protection provisions are, however, bound by the findings of the enforceable decision of the President of the Personal Data

17 With such high administrative fines that may be imposed on private sector entities, Article 83 Para- graph 7 of the GDPR leaves it to each Member State to decide whether and to what extent administrative fines may be imposed on public authorities and bodies; in the new Act on the Protection of Per- sonal Data, the Polish legislator has provided for administrative fines of up to PLN 100,000 for state and local government cultural institutions (Article 102 of the APPD). 18 For example, a case concluded with a court awarding compensation to former Petrobank customers in connection with the bank’s violation of personal data protection provisions (www.parkiet.com/Wiadomosci/311149873-LG-Petro). 42 EWA KULESZA Protection Office regarding the violation of provisions on the protection of personal data or findings of a final judgement issued as a result of lodging a complaint with the administrative court.

3.2.3. Criminal liability of data controllers

Although the GDPR includes liability in the form of administrative fines imposed for a violation of provisions specifying the grounds for data processing in Article 6 and Article 9—which means that data processing without reference to any of these premises is a violation of the provisions on data protection—in Article 107, the new law additionally provides for criminal liability for the processing of personal data when it is not permitted or when the entity processes data which it is not authorised to do. The Polish legislator decided that such a breach of the provisions on the protection of personal data should be punished with a fine, a restriction of liberty or imprisonment of up to two years—if the entity processes “ordinary” data—or imprisonment up to three years if the unacceptable processing concerns data subject to special protection. The previous experience of the Inspector General for Personal Data Protection related to refusals to prosecute violations of the protection of personal data by the prosecutor’s office, in particular, the reference to the negligible social harmfulness of the crime or a lack of crime, give grounds for the recognition that the threat of imposing an administrative fine will be taken more seriously by data controllers than penalties provided for in Article 107 of the Data Protection Act.

4. Conclusions

The practice of applying the no longer binding Act on the Protection of Personal Data provided many examples—of which only some have been presented in the article—indicating not only the non-performance of obligations resulting from previously applicable provisions but also a lack of ethical behaviour in dealing with customers. And while the past tense was used when discussing examples of violations of customers’ rights in many cases, it should be stated that unethical and infringing practices of economic entities were not uncommon19 and it cannot be ruled out that they will also happen nowadays, as evidenced by the fact that cases of violating customers’ rights from the recent past are still being adjudicated by the administrative courts (cf. the case concluded by the Supreme Administrative Court’s ruling of 18th of April, 2018, the reference number I OSK 1354/16).

19 For example, the activities of law firms, described by the press, specialising in obtaining compensation for victims of road accidents that buy illegally the names of victims of accidents or use the state of shock that victims of accidents are in to swindle signatures on contracts authorising them to file claims for compensation for an excessively high commission (cf. e.g. article by Bojanowski, 2009, p. 2). THE PROTECTION OF CUSTOMER PERSONAL DATA… 43 In the hitherto encountered unfair practices, the most burdensome legal infringements for customers included preventing their rights from being exercised, including the right to control data processing, not providing the company’s address to prevent access to it by data subjects or the controlling authorities, a lack of data security and not applying the required procedures, not securing documents containing personal data or simply abandoning them, not updating bank customers’ data in the register of the Credit Information Bureau, using unverified datasets and sending marketing offers to deceased people, or controllers requesting data inappropriate for the purposes stated or requesting an excessive amount of data. The presented examples of actions taken to the detriment of customers undermined confidence in business entities and infringed personal rights, and even subjected customers to material damage. In turn, misleading as to the purpose of data processing, transferring data to other entities, selling datasets or trading data collected for another purpose were not only unethical activities but also activities that provided unjustified profits to entrepreneurs at the expense of customers’ rights. It is difficult to clearly determine the reasons for this type of behaviour on the part of business owners. Undoubtedly, these reasons stem from the disregard for the applicable law on the part of the people violating the law as well as the prose- cuting authorities, which responded to the majority of notifications of suspected criminal offenses with information that they had failed to prosecute or they had dismissed cases due to the negligible social harmfulness of the perpetrator’s act. The reaction of the prosecutor’s office was so striking because it was related to a violation of the provisions protecting the constitutionally guaranteed right of citizens. It can be hoped that the situation will change under the current GDPR, in particular, due to the entry into force of the above-mentioned provisions allowing for the punishment with financial penalties of data controllers who violate the law and providing a real opportunity to claim compensation for a violation of the right to personal data protection. However, the question arises whether unethical entrepreneurs will not risk making a profit over the threat of even a severe financial penalty or paying compensation to a person who had been put at risk by their personal data being used in a manner contrary to the law.

References

Act of 10 May 2018 on the Protection of Personal Data, Journal of Laws 2018, item 1000 [Ustawa z dnia 10 maja 2018 r. o ochronie danych osobowych, Dz.U. 2018, poz. 1000]. Act of 29 August, 1997 on the Protection of Personal Data, Journal of Laws 2016, item 922 as amended [Ustawa z dnia 29 sierpnia 1997 r. o ochronie danych osobowych, Dz.U. z 2016 r., poz. 922 ze zm.]. 44 EWA KULESZA Barcz, J., Górka, M., & Wyrozumska, A. (2015). Instytucje i prawo Unii Europejskiej. Podręcznik dla kierunków prawa, zarządzania i administracji. Warszawa: Walters Kluwer. Barta, P., & Kawecki, M. (2018). Rozporządzenie UE w sprawie ochrony osób fizycznych w związku z przetwarzaniem danych osobowych i swobodnym przepływem takich danych. Komentarz (P. Litwiński, Ed.). Warszawa: C.H. Beck. Bielak-Jomaa, E., & Lubasz, D. (Eds.) (2018). RODO. Ogólne rozporządzenie o ochronie danych. Komentarz. Warszawa: Walters Kluwer. Bojanowski, M. (2009, July 23). Ucywilizować łowców nieszczęść. Gazeta Wyborcza, 171. Directive of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data. https://eur-lex.europa.eu/legal-content/en/TXT/? uri=CELEX%3A31995L0046 Generalny Inspektor Ochrony Danych Osobowych. (2000). Sprawozdanie z działalności Generalnego Inspektora Ochrony Danych Osobowych za okres 01.01.1999 r. – 31.12.1999 r. Warszawa: GIODO. Generalny Inspektor Ochrony Danych Osobowych. (2005). Sprawozdanie Generalnego Inspektora Ochrony Danych Osobowych z działalności za rok 2004. https://giodo. gov.pl/data/filemanager_pl/727.pdf Generalny Inspektor Ochrony Danych Osobowych. (2007). Sprawozdanie z działalności Generalnego Inspektora Ochrony Danych Osobowych w roku 2006. https://giodo. gov.pl/data/filemanager_pl/1051.pdf Kulesza, E. (2010). Ochrona danych osobowych klientów jako element działania etycznego przedsiębiorcy. Annales. Ethics in Economic Life, 13(1), 97–105. Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation). Official Journal of the European Union, L 119, vol. 59. https://eur-lex.europa.eu/ legal-content/EN/TXT/?uri=CELEX%3A32016R0679 Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 45–58 doi: http://dx.doi.org/10.18778/1899-2226.21.7.03

Małgorzata Zajaczkowski Warsaw School of Economics Collegium of Socio-Economics Institute of International Studies e-mail: [email protected]

Ethical aspects of the world trading system on the example of Fair Trade*

Abstract The effect of globalization is not only an improvement of living conditions in developing countries, but also a widening of development disparities and economic inequalities between countries of the rich North and the poor South. The Fair Trade can be considered as a response to emerging problems of development. Therefore, it can be perceived as a form of assistance directed to the marginalized producers in the Global South by enabling them to manufacture, sell and distribute goods to markets in developed countries. This is an alternative to the existing formula of international trade; whose aim is to help producers in the South by integrating them into the current trading system under certain conditions. The idea is to create a new business relationship between producer and consumer, where the production and consumption are bound together in a new supply chain and where the economic benefits are distributed more fairly. It means that the prices of Fair Trade products are set at a level that would ensure a steady income to the producer and would lead to raising their living standards and prosperity. The ethical aspects of the Fair Trade system are clear. The problem is whether the Fair Trade standards can be used on a wider scale in the global economy, whereas there is an evident clash of certain ethical values with market economy rules based on maximizing profits and increasing efficiency.

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 18(1), 7–19. 46 MAŁGORZATA ZAJACZKOWSKI Keywords: Fair Trade, developing countries, development disparities, international trade

JEL Classification: F13, I31, Q17

1. Introduction

Fair Trade is an idea aimed at improving the lives of marginalized producers from developing countries through a specific system of sales and distribution of goods coming from the Global South. Based on this concept, an alternative model of a commercial transaction was created—in relation to the market and universally accepted trading rules—in which the relationship between the producer and the consumer is determined by means of a new supply chain. The assumption is that benefits under such a transaction should be distributed more fairly, which means taking into account difficult situation of producers from developing countries. In practice, it looks like the prices of Fair Trade products are set at a higher level than in the conventional market, so that the producers can receive higher wages which would contribute to better quality of their lives. The essence of Fair Trade is observing the standards of Fair Trade by both organizations and manufacturing companies from the South as well as buyers—importers and other traders from developed countries. The Fair Trade model aims to limit the chain of middlemen which used to take the biggest share of the product price. The Fair Trade core assumption is that the largest part of the product price should be returned in the form of payment to the producer. The benefits that a producer obtains create possibility of getting the payment in advance and information on the conditions for the sale of goods on the market. Importers are obliged to purchase, as far as possible, directly from farmers or local producers who are associated in producer groups called cooperatives. However, it is difficult to implement and maintain the Fair Trade idea in practice. First, because the Fair Trade does not work in a vacuum, its functioning is nearly associated with mechanisms prevailing in the conventional market. Sec- ondly, in the face of market realities, there are certain Fair Trade standards which are modified or changed. It resulted from the need to adapt to common principles and rules in the market economy, of which the Fair Trade is a part. Thirdly, the Fair Trade expansion does not go hand in hand with maintaining the traditional trend of thinking about this movement. The growing importance and expansion of Fair Trade implies the need to open up to new challenges and partners. This means taking up a new type of activity (promotion campaign, marketing strategy), as well as the opportunity to include new business partners.

ETHICAL ASPECTS OF THE WORLD TRADING SYSTEM… 47 The article addresses the problem of expanding importance of the Fair Trade in the international system. The main goal is to analyze the Fair Trade objectives and principles and their implementation in practice. The first part presents the evolution of formation of Fair Trade, the second one focuses on its basic premises and in the third part there was taken up an attempt to assess the results of functioning of Fair Trade movement.

2. The origin of the phenomenon

In the subject literature, there are at least three perspectives through which the concept of Fair Trade can be analyzed. The first one perceives the Fair Trade as an alternative concept to globalization. It is presented as a mechanism leading to the creation of a trading system that would operate as a complement to the existing one, in which the principles and objectives are subordinated to the realization of trade interests in favor of the least developed countries (LDCs). The goal is to create alternative markets in which international trade in goods is based on certain principles such as fair prices, partnership practices, social and environmental standards. The second proposal concerns the phenomenon of decommodification, and thus the independence of the individual from the free market (Lyon & Moberg, 2010, p. 7). It is about the establishing of a bond connecting the producer of a product and its buyer, as well as breaking with the existing impersonal nature of the market by introducing values related to the principles of solidarity and community engagement. According to this approach, the vast majority of Fair Trade literature is devoted to communities, or rather producer cooperatives engaged in the production of specific goods. In this context, there is commonly presented an image of Fair Trade producer groups who invest funds from the social premium for the purposes related to development of the whole community. The money is usually spent on the construction of schools, hospitals and sanitary systems. It is being created an impression that consumers from developed countries directly contribute through social premium to development of the Global South. The third perspective is related to the Fair Trade mechanism which benefits limited number of producers from the South by getting access to international markets under strict conditions. The approach is based on a relatively high level of institutionalization of the Fair Trade movement which takes the form of numerous Fair Trade organizations. Their common aim is dynamic development of Fair Trade and going beyond the niche market. For this purpose, marketing skills and promotion strategy of Fair Trade institutions are necessary to be present on the market, as well as cooperation with international companies and national entrepreneurs operating in the conventional system. The first initiatives of “Fair Trade” with the aim of realizing the goals of social justice through the use of market mechanisms appeared in the 1940s. Initial attempts to create alternative sales networks for products originating from devel- 48 MAŁGORZATA ZAJACZKOWSKI oping and crisis-affected countries and regions were made in the United States and Western Europe. Organizations such as Sales Exchange for Refugee Rehabilita- tion and Vocation (SERRV) or the Oxfam have started to buy artists’ work from the countries of the South at a higher than market price and export them to developed Northern countries. It was a way that let to avoid intermediaries in trade transactions, while guaranteeing higher prices for contractors from the countries of the South (Lyon & Moberg, 2010, p. 5). The institution that supervised this type of exchange was the Alternative Trade Organization (ATO). In the 1960s and 1970s, under the auspices of ATO, there were developed some sales network of products from developing countries under the name of World shops. At the same time, small stores and mailing catalogs offering goods from developing countries were expanding in the US (Raynolds & Long, 2008, p. 16). At the beginning of the 1980s, different sorts of Fair Trade activities began to be transformed into an organized Fair Trade movement whose common elements were based on similar principles related to the idea of justice. The ATO provided an institutional framework for the emerging international movement. In the 1990s, it took place further consolidation of Fair Trade movement through the formation of institutional platform made up of five associations: Fairtrade Labelling Organi- zations International (FLO), International Fairtrade Association (IFAT), Network of European World Shops (NEWS!), European Fairtrade Association (EFTA), Fairtrade Federation (FTF) (Raynolds & Long, 2008). The introduction of certificates and the Fair Trade logo labeling was a turn- ing-point in the Fair Trade history. The aim of the certification was, firstly, to expand the range of products, namely agriculture and handicrafts, and secondly, to introduce them to large retail chains in Western Europe and the USA. The first independent initiative form 1988 on the certification of Fair Trade products be- longed to the Dutch foundation Max Havelaar. Next actions were taken jointly by the British organizations Oxfam, Traidcraft, Christian Aid, New Consumer, the World Development Movement, CAFOD, which together established the institution under the name of Fairtrade Foundation. Its fast-growing engagement led to the establishment in 1997 the Fairtrade Labelling Organizations International (abbreviated as FLO International), which combined various certification initiatives into one institution. Currently it is functioning under the name of Fairtrade International (Fairtrade Int.).1 As part of the FLO central system there was formed a special unit for certification purposes under the name of FLO-Cert. Due to the intensive development of sales of certified products, especially food, the significance of the special certification unit of the FLO has substantially increased. As a result of dynamic expansion of the Fairtrade Int. the ATO which was much more attached to traditional forms of actions and less expansionary has lost its importance. Despite the fact that it has also dealt with distribution of certified products, its ideas regarding the directions of further Fair Trade development have proven to be less progressive than those chosen by the Fairtrade Int.

1 Formally, the institution is registered as Fairtrade Labelling Organisations International (FLO Int.), but for marketing and image purposes, it was decided to adopt a simpler name Fairtrade International (but remaining with the popular abbreviation FLO). ETHICAL ASPECTS OF THE WORLD TRADING SYSTEM… 49 The source of current problems within the Fair Trade system should therefore be sought in relations between the two branches of movement: the ATO and the Fairtrade Int./FLO. Both formations agree on the objectives, but perceive them differently, especially on how they should be implemented (Raynolds & Long, 2008, p. 18). The ATO strives to create new Fair Trade sales channels with direct involvement in import and distribution. It is about maintaining the closest trade relations between the producer and the consumer, which means the elimination or substantial reduction of intermediaries in Fair Trade transactions. The ATO advocates the development of the “dense network of connections” model based on trust and mutual exchange of information. However, due to the need to expand existing sales channels, the formula proposed by the ATO is difficult to implement. Com- mercial relations based on mutual trust and free access to information are difficult to reconcile with the commitment into the Fair Trade rules, primarily in the situation of mass selling and the need to involve business entities from the outside of the movement. The formula represented by the Fairtrade Int. is an approach more suited to the current market conditions. Its mechanism `is based on the system of independent certificates, but also on Fair Trade promotion and marketing activities. Rela- tions between the consumer and the producer are built on the basis of formalized rules, standards and procedures for product labeling (Raynolds & Long, 2008, p. 18). In the FLO’s model, import and distribution are mainly serviced by commercial companies operating on the conventional market. Unlike ATO, communication between Fairtrade Int. and manufacturers is based on standards and procedures, but between the institution and consumers is limited to a small label on a Fair Trade product. The implementation of the Fair Trade principles based on the “close business relations” is difficult to meet in that system. This causes a lot of negative opinions growing around the Fair Trade movement. One of the gravest accusations is a departure from core principles, which is clearly visible in the pursuit of commercialization of Fair Trade activities and expansion into the conventional market. Secondly, there is a lack of sufficient information on actual operations taken by the Fair Trade institutions and transparency in the field of income distribution. Institutions gathered around the FLO are more market- oriented than the ATO, which means that they are driven by similar rules to those applying on the conventional market. In the current Fair Trade system—made up of numerous Fair Trade organizations its members and other stakeholders—the dominant position was obtained by the approach represented by the Fairtrade Int. and its certificate system FLO-Cert. Thanks to their determination and decision on cooperation with large commercial companies, there was sharp growth in sales of Fair Trade products. At present, national labelling initiatives and Fair Trade institutions operate in 34 countries. In 2016, the sales of Fair Trade products amounted to 7.88 billion EUR (Figure 1). The most dynamically developing market was Austria, where retail sales increased by 46% compared to the previous year. In countries with a stable Fair Trade market, such as the UK, France, Norway, the Netherlands or Switzerland, an increase of over 20 percent was recorded (Faitrade International, 2017). 50 MAŁGORZATA ZAJACZKOWSKI Some stable increase in sales of Fair Trade products took place also on other markets, which in total reached an increase of approx. 34%. The growing significance of Fairtrade Int. is reflected by the establishment of its representation offices in India, Hong Kong, South Korea, Taiwan and the Philippines.

Figure 1. Sales of Fair Trade products in the world, 2004–2016, in millions of EUR (estimated value)

Note. Adapted from the data delivered by Statista.

3. General rules

Fair Trade mechanism consists of several elements that form an integrated system of Fair trade production and sales. It is made up of: (1) Fair trade minimum price, (2) Certification, (3) Social premium, (4) Creation of producer cooperatives (5) and long-term contracts in purchase-sale transactions. Ad 1. The most important element of Fair Tade is the product price. It is a minimum price (floorprice) which the importer or other buyer of Fair Trade products is obliged to pay. It includes production costs and a provision for producers. When the market price is higher than the Fairtrade minimum price, producers should receive the current market price or the price negotiated under the individual contract (Fairtrade International, 2018). Generally, the Fair Trade minimum price is slightly higher than the market price. However, if the minimum price for a given Fair Trade product falls below the market price, then the importer is obliged to pay the market price which becomes the minimum Fair Trade price. The price per product unit is determined on the basis of average production costs and the minimum wage in a given region in developing countries. ETHICAL ASPECTS OF THE WORLD TRADING SYSTEM… 51 The producers receive a Fair Trade minimum price which exceeds the market price of a given product, provided that they meet certain Fair Trade standards. In practice, the producer gets a small percentage of the final price of the product within its salary. However, in comparison with the situation on the conventional market, the wages are usually higher and more stable. For example, the producer gets about 4% of the final price of the chocolate bar. In turn, for 1 pound of coffee beans, the producer receives a minimum of 1.26 USD or 0.05 USD above the market price if it exceeds the Fair Trade price. However, compared to the typical products available in the supermarket, this proportion can be twice as small (Nicholls & Opal, 2005, p. 29). Ad 2. An integrated part of the Fair Trade system is the certification and labelling arrangements governed by the FLO or other entities such as the World Fair Trade Organization (WFTO). The certificates are granted by the WFTO, the FLO- Cert or other full-fledged unit including national Fair Trade certifying institutions. It is assumed that products with a Fair Trade labelling mark meet similar labor and environmental standards. In order to obtain a Fair Trade certificate, producers must first create a producer group or cooperative that meets the conditions imposed by the Fair Trade institution. Secondly, they must receive a guarantee for reception of goods by the importer. Thirdly, producers are obliged to comply with the rules related to the protection of natural environment, limiting the use of artifi- cial fertilizers and pesticides. The use of genetically modified organisms is forbid- den (Fairtrade Labelling Organizations International, 2009, p. 5). In addition, the employment of employees is associated with the observance of the minimum labor standards adopted by the International Labor Organization (ILO). Slave labor and child labor under the age of 15 are prohibited. All employees should get the right to form and join associations. The maintenance of Fair trade certificate is associated with strictly defined costs for the whole production co-operative. Since coffee is the most common used Fair Trade product, the easiest way is to present the average costs of holding a certificate by the coffee producing cooperative. The minimum fee for obtaining a Fair Trade certificate ranges from 2,200 to 2,400 EUR. It is an average payment for a small producer group, which counts less than 100 people, including both producers and employees. In addition, the cooperative is obliged to pay an annual fee to the certifying authority, which is amounted to approx. 1,260 EUR. Consid- ering the relatively low annual income in developing countries, which is below 1,000 USD, this amount is relatively high. As a result of a long process needed for granting certificates only small part of agriculture goods originated from the least developed countries have received the Fair Trade labeling. It is much less common in manufactures and handicraft goods. Products that do not have FLO certificates cannot bear the Fair Trade labeling mark even if they are sold in compliance with Fair Trade standards. This applies, for example, to handicrafts or textiles. However, all stakeholders of the Fair Trade movement may be members of the International Fair Trade Association, which brings together both producers and traders with and without certificates. 52 MAŁGORZATA ZAJACZKOWSKI Ad 3. Another element of the Fair Trade mechanism is the social premium. It is the extra sum of money, paid on top of the selling price that farmers or workers invest in projects of their choice. Each premium amounts to a minimum of 10% of the product price. This funding goes into a communal fund for workers and farmers who jointly decide on allocation of additional income. Premium money in this sense is meant to improve the situation of local communities in health, education, environment, economy etc. Most often, they invest in construction of schools, education activities, health care, purchasing of new production equipment. It is important that the objectives on which the premium money is spent would be met with Fair Trade rules. Therefore the FLO inspectors examine whether the funds are spent in accordance with their purpose. This extra money is transferred entirely to development purposes of the local community. Ad 4. Producer cooperatives are basic Fair Trade organizational structure which gather farmers and producers. The condition for receiving a Fair Trade certificate is membership in such organizations. The share of individual members is proportional to the sales of their products in the Fair Trade transactions. By participating in a cooperative their members offer themselves mutual assistance since the final output depends on engagement of the whole community. It is much more beneficial to work in a producer organization than individually, especially in the case of problems with shortages of machines or lack of specialized knowledge. Members of a cooperative have easier access to information on price setting or its fluctuation both on the local and international market. This is particularly important in the case of cotton, cocoa or coffee prices, which are set on commodity exchanges in New York or London. Co-operatives give their members better bar- gaining position in negotiations with middlemen or other buyers of their goods. The way in which cooperatives are run and managed is based on the respect of the rights of all their members. Voting and election of representatives of the community should be on an equal basis. Ad 5. The Fair Trade mechanism enables the producers to sign the long-term contracts. The Fair Trade standards impose on buyers an obligation to give a financial advance on contracts, called pre-financing. The aim is to help producers get access to capital and overcome financial shortages. This promotes entrepre- neurship and may contribute to enhance economic and social situation of the whole cooperative (Mathews, 2009). The producers can plan future production and invest in development of rural areas or artisan plants. The average contract period lasts from half to one year. Importers in the Fair Trade transactions are often obliged to finance future seasonal crops up to 60% of their purchase price. According to the Fair Trade standard the purchase price shall be paid before deliv- ery of the products. An advance payment allows producers to maintain financial stability and invest money in other crops or production. ETHICAL ASPECTS OF THE WORLD TRADING SYSTEM… 53 4. Implementation

As a matter of principle the concept of Fair Trade is often objected to the notion of free trade (Claar, 2011, pp. 79–80; DeCarlo, 2007, p. 104; Nicholls & Opal, 2005, pp. 17–19; Sabry, 2011, pp. 25–35). Fair trade organizations openly criticize the market based standards of free trade, and thus seek to introduce an alternative system, based on fairer rules (Decarlo, 2010, pp. 91–98). In this “alternative” system, the goal is to build a market model that is different from the generally applicable framework. The Fair Trade movement is convinced that “free trade” harms the poorest, because prices in conventional trade for the commodities coming from countries of the South are “unfair”. In this respect, it is postulated to change some of the rules of the international trading system in order to better serve the poorest countries, among others by introducing special tariffs to protect the economies of developing countries, as well as establishing trade agreements that would sanction national import quotas for certain goods.2 The main reason for the criticism of the Fair Trade movement is the mechanism for determining the minimum price, and therefore controlling and maintaining prices at a strictly defined level. The decisive factor in this arrangement is the protection of the group of producers from the countries of the South, and not the market relations between supply and demand. The accusations are therefore focused on the development of uncompetitive production, where one group is protected at the expense of other market participants. Such activities are, by their very nature, discriminatory and protectionist, although subordinated to the noble purpose of helping poor producers from developing countries. An additional element is the effectiveness of the mechanism based on Fair Trade purchase and sale transactions. This means that the scale of expenditure on Fair Trade development is disproportionate to the benefits obtained by producers from the South. The doubts raised by the operation of the Fair Trade mechanism concern two issues: first, the principles and standards on which the movement is based and, secondly, the direction of Fair Trade development. Increasing problems can be divided into three groups: (1) the first concerns consumers, (2) the second involves producers (3) and the third relates to the functioning of the international trading system. Ad 1. Consumers are the backbone of the entire Fair Trade system, because by choosing and buying Fair Trade products they fund it. The problem is that the average consumer does not have enough information on the distribution of Fair Trade revenues. It is mostly about the wages that producers and cooperatives from developing countries finally receive after the cuts of all financial liabilities. The consumer, guided by ethical considerations, buys a product for a higher price, because he/she assumes that a significant part of the Fair Trade price will go to a poor producer from the South. This is in line with the Fair Trade assumptions,

2 These postulates were announced by the Trade Justice Movement organization (http://www.tjm.org.uk/), which brings together numerous Fair Trade organizations in the world. 54 MAŁGORZATA ZAJACZKOWSKI where the aim is to eliminate middlemen, namely too many importers, distributors, retail sales networks (Jaffee, 2007, pp. 147–149). These entities receive a part of the profits from the sale of products in Fair Trade, which should be largely transferred to the producers from the South. On the other hand, more and more extensive Fair Trade sale or distribution channels require proper services in the form of numerous Fair Trade supporting institutions as well as additional business entities outside the system. Part of this obligation is taken over by the producers. It is clear that the greater availability of Fair Trade products on the conventional market involves rising beyond the niche market. The operation of middlemen is necessary for the sake of proper functioning of the Fair Trade system. Ad 2. In conformity of the Fair Trade principles producers from the Global South should be the main beneficiaries of the system. However, only a limited number of workers in the countries of the South have the opportunity to participate in a Fair Trade cooperatives. Numerous trade and institutional barriers are a reason for their small attendance. The largest obstacle are costs related to obtaining and maintenance of Fair Trade certificates, which require producers to meet strictly defined conditions. Another obstacle is limited to production capabilities. The Fair Trade production stimulated by higher prices encounters natural limitations. The low productivity and efficiency of producer cooperatives makes it difficult for individual farmers to receive higher wages for larger quantities of products. The situation results from the traditional form of cultivation and management of small farms. For example, in the coffee-farming, increasing quantities are not the result of increased production within the cooperative, but a consequence of issuing further Fair Trade certificates, which leads to excessive supply of this product (Kohler, 2010, p. 28). People encouraged by higher price for Fair trade products seek for certificates, through which they expect to gain more profits. It causes market distortion which finally can hit the poorest producers from the South. Higher wages of Fair Trade producers are connected with more responsibility and major work compared to conditions of employees out of the system. Due to the need to eliminate or limit a number of middlemen the cooperatives are obliged to perform necessary activities that would otherwise be performed by intermediaries. Only a few producer groups are able to effectively manage the export process of their products and not to bear higher costs. The best managed and strongest producer organizations experience the greatest gains while smaller and weaker cooperatives are worse off and cannot increase their trade capacities. It is difficult to meet all requirements to get the certificate, therefore worse managing cooperatives can apply for special support programs from aid institutions, foundations or associations (Jaffee, 2007, pp. 151–163). Producer co-operatives based on traditional forms of social and economic de- pendence are not advanced in terms of production methods, labor productivity or management. Changes are difficult to carry out and they require much investments. However, compared to an individual farmer, cooperatives have greater opportunity to operate effectively on the local market, receive technical and financial support from Fair Trade organizations, as well as some logistics facilities. ETHICAL ASPECTS OF THE WORLD TRADING SYSTEM… 55 They may invest the money coming from social premium for public usage objectives and take on the risk of operating on the market. On the other hand, cooperatives preserve traditional forms of production. The rules on which they operate encourage people to stay at their current place of work and to continue inefficient production. The guaranteed minimum price entails weak incentives to change the job. Even low-paid producers do not have enough reasons to change their activities and look for other forms of earning. Ad 3. The third problem results from the assessment of the potential impact that the Fair Trade may have on international trading system. The claim about the negative effect through the minimum price seems to be exaggerated. First, since the potential of Fair Trade does not have enough influence on international trade system, the minimum price mechanism would hardly distort the market economy mechanisms. Secondly, guaranteed fair trade minimum encourages farmers to join the Fair Trade system, but the scale of the engagement in relation to world trade is relatively small. The Fair Trade share in total international trade does not exceed 1% (Elliott, 2012, pp. 1, 8). There is a chance to increase the impact of Fair Trade on global trade providing that the alternative system would further develop by expanding to new regions and products as well as substantial increase in retail sales. Only under such circumstances the Fair Trade minimum price may have stronger impact on conventional commodities market (Nicholls & Opal, 2005, p. 42). An example is the coffee market. Due to the large supply and the guaranteed price, the coffee price dropped substantially which contributed to the deterioration of living conditions of coffee producers outside the Fair Trade system. Moreover, producer cooperatives operating in the Tair Trade system do not have the prospect to sell their entire crops or production at a guaranteed price. Therefore some part of Fair Trade production is sold at market price, which is usually lower than the Fair Trade minimum price. For each producer cooperative, the main goal is to sell as much as possible of its yield at the preferential price. However, a reason to be pleased is a sale ranged at 30–40% of Fair Trade production. The rest is sold at market price. Thereupon if significant quantities of the Fair Trade products, e.g. coffee, are sold at market price, it bears it upon overproduction and further drop in prices. It has an impact not only on the Fair Trade producers but also employees and farmers working outside the system.

5. High-minded goals in confrontation with market realities

The implementation of basic objectives of Fair Trade, which are to raise the standard of living and reduce poverty, is extremely difficult. In fact, there is not enough evidence that the Fair Trade system generates net profits (Barrientos & Smith, 2007, pp. 103–120). At least two distinct types of actions carried out by Fair Trade institutions can be identified in order to enhance the living standards of the producers from the South. The first option is to raise the price for Fair Trade products 56 MAŁGORZATA ZAJACZKOWSKI and direct them to specialist stores and sales networks. It was a characteristic formula of the Fair Trade system in the initial period of its operation, dated from the 1960s. Handicrafts and agri-food products from developing countries were then sold in places called “World shops” or “Fair Trade shops” run by charities and aid institutions. Unfortunately, this method did not guarantee high sales but has strengthend the position of Fair Trade products in the niche market. The second—alternative solution is based on the idea on incorporating to the Fair Trade system new participants, i.e. business entities in order to expand Fair Trade sales and increase profits by gaining mainstream market. By granting Fair Trade certificates it has led to the expansion of the scale and scope of sales. This is precisely the direction currently being pursued by the Fairtrade International (FLO), which brought together certifying institutions and producer networks from developing countries. A lot has already been achieved in this strand (Jaffee, 2007, pp. 199–205). However, the decision itself is highly controversial. The Fair Trade certificate was awarded to international corporations such as Kraft, Nestlé, Procter & Gamble, Sara Lee, McDonald, Starbucks and Chiquita. The problem is that Fair Trade goods are only a small part of their assortment, and the companies themselves are obliged to buy only a small number of Fair Trade products. In return, they obtain the brand of a socially responsible company that raises their image and prestige on local and international market. One can get the impression that Fair Trade is treated quite instrumentally in this system (more in Claar, 2011, pp. 52–60). In order to acquire a socially responsible brand, companies use Fair Trade for it. Both concepts—Fair Trade and corporate social responsibility (CSR) have very similar assumptions and common values. The point is to behave responsibly and ethically in relation to various social groups affected and with the greatest possible respect for natural environment. Similar goals are pursued by the Fair Trade, whereas the main reference is well-being of producers from the countries of the South. Assuming that the FLO has discovered an effective way to develop Fair Trade system by increasing sales of Fair Trade goods, the principles and original goals remain open (Barrientos & Smith, 2007, pp. 108–109). Inclusion of international corporations into the Fair Trade system is at odds with basic principle related to limiting of middlemen and shortening of supply chains. Maintaining of special relations between the producer and the client based on trust and respect seems to be inconsistent with a strategy of inclusion of international corporations. The companies are accused of using the Fair Trade logo to promote and create their positive images on national and global market. Opponents blame Fair Trade organizations such as FLO for betraying ideas and principles in return for searching profits at the expense of producers from the countries of the South. However, the problem seems to be much more complicated. It is a big challenge for the Fairtrade International to guarantee producers higher profits in case of increasing and broadening Fair Trade producer networks. In this context granting certification for international corporations can improve working conditions of those employed by these companies. Meeting certain Fair Trade requirements by international corporation means that workers on tea, coffee or banana plantations are better off than others. Their owners are obliged to pay “fair” wages and set ETHICAL ASPECTS OF THE WORLD TRADING SYSTEM… 57 proper working conditions for workers. This may indicate that the companies equipped with Fair Trade certificates will seek to make the changes permanent by improving working conditions and raising minimum wages on large plantations. In practice implementation of the task is very difficult, but in the long term it is not excluded. Certificates are not granted once and for all, but their maintenance is associated with a number of inspections and controls. Sometimes on the ground of failure to meet Fair Trade standards the certifications are taken away from individual producers, entire cooperatives or large plantations. Undoubtedly, it is much easier to carry out detailed checks in small cooperatives than on plantations owned by corporations, including the Chiquita company. However, even in large plantations some deviations from the Fair Trade rules can be noticed and stigmatized. The challenge for the whole movement of Fair Trade is to how reconcile Fair trade ideas and principles with market-driven development, where the urgent goal is to increase sales and revenues concentrated on the conventional market (Jaffee, 2007, pp. 217–218).

6. Conclusions

Within the framework of the Fair Trade movement there is a slow transition process from an alternative trading mechanism to a model located in the mainstream. This means a departure from traditional model of the producer-client relationship with a limited number of intermediaries for the type of activity that is subject to the principles and rules of the conventional market. The sources of changes should be seen in the pursuit of Fair Trade institutions to expand their business and increase their market share. The reasons for dynamic development of the Fair Trade movement are seen first in growing awareness of ethical consumer choices and, second, in the interests of big business to incorporate Fair Trade into the mainstream economy. The latter is facing many opponents who disagree with this choice of development, directly linked to commercialization. New rules of the game related to entering the wider market require changing some Fair Trade principles and adapting them to the market environment. On the one hand, this may be a chance to survive and develop Fair Trade, which requires modification of some rules and submission to international competition. On the other hand, it means moving away from original principles and adapting to rules governing the market economy. The effects of changes are difficult to predict. One thing is certain, the growing presence of Fair Trade on the conventional market gets more attention to development problems of the Global South. The Fair Trade message raises awareness of consumers who are guided by social considerations and environmental protection when choosing goods. Fair Trade contributes undoubtedly to compre- hension of developmental needs of people living in the South among societies in developed countries. 58 MAŁGORZATA ZAJACZKOWSKI References

Barrientos, S., & Smith, S. (2007). Mainstreaming Fair Trade in global production networks. In L. T. Raynolds, D. Murray, & J. Wilkinson (Eds.), Fair Trade. The challenges of transforming globalization. London: Routledge. Claar, V. V. (2011). Fair Trade? Its prospects as a poverty solution? Warsaw: Wydawnic- two Prohibita. Elliott, K. (2012). Is my Fair Trade coffee really fair? Trends and challenges in Fair Trade certification. CGD Policy Paper 017. Washington DC: Center for Global Develop- ment. Fairtrade International. (2017). Building Fairtrade Markets. Annual Report 2016-2017. https://annualreport16-17.fairtrade.net/en/building-fairtrade-markets/ Fairtrade International. (2018). Minimum price and premium information. https://www. fairtrade.net/standards/price-and-premium-info.html Fairtrade Labelling Organizations International. (2009). Fairtrade Leading the Way. Annu- al Report 2008/09. Fridell, G. (2007). Coffee: The prospects and pitfalls of market-driven social justice. Toron- to: University of Toronto Press. Grącik-Zajaczkowski, M. (2015). Etyczne aspekty światowego systemu handlowego na przykładzie koncepcji Fair Trade. Annales. Ethics in Economic Life, 18(1), 7–19. Jaffee, D. (2007). Brewing justice. Fair Trade coffee, sustainability and survival. Berkley: University of California Press. Kohler, P. (2010). The economics of Fair Trade coffee: For whose benefit? Saarbrucken: VDM Verlag Dr Muller. Lyon, S., & Moberg, M. (2010). Fair Trade and social justice: Global ethnographies. New York–London: New York University Press. Miller, F. P., Vandome, A. F., & McBrewster, J. (2010). Free Trade. Alphascript Publishing. Moberg, M., & Lyon, S. (2010). What’s fair? The paradox of seeking justice through markets. In S. Lyon, & M. Moberg, Fair Trade and social justice: Global ethnographies. New York–London: New York University Press. Nicholls, A., & Opal, Ch. (2005). Market-Driven ethical consumption. London: Sage Pub- lication. Panek, M. (2010). Fair trade: Altruism or egoism? An economic analysis of Fair Trade and the social phenomena behind it. Saarbrucken: Lambert Academic Publishing. Raynolds, L. T., & Long, M. A. (2008). Fair/Alternatice Trade. Historical and empirical dimensions. In L. T. Raynolds, D. Murray, & J. Wilkinson (Eds.), Fair Trade: The challenges of transforming globalization. New York: Routledge. Statista. (2018). Revenue of Fairtrade International products worldwide 2004-2016. https://www.statista.com/statistics/271354/revenue-of-fair-trade-products-worldwi de-since-2004/ Weitzman, H. (2006, August 9). ‘Fair’ coffee workers paid below minimum wage. Finan- cial Times. Weitzman, H. (2006, September 9). The bitter cost of ‘fair trade’ coffee. Financial Times. Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 59–73 doi: http://dx.doi.org/10.18778/1899-2226.21.7.04

Beata Bielska, Katarzyna Tamborska Nicolaus Copernicus University in Toruń Faculty of Humanities Institute of Sociology e-mail: [email protected], [email protected]

Transnational corporations as entities of informal influence. Some reflections based on the example of their engagement in activities directed at LGBT groups in Poland*

Abstract

The paper explores the assertion about multi-faceted tools of impact used by large corporations that aim to limit the subjectivity of consumers. It is based on the concept of “deep capture” (Hanson & Yosifon, 2003). Deep capture suggests that the consumers have only the idea of their own subjectivity, and that human behaviour is largely dependent on external situational factors rather than the individuals’ dispositions. In this context, the present authors analyse the role of large corporations in shaping the image of LGBT people in Poland. Noteworthy is the consideration to build and strengthen the belief that LGBT people are a group which suf- fers discrimination, to which anyone should make gestures of support throughout consumer decisions. An overview of the actions of business entities for LGBT groups in Poland allows us state that these actions cannot be called large-scale. The actions of Polish companies can be recognised as not very intense or committed. Western transnational corporations have vast experience in actions for LGBT people, but this is not necessarily the case in Poland.

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 18(1), 21–31. The article is an element of the projects which were financed by the Nicolaus Copernicus University in Toruń within faculty research grants: No. 2035-H (A potential for change. An analysis of the sexual minority movement in Poland through a social movement theory perspective) and 2038-H (Capture category as an interpretative tool for the actions of large economic entities in conditions of globalization). We would like to sincerely thank Dr. Maciej Gurtowski for his comments on the article. 60 BEATA BIELSKA, KATARZYNA TAMBORSKA Keywords: deep capture (deep interception), regulatory capture, LGBT, pink money (pink dollar), corporation

JEL Classification: M14

1. Introduction

Transnational corporations are important economic, political and cultural actors on global and local levels. Their role is also analysed in the context of the strength and sovereignty of the modern national state (Baszkiewicz, 2008, p. 15; Sala, 2005, p. 39), in the context of the effectiveness of various institutions that regulate various aspects of the citizens’ lives, such as food, access to medication, or the reception of media content. Researchers working on global processes point to a probable scenario, according to which transnational corporations will take over political and economic initiative from the governments of certain countries (Szala- cha-Jarmużek, 2013). As Katarzyna Marzęda (2006, p. 302) concludes, national politics are increasingly influenced by the corporate vision of socio-economic development. In a Polish context, the influence of corporations is analysed, among others, through post-colonial studies (Zarycki, 2009, p. 19). Although transnational corporations are mostly associated with political and economic influence, their cultural influence is strongly tied to the previous aspects and therefore worth analysing. The word “influence” alone is understood as the actions of entities, which can be intentional or unintentional, and are based in the change of actions or the conditions of the actions of other entities, in a way which is congruent with the interest of the influencing entities. When referencing the actions of large economic entities, we will use the terms “transnational,” “multinational” and “global” synonymously, although these terms can be differentiated (Gierańczyk & Stańczyk, 2003, pp. 73–83). Accord- ing to the United Nations, transnational corporations are defined as “mostly incor- porated enterprises comprising parent enterprise with a minimum of a 10 percent stake in shares or stocks in foreign companies or foreign affiliated companies” (Sala, 2005, p. 33). Therefore, the focus of our interest is the large social organisations being analysed for their influence on a macro-social level (corporation— state, corporation—public opinion), and impacting on an individual level (consumer). We are also interested in units that are situated outside of the corporation, and not, as in the examples in Maja Biernacka’s analysis (2009), functioning within its structure (workers). Corporations are a subject of interest for several disci- plines such as economics (cf., for instance, Rosińska-Bukowska, 2009), political science (Tausch, 2012, pp. 79–92), and sociology (Tittenbrun, 1991). This paper focuses on the phenomena associated with the interventions by transnational corporations trying to create a friendly image of a particular actor in globalisation within the environment that surrounds it (clients, lawmakers). The goal of these TRANSNATIONAL CORPORATIONS AS ENTITIES… 61 actions is, among others, (1) gaining a favourable attitude from state authorities and working out legislative action that will be beneficial to the company (Miller, 2007) (in later parts of the article we will discuss regulatory capture), as well as (2) creating positive associations in the environment of current and potential clients, through forming a discourse that is beneficial to conducting a particular type of activity, creating trends aimed at particular products and services. Actions that serve the interests of large corporations are disseminated, conducted in an unclear fashion, and are difficult for the average consumer to identify (Miller, 2007). The consumer knows about the existence of advertising, but most often assumes that they do not influence his/her choices (Hanson & Yosifon, 2003, p. 264). Among propaganda strategies that we can identify, for example, financing the activity of non-government organisations with a specific profile, sponsored journalist and expert activity, and specially profiled social campaigns (Burton, 2007, pp. 249–255). A baseline theory that will undergo verification in this article is the assumption that there exist multi-faceted tools of influence that are used by big corporations that aim at the limitation of the subjectivity of consumers. This is the deep capture concept, developed by Jon Hanson and David Yosifon (2003, pp. 129–346), which underlines the fact that large corporations not only influence government organisations but also the ideas of individuals. In light of this concept, consumers are only under the impression of their own subjectivity while they are actually acting under the conditions created by big actors that reach the entire globe. It is hard to avoid a reference to the macro changes in Western societies— individualisation or consumerism analysed as a lifestyle aspect, as well as the reformation of economic life (consumerism as a driving force of the capitalist economy). We can assume that the actions of international corporations are aimed at gaining more profit by becoming a part of these changes, and, as a consequence, maintaining and intensifying these changes. We are, therefore, making a reference to the subjectivity of consumers and their individual decisions, because in current Western culture the individual approach, which refers to the individual’s power over their own life and the possibility to make independent decisions, is assumed to be obvious and natural. In his article describing “the discourse of innovation,” Tomasz Zarycki points to the way that individualism and self-reliance in the shaping of, for example, a professional career, is developed in corporations (2014, pp. 20–34). Being aware of the differences between the United States (where the concept originated) and Poland, it makes sense to note that the conditions which accommodate the aforementioned actions of corporations are alike. In this aspect, Poland adopts the Ameri- can neo-liberal model—process that initiated during the time of political transition from the 1980s to the 1990s (Kowalik, 2007, pp. 781–797). One of the typical elements of such a model is the focus on the individual, and not the society (Zawojska, 2006). The conviction of having influence over one’s own life can be seen in the most recent Social diagnosis 2015. From 69.2% in the year 2000 to 84% in 2015 considered the most recent year of their life to be a successful one. Starting with the

62 BEATA BIELSKA, KATARZYNA TAMBORSKA year 2000, on average 80% of those surveyed claimed that this fact depended on them (Czapiński & Panek, 2015, pp. 280–281). In this article, we are going to analyse the potential of using the concept of deep capture in a Polish setting.

2. Interpretation model

The deep capture concept describes a vision of consumer action as a response to the conditions created by large economic subjects (Hanson & Yosifon, 2003, pp. 129–346). For the authors, one assumption is key—that human behaviour largely (although not all of it), depends on external situational factors, and not on the individual dispositions of individuals. An approach which concentrates on an individual’s internal characteristics is termed “dispositionism,” while an approach which places the characteristics of the situation in the first place is called “situa- tionism.” Authors, therefore, propose a new way of looking at the vision of human activity, or a new application of that which social psychology has already established, for research in the field of law, economy, and for the analysis of large corporations’ modes of action. This basic assumption about a seeming subjectivity of the consumer was largely based on the results of a well-known experiment conducted in the 1960s at Yale University (Milgram, 1960/2008). The studies on the influence of authority showed that people predict a much lower level of obedience in a survey which describes such a situation, than when they take part in the experiment themselves. What is more important, the subjects presented a varying level of obedience depending on the changes taking place in particular circumstances in the experiment. According to Hanson and Yosifon, the experiment showed that the decisions of an individual are largely decided by the varying circumstances in which they will find themselves. An opposite stance is assumed by the social psychologists claiming that finding the causes for behaviour within the internal characteristics of an individual instead of situational circumstances the fundamental attribution error. This error occurs, in part, because one is never able to know the full situational context, and doing so would require a much greater cognitive exertion and engagement (Aronson, 2004, pp. 156–159). According to Hanson and Yosifon, corporations spread the “dispositionist” vision of a person (the one which considers a person’s internal dispositions) and at the same time undertake marketing activity which is based on the assumptions of the “situationist” concept. They attempt to regulate consumer behaviour by changing situational factors, while at the same time allowing the individual to maintain an illusion of subjectivity. According to Hanson and Yosifon, this is an extension of the tools of influence possessed by economic actors that were described by Stigler (1971) as regulatory capture. Simply put, regulatory capture is based on influencing subjects who carry the responsibility of regulating the activity of large corporations, which TRANSNATIONAL CORPORATIONS AS ENTITIES… 63 would show in such a way, that the controllers would be realising the interest of the subjects to the control of which they were assigned. According to Hanson and Yosifon, corporations use tools of influence when dealing with institutions as well as consumers; they “capture” the ideas of the consumer which he has regarding his own subjectivity. In this case, the “capture” has a much deeper meaning, because it reaches the space of general ideas, and it is difficult to perceive them on an individual level because it surrounds various areas of social life with its influence.1 According to Hanson and Yosifon, the consumer not only does not notice the dictate of varying circumstances, but he does not even think about their existence. Such a state of things is illustrated by the authors with the example of a runner, who assumes that he and his competitors find themselves in a place of equal chances, and the result of the race depends only on the personal abilities of those running in it (2003, p. 228). Corporate actors orchestrate the factors that influence how the individuals behave without realizing that their actions are manipulated by external circumstances. According to the authors, it is not only the representatives of authority or politicians that are a party to the process of capture, but also the scientists, the media, and the widely understood intellectual elite. It sometimes happens that the third “independent” side is intentionally formed and actually financed by corporations, e.g., an internet service that supports the protection of the right to free consumer choices that are limited only by their own sense of responsibility (Hanson & Yo- sifon, 2003, p. 249). A more widely discussed situation is the one in which research grants for scientists make it impossible to conduct independent research (pp. 272–274).

3. Arguments for the deep capture hypothesis

Hanson and Yosifon’s approach seems to be justified and probable because we can identify the benefits received by economic subjects, which become possible to be observed after applying this perspective: (1) maintaining a “dispositionist” (subjective) vision of a consumer as a sov- ereign subject, which causes one’s vision of themselves to be more positive (2003, p. 228); (2) it allows for the creation of a conviction that those corporations which maximise profit also maximise common wellbeing, through a supply of the products for which a need is expressed by individuals (pp. 226–227); (3) the assumption made by the dispositionists translates into a general approach which defies federal regulations because a market of free consumer choices becomes the only regulator (p. 227);

1 For more details on the concept of “capture”, which could be found also in the works of K. Marx, cf. Byrne (2018). 64 BEATA BIELSKA, KATARZYNA TAMBORSKA (4) the consumer is responsible for all decisions which are made, not the corporation, therefore the consumer himself is responsible for her choices, including—among others—cigarette smoking or eating high-calorie foods (pp. 247–248); (5) if a consumer is not happy with the result of such competition, she cannot blame anyone but herself—market processes are fair, all she can do is change her choices (p. 228).

4. The deep capture concept versus LGBT-friendly activity

The concept of deep capture is a tool which allows for the analysis of so-called behind-the-scenes phenomena, “social actions, which are hidden by the subjects performing them due to fear of sanction” because they usually break social norms (Gurtowski & Waszewski, 2009, pp. 199–201). However, here we would like to discuss not so much the activities which are purposefully hidden, but those which are not very visible, or purposefully not exposed. This article constitutes an example of the attempt to use the concept described above for the analysis of the corporate activities aimed at sexual minorities (LGBTQ—lesbian, gay, bisexual, transgender, and queer persons) in Poland. The term “sexual minorities” may be problematic in this context, but it is used not as an indicator of a definite sexual or gender identity, but as a determinant of the common history of a movement, its experiences, and postulates. The term LGBTQ also functions in various ways, sometimes as an abbreviation, sometimes with additional categories (I—intersex persons, A—asexual persons, A—allies, heterosexual allied people). In this text, we purposefully do not use the term “gay men and lesbians” or “gay-lesbian” movements, because such descriptions in literature are considered inadequate, and to have an application at most in a historical frame of the movement’s development. In the context of the purchasing power of the LGBT community, the term “pink money” (Sielicki, 2014, p. 8) is used; companies which are friendly with the LGBT community are deemed LGBT-friendly and any simulated activity of these companies as pink washing and in a wider setting of international relations, simulated activity by nations as homonationalism (Puar, 2013). One of the factors which can motivate companies to invest in LGBT-friendly activity is rankings, such as the Corporate Equality Index which has been made since the year 2002 by the Human Rights Campaign Foundation in the USA. This index pertains to the USA companies that are active in Poland, e.g., Coca-Cola, Apple. Medium-sized and large enterprises are analysed, ones which offer full- time employment to at least 500 people, but basing on the list by the biggest law firms in the USA and on a list compiled by Fortune magazine. A company may also volunteer itself for the ranking. In the most recent report, 947 organisations were graded. The grading was based on surveys filled out by company representatives, which were verified by researchers (an analysis of media reports, law acts, financial documents as well as statements made by individual informers referring TRANSNATIONAL CORPORATIONS AS ENTITIES… 65 to possible support of anti-LGBT activity). The ranking’s purpose is to grade equal employment opportunities for LGBT persons (including cooperation with suppliers and sellers), worker’s benefits (supplying equal benefits to people who are in same-sex relationships as well as their families, and removing unfair differ- entiation of benefits in the case of transgender persons and their dependents), competence in the organisation of infrastructure pertaining LGBT (implementing anti-discriminatory policies, education, considering the variables of sexual orientation and gender identity in internal research) and the level of its engagement in this area (public support for the LGBT community, a lack of anti-LGBT activity). The ranking pertains the companies’ global activity (not only within the USA), and that of its subcontractors and suppliers. The ranking’s results are used to put together guides for potential workers and clients of the companies which are being evaluated (Human Rights Campaign Foundation, 2018). The Foundation for Thought—LGBT Business Forum in Poland is yet another example of the involvement of enterprises in social activity (Drozdowski, n.d.). This organisation functioned from 2012 to 2016. Its goal was favourable actions for the LGBT community—the promotion of the equal treatment of LGBT persons in employment through the creation of a working environment free of discrimination, and through the encouragement of companies to consciously create an image which is LGBT-friendly (Szypuła, 2012). The proposed means of achieving this goal (Fundacja LGBT Business Forum, 2012):

Granting the LGBT Diversity Index award to business and social organisations functioning in Poland or other awards connected to the promotions of equal- rights attitudes, The encouragement and initiation of an exchange of the experiences of workers and managers from the LGBT community, through the organisation of meet-ups, debates and training courses, The organisation of training courses on the topics of labour law and worker talent management, Organising the Polish edition of the LGBT Business Forum conference, dedicat- ed to LGBT-related topics in the workplace, Supplying reliable information through research activity and cooperation with other subjects which deal with marketing research and social opinion research.

In the years 2014–2016, the foundation organised conferences during which businesses received the first awards (Rainbow Bees) and an anti-award (Rainbow Wasp) in Poland, which were supposed to turn attention towards the attitudes which enterprises held towards LGBT matters. In the first edition, awards were received by Google Poland, for the “Most LGBT-friendly company in Poland”, British Council in the “Organisation” category (for a full implementing of LGBT- friendly policy), LOT Polish Airlines in the “Surprise” category, (for their action directed at the LGBT community—details follow in a further section of the article), and Barefoot Wine in the category “Initiative and activity” (for openly 66 BEATA BIELSKA, KATARZYNA TAMBORSKA expressing support for LGBT issues, which was shown through the promotion of the brand at LGBT events, including the Equality Parade). The anti-award was received by IBM, for a complete cessation of activity for the LGBT cause after openly supporting EuroPride in 2010. Enterprises were able to take part in the organisation’s activity by including themselves in the LGBT Diversity Business Network Platform. State institutions and non-government organisations could also take part in this activity. The platform served as an exchange of good business practice in diversity management. The annual Platform membership of 10,000 PLN was waived. The fee included not only the ability to inform about participate in workshops pertaining to the aforementioned issues, participation in conferences, access to reports, company promotion within forum activity, including the company in the organisation’s database, etc. Platform members included: financial agencies, including mortgage agencies, beauty salons, a travel agency, but not large international corporations. The forum itself informed that

it cooperates with the Polish Private Employer Confederation Lewiatan, through the Forum of Responsible Business within the “Diversity Card” action signed by companies such as Aviva, Orange (TP, Centertel), Orbis, Totalizator Sportowy, or Unilever. [The forum] gained the support of the Embassy of the United States, as well as the Government’s head of Equal Treatment Agnieszka Kozłowska-Rajewicz. (retrieved from http://lgbt.biz.pl/partnerzy/2 on May 15, 2014)

One of the aspects of this activity was the Market and work environment research of LGBT persons in Poland 2014 study. The goal of this study was a diagnosis of the situation in which LGBT persons find themselves on the employment market, and getting to know their opinions as consumers. Data from an internet survey was collected until the end of March 2014. The report was published in June of the same year, and presented during “Equality Week”. This was the first study which was supposed to allow an assessment of the approach presented by LGBT consumers when it came to diversity management. 1,362 respondents took part in the study. The study was not representative—the results cannot be general- ized to the entire LGBT community. Nonetheless, it was the first research in Po- land addressing these issues, and hence it deserves to be discussed here. When answering these questions, people were allowed to vote for the companies they considered as the most LGBT-friendly. Awards were given by a group of LGBT organisation representatives. The vote was considered, however, it remains unknown as to how it was implemented. Survey respondents listed the following companies: Google (137 votes), Ap- ple (84), IKEA (83), Coca-Cola (48), Starbucks (43), IBM (35), Microsoft (32), Facebook (28), Nike (18), H&M (18), Subaru (17), Unilever (15), Oreo (14), Dolce and Gabbana (14), McDonald’s (13), Zara (12), HP (11), Absolut Vodka (10), Nivea (10), Disney (10) (Sielicki, 2014, p. 16).

2 The Forum’s website was shut down. TRANSNATIONAL CORPORATIONS AS ENTITIES… 67 LGBT Business Forum stated, that the estimated value of the Polish LGBT market amounts to 2.5 million persons and 140 billion PLN (Szypuła, 2013), however, at times this estimate amounts to 20 billion euro (Sielicki, 2014, p. 9), though no details (base assumptions) of these calculations were given. During the research on market and work environment, buying decisions depending on how the potential manufacturer treats or refers to LGBT issues were analysed. When answering the following question: “If you found out that the company which manufactures goods or provides services discriminates against LGBT workers, what would be your reaction?” 76% of people surveyed3 stated that they would cease using the services or buying the products of this company. For 61% of the persons studied, support for the LGBT community was the basis for choosing one service or product over another, and they would resign from a different company’s services or goods (“Does the fact that a company is an LGBT-friendly influence your decision to buy a product or use the services of one company and not its competition, assuming that both products/services are of the same quality and have the same price?”) (Sielicki, 2014, p. 35). Nearly every third person declared that at their place of work, anti-LGBT discrimination policies are implemented, and half of them claimed that these procedures are truly in place. Most of the people taking part in the research did not point to any particular solutions of this sort (p. 59). This may point to a certain level of potential when it comes to business activity aimed at the LGBT community. The study was repeated in 2015. Currently, actions similar to that of LGBT Business Forum, only under a different name, is undertaken by the Pro Diversity foundation (https://prodiversity.pl/). It was established in part by two individuals who were previously active in LGBT Business Forum. However, this foundation has included the LGBT-friendly company index in its activity. It will be announced in the fall of 2018. Declarations made by companies are to be verified with the help of data collected during the general market and LGBT work environment research in Poland. The results achieved by particular companies will be classified, and those which will be in the top five can decide whether or not they want this information revealed (Pro Diversity, 2017). Small spelling errors in two places (pages 7 and 10) and the construction of the ranking point to the fact that the project is based on the model that has been in use since the year 2005—the Stonewall Workplace Equality Index. Another strategy for creating change in companies, one less organised but with potential when it comes to mass number, is consumer boycott. The Homo- pedia—

the free LGBT encyclopedia, […] functioning next to, and partially as an alternative to Wikipedia, which is suspected of favouring ultra-right communities and nationalistic organisations, as well as introducing biased information pertaining to homosexuality. (Konarski, 2013)

3 From among 1,033 people who answered the question. 68 BEATA BIELSKA, KATARZYNA TAMBORSKA promoted a boycott of anti-LGBT companies such as Polski Bus, because its owner financed organisations which opposed same-sex marriage; Ferrero Pol- ska, due to the fact that in the rules of their “Maxi Couple,” same-sex couples were excluded from the contest; Zysk i Spółka, because it publishes the writings of Wojciech Cejrowski, who regularly calls homosexuals “fags”; “Rzeczpospoli- ta”, because in June of 2009, when the tolerance march took place, the newspaper published a picture which compared same-sex marriage to zoophilia. (Gąsior, 2013)

Another (unsuccessful) example of an attempt to engage a large Polish company in pro-LGBT business activity is the case of LOT Polish Airlines. On May 8, 2014, the Polish airlines placed a rainbow flag on its website and encouraged travel to places which are LGBT-friendly. After one day, the company neutralised the message somewhat into Friendly-travel (www.lot.com/pl/pl/friendly-travel). The company left the flag and the sentence “Plan your vacation in the hip, LGBT- friendly places in the whole world which are pulsing with life.” A picture of a male same-sex couple was removed. The writing now spoke of “places friendly to everyone.” The media, politicians and LGBT organisations quickly reacted to LOT’s actions. They were criticised from both sides: for creating an LGBT-friendly message (from what is considered the right wing) and for withdrawing from this message (PR companies, LGBT organisations) (Karpieszuk, 2014). This example shows the specifics of the reception of LGBT-related content in Poland and how little thought is given to the actions taken by LOT. One can only assume that they could have been a simple copy of the campaigns done by western companies—without considering the context of these actions and image repercus- sions. Political influence was also suggested as a motivation for LOT’s actions. Another example of an attempt at engaging companies in LGBT activity was the “QueerCard” (“QueerKarta”)—an initiative by the Equality Factory in Lodz.4 The goal of his project was the creation of a network of various service points which declare themselves as open to all guests, regardless of their ideals, sexual orientation or gender identity. The QueerCard entitled its owner to lower prices in selected spots, and the card itself could be acquired during events organised by the Equality Factory. The project was joined by restaurants, clubs, hostels, beauty salons, sex shops, and a job training company (http://fabrykarownosci.com/tml/). The project is not currently continued, discounts are no longer offered. The best known and popular enterprises which are engaged in making offers to the LGBT community are so-called “industry clubs” (“kluby branżowe” in Polish) such as HAH in Poznan and Sopot, and Red in Bydgoszcz. A small Polish company, LGBT OUTFILM, provides film distribution services. It is difficult to compare these steps to the initiatives of bigger companies.

4 A similar project was run in Poznan by the Stonewall group—they created a map of LGBT-friendly places. TRANSNATIONAL CORPORATIONS AS ENTITIES… 69 The QueerCard only pertained to the area of Lodz, and large corporations did not engage in this activity. Hence, an influence of business on creation of LGBT- friendly climate should not be overestimated. LGBT organisations in Poland are relatively likely to complain about a lack of business support. The Equality Parade did not gain a significant sponsor until the year 2014—Norway Funds (“Fundusze Norweskie sponsorem Parady Rów- ności,” 2014). In Poland, there are no examples of large companies which strongly underline a positive attitude towards the LGBT community (Gąsior, 2013). The above actions pertain only to the element of deep capture, which refers to the support of organisations by creating an environment which is friendly towards business. One should also notice the role of such an initiative in building a conviction of the fact that LGBT persons constitute a minority which is discriminated against, towards which anybody can make gestures of support through their decisions as consumers. We can assume that such a definition of the situation will influence the consumer’s self-esteem positively that, in time, may support a weaker minority in the name of “equal treatment.” While the activity of Polish companies remains minimal, Western supranational corporations have significant experience in activity aimed at supporting the LGBT community, but not necessarily in Poland. Among the companies which are recognised as openly supportive of the LGBT community, we have such companies as Nike (http://nikeinc.com/lgbt) which supports LGBT organisations or demonstrating their support through footwear design, Unilever which is judged as the best supporter of its LGBT employees in international rankings (Stein, 2014), or IBM in which the initiator of LGBT Busi- ness Forum was employed and where he dealt with LGBT issues. It is worth noting that support for LGBT persons in corporations is usually an element of diversity management, which also encompasses support for women, people of colour, or persons with disabilities. The basis of these policies is the conviction that diversity is not only beneficial for the image of the company, but it also simply pays off—thanks to these policies talented workers are not excluded simply by their belonging to a group which is considered discriminated against, and workers which are treated better are more motivated, more effective and less likely to leave; diverse employees recognise the needs of diverse consumers better, and therefore consumers which are often ignored (untapped market segments (Sears & Mallory, 2011)) or especially wealthy (presenting a greater purchasing power in comparison with the general population with children (Paul, McElroy & Leatherberry, 2011, pp. 110–111)). Sometimes, the public institutions are the motivating factor for change when they commission projects that demand the implementation of anti-discriminatory policies; sometimes this is done through civil’s unions (Sears & Mallory, 2011, pp. 6–7). 70 BEATA BIELSKA, KATARZYNA TAMBORSKA 5. Downsides and upsides of the concept

An important disclaimer when it comes to the concept of deep capture is its reference to the category of value attribution. Despite the fact that the authors of the concept use it mainly to depict actions which are judged as negative, it does not necessarily have to be so. A good example here may be the actions which aim at supporting the LGBT community. It is worth noting that depending on the viewpoint, these will be pro- equality actions, democratic ones, actions which are pro-diversity, freedom and social justice, while from a different perspective this will be a promotion of inappropriate, irresponsible, family-toxic sexual practices. In the latter form, it will also be the copying of Western patterns which are destructive to society and its citizens, while in the first it will be an adaptation to better Western examples. Amongst the possible difficulties in applying the deep capture concept to the analysis of corporate activity, we can list a methodological problem—it is hard to point out cause and effect relationships, direct motivations of corporations related to, for example, a reformation of the public sphere according to their business interest. This argument can be countered by claiming that enterprises strive towards an avoidance of the actions that may cause financial loss, therefore the actions that are aimed at supporting of the LGBT community through the support of non- governmental organisations are a rational business calculation (the LOT case does not necessarily confirm this). From a different viewpoint, these are strategies in which it is difficult to pinpoint a direct translation into profit, although an attachment of LGBT persons to gay-friendly brands has been reported (Sears & Mallor, 2011, p. 116). Considering this, it is worth marking that not all the actions of LGBT-friendly corporations have to, in their entirety and at every level, only be an attempt at gaining profit. They may be a result of the convictions of the owners or employees of companies, and may be made regardless of the financial benefits, and even at a risk for loss. As stated by one of the researchers of globalisation processes, Joanna Szalacha-Jarmużek, the question of whether or not an outsider can establish the intention with which a particular subject that appears in the analysed process made a given action is one of the most difficult questions in social sciences. We can only test the effects of these actions and hypothesise about the motives that caused them (Szalacha-Jarmużek, 2013, p. 17). However, the moral evaluation of particular marketing campaigns, which create trends for a particular product, or underline particular elements of employment policy, becomes secondary. What seems important is the extent to which the concept of deep capture allows for a presentation of the mechanisms which form the approach to the general rules of the functioning of an economy. This is a perspective which allows us to notice the common interests of big corporations— maximizing market possibilities, and minimizing limits and government regulations. This is demonstrated by the functioning of supranational trade organisations created from subjects which serve common interests, and sometimes only appear to be competing with each other (price fixing). TRANSNATIONAL CORPORATIONS AS ENTITIES… 71 Sometimes, however, as is the case with the LGBT community, while on the surface, the activity of a corporation may seem important; a deeper analysis may reveal that it is overemphasised, and that it is easy to overstate its meaning. We can then speak of a potential area for a corporation’s activity, not necessarily a real one. The action ns of a corporation can be clearly visible in other areas— this is why they are worth further analysis. An example of an area for such an analysis can be, for example, the (de)regulations pertaining to the food industry, as well as energy sourcing and environmental protection. We can, therefore, ask how much influence corporations have over what products we consider healthy, and what products we avoid, what energy sources we use and what new energy sources we allow or not, do they form trends for particular behaviours, attitudes, and even social movements in an organised and intentional way. We can only try to analyse such activity in the context of behind-the-scenes phenomena, ones which are more difficult to detect and analyse (Gurtowski & Waszewski, 2009, p. 167), as well as the context of divisions into a centre, peripheries and semi- peripheries.

References

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Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 75–84 doi: http://dx.doi.org/10.18778/1899-2226.21.7.05

Maciej Soin Lodz University of Technology Faculty of Management and Production Engineering Institute of Social Sciences and Management of Technologies e-mail: [email protected]

Philosophical difficulties of stakeholder theory*

Abstract

Philosophical difficulties of stakeholder theory—which plays an important role in CSR and business ethics—are mainly connected to the questions of its status and justification. What sense does stakeholder theory have: descriptive, instrumental or normative? And if normative, why then should executives worry about multiple stakeholder demands? It is well known that Freeman, one of the most important authors of stakeholder theory, deliberately disregarded these problems. In philosophical questions, he invoked Rorty’s pragmatism that in his opinion effectively undermined the “positivistic” dichotomy between facts and values, science and ethics, and enabled stakeholder theory to be understood as both descriptive and normative. The article presents some difficulties connected with this view, focusing on its dubious assumptions and unfavourable consequences. These assumptions con- tain a false dilemma, taken from Rorty, which states that knowledge follows either a rule of representation or a rule of solidarity. One of the unfavourable consequences is the conclusion that stakeholder theory may be true only if its followers are able to force the stakeholders to accept its truthfulness. The main thesis of the article says that, because of pragmatic justification, stakeholder theory became a sort of arbitrary narration, which is unable to deal with its (empirical) misuses. However, a more traditional view on facts and values enables us to appreciate the descriptive advantages of the theory and to identify difficulties connected with its normative layer. From this point of view, the attempt at a pragmatic interpretation of stakeholder theory was a misunderstanding that should be withdrawn from circulation.

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 19(3), 7–16. 76 MACIEJ SOIN Keywords: stakeholder theory, pragmatism, facts and values, Freeman, Rorty

JEL Classification: A13, L21, M14

1. The Problem

The “stakeholder theory” is not an overly complicated concept, at least in basic ethical and business applications. As a reminder: let’s take any enterprise P and let’s call these economic entities, which somehow concerns the activities of this company with its stakeholders. Apart from owners, in the case of a joint-stock company—shareholders, there will be clients, employees, suppliers, etc. The basic content of stakeholder theory boils down to the claim that management P should be guided in its decisions not only by the interests of the owners but also by the interests of the other stakeholders. This means, among other things, that maximizing profits, and thus realizing the interests of the owners, is neither the only nor the main objective of the company’s managers. The aim is balancing the interests of all the concerned groups. And regardless of whether the management of the enterprise is aware of it or not, these interests are considered to some extent, because assuming the elementary economic freedom of individual entities, otherwise it would not be able to cooperate at all. However, problems start when we ask, to what extent should the company managers consider the needs and postulates of individual stakeholders? That means: how to understand the balancing of interests between, for example, the owners and clients of the company since these interests are at least in some way contradictory (for example, when it comes to the price of the purchased goods). And: why should these interests be considered, and not for example “guided by” the principle of profit maximization and hope that—as the liberal would like to believe—the “invisible hand of the market” will agree these actions with other, equally specific actions of other entrepreneurs and customers? The first of these issues—as a “difficulty in applying”—results from the very general nature of the concept and can be temporarily solved by its specification for individual cases. Therefore, it remains an empirical matter of practice. The second difficulty refers to the normative content of the stakeholder theory and asks for at least an outline of reasons that encourage its acceptance. We can, therefore, describe it as a philosophical “difficulty of justifying.” It is very characteristic of the contemporary state of philosophy, as well as social sciences, that Freeman, one of the main authors and propagators of the theory of stakeholders put a lot of effort to present this second difficulty as irrelevant. Although he initially referred to the authority of Kant and his imperative, in a mature version of his views he bound the theory of stakeholders to Rorty’s philosophical pragmatism, which, in his opinion, effectively undermined the “positivist” dichotomy between facts and values, as well as between science and ethics. PHILOSOPHICAL DIFFICULTIES OF STAKEHOLDER THEORY 77 By doing so—at least according to Freeman—he made it possible to recognize the stakeholder theory as both a descriptive and a normative concept, and thus—to recognize the said problem as poorly placed. The only question is whether such a resolution does not generate new difficulties related to the dubious assumptions and consequences of the adopted perspective. In our deliberations, let us take a closer look at Freeman’s and his col- leagues’ arguments, aiming to justify the thesis that the association of the theory of stakeholders with philosophical neo-pragmatism brought more harm than good. It cannot be defended either practically or theoretically. Although we will mainly deal with the normative layer of stakeholder theory and its use in business ethics, apart from most of the complications associated with Freeman’s position, we will see that in his texts (neo) pragmatic interpretation of the stakeholder theory has been carried out so firmly that, the purpose of the criticism is quite clearly.

2. Two versions of the justification of stakeholder theory

As was said, Freeman’s views on the philosophical basis of the stakeholder theory were subject to significant evolution, and the first version of the “difficulty of justification”—formulated in the famous article by Evan and Freeman in 1983— appealed to the imperative of Kant and only casually mentioned his more recent studies. The stakeholder theory was there presented as a kind of revision of the enterprise theory in the “Kantian spirit”, expressing first of all the principle that each group of stakeholders “has the right to be treated as a goal in itself, and not only as a means to achieve a goal” (Evan & Freeman, 1997, p. 187). If the question was: “in whose interest should the company operate?”, the answer emphasized the need to balance the interests of particular groups resulting primarily from the application of the Kantian imperative to determine the company’s objectives. It was, therefore, a typical normative concept, extending managers’ obligations towards owners (shareholders), by appropriate definitions, and therefore— speaking Wittgenstein’s jargon—doing it with grammatical movements.1 Although the arguments of Evan and Freeman also used practical suggestions (the need to balance the interests of individual groups is also important from the point of view of the company’s survival), as well as concepts characteristic of consequences ethics (e.g. the concept of unintended effects), the absolute priority was given to the ethics of duty. The main point of justification was limiting the possibilities of actions resulting from the right of ownership by denying the company and its managers the right to infringe the guiding principle of the autotelicity of the stakeholders. The duty to comply with it was the undisputed assumption of

1 The version of the justifications was moreover, and as testified by Phillips, Freeman and Wicks in the article What Stakeholder Theory Is Not (2003, p. 481) alongside Kantianism Freeman, his collaborators and other supporters of the “stakeholder theory” also referred to such different concepts as the idea of the common good, feminist ethics, risk concepts, property rights, social agreements etc. 78 MACIEJ SOIN the authors, who, on the one hand, stipulated that they did not intend to treat such formulas as “absolute truths”, but on the other hand they argued that each stakeholder theory must be in line with the principles derived from Kant’s imperative: limited company rights and responsibility for the effects of its operation (cf. Evan & Freeman, 1997, p. 193).2 From this point of view, the consequences of the actions, including the unintentional ones, are only valid as long as the company has to ensure their compliance with the mentioned principles. Why, however, must it? On this issue, Evan and Freeman could only repeat that according to the stakeholder theory, the company should be managed for the benefit of stakeholders, and its managers must represent the interests of all their groups (cf. Evan & Freeman, 1997, p. 200). Of course, the compliance of the postulated management principles with the stakeholder theory is no justification for the stakeholder theory, because it assumes what would possibly support. And no wonder, since—as we remember from the lesson of Hare, or actually Wittgen- stein—ethical argumentation, like any argument, reaches its end with the articula- tion of its main principles (cf. Hare, 1952, p. 32 et seqq.; Wittgenstein, 1972, item 217 et seqq.). If the Kantian imperative does not justify what defines the theory of stakeholders, then in response to the objections resulting from the different understanding of the purpose of the enterprise (e.g. known Friedman arguments) we can only repeat the questioned explanation. Only that in a dispute about the purpose of economic activity, as in any case in which two opposing principles meet, or two competing systems of postulates, one side presents itself to the other as a kind of foolishness or dissociation (cf. Wittgenstein, 2001, item 611). Perhaps this is the reason why Freeman in his subsequent works changed both the collaborator and the way of presenting the theory of stakeholders. The mature resolution of the problem of its justification, presented in the 1998 article by Wicks and Freeman (1998), referred no longer to Kant but to the “new pragmatism”. Although the argument contained in this article referred to the whole of organizational research, in a later statement of achievements it obtained the status of developing the principles of “pragmatism for theoreticians of the stakeholder” (cf. Freeman, Harrison, Hicks, Parmar & de Colle, 2010, p. 72 et seqq.).3 Accord- ing to the thesis of Wicks and Freeman, a position that revolutionizes research on organizations because it avoids epistemological opposition marginalizing their ethical dimension. It allows to focus organizational research on their “practical relevance”, subordinated—according to the authors’ statement—to making people live better. Pragmatism, or “new pragmatism”, of which reported authors are concerned, is associated above all with—not only in the American humanities—Richard Ror- ty’s over-influential position. It builds its identity mainly in opposition to positivism and neo-positivism. Wicks and Freeman enumerate the whole set of allegedly

2 The emphasis on the compliance of actions with the rules requires doubting whether the referred concept has a Kantian character. As it is known, according to Kant, compliance with the obligation alone is not enough to consider action as ethical. Intentions are decisive. Cf., for example, Höffe, 1995, p. 178. 3 The repetition of thesis from the article from 1998 in the “canonical” presentation of the stakeholder theory from 2010 proves that we are dealing with its current and still sustained version. PHILOSOPHICAL DIFFICULTIES OF STAKEHOLDER THEORY 79 false alternatives characteristic of this apparently outdated way of thinking, with the advantage of the new approach being to avoid them (1998, p. 125 et seqq).4 This applies to issues as basic as: (1) opposition between discovery and creation (finding/making); in this case, Wicks and Freeman accuse positivism above all persistently holding on to objectivity and disregarding the processes of social construction of reality; (2) opposition between the description and the obligation (describing/prescribing), where the result of positivist attachment to the idea of an impartial description of facts is the exclusion of the most interesting questions (such as “what I should do?”) in the field of scientific reflec- tion; (3) opposition between science and non-science (science/non-science), in which the negative effect of positivist fixation on the point of the method is to deprive the value of other types of research, not based on strict rules of justification of theorems (e.g. a humanistic type, including an ethical one). The source of errors that Wicks and Freeman consider to be avoided due to the pragmatic perspective, is the attachment to the positivist idea of a non-valuing science centered on discovering an allegedly objective truth. This does not mean, as the authors argue, that pragmatism is to be a simple reversal of positivism in which “everything goes”. According to their declaration, it is rather about blurring the boundaries between the members of the mentioned opposition, hence between finding and making, describing and prescribing, and finally between science and non-science. According to the more positive suggestions of Wicks and Freeman, the reality is not an illusion, it should not be attributed to its objective nature. The idea of “right opinions” about reality, based on its purely current view, is a myth because every inquiry is essentially an interpretation or narration. If science is a language game, or more strictly—one of many language games, equal ways of telling stories about the ambiguous reality, it does not take priority even in what is usually considered its domain, namely in the field of science. In short, along with the (neo) pragmatic casing, the stakeholder theory is equipped with a standard set of postmodernist ways to depreciate objectivity, cognition and truth.5 What does this mean for stakeholder theory? First, the fact that for a credible explanation of the ethical obligations of managers, becomes a matter of agreement on acceptable rules of economic activity, to be reached between stakeholders. And, moreover, that along with all the alternative visions of management theory and the enterprise is presented as a kind of “pragmatic experimentation”, that is, unrestrained testing of new organizational ideas, or “alternative ways of life”—

4 Incidentally, a closer look at the writings of at least some of the “positivists” could show to what extent their picture, drawn up by Wicks and Freeman, is based on philosophical stereotypes. Carnap, for example, in his ontological views was much closer to postmodernism than, say, classical metaphysics. Cf. Soin, 2016a. 5 When asked “is Rorty’s neo-pragmatism a variant of the postmodernist campaign against the great narratives?”. The answer must be yes. Cf. Szahaj, 2002, p. 188 et seqq. 80 MACIEJ SOIN created to “better realize human aspirations”. In line with Wicks and Freeman’s general message to scientists dealing with organizations who instead of imitating reality, or looking for the hidden basis of phenomena, should run the creative power of the imagination (1998, p. 130 et seqq.; cf. Freeman et al., 2010, p. 73). Although these authors repeatedly assure that the acceptance of pragmatism does not entail the abandonment of current research standards we know that: instead of conducting esoteric and irrelevant discussions “that do not make a difference”, the academics should primarily contribute to the progress contributing to the improvement of the quality of life (cf. Wicks & Freeman, 1998, p. 136).

3. Critical remarks

Both the early, “Kantian” version of the justification of the stakeholder theory, as well as its later, pragmatic variant, raise important doubts, which we will present in a very short form, not going to exhausting the doubtful places in the arguments of Freeman and his associates. We will focus on the pragmatic version of the problem as more sophisticated than the “Kantian” version. It is enough to say about the latter that it cannot justify its normativity other than by appealing to authority, in addition, misunderstood, since—as has been said—the assignment of a simple ethical duty to Kant neglects the basic role of intentions in the constitution of the ethical dimension. On the other hand, the pragmatic version can be said with a high probability that at the source of its most questionable points lies the erroneous interpretation of the views of late-Wittgenstein, widespread among others by Rorty.6 In this interpretation, the discussion about language games is treated as a convincing argument for relativism that invalidates the classic or correspondence concept of truth. Meanwhile, one should distinguish between language games in which it comes to cognition and which are equipped with mechanisms for adopting rules to their subjects, from language games in which there is something other than the growth of knowledge (religion, art, teaching, playing, etc.). And also, to notice that the situation of such abstract sciences about necessity as mathematics or logic is quite different from sciences based on empirical evidence, especially those dealing with natural types, e.g., botany or zoology. And that there is another case of management sciences that operate on the purpose- rational level of analysis, that is, they do not discuss goals, but the means to achieve those goals. Using Wittgenstein’s stand to oppose old-fashioned positivist objectivity and (post) modern “philosophy of hope” is an error, at best, based in misunderstanding. The interpretative and factual error of Rorty and other postmodernists is in their attempt to fit different things into one pattern.

6 Cf. Soin (2008), where one can find a textual justification for the non-postmodernist interpretation of the evolution of Wittgenstein’s views. PHILOSOPHICAL DIFFICULTIES OF STAKEHOLDER THEORY 81 3.1. The ambiguity of “better life” and “usability”

So much for the overall perspective of criticism of linking the theory of stakeholders with neo-pragmatic postmodernism. More specific, perhaps the most abusive misuse of both Freeman and his patrons is the way of using the slogan of “better life” as the only proper goal of philosophical and scientific activity (and the purpose of giving sense to the teachings about the organization), as if it was a well-defined and non- controversial idea. Meanwhile, the highly disputable character of what different people will be called “better life” and “striving for it” is not only the basic fact, which omission leads to generals, but also the main problem, however, requires a more careful approach to the facts and values.7 In part, Wicks and Freeman also had to admit it, stating that pragmatism in their notion is not identical with utilitari- anism, because talking about usability refers to the question about its evaluation criteria, diversified in a pluralistic society, and therefore to the question of whose values will be used as criteria for assessing organizational progress (1998, p. 129). However, this means that, contrary to the assurances of Wicks and Freeman, the concept of utility cannot fulfil the role of the assessment criterion. It is as diverse as the value systems that lie behind it and that can serve its opposing specifications.

3.2. The formal nature of the thesis about the construction of reality

It should be noted, moreover, that neither the constructivist thesis about social creation of reality nor the classics of pragmatism about the processes of making sense of its elements are applicable to any justification of stakeholder theory, for the simple reason that any content can be adapted to them, regardless of its political, ethical or unethical connections. This is because the mechanisms of “sensemaking” indicated by the sociological classics of pragmatism are basically purely formal, referring mainly to the way in which meaning is given. And no wonder, since every idea can be the subject of dissemination, objectification, socialization and internalization, equally democratic, or authoritarian, both conservative and liberal. However, if pragmatism is unsuitable for justification, then its usefulness for answering the most practical question summoned by Freeman, namely: what we should do?—is zero. More so when it comes to an equally practical question: which ideas should be disseminated and whose ideas we are to teach.

3.3. Nihilist consequences and internal contradiction

Of course, the justification of the normative actions of the stakeholder theory was not the goal of the authors who were discussing Rorty’s intention to annul the problem of justification as a relic of “foundationalism.”8 If every allegedly purely

7 Cf. Soin (2013) where the results of analytical investigations on the relationship of facts and values are discussed, emphasizing the importance of social homogeneity in this matter. 8 Cf., for example, Rorty (1996), where already in the introduction we will find out that the truth should be replaced by freedom, although it cannot be justified because even the conviction that cruelty is a terrible thing cannot be justified. 82 MACIEJ SOIN descriptive theory is essentially normative in nature, then demanding justification from a concept like the theory of stakeholders is in the eyes of a pragmatic postmodernist an unjustified exaggeration, resulting from attachment to the old- fashioned idea of objectivity. Only then it turns out that the theorist’s main problem—also in the field of management science—is not patient collecting evidence for the claims formulated within it but obtaining such an influence on his subject to shape it in accordance with these claims. For if what is considered true is true, instead of arguing for a thesis, it must be ensured that enough people recognize it as truth. In short, according to the logic of the social construction of reality instead of matching the theory to the object, the object should be changed according to the suggestive postulates of theory. This is an otherwise modern version of full- blooded Bolshevism, consistent with the Leninist formula of reading the classics of German idealism, for which—as you can recall—Lenin was criticized by the soberer communists as a voluntarist. This formula is also inherited from Rorty by Wicks and Freeman, which is indicated, inter alia, by the enthusiasm with which they praise unhampered “pragmatic experimentation”, thus introducing new organizational and definition solutions primarily because they are new. But because the authors at the same time argue that they do not accept extreme relativism in the style of “everything goes” and do not give up the standards of science, then the philosophically expanded version of the stakeholder theory, in addition to cognitive nihilism, is characterized by an internal contradiction.

3.4. Alleged overcoming false alternatives

Therefore, contrary to what Wicks and Freeman claimed, and what the authors of the sum of achievements of the theory of stakeholders repeated, there is no quali- tative difference between neo-pragmatism and relativistic anti-positivism. On the contrary, if the criterion of usability is not a criterion because its content depends on the value-based system and changes from case to case, then a new kind of ethical inquiry about the organization—in an unrestrained way of using the imagination—remains its purely subjective creation. At most, along with a pragmatic elaboration of the stakeholder theory, a false alternative inherited from Rorty comes to the front. This alternative says that cognition and reasoning, knowledge and learning can either be an absolute system, completely imitating reality and founded on unshakable foundations, or there is no such thing at all. And because a lot can be said about our cognitive achievements, but not that they form an absolute knowledge system (no matter how well some of our knowledge is justified), then the postmodernist verdict is: in fact, science is no different from magic and we should not recognize its cognitive superiority. Quite close to the slogans like “everyone has their own truth” and other anti-rational beliefs, as if analyzing these matters could only be operated with an unrealizable ideal.9

9 Rorty’s alternative belongs to the typical cases analyzed by Wittgenstein as errors resulting from the use of excessive generalizations. Cf., for example, Soin, 2014. PHILOSOPHICAL DIFFICULTIES OF STAKEHOLDER THEORY 83 4. Conclusions

In conclusion, we can say that because of a marriage with (neo) pragmatism, the stakeholder theory has become a kind of arbitrary narrative focused on self- promotion, that is, the self-aware practice of spreading beliefs about yourself and by the way on your subject. Therefore—as you can argue—this connection does not work either theoretically or practically. It does not work theoretically, because apart from slogans about a better life, it does not have any evidence for its grammatical-normative content. It does not work empirically, because it cannot cope with the notorious abuse of the rhetoric of stakeholders as a smokescreen for activities carried out in a purely selfish interest.10 On the one hand, the general nature of the theory contributes to this, but on the other, it is associated with a perspective for which, in principle, such issues are not important. That is why an attempt to pragmatically interpret the theory of stakeholders should be considered a misunderstanding, which should be withdrawn as soon as possible. Only then—thanks to the traditional distinction between facts and values—we will be able to appreciate the descriptive qualities of the theory and identify the difficulties associated with its normative layer.

References

Evan, W. M., & Freeman, R. E. (1997). Spółka i osoby żywotnie zainteresowane. Kapita- lizm kantowski. In L. V. Ryan, & J. Sójka (Eds.), Etyka biznesu. Z klasyki współ- czesnej myśli amerykańskiej (E. Dratwa, Trans.). Poznań: Wydawnictwo “W drodze” [(1983). A stakeholder theory of the modern corporation: Kantian capitalism. In T. L. Beauchamp, & N. E. Bowie (Eds.), Ethical theory and business. New York: Prentice Hall, Englewood Cliffs]. Freeman, R. E., Harrison, J., Hicks, A., Parmar, B., & de Colle, S. (2010). Stakeholder theory. The state of the art. Cambridge: Cambridge University Press. Hare, R. M. (1952). The language of morals. Oxford: Oxford University Press. Höffe, O. (1995). Immanuel Kant. (A. M. Kaniowski, Trans.). Warsaw: Wydawnictwo Naukowe PWN. Phillips, R., Freeman, R. E., & Wicks, A. C. (2003). What stakeholder theory is not. Busi- ness Ethics Quarterly, 13(4), 479–502. Rorty, R. (1996). Contingency, irony, and solidarity (W. J. Popowski, Trans.). Warsaw: Wydawnictwo Spacja. Soin, M. (2008). W kwestii prawdy. Wittgenstein i filozofia analityczna. Warsaw: Wydaw- nictwo Instytutu Filozofii i Socjologii PAN.

10 We cannot develop this issue here, which, however, is an equally important issue, as incompatible with declarations of use, made of the slogans of Corporate Social Responsibility. A good example where these problems can be considered is the issue of Internet governance, in which dominant entities refer to stakeholder theory. Cf. Soin, 2016c. 84 MACIEJ SOIN Soin, M. (2013). Wartość i fakt. Etyczne i socjologiczne zastosowania filozofii lingwistycz- nej. Warsaw: Wydawnictwo Instytutu Filozofii i Socjologii PAN. Soin, M. (2014). O sporze Poppera z Wittgensteinem. Przegląd Filozoficzny – Nowa Seria, 4, 125–138. Soin, M. (2016a). Deflacjonizm. In J. Hołówka, & B. Dziobkowski (Eds.), Panorama współczesnej filozofii. Warsaw: Wydawnictwo Naukowe PWN. Soin, M. (2016b). Filozoficzne trudności teorii interesariuszy. Annales. Ethics in Economic Life, 19(3), 7–16. Soin, M. (2016c). Interesariusze internetu. Prakseologia, 158(1), 213–240. Szahaj, A. (2002). Ironia i miłość. Neopragmatyzm Richarda Rorty’ego w kontekście sporu o postmodernizm. Wrocław: Wydawnictwo Uniwersytetu Wrocławskiego. Wicks, A. C., & Freeman, R. E. (1998). Organization Studies and the New Pragmatism: Positiv- ism, Anti-positivism, and the Search for Ethics. Organization Science, 9(2), 123–140. Wittgenstein, L. (1972). Philosophical Investigations. Warsaw: Państwowe Wydawnictwo Naukowe. Wittgenstein, L. (2001). On Certainty. Warsaw: Wydawnictwo KR. Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 85–96 doi: http://dx.doi.org/10.18778/1899-2226.21.7.06

Krzysztof Tapek Jagiellonian University Chair of Economic Policy on Department of Law and Administration e-mail: [email protected]

Corporate social responsibility in the light of Kant’s categorical imperative*

Abstract

Immanuel Kant’s philosophy, especially his categorical imperative, is one of several ethical theories mainly used to morally legitimize actions, referred to as Cor- porate Social Responsibility. The aim of the current article is to evaluate if Kant’s philosophy can be used as the ethical foundation for Corporate Social Responsibil- ity as well as to present its advantages and disadvantages in a theoretical and practical approach.

Keywords: categorical imperative, Immanuel Kant, Corporate Social Responsibility, business ethics

JEL Classification: M14

I was involved in philanthropy. Corporate social responsibility is an important part of it. In other words, donations and social campaigns. Some may protest, but from experience, I know that the more a company has on its conscience, the thicker brochures it prints. Rainer Voss (Bauder, 2013)

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 19(1), 7–19. 86 KRZYSZTOF TAPEK 1. Introduction

Both in Polish and in foreign literature, the concept of Corporate Social Responsi- bility (hereinafter: CSR) enjoys consistently high popularity. It originates from the concept of corporations as a social institution formulated in the 1930s. As such, the corporation has, besides its economic function, also an equal social function (corporate social responsibility), which consists, among other things, in ensuring appropriate working conditions, inter alia, to ensure appropriate working conditions, fair remuneration of employees, protection of consumer interests by guaranteeing high quality of products, care for the natural environment, charitable donations, supporting non-governmental non-profit organizations and contributing to the welfare of society as a whole (Oplustil, 2010, pp. 158–159). The business and scientific environment is not in agreement as to how CSR should be recog- nized, as well as whether or not the idea itself is right. As an example, a critic of the concept can be used Milton Friedman (1970), who stated that the only social responsibility to which the business is obliged is to increase profitability and benefits for shareholders (while formulating the fundamental concept of the shareholder approach to CSR). To illustrate the scope of the topic, it is enough to recall only a few CSR concepts, e.g. based on the theory of the agency, stakeholder theory, shareholder theory, institutional theory, company theory or the theory of strategic leadership.1 The multiplicity of concepts translates into the inability to conduct meaningful empirical research on the impact of applying CSR on the value of a company, the valuation of its shares or the increase in the prestige of an enterprise. A list of selected empirical CSR research included in the Corporate Social Responsibility: Strategic Implications study shows extremely different results of tests carried out according to similar or the same indicators, in the same countries, at similar times (cf. McWilliams, Siegel & Wright, 2006, p. 11). This indicates that the research problems on CSR concern not only the theoretical but also the empirical- methodological plane. For ordering the terminology, the classification of duties (“pyramid”) CSR created by A. B. Carroll (1991) accepted by a large part of theoreticians will be quoted below: (1) the lowest level of the “pyramid” is the economic responsibility that is required by society for profit-making organizations; it relies on maximizing sales revenue and minimizing costs; (2) the second level of the “pyramid” is the legal responsibility, which is also required by society; it consists in compliance with the law, compliance with contractual obligations, and the protection of consumer rights; (3) the third level of the “pyramid” is the ethical responsibility expected by society; it consists in avoiding undesirable behaviour and acting in accordance with the spirit of the law;

1 Compare the theory and their authors in McWilliams, Siegel and Wright (2006, p. 7). CORPORATE SOCIAL RESPONSIBILITY IN THE LIGHT OF… 87 (4) the fourth, highest degree of the “pyramid” is the philanthropy responsibility that is desired by society; it involves the promotion of programs supporting society and involvement for the local community. Some authors try to find a philosophical and ethical basis for CSR. Utilitarian theory and Kantian morality are often used, although these are just some of the many ethical theories that can serve as the foundation for CSR. According to utilitarian theory, the usefulness of action determines its moral character. Therefore, the morality of behaviour can always be assessed ex-post, observing its consequences. According to the utilitarians, one should always choose this behavior since it brings greater “happiness”; happiness is identified here with good. Benefit is the only thing that is desired as an end, while other “things” are only desirable if they can be considered as means that lead to the goal (good) (Chryssides & Kaler, 1999, pp. 98–99). Another ethical approach often used to rationalize CSR activities is Kantism. This is detailed below.

2. The concept of categorical imperative

A detailed description of the concept of a categorical imperative is presented in the Groundwork of the Metaphysic of Morals from 1785. Kant goes from the concept of “goodwill”, which is not good for its effects but is good in itself (2001, p. 19). The will is good only when it strives to fulfil its duty. If no subjective reasons (complacency, measurable property benefits, etc.) motivate them to act as such but to perform their duty. Such actions can be said to be “moral”, but it should be remembered that it is not about acting “in accordance with the duty” is not about acting “in accordance with the duty”, but acting “out of duty” (2001, pp. 23–25). An action based on duty derives its moral value not from the results it entails, but the principle from which it is derived (Albert, Denise & Peterfreund, 1980, p. 235). This principle is respect for the law because only the law in itself can be the subject of respect and the same, order. Proceeding from duty is to completely exclude the influence of the inclination. So the only thing that could lead the will is objectively—the law (categorical imperative), and subjectively—the pure respect for this practical law (Kant, 2001, p. 29). Then Kant formulated the law (objective order) according to which one should proceed in order that deeds fulfilled in accordance with its word could be considered moral. For this purpose, Kant formulated imperatives. All imperatives express duty and thus indicate the relation of the objective law of reason to the subjective will (2001, p. 48). A distinction can be made between a hypothetical and a categorical imperative. The former indicates that a particular act is suitable for achieving a goal. If it has the task to indicate how to achieve a possible goal is a problematically practical principle (also called the imperative of skill, indicating, for example, how to effectively poison a man or how to heal him). If it points to the real goal, it is an assertorically practical principle (indicating, for example, how to achieve happiness in life; although each person is guided by the same goal 88 KRZYSZTOF TAPEK but uses different means to achieve it.). The categorical imperative recognizes an act as objectively necessary, without assuming as a condition the goal which is to be achieved by this behaviour (an apodictically practical principle, also called the imperative of morality) (2001, pp. 50–53). The categorical imperative states: act as if the maxims of your action were to become a universal law of nature (Kant, 2001, p. 61). Kant expresses this imperative as a two-step test. First, it is required that the maxim can be universalized as a general law without a logical contradiction.2 Secondly, even if we do not find in the maxim of the logical contradiction described above, the maxim cannot have internal disharmony by “wanting” it as a maxim for itself, but not for others and vice versa.3 Duties in accordance with the first-degree test Kant calls perfect duties, while compliant with the second-degree test, imperfect duties. Perfect duties define precisely who and what is morally obligated. These are determined. Imper- fect duties are not determined. People are free to choose whom or what to do and how they will fulfil their moral duty. In this regard, perfect duties are banning certain actions that are considered morally reprehensible, and imperfect duties are orders to pursue specific goals that are morally valuable (evaluated as merit) (Kant, 1991, p. 194). Imperfect duties leave the freedom to choose a means to fulfill a moral obligation. Then Kant’s law of categorical imperative is clarified in such a way that man and every intelligent being should be treated as a goal in themselves, never as a means to achieve the goal (2001, p. 71). Kant’s philosophy is individualistic, and to refer to CSR at all, one must first determine whether a categorical imperative may also apply to corporations, which as collective entities do not have their own individual will after all. This question can be answered in the affirmative (although some theoreticians disagree bringing forth serious accusations against the Kantian approach to CSR). One can assign a moral subjectivity to a corporation by assigning it to the managers making decisions on behalf of the corporation. The members of the management represent the corporation as an entity (Ohreen & Petry, 2012, p. 370).

3. Kant’s categorical imperative as justification for the concept of corporate social responsibility

CSR, in the context of Kant’s concept is captured in such a way that there is a categorical imperative to care for others and to contribute to the happiness of others. These actions, to be authentic and morally valuable, must be driven by

2 As an example of such a contradiction Kant gives the acceptability of committing suicide in the case of accumulation of adversity and falling into hopelessness; in his opinion, it is not possible to want to recognize the acceptability of suicide as a general law of nature (2001, pp. 61–62). 3 As an example of such a contradiction, Kant gives a rich and powerful man who does not help others. Although such a lack of empathy and compassion could be a universal law, it is not possible to want such a law to be universal, because even a rich and powerful person can fall into poverty and he/she will need help himself/herself (2001, pp. 63–64). CORPORATE SOCIAL RESPONSIBILITY IN THE LIGHT OF… 89 a sense of duty, not by imposed orders or legislation. Additionally, the fulfilment of this obligation must be for the happiness and well-being of others and not as a tool to make the corporation CSR, in the context of Kant’s categorical imperative would require concept is captured in such a way that there is a categorical imperative to caring e for others and others, and to contributing to e to the happiness of others privileges from the authorities or to gain a competitive advantage as an “ethical corporation”. In such cases, CSR actions taken in relation to stakeholders would only bring them to the role of “means” to achieve a business goal. How- ever, if an action is to be considered morally good it is not sufficient that it will be in accordance with the moral law; it must also be complemented by the consideration of the moral law (Etang, 1992, p. 738). According to some theoreticians of business ethics, charity duties resulting from CSR have the character of imperfect duties.4 As a result, the members of the corporation have the freedom of recognition as to how and whether to implement CSR programs at all. They can choose between the fight for gender equality, sponsorship of local football clubs and aid donations for institutions supporting homeless or for orphanages. Corporations may also decide that they do not implement CSR in general and allocate the entire profit to the division among their shareholders. Consequently, some CSR theorists state that the application of Kant’s philosophy to corporate social responsibility leads to moral freedom and “laxity”. The answer to this position is the allegation of misinterpretation of Kant’s philosophy. Ohreen and Petry state that imperfect duties must be interpret- ed in such a way that in certain circumstances they entail the duties of acting in a strictly defined way, and never give us so much freedom to reject them completely (2012, p. 375). Besides (according to the authors), according to Kant’s philosophy, the duty (even imperfect) is all the more necessary, the lower the cost can be fulfilled and the better it can be achieved by the given action. Therefore, if a corporation can share money with the starving people, and at the same time the cost of doing so will be equal to zero (e.g. thanks to tax exemption), then the corporation is no longer free and must fulfil a “charity duty”. The above issue is also connected with the necessity of each time discerning whether specific, planned action is a perfect or imperfect duty. An example of this may be the postulate to reduce carbon dioxide emissions, the fulfillment of which, however, will result in the inability to provide very significant help to people starving in Africa (the example provided by Fredriksen and Nielsen, 2013, p. 25). If you consider both duties imperfect, you can weigh both values and choose the one that better fits with the categorical imperative. However, since CO2 emissions are considered to have a very serious impact on the natural environment and can have a significant impact on the quality of life of future generations, it should be assumed that CO2 reduction is a perfect duty and should be given priority over imperfect duties that can also be achieved by other means. Thus, for the supporters of the Kantian approach to business ethics, harmful activities (violation of perfect

4 Ohreen and R. Petry, as an example view, invoke Hill (1971, 1992, 2002). 90 KRZYSZTOF TAPEK duties) deserve moral condemnation to a much greater extent than a reprehensible omission (fulfil imperfect duties). Another author—J. L’Etang—sees how important the role of Kant’s philosophy is in building codes of ethics for business (1992, pp. 741–742). She states that due to the specificity of ethical codes as a set of moral norms (which must be followed even though they are not imposed by positive law), Kant’s philosophy better serves their rationalization than (also widely used in this area) the views of utilitarians. In the author’s opinion, ethical subjects find it easier to identify with views derived from a categorical imperative that is common to all, rather than to the philosophy of utilitarians. The calculation of benefits and their evaluation may differ for each ethical entity. In addition, in the case of the categorical imperative, regular employees or shareholders with few shares, are just as qualified to make moral assessments as the management (it can be argued that there is no such regu- larity in the utilitarian approach to CSR). Therefore, building a code of ethics based on Kant’s philosophy can be an initiative in which the owners, managers and stakeholders will be included contributing to a wider acceptance of the standards. The issue of ethical codes appears often in the context of CSR. It is postulated that ethical codes should be introduced by the corporate ownership bodies. Only then can the specific actions of responsible business be implemented. Only then can one defend the view that CSR activities are based on categorical imperatives, because corporate members (“owners”) have decided so in the voting act. If on the other hand, managers against the will of the majority of shareholders are pushing the implementation of CSR programs, it can be argued that shareholders interested only in the profit of corporations are treated by managers only as means to the goal of charity, despite the fact that this goal is noble. This behavior contra- dicts the philosophy of Kant (Mansell, 2013, p. 591). This is associated with another problem of “pushing” CSR by governments and introducing CSR as a set of obligations provided for by law. Such an action in the light of a categorical imperative is incorrect, because it excludes the possibility of conduct directed by duty alone, assuming that the implementation of CSR has a positive moral value (Masaka, 2008). Carroll’s concept described above was blended with Kantian ideas by Dub- bink and Liedekerke (2009). According to the authors, Kantian philosophy better reflects the essence of CSR (in Carroll’s approach) than competitive utilitarian theory. Kant (1991, pp. 63–64) distinguishes between positive law (having binding effect, established by the competent authorities) that can be enforced by means of state coercion and ethical laws. The latter are derived from the categorical imperative and, are divided into perfect and imperfect duties. The for-profit corporation must pursue its economic goals. The positive law is only implemented by the corporation under the state coercive measures. This is a sine qua non requirement for action in a specific socio-political environment. In turn, perfect duties and imperfect duties define the ethical and philanthropic responsibility. CORPORATE SOCIAL RESPONSIBILITY IN THE LIGHT OF… 91 4. Evaluation of the Kantian concept of corporate social responsibility

As shown above, Kant’s ethical philosophy occupies an important place in theoretical work on the essence, genesis and character of duties carried out as part of CSR activities. However, this is also a concept that is often criticized. First, the Kantian concept of CSR is accused of being based on too idealistic assumptions. The statement that both corporate management and its members (for example, shareholders, which are often other corporations then acting as institutional investors) are guided by the implementation of social responsibility programs only by categorical imperative and the duty (in its Kantian concept) is quite naive. Raison d’être of the for-profit is first and foremost the generation of income. Corporate managers are held accountable for their financial results, hence, the effort to increase the profitability of ventures, the institutional investors are primarily interested in benefiting from investments in shares. In the case of these two entities involved in the corporation, it is difficult to speak of charity as an obligation. Another problem with institutional investors is the attribution of ethical subjectivity to them, it is limited to the level of their shareholders and managers. The shareholders and the management, guided by the categorical imperative make decisions about the implementation of CSR by the corporation so that the institutional investors participate. The holding structures often consist of more “layers” or are more complicated. On the other hand, small shareholders (individuals), although undoubtedly, are moral entities, often remain in the minority or, due to low capital involvement, do not participate in the decision making process by the company. Hence, most often they have no influence on whether the corporation will adopt the CSR programme and, if so, to what end. CSR as a manifestation of the implementation of categorical imperative encounters significant difficulties. When the implementation of CSR is not due to the categorical imperative it is to repair the company’s image, increase its market share and profitability by influencing the consumers who reach for a product of a company that cares about the environment or contributes to the development of the local community, and seen more favorably by the local authorities. Such use of CSR is not the categorical imperative. It is exploited to achieve a business goal, not as an action implemented to fulfil a moral obligation. The members of the local communities or corporate employees are then treated as pawns to achieve a specific business goal. Examples of instrumental use of CSR are plenty. Only a few will be recalled here: (1) Enron—one of the leaders of the American CSR, fighting global warm- ing, undertaking actions to reduce CO2 emissions, lobbying for the introduction of laws promoting renewable energy sources and CO2 reduction, it was a leading investor in the field of gas exploitation (an energy resource that emits less CO2 than competing raw materials) and renewable energy sources; the company declared bankruptcy after a scandal related 92 KRZYSZTOF TAPEK to falsification (in collaboration with the accounting and auditing firm, Arthur Andersen) of financial statements to hide its debt obligations and maintain its position among stock investors; (2) Lehman Brothers—in 2007, the company reported in a letter to shareholders: “Strong corporate citizenship is a key element of our culture […]. As a global corporate citizen, Lehman Brothers is committed to addressing the challenges of climate change and other environmental issues which affect our employees, clients, and shareholders alike”5; at the same time, the company maintained “creative” accounting, which led to its bankruptcy in 2008; (3) Goldman Sachs—It’s annual report of 2008 claimed: “To seek to create new business opportunities that benefit the environment, consistent with our central business objective of creating long-term value for our shareholders and serving the long-term interests of our clients […]”6; during an interrogation before the Senate Committee, a board member, Daniel Sparks, could not explain why the bank was selling to customers the financial product Timberwolf I, which by board members was referred to in confidential correspondence as a shitty deal7; (4) Pfizer—On its website, it boasted: “At Pfizer, we believe that through continuous improvement of Corporate Responsibility standards, we strengthen the value of the company by realizing our goal—providing patients with treatment that contributes to a significant improvement in their quality of life.”8 The aphorism helped the company as the painkill- ers Celebrex and Bextra were not withdrawn from the market despite the 2005 tests that proved that the risk of a heart attack and stroke no higher than in the patients who did not use these drugs (Mendes, 2007, p. 3); (5) Deutsche Bank—Its website, in the social activity tab held: “Deutsche Bank’s business philosophy aims at sustainable development based on close cooperation with clients, shareholders, our staff and the communities in which we operate. […] The Deutsche Bank Group has been involved in various social, scientific and cultural initiatives for many years, guided by the principle of ‘giving more than just money.’ We are proud that when moving in the world of finance, we have not lost sensitivity to what is important to our environment. We know that not only money pays off”9; however, this did not prevent the company from pursuing “tax tourism” and making huge profits in Luxembourg.10 A large percentage of the international corporations—declares implementation of the CSR idea, investing in environmental protection, caring for the development of employees and local communities, while at the same time, the employ-

5 http://mhcinternational.com/monthly-features/articles/95-csr-in-turbulent-times 6 http://www.goldmansachs.com/citizenship/esg-reporting/env-report-2008.pdf 7 http://www.huffingtonpost.com/2010/04/27/shitty-deal-goldman-exec_n_553541.html 8 http://www.pfizer.com.pl/o-firmie/wartosci-firmy-i-spoleczna-odpowiedzialnosc 9 https://www.db.com/poland/pl/content/filozofia_biznesu.html 10 http://biznes.newsweek.pl/luksemburg-leaks-ktore-firmy-uciekly-z-podatkami-do-luksemburga-,arty kuly,351344,1.html CORPORATE SOCIAL RESPONSIBILITY IN THE LIGHT OF… 93 ees are treated only as a means to achieve a business goal (specific treatment of people as assets); after exceeding a certain age (51–55 years), employees are fired because their productivity decreases; there are human resource management approaches that an employee redundant after he or she has achieving professional success. The argument—the success cannot be repeated and the individual may be too costly to retain. Corporations build relationships with clients, employees and local communities by implementing CSR programs, but at the same time they often commit unethical behaviors that unmask and depreciate these activities as directed only at increasing the company’s profitability. As the research conducted by the Forum Odpowiedzialnego Biznesu [Responsible Business Forum] and GoodBrand CEE11 on the sample of Polish companies indicates, the need to build the brand and the company’s image remains the main motive for companies engaging in CSR—76% of respondents indicated such answers, while in 2003 this number was 72%. It is consoling that the need to build better relations with the local community is currently an equally important motivator—the increase in motivation in this area amounted to over one third, that is, it increased from 42% in 2003 to 74% in 2010. However, here you can also have doubts whether building relationships with the local community is caused only by the sense of duty of the members of the corporation. Other studies (conducted on the American market) showed that 62% of companies donating funds for charity transfers them to organizations associated with board members, with subsidies being higher if the financial interests of managers are less connected with the interests of shareholders, i.e. when the agency conflict occurs with more intensity (Masulis & Reza, 2015, pp. 630–631). Research has also confirmed that executive managers strategically use CSR, supporting charities with which independent managers are associated, thus improving relations with the latter (p. 631). The above arguments and examples concern a wider problem regarding the answer to the question of whether there is any such thing as corporate social responsibility or is it only one of the instruments to increase profitability. However, if we cannot talk about CSR at all, then we cannot talk about CSR in terms of Kant’s ethical philosophy or any other. It seems that the Kantian approach to CSR is particularly susceptible to distortions like those described above. It attaches as much importance to the actual activities of responsible business as to the motives for which these activities are carried out. While in the context of other theories, it would be possible to push through CSR for purely business reasons, for Kant they do not have any moral value in such a case. For this reason, it is much more difficult to meet the requirements of CSR in the understanding of Kant than other approaches to this idea. One can of course choose from the concept of Kant only those elements which fall better in the “confrontation with reality” (as, for example, the division of CSR duties into perfect and imperfect duties) and reject those that remain only idealistic assumptions (for example, the implementation of the

11 http://odpowiedzialnybiznes.pl/publikacje/badanie-menedzerowie-500lider-csr/ 94 KRZYSZTOF TAPEK CSR concept by corporate members only from a sense of duty). However, in this case, will we be able to continue to talk about CSR in the context of a categorical imperative? It seems that there is no such possibility.

5. Conclusions

As shown above, there are many arguments for placing a responsible business ideology on the philosophical foundation in the form of Immanuel Kant’s views, on the categorical imperative he formulated. However, while this procedure works well in theoretical studies, the economic reality verifies the idealistic assumptions. The actions of corporations often contradict many moral laws and unmask the actual goal of these entities’ activities, which is to maximize profits and influence. CSR is used only as a tool for “creating appearances”, “distracting attention” or making the company be positively received by the environment. Such action has nothing to do with Kant’s acting out of duty and following a categorical imperative. However, it is difficult to say whether any other ethical theory better ful- fils the role of a moral rationalizer for CSR activities. Certainly, one should not close the discussion on this subject, but it is worthwhile to pay attention to the theory, which following R. Rorty quotes A.C. Wicks (1990). He rejects the recognition of one pattern of conduct as the only one that is competent and directs the ethics to issues that William James referred to as “that’s what we believe is good”. Instead of looking for a metaphysical foundation or type of external justification for CSR activities, it is better to focus on their pragmatic effects. Such a perspective is probably the closest to the way CSR is used by the businesses.

References

Albert, E., Denise, T., & Peterfreund, S. (1980). Great traditions in ethics. New York: Van Nostrand. Bauder, M. (2013). Master of the universe [original title: Der Banker: Master of the Uni- verse]. 3sat/ARTE, Bauderfilm, Hessischer Rundfunk, Germany-Austria. Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39–48. Chryssides, G., & Kaler, J. (1999). Wprowadzenie do etyki biznesu [An Introduction to Business Ethics] (H. Simbierowicz, & Z. Wiankowska-Ładyka, Trans.). Warszawa: Wydawnictwo Naukowe PWN. Dubbink, W., & von Liedekerke, L. (2009). A Neo-Kantian foundation of corporate social responsibility. Ethic Theory and Moral Practice, 12(2), 117–136. CORPORATE SOCIAL RESPONSIBILITY IN THE LIGHT OF… 95 Fredriksen, C., & Nielsen, M. (2013). The ethical foundations of CSR. In J. Okpara, & S. O. Idowu (Eds.), Corporate social responsibility challenges, opportunities and strategies for 21st century leaders (pp. 17–34). Berlin: Springer. doi: 10.1007/978- 3-642-40975-2 Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. New York Times Magazine. Hill, T. E. (1971). Kant on imperfect duty and supererogation. Kant-Studien, 62, 55–76. Hill, T. E. (1992). Dignity and practical reason in Kant’s moral theory. Ithaca: Cornell University Press. Hill, T. E. (2002). Human welfare and human worth: Kantian perspective. New York: Clarendon Press. Kant, I. (1991). Metaphysics of morals. Cambridge–New York–Melbourne: Cambridge University Press. Kant, I. (2001). Uzasadnienie metafizyki moralności [Groundwork of the Metaphysics of Morals] (M. Wartenberg, Trans.). Kęty: Antyk. L’Etang, J. (1992). A Kantian approach to codes of ethics. Journal of Business Ethics, 11(10), 737–744. Mansell, S. (2013). Shareholder theory and Kant’s “Duty of Beneficence”. Journal of Busi- ness Ethics, 117(3), 583–599. Masaka, D. (2008). Why enforcing corporate social responsibility (CSR) is morally questionable. Electronic Journal of Business Ethics and Organization Studies, 13(1), 13–21. Masulis, R. W., & Reza, S. W. (2015). Agency problems of corporate philanthropy. Review of Financial Studies, 28(2), 592–636. McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43(1), 1–18. Mendes, E. (2007). The moral argument against the business case for corporate social responsibility: A call for a new moral and spiritual approach. University of Otta- wa. http://www.ucalgary.ca/christchair/files/christchair/Mendes-detailed-pa per.pdf Ohreen, D., & Petry, R. (2012). Imperfect duties and corporate philanthropy: A Kantian approach. Journal of Business Ethics, 106(3), 367–381. Oplustil, K. (2010). Instrumenty nadzoru korporacyjnego (corporate governance) w spółce akcyjnej. Warszawa: C.H. Beck. Tapek, K. (2016). Corporate Social Resposonsibility w kontekście imperatywu kategorycz- nego Kanta. Annales. Ethics in Economic Life, 19(1), 7–19. Wicks, A. C. (1990). Norman Bowie and Richard Rorty on multinationals: Does business ethics need “Metaphysical Comfort”? Journal of Business Ethics, 9(3), 191–200. http://biznes.newsweek.pl/luksemburg-leaks-ktore-firmy-uciekly-z-podatkami-do-luksem burga-,artykuly,351344,1.html http://mhcinternational.com/monthly-features/articles/95-csr-in-turbulent-times http://odpowiedzialnybiznes.pl/publikacje/badanie-menedzerowie-500lider-csr/ http://www.goldmansachs.com/citizenship/esg-reporting/env-report-2008.pdf http://www.huffingtonpost.com/2010/04/27/shitty-deal-goldman-exec_n_553541.html 96 KRZYSZTOF TAPEK http://www.pfizer.com.pl/o-firmie/wartosci-firmy-i-spoleczna-odpowiedzialnosc https://www.db.com/poland/pl/content/filozofia_biznesu.html

Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 97–109 doi: http://dx.doi.org/10.18778/1899-2226.21.7.07

Michał A. Michalski Adam Mickiewicz University in Poznań Faculty of Social Sciences Institute of Cultural Studies e-mail: [email protected]

* Consumer social responsibility

Abstract

In our contemporary literature and academic discourse, we often see how popular the topic of corporate social responsibility is. It will be argued that another problem, tightly linked to this issue, and strongly influencing the business environment is the consumer behaviour. This second part of business relations is often associated rather with legal demands and customer protection. The purpose of my article is to show how consumer social responsibility can help not only the corporations but also those involved in the market exchange to contribute to the common good and improve quality of millions of transactions people make every day. To become real, this responsibility needs effort—courage to witness by expressing consumer’s opinion and education. The first aspect shows how important action is in revealing values and introducing ethics into everyday market activity, the second shows that emphasizing basic economic education and expecting thorough information from companies can help build and enhance consumer awareness. This article also attempts to demonstrate the contributions of Catholic Social Thought to the problem of social responsibility.

Keywords: consumer social responsibility, corporate social responsibility, ethics, witness, common good

JEL Classification: M14, P46

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 11(1), 181–192. 98 MICHAŁ A. MICHALSKI Ethics today requires the full participation by all involved in the problem. Gerard I. Nierenberg (1987, p. 20)

1. Balance of responsibility

To begin, I want to explain why I chose this topic. After studying many texts in the field of business ethics, I noticed that the main emphasis is being put on the issue of enterprise behaviour. One regularly encounters the discussions about the corporate social responsibility. Many efforts are made by economic organizations trying to find the ways to incorporate social responsibility into everyday activities. However, not enough attention is paid to the issue of consumers’ social responsibility.1 There are not too many sources dealing with this subject. There are publications regarding customer-management relations, and some that deal with the activities of consumer organizations. The latter, although they have played an important role in business for several decades and actually contributed to the development of the social responsibility of the consumers have mainly focused on the legal aspects. These are often used as intermediaries for clients who are struggling with companies in lawsuits. Therefore, they are treated rather as opponents and “supervisors” of enterprises. Despite the contribution of these organizations to economic life, not a real change can occur without an involvement of the consumers. The social responsibility of the consumer should therefore improve the cooperation between enterprises and their clients. It should be a necessary counter- weight to business activities, which alone cannot create a situation of equilibrium.2

2. New image of interdependence and responsibility

To be sure, the old prescriptions of the “neighbor” ethics—justice, charity, honesty, and so on—still hold in their intimate immediacy for the nearest, day-by-day sphere of human interaction. But this sphere is overshadowed

1 Lewicka-Strzałecka draws attention to the exceptional and exaggerated importance of consumption in the modern world: “One of the most important roles played by man in the modern world is the role of the consumer. Other roles—an employee, an employer, a representative of a specific profession, a parent, a superior, a subordinate etc. are sometimes performed only in certain periods of life, sometimes only by certain persons. While, we are all consumers, from birth to death, whether we like it or not. Consumption has now far gone beyond its constitutive functions, which it fulfills in nature, which consists of sustaining the functioning and development of organisms, so consumption in this broad sense is a characteristic that has little to which a modern man is entitled” (2006, p. 11). 2 It is also important to recognize the differences between corporate responsibility and consumer responsibility. The first one is chosen, the second one is given. Taking into account another criterion both can be negative responsibility. However, in order to shape and transform economic life more and more, the commitment of both parties should take the form of positive responsibility more and more clearly, and it is its shape in the case of corporate social responsibility, which I want to write about here (cf. Lewicka-Strzałecka, 2006, pp. 9–10). CONSUMER SOCIAL RESPONSIBILITY 99 by a growing realm of collective action where doer, deed, and effect are no longer the same as they were in the proximate sphere, and which by the enormity of its powers forces upon ethics a new dimension of responsibility never dreamed of before. Hans Jonas (1985, p. 6)

The globalisation, a multidimensional process that seems to be affecting all aspects of humanity, is making its imprint in every country. People are afraid of it, and at the same time, they hope that it will improve their lives. It is a source of opportunities and threats. Among its many manifestations, one can observe a growing awareness and tendency to express and use human rights. Because of cultural, political, social and economic transformations, people are increasingly making use of their freedom—whether it brings good or bad outcomes. It is linked to the political mod- ernization that paradoxically deprives politics of power and borders (Beck, 2002, p. 292). Consequently, more often it is citizens who make their own choices, and not—like it was previously—that the state does it instead of them. At the same time, societies are experiencing shrinking social security because states and their governments are withdrawing from providing public services more and more. It is a stimu- lus and a signal for people, which inform them that their surroundings are changing radically and that they will probably have to make some decisions that they may have never made before. The social space “abandoned” by the state and its agencies is an area that encourages and even demands civic initiatives.3 It is an opportunity to improve civic virtues that will support the creation of a global civil society (Dylus, 2005, pp. 139–140), also called—according to the language of economics—a global society of services (p. 78). This huge transformation is also noticeable in the field of business. Over the last thirty years, societies have experienced unparalleled changes. One of the effects of the growing awareness of the human rights is an increase in consumer awareness. It began decades ago and is continuing. In some regions and countries, the levels of awareness are high and in others, the people are catching up. Anoth- er tendency on the rise is a kind of “consumerist slavery”—the excessive consumption (consumption over needs) (Dylus, 2005, p. 22).4 The last manifestation of the changes described is work carried out by consumers (cf. Beck, 2002, p. 324). Although, their efforts often go unnoticed in the labour market, these are related to consumer freedom. Currently, people have the opportunity to purchase and use new products or services. Instead of going to the bank to withdraw money, people may use the ATMs and do it whenever it is convenient for them—making the banking hours irrelevant. The same applies to eating choices. One may eat at a traditional restaurant with

3 Although there are great opportunities, I am far from an optimistic—even utopian—view that everyone is able to see them and use them equally skillfully (and that only his resourcefulness will depend on the result of his efforts). Rather, I am of the opinion that there will always be those who will not succeed, and those who will need additional support. 4 There is more and more talk about compulsive buying disorder—addiction to shopping. Cf., for instance, Szwarc, 2006, p. 164. 100 MICHAŁ A. MICHALSKI waiters, or one may opt for a self-service restaurant. The consumer decides on his or her work as a result of one’s choice.5 One may prefer more freedom in choosing, touching, sniffing, when shopping in a large self-service store, and not mind “weightlifting” when placing goods in the shopping cart, putting them at the cash register, reloading them in the cart and putting them in the car.

3. Consumer’ testimony in a civil market economy

Nathaniel Hawthorne wrote: The greatest obstacle to being heroic is the doubt whether one may not be going to prove one’s self a fool; the truest heroism is to resist the doubt, and the profoundest wisdom is to know when it ought to be resisted, and when to be obeyed. Gerard I. Nierenberg (1987, p. 28)

One slogan, which appeared years ago during the election campaign in Poland, intended to encourage people to express political preferences and participate in elections, accurately describes the situation of consumers.6 It reads, “If you do not vote—you cannot complain.” Often, the percentage of citizens taking part in the political elections is treated as a measure to show whether a given society deserves to be called civil or not. Similarly, a similar criterion for the number of consumers expressing their opinions may help determine whether a society is a civil market economy. Certainly, the comparison of post-communist and capitalist countries would show that the first of them have a large backlog in this area (which does not mean that in democratic and free market countries consumer awareness must be obviously and automatically high, although they probably have more experience and longer traditions, e.g. in the field of ethical investment7). In Poland, there is a slow but noticeable increase in consumer awareness, which had no chance of developing during the communist regime and a centrally controlled economy, when it was almost impossible to implement human rights and civil liberties. In- creasingly, Poles see that expressing their own opinions is not only desirable but also necessary.

5 It is possible to argue whether the consumer is fully aware of the real cost of their purchases. The alternative transaction cost is not always easy to see and measure. 6 “Consumer power has more scope than the power of voters who vote once in a while and not everyone does. However, everyone, willingly or not, votes through systematically repeated acts of buying and decides about the success or failure of companies. The purchase plebiscite takes place every day, and its result can very quickly influence the course of events and remove unwanted companies from power” (Lewicka-Strzałecka, 2006, pp. 118–119). 7 The wording of socially responsible investment (SRI) is also used. The genesis of institutions operating on such principles dates back to the third decade of the twentieth century in Great Britain. Their flourishing took place at the end of the twentieth century. In recent years, there has been talk about the need to reform the crisis and distort the identity of many SRI funds, which in practice differs little from other investment institutions. Cf. Lewicka-Strzałecka, 2006, pp. 39–43, 50. CONSUMER SOCIAL RESPONSIBILITY 101 Every enterprise needs information to operate. Business organizations collect data through multiple research projects, but this is mainly anonymous and one- dimensional information that mainly provides numbers and simplified statements.8 Their quality and character are undoubtedly different from the opinion expressed by the “flesh and blood” consumer, who speaks directly: “I like this, I do not like that.” I believe that this way of expression can be more convincing for the opinions of decision-makers in companies. Such signals may at the same time undermine the faith of those who trust that it is enough to follow the indications of the invisible hand of the market, and to profitably satisfy the needs of the target group— statistical, “invisible|” (or poorly visible) buyers—will be only a matter of time. When consumers make it clear as to what is important to them, they send a clear signal that they care about how society produces and increases wealth. They become examples for enterprises, but also for those who study and prepare to work in business—it is harder to teach students sensitivity and ethical sense towards the consumer without specific examples, showing that this side of trade relations is ready to actively participate in them and shape them (cf. Nierenberg, 1987, p. 18). Those buyers who react responsibly become witnesses of values probably shared by the majority of society, but not disclosed—and therefore, in some way absent. In our modern world, ruled by the morality of intention, the only available way to show that someone believes in the existence of good is to adopt a witness attitude (Delsol, 2003, pp. 117, 121–122)9 that is not able to satisfy being a merely passive, “statistical” consumer.

4. The language of buying

I buy, therefore I like, accept and support! Michal A. Michalski

This section will deal with the problem of communicating the client’s point of view to the company. Expressing opinions is not only limited to calling the helpline or writing a letter to the company. In modern marketing literature, much attention is paid to the issue of consumer complaints. Research shows that only a small percentage (10%) of dissatisfied customers complain (cf. Shaw, 2001, pp. 224–225), the rest simply never return.10 More and more companies are beginning to understand that the complaining customer is

8 It must be emphasized here that their results are not an exhaustive description of reality. 9 This applies to the relationship between faith and the deeds described in the Epistle of St. James (James 2:14–17). 10 Some of the dissatisfied customers would continue to use the offer of the company because they do not have access to alternative offers, for example for financial, geographical reasons, etc. However, it should be expected that as soon as this problem is resolved, they would not cooperate with an unsatisfactory supplier. 102 MICHAŁ A. MICHALSKI a blessing, because it is a sign that he cares, and provides valuable information on the quality of services and products. The decision not to buy is an important message from the client or the public. Unfortunately, there are companies that do not understand this. Such companies run the risk of “falling out” of the market. At the same time, the language of buying seems to be forgotten and its message underestimated by many consumers. Everyone who purchases a product or service invests their goods (not only financial), agrees to the terms of the agreement (regardless of whether it is in writing or not), declaring that the buyer accepts the arrangements and rules according to which the seller acts. The buyer is always able to choose and is not forced to buy a particular product. Another problem occurs when the consumer is cheated and simply does not realize it—then it is difficult to expect responsible behavior if he is not aware of the defect of the contract. 11 A purchase decision is a way of manifesting values.12 These values are invisible and the buyer makes them visible if he really cares about them, e.g., a visible sign of approval for pornography and adultery is buying products from the porn industry. Whenever the buyers have the impression that their trust is abused through misleading advertising or fraudulent commercial practices, they should remember that they may act and that their vote matters. Complaints are often time- consuming and energy-intensive requiring collecting information, and dealing with bureaucratic structures and procedures that may discourage any action.13 In many instances, one may have to wait a long time for the desired changes and improved legal regulations to appear. In comparison, an individual or collective boycott seems easier and more accessible. Despite the above-mentioned difficulties, knowledge and proper use of the language of buying turns out to be fruitful when we observe a growing number of business entities who respond to signals sent by buyers, e.g. by declaring and engaging in ethical investing (cf. footnote 5).

5. A climate for responsibility Responsibility is personal. Chantal Delsol (2003, p. 215)

One may assume that responsibility is always someone’s responsibility—to exist, it needs an individual subject. Without this, it is only a rhetorical issue.

11 Freedom is, therefore, a necessary condition for an important contract. The story of Nelson Man- dela's refusal to be released under certain conditions is a good example: Mandela demanded an uncon- ditional release before he could negotiate with Botha’s government: “Only a free person can negotiate. Prisoners cannot enter into contracts” (Nierenberg, 1987, p. 29). 12 A comprehensive set of proposals for citizen-consumer activity was proposed by Al Fritsch (2006). 13 A question may arise whether the case of the complaints procedure and their settlement are not designed so as to discourage potential applicants from the outset. CONSUMER SOCIAL RESPONSIBILITY 103 It is important that a consumer possesses the basic competencies to understand the complexity of modern economic processes. A lack of economic knowledge can become a serious problem that may impair the consumers. It is difficult to engage in business relations without understanding why and what is happening within a transaction or its consequences. Great disproportions in education certainly contribute to the situation in which large portions of society become passive recipients of the market activity. Therefore, it seems reasonable to attend to the education in this area—e.g. to teach the basics of economics at a primary level.14 The second issue concerns over-specialization, which leads to different divisions. This is manifested by the emergence of specific ghettos resulting from narrow specialization that leads to a relative isolation of various social and professional groups. In various areas of our economic systems that “discover” more and more forms of work organization and exchange, and also “employ” advanced technology, “dialects” are created that perform descriptive and communication functions. Unfortunately, this development has negative sides—these highly specialized “languages” exclude from the circle of discussion those participants who are unable to communicate using them. The inability to understand specialist vocabulary becomes a serious shortage that makes it difficult to be a conscious consumer. The society is divided into two groups: the first one— better educated, composed, among others, of university and economics faculties graduates, who are able to understand, for example, everyday economic news, and the second, unaware of the market reality, unable to reflect on the whole of the processes in which it participates and various connections that connect it with other—often distant in time and space—events.15 The last question is whether companies are able to do something about providing information and education to help consumers. Perhaps part of the money spent on—mostly biased and one-sided—advertising messages could be devoted to reliable and understandable information that would gradually cure our societies of the economic illiteracy they suffer. It seems possible to gradually transform the economic reality—a not very clear one, complicated and difficult to understand. Since it is not surprising that we require openness and transparency from public institutions, why would it be a strange requirement for companies to be the same, when they actually serve the public interest—which most of them declare (cf. MacIntyre, 1997, p. 244). More information means more potential knowledge. If consumers and businesses are able to use it properly, it helps all.

14 Analogically to education in the field of civic knowledge, which does not concern only the sphere of political activity. 15 Dividing a society in two groups is a significant simplification. Certainly, the reality is much more complex and probably getting the right education is not a guarantee that one fully understands the economic reality. 104 MICHAŁ A. MICHALSKI 6. Catholic social teaching and social responsibility–The Church and the social character of man

Do not be satisfied with mediocrity. John Paul II (1981)

Free market society needs not only consumers but also responsible individuals, capable of hard work and creative action. Rocco Buttiglione (2000, p. 27)

The concept of responsibility and emphasizing the social dimension of humanity are among the most important issues of the Church’s teaching. This sentence is not cutting-edge although considering academic texts and discussions on corporate social responsibility, one would say that for many it could be a novelty.16 The call of the Church’s social doctrine to be responsible does not indicate exactly who should bear more, and who should bear less responsibility, but rather invites all those involved in social life to take responsibility as much as possible, depending on the role and vocation. The echo of this invitation is heard many times: it takes the form of a call to “care for your brother” (Matthew 18:10–20; 1 John 4:7–21 and many others). This is inscribed in the Gospel and means to take care not only for your life, but also for the lives of others, both in the temporal and eternal dimensions. It also takes the form of a general call to commitment, deeply rooted in the Church’s teaching—to read the signs of the times and respond to the challenges we face (cf. Gaudium et spes, Centesimus Annus, Sollicitudo rei socialis, and Laborem exercens among others). This is the same call that was heard by the first man in the Garden of Eden—to go and replenish the Earth and subdue it—to discover and manage it for the benefit of man and the glory of God. It is a vocation to care for the proper development of humanity—which will not be either underdevelopment or hyper-development (John Paul II, 1987, 28)—which are abnormal and destructive phenomena present in the modern world. The Church’s social teaching proposes solidarity and subsidiarity as essential tools for truly responsible human development. The first of these, defined by John Paul II (1987, 38) as “strong and lasting” will to engage on behalf of “the common good,” it is the opposite of conformism, which presupposes homogeneity rather than unity and non-engagement, thus being subject to current conditions (cf. Al-

16 In A. Lewicka-Strzałecka’s book Odpowiedzialność moralna w życiu gospodarczym, in the part devoted to the promoters of corporate social responsibility in Poland, no word was given to the Church and its social teaching. The situation is not an exception. There may be two reasons. Either the academic authors often do not see the Church’s contribution in this area and are not aware of the content of the Church’s documents, or the Church and its members are still making too little effort in this area (an example of the Church’s interest in the current problems of corporate social responsibility may be, among others, the conference The Good Company. Catholic Social Thought and Corporate Social Responsibility in Dialogue, which took place in Rome in 2006). CONSUMER SOCIAL RESPONSIBILITY 105 ford & Naughton, 2006, pp. 78, 184; John Paul II, 1991, 15). Both of these non- violent attitudes make not only the consumer but also the civic social responsibility troublesome. Subsidiarity means,

a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good. (John Paul II, 1991, 48)

Using the language of social responsibility, one could say that the role of the consumer is to react to the level at which he is involved. Catholic social teaching also raises the problem of consumerism, which is the result of the alliance of the market and libertinism. In this combination, market values are the only ones that are taken into account in society, so everything gradually becomes a commodity (cf. Buttiglione, 2000, p. 27). This is a suicidal tendency because society needs much more value to exist than a set of those that are inscribed in the market economy system.17 At the individual level, this means that being a consumer is only a part of being a man who, in search of fulfilment, must enter the area of management, but also exceed it. The defence of values other than the market is a warning against thinking in purely materialistic terms that make it difficult to imagine—and therefore, to take into account—the spiritual and moral side effects of economic activity. At the same time, the social teachings of the Church are an invitation to accept a true and full vision of the human being—created as a spiritual-psycho-physical unity—responsible for the good or bad use of his freedom.

7. What about ethics?

Ethical values have this special feature that they are meaningless in words, and they only mean when the subject becomes their hostage—not any individual, but a free subject because the act made under compulsion cannot have a moral value. Man becomes a subject only as a hostage and a witness of values which he himself pointed out. Chantal Delsol (2003, p. 124)18

17 “As history demonstrates, a democracy without values easily turns into open or thinly disguised totalitarianism” (John Paul II, 1991, 46). 18 The problem of practising virtues is also described by Gerard I. Nierenberg, although his position differs from Chantal Delsol’s opinion. It seems that Nierenberg blames both the solutions and the underlying values. It is unclear as to his meanings. Should the ethics follow and adapt to changing conditions, or vice versa? He writes: “Philosophy, law and ethics, to be effective in a dynamic world must be made vital enough to keep pace with the progress of life and science. In recent civilization, ethics, because controlled by theology and law, which are static could not duly influence the dynamic, revolutionary progress of technique and the steadily changing conditions of life; and so we witness 106 MICHAŁ A. MICHALSKI In recent years, one can observe and hear vivid discussions on ethical issues in science, education, politics, economics and religion. Much attention and power are devoted for companies to create codes of ethics and employ ethics managers. One may wonder if this is a sign showing that we live in a time during which humanity appreciates moral standards more, or perhaps our current situation is the result of a crisis of ethics that compels us to reflect and act. Undoubtedly, the Western world is experiencing a serious fall of morality, which is admitted reluctantly.19 Its traditional Judeo-Christian ethics, which helped Europe build its identity, today arouse suspicion, especially among those who pro- fess and practice “faith” in the Enlightenment paradigm. One of the serious ethical problems of modernity is the double morality experienced in social life when organizational morality meets individual morality.20 This problem of different moral standards has enormous consequences in all areas. In business, it generates common stereotypes, such as the one according to which the moral point of view is the opposite of financial prudence and efficiency (Goodpaster & Matthews Jr., 1997, p. 97). The opinions such as the following are not rare:

I do not know any investment advisor I would allow to decide on my behalf in any other matter than just making profit [...] The greatest advantage of these specialists [...] is their limitations; they should not allow themselves too much vision of the world, because it would distract them. (Goodman, 1971, p. 66)

Let us consider the figure of witness here once again as the one with the potential to overcome this “dual” problem. It would be nice to hear that the testimony is profitable—it is in fact, but it is not so easy. It is profitable, but not necessarily financially, and not necessarily immediately. Perhaps acknowledging the benefits of being a witness depends on the accepted vision of a society. For those who choose the concept of the common good, imagining that their commitment will bear fruit, even if they themselves cannot taste it, is not a problem. For those who prefer a utilitarian vision, it may be more difficult. However, I believe that the testimony is the only way to save ethics. Books and lectures alone— even the finest ones—will not do it. Only the values that are woven into daily activity are able to affect reality and transform it. Ethics needs dialogue and prac-

a tremendous downfall of morals in politics and business. Life progresses faster than our ideas, and so medieval ideas, methods and judgements are constantly applied to the conditions and problems of modern life. […] Medieval legalism and medieval morals – the basis of the old, social structure—being by their nature […] opposed to change [are] becoming more and more unable to support the mighty social burden of the modern world […]” (1987, p. 14). 19 Already at the beginning of the 20th century, such thinkers as Florian Znaniecki (The Decline of Western Civilization) and Oswald Spengler (The Decline of the West) warned against this fall. 20 “The business executive today is not so much concerned that someone may be looking, but that everybody is. And ‘everybody’ seems to have a different set of ethical standards. This is what causes an executive to agree with Hamlet that ‘conscience does make cowards of us all’” (Nieren- berg, 1987, p. 11). CONSUMER SOCIAL RESPONSIBILITY 107 tice21 to stay alive. It requires a continuous dialogue of words and acts. It is in the interests of consumers to provide the company with an opinion. It encourages economic organizations to explore more deeply the resources of their values in search of the least harmful and acceptable solutions not only by direct users of their products and services.

8. Conclusions

[…] in a participatory society no single party is most important, but none can be left out. Henk J. L. van Luijk (1992, p. 25)

[…] to live so that others can live better after I have gone. Charles Handy (Alford & Naughton, 2006, p. 222)

Consumers now have the opportunity, as never before, to respond to the challenge of responsibility. I do not mean starting a bloody revolution but becoming an involved party in economic life. Certainly, filing complaints and suing enterprises is not enough. If buyers do not become more active, they will not be able to enjoy a market that best serves real human development, and not just trying to find the best combination of supply and demand. The social responsibility of the consumer is aimed at preserving and improving the conditions of the joint presence of market entities so that not all of them can only give best of what they have but also receive what is possible to achieve. Consumers and enterprises simply need each other and cannot meet their goals and their needs on their own. Therefore, the corporate social responsibility should be accompanied by the social responsibility of consumers, to create a real economy of dialogue, and to stimulate a more human-based growth of societies. Enter- prises and consumers are not enemies and it makes no sense to ask who should win.22 Rather, it is about finding an answer to the question of how they can cooperate and help each other to contribute to the common good of all. Using the language of management one could say that not only enterprises, but also consumers are able and encouraged to broaden their perspective of the way they perceive social reality—from the concept of shareholders and stakeholders—to the model of the common good that surpasses the previous two (cf. Alford & Naughton, 2006, pp. 38–69).

21 “In our pluralistic world of business people and professionals, no matter how much the limits of authority are strained, no theoretical system of ethics can even begin to meet their needs” (Nierenberg, 1987, p. 22). 22 Unfortunately, the “war” mentality still seems to dominate in the economic sphere. This is manifested, among others, in management and marketing terminology as well as various “richest” and “largest” rankings. 108 MICHAŁ A. MICHALSKI Undoubtedly, enterprises should facilitate and help their clients to communicate their opinion and emphasize the importance of it at all levels of the organization. It is in their interest to find out if buyers share their hierarchy of values. Questions that each company can ask themselves may be as follows: Do we really care about the client? Are we not afraid to tell him the truth? Do we really want the customer to trust us? Do we trust him? To become more socially responsible, consumers can certainly take care of diligent and lifelong learning in the field of basic economic principles (of course, it is not necessary for everyone to get an MBA). They should require companies to communicate with them in a comprehensible language. Finally, they should boldly show what they think and feel. This may require their time and effort, which may cause doubt as to whether it is worth showing commitment and responsibility. No matter what they do, they are responsible anyway. Even if they do not take responsibility, it lies with them—even if it was only to be responsible in order to avoid social responsibility. We should also remember that consumers are not only responsible for themselves. They are also spokes- men and witnesses for their relatives, friends, neighbors—for all of society and generations to come in the future: for their welfare and well-being.23

References

Alford, H. J., & Naughton, M. J. (2006). Managing as if faith mattered. Christian social principles in the modern organization. Notre Dame, Indiana: University of Notre Dame Press. Beck, U. (2002). Risk society: Towards a new modernity (S. Cieśla, Trans.). Warszawa: Wydawnictwo Naukowe SCHOLAR. Buttiglione, R. (2000). Behind Centesimus Annus. In M. Novak, W. Brailsford, & C. Hees- ters (Eds.), A free society reader. Principles for the new millennium. Lanham– Boulder–New York–Oxford: Lexington Books. Delsol, C. (2003). The unlearned lessons of the twentieth century: An essay on late modernity (M. Kowalska, Trans.). Kraków: Znak. Dylus, A. (2005). Globalizacja. Refleksje etyczne. Wrocław–Warszawa–Kraków: Ossoli- neum. Fritsch, A. (2006). Fifty possible ways to challenge over-commercialism. In Earth Healing (2nd Edition). http://www.earthhealing.info/fifty.htm Goodman, W. (1971). Stocks without sin. Harpers, August, 66 [reprinted in: C. D. Stone. (1997). Why shouldn’t corporations be socially responsible (J. Sójka, Trans.). In L. V. Ryan, & J. Sójka (Eds.), Business Ethics. Poznań: “W drodze”]. Goodpaster, K., & Matthews Jr., J. B. (1997). Czy spółka może mieć sumienie? (E. Dratwa, Trans.). In L. V. Ryan, & J. Sójka (Eds.), Business Ethics. Poznań: “W drodze”.

23 “[…] moralists should not regard individuals as animals and/or gods, but as members of a time- binding class, aware of their debt to the past and conscious of their obligation to the future (Nierenberg, 1987, p. 68). CONSUMER SOCIAL RESPONSIBILITY 109 John Paul II. (1981, August 25). Speech in Castel Gandolfo. John Paul II. (1981). Laborem exercens. http://w2.vatican.va/content/john-paul-ii/en/encycli cals/documents/hf_jp-ii_enc_14091981_laborem-exercens.html John Paul II. (1987). Sollicitudo rei socialis. http://w2.vatican.va/content/john-paul-ii/en/en cyclicals/documents/hf_jp-ii_enc_30121987_sollicitudo-rei-so cialis.html John Paul II. (1991). Centesimus Annus. http://w2.vatican.va/content/john-paul-ii/en/encyclic cals/documents/hf_jp-ii_enc_01051991_centesimus-annus.html Jonas, H. (1985). The imperative of responsibility. University of Chicago Press. Lewicka-Strzałecka, A. (2006). Odpowiedzialność moralna w życiu gospodarczym. Warszawa: Wydawnictwo Instytutu Filozofii i Socjologii Polskiej Akademii Nauk. van Luijk, H. J. L. (1992). A vision of business in Europe. In J. Mahoney, & E. Vallance (Eds.), Business ethics in a new Europe. Dordrecht–Boston–London: Kluwer Aca- demic Publishers. MacIntyre, A. (1997). Why business ethics problems are unsolvable? (A. Zaporowski, Trans.). In L. V. Ryan, & J. Sójka (Eds.), Business Ethics. Poznań: “W drodze”. Michalski, M. A. (2008). Społeczna odpowiedzialność konsumenta. Annales. Ethics in Economic Life, 11(1), 181–192. Nierenberg, G. I. (1987). Workable ethics. What you need to succeed in business and life. New York: Nierenberg&Zeif Publishers. Second Vatican Council. (1965). Gaudium et spes. The Pastoral Constitution on the Church in the Modern World. Shaw, R. (2001). Database marketing: strategy and implementation (R. Nowakowski, Trans.). Warszawa: Wydawnictwo Studio Emka/The Economist Books. Szwarc, M. (2006). Jak wejdę do sklepu, to koniec. Zwierciadło, 11/1921.

Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 111–123 doi: http://dx.doi.org/10.18778/1899-2226.21.7.08 Iwona Codogni Cracow University of Economics e-mail: [email protected]

The chances and limitations of applying a CSR strategy in Polish enterprises*

Abstract

The topic of the article is the perspectives of CSR in Polish companies. The article contains a definition of corporate social responsibility, the state and dynamics of ethical reporting, and the factors that can influence the dynamics of CSR in Po- land—both in a favorable and adverse way.

Keywords: ethics, corporate social responsibility, CSR

JEL Classification: M14

1. Introduction

The economy, just like any other field of human life and activity, can give rise to moral problems—the need to distinguish between desired and undesirable actions, proper and improper actions, right and wrong ones, good and bad ones, requires making choices. The aim of this work is to analyze the opportunities and limitations of the application of corporate social responsibility (CSR) strategies in Polish enterprises. What are the reasons that companies have begun to get involved in social issues? Is this a response to the growing expectations of stakeholders? And what are the chances and limitations of implementing CSR strategies in Polish enterprises? The purpose of this article is to try to answer these questions.

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 15, 281–294. 112 IWONA CODOGNI 2. The definition and scope of the subject of corporate social responsibility (CSR)

The corporate social responsibility strategy is becoming more and more popular among companies around the world. In Poland, more and more enterprises have started to be interested in the approach to doing business, taking into account not only the achievement of economic benefits, but also the needs of their stakeholders. There are many different definitions of corporate social responsibility in the literature. Selected ones are presented in Table 1.

Table 1. Definitions of corporate responsibility

A responsible company is one that listens to its stakeholders and responds with honesty to their concerns. (Starbucks, CSR Report, 2004) CSR commits us to operate in a socially responsible way everywhere we do business, fairly balancing the needs and concerns of our various stakeholders – all those who impact, are impacted by, or have a legitimate interest in the Company’s action and performance. (Chiquita, www.chiquita.com) CSR [is] the proposition that companies are responsible not only for maximizing profits, but also for recognizing the needs of such stakeholders as employees, customers, demographic groups and even the regions they serve. (PricewaterhouseCoopers, www.pwcglobal.com) CSR is the continuing commitment by business to behave ethically and contribute to economic development Chile improving the quality of life of the workforce and their families as well as of the local community and society at large. (Lord Holme, former executive director of Rio Tinto, and Philip Watts, former chair of Royal Dutch Shell) CSR requires companies to acknowledge that they should be publicly accountable not only for their financial performance but also for their social and environmental record… CSR encompasses the extent to which companies should promote human rights, democracy, community improvement and sustainable development objectives throughout the world. (Confederation of British Industry, 2001) CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis. (European Commis- sion, Directorate General for Employment and Social Affairs) CSR is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life, in ways that are both good for business and good for [international] development. (World Bank, www.worldbank.org/privatesector [...])

Note. Adapted from “Corporate Responsibility a Critical Introduction,” by M. Blowfield & A. Murray, 2008, Oxford University Press, p. 13.

The corporate social responsibility strategy is a basket of activities in many areas. The prominent areas of corporate social responsibility include, among others (Blowfield & Murray, 2008, pp. 24–36): (1) legal compliance, (2) philanthropy and community investment, (3) environmental management, THE CHANCES AND LIMITATIONS… 113 (4) sustainability, (5) animals rights, (6) human rights, (7) worker rights, (8) market relations, (9) corruption, (10) corporate governance. Some enterprises introduce into their activity a full strategy of corporate social responsibility taking into account all the above-mentioned areas. Unfortunate- ly, there are not many such enterprises in Poland, but we are observing a growing interest in this subject. Also, stakeholders increasingly expect an active attitude and full involvement of the organization in social issues. We observe four levels of commitment, attitudes of enterprises, and issues related to corporate social responsibility: (1) Obstructionism—enterprises do as little as possible to solve ecological and social problems. (2) Defensive attitude—the organization respects only the applicable law, but otherwise does nothing for the local community or the natural environment. (3) Adjustment attitude—regarding CSR, the organization fulfills its basic legal and ethical duties, and in some cases goes beyond those duties. (4) Active attitude—the organization perceives itself as a citizen and actively seeks ways to contribute to the social good. Polish organizations very often take a defensive or adaptive attitude towards social issues. That is, they follow the letter of the law, but they are very cautious about social issues. Fortunately, there are also examples of organizations that are very actively implementing the CSR strategy. One such company is Danone, which has been running a campaign to feed children in schools for eight years (the first such action took place in 2003/2004). Thanks to the “Podziel się Posiłkiem” Program [“Share Your Meal” program],1 as many as 10 million meals have been distributed so far. The action of Danone is an example of how, thanks to the campaign of feeding—disseminated within the framework of socially engaged marketing—it is possible to simultaneously help those in need of support and take care of your impeccable image and sales volume. A few other examples of socially involved advertising campaigns can be given, such as Cisowianka mineral water (helping to build wells in Sudan) or Żywiec water (planting trees). The most important thing is that enterprises with Polish capital are beginning to engage in social issues.

1 http://www.podzielsieposilkiem.pl/index.php?Pages&MenuId=51 114 IWONA CODOGNI 3. The condition and dynamics of CRS in Poland

Despite the constantly growing interest of Polish entrepreneurs in the strategy of corporate social responsibility, it should be noted that it is still too small. What are the reasons for this situation? They can include a multitude of definitions, as well as imprecision in defining the concept of corporate social responsibility. It is difficult to implement a strategy that is very differently defined. Another reason for the low popularity of CSR in Poland may be the internal contradiction in the very idea of corporate social responsibility, which consists in the fact that many entrepreneurs share the view of Milton Friedman, that the goal of maximizing profits abol- ishes the social goal (Filek, 2008, p. 62). Organizations still have problems with measuring and reporting CSR. In connection with this measure is the number of CSR reports submitted by Polish enterprises in the largest organizations involved in reporting, which will be used in this article to determine the degree of development of good practices in Poland. This metric was chosen because of its uniqueness—many Polish enterprises introduce individual aspects of CSR practices but do not decide to implement a full CSR strategy. Therefore, it is often impossible to determine with certainty whether a given company is already socially responsible or not yet. The presentation of the official report suggests the full implementation of the CSR strategy. Therefore, the data contained in the AccountAbility, Global Reporting Initiative and Global Compact resources were analyzed to illustrate the development of CSR strategies in Poland. The AA 1000 Assurance Standard was introduced in 1999 in Great Britain by the Institute of Social and Ethical AccountAbility. It aims to involve stakeholders in building processes that make up the corporate social responsibility system and create guidelines for their verification. The most important advantage of this standard is that it is based on a process approach, and thus enables companies to conduct an ethical audit. It is also extremely important that managers, thanks to this standard, have the opportunity to build the company’s strategy together with stakeholders, thus satisfying their expectations (Adamczyk, 2009, p. 175).

Table 2. The number of Polish entities submitting AA1000 reports

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1 0 0 1 1 3 3 4 5 9 11 15 20 Note. Adapted from database of entities submitting AA1000 reports, www.corporateregister.com.

GRI (Global Reporting Initiative) is an international organization that in 2000 created a guide for preparing reports for socially responsible enterprises. The form of the study makes it possible to use a report template regardless of the company’s business profile. It also presents tips on how to present the strategy in the context of sustainable development (Adamczyk, 2009, p. 176). Table 3 presents the number of GRI reports submitted by enterprises in individual countries (chosen for the table were the first and last three countries according to the number of reports in 2010, European countries and significant economies). THE CHANCES AND LIMITATIONS… 115 Table 3. Reports registered by the Global Reporting Initiative (selected countries)

Country 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1 USA 4 8 19 24 24 36 35 45 67 116 138 181 2 Spain 0 1 3 9 14 36 60 87 121 129 151 168 3 Brazil 0 1 1 5 4 7 12 17 38 71 81 134 4 Japan 1 7 23 17 14 19 19 18 26 64 92 120 5 Sweden 2 4 4 3 2 5 7 10 11 26 73 83 6 Australia 0 2 7 7 5 9 17 32 39 60 76 69 7 Netherlands 1 4 7 6 8 17 28 26 31 41 51 68 8 Canada 1 2 6 6 5 11 15 24 27 38 43 66 9 Germany 0 1 7 5 6 10 17 16 34 41 51 63 10 Great Britain 1 8 20 14 13 15 19 25 31 48 48 62 11 South Korea 0 0 0 0 3 5 8 15 28 37 57 60 12 China 0 0 1 3 1 3 3 6 8 17 54 59 13 South Africa 0 3 1 8 15 19 21 25 22 48 51 53 14 Switzerland 0 0 2 1 1 8 11 12 17 28 32 50 15 Italy 1 0 5 2 7 9 11 17 26 39 46 48 16 Austria 0 0 0 0 3 8 9 7 16 17 13 42 17 Mexico 0 0 0 0 0 0 1 2 5 14 21 35 18 Portugal 0 0 1 1 1 2 4 5 8 23 30 35 19 Finland 0 0 3 1 8 14 14 10 11 16 25 33 20 Greece 0 0 0 0 0 2 5 5 7 13 27 33 21 France 0 3 3 3 9 11 10 20 17 25 27 31 22 Hungary 0 0 0 3 2 3 3 2 7 9 29 27 24 India 0 0 1 3 1 5 4 6 7 22 21 24 26 Belgium 0 0 0 0 0 0 3 6 8 14 17 20 28 Norway 0 0 0 0 1 1 5 7 8 10 16 17 29 Denmark 0 0 2 4 2 2 2 4 4 6 9 16 38 Russia 0 0 0 0 1 1 3 5 8 11 5 9 39 Poland 0 0 0 0 0 1 0 1 1 0 6 8 44 Croatia 0 0 0 0 1 1 2 1 1 2 2 3 45 Ireland 0 0 2 1 0 1 1 2 1 2 2 3 Czech 50 0 0 0 0 0 0 2 2 1 1 1 2 Republic 57 Luxembourg 0 0 0 0 0 0 1 1 1 2 2 1 61 Slovakia 0 0 0 0 0 0 0 0 0 1 2 1 70 Romania 0 0 0 0 0 0 0 0 0 0 5 0 71 Seychelles 0 0 0 0 0 0 1 0 0 0 0 0 72 Uganda 0 0 0 0 1 0 0 0 0 0 0 0 73 Zimbabwe 0 0 0 0 1 0 0 0 0 0 0 0 WORLD 11 44 122 137 163 274 371 511 706 1109 1488 1832 Note. Adapted from the database of reports from the Global Reporting Initiative, http://www.globalreporting.org/. 116 IWONA CODOGNI The Global Compact program was initiated in 2000 by UN Secretary-General Kofi Annan. It contains an overview of good practices based on nine principles derived from the Declaration of Human Rights, the Charter of Fundamental Rights of the International Labor Organization and the recommendations of AGENDA 21. It includes issues of human rights, labor rights, environmental protection and the fight against corruption (Adamczyk, 2009, pp. 175–176).

Table 4. Global Compact reporting in the world and in Poland

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Number of acceding organizations 39 70 155 442 411 371 943 978 1663 1490 1728 556 in a given year Number of Polish accession organiza- 0 1 0 1 1 3 2 2 32 16 15 4 tions in a given year Number of reports from organizations 0 0 0 0 0 1 1 2 3 5 14 3 from Poland Note. Adapted from the database of entities participating in the Global Compact, http://www.unglobalcompact.org.

In total, 104 Polish enterprises appeared in the above-mentioned initiatives (some in more than one of the above initiatives). 52 of them were active, that is, they sent at least one report. Of the total number of 3,742,673 business entities registered in Poland (data for 2009), 100 enterprises constitute about three hun- dredths of a per mille (data are probably understated due to the fact that not all databases were analyzed and not all companies publishing CSR reports register them in one of the databases, but it certainly gives a view of the order of magnitude). However, when analyzing the dynamics of the number of submitted reports, a significant upward trend can be observed.

4. The chances and limitations in applying CSR strategies in Poland

Undoubtedly, it should be emphasized that Polish organizations are increasingly willing to implement a corporate social responsibility strategy. Entrepreneurs have noticed that thanks to the adoption of a strategy that takes into account the needs of stakeholders, it is easy to build a positive image and competitive advantage, which is so important especially in uncertain times (financial crisis, inflation, high competition). Socially responsible companies also gain in the eyes of employees and thus make another advantage in the form of a qualified workforce. An employee is the most valuable resource for such an enterprise, in a literal sense, because he is definitely better paid than a person working in a company that did not implement a CSR strategy (in 2004, remuneration was higher by 558 PLN on THE CHANCES AND LIMITATIONS… 117 average compared to other enterprises). The investment expenditures of the CSR enterprise on the employee are also higher (about 530 PLN in 2004). Better work efficiency also affects the company’s performance. The annual gross profit con- verted into one employee in 2004 amounted to 29,300 PLN in a socially responsible undertaking and only 24,000 PLN in other enterprises from a given industry (Bem-Kozieł, 2008, pp. 109, 116). Social responsibility also affects the enterprise’s innovativeness resulting from the more entrepreneurial attitude of employees internalizing the organization’s goals. An important opportunity for the development of corporate social responsibility may be the development of modern communication technologies, and mainly the resulting change in the way information is disseminated. Until recently, information was very centralized—based on information agencies, the press, radio and television. So information that did not go into this official circulation was, in the best case, local and did not reach the consciousness of a wide audience. Currently, thanks to the development of the Internet, the information system is a distributed system. Authors do not need publishing houses to publish their books (in the form of e-books), journalists do not need newspapers to reach readers. Many of them, thanks to social networks and the blogosphere, reach more readers than the press could provide. Local news no longer exists—all information published on the Internet becomes available all over the world—if, of course, it interests readers. This democratized circulation of information means that the manipulation of information by enterprises, which hide inconvenient facts from the public, is less and less feasible. Therefore, it is profitable for enterprises to implement CSR strategies that guarantee a good image. “Reputation is a resource that can generate future profits because it is an assessment of the company’s value made by the external environment. It is an important factor in strengthening or weakening the enterprise’s efficiency” (Paliwoda-Matiolańska, 2009, p. 179; Weigelt & Camerer, 1998, p. 443). The introduction of a corporate social responsibility strategy can also be a source of enterprise innovation. Consumers are increasingly pushing for modern enterprises to look for new economic or technological solutions. Therefore, the source of the company’s innovativeness may be respond- ing to economic, social and ecological problems of consumers (Paliwoda- Matiolańska, 2009, p. 184). What are the barriers that make it difficult or impossible for enterprises to implement a corporate social responsibility strategy? Apart from the problem in defining the concept itself and the problem of understanding that this strategy provides profit in the long term, a number of other barriers should be noticed. These include, among others, “long-term absence’ in the economic sciences of theories suggesting the responsibility of the company’s shareholders for social issues. For many years, other theories have triumphed, including: the theory of unintentional order, the separatist vision of economic activity, methodological individualism and assumptions about economic positivism freeing economics from ethics in business life. Therefore, the criterion of effectiveness remains the dominant way of assessing business activity (Filek, 2008, p. 64). Barriers resulting from the history of Poland are also important. The individualistic attitude that has 118 IWONA CODOGNI its roots in the liberum veto lingers in the Polish mentality. Moreover, the long- term absence of the Polish state also left its mark. Also, the PRL [Polish People’s Republic] era taught Poles the habits of prevarication and bribery as a normal way of “dealing” with matters—including official ones. One of the problems of the PRL, which remains a problem to this day, is the strong relationship between the economy and politics, which also hinders ethical business operations. Another obstacle hindering the ethical conduct of economic activity in Poland is the economic conditions resulting from the lack of capital—in the face of the threat to the existence of a business organization, ethical issues getting less and less important for the entrepreneurs. The little-developed consumer movement in Poland does not exert sufficient pressure on enterprises to direct them towards socially responsible activities. However, the most important barrier, especially in the sectors of small and medium-sized enterprises, is still the insufficient knowledge of Polish managers regarding business ethics and the possibility of applying the principles of social responsibility as a compact business strategy (Filek, 1996, pp. 49–55). An enterprise, as an open and adaptive system (Peszko, 2005, p. 39), is susceptible to environmental influences, and its mission assumes meeting the needs of this environment. Therefore, the probability of changes occurring in enterprises towards social responsibility increases significantly if they are surrounded by a force which enterprises push in this direction – the forces that Jacek Sójka calls “the demand for honesty” (2003, p. 134). So are there such forces in Poland? How intense are they? Tables 5 and 6 present data collected as part of the World Values Survey carried out in between 2005 and 2007 (the data from Poland were collected in 2005) regarding the beliefs and values of the inhabitants of individual countries (as before, chosen for the table were the first and last three countries, European countries and significant economies). As can be seen from the quoted data, the Polish “demand” for environmental protection is not very high, so it can be assumed that implementing CSR solutions in the field of environmental protection may encounter resistance in Polish enterprises, as most Poles do not want to make economic sacrifices to protect the environment. What is more, the attempt to analyze the trend based on previous editions of the World Values Survey indicates a tendency to decrease the expectations of Poles regarding environmental protection—the results are presented in Tables 7 and 8. Tables 9 and 10 present respondents’ answers to topics related to equal employment opportunities (as before, chosen for the table were the first and last three countries, European countries and significant economies).

THE CHANCES AND LIMITATIONS… 119 Table 5. Respondents’ answer to the Table 6. Respondents’ attitude to the alternatives statement “I would give part of “Environmental protection or economic my income to environmental development” protection” Environmen- Economic develop- I agree I disagree tal protection ment and job creation 1. Germany 37.2% 62.7% 1. Ethiopia 23.0% 77.0% 2. Romania 38.2% 61.8% 2. South Africa 27.9% 70.8% 3. New Zeland 38.6% 61.5% 3. Indonesia 34.7% 25.4% 6. Ukraine 45.6% 54.5% 4. South Korea 35.1% 52.5% 7. Spain 49.0% 51.0% 5. Germany 36.9% 50.2% 10. USA 52.3% 47.7% 8. Poland 42.1% 54.4% 11. Brazil 52.6% 47.4% 11. Bulgaria 46.4% 50.1% 12. Poland 53.0% 47.0% 17. Netherlands 50.1% 46.6% 13. South Africa 53.0% 46.9% 18. Romania 52.0% 46.1% 14. Serbia 54.6% 45.5% 19. India 52.5% 35.0% 16. Finland 56.7% 43.4% 21. Japan 53.2% 34.1% 17. Bulgaria 57.0% 43.0% 23. USA 54.1% 45.9% 18. Australia 57.2% 42.8% 24. Francja 54.3% 41.4% 20. Italy 61.4% 38.6% 27. Russia 55.1% 40.8% 24. Switzerland 63.2% 36.8% 28. Ukraine 55.6% 43.8% 27. Japan 66.4% 33.6% 37. Italy 60.9% 31.4% 28. India 68.0% 32.0% 38. Great Britain 61.6% 36.1% 29. Norway 68.5% 31.5% 41. Brazil 63.6% 31.4% 32. Sweden 71.2% 28.7% 43. Spain 64.2% 33.3% 35. Canada 73.7% 26.4% 44. China 64.4% 29.5% 36. South Korea 75.8% 24.2% 45. Sweden 64.7% 33.5% 44. China 82.4% 17.6% 46. New Zeland 65.0% 35.0% 49. Iran 84.8% 15.2% 47. Australia 65.7% 34.3% 50. Thailand 86.5% 13.5% 48. Finland 65.9% 33.0% 51. Vietnam 96.2% 3.7% 52. Canada 72.2% 22.7% 53. Switzerland 74.4% 20.0% 54. Argentina 74.9% 21.8% 55. Norway 77.2% 20.9% 56. Andorra 84.0% 9.4% Note. Adapted from the Values Surveys Databank database, http://www.wvsevsdb.com/wvs/WVSAnalizeStudy.jsp. 120 IWONA CODOGNI Table 7. The attitude of Polish respondents to the alternatives “Environmental protection or economic development”

Environmental protection Economic development and job creation 1997 48.6% 47.5% 2005 42.1% 54.4% Note. Adapted from the Values Surveys Databank database, http://www.wvsevsdb.com/wvs/WVSAnalizeStudy.jsp.

Table 8. Respondents’ answer to the statement “I would give part of my income to environmental protection”

I agree I disagree 1990 74.8% 25.1% 1999 62.8% 37.3% 2005 53.0% 47.0% Note. Adapted from the Values Surveys Databank database, http://www.wvsevsdb.com/wvs/WVSAnalizeStudy.jsp.

Among the surveyed sample of Poles, 30.8% were convinced that in a situation of a deficiency of jobs, men should have a greater right to work than women. This is the second highest result among European Union countries and an order of magnitude higher than the result of Sweden. The vast majority of Poles are also convinced that they should be given preference for a job vacancy over other na- tionalities—the result of 81.6% is the highest among the European Union countries. Therefore, the introduction of CSR solutions in the field of an equal employment opportunities policy because of nationality is not a forced and promoted activity by the environment. The policy of equal employment opportunities due to gender seems to be an idea accepted by the environment of Polish enterprises, so its implementation should not be problematic. Analysis of historical data indicates that Poles’ beliefs about equal employment opportunities for women and men are changing towards those granted by the majority of European Union citizens—the conviction that men must be privileged in subsequent studies is systematically dropping, as shown in Table 11. Analysis of the dynamics of Polish respondents’ belief about the need to privilege Poles when allocating jobs in Poland is less clear. Before 1990, when the issue was almost purely theoretical, 20–30% of respondents were opposed to favoring Poles, but later, when the problem gained a practical value, the number of opponents favoring Poles dropped to about 4%. The data is presented in Table 12.

THE CHANCES AND LIMITATIONS… 121

Table 9. Respondents’ agreement with the Table 10. Respondents’ agreement to the statement statement “In the case of a limited number “In the case of a limited number of jobs, of jobs, men should have more rights to employers should give priority to persons work than women” (selected countries) from [name of the country] over foreigners” (selected countries) I agree I disagree I agree I disagree 1. Egypt 89.1% 4.3% 1. Jordan 98.5% 0.8% 2. Jordan 88.2% 7.9% 2. Egypt 97.9% 0.2% 3. Iraq 83.9% 16.1% 3. Taiwan 91.0% 3.8% 11. India 51.4% 20.5% 13. Poland 81.6% 8.4% 15. China 42.3% 32.7% 14. Brazil 81.4% 9.5% 18. South Africa 37.1% 49.5% 15. Russia 81.4% 9.0% 19. Russia 36.6% 43.7% 18. South Korea 78.9% 2.4% 20. South Korea 36.5% 26.4% 20. South Africa 78.3% 11.0% 22. Romania 35.2% 40.9% 22. Bulgaria 76.6% 14.7% 26. Poland 30.8% 51.0% 24. India 75.2% 6.1% 29. Japan 27.1% 17.9% 34. China 66.0% 13.7% 33. Bulgaria 24.2% 52.6% 35. Romania 65.1% 14.6% 34. Brazil 22.3% 64.1% 37. Italy 63.9% 19.1% 35. Switzerland 22.1% 62.9% 38. Japan 62.7% 6.1% 36. Italy 22.0% 59.2% 40. Spain 57.7% 34.2% 40. France 18.1% 73.8% 41. Germany 55.7% 27.9% 41. Germany 17.8% 66.8% 42. USA 55.4% 20.0% 43. Spain 17.4% 76.0% 43. Finland 54.9% 30.8% 44. Great Britain 16.2% 76.1% 45. Great Britain 52.9% 36.4% 45. Kanada 14.3% 77.9% 46. New Zeland 51.9% 29.3% 46. Australia 13.9% 64.7% 47. Switzerland 48.0% 35.5% 48. Netherlands 12.5% 81.4% 49. France 42.1% 46.4% 50. Finland 9.6% 81.5% 50. Australia 41.6% 36.4% 51. New Zeland 8.0% 72.6% 51. Canada 40.9% 46.1% 52. USA 6.8% 66.4% 52. Netherlands 40.1% 49.8% 53. Norway 6.5% 88.6% 53. Norway 34.7% 57.3% 54. Ethiopia 6.0% 85.6% 54. Andorra 29.8% 53.2% 55. Andorra 4.4% 89.9% 55. Sweden 11.8% 79.9% 56. Sweden 2.1% 94.1% Note. Adapted from the Values Surveys Databank database, http://www.wvsevsdb.com/wvs/WVSAnalizeStudy.jsp.

122 IWONA CODOGNI Table 11. Polish respondents’ answer to the statement “In the case of a limited number of jobs, men should have more rights to work than women”

I agree I disagree 1989 54.7% 30.2% 1990 56.1% 33.1% 1997 44.6% 41.2% 1999 34.9% 47.8% 2005 30.8% 51.0% Note. Adapted from the Values Surveys Databank database, http://www.wvsevsdb.com/wvs/WVSAnalizeStudy.jsp.

Table 12. Polish respondents’ answer to the statement “In the case of a limited number of jobs, employers should give priority to Poles over foreigners”

I agree I disagree 1989 67.3% 23.2% 1990 60.3% 31.2% 1997 90.6% 4.5% 1999 90.7% 3.6% 2005 81. 6% 8.4% Note. Adapted from the Values Surveys Databank database, http://www.wvsevsdb.com/wvs/WVSAnalizeStudy.jsp.

5. Conclusions

The implementation of CSR assumptions in Polish enterprises is a result of social expectations, the financial situation and the organizational culture of the organizations under study, the socio-economic situation of the country, as well as its social level (Filek, 2008, p. 63). If the barriers to the development of socially responsible business lie mainly in historical events, then it is to be expected that the change of conditions after 1989 (the change of political regime) and 2004 (Poland’s accession to the European Union) will gradually limit these restrictions. The quoted results of the study of the beliefs of Polish society show that the attitude to equal opportunities in employment is positively changing, while the tendency to improve the environment at the price of financial sacrifices is negative, which is probably related to the still low income of Poles. Organizations implementing a CSR strategy gain significantly in the eyes of employees, who are willing to identify themselves with the goals of socially responsible enterprises. It should be emphasized that socially responsible enterprises pay a lot of attention to meeting the needs of human resources (including financial needs) and invest in staff development. A very promising trend is the growing attention devoted to the issues of ethics in business and corporate social responsibility at Polish universities of economics. In recent years, the interest of scientists in this subject has also increased, THE CHANCES AND LIMITATIONS… 123 which directly translates into the number of conferences organized, and thus also scientific publications in the field of ethics in business. We are observing an increasing interest in CSR issues of entrepreneurs who are trying to respond to the needs of their stakeholders. The barrier related to the awareness of managers is reduced. More and more enterprises and state offices are introducing codes of ethics as a framework for binding behavior for all employees of the organization. This significantly eliminates the tendency for corrupt behaviors and limitations related to the mentality of Polish employees, with their roots in the history of our country. It is promising that many organizations are implementing a coherent CSR strategy. The trend in ethical reporting is growing. When analyzing empirical data, it should be expected that this trend will grow, which is an extremely positive phenomenon.

References

Adamczyk, J. (2009). Społeczna odpowiedzialność przedsiębiorstw. Warszawa: Polskie Wydawnictwo Ekonomiczne. Bem-Kozieł, K. (2008). CSR a efektywność pracy. In M. Bąk, & W. Kulawczuk (Eds.), Społeczna odpowiedzialność biznesu w małych i średnich przedsiębiorstwach (pp. 109–119). Warszawa: Instytut Badań nad Demokracją i Przedsiębiorstwem Prywatnym. Blowfield, M., & Murray, A. (2008). Corporate responsibility: A critical introduction. Oxford University Press. Filek, J. (1996). Przeszkody w uetycznianiu gospodarki polskiej. In A. Węgrzecki (Ed.), Etyczny wymiar przekształceń gospodarczych w Polsce (pp. 49–55). Kraków: Aka- demia Ekonomiczna w Krakowie. Filek, J. (2008). Przyczyny małego zainteresowania ideą CSR w Polsce. In M. Bąk, & W. Kulawczuk (Eds.), Społeczna odpowiedzialność biznesu w małych i średnich przedsiębiorstwach (pp. 61–73). Warszawa: Instytut Badań nad Demokracją i Przedsiębiorstwem Prywatnym. Główny Urząd Statystyczny, Bank Danych Lokalnych, http://www.stat.gov.pl. Paliwoda-Matiolańska, A., (2009). Odpowiedzialność społeczna w procesie zarządzania przedsiębiorstwem. Warszawa: Wydawnictwo C.H. Beck. Peszko, A. (2005). Podstawy zarządzania organizacjami. Kraków: Uczelniane Wydawnic- twa Naukowo-Dydaktyczne AGH. Program „Podziel się Posiłkiem”. http://www.podzielsieposilkiem.pl/index.php?Pages& MenuId=51 Sójka, J. (2003). Etyczna refleksja nad gospodarką polską. Szanse i zagrożenia. In A. Wę- grzecki (Ed.), Etyczne aspekty bogacenia się i ubóstwa. Kraków: Akademia Ekonomiczna w Krakowie. Weigelt, K., & Camerer, C. (1998). Reputation and corporate strategy: A review of recent theory and applications. Strategic Management Journal, 9(5), 443–454.

Annales. Etyka w Życiu Gospodarczym / Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 125–140 doi: http://dx.doi.org/10.18778/1899-2226.21.7.09

Robert Rogowski State University of Applied Sciences in Nowy Sącz Institute of Economics e-mail: [email protected]

The practice of CSR implementation in Polish companies according to the CSR advisors*

Abstract

The paper presents the experiences of advisers in implementing the concept of CSR in Polish enterprises. The article presents the results of surveys covering such issues as the implementation of CSR motives and actions taken by operators in the implementation of CSR policies. CSR advisors also identified that companies can use unethical practices. This is also a characteristic of CSR advisors.

Keywords: CSR, ethics, Polish enterprises

JEL Classification: M14

1. Introductory remarks

The concept of corporate social responsibility (CSR) dates back to the mid- twentieth century. In 1953, Bowen, with his book entitled Social Responsibilities of the Businessman1 made the discussion about the idea of responsibility connected with business activity more dynamic, which in time, turned into the concept of

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 19(1), 37–54. 1 In 2013, a new edition of this book was published at the University of Iowa. The author writes about CSR as follows (p. 6): “It refers to the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.” 126 ROBERT ROGOWSKI CSR (Corporate Social Responsibility) (p. 6). There are many CSR definitions. They include its social, economic, political or environmental aspects. The authors who take up this topic use such terms as: ethical practices, environmental protection, and transparency in actions, consideration of all parties involved, responsibility, responsible behavior, moral obligations, or corporate social responsibility. It should be noted that the motives for CSR implementation in enterprises may be different, starting from a pure business calculation (CSR as a certain management strategy that allows maximizing economic benefits), through trend, the pressure of the environment (competition or consumers who enforce CSR implementations), the possibility of using financing and consulting in the implementation of CSR, or pure care resulting from moral motives and the desire to be responsible for their actions. As Bowen notes that business decisions have a direct impact on the lives of people in society. This impact applies only to entrepreneurs, shareholders, employees or clients, both directly and indirectly. Economic life always takes place in society and only then makes sense. It is in a society that products and services are provided. It is in the society that clients are sought for, whose acquisition and maintenance determines the continuity and development of a business. Enterprises make a significant contribution to the common good by hiring employees, manufacturing goods, providing services and paying taxes. It is entrepreneurs who are the basic and indispensable subjects of economic life. Each entrepreneur is “the creator of new techniques, raw materials, goods as well as new needs. His activity is creatio ex nihilo: it is overcoming the imperfections of knowledge and discovering new possibilities taking place in the form of a creative act of noticing what remained behind the veil of ignorance” (Klimczak, 2001, p. 109). Economic activity is one of the basic areas of human and social functioning. Its conduct is possible only in a social context, through cooperation with others. The functioning of enterprises in society means that they should not behave in any manner—they are obliged to act properly and the responsibility connected with it. Such a responsibility results from the fact that enterprises influence the situation of members of society; specific people with personal dignity, should be the subject and the goal of the whole social and economic life. The aim of the research results presented in the article was to identify the experience of advisers dealing with the implementation of the CSR concept in Polish enterprises. The research results have been discussed in which problems such as: motives for CSR implementation, activities undertaken by economic entities in the implementation of CSR policy, and identification of unethical practices used by enterprises were taken. The article also describes the CSR advisors themselves. The layout of the study is as follows: the first part outlines the idea of CSR briefly and demonstratively, while the second presents the results of the research. THE PRACTICE OF CSR IMPLEMENTATION… 127 2. CSR concept

Rahman (2011) presented the evolution of defining CSR within six decades, counting from the 1950s. Initially, the duties of entrepreneurs and managers were not limited to taking actions that gave the best economic results but also taking into account the human and social aspects. Davis then justified corporate social responsibility by pointing to the consequences of their decisions, which have a broader, than only economic or technical, dimension. Frederick wrote about the need for business to take into account the expectations of society so that the effect would be to improve socio-economic well-being. In 1970, Heald described CSR as a relationship between an enterprise and the community. Even Friedman, an opponent of the CSR concept, paid attention to the need to take care of profit, but in accordance with the applicable legal principles. Subsequent CSR approaches took into account the necessity of balancing between various goals, such as profit, employee welfare, suppliers, local community or the whole nation. In the 1970s, the economic, legal, ethical and philanthropic expectations of the society towards business were pointed out. Four aspects of the social activity of enterprises appeared then: social responsibility, social accounting, social indicators, and social audit. It was further pointed out that the idea of CSR should be implemented as a free choice, as opposed to obligations arising from the law. In 1984, Freeman proposed the theory of stakeholders, in which he cataloged the stakeholders of enterprises to which he included consumers, competitors, media, journalists, suppliers, government, consumer associations, local communities, and business associations. In 1999, CSR was defined as a “contract between business and society in which society grants a license to an enterprise and in return expects responsible and acceptable practices.” Next, the concept of 3P (People, Planet, Profit) was indicated as the basis for CSR, according to which what is good for the environment and for society is also good for the financial effects of economic activity. In 2002, the European Commission described CSR as a concept in which enterprises consider social and environmental aspects in their business activities on a voluntary basis. In 2001, Lantos distinguished three types of CSR: ethical (morally responsible actions that take into account the damages that the company’s activities may cause), altruistic (voluntary activities of the company that may involve losses and sacrifices) and strategic (support for a society realized as an element of strategic corporate business goals). In 2007, the issue of CSR in third world countries was also taken, in which many corporations do not feel obliged to implement this concept (Rahman, 2011). In 2008, the World Business Council for Sustainable Development introduced its definition of CSR, referring to the behavior of business people in an ethical way for economic development, improving the quality of life of employees and their families, as well as local communities and society as a whole. UN Global Compact, as the world’s largest UN initiative for corporate social responsibility and supporting sustainable development, undertakes actions for the sustainable development of the economy, the fight against corruption, environmental protection and ensuring social inclusion. Instead of the definition of 128 ROBERT ROGOWSKI CSR, it promotes the application of 10 basic principles in business. In 2011, the European Commission published a new definition defining CSR as the responsibility of enterprises for their impact on society. The literature also distinguishes three dimensions of entrepreneurs’ responsibility: the micro-plane (the attitude of the entrepreneur towards himself, the attitude towards others—employees, contractors, supervisors and the attitude to non-personal goods—for example to the natural environment), the mezo-plane (regarding the organization of economic units) and the macro-plane (covering the problems of organizing the socio-economic system, also on an international scale) (cf. Dylus, 2002, pp. 273–287). It is assumed that all dimensions should be treated as a whole—integrally.2 One can point to a few basic areas of social responsibility of the entrepreneur. These include: economic responsibility, i.e., the need to care for a positive economic result, legal responsibility and compliance with applicable law, ethical responsibility in (accordance with moral principles, and philanthropic responsibility in undertaking activities for the benefit of the society (cf. Rybak, 2002, pp. 67–69). The economic responsibility of the entrepreneur lies in ensuring the possibility of its functioning and therefore demands taking care of a positive financial result. Thanks to this, the owner is rewarded for the risk, capital employed and work involved. Jobs are maintained, and thanks to reinvestments, there is a possibility of further development of the company. Profit means de facto contributing to the achievement of the common good (provided that it is not exploitation, i.e. a profit achieved through unfair economic activities). Profit is, therefore, a good and should be treated as a means to achieve other goals. It should serve every man, not only the owner of the enterprise but also employees and even consumers (cf. John Paul II, 1991, No. 35). The legal responsibility of the entrepreneur means that he/she is acting within the limits of the established law.3 Assuming that legal regulations are fair, organizing socio-economic life and inhibiting immoral activities, their observance is a condition for maintaining the social order. Compliance with the law by the entrepreneur is the implementation of responsibility and contributes to the preserva- tion of the socio-economic order. The ethical responsibility of an entrepreneur means that as a moral being, he/she bears responsibility for all his/her actions, just as every man is responsible, regardless of the area of his activity. Therefore, the actions, or the negligence of the entrepreneur, are related to responsibility. This applies to all relationships,

2 Economic ethics, asking about the scope of responsibility of the enterprise and the entrepreneur, developed a stakeholder theory. The term means “all whose interests or rights are in any way related to the activities of a given company.” People who are interested are talked about, so people who are directly or indirectly affected by the company’s operations. This means that they cannot be excluded from entities for which moral responsibility is taken (Dylus, 2000, p. 27). 3 The definition of the law is given by F. J. Mazurek: “The law norms social relations between human persons, social groups, relations between persons and state authority, and the attitude of persons to various types of goods. It integrates social groups, sets social roles, controls actions, and defines a socio-economic system; it is experienced by entities as a claim-obligation and is a type of language expression having a specific meaning” (1973, p. 49). THE PRACTICE OF CSR IMPLEMENTATION… 129 both within the enterprise (primarily the relations between the employee and owner) and at the interface between the enterprise and the environment (relations with suppliers, consumers, the local community, the state). The philanthropic responsibility of an entrepreneur is going beyond mere justice and may manifest itself in engaging the enterprise in various social programs. In practice, the intentions of such actions may be utilitarian, moral or mixed (moral-utilitarian). The allocation of a part of financial resources or other support is a help for specific people and a contribution to the realization of the common good. Garriga and Mele (2004) note that the majority of contemporary CSR theories include four basic goals of enterprises implementing the principles of corporate social responsibility. First, focus on getting long-term profits; secondly, to run a business in a responsible manner; thirdly, taking into account the expectations of society and, fourthly, contributing to the good of society through ethically correct actions. The CSR concept was also taken into account by the ISO International Or- ganization for Standardization, which in 2010 introduced the ISO 26000 social responsibility standard (Guidance on Social Responsibility). It defines social responsibility as the organization’s responsibility for the impact of its decisions and actions on society and the environment through transparent and ethical behavior.4 Researchers note that the implementation of CSR is combined with many benefits including improving the image, translating into increased customer loyalty, greater satisfaction, and greater employee motivation, and easier access to capital. Implementation of the CSR concept may turn out to be a profitable element of corporate strategy, lowering the risk and allowing maintaining long-term relationships leading to many benefits (cf. Nur-E-Alam, 2015). An important question about CSR is the moral evaluation of the practices undertaken. Since this is not the purpose of this study (the problem belongs to normative ethics), it is only possible to signal selected controversies or ethical answers. The moral evaluation of implementing specific solutions under CSR in practice requires answering questions: what are the motives and goals of the activities (the subjective aspect of the act)? What are the effects of the activities (the objective aspect of the act)? Are these actions real or simulated? The development of an enterprise is good in itself, and CSR is certainly an exemplification. In the case of CSR, a number of good practices are implemented for various entities related to the company. Theoretically, these themes can be purely utilitarian, or altruistic. Without going into an ethical analysis, it is worth noting that there are entrepreneurs who, although they do not formally implement CSR strategies, in practice undertake to implement various types of good towards employees, clients or people in need,

4 This procedure “contributes to sustainable development, including health and the well-being of society; takes into account the expectations of stakeholders (individuals or groups who are interested in decisions or activities of the organization); it complies with applicable law and is consistent with international standards of conduct; it is integrated with the activities of the organization and practiced in its activities undertaken within its area of influence” (Polish Committee for Standardization, 2012). Guidance on social responsibility was developed by KT [Technical Committees] 305 on Social Responsibility and published on November 5, 2012. 130 ROBERT ROGOWSKI without simultaneously publicizing this fact. It is necessary to distinguish small business entities that delay or postpone the CSR implementation due to lack of time, funds, or other ongoing management issues. It is much easier for the larger enterprises with resources to engage in formalized CSR activities.

3. Study results

Preparing to conduct research, 281 Polish CSR advisers registered in the Polish Agency for Enterprise Development were identified, to which a request was submitted to complete a questionnaire. The research was carried out in May and June 2014. The traditional methodological problem was to obtain enough of returned completed questionnaires. For its increase, it was twice asked to participate in the research and people were offered to submit a research report.5 Taking into account the percentage of returned questionnaires (16%), the conclusions drawn below should be treated as preliminary and further research is necessary for achieving a fuller understanding of the issues involved in the implementation of the CSR in the Polish enterprises. Measurement of morality in economic life is difficult, but its attempts to some extent approximate the truth about the ethos of Polish entrepreneurs and managers. It seems that too often there are a priori statements about the fact that in business we deal with frequent irregularities. As noted by Kahne- man, Nobel laureate in the field of economic sciences, “[i]t is possible that this is a cognitive mistake resulting from the inclusion of some statistical information and media reports of evil occurring in the economic environment” (2012). Consid- ering the imperfections of the survey using the questionnaire, it seems that the obtained research results, to some extent, certainly bring closer to broadening the knowledge about economic practice in Poland. Answers were obtained from 46 people (over 16%). All advisers had higher education. Of the respondents, 22 are men and 24 are women. The age structure is as follows: 33% of respondents are over 45 years old, 39% are 39 to 45 years old, 26% are from 25 to 35 years old and 2% are under the age of 25 (Chart 1). Most answers came from advisors working in the following voivodeships: Masovian (39%), Lesser Poland (13%) and Lower Silesian (11%). The remaining voivodships were represented by several advisers.

5 One of the respondents, a specialist dealing with corporate social responsibility, proposed a conversa- tion with the research implementer, which took place in July 2014 and covered the issues and practice of implementing CSR in Polish enterprises. Therefore, it can be stated that the supplement of the research was an interview with a practitioner professionally involved in the analyzed subject. THE PRACTICE OF CSR IMPLEMENTATION… 131

Chart 1. Age structure of the surveyed CSR advisors Considering the advisors surveyed, they most often had an education in the field of economic sciences and / or management sciences (57% of respondents), completed a CSR course / training (33% of respondents), completed post-graduate studies in the field of business ethics/CSR (13 % of respondents), completed law studies (4% of respondents) or philosophy (2% of respondents). The vast majority of people declared that they had experience in business in the field of CSR (87% of people). In carrying out the research, attempts were made to learn the motives of dealing with CSR consulting. Some of the respondents referred to ethical categories. The following statements appeared: “The use of my competences for the common good”, “Once it was called decency. Today, CSR. Each of us has the right to a dignified life, a clean environment, and a good life in the community,” “I want to support these efforts to contribute to reducing the size of social alienation of companies that pursue one goal—profit,” “Reaching with the message about the need to repent in the exploitation of the environment for future generations,” “Willing to make companies aware that they should take responsibility for the impact they have on their environment.” For some advisers, this is the realization of their professional interests (11 statements indicating the implementation of CSR as a hobby, passion, self-realization etc.). In several cases, it was a professional path resulting from previous experiences (work in the NGO sector, dealing with public relations, social work, consulting for companies in general). Some referred to the demand reported by companies as a motive for dealing with CSR (4 responses, including e.g. “There is a growing demand for consulting in this field—very good prospects for the future”). There are rarely purely economic justifications, i.e. referring to the possibility of earning from counseling (4 people, among them the following statement: “You can earn money from it, and the effects are usually positive for everyone”). It was also pointed out that the interest of CSR on the part of a business is related to the possibility of benefiting from co-financing the implementation of this concept, with the chance to gain a better market position. The role of CSR in improving the quality of relations between employees in the workplace, increasing the effectiveness of their work 132 ROBERT ROGOWSKI and attracting talented young employees was also noticed. One of the advisors widely justified his work by stating that CSR was, “the ability to influence the effectiveness and quality of the company from the financial, economic, environmental, and social and employee side”. Among the respondents, only one person deals exclusively with CSR consulting. Other people work as business consultants (12 people), some are responsible for internal and external communication in the company (5 people), several people run associations, own company or manage the entrusted property (5 people), several people deal with employee issues, including conflict resolution, prevention of mobbing, employee volunteering, occupational health and safety, supervision of the training process (5 people), some people are connected with environmental protection (4 people), with project management in various organizations (6 people). The respondents also included: a specialist in financing and implementing economic innovations, auditors, a financier, and an appraiser. One of the research problems was to recognize the potential economic and financial benefits as the motive for implementing CSR. In the opinion of advisers, this is a relatively frequent motive (63%). One in three respondents said that this is probably not the main reason (Chart 2).

Chart 2. Implementation of CSR only due to potential economic and financial benefits In half of the cases, the advisors stated that the motivation for implementing the CSR concept was to improve the company’s image (Chart 3). THE PRACTICE OF CSR IMPLEMENTATION… 133

Chart 3. Implementing CSR only for the sake of improving the company’s image In 13%, the implementation of the CSR concept consisted only in creating formal documentation (Chart 4).

Chart 4. Implementing CSR primarily as creating formal documentation In most cases, employees of enterprises have a positive attitude towards practices undertaken within CSR (72%). There are also opposite opinions (Chart 5).

134 ROBERT ROGOWSKI

Chart 5. Positive attitude of employees of enterprises to the implemented CSR concept It turns out that there are slightly more enterprises that actively seek external specialists asking for consultations regarding CSR (56%). In almost half of cases, enterprises receive an offer from external institutions in the field of consulting and developing CSR strategies (Chart 6).

Chart 6. Enterprises applying for the CSR consultations themselves The majority of enterprises (68%) provide information about activities undertaken within CSR to the environment (Chart 7).

Difficult to say 17%

Chart 7. Informing the environment by enterprises about the activities undertaken as part of the CSR THE PRACTICE OF CSR IMPLEMENTATION… 135 An interesting issue was the identification of the type of positions occupied in enterprises by those responsible for CSR. In every third case, it was the person occupying the highest position in the enterprise. Every third employee was given this additional obligation. In every fourth case, it was an independent position. In a few cases, it was an outsider (Chart 8).

Chart 8. Posts occupied in the company by those responsible for CSR It turned out that the bigger the enterprise, the more interest it is in the implementation of CSR. The most common were joint-stock companies (52%), followed by medium-sized enterprises (28%). Some respondents said (10%) that there are no significant differences taking into account the size of the enterprise (Chart 9).

Chart 9. The type of enterprises most often interested in implementing CSR according to the size criterion 136 ROBERT ROGOWSKI The respondents also prioritized the motives for implementing CSR in enterprises. In top priority was to improve the image (30%). In the second place was following the trend (26%), the third was to improve the financial picture (15%). The reasons such as the external requirements, willingness to implement initiatives for local communities and others were mentioned less frequently (Chart 10).

Chart 10. The main theme of implementing the CSR concept

Implementation of CSR is associated with the implementation of various types of practices. Research has shown that activities such as: creation of CSR strategies (87%), improvement of relations with employees (72%), implementation of environmental standards (72%), implementation of CSR strategies (65%), and implementation of initiatives for local communities (65%) dominate. About half of the companies these are: implementation of the code of ethics (57%), CSR reporting (54%), increasing work safety (54%), charity activities (54%) and conducting a dialogue with stakeholders (46%). The least mentioned were, supply chain management (28%), measuring CSR effectiveness (24%) and counteracting corruption. (20%). The distribution of responses is shown in Chart 11. The aim of the research was also to learn about the most common unethical practices occurring in enterprises in the opinion of CSR advisors. The most common indications concerned, not paying overtime for employees (59%), non- compliance with regulations regarding environmental protection (48%), employee mobbing (43%), non-payment of wages on time (43%), and misleading the customers (37%). The less frequently mentioned were: the use of unfair contract clauses (33%), unreported employment (30%), and avoiding taxes (26%). At the bottom of the list were the use of whisper marketing (17%), corruption (15%), misleading suppliers in advertising (15%), and the use of negative campaigning (7%). The distribution of responses is presented in Chart 12. THE PRACTICE OF CSR IMPLEMENTATION… 137

Chart 11. Activities implemented by enterprises under CSR

Chart 12. Unethical practices in the Polish enterprises

138 ROBERT ROGOWSKI 4. Conclusions

The CSR concept has its rich history. The content itself has undergone modifica- tions and corrections. The conducted research has brought closer the knowledge about the implementation of the CSR concept in Polish enterprises based on the experience of advisors. The main motive for implementing CSR is the potential economic and financial benefits (63%) and the improvement of the company’s image (50%). CSR is also the trend (26%). Implementing CSR is usually specific practical activities. Only in 13%, the implementation of CSR turned out to be only the creation of formal documentation. Employees most often show a positive attitude towards CSR (72%). The implementation of CSR in enterprises may be the result of an initiative of external entities (46%). The majority of enterprises (68%) use an active information policy, providing information about activities undertaken within CSR to the environment. People involved in CSR in enterprises occupy various positions. The largest interest of the CSR concept is shown by joint-stock companies (52%) and medium-sized enterprises (28%). Enterprises as part of CSR implementations most often create a CSR strategy (87%), improve relations with employees (72%), implement environmental standards (72%), implement CSR strategy (65%) and undertake initiatives for local communities (65%). According to the respondents, the most common unethical practices in Polish enterprises are: non-payment of overtime (59%), non-compliance with environmental protection (48%), employee mobbing (43%), non-payment of wages on time (43%) and misleading customers (37%). The conducted research allows drawing several conclusions, which, what should be emphasized, are preliminary and require confronting with the results of further in-depth scientific research. It turned out that the implementation of CSR is primarily pragmatic. It should also be noted that CSR is usually specific practical activities, not limited to formal activities that would serve only informational and marketing purposes. As one might suppose, mainly large entities take active steps in implementing complex CSR strategies. Not so well is the opinion of the respondents on the scale of the most common unfair practices used by economic entities operating in Poland. However, be aware that these opinions may be the result of not only own experience, but also may be related to the previously mentioned cognitive error and a stereotypical view of business reality and not fully aware of the extent of the good that takes place in economic life. Running a business requires effectiveness and efficiency in management. Profit, as one of the economic indicators, is a condition for the functioning of an economic entity in the long run. Apart from the economic aspect, economic activity also has a normative legal, ethical or even esthetic aspect. The entrepreneur must move in this multidimensional space, taking care of the economy. It is worth remembering that an economic entity does not have to strive to maximize profit, but it is necessary to make a profit. It should be noted here that every organization THE PRACTICE OF CSR IMPLEMENTATION… 139 for its functioning must care for its financial result6. The entrepreneur, however, can make a profit by taking wicked (immoral) actions. Then one should talk about exploitation, not profit. Entering solutions offered by the CSR concept by economic entities may result from different premises and have different purposes. Certainly, it is a good thing, an added value that enriches the organizational culture of the company. Such activities can serve the development of business and promote a competitive position on the market. On the other hand, it is difficult to unequivocally assess these practices from the ethical side, especially with a super- ficial, image-like comparison of the “degree” of the ethicality of a given economic entity with other entities, within which various goods can be implemented without calling it CSR and without announcing it. Every human act requires a separate ethical analysis and people who carry out similar-looking business practices can be judged differently from a moral point of view. In the future, it would be worthwhile to carry out research aimed at obtaining an answer to the question regarding the relationship between the implementation of the CSR concept and economic effectiveness in Polish enterprises. An interesting research problem would also be to diagnose the reasons for the lack of interest in the practice of CSR by small enterprises (how much the lack of resources is the cause—time, people, financial resources, as the lack of knowledge about CSR, lack of conviction regarding the legitimacy of implementing CSR in small business organizations and others).

References

Bowen, H. (1953). Social responsibilities of the businessman. New York: Harper & Row. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A renewed EU strategy 2011–14 for Corporate Social Responsibility. (2011, October 25). Brussels. http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52011 DC0681 Dylus, A. (2000). Odpowiedzialność moralna przedsiębiorców. Asekuracja&Re, 7. Dylus, A. (2002). Erozja standardów etycznych w biznesie. In J. Mariański (Ed.), Kondycja moralna społeczeństwa polskiego (pp. 271–297). Kraków: Wydawnictwo WAM Polska Akademia Nauk. Garriga, E., & Mele, D. (2004). Corporate social responsibility theories: Mapping the terri- tory. Journal of Business Ethics 53(1), 51–71. John Paul II. (1991). Centesimus annus. Kahneman, K. (2012). Thinking, fast and slow, Poznań: Media Rodzina.

6 A charitable organization can help financially on the scale in which it acquires funds. The household must also be managed taking into account inflows and outflows. Orders and parishes must also be managed financially. In the case of enterprises, the achievement of profits results not only from the condition of survival, but also can serve its development. 140 ROBERT ROGOWSKI Klimczak, B. (2001). Etyczne aspekty reguł konkurencji gospodarczej. In W. Gasparski, J. Dietl (Eds.), Etyka biznesu w działaniu. Doświadczenia i perspektywy (pp. 100–116). Warszawa: Wydawnictwo Naukowe PWN. Mazurek, F. J. (1973). Prawo naturalne podstawą stosunków społecznych. Roczniki Nauk Społecznych, 21(2). Nur-E-Alam, S. (2014). CSR practices and competitive advantages: A descriptive study. American Journal of Trade and Policy, 1(2), 109–116. Polish Committee for Standardization. (2012). Polska Norma PN-ISO 26000:2012. http:// www.pkn.pl/iso-26000 Rahman, S. (2011). Evaluation of definitions: Ten dimensions of corporate social responsibility. World Review of Business Research, 1(1), 166–176. Rybak, M. (2002). Społeczna odpowiedzialność przedsiębiorstw. In M. Borkowska, & J. Gałkowski (Eds.), Etyka w biznesie. Lublin: Towarzystwo Naukowe Katolic- kiego Uniwersytetu Lubelskiego. UN Global Compact. https://www.unglobalcompact.org/ World Business Council for Sustainable Development (2008). http://www.wbcsd.org/ho me.aspx Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 141–152 doi: http://dx.doi.org/10.18778/1899-2226.21.7.10

Urszula Gołaszewska-Kaczan University of Bialystok Faculty of Economics and Management Department of Management e-mail: [email protected]

Jacek Marcinkiewicz University of Bialystok Faculty of Economics and Management Department of Econometrics and Statistics e-mail: [email protected]

Jarosław Kilon Grupa Partnerska BUCHALTER e-mail: [email protected]

Assessment of investment attractiveness in shares of socially responsible companies based on the RESPECT index in 2009–2017*

Abstract

Both in theory and practice, it is emphasised that engaging in CSR actions brings many benefits to companies. One of the commonly listed advantages is more trust from investors, which enables the achievement of superior returns from securities issued by socially responsible firms. The paper endeavours to investigate whether this benefit can be also noticed among businesses in the Polish index of socially responsible companies RESPECT. The study involves firms included in the RESPECT index from its inception (November 2011) to the end of 2017. The authors compared the RESPECT index with selected Polish market indices between 2009 and 2017. Empirical studies, based on an analysis of returns, risk,

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 19(3), 113–127. 142 URSZULA GOŁASZEWSKA-KACZAN, JACEK MARCINKIEWICZ, JAROSŁAW KILON dividend yields, and shareholder structure, facilitated the assessment of the attractiveness of investments in the shares of socially responsible businesses against the background of other firms quoted on the Warsaw Stock Exchange.

Keywords: Corporate Social Responsibility, RESPECT index, Warsaw Stock Exchange

JEL Classification: G12, M14, Z13

1. Introduction

Along with the changing conditions of doing business, the perception of the role that companies play and should play also change. For many years, it has been emphasized above all that business entities cannot focus only on earning a profit. It is also necessary to pay attention to other than financial expectations of various groups of stakeholders, as well as to make attempts to implement them. The enterprise is not detached from the environment in which it operates. Using the resources of the environment must also give something from itself. The idea that perfectly describes this approach is corporate social responsibility. The concept of corporate social responsibility has been shaped for many years. And although the first examples of the implementation of the idea of corporate social responsibility were already visible in the 19th century (it is worth pointing out, for example, the activities of philanthropists such as G. Peabody, A. Carnegie, S. Girard), a real flourishing of practices in this area occurred in the 21st century. In theory and practice, it is emphasized that involvement in socially responsible activities allows companies to realize many benefits. One of the often mentioned profits is greater investor confidence, which gives the opportunity to achieve better results in the securities market. This article is a development and continuation of research previously undertaken by the authors, originally covering the years 2009–2015 (Gołaszewska- Kaczan, Kilon & Marcinkiewicz, 2016). The study was an attempt to examine whether in the case of companies included in the Polish index of companies responsible for RESPECT, such positive. The research included companies belonging to the RESPECT index from the beginning of its quotations (2009, November) until the end of 2017. The study carried out a comparative analysis of the RESPECT index with other selected indices describing the general situation of the stock exchange over the years 2009–2017. The research used the analysis of return rates, risk, and dividend rate as well as shareholder structure. ASSESSMENT OF INVESTMENT ATTRACTIVENESS… 143 2. The concept of corporate social responsibility and benefits associated with its implementation

Despite the relatively long history, corporate social responsibility (CSR) has not been coherently adopted by all definitions. The development of ideas leads to the emergence of constantly new approaches, and practice proves that it is possible to take socially responsible actions in ever new areas. In this study, however, definitional considerations will be omitted,1 only selected official approaches will be indicated, which probably have the most decisive influence on the current perception of social responsibility. An important role in the development and popularization of social responsibility for many years has been played by the European Commission and this institution in October 2011 published a communication A Renewed EU Strategy 2011– 14 for Corporate Social Responsibility (COM (2011) 681). The Commission puts forward a new definition of CSR as “the responsibility of enterprises for their impacts on society.” The prerequisite for being a socially responsible company is to respect for applicable legislation, and for collective agreements. Enterprises must integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders. The definition of the European Commission corresponds to the definition of social responsibility proposed by the International Organization for Standardiza- tion (ISO) in 2010. Although the ISO definition recognizes that the idea of social responsibility can be implemented not only by enterprises but also by other organizations (departing from the original concept of social responsibility attributed to enterprises), the idea of including the analyzed term itself is similar. According to ISO 26000, social responsibility falls on a specific organisation “for the impacts of its decision and activities on society and the environment, through transparent and ethical behavior that: (1) contributes to sustainable development, including health, and welfare in a society; (2) takes into account the expectations of stakeholders (individual or group that with an interest in any decision or activity of an organization); (3) is in compliance with applicable law and consistent with international norms of behaviour; (4) is integrated throughout the organization and practised in its relationship.” Both definitions cover social responsibility quite practically, emphasizing the most important aspects and areas of interest. These can be a starting point to indicate areas in which socially responsible activities should be undertaken. Accord- ing to ISO 26000 (p. 4), these are: organizational order, human rights, work practices, environment, fair organizational practices, consumer issues, social involvement, and local community development.

1 Interesting considerations on this subject can be found in Rok (2013). 144 URSZULA GOŁASZEWSKA-KACZAN, JACEK MARCINKIEWICZ, JAROSŁAW KILON The idea of social responsibility assumes voluntary action, indicating the areas of action are not tantamount to the need to take initiatives in every field. In each of the areas the company can show innovation, choose the form of commitment corresponding to its capabilities, interests, and objectives. The variety of activities undertaken in each area can be seen on the basis of reading the annual Responsible Business in Poland reports. Good Practices, issued by the Responsible Business Forum. Every year several dozen companies announce their actions, programmes, and practices there to show the scale and breadth of their social involvement. At the same time, from year to year, more and more organizations publish their own social reports describing the activities undertaken. This certainly proves the growing scale of interest in the concept of social responsibility. At this point, one may pose a question: What is the reason for such involvement? What benefits do entities expect to derive from such activity? The literature provides a variety of benefits related to undertaking corporate social responsibility initiatives. According to the Responsible Business Forum, the profits resulting from the implementation of the corporate responsibility strategy considered in the long- term perspective are as follows (Encyklopedia CSR, n.d.): (1) Increased interest of investors—cooperation with responsible companies is interested both in lenders and many investors for whom the financial credibility of the company depends on its social credibility. (2) Increased loyalty of consumers and stakeholders—the increase of consumer’s social awareness causes that in their choices they are also guided by trust in the company and its image. A growing group of consumers draws attention to the “ecological” nature of a product or service, adherence to the principles of social responsibility in the process of its production and the company’s overall reputation. (3) Improving relationships with the community and local authorities— activities in the field of social engagement makes it easier for the company to get rooted in the community and win the favor of its residents, as well as gain the trust of local authorities. (4) Increase in competitiveness—the implementation of responsible business principles is one of the tools by which companies gain a competitive advantage. (5) Raising the level of the company’s organizational culture—a responsible company raises its standards of behavior towards stakeholders, which influences the formation of the company’s organizational culture based on trust, responsibility, and transparency for all interested parties. (6) Shaping a positive company image among employees—being a socially responsible company can be an instrument of non-financial motivation, the company’s image improves in the eyes of the employee. (7) Acquiring and retaining the best employees—building the image of a socially responsible company translates into building the image of the employer of choice, which allows you to attract new and retain the best employees. ASSESSMENT OF INVESTMENT ATTRACTIVENESS… 145 This is reaffirmed by the ISO 26000 standard that holds that the socially responsible activities can have a positive impact on: (1) competitive advantage; (2) the reputation of the organization; (3) the ability to attract and retain employees, consumers, customers, and users; (4) morale, commitment, and efficiency of employees; (5) opinions of investors, owners, donors, sponsors, and the financial community; (6) organization relations with enterprises, government institutions, media, suppliers, similar organizations, clients and the community within which the organization operates. In turn, Anam Kachniewski, Sobolewski and Owczarek (2012), focusing only on the listed companies, indicate the following opportunities related to the implementation of CSR (p. 7): (1) Opportunity for better risk management through mapping of stakeholders and related opportunities and threats, which allows for better understanding of potentially problematic areas. (2) A chance to improve the image and reputation. (3) A chance of winning in the fight for talent on the market, thanks to the involvement of employees in CSR programs and management through values. (4) A chance for innovation. Thanks to the practice of stakeholder management and socio-environmental analysis, CSR creates innovation. (5) A chance to take a leadership position that overtakes regulations relevant to its operations and influences their future shape. (6) Access to the capital of investors who take into account ESG factors in business decisions (issues related to the environment, society and corporate governance). At this point, attention will be focused on one of the above-mentioned benefits, which, however, appears in each of the presented combinations—the benefits associated with shaping relations with investors. According to the authors quoted earlier, as much as 90% of the investors believe that ESG factors affect the company’s financial performance in the next 3 to 5 years (Anam et al., 2012). In turn, according to the consulting company Mc Kinsey, as many as 80% of potential investors are ready to pay up to 27% more for shares of companies implementing the CSR principle, because according to shareholders, it will ensure stable growth of the company’s value and greater market confidence (Wołowiec, 2004, p. 4). However, according to Robbins and DeCenzo social responsibility leads in the long run to an increase in the share prices. The Stock Exchange treats a socially responsible company as less risky and less exposed to public criticism, thus assigning its shares a higher price index, which leads to higher profits (2002, p. 99). 146 URSZULA GOŁASZEWSKA-KACZAN, JACEK MARCINKIEWICZ, JAROSŁAW KILON 3. Corporate social responsibility and investment results: The case of the Warsaw Stock Exchange

In the classical approach of the income-risk relation, it is assumed that both the rate of return on the portfolio and the investment risks are some kind of derivative of the implemented investment strategy and the degree of portfolio diversification. The selection of companies for the investment portfolio (which is reflected in the RESPECT index in this report) therefore directly determines both the rate of return on investment and its risk. Due to the fact that the RESPECT index portfolio includes a limited number of entities (the basis for selection is the adopted substantive criteria related to the implementation of CSR), the question about the economic rationale for investments in this group of entities becomes interesting. To examine whether investors choosing socially responsible companies operating on the Warsaw Stock Exchange are realizing the benefits associated with this investment approach, the situation of enterprises included in the RESPECT index has been analyzed. This index was created in 2009 and groups companies from the WSE Main Market, operating in accordance with the highest management standards in the field of corporate governance, information governance and investor relations, and taking into account ecological, social and employee factors in its operations. The companies that make up the RESPECT Index portfolio are selected as a result of three-step verification carried out by the WSE and the Association of Stock Exchange Issuers in the scope of the above-mentioned areas, as well as an audit carried out by Deloitte (questionnaire study supplemented with a direct audit of the company). The RESPECT index can only include companies from the following indices: WIG20, mWIG40, sWIG80. The key area of evaluation in the selection process of companies included in the portfolio is the management of the organization with regard to CSR policy. This area includes, among others, such issues as preparing reports in accordance with the standards of the Global Reporting Initiative (GRI), implementation of environmental policy, or the scope of application of the code of ethics in the company. Among the scientists dealing with the subject of socially responsible investment, there is a general disagreement on the expected return rates and the risk of investing in socially responsible companies. The studies meet both attempts to justify lower income ratios of socially responsible portfolios compared to conventional portfolios as well as evidence of the reverse situation. Advocates of the first approach argue that the attempt to create an investment portfolio, which includes socially responsible companies, results in lower diversification opportunities (Hong & Kasperczyk, 2009, pp. 15–36). The immediate consequences of a limited set of potentially potential entities are a component of the investment than a lower risk management (variance) of the portfolio and additional costs related to the process of building and managing the portfolio. There have been several attempts to look for purely financial reasons for the lower rates of return on investment in shares of socially responsible companies (Statman & Glushkov, 2009, pp. 33–46). These are based on the assumption that such a situation is caused by a number of ASSESSMENT OF INVESTMENT ATTRACTIVENESS… 147 internal as well as external factors, among which are mentioned, among others, increase in the costs of the company’s operation as a result of raising employee (without increasing work efficiency salaries or voluntary use of more expensive, environmentally friendly raw materials or materials (instead of cheaper substitutes). In opposition to the above assumptions, hypotheses are put forward saying that investments in portfolios of socially responsible actions are characterized by a higher (than conventional) income/risk ratio (Dowell, Hart & Yeung, 2000, pp. 1059–1074). The reason for this is the indirect impact on the profitability of investments of many organizational aspects related to the operation of the company. The effects of intangible activities related to the management of the enterprise (resulting from the adoption and application of responsible business principles), reduction of potential costs of crises in the enterprise (as a result of the application of ethical standards and corporate governance), or reduction of environmental degradation (and thus reduction of operational risk) translate to—in the opinion of advocates of this approach—reduce the financial risk of investments. Among the sources for the potential of additional investment value are the potential effects of research and development activities that may quickly translate into high profits of the company, as well as the benefits of a responsible employment policy (an increase in job satisfaction reflected in the company’s financial results) (Edmans, 2011, pp. 621–640). Bearing in mind the above observations, the comparative analysis will cover companies belonging to the RESPECT index in the period from November 2009 to December 2015. The aim of the study will be an attempt to answer the question whether and to what extent the company’s presence in the index is reflected in the parameters determining the attractiveness of investments in shares of this company (rate of return, risk, dividend rate). In a broader context, this analysis is a kind of contribution to an attempt to resolve the key issue: is socially responsible investing cost-effective? (Whereby the investor’s point of view may be radically different from the popular social opinion.) Among the 28 companies in the RESPECT index at the end of 2017, 8 had been its participants since the first edition in 2009. These 8 were among the 17 that represented the industrial sector. Most of the entities participating in the RESPECT index are large or medium-sized entities that are also participants in the WIG20 or mWIG40 indexes. This allows concluding that there is a statistically significant relationship between the size of the company and the membership in the index of responsible companies (positive and strong correlation between the size of the company and conducting activities that are perceived as economically, ecologically and socially responsible). This leads to the statement that the corporate social responsibility (and certainly the creation of such an image) can only be afforded by the large companies (the largest among listed companies). The volatil- ity of the index composition results from its periodic revision, however, it is worth noting that among the entities that systematically maintain their position in the RESPECT there are a number of companies in which the State Treasury is a significant shareholder. 148 URSZULA GOŁASZEWSKA-KACZAN, JACEK MARCINKIEWICZ, JAROSŁAW KILON Since all companies belonging to the RESPECT index belong simultaneously to one of the WIG20, mWIG40 or sWIG80 indexes, the RESPECT index will be (in the scope covered by the conducted analysis) compared to price indices. The specificity of the index (income type and inclusion in the Polish companies’ index) prompted the authors to make an additional comparative analysis with the income type index, which is WIG. The comparison of return rates and risk of the investment portfolio corresponding to the composition subject to index research was carried out in the period from the beginning of the publication of the RESPECT index until the end of 2015. Bearing in mind the methodological differences in calculating indexes, the authors made an attempt to explain to what extent the possible higher return rate of the RESPECT index is the result of investors’ more favorable perception of companies belonging to the index (more favorable valuation of companies by investors, better management), and to what extent is the result of a different counting methodology. The diversification of the RESPECT index composition over time limits con- siderably the possibility of making a full comparative analysis in terms of investment attractiveness (at the level of specific companies). A more complete analysis was performed for 2015—assuming the relative constancy of the composition and structure of the RESPECT index. This approach enabled the presentation of the RESPECT index against the background of WIG20, mWIG40 and sWIG80 in terms of not only the rate of return and risk but also in terms of ownership structure (State Treasury share) or the dividend payment rate. The authors also undertook an attempt to compare the results of the RESPECT index with those designed for this purpose on the basis of price indices with their own index (in which the weights were shares of companies from WIG20, mWIG40 and sWIG80 indexes in the RESPECT index). For the mentioned indices, a classical analysis of profitability (based on market rates of return) and investment risk was carried out. The annual rate of return was used as the measure of the income generated by investors (only due to changes in the market prices of securities) (Table 1). The standard deviation of the daily loga- rithmic return rates calculated separately in each of the annual periods covered by the analysis was used to describe the risk.

Table 1. Annual rates of return of indices in 2009–2017 Year RESPECT WIG WIG20 mWIG40 sWIG80 2009 70,9% 46,9% 33,5% 55,2% 61,8% 2010 32,2% 18,8% 14,9% 19,6% 10,2% 2011 -11,2% -20,8% -21,9% -22,5% -30,5% 2012 29,2% 26,2% 20,4% 17,4% 22,9% 2013 -1,2% 8,1% -7,0% 31,1% 37,3% 2014 4,5% 0,3% -3,5% 4,1% -15,5% 2015 -15,2% -9,6% -19,7% 2,4% 9,1% 2016 10,9% 11,4% 4,8% 18,2% 7,9% 2017 22,3% 23,2% 26,4% 15,0% 2,4% Note. The calculation of the return rates included the exchange rate from the last session of the analyzed period and the exchange rate at the session closing the previous year. Adapted from Warsaw Stock Exchange (WSE) data. ASSESSMENT OF INVESTMENT ATTRACTIVENESS… 149

3500

3000

2500

2000

1500

1000

500

2008-12-31 2009-09-30 2010-03-31 2010-06-30 2012-09-30 2013-03-31 2013-06-30 2015-12-31 2016-03-31 2016-06-30 2009-03-31 2009-06-30 2009-12-31 2010-09-30 2010-12-31 2011-03-31 2011-06-30 2011-09-30 2011-12-31 2012-03-31 2012-06-30 2012-12-31 2013-09-30 2013-12-31 2014-03-31 2014-06-30 2014-09-30 2014-12-31 2015-03-31 2015-06-30 2015-09-30 2016-09-30 2016-12-31 2017-03-31 2017-06-30 2017-09-30

NOTOWANIA RESPECT WYSKALOWANE WIG WYSKALOWANE WIG20 WYSKALOWANE MWIG40 WYSKALOWANE SWIG80

Chart 1. Quotations of the analyzed indices in 2009–2017 (calibrated on December 31, 2008 to the value of 1000 basis points)

Note. The base date of the RESPECT index is 2008, December 31—the base value of the index is 1000 points. Adapted from Warsaw Stock Exchange (WSE) data.

Among the indexes taken into account in the analysis in the majority of periods, the quoted companies in the RESPECT index were characterized by higher rates of return compared to other groups of share (Chart 1). In the first four years of the analysis, the RESPECT index achieved better results both in comparison to other price and income indices. Over time, however, this advantage evaporated, or the index achieved worse results (Table 1).

Table 2. Investment risk in individual years (deviation of index return rates)—daily in a given year Year RESPECT WIG WIG20 mWIG40 sWIG80 2009 0,0196 0,0180 0,0222 0,0131 0,0115 2010 0,0130 0,0104 0,0127 0,0081 0,0073 2011 0,0152 0,0140 0,0155 0,0135 0,0118 2012 0,0088 0,0090 0,0106 0,0080 0,0071 2013 0,0115 0,0096 0,0111 0,0097 0,0076 2014 0,0093 0,0085 0,0094 0,0094 0,0084 2015 0,0110 0,0092 0,0108 0,0090 0,0072 2016 0,0120 0,0057 0,0094 0,0120 0,0098 2017 0,0091 0,0050 0,0065 0,0095 0,0075 Note. In calculations as a measure of risk, the standard deviation of daily returns in the audited year was assumed Adapted from Warsaw Stock Exchange (WSE) data.

150 URSZULA GOŁASZEWSKA-KACZAN, JACEK MARCINKIEWICZ, JAROSŁAW KILON It is worth noting that in the same periods, the risk of investing in the RESPECT index portfolio, measured by the standard deviation of daily return rates was comparable or higher than in the case of investments in most other index portfolios (Table 2). A combined analysis of income and risk (as a measure, the authors assumed here the quotient of both measures), indicated that in 4 out of 9 periods (2010, 2011, 2012, 2014) the “risk price” that investors had to pay was the highest in relation to companies forming the portfolio of the RESPECT index (Table 3).

Table 3. Return rate/risk Year RESPECT WIG WIG20 mWIG40 sWIG80 2009 36,22759 26,06282 15,10452 42,21932 53,62046 2010 24,79890 18,03563 11,71578 24,09573 14,00973 2011 -7,40458 -14,84330 -14,06860 -16,65870 -25,82360 2012 33,31904 29,01724 19,22171 21,63740 32,06577 2013 -1,07369 8,35572 -6,32793 31,98156 49,07484 2014 4,80524 0,30243 -3,76998 4,409588 -18,60050 2015 -13,81630 -10,47590 -18,18610 2,677842 12,71064 2016 9,09337 11,55307 3,98883 19,27524 13,88101 2017 24,57833 31,02011 27,68367 23,04585 4,72470 Note. Adapted from Warsaw Stock Exchange (WSE) data.

This situation leads to the question of whether the slightly higher return rate that investors can potentially achieve from investing in the RESPECT index portfolio is a sufficient price for the risk incurred. In the opinion of the authors—from an accounting point-of-view, such an investment in some periods, generated incomes higher than the indexes adopted for the benchmark, the differences, however, should not be treated as a factor clearly supporting such a choice. It is worth noting that with the passage of time (from 2015), this premium has been declining, which additionally, could not have provided investors with sufficient incentive to invest in the portfolio of socially responsible companies. This opinion was confirmed in previous years by the values of other ratios describing the portfolio of the RESPECT index. Comparison of RESPECT with other indices (as well as with the own index based on price indices constructed for this purpose, including weightings of shares of companies from WIG20, mWIG40 and sWIG80 indexes in the RESPECT index) is not favorable for RESPECT (Gołaszewska-Kaczan, Kilon & Marcinkiewicz, 2016). At the same time, both the relation of the price to book value (P / BV) and price to earnings (P / E) do not significantly distinguish the index of socially responsible companies from other indexes. The basic factor determining the higher profitability of investments in shares of the RESPECT index companies is higher than in alternative cases the dividend rate. It is also worth emphasizing that such a situation is systematic—it occurs in the majority of analyzed periods. The dividend payment rate is also not unrelated to the state shareholding in the shareholding structure (Kilon & Marcinkiewicz, 2014). Among the companies from the RESPECT index, the percentage of companies with the State Treasury’s ASSESSMENT OF INVESTMENT ATTRACTIVENESS… 151 share is higher than among the other companies. The share of the State Treasury, weighted by capitalization, was significantly higher among the “responsible” companies than among the other companies. The presented facts confirm the assumption about the relationship between the size of the company and the shareholder structure with the affiliation to the RESPECT index. Creating the image of a socially responsible company is an attribute of large companies with a significant share of the State Treasury.

4. Discussion of results and conclusions

The research results presented in this article show that the higher return rate of the RESPECT index compared to other indices (WIG, WIG20, MWIG40, and SWIG80) was observed in 2009–2012. Membership in the RESPECT in this period gave economic benefits (higher rates of return) in the first years after the introduction of the index—since 2015; such signals have not been observed. In subsequent years, the MWIG40 index behaved more favorably. Therefore, the question can be formulated: why RESPECT was better than other indexes only in the initial period? According to the authors, this may indicate both the fact of discounting share prices in both share of the index and the so-called “profitability of new products”. Taking into account the research results presented in this study, the hypothesis about the market benefits of belonging to the RESPECT index should be falsified. Undoubtedly, affiliation to the RESPECT index gives the company a number of “image-related” benefits of marketing importance for companies. In relation to public companies in Poland, the development of the idea of CSR, in theory, is faster than in practice. This idea is noteworthy, but it seems that it is not fully reflected in the investor behavior. In light of empirical research, the social responsibility of businesses is seen, mostly, as a social idea. From the investor’s point of view—it is (within the Polish conditions) a source of extra cost rather than additional benefits. The results of surveys conducted, among others, in the USA indicate that investors may, to some extent, be inclined to tolerate a business behavior that is socially irresponsible but profitable. CSR is, to a large extent, long-term thinking and investors often strive for short-term and quick profits. This raises the question of whether listed companies should be socially responsible, is fair, or whether the priority for investors should be their profitability. Searching the answer this inquiry may be an interesting direction for future research.

References

Anam, L., Kachniewski, M., Sobolewski, L., & Owczarek, M. (2012). Jak zyskać na odpo- wiedzialności? CSR w strategiach spółek giełdowych. Przewodnik dla CEO i executives. Warszawa: CRSinfo. 152 URSZULA GOŁASZEWSKA-KACZAN, JACEK MARCINKIEWICZ, JAROSŁAW KILON Communication from the Commission to the European Parliament, the Council, the Euro- pean Economic and Social Committee and the Committee of the Regions. A renewed EU strategy 2011–14 for Corporate Social Responsibility [COM(2011) 681 final version]. (2011, October 25). Brussels. http://odpowiedzialnybiznes.pl/public/ files/Komunikat_KE_Strategia2011_2014.pdf Dowell, G., Hart, S., & Yeung, B. (2000). Do corporate global environmental standards create or destroy market value? Management Science, 46(8), 1059–1074. Edmans, A. (2011). Does the stock market fully value intangibles? Employee Satisfaction and equity prices. Journal of Financial Economics, 101(3), 621–640. Gołaszewska-Kaczan, U., Kilon, J., & Marcinkiewicz, J. (2016). Ocena atrakcyjności inwe- stycji w akcje spółek społecznie odpowiedzialnych na podstawie indeksu RES- PECT. Annales. Ethics in Economic Life, 19(3), 113–128. Hong, H., & Kasperczyk, M. (2009). The price of sin: The effects of social norms on markets. Journal of Financial Economics, 93(1), 15–36. Kilon, J., & Marcinkiewicz, J. (2014). Struktura akcjonariatu spółki a atrakcyjność inwe- stycji na rynku akcji GPW w Warszawie. Optimum. Studia Ekonomiczne, 3(69), 207–220. Polish Committee for Standardization. (2012). Polska Norma PN-ISO 26000:2012. http:// www.pkn.pl/iso-26000 Robbins, S. P., & DeCenzo, D. A. (2002). Fundamentals of Management. Warszawa: Pol- skie Wydawnictwo Ekonomiczne. Rok, B. (2013). Podstawy odpowiedzialności społecznej w zarządzaniu. Warszawa: Poltext. Statman, M., & Glushkov, D. (2009). The wages of social responsibility. Financial Analy- sts Journal, 64(4), 33–46. Wołowiec, T. (2004). Społeczna odpowiedzialność przedsiębiorstwa nową formułą zarzą- dzania. Ekonomika i Organizacja Przedsiębiorstw, 3, 3–11.

Encyklopedia CSR. http://odpowiedzialnybiznes.pl/hasla-encyklopedii/spoleczna-odpowie dzialnosc-biznesu-csr/ ISO 26000 Social responsibility. http://www.pkn.pl/sites/default/files/discovering_iso_26 000.pdf RESPECT Index. https://www.gpw.pl/RESPECT_Index Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 153–165 doi: http://dx.doi.org/10.18778/1899-2226.21.7.11

Agnieszka Marek The John Paul II Catholic University of Lublin Faculty of Social Sciences Department of Employees Management in Organisation e-mail: [email protected]

Corporate social responsibility in FC Barcelona as Carroll’s CSR pyramid in practice

Abstract

Corporate social responsibility (CSR) is a subject of great interest to both theoreticians and practitioners of management as well as to international organisations that promote this idea among existing enterprises. Despite many years of research on CSR, there is no single binding definition of this concept, therefore for the needs of this publication, the definition of Archie B. Carroll, and the resulting approach to CSR implementation in companies, has been adopted. The aim of the article is to analyse CSR activities undertaken by FC Barcelona in the framework of a system derived from Carroll’s CSR pyramid, therefore its activities have been divided into four groups corresponding to the dimension of financial, legal, ethical and philanthropic responsibilities. Due to the commercialisation of football, FC Barcelona is treated as a global enterprise, considering, however, the specificity of regulations governing the sports sector as well as goods and services offered by the club. The research has been based on an analysis of literature and available documents published by the club itself as well as by international organisations regulating football tournaments on national and international levels. The study has indicated that FC Barcelona is taking action in all the dimensions of social responsibility highlighted in Carroll’s pyramid and can be seen as a socially responsible organisation, at the same time meeting expectations of its stakeholders.

Keywords: corporate social responsibility, FC Barcelona, Carroll’s CSR pyramid

JEL Classification: M14, Z20 154 AGNIESZKA MAREK 1. Introduction

Under the influence of changes taking place in the economy, football clubs have changed their character from local organisations that facilitated spending time together and integrating society into commercialised enterprises. These changes are the most visible in the case of the best clubs from the so-called Big Five— Spain, Germany, Italy, France, and England—which have already become global brands and have fans all over the world. Therefore, the clubs are expected not only to achieve their goals for the sport, but also to reach specific economic goals depending both on their ranking and their budget. In addition, football clubs are perceived as organisations that not only serve as a source of entertainment but are also capable of promoting specific values and pursuing several social goals to improve the quality of life of local communities (Kuźbik, 2016, p. 120). Social responsibility is especially important for clubs with a global reach, as millions of people1 observe not only their fight for world trophies, but are also interested in their non-sports activities, and the players are role models for many of their fans. This article will present FC Barcelona’s activities in the field of social responsibility and an analysis of these activities in the context of the CSR pyramid proposed by A. B. Carroll.

2. Corporate social responsibility

According to Grzegorz Zasuwa (2012), CSR in the new paradigm, is treated as an investment to bring specific benefits. It can contribute to achieving a company’s competitive advantage if new products or innovative business processes are created as a result of social involvement (p. 187). Positive effects of CSR include: the promotion of sustainable development, the improvement of health and well-being of society, an increased interest on the part of investors, the improvement of relations with the local community and authorities, growth of customer loyalty, the creation of a positive image of a company or the attracting of talented employees (Skrzypek, 2015, p. 202). In addition, expectations of society towards enterprises are constantly changing. Apart from the standard offer of high-quality products or services, companies are expected to respect the needs of stakeholders and minimise a negative impact on society or the natural environment. An organisation that does not meet these requirements may not survive in the market, as the disclosure of irresponsible behaviour usually results in a loss of customers and a dramatic drop in sales (Filizöz & Fisneb, 2011, p. 1406). It is not surprising that today’s enterprises are increasingly trying to be socially responsible, and the CSR concept itself is a subject of great interest to not only entrepreneurs but also international organisations (Carroll, 1979, p. 500). Subject matter experts do not agree on the

1 As reported in the 2016/2017 season report, FC Barcelona has 293,000,000 fans on social media, an impressive number, even if some of them have also accounts on different platforms. CORPORATE SOCIAL RESPONSIBILITY IN FC BARCELONA… 155 definition of corporate social responsibility or its components, which is why many researchers are considering the essence of this concept (Carroll, 1999, pp. 268– 295; Hamidu, Haron & Amran, 2015, pp. 83–95; Kuźbik, 2016, pp. 69–100; Sheehy, 2015, pp. 625–648). For this article, the author will rely on the approach to CSR proposed by A. B. Carroll (1979). His early CSR definition states:

The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organisations at a given point in time. (p. 500)

In 1991, Carroll finetuned it by proposing that the CSR consisted of four dimensions: economic, legal, ethical and philanthropic. These are presented in the form of a pyramid (Fig. 1). He added that all the components had always been included in the concept of CSR only that ethics and philanthropy had gained in importance in recent times (Carroll, 1991, p. 40). According to Carroll, a CSR driven company “should strive to make a profit, obey the law, engage in ethical practices and be a good corporate citizen” (p. 43). It is not without good reason that Carroll in the first place in his model men- tions economic responsibility that is required by a society. The rational allocation of financial resources is crucial for the existence of a company, which in certain circumstances will provide the company with a profit, as well as financial liquidity along with the company’s responsibility for liabilities incurred and proper management of assets (Komorowski, 2011, p. 170). Achieving profit is necessary for a company’s survival and its development. These are essential elements in building credibility and trust on which the investors make their decisions. The economic profitability might be included to CSR as the fundamental condition for existence of any enterprise because the society expects a company to be able to secure its development by balancing risks and anticipated benefits (Carroll, 2016, p. 3; Komorowski, 2011, p. 171) According to Carroll, the second area of social responsibility is the legal aspect. In its actions, a company should comply with all applicable laws—local, national and international, including a respect for human rights (Jutterström & Norber, 2013, p. 5). The legal responsibility dictates: offering products and services that meet at least the minimum legal requirements, fulfilling legal obligations towards stakeholders, and being a law-abiding corporate citizen (Carroll, 2016, p. 3). The other two dimensions of social responsibility in Carroll’s pyramid: ethical and philanthropic one, are not required by law but are the result of voluntary decisions and actions. For each organisation legal and financial responsibility are the minimum but for those who aim to develop and gain competitive advantage this minimum has to be supplemented with moral responsibility as first two dimensions are no longer sufficient (Kuźbik, 2016, pp. 57–58). That is why Carroll adds ethical responsibility, third—not required but expected by a society—aspect of CSR (Carroll, 1999, p. 283) Many companies define the ethical framework of activities that they conduct to accomplish their mission. This framework often 156 AGNIESZKA MAREK contains a list of key values and their definitions (Snider, Hill & Martin, 2003, p. 180) that companies use when making decisions and solving emerging problems. It is expressed through the formalisation of moral norms in the form of ethical codes or sets of good practices, as well as through the organisation of ethics training and monitoring systems or, simply, by the enforcement of accepted norms. The confirmation of moral responsibility of an organisation is provided by means of formal certification and voluntarily announced social reports to communicate these activities to the stakeholders (Lewicka-Strzałecka, 2006, p. 78).

Fig. 1. Carroll’s Pyramid of CSR

Note. Adapted from “Carroll’s pyramid of CSR: taking another look,” by A. B. Carroll, 2016, International Journal of Corporate Social Responsibility, 1(3), p. 5.

The fourth element of Carroll’s pyramid is philanthropy, including financial support for the needy individuals or groups, and various forms of volunteering in which employees can use their skills and abilities outside the organisation. Philan- thropic activities are often carried out through charitable funds to accomplish various social goals financed by companies (Haynes, Murray & Dillard, 2013, p. 231). In Carroll’s pyramid, philanthropy is not required by the society, meaning that if a company does not engage in such activities it will not be seen as organisation which violates CSR rules. It is, however, desired by society and per- CORPORATE SOCIAL RESPONSIBILITY IN FC BARCELONA… 157 ceived as one of the manifestations of being a good corporate citizen (Carroll, 2016, p. 4).

3. FC Barcelona as a socially responsible organisation

FC Barcelona has been a world-class club for many years. It regularly participates in the Champions League games and has been a 5-times victor. It has won 22 international tournaments, 23 in the Spanish league, 28 in the King’s Cup (Co- pa del Rey) and several others. As one of the three Spanish teams, it has never fallen out of the Primera Division. It has millions of fans around the world making FC Barcelona a global brand. The club dates back to 1899 when Hans Gamper, a Swiss, gathered a group of 12 male football players in Catalonia and founded an association: Football Club Barcelona (Fútbol Club Barcelona). Even then, the distinctive features of the club were forming: Catalan identity, democracy, multiple sports and universality.2 More than one hundred years later, on its official website, one finds the very similar characteristics of FC Barcelona: Catalanism, universality, and democracy. However, the fourth value has changed—social commitment has replaced multiple sports.3 This change indicates that social responsibility has become one of the pillars of FC Barcelona’s activity. Through its CSR activities, the “Catalan Pride” shows that the motto “More than a club” is not just a slogan but a commitment to the local and global community. Due to the specific nature of activities of the football clubs, the CSR initiatives will differ depending on the stakeholders and the interests and initiatives. The internal stakeholders of a sports club include all its employees (players, sports and medical staff, administrative employees), owners, shareholders, investors and trade unions. External stakeholders include customers, competitors, creditors, suppliers (e.g.: companies providing equipment for footballers), TV stations, local and international sports institutions, local and national authorities, the local community (Filizöz & Fisneb, 2011, p. 1410; Skrzypek, 2015, p. 194), universities, media, courts and other entities constituting the organisation’s environment (Sznajder, 2013, p. 197), and—as the so-called silent stakeholder (Jastrzębska, 2015, pp. 49–51)—the natural environment. In FC Barcelona, a participatory democracy model is used, combining membership with club ownership, which is why one of the most important stakeholder groups are club members known as socios. They are part of the council of dele- gates and have a real influence on club management. They have the right to choose the club’s president and board as well as to verify whether decisions taken by the board are in accordance with the applicable statute, they also have the right to vote on charitable activities of the FC Barcelona Foundation (Hamil, Walters & Watson, 2011, p. 154). As of June 30, 2017, the socios group comprises

2 https://www.fcbarcelona.com/club/history/decade-by-decade 3 https://www.fcbarcelona.com/club/identity/card/more-than-a-club 158 AGNIESZKA MAREK 143,855 members, of whom as many as 132,748 live in Catalonia. Men dominate among club members (74%), women constitute 26% of the population. The statistics do not distinguish children, but almost 9,000 members are persons under 5 years of age (FC Barcelona, Report 2016/2017 [hereinafter referred to as Report 2016/2017], p. 110). One can see that being socio of FC Barcelona is in many cases a family tradition and proof of a true membership in the club. FC Barcelona’s activities in the field of corporate social responsibility in the framework of a system corresponding to Carroll’s CSR pyramid are presented below. It should be emphasised that this division is conventional, as individual activities can often be qualified to more than one dimension. The main entity enabling ethical and philanthropic activities on behalf of FC Barcelona is the Bar- ca Foundation established in 1994, thanks to which over one million children around the world have already received assistance in the framework of a variety of programmes.

3.1. Financial aspect

Although matches and accompanying emotions are the main product offered by football clubs, one must not forget that in the commercialised world a club is an enterprise that must look after its profitability (cf. Kuźbik, 2016, p. 117). The proceeds from match tickets do not ensure stable development for clubs, which is why, especially in the case of global clubs, an increasing share of revenues comes from business activities. Specially designed stadiums are aimed at attracting fans- consumers to the shopping centres operating on their premises “in which (almost) all consumer needs can be met” (Antonowicz, Kossakowski & Szlendak, 2015, p. 119). A club’s income consists of revenues from tickets and rights to broadcast matches, revenues from transfers, money obtained from sponsors and from trade in goods. Expenses are mainly the costs of transfers and players’ remuneration. Each club participating in tournaments organised by the UEFA which achieves income or incurs expenses over €5 million is required to comply with the rules of financial fair play (Tittenbrun, 2016, p. 88). These have been specified and codified by the UEFA in relevant documents. Any violation of these rules may result in penalties – ranging from a reprimand to exclusion from matches or taking back a won trophy. The main financial requirements of the UEFA (2015) are: no overdue payments to football clubs (timely payment of fees for player transfers), a lack of arrears in the players’ remuneration and payments resulting from rights to use their image, bonuses and other contractual benefits, and a lack of tax arrears (pp. 26–31). The condition for the UEFA’s positive assessment of a club is the presentation of the required financial documents and the balance between expenses and revenues in the three-year settlement period (Tittenbrun, 2016, p. 88). An additional audit can be made if the salaries and bonus expenses for employees exceed 70% or the net debt exceeds 100% of the annual income (UEFA, 2015, p. 39). The financial report for the financial year 2016/2017 shows that FC Barcelona generated an operating profit of 708,169 thousand Euros, which is a 4% increase from the year before. An examination of the club’s revenues for CORPORATE SOCIAL RESPONSIBILITY IN FC BARCELONA… 159 the previous five seasons shows that they have been systematically growing, which leads to the conclusion that the club manages its finances rationally. What is more, the players’ salaries remain below the 70% recommended by the UEFA, and the debt ratio within the standards set in the Club’s By-Laws (Report 2016/2017, pp. 290–291). As part of the social responsibility strategy, the club should support the training of children and young people as well as activities aimed at developing the local community. It is worth noting that expenditures on women’s football and infrastructure development are excluded from the break-even analysis—a basic indicator of financial fair play (Schubert, Könecke & Pitthan, 2016, p. 299). FC Barcelona is actively engaged in the development of children and young adults. The most famous forge of young talents is, of course, La Masia, which has trained players as Lionel Messi, Andrés Iniesta and Jordi Alba and many others. Although adepts of this youth academy get their chance less often than in the past, the example of Sergi Roberto, who joined the first team in 2013 indicate that La Masia still train players who are vital part of FC Barcelona’s success. Additionally, the club runs 36 football academies on five continents. The Warsaw FCB Escola Var- sovia where children between the ages of 6 and 12 are trained in the sport and the philosophy of FC Barcelona is one such school.4 Young students of football schools meet at tournaments organised by the club. In the 2016/2017 season alone, more than 1,500 children from 20 countries participated in the FCB Escola Inter- national Tournament. The club organised over 170 training camps, including the first girls camp in Iceland (Report 2016/2017, p. 190).

3.2. Legal aspect

Each football club must meet a number of legal requirements if it wants to participate in both national league and international championships. The higher the level of tournaments, the more demanding and detailed the regulations that govern them are. FC Barcelona takes part in La Liga Santander, Copa del Rey, and the Catalan Cup, and has been continuously playing in the Champions League for many seasons. Each of these tournaments has its own rules which the club must adapt to not be excluded from it.5 La Liga is one of the three European leagues with the highest UEFA index. This position entitles it and therefore to putting up three teams in the Champions League, and the fourth in the qualifying rounds. Two successive teams from La Liga and the cup winner are eligible for the Europa League. Football clubs participating in international championships must also comply with the financial fair play rules mentioned earlier.

4 https://www.fcbescola.pl 5 The rules of qualification and participation in individual tournaments are very detailed and strictly determined by the appropriate sports body. A number of regulations relating to La Liga can be found on the site: http://www.laliga.es/lfp/normativa. Champions League matches are regulated by the UEFA, which publishes a special document for each season, e.g.: UEFA (2017a). The rules of the Europa League are defined by the same body in the document: UEFA (2017b). 160 AGNIESZKA MAREK The examples of the adjustment of FC Barcelona’s activities to new legal regulations at the end of the 2015/2016 season listed in the report indicate the degree of meticulousness and thoroughness of the requirements in relation to clubs. These included: the improvement of lighting at Camp Nou, new camera positions on the pitch, the improvement of shelters, the press box and zones for the directors of the match, and the introduction of new match documents (Report 2016/2017). Due to a large number of rules and regulations, it is impossible to fully analyse their implementation by a specific club, but the presence of FC Bar- celona in prestigious tournaments indicates that it meets the legal responsibility criterion. The internal regulations regarding the functioning of the club are included in its regularly updated Statute (FC Barcelona, 2013). FC Barcelona shows great concern for respect for human rights. In its Code of Ethics, the club’s organisational culture has been defined as “firmly based on fulfilment of human and social rights” (FC Barcelona, 2016, p. 6). The Code also contains a statement that FC Barcelona respects human rights recognised inter- nationally, contained, among others, in the Charter of Human Rights and the Dec- laration of the International Labour Organisation. This results in building relationships between employees based on mutual respect, creating healthy and safe working conditions and avoiding any form of harassment and discrimination (p. 12). The players of the Catalan Pride participate in the UEFA’s “No to Rac- ism” campaign, aimed to combat racism, discrimination and intolerance in football.

3.3. Ethical aspect

As mentioned in the presentation of Carroll’s pyramid, ethical responsibilities are not required by society, but stakeholders expect the club to act ethically. This dimension of social responsibility is particularly important in sport, as many people admire and imitate players’ behaviour, looking not only at their sports achievements but also at their values and specific conduct. It is important to build the image of the club and maintain its consistency with all of its activities. The key values at FC Barcelona are respect, effort, ambition, teamwork and humility.6 They are, next to their love for football, a part of the blue-red soul of FC Barcelona (Violan, 2014, p. 53). Barcelona, realising its “More than a club” motto, wants not only to win in style but to provide its fans a spectacle. One factor that enables such a spectacle is Barcelona’s specific game philosophy, the Tiqui- Taca. It is a form of fulfilling the values of the club, as its unique technical skills, quick passes and the pace of the game (Boedker, 2016) require an effort, teamwork and humility. The values shared by the club members are instilled in the players of the young teams playing under the auspices of Barcelona. They are also promoted by sports activities, games or educational stories as part of the Barça kids programme. It is aimed at children between 6 and 12 years of age in Catalonia

6 https://www.fcbarcelona.com/club/identity/card/values CORPORATE SOCIAL RESPONSIBILITY IN FC BARCELONA… 161 and other places where the Catalan language is spoken (FC Barcelona Foundation, Report 2015/2016 [hereinafter referred to as Report 2015/2016], p. 24). FC Barcelona has its own Code of Ethics and Conduct adopted in 2010, which applies to all employees of the club, as well as people associated with it. The statement that they are obligated to fulfil all requirements towards third parties resulting from contracts indicates the responsibility of the club towards its stakeholders. In this context, the principles of relations with customers, suppliers, etc. have also been codified. In addition, all activities undertaken by members and persons associated with FC Barcelona should be performed with due diligence, responsibility and professionalism (FC Barcelona, 2016, p. 10). Club authorities, ensure that the services offered meet not only the minimum required standards but are of high quality and professionally rendered. The Code includes regulations on equal access to tools enabling employees their professional development, clear criteria of promotion, as well as the guarantee of ensuring a work-life balance, which proves responsibility towards employees, i.e. internal stakeholders of the club. The Code also regulates the unauthorised expenses and benefits, corruption, and sports betting. Additionally, FC Barcelona seeks to comply with all the applicable tax laws and report on all its activities in this area (FC Barcelona, 2016, p. 15). Programmes addressed to the children who are struggling with serious diseases are also part of activities conducted by the foundation run by FC Barcelona. “The Project Hope” and “The Hospitals Project” are programmes in which the children can meet with players from the first team and club activists. During the Christmas season, the players visited over 1,000 children in hospitals in and around Barcelona. In addition, more than 100 children were invited to matches or training sessions during which private meetings with players took place.7 Thus, the world’s top players, by devoting their time, bring the children enormous joy and contribute to their dreams.

3.4. Philanthropy

Philanthropic activity is often treated as an element of public relations, however, in a large part of socially responsible organisations, it flows from the adopted strategy rooted in shared values and genuine willingness to help the local community (Haynes, Murray & Dillard, 2013, p. 231). In the case of FC Barcelona, its recognition is so enormous that the club does not need to use philanthropy to improve its image, which is why this activity can be perceived as an expression of concern and striving for social change. One of the examples of philanthropic activity is the cooperation of FC Barcelona with the UNICEF, in which the players of the club spent five years playing in shirts with the UNICEF logo, thus giving up the possibility of obtaining any sponsorships. The initiative was a sensation in the football world, as instead of signing a lucrative contract, FC Barcelona contributed to raising the visibility of UNICEF and its activities. On the 10th anniversary of the

7 https://foundation.fcbarcelona.com/progpedwellbeing 162 AGNIESZKA MAREK cooperation, the organisations signed a new contract under which FC Barcelona was to provide $2 million annually for the children. As a result, children from Brazil, China, Ghana and South Africa have access to education and sport. In addition, this cooperation helps to fight for respecting children’s rights and raising awareness about AIDS in Angola, Malawi and Swaziland.8 An example of philanthropic activity can also be found in the FootballNet programme implemented by the FC Barcelona Foundation, addressed to people between 8 and 21 years of age. Its aim is to promote specific values by organising various events and engaging the children in cooperation with local organisations based on the vulnerability criterion (Report 2015/2016, p. 14). In the 2015/2016 season, the guiding value in FootballNet was social exclusion, therefore a number of activities were undertaken to allow people with disabilities to take part in the programme and show they could participate in sports activities (p. 17). Thanks to the cooperation with Shell, FootballNet is now present in Iraq, Oman, Qatar and Saudi Arabia, involving local staff especially trained for this purpose. In these countries, it has been particularly important to include girls in the programme and provide them with access to training in appropriate conditions (pp. 19–20). The Barca Foundation has also covered with its programme over 4,000 of young refu- gees from camps in Greece, Italy and the Middle East.9 All the presented activities effectively combat exclusion in various aspects of social life. The FC Barcelona Foundation supports financially the construction of SCJ Paediatric Oncologic Centre in Barcelona to enable more effective treatments against cancer among children. Fulfilling the dreams of sick children, employees of the club send them shirts signed by the players and other gadgets from the club shop. As mentioned earlier, the first team players visit children on the occasion of Christmas or New Year and invite them to matches and training sessions.10

4. Conclusions

The aim of the article was to present FC Barcelona’s activities in the field of CSR as the implementation of Carroll’s CSR pyramid in practice. In financial terms, the most important thing for a football club is to comply with the UEFA’s financial fair play rules, which in this case are dutifully execut- ed. FC Barcelona has systematically increased its operating profit for past five seasons. The presence of the club in domestic and international tournaments indicates that it meets all the legal requirements imposed by the international bodies managing these events. Hence, the criterion of legal responsibility is systematically implemented. FC Barcelona, with the participation of the foundation set up by the club, re- alises several programmes that demonstrate the ethical and philanthropic respon-

8 https://www.unicef.org/media/media_90305.html 9 https://foundation.fcbarcelona.com/refugeeProg. 10 https://foundation.fcbarcelona.com/progpedwellbeing CORPORATE SOCIAL RESPONSIBILITY IN FC BARCELONA… 163 sibility of the club. In its activities, FC Barcelona is guided by well-defined key values that are shared and promoted not only among players and members, but also among the children and youth adults on different continents. The club’s employees and associates are bound by the Code of Ethics and Conduct that regulates various aspects of FC Barcelona’s activities, including contacts with particular stakeholder groups. The examples of actions taken are a sufficient proof that the club conducts activities in every dimension of social responsibility distinguished in Carroll’s pyramid, in terms of the financial and legal aspects required by society as well as in the ethical and philanthropic dimensions perceived as voluntary. Therefore, FC Barcelona can be seen as a socially responsible organisation that meets expectations of its stakeholders.

References

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Annales. Ethics in Economic Life 2018 Vol. 21, No. 7, Special Issue, 167–175 doi: http://dx.doi.org/10.18778/1899-2226.21.7.12

Artur Grabowski University of Economics in Katowice Faculty of Economics Department of Economics e-mail: [email protected]

Activity of German sports (football) enterprises and Corporate Social Responsibility*

Abstract

At the turn of the 1920s and 1930s, a new economic doctrine called ordoliberalism was born in Germany. The foundations of this doctrine were values such as responsibility, solidarity, justice, and freedom. Classics of ordoliberalism formulated a number of recommendations and requirements for businesses in their writings. One of them was the public responsibility, which had the private-economic and socio-economic nature. In Germany sports’ (football) enterprises functioning in the form of companies and associations are participants in the sports-economic competition in the two professional leagues (1.Bundesliga and 2.Bundesliga). At the same time sports enterprises pursue different aims: among the economic goals, there are also the social goals. In the structures of sports enterprises, there are several departments dealing with CSR and implementation of partnership projects. The article concludes that 1) the constitutive elements of ordoliberalism had an influence on the functioning of sports (football) enterprises in Germany, 2) the projects realized under the social responsibility rule that were undertaken by sports companies were strongly related to sports education, environmental protection, and social exclusion.

Keywords: sports enterprises, social market economy, corporate social responsibility

JEL Classification: B29, M14, P16

* The article is an updated version of the paper published in Polish in the Annales. Ethics in Economic Life, 20(3), 121–130. 168 ARTUR GRABOWSKI 1. Introduction

The doctrine of ordoliberalism was developed in Germany at the turn of the 1920s and 1930s. However, its practical implementation, due to a social market economy (Soziale Marktwirtschaft), was possible only after 1948. An important element of the free-market economic system were enterprises because their activities contributed to the increase in society’s prosperity. According to Chancellor Ludwig Er- hard, the purpose and meaning of the operation of socially responsible enterprises were to participate in the economic competition. While the economy was supposed to serve people, because people were at the center of economic processes (Grabowski, 2013, p. 28). The article formulates the following theses: (1) sports (football) enterprises carry out tasks resulting from the ordoliberal doctrine, and (2) pro-social activities undertaken by football enterprises are not occasional and accidental but result from previously formulated strategies and codes. To verify the aforementioned theses, literary studies have been carried out, which included the history of economic ideas (in particular the ordoliberalism doctrine) and the activity of sports (football) enterprises in 1998–2018. The collected material was then subjected to elemental, causal and logical analysis. Case studies were conducted in relation to sports enterprises (clubs) which were a part of the professional football league in the Federal Republic of Germany. Also, based on an interview with an agent of the Hamburger SV club, CSR activities are presented (in particular the “The Hamburg Way” project).

2. Ordoliberalism doctrine regarding the functioning of enterprises in a market economy

Ordoliberalism is a doctrine, from which the German economic system is derived. The material from which the foundation of the ordoliberal system was built was constituting and regulating principles. These principles created the economic constitution of ordoliberalism. Amid the constitutional principles, there were, among others: the principle of responsibility. It was considered important for the functioning of order in the competition. According to Walter Eucken, business owners and management were obliged to take responsibility for their decisions regarding the disposal of capital and for investments (1990, pp. 280–281, 284). According to Wilhelm Röpke, the market economy did not function in an an- thropological vacuum, but within strictly defined frameworks set by norms and values. Economic humanism in modern capitalism could not exist properly without solid foundations, such as responsibility, solidarity, social integration, justice and cooperation. Running a business required having appropriate personal qualities, in which Röpke included among others: self-discipline, justice, reliability, honesty, social awareness and respect for human dignity (1949, p. 83, 1961, pp. 154–155, 166, 171, 175–176, 185, 191). ACTIVITY OF GERMAN SPORTS (FOOTBALL) ENTERPRISES… 169 According to Alfred Müller-Armack the enterprise in the social market economy was a community of people employed in it. Economic entities operate in a specific legal order and bear responsibility for their actions. The company’s function is to provide the population with the right products every day, but above all to bear public and social responsibility. Public responsibility was of a dual nature: private-economic and socio-economic. Managers leading enterprises in a market economy were obliged to be responsible to society. Activities carried out by economic entities were also to be focused on providing support to vulnerable social groups. The struggle with inequalities took place in the specific conditions created by the social market economy (1981, pp. 118, 121, 131).

3. German football entity in a socio-economic context

Sports clubs (football) maintain relationships with the internal and external environment. Their activities have an impact on the environment, and this situation has been observed for many years. The development of the social market economy after 1948 and the establishment of a football league in 1963 positively influenced various levels of society. Sports competitions have become an element of mass culture, and a way of spending free time. In the stadiums, among the audience there are representatives of various social groups, even whole families are present. Football stadiums in Germany (especially those belonging to professional clubs) are an important element of the urban landscape, and they play a role not only in sport but also in entertainment and culture. Originally, sports clubs functioned primarily as associations, which by their very nature were focused on the implementation of social goals, such as the education of the young generation (mainly where they had their home bases), and creating conditions for this. According to data for 2017, there were 29,598 sports associations (clubs) registered in Germa- ny, which included 7,043 million people (including 773 thousand women and 322 thousand girls) (“DFB Mitglieder-Statistik 2017,” 2017, p. 2). As a result of the progressive professionalization, commercialization and globalization of sports, there have been changes in the organizational structures of football entities, or more precisely defining football enterprises. Nowadays, football clubs in the Federal Republic of Germany are economic entities. Clubs from both professional leagues conduct economic activities, achieve multimillion incomes, and have investors.1 The cumulative value of professional football was EUR 5.1 billion (2010), which represented 0.2% of Germa- ny’s GDP. At the same time, football entities strive to achieve sports-related goals, as well as economic and social ones. The total incomes of 18 football enterprises from the 1st Bundesliga in the 2016/2017 season (the period from July 1, 2016, to June 30, 2017) amounted to 3.37 billion EUR. Equity amounted to 1.31 billion EUR. Of the 18 entities, 16 ended the balance sheet period with a positive

1 In contrast to Poland, none of the football clubs in professional leagues has a local government shareholder or is directly subsidized by public (municipal) authorities. 170 ARTUR GRABOWSKI financial result (DFL Report 2018, 2018, p. 54). Equally important is the social impact of football clubs, foundations set up by players, and the organizer of competitions (DFL-Deutsche Fussball Liga) for functioning in the environment.

4. Selected activities of German sports entities (football) as part of CSR

The first sports club (football club) that presented the CSR code to the public, was VfL Bochum 1848. The club from the Ruhr area has almost 170 years of tradition. In the beginning, the ethos of the club was pointed out, the foundation of which is rooted in the region and the community. Fans are the audience at the matches, members and employees of the club, players and business partners. The Club from Bochum formulated the following catalogue of values: (1) We admit our regional identity and tradition, (2) We are professionals, (3) We are close, (4) We are steadfast, (5) We are thrilling, (6) We admit our social responsibility. Striving for social responsibility was rooted in the values associated with sport—tolerance, fair play, solidarity and equality (VfL Bochum, n.d.). The Club from Bochum maintains a friendly relationship with FC Bayern Munich. In turn, this club, since 1900 has become part of the socio-cultural landscape of the Bavar- ian capital. In 2010, FC Bayern made a written wording of the values he aspires to, namely: responsible activities and commitment to caring for people, willingness to help, tolerance and honesty (“FC Bayern Magazin. Sonderedition,” 2010, pp. 12, 54). Moving from declaration to practice, selected projects run by the Bundesliga Foundation, individual sports clubs and footballers will be presented. With the initiative of the game management company and 36 football entities (from both professional leagues), the Bundesliga Foundation was created in 2009. The vision of the foundation was: to use the power of sport (football) to create social benefit and solidarity. The Foundation focused on four areas of activity: children, people with disabilities, social integration and providing support to athletes. The main initiatives undertaken by the foundation concerned, among others: providing support to young people of immigrant background in integration with the native society, help in learning German, personal and professional counselling for young people from immigrant backgrounds. From the very beginning, the foundation has been involved in the national project “Stadium – a place of learning” (“Lernort Stadion”). Several football players are involved in its implementation. Youth classes take place regularly in seminar rooms located on 17 stadiums (location of objects: Berlin—two, Bielefeld, Bochum, Bremen, Braunschweig, Dortmund, Dresden, Frankfurt am Main, Gelsenkirchen, Cologne, Mönchengladbach, Mu- ACTIVITY OF GERMAN SPORTS (FOOTBALL) ENTERPRISES… 171 nich, Nuremberg, Rostock, Stuttgart, Wolfsburg). The main topics of the workshops were, among others: anti-mobbing, career counselling, social integration, intercultural dialogue, social inequalities, civil courage, teamwork, right-wing extremism, personal development, prevention of violence, healthy lifestyle. The financial support is provided by the Robert Bosch Foundation (each center receives an annual 50,000 euros), and substantive support by the Center for Political Research from Munich. So far over 30,000 people have participated in the project since 2009 (condition as of January 2017). “Football meets culture” (“Fussball trifft Kultur”) is a project initiated by the organizers of the book fair in Frankfurt am Main and the Bundesliga Foundation. It is addressed to children and youth, and its aim is to increase and equalize educational opportunities. The combination of access to culture, education and sport takes place in 13 centers in Germany through regular educational and sports activities conducted during the school year. The most important stakeholders for clubs from the professional football league are: players, club employees, inhabitants of the region, football federation, sponsors, fans, media, supporting members, business partners and suppliers, representatives of the political scene, non-governmental organizations. Social responsibility is multidimensional, as evidenced by the initiatives taken by individual football clubs. The activity of VfL Wolfsburg is focused on the implementation of the project “We’re starting together” (“Gemeinsam bewegen”) and four leading themes: education, social inclusion, health and environmental protection (“VfL Wolfsburg, Der Nachhaltigkeitsbericht 2016,” pp. 6, 24). Football players in both professional leagues are owners of stadiums. Using these objects gives possibilities to implement projects related to environmental protection. Since 1995, SC Freiburg has solar collectors mounted on the roof of the stadium, which allows not only to generate energy (275,000 kWh per year), but also to reduce CO2 emissions. As a result, only green energy is used in the stadium (SC Freiburg, 2015). In most clubs of the 1st Bundesliga, a ticket for a match entitles you to a free passage to the stadium and back by public transport (buses, metro, trains, and trams). Another option was created in Bremen, where you can use water transport. There are 5 ships available that can carry a total of 4,000 passengers, who from the center of Bremen will reach the marina located near the stadium of the local club. In total, 378,000 people used public transport during the season, choosing a match. Every year, EUR 600,000 from the Werder Bremen budget are allocated for CSR activities, including among others: 100% Werder —Partner project, based on training in cooperation with schools in the areas of pedagogy, sports and healthy eating (Werder Bremen, 2015, pp. 3, 12). Extensive activities are conducted by another football entity—FC Bayern Munich, which supports not only educational projects, but also provides material assistance to victims of natural disasters in Asia or co-finances conservation works on the historic cathedral in Mainz (Grabowski, 2013, p. 103). The players themselves are also involved in these types of projects. Bayern player Philipp Lahm

172 ARTUR GRABOWSKI founded a foundation in 2007 which supports personal and sports development, mainly during summer camps in Germany, and also helps in school and sports education in less-developed urban areas in South Africa. Summing up, in the season 2015/2016, professional football in Germany (1st Bundesliga and 2nd Bundesliga—a total of 36 entities) and the Bundesliga Foundation and 10 foundations founded by footballers donated 28.1 million EUR to social purposes (including: clubs 1st Bundesliga 16.53 million EUR, clubs 2nd Bundesliga 4, 73 million, EUR Bundesliga Foundation 3.56 million EUR, footballers’ foundations 3.31 million EUR). More than one million people have been directly supported (of which 72% are children and youth under 18), the vast majority (91%) of the residents of the regions in which the clubs are based. The projects concerned the following areas: integration, the fight against social exclusion, a breakthrough in energy policy, environmental awareness and protection of the natural environment, modern dietary trends and healthy eating. In total, 224 projects were implemented by clubs from the 1st Bundesliga, and 152 by those from the 2nd Bundesliga. Football enterprises in Germany are treated as representatives of the medium-sized sector of companies due to their annual revenues and employment. Research carried out among all German enterprises indicated that they devote 0.17% of incomes to social purposes. This rate for clubs associated in both professional leagues was 0.67% (Bundesliga Stiftung, 2017, pp. 14, 36, 38–40). Although the presented data confirm the responsibility of football clubs, this does not mean that they should not further expand their involvement (financial, personal, design) in order to improve social conditions in their cities and regions.

5. The Hamburg Way—social commitment of Hamburger SV

Hamburger SV (HSV) is an association of sports that has existed since 1887 in Hamburg. For many years this multi-functional sports club has been an important participant in the city’s life. As a result of changing the legal form, the football section was transformed into a commercial law company in 1991—HSV Sport AG (the current name is HSV Fussball AG).2 The majority shareholder in this company is the Hamburger SV association. In the 2015/2016 season, the revenues of the HSV Fussball Company amounted to 122.9 million EUR (Lagebericht HSV Fussball AG, n.d.). The average employment level in the analyzed period was 185 people. There are various relationships between HSV and the environment. HSV has stakeholders, including shareholders, employees, clients, sponsors, the public sector (local authorities) and the community. In 2015, Hamburger SV announced a code that contained references to playing an active role in society through the activities of the HSV Foundation and the “Der Hamburger Weg” project (“The Hamburg Way”). The project covers three areas: education, social issues and sport. 10 projects are implemented within these

2 HSV Fussball AG has five daughter companies that deal with, among others operation and management of the stadium, commercial activity, museum facility, travel agency and campus. ACTIVITY OF GERMAN SPORTS (FOOTBALL) ENTERPRISES… 173 themes. In the area of education, the offer includes several thematic modules (classes take place in the halls of the stadium) depending on the age group, e.g. human dignity, HSV during the National Socialism, media competence, group formation, the economic significance of the HSV club. In the 2015/2016 season, 1,400 students and 130 teachers participated in the project (HSV Stiftung, n.d., p. 6). In order to deepen the examined issue, a letter posing with questions was written to the department responsible for CSR at HSV Fussball AG. The answers to the research questions were provided by Marieke Patyna (clerk of the board HSV Fussball AG) on April 24, 2017. The following responses were obtained: (1) The goals of CSR engagement: resulted mainly from the vision of the club, which concerns taking an active role in society, in particular through the foundation of HSV—“The Hamburg Way”. This was part of HSV’s self-awareness as a club that is socially involved in the life of the city. Children and youth are in the center of its attention. (2) CSR instruments: the HSV foundation implements long-term projects in each season, but also conducts periodic activities and organizes events for the young generation in three areas: education, social and sport. (3) Cooperation under CSR: it takes place primarily with the Hamburg local authorities, partners (Audi, Emirates, Floating Homes, HEK, NDR 2, QSC AG, Reyher) and patrons (representatives of the acting and sports milieu). (4) CSR report: in 2009, HSV was the first of the Bundesliga clubs to publish such a report. Its subsequent editions were released in 2011 and 2016. (5) Importance in the practice of sustainable development: refers to the up- bringing of the young generation in the HSV football academy by supporting development. The same applies to the city of Hamburg, where the development of young talents is supported and opportunities for the dis- advantaged are opened. HSV has the right resources to improve the situation and wants to use it. Establishment of the foundation made it possible in an institutional manner to ensure the conduct of activities for social responsibility. (6) The importance of fans and fan clubs in social initiatives: they are important for both HSV and the foundation. Fans, when buying a match ticket, have the option of donating 1 euro. The funds collected in this way are spent on social projects. While, since the 2015/2016 season, fan clubs have the opportunity to submit projects for support, which are then selected by lot. (7) The impact of the social market economy on the activity of football clubs: HSV, being a professional football club, in recent years, due to the professionalization and commercialization of the football industry, has increasingly become an economic entity. HSV’s social commitment is not ad hoc, as the “The Hamburg Way” has been developed for nine years. CSR plays an important role in the functioning of this professional football club. 174 ARTUR GRABOWSKI 6. Conclusions

Summing up the considerations regarding the activities of German sports enterprises in the sphere of corporate social responsibility, based on the analysis of literature, secondary data and the interview conducted, the following themes have been positively verified: (1) Sports (football) enterprises carry out tasks arising from the ordoliberal doctrine. This applies above all to the issue of socio-economic responsibility. In the organizational structures, they created CSR sections and implement projects, they cooperate with the stakeholders. (2) Pro-social activities undertaken by football enterprises in Germany result from the strategies and business goals. In addition, they cover various initiatives that concern many areas, such as integration, the fight against social exclusion, a breakthrough in energy policy, modern dietary trends, environmental awareness, environmental protection and, healthy eating. The number of implemented projects is impressive (224 in the 1st Bun- desliga), as is their long-term nature. It is worth noting that the goals of engaging in CSR projects resulted from the vision of clubs as entities actively participating in the life of German society. Ger- man football clubs undertake social activities mainly in the city or region where they have their own headquarters. By their attitude, they try to refer to the roots of ordoliberalism. Sports enterprises, aware of the dangers resulting from the imperfections of the market mechanism in the era of liquid modernity, would like to take part in the improvement of the quality of life, protection of the natural environment and promotion of ethical behaviour. It should be noted that in the previous 55-year history of the German Bundesliga only once had a corruption scandal (season 1970/1971) involving several teams (two of them—Arminia Bielefeld and Kickers Offenbach— were relegated to lower leagues, and disqualified were punished activists, coaches and players—in the group of 56 people there were also two Poles). Nowadays, there are no such situations, and what is important, the systematic development of football clubs (enterprises) from the 1st Bundesliga and the 2nd Bundesliga has made them an employer for over 53,000 people. In addition, clubs are conscientious taxpayers (in the season 2015/2016 it was EUR 1.13 billion) for the state, which is not common in football business (a negative example are clubs from Spain). Today German professional football clubs are heading for ordoliberalism in the past, operating under the conditions of the evolving social market economy.

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