THE POLITICAL ECONOMY OF CORPORATE RESPONSIBILITY ACROSS EUROPE AND BEYOND: 1977-2007 A Dissertation Presented to the Faculty of the Graduate School of Cornell University In Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy by Daniel Phillip Kinderman January 2011 © 2011 Daniel Phillip Kinderman THE POLITICAL ECONOMY OF CORPORATE RESPONSIBILITY ACROSS EUROPE AND BEYOND: 1977-2007 Daniel Phillip Kinderman, Ph. D. Cornell University 2011 How can we explain the variation of Corporate Responsibility (also known as CSR and Corporate Citizenship) – business’s voluntary engagement for social and environmental ends above legally mandated minimum standards? This thesis develops a political-economic explanation for CR’s temporal and cross-national variation. It argues that Corporate Responsibility has elective affinities with economic liberalization and market liberalism, and functions as a material and symbolic substitute for institutionalized forms of social solidarity. The erosion and dismantling of Institutionalized Social Solidarity (ISS) is associated with the rise of CR. The dynamics of the response may be country or Variety of Capitalism specific. Both employers and state officials have an interest in compensating for the hardships of liberalization and the weakening of institutionalized social solidarity. One way in which they seek to legitimate the market vis-à-vis their ‘stakeholders’ and the electorate, and justify themselves vis-à-vis their own conscience, is through Corporate Responsibility. Those in the engine rooms of contemporary capitalism want to perceive themselves as serving the common good. This is true irrespective of capitalist ‘varieties.’ Using Corporate Responsibility Associations (CRAs) as a proxy for the institutionalization of CR, the thesis tracks the growth and spread of CR across Europe and beyond. Chapters illustrate the co-evolution of CR and Thatcherism in the UK since the late 1970s; the rise of CR and the decline of Organized Capitalism in Germany since the mid-1990s; the conversion and contestation of EU-level CR since the 1990s; and CR’s spread and variation across the OECD. The thesis concludes by reflecting on the outlier case of New Zealand, on the transnational networks of CR, and on the ambivalence of responsible business in contemporary capitalism. CR is not only part of the solution to pressing problems, but – as a complement to market- liberalism and a substitute for institutionalized social solidarity – part of the problem BIOGRAPHICAL SKETCH Daniel Kinderman was born in Berkeley, California, and grew up in Victoria, British Columbia, Canada. He got a B.A. in Political Science with a Minor in Philosophy from the University of Victoria, and an M.A. in Political Science from York University in Toronto, before enrolling in graduate studies at Cornell. For his graduate research, he spent three years living in Europe and was a visiting researcher at the Max-Planck-Institute for the Study of Societies in Cologne and the Social Science Research Center (WZB) in Berlin, Germany. He is currently an Assistant Professor in the Department of Political Science and International Relations at the University of Delaware. iii For Dagmar and Sophie iv ACKNOWLEDGMENTS This thesis had a long and difficult birth. Throughout, I have been extraordinarily privileged to work with some of the best, brightest, and most generous minds in the social sciences. All five committee members from three disciplines were an extraordinary source of mentorship, insight, and inspiration. Thanks to them, this thesis is much better than it otherwise would have been. Christopher Way has been an indispensable source of sharp insights and mentorship – from the first seminar I took with him eight years ago to the final revisions of my thesis. I am grateful to Jonas Pontusson for his continued engagement with, interest in, and commitment to this project while at Princeton and after his move back to Social Europe. Again and again, Richard Swedberg has encouraged me to think outside the box – and integrate exciting insights from economic sociology into my work. His support has helped me greatly, especially when the going was tough. As the philosopher on my committee, Dick Miller has pushed me towards greater analytical and conceptual clarity – while maintaining a critical stance towards capitalism. Finally, I will forever be indebted to Peter Katzenstein for his extraordinary job as chair of my committee. Peter did a splendid job of managing my interdisciplinary five-member committee, and pushed me hard to expand my horizons and push beyond my limits: methodologically and in terms of the breadth, depth, and ambition of my thesis. I could not always rise to Peter’s high standards. But even in these situations, he supported me. Peter’s scholarship and extraordinary dedication to his students will forever be an inspiration to me. I have also benefited from generous support from a number of institutions: Cornell (in particular), but also the New School for Social Research, the Max-Planck- Institute for the Study of Societies and the Social Science Research Center Berlin (Wissenschaftszentrum Berlin or WZB). All of these institutions and the people in them were very hospitable to me while I was working on the thesis. Last but certainly v not least, I wish to thank my family for their inordinate kindness, love and support throughout the difficulties that my PhD entailed. During the past three years, I’ve been blessed with the companionship of my amazing wife Dagmar. She has stood by me during the most difficult phase of my PhD. She and our wonderful daughter Sophie are a constant reminder that there are many more important things in life than work. vi TABLE OF CONTENTS Page BIOGRAPHICAL SKETCH .………………………………………………………...iii DEDICATION PAGE………………………………………………………………...iv ACKNOWLEDGMENTS…………………………………………………...………...v LIST OF FIGURES ………………...…………………………………………...…. viii Chapter 1: The Political Economy of Corporate Responsibility across Europe and Beyond………………………………………………………………………................1 Chapter 2: The Transformation of British Capitalism and the Rise of CR….. ….......51 Chapter 3: The Rise of CR and the Decline of Organized Capitalism in Germany……………………………………………………………….………….145 Chapter 4 : Conversion, Contestation, Ambivalence: The Rise of Market Liberalism and CR at the EU Level……………………………………...…...……. 216 Chapter 5: Varieties of Capitalism, Institutionalized Solidarity, and the Spread of Corporate Responsibility across the OECD: 1982-2007………………………...278 Chapter 6: Conclusion: Whither Capitalism and Corporate Responsibility?.............312 References………………………………………………………………………...…337 Appendix………………………………………………………………………….…348 vii LIST OF FIGURES Page Figure 1.1 CR’s Spread across the OECD in the Last Thirty Years 4 Figure 1.2 CR Leaders and Laggards in Contemporary Europe 4 Figure 1.3 CR in the UK and Germany 5 Figure 1.4 Institutional Change and the Legitimacy of Business: The Functions of CR 20 Figure 1.5 The Three Worlds of CR 26 Figure 1.6 Durkheimian and Williamsonian Orders 32 Figure 1.7 Welfare States, Organized Capitalism & CR 40 Figure 1.8 Institutionalized Social Solidarity and CR as Complements 47 Figure 2.1 BITC’s Membership 57 Figure 2.2 Privatization and Business in the Community Membership 64 Figure 2.3 BITC’s Financial Development, 1983-2007 123 Figure 2.4 BITC’s Growth in Staff 123 Figure 2.5 SBC’s Membership 135 Figure 2.6 SBC’s Ups and Downs 136 Figure 2.7 Corporate Responsibility’s Dynamism 139 Figure 3.1 Shareholder-Value and CR Among German Firms in the Late-1990s 194 Figure 3.2 CR, Shareholder-Value, and Co-Determination 196 Figure 3.3 CR and the Public Purse 207 Figure 3.4 Henkel’s MIT Initiative, 1998-2006 209 Figure 3.5 Percentage of Employees in Vocational Training at Mannesmann / Vodafone in Germany, 1980-2006 211 Figure 3.6 Econsense and the Growing Profit Ratio 212 Figure 4.1 The Spread of CR across Europe 220 Figure 4.2 The Growth of CRA Membership across Europe 220 Figure 4.3 The National Origins of Corporate Lobbyists in Brussels 258 Figure 4.4 CSR Europe’s Membership By Country of Origin 259 Figure 4.5 Membership of Firms from Large Countries in CSR Europe 260 Figure 5.1 CR’s Timing by Country / Variety of Capitalism 285 Figure 5.2 CR’s Spread across the OECD 287 Figure 5.3 CRAs over Time, Including Multiple CRAs per Country 288 Figure 5.4 Varieties of Capitalism and CR 289 Figure 5.5 The Effect of Different Codings on the Timing of CR 291 Figure 5.6 Timing to CR and Product Market Regulation in LMEs, CMEs and MMEs 294 Figure 5.7 CRA Membership across the OECD 297 Figure 5.8 Corporate Responsibility: LMEs versus CMEs 297 Figure 5.9 CRA Membership in LMEs and CMEs 299 Figure 5.10 CRA Membership and PMR Density 301 viii Figure 5.11 Wage Bargaining Centralization and CR 304 Figure 5.12 The Effect of Different Codings on Wage Bargaining Centralization 304 Figure 5.13 The Taxation of Capital and the Timing of CR across the OECD 306 Figure 5.14 The Impact of Different Codings on STR 306 Figure 5.15 CR, Wage Bargaining and PMR 309 Figure 6.1 The Argument of this Thesis and Alternative Explanations 314 Figure 6.2 The Transnational Networks of CR in Europe, c. 2007 330 ix CHAPTER 1 The Political Economy of Corporate Responsibility Across Europe and Beyond, 1977-2007 I. Introduction The 1980s were tough times for British workers. Margaret Thatcher’s unleashing of capitalism left social wreckage and mayhem in its wake, making the 1960s and 1970s seem like capitalism light. Yet Thatcher’s forceful installation of a market-driven order did not precipitate a straightforward profit- or shareholder orientation in the British business community, as is commonly thought. As power shifted to employers, prominent businessmen committed themselves to Corporate Responsibility. Hector Laing, Lord Laing of Dunphail (1923-2010) was one such businessman. Laing was Chairman of United Biscuits, a close friend and outspoken supporter of Thatcher and her policies, and a leading advocate of Corporate Responsibility in the UK.