Listen to the voice of the customer—First steps towards stakeholder democracy
| DOI | http://doi.org/10.1111/beer.12252 |
| Published date | 01 July 2020 |
| Author | Sabrina Scheidler,Lars Lengler‐Graiff,Jan Wieseke,Laura Marie Edinger‐Schons,Gina Mende |
| Date | 01 July 2020 |
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Business Ethics: A Eur Rev. 2020;29:510–527.wileyonlinelibrary.com/journal/beer
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Customers shoul d have the same right to co-decide how
the company alloc ates its resources as ever y other mem-
ber of the stakehold er network. When I was ne glected
this vote by my favorite soft drin k producer 18 years ago,
I started a company i n which every decision is made in a
consensus democ ratic way. The basic idea is commu nica-
tion on eye-level. Altho ugh I see this as a natural thing, it
seems to be an innovative bu siness model for many es-
tablished companies.
Uwe Lübbermann , founder and central mode rator of
Premium Cola, a consensus-democratic internet collec-
tive, winner of the “50 Mos t Impactful Social In novators
Award” and consultant f or the topic of corporate
democracy.
Corporatio ns have increasing power an d influence in the pub lic
sphere (Grant, 1997; Roach, 2007). Some multinational corporations
(MNCs) now own more re sources than small co untries and have in-
creasing polit ical power (Ander son & Cavanagh, 1996; Cran e &
Matten, 2010). Corporate philanthropic donations are increasing in
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© 2019 The Authors . Business Ethics: A E uropean Review publ ished by John Wiley & So ns Ltd
1Chair of Corpor ate Social Respons bility,
University of Mannheim, Mannheim,
Germany
2Sales and Mar keting Departm ent, Ruhr
University Bochum, Bochum, Germany
3Business Studies and Global Marketing,
Universit y of Applied Science s Dortmund,
Dortmund, Germany
Laura Mari e Edinger-Schons, Chair of
Corporate S ocial Responsibil ity, University
of Mannheim, Schloss, 68131 Mannheim,
Germ any.
Email: schons@bwl.uni-mannheim.de
Deutsche Forschungsgemeinschaft, Grant/
Recently, calls have grown louder for more stakeholder democracy that is, letting
stakeholders p articipate in the proce ss of organizing, decision-ma king, and govern-
ance in corporations , especially in the area of Co rporate Social Responsi bility (CSR)
activities. D espite the relevance of the subject, th e impact of customer involvement
in CSR on their compa ny-related attitudes and b ehaviors still represe nts a major
research void. The pa per at hand develops a conceptua l framework of consumer
involvement in CSR based on the existing literature, theories of stakeholder democ-
racy, and organization al boundaries as well as draw ing from the qualitative foc us
group interviews (N = 24). The fr amework is tested on a large sc ale, two-time point
field-experimental study (N = 3,397). More specifica lly, consumer reactions to t hree
degrees of customer i nvolvement (i.e., information, fe edback, and dialogue) are tes ted
in two different C SR domains (i.e., company-internal business proce ss vs. company-
external philanthropic CSR). Results indicate that the customer involvement in CSR
has a more beneficial ef fect in terms of stren gthening customer ou tcomes in CSR
domains that direc tly affect external st akeholders of the company (i.e., philanth ropic
CSR) than in doma ins that mainly concern compa ny-internal stakeholders (i .e., busi-
ness process CS R).
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EDINGER-SCHONS Et a l.
volume and through these donations, companies progressively take
over state func tions providing imp ortant public goo ds without being
democratic ally elected to do so ( McGoey, 2015; Reich, 2006 , 2010,
2012; Scherer, Rasche , Palazzo, & Spicer, 2016). Apart from that , cor-
porations increasingly influence public opinion by funding think tanks
and elections, thereby potentially shaping civic discourse (Callahan,
2017). As Scherer et a l. (2016) note, businesses not onl y influence pol-
itics but have bec ome political ac tors themselves an d cocreate their
institutional environment.
Thinkers from various disciplines have pointed to the poten-
tial threat to democracy that such an adoption of political power
by business implies (Deetz, 1992; Driver & Thompson, 2002; Nace,
2005; Scherer, Baumann-Pauly, & Schneider, 2013). This threat arises
because, while an increasing volume of financial resources (includ-
ing resources used to fund public goods, for example, through CSR
budgets) is allocated through big corporations, the governance within
most large MNCs is far from being organized in a democratic way
(Harrison & Freeman, 2004; Kerr, 2004; Powley, Fry, Barrett, & Bright,
2004) and thus lacks legitimacy (i.e., suffers from a “legitimacy gap”;
Crane, Matten, & Moon, 2004; Scherer et al., 2016). Further, apart
from the undemocratic allocation process, the consequences of allo-
cation choices of large corporations might not represent the needs
and preferences of their stakeholders or the wider public (i.e., a so-
called “social issues gap” may exist; Callahan, 2017; Simon, 1995). Very
prominently, in a podcast titled “Why Big Philanthropy Needs Scrutiny
Not Just Gratitude” Reich (2017) has argued that corporate “philan-
thropy is an exercise of power and in a democracy, power deserves
scrutiny, not just gratitude” (Reich, 2017).
Voices are growing louder which propose that stakeholder de-
mocracy (Dawk ins, 2014; Matten & Crane, 2 005; Moriart y, 2014;
participate i n the process of organ izing, decision-mak ing, and gov-
ernance in corp orations (Crane, D river, Kaler, Parker, & Parkinson,
-
way to more democr atic representat ion and thus more legi timacy
of business. The b asic idea is the following: if w e unanimously agree
that democra cy is an importa nt characterist ic of our political sy s-
tems (Harrison & Fre eman, 2004) and if we fur ther accept that cor-
porations have tu rned into political act ors (Detomasi, 2015; Scherer
et al., 2016), why should we not d emand that they renew their cor-
porate governanc e structures to be more de mocratic? Although the
power and politi cal activity of c orporate actors a re omnipresent,
the topic has enjoye d very little critical p ublic or research attention
(Scherer & Palaz zo, 2011; Scherer et al., 2016). While t he concep-
tual literatur e on CSR has taken a politic al turn (Scherer et al., 2016)
to discuss the new p olitical power and en gagement of business es,
this paper, we will take a cl oser look at one specific topic r elated to
making corporate decision-making more participative and thus more
democratic, that is, customer involvement in CSR.
The idea of stakeholder democracy is often devalued as unrealis-
tic due to the potent ial efficiency red uction that could be imp lied by
everybody d eciding on everyth ing (Harrison & Freeman, 20 04; Kerr,
who wants to have a
say in which decisions an d to design corporate de cision making ac-
have a say on certa in CSR topics that are re levant to them but not on
others. Taking this as a s tarting point, we intend to f ill voids guided
by the following re search questions: do custo mers appreciate to be
asked for their opi nion on a company's CSR s trategy and do th ey
wish to be active ly involved in cocreating it? And, i mportantly, does
their degree of ap preciation depend on th e respective CSR doma in?
We address these qu estions by drawing o n existing theore tical
contributions on stakeholder democracy, organizational boundar-
ies (Aldrich & H erker, 1977; Santos & Eisenhardt , 2005), and stake-
holder involvem ent in CSR (Morsing & Schult z, 2006). Furthermore ,
we use qualitati ve data from focus grou ps (Study 1, N = 24) to de-
in different CSR domains which either concern company-external
(i.e., customers) or company-internal (i.e., employees) stakeholders.
More specific ally, based on the findi ngs of our focus group s tudy,
we argue that cus tomers appreciate being i nvolved in CSR decisions
that concern comp any-external st akeholders and not in t hose that
are internal to the c ompany. We empirically tes t this framework in
a large-scale field-experimental study including two-time points of
measurement (Study 2, N = 3,397) which we conduct in co llabora-
tion with a large int ernational retailer. More spec ifically, the effects
of the three dif ferent degrees of cus tomer involvement (bas ed on
Morsing & Schul tz, 2006, that i s, information, fee dback, and dia-
logue) are tested in two different CSR domains (i.e., philanthropic
CSR, that is , donations vs. busin ess-process CSR , that is, employee
support).
Supporting our theorizing, results indicate that customer in-
-
cation with th e company and loyalty in domai ns that affect externa l
stakeholders of the company (i.e., corporate philanthropy) than in
CSR domains that mainly concern company-internal stakeholders
(i.e., employee su pport as a form of business p rocess CSR).
The results of ou r two studies make sever al contributions to the -
ory buildin g and to managerial pra ctice. First, we c ontribute to re-
search on stakeholder democracy by generating empirical evidence
may be a fruitfu l path to develop feasibl e methods of stakeh older
democracy t hat would maximize partici pation and support. Sec ond,
we contribute to th e theoretical disc ussion on the border s of the
organization b y pointing out that the CSR dom ain (i.e., company-in-
ternal busines s process CSR vs. ex ternal philanthr opic CSR) mod-
erates the ben eficial impact of cus tomer involvement in C SR on
themselves as a p art of the organiz ation in areas in which th e or-
ganization has a s trong impact on societal o utcomes (i.e., corporate
philanthropy) an d in which, thus, the lin e between the inside an d the
outside of the or ganization is blurred. H owever, in areas that mainly
concern the inter nal business process es of the corporation (e.g ., em-
ployment prac tices) customers d o not appreciate to be invol ved in
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