CSR and Subsidiaries: Engage NGOs and Hire the Right People
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CSR and Subsidiaries: Engage NGOs and Hire the Right People

ANDREA FOSFURI INVESTIGATED HOW TO ALIGN SUBSIDIARIES ON HEADQUARTERS CSR PRACTICES, THUS AVOIDING REPUTATIONAL DAMAGE IN SPITE OF UNALIGNED GOALS

In 2010, a wave of suicides among young workers exploded at the Chinese subsidiary of the Taiwanese multinational Foxconn. The electronics contractor makes products for clients including Apple and Hewlett-Packard. The case highlighted how behavior at a subsidiary (in this case, labor abuses) could impact the headquarters of global brands thousands of miles away.
 
In “Orchestrating Corporate Social Responsibility in the Multinational Enterprise,” Andrea Fosfuri (Dean of the PhD School, Department of Management and Technology) and Christian Geisler (King's College London) create a mathematical model and use game theory to understand from a theoretical point of view how situations like the Foxconn case are generated and what companies can do to avoid them.
 
“This is a well-known phenomenon from a management point of view,” said Fosfuri. “The goals of multinationals in terms of Corporate Social Responsibility (CSR) and a subsidiary might be different. Subsidiaries might be looking at their own performance in the local market, whereas the headquarters cares about having a strong brand and investing in the brand.”
 
The research found that there might be cases in which a headquarters that talks a lot about sustainability helps the rest of the organization to “walk the talk,” particularly when the multinational is smaller and in fewer markets. In that case, spending resources and communicating they are very committed might make it difficult for the subsidiary to deviate. “Sometimes talking can be good,” Fosfuri noted. “This surprised us, because in some contexts it can be seen as greenwashing. But it can help create a commitment in the organization for sustainable behavior.”
 
Another important mechanism to increase subsidiary engagement is to work closely with NGO and activist groups and pressure groups that might encourage the subsidiary to behave in the right way. One of the problems for multinationals, in fact, is a lack of monitoring tools on the ground. The NGO can help identify any misbehavior.
 
Lastly, hiring a top manager that can act altruistically (as opposed to a laser focus on the bottom line) can be a benefit when it comes to dealing with subsidiaries.
 
Christian Geisler Asmussen, Andrea Fosfuri, “Orchestrating Corporate Social Responsibility in the Multinational Enterprise.” Strategic Management Journal, Volume 4, Issue 6, June 2019, Pages 894-916, DOI: https://doi.org/10.1002/smj.3007

 

by Jennifer Clark
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