**4. CSR critic analogy**

Organizations from the purview of the institutional economic theory are constitutionally legal entities, hence not actual personalities; therefore as artificial personalities, they possess artificial responsibilities which are streamlined to the economic interest of their shareholders [7]. This questions the activities of organizations in engaging in CSR which is not purely an economic activity that directly optimizes shareholders' economic benefits in the organization; better put it begs the question of the rationale for engaging a legal construct (i.e., organization) to execute social responsibilities not captured in the contract that establishes its legality [2].

Friedman [2] in addressing the acclaimed influence of CSR on the host or operating society questioned the competence of organizations' management in choosing which societal issues to advocate and the techniques of promoting such advocacy. This further questions the ethics of appropriating organizations' economic resources belonging to the principals/shareholders/owners (via lowering profits), employees (via reduced wages), and customers (via increased prices) for advancing societal issues. Nonetheless, the practitioners of CSR do not articulate it as a cost but as the activation and deployment of valuable competence and resources that enhance and sustain the performance of an organizations' posterity in the environment they function [8].

Friedman's [2] postulations are anchored on the differentiation between the role of an agent (organization management) and the principal (owner); hence, the role of the agent is the optimization of the principals' explicit interest in a manner that observes legal and ethical protocol; except explicitly stated by the principal, CSR

*Corporate Social Responsibility: The Ethics of Legitimacy DOI: http://dx.doi.org/10.5772/intechopen.104805*

should not be engaged with exception to the point where its engagement is directly correlated to the optimization of the principals' objectives. Alternatively, Jensen [29] contends that ultimately organizations' long-term social responsibility is the optimization of organizational value; hence, stakeholders' interests are considered to the extent they align to the maximization of organizations' core shareholders' objectives (i.e. profitability). Conclusively, Friedman and Jenson are projecting that in situations where there is no explicit inclusion of CSR to the organizations' objectives by the shareholders, managements' engagement in CSR activities is only necessary and legitimized to the extent that such engagement is anchored on optimizing shareholders' interest. Ultimately, the contention for the validity of engaging in CSR activities is established on answering the extent to which such activities positively enhance an organization's goal attainment and viable posterity; empirically, studies on this correlation have resulted in contradictory findings [21, 30–33].

#### **4.1 CSR and legitimacy**

The advancement of organizations in the achievement of their core objectives eventually gives them visibility beyond their economic scope; they eventually gain political and social visibility as they optimize their value proposition, gain market share, and become significant in their industry. The above gives them relatively high bargaining and lobbying pressures to address social and political issues by leveraging on their advanced economic advantage. The quest for organizations to be socially and politically relevant is rationalized by the need to consolidate their economic advantage, and the need to relatively predict and control their environment especially as it concerns their goals. Social, environmental, and political visibility does not necessarily result in economic power but is capable of influencing economic issues [7].

This visibility by organizations are relatively checked and regulated by policy enacted by the government, but this process in most cases is limited by bureaucratic protocols, hence another viable and much organic check on the gained visibility of organizations is their host and operating society, and in today's business world, the global society.

The regulation of the continuous visibility of organization by government policy is relatively effective, and in most cases without a valid political will by the elected, the lobbying pressure of these organizations dilutes the enactment of potent policies and laws that accurately checks the excesses of organizational visibility. In the situation where these policies and laws are highly potent, an effective implementation may become an issue; hence, organizations yield unregulated influence that defines the political, social, environmental, and economic scope of the society they operate and define the engagement of these variables according to the organizations' interest. This is made worst when the organizations that have gained these visibilities are foreign organizations, whose interests will be defined by their home society. The question then is to what extent is an organization ethically and socially responsible in a host society without explicit or weak policy and regulation. Arguably, host or operating societies without explicit or weak policy and regulation may not effectively determine nor confirm the legitimacy of such organizations in their environment. Hence, such societies are mostly in the survival mode of nation-building.

Alternatively, the organic structure of a society is capable of being much more potent in handling and addressing social, environmental, and economic issues than the apparatus set up by the government. This is mostly seen in societies where resources (i.e. natural) are obtained in crude forms. This is triggered mostly because the host or operating society is directly affected by the neglect of such organizations to be socially and environmentally responsible for the consequences of their economic engagement in such society. Hence such host society actively and consciously articulates the defaults of such organization and the possible remedies that could re-align the organization to gain legitimacy. Where such organizations fail to negotiate and reach a consensus as to the valid remedies that addressed their neglect, such host society may reinforce their disapproval via boycotting of the organizational value propositions (i.e. products), withdrawal of access to some factors of production (i.e. land, labour, etc.), lobbying for more stringent government tax and regulation, address press conferences, etc. [27].

Organizations that are intentional about their gaining legitimacy are strategically deliberate about their collaboration and involvement with stakeholders, and Gray et al. [30] observe that such organizations may deplore the following strategies in advancing, sustaining or repairing the acceptance of their legitimacy by the host society, and they include; full disclosure on changes in organizations engagement and performance (i.e. effective in addressing legitimacy gap that arose from performance failure in the organization), influence organizations' perception by the society without altering organizations engagement and performance (i.e. effective in addressing legitimacy gap that arose from societal misconception of organizational engagement), deflect society's focus on conflicting issues via the promotion of related positive activities (i.e. effective in addressing legitimacy gap that arose from manipulations), and influence via educating the society on having a realistic expectation about the organizational performance (i.e. effective in addressing legitimacy gap that arose from unrealistic societal expectation from the organization).

#### **4.2 Implication of legitimacy gap**

Studies have revealed that a legitimacy gap connotes a misalignment between the societal expectation of organizations' engagement and the actual organizations' engagement. Hence, the operation of an organization in its host community is non-compliant with the presiding societal value establishment [25, 27, 34–36]. The misalignment that generates the legitimacy gap is mainly categorized into two.

First, societal values evolve, and this evolution is mainly enshrined in having a value system that is relevant and sustainable in addressing topical issues, and also establishing values that close explicit or implied loopholes. Consequently, when the value systems of societies evolve, organizations' engagement should reflect those realities in their engagement; hence, when organizations are not streamlining their engagements to reflect the current societal value system, and insist on observing the old societal value system, a legitimacy gap arises. The implication of an evolved value system denotes that society evaluates and calibrates organizational engagements by different parameters that reflect the priority of such society and the roles those organization engagements play in influencing such priorities, hence organizations face a considerate legitimacy gap when there is a misalignment between societal value system expectation and actual organizational value system. Organizational responsiveness to evolved societal value systems should also be time-sensitive; when organizations' response is slower to the dynamics of the evolving society value system, there arises a gap in legitimacy. The legitimacy gap also occurs when an organization does nothing in complying with society's value system. Organizations also experience a legitimacy gap when they fail to fully disclose their engagement activities and their synchronization with the present societal value systems; hence, the host society

#### *Corporate Social Responsibility: The Ethics of Legitimacy DOI: http://dx.doi.org/10.5772/intechopen.104805*

operates with the notion that there is no compliance because such disclosure was not effected by the organization. Organizations should disclose relevant stakeholders' information to promote the principle of cooperation and collaboration, hence, getting society informed of its alignment to their value system and ultimately closing the legitimacy gaps.

Secondly, some organizations' management may have been involved in certain engagement whose practices are not disclosed but has the potential to negatively affect the organization's reputation and legitimacy. When such organizational engagement (i.e. organization shadows; potential disruptive organizational engagement that is not known to the public) are disclosed, it presents a threat to the legitimacy of the organization to its host or operating society. The possibility of such disclosure may be triggered by the activities of media personnel, disgruntled employees or management staff, corporate espionage, activities of competitors, whistleblowers, activities of pressure groups, independent audit operations, etc. the disclosure of organizational shadows has a significant potential to generate a legitimacy gap.

Organizations are advised to ensure commensurate compliance with societal social values, and ensure their activities are ethical and consistent with social and legal considerations. Hence, organizations who have encountered a legitimacy gap may deplore the following strategies in addressing a legitimacy gap; Ashforth and Gibbs [37] posit that organizational strategies for handling legitimacy are typified into substantive management techniques (denotes a tangible change in organizational goals, procedures, structure, and protocol for societal engagement), and symbolic management techniques (denotes portrayal of organizational behavior to impress a position aligned to societal expectation and values). These strategies have been stratified with regard to the demands of the organization in its quest for legitimacy [26–28, 37, 38]. As organizations are in different phases of the quest for legitimacy, the strategies they deplore to achieving this quest could be stratified into gaining, maintaining, or repairing its legitimacy.

In gaining legitimacy, the organization usually operates in new territory or are the first movers in their industry, hence the need to consciously navigate their social compass in aligning to the societal value system and relevantly engaging stakeholders to promote goodwill and acceptance. In gaining legitimacy, organizations deliberately position themselves as partners in social progress and long-term players in the social affairs of the host or operating societies; hence, by engaging in areas of mutual benefits they invariably promote their economic interest. Gaining legitimacy requires organizational pro-activeness, strategic involvement, and collaboration with relevant stakeholders.

In maintaining legitimacy, organizations need to consolidate previous efforts and strategically pioneer new techniques of remaining relevant to their stakeholders. Maintaining legitimacy demands that organizations are strategically conscious of their environment and its influence on their operations, this enables them to proactively address issues as they arise, hence ensuring that society's perception of their activities is favorable. Organizations whose value proposition in the market is largely accepted in line with their high investment in legitimacy alignment will need to invest more in maintaining their legitimacy, compared with organizations whose value propositions are not vested in their legitimacy status.

In repairing legitimacy, organizations deplore reactive measures in responding to the legitimacy gap between the organization and societal social systems. Repairing legitimacy demands a high level of disclosure and accountability from the organization, and a willingness to widely consult with stakeholders on ways to redeem their legitimacy status in society.

#### **4.3 "Loss/abandonment phase" of legitimation**

Organizations in their quest for legitimacy, and having deplored strategies to gain, maintain or repair legitimacy may get to a point where they analyze their engagement protocol and their interaction with society in line with a benefit analysis and may conclude that there is no value inherent in their continuous involvement in establishing legitimacy for their business activities and engagement, and hence, decides to not engage in legitimacy activities; this is known as a "loss/abandonment phase." Hence, when a "loss/abandonment phase" occurs, it connotes that an organizations' management has not discerned any advantage or value for continuous engagement of legitimacy practices, and therefore terminates their legitimation activities [27, 39].

The cause of a "loss/abandonment phase" amongst other things may be triggered by misalignment with societal value systems and organizations' value propositions, continuous disagreement with relevant stakeholders, and unrealistic cost of gaining, maintaining, or retaining legitimacy.

Irrespective of the cause for a "loss/abandonment phase," such organizations face the challenge of increased government taxes and operating costs, high cost of attracting and retaining quality employees, reduced consumer demand, tougher regulations, high interest on capital, and higher marketing coast, as a result of the society not giving its legitimacy status to the organization [27, 38].

#### **4.4 Dynamic capability theory perspective on CSR**

Dynamic capability connotes an organizations' capacity to incorporate, create, and restructure internal and external resources/competence/advantages to tackle environmental dynamics [40]. Hence, "dynamic" denotes the competence to use tangible and intangible resources (i.e. CSR) to actualize congruence with the dynamic organizational environment (i.e. society). "Capabilities" denotes the organizations' ability to strategically align organizational resources and strategies (i.e. CSR) to changing organizational environment. Zollo and Winter [41] posit that dynamic capability is a structured and learned pattern of integrating advantageous resources by which organizations methodically create and modifies processes and culture to actualize the effectiveness of operations in its environment.

The dynamic capability is anchored on the postulation that organizational competence in dispensing its resource (i.e. CSR) to strategically align (i.e. in a manner that is unique and distinct from competitors) to its environment (i.e. societal values), will gain market acceptance and competitive advantage (i.e. legitimacy) [40, 42]. Hence, an organization's ability to incorporate and be at par with the dynamics of societal values, creates organizational culture that is proactive in advocating the evolving demands of societal value, and restructure organizational norms to conform with societal value creates, gains, and sustain objective legitimacy for their operation in the host society, and subsequently ensure acceptance in the market landscape; nonetheless, organizations inability to subscribe to the above assertions may deny them legitimacy.

Teece et al., [40]; Zollo and Winter [41]; Mahoney [43] further assert the following; first, that the dynamic capability is continuously relevant in organizational life, and not just in responding or reacting to the organizations' environmental dynamics; hence, aligning to positive societal norm should not be on a need basis. Also, that focus should be on the organizational procedural routine and not just competence; hence, an organization in advancing CSR activities should ensure their processes or

operating routine conform to societal values, and not just on the values offered or competence possessed. Finally, developing strategic dynamic capability is a learning process that organizations can acquire and optimize in social processes to gain legitimacy.
