Vocal in the United States and Muted in Europe: Why Do Corporations Approach Morality Issues Differently?
This is part of our special feature, Business in Politics and Society.
Earlier this year, Disney publicly condemned a legislative proposal in Florida that would prohibit discussions of sexual orientation and gender identity in public schools (Associated Press 2022). A few months later, 200 CEOs urged the US Congress to take action on gun control after a school shooting in Uvalde, Texas (Lodewick 2022). And about a year ago, a coalition of American companies threw their support behind the For the People Act, a congressional bill to address voting restrictions that disproportionately impact people of color.[i]
There are plenty of other examples of American corporations taking public stances on hot-button issues that pit conflicting moral values against each other. Scholars view this as a voluntary initiative by corporations motivated by a wish to boost sales (Bhagwat et al. 2020) or please a specific stakeholder group (Burbano 2021). Indeed, a firm-level analysis helps us understand why some American companies engage in this practice and others do not. But as our attention shifts to Europe, we rarely see firms speaking up on morality issues, even if these issues are also common and salient on this side of the Atlantic (Engeli, Green-Pedersen, and Larsen 2012).
How can we explain that? Stark differences across countries and regions suggest that we should look beyond firm-level characteristics and more toward macro-level factors. That calls for institutional analysis. Institutions are the informal and formal rules that structure the behavior of organizations and individuals in a society (North 1990). This article proposes that companies are more likely to weigh in on morality issues in America than they are in Europe for three main reasons. First, unlike European institutional environments, American pluralism allows firms to express themselves independently. Second, the American political discourse is becoming increasingly polarized, which forces actors to “pick sides”. Third, employee activism is becoming institutionalized in the American business community.
The article consists of three parts. The first provides a short overview of the phenomenon, referred to as corporate moral advocacy. The second will flesh out the institutional explanation of why we predominantly observe this type of corporate engagement in the US, and not in Europe. The last section looks ahead and asks if corporate moral advocacy is something that will spread to Europe.
What is corporate moral advocacy?
Many political issues deal with the regulation of economic and government activities. What is normally at stake here is how to achieve a particular goal, which people deem important. Morality issues, in contrast, are about the regulation of social norms (Mooney and Lee 1995). Furthermore, these debates concern the end itself, not the means. Deeply held moral beliefs determine positions on these issues. Pro-choice versus pro-life is a morality issue. Other examples include LGBTQ rights, gun rights, immigration, and euthanasia. Corporate moral advocacy is defined as those instances when a company takes a position on a morality issue.
This phenomenon can be viewed as a new domain of corporate social responsibility (CSR). CSR consists of policies and practices that reflect business responsibility for some wider societal good (Matten and Moon 2008). But while CSR normally refers to policies and practices that firms themselves enact, corporate moral advocacy is about pressuring policymakers to act responsibly. Adopting same-sex partner benefits to boost diversity and inclusion is a type of CSR. A company urging lawmakers to pass LGBTQ anti-discrimination legislation is corporate moral advocacy.
While conventional CSR has become mainstream globally, we can hardly say the same about corporate moral advocacy. Even in the United States, the firms that engage in it are relatively few and unevenly distributed across industries. Notably, thirty-six percent of the firms (and virtually all of the large ones) that endorsed the For the People Act cited in the introduction were tech firms.[ii] The corresponding number for the “CEOs for Gun Safety” coalition was forty-seven percent.[iii] However, a more conspicuous discrepancy is between the United States and Europe.
While corporate moral advocacy has become a regular part of American politics, it is barely noticeable in Europe. That is not to say there are no examples. For instance, Siemens publicly supported a policy of welcoming migrants to Germany (Cutter 2019), and several businesses rallied in support of same-sex marriage legalization in Northern Ireland (Morrison 2018). Moreover, many European firms responded to the Black Lives Matter movement by supporting racial equality. But these are rare exceptions. In fact, it is more common to witness European firms undertaking corporate moral advocacy in the United States than on their home turf. For instance, among the signatories to demand action on gun control, we find Logitech (Switzerland), Oatly (Sweden), and Unilever (United Kingdom). An even greater number of European firms endorsed the For the People Act. This observation shows that the relevant distinction is between the United States and Europe, not between American and European firms.
Why are firms in America speaking up while firms in Europe are on the fence?
To explain this empirical puzzle, it is important first to ask: Why do corporations care about behaving responsibly (or at least give the impression thereof)? The literature on CSR tells us that it provides a means of securing legitimacy. Legitimacy is a “generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman 1995, 574). Business entities that lack legitimacy will struggle to access vital resources such as capital, labor, input materials, and community approval. Another aspect of the definition is that perceptions of legitimacy are socially constructed. In other words, what people consider responsible business behavior changes over time and varies across societies.
In many European countries, legitimate business behavior means adhering to collectively codified norms and rules. The institutions in these countries are “corporatist,” characterized by highly structured and hierarchically-ordered business communities. Powerful business organizations enforce discipline and unity. Together with the government, these organizations specify proper business conduct. American pluralism, in contrast, empowers individual firms. These can pick and choose which associations to join. That makes for rather weak business associations that struggle to impose business discipline. Instead, firms act according to their own preferences and interests. Consequently, a firm operating in the American institutional context must claim distinctive authorship of its legitimacy (Wilson 2003).
These diverging notions of legitimacy lead to different types of socially-responsible business behavior. In their seminal article from 2008, Matten and Moon distinguish “implicit” and “explicit” CSR (Matten and Moon 2008). European firms traditionally practice implicit CSR, where the social responsibilities of business are stipulated by law or arrangements at the industry or business community level. As a result, European companies rarely pursue their own versions of corporate responsibilities. US-style explicit CSR, on the other hand, rests on corporate discretion. Here, individual firms voluntarily and deliberately define their CSR programs and policies.
What does this mean for corporate moral advocacy? One should recall that morality issues pit conflicting basic values against each other. Moreover, these issues rarely have a direct impact on business operations (Chatterji and Toffel 2019). With this in mind, it is difficult to envisage morality issues that are salient to an entire industry, let alone a whole business community, and engender unity between firms. Therefore, corporate moral advocacy is unlikely to occur in an institutional environment where broad business organizations articulate employers’ interests and social responsibilities. Inversely, corporate moral advocacy fits better with American institutions that give corporations discretion over their own political and social actions.
However, American pluralism has a long history and cannot explain why corporate moral advocacy has suddenly become a regular occurrence in the United States (Nalick et al. 2016). It would be tempting to point to the rise of social media, as it has decentralized voice and placed new expectations on the shoulders of companies (Etter, Ravasi, and Colleoni 2019). Although social media certainly drives companies to take positions on morality issues, it does not explain why the United States and Europe differ regarding the incidence of corporate moral advocacy. For that, we need to add something else to the picture. Two recent developments are particularly relevant. The first one concerns the increasing political polarization in the US. Although there is a tendency to exaggerate the level of polarization (Fiorina, Abrams, and Pope 2005) it is true that more and more Americans harbor resentment toward political opponents (Iyengar et al. 2019). Morality issues especially trigger animosity (Gidron, Adams, and Horne 2020). New comparative research also shows that the United States is more ideologically polarized than European countries (Boxell, Gentzkow, and Shapiro 2020; Draca and Schwarz 2021). Under such polarization, perceptions of legitimacy are increasingly based on a foe-versus-ally view of the world (Talisse 2019). As a result, political polarization in the US compels firms to act responsibly by displaying a high degree of partisanship.
The second relevant development is the institutionalization of employee activism. Key to this is employee resource groups (ERGs; also known as “affinity groups,” “employee networks,” “employee councils,” “employee forums,” and “business resource groups”). ERGs are employee-led groups whose aim is to promote diversity and inclusion (Welbourne, Rolf, and Schlachter 2017). For example, Google currently lists 16 ERGs on its website.[iv] They include groups dedicated to Black Americans, the disabled, and members of the LGBTQ community. These are different from labor unions because their role is not to improve wages or general working conditions. Rather, ERGs advance the claims and grievances of historically disadvantaged groups, agendas that directly connect to many morality issues.
The last twenty-five years have seen a steep rise in ERGs, especially in the United States (Mercer 2011). As an illustration, seventy-five percent of Fortune 1000 firms have an LGBTQ ERG.[v] So, while labor unions are the main conduits of employee power in Europe, ERGs are becoming increasingly influential in the US, not least as mobilizing structures of employee activism (Chuang, Church, and Hu 2018). Several scholars have noted that these employee activists push their firms to defend and promote their legislative agendas (Maks-Solomon and Drewry 2020; McKean and King 2021). Seemingly, ERGs are instrumental to the advent of corporate moral advocacy.
To summarize, three facets of the American institutional environment explain why corporate moral advocacy predominantly takes place in the United States. First, the pluralist system of interest representation allows individual firms to decide which political issues to address and the content of their social responsibility. Conversely, it is harder to reconcile corporate moral advocacy with the European corporatist structures, which strive for business unity and focus on issues of key concern to the broader business community. That said, American pluralism is deeply rooted and does not sufficiently account for the recent growth of corporate moral advocacy. For that, we must heed the growing political polarization of American society and the institutionalization of employee activism through the spread of employee resource groups. Polarization makes it increasingly untenable for firms to gain, maintain, or repair their legitimacy while staying silent on divisive issues, something that employee activists can act on to demand that the corporation take stands on morality issues.
Convergence: a question of time?
Will corporate moral advocacy extend to Europe? The evolution of CSR can provide certain insights. European corporations have largely shifted from implicit to explicit CSR (Matten and Moon 2008; 2020). Several factors have contributed to this shift. One is that many countries have rolled back their corporatist institutions (Streeck and Hassel 2003). In the wake of this, governments have encouraged self-regulation and CSR in their efforts to restore legitimate societal governance (Knudsen, Moon, and Slager 2015). At the same time, corporations saw explicit CSR as a means to defend their legitimacy in the face of declining labor unions and social partnerships (Moon 2004). If the institutional underpinnings of implicit CSR have weakened, is not a European version of corporate moral advocacy also waiting around the corner?
The answer to this question is not straightforward for the simple reason that Europe is heterogeneous. Even though the overall trend is less political coordination among employers (Martin and Swank 2012), it has not played out equally across all countries. Today, the least pluralist countries are the Nordic countries, which exhibit enduring corporatist institutions (Siaroff 1999; Jahn 2016). On that account, these are places where we would not expect to observe corporate moral advocacy. Interestingly, the only example the author knows was when the American ice cream manufacturer Ben & Jerry’s supported a government proposal that would let Afghan asylum seekers stay in Sweden.[vi] For the opposite reason, corporate moral advocacy is more likely to occur in the pluralist United Kingdom, Ireland, and Italy (Siaroff 1999; Jahn 2016).
These three countries are still not as pluralist as the United States, even though the United Kingdom comes close (Siaroff 1999; Jahn 2016). ERGs are relatively common in the United Kingdom (Colgan and McKearney 2012; Mercer 2011). However, despite Brexit, British polarization remains relatively low, and there is little evidence that it has increased. If anything, it has decreased (Draca and Schwarz 2021, 45; Boxell, Gentzkow, and Shapiro 2020, 19). The same is true of Italy (Draca and Schwarz 2021, 45). Ireland, in contrast, has become more polarized, albeit not as much as the United States (Draca and Schwarz 2021, 45). In brief, the United Kingdom and Ireland seem to be the most likely theaters of corporate moral advocacy in Europe. That does not mean they will reach US levels anytime soon, for the reasons mentioned above. In the meantime, firms across Europe wishing to grab newspaper headlines and create a buzz will probably attempt corporate moral advocacy, even if these attempts will likely be sporadic and singular.
Niels Selling is a researcher at the Institute for Future Studies in Stockholm, Sweden. His research focuses on corporate political activity, business power, political economy, and elites. He is currently the lead investigator for the project “Firms as Political Activists: The Scope and Nature of Corporate Political Responsibility,” funded by the Swedish Research Council (grant no 2019-00595).
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Published on November 2, 2022.