Blending in the Iron Cage: The Integration of Social and Economic Discourse in U.S. Firms, 1960-2010

In the corporate US there is a striking rise of “win-win” discourse that claims economic and social goals can be mutually reinforcing. This ideology of mutual socio-economic benefit, which emphasizes both the social benefits of economic activities and the economic benefits of social responsibility, is growing despite ambiguous support for such claims. The rise of such rhetoric in the absence of strong empirical support is a puzzle. Assuming stakeholders are not easily duped and recognize the mixed empirical evidence gained by social responsibility rhetoric, why would a “win-win” discourse emerge? We seek to understand whether and in what kind of organizations social value is presented as harmonious with notions of economic value. Specifically, we examine the factors associated with increased emphases on social responsibility embedded in discussions of finance and production in annual reports (Waddock 2008). In many cases, corporate responsibility becomes another factor that feeds into economic productivity. This invokes the fundamental question whether the market civilizes (Smith 1778, Hirschman 1982), destroys (Polanyi 1944), or evolves inside and along with society (Granovetter 1985).

We examine this issue by drawing on an analysis of depictions of social and economic spheres in corporate annual reports. We constructed a unique dataset consisting of 300 firm-level annual reports spanning the period 1960-2010 from 80 large U.S. companies sampled from the S&P 500. We extracted information related to emphases on finance, production, and corporate responsibility (CR) – from labor-rights and poverty to environmental issues to philanthropic efforts. CR efforts are often buffered from a firm’s technical core as in, for example, corporate sponsorship of activates unrelated to the production process or in the segregation of CR to a stand-alone section of an annual report. Importantly, here we focus on CR efforts that are blended into elemental profit-making activities of production and to financial reporting.

Our study makes three important contributions to the literature. First, it illuminates changes in the relationship between two fundamental arenas of the modern world, society and economy (Krippner and Alvarez 2007, Hirschman 1982). The rise of discourse advocating an economic motive for engaging in social activities marks an unprecedented shift in the history of corporate America (Meyer and Bromley 2013, Vogel 2005). Second, the paper calls attention to the role of cultural, institutional pressures in constructing and re-constructing theories of causality, in this case in terms of how economic activities in firms promote the public good and how doing good contributes to profits (Bromley and Powell 2012). Third, our paper adds to existing organization theory by providing evidence that cultural rationalization facilitates the integration of previously distinct domains (cf. Batillana and Lee 2014, Thornton et al. 2012, Pache and Santos 2010). We capitalize on the way firms use rationalized evaluations to justify their actions, which is a novel operationalization of the emerging sociology of (e)valuation for organizational theory (Lamont 2012, Karpik 2010).